Learning from the PayPal Mafia
How can we open up unique networks and opportunities to a broader set of the population?
Elon Musk, Peter Thiel, Reid Hoffman, Max Levchin - the early PayPal founding team (commonly known as the PayPal Mafia) has in many ways defined the 21st century tech industry. What this group of people built at PayPal, and even more impressively, after PayPal, is nothing short of extraordinary. Right now I’m reading Jimmy Soni’s The Founders, an account of PayPal’s early days, and it is clear that the early PayPal team selected for towering ambition and intellectual ability. Yet for better or worse, the PayPal Mafia also all had a very specific demographic profile, including predominantly coming from a few select schools and being almost all male.
It’s difficult to tell which company alumni team might be the next similarly influential one, but today I want to discuss how we can expand the opportunity set so that the next PayPal mafia can have a more diverse set of backgrounds, experiences, and perspectives. When I think about how we can get more people into these unique types of networks, I want to examine the points in the journey into the tech sector where we can make the industry more accessible to people from a broader range of backgrounds.
Reading The Founders, it becomes clear that the pipeline into tech starts quite early. Soni notes that “several of the early (PayPal) engineers” had ties to the Illinois Math and Science Academy, perhaps the most prominent STEM public school in Illinois. Peter Thiel liked to recruit members from the Stanford Review, the collegiate publication he started, to join his teams and companies, while Max Levchin recruited his friends from University of Illinois Urbana-Champaign to join him in his ventures. The book notes that Thiel valued a team’s “prehistory - the bonds of work and friendship that exist prior to starting a venture,” and in PayPal’s case, this prehistory started young.
For this reason, it is absolutely crucial that computer science and accelerated STEM education starts at young ages across the population, as Noah Smith eloquently argues in “Someone Has to Run the Fabs.” I’ve also always found it confounding that, at least for my generation, primary opportunities to learn coding and technical concepts didn’t come until college; exposing these concepts to a wider set of people at a young age could significantly expand the pool of young technical founders.
On the other side of the founding timeline are the decisions that we make about who to start a venture with and who to hire and promote. This is where expansive and inclusive thinking from founders and management teams can make a difference. Having a leadership team that is representative of a company’s customer base, or rank-and-file employees, can significantly help with effectiveness and morale (the U.S. military has written about this in detail). And if prospective founders do not yet know who their customers or employees will be, there’s immense benefit to having a broad set of perspectives and experiences to inform business and product strategy.
Despite PayPal being founded over 20 years ago, fintech still feels like it is in its early days. When I look at the fintech fundraises in Q1’22, I see a lot of money going into investment infrastructure and investment brokerage, amongst other categories. Yet only 56% of Americans invest in equities and 16% of Americans have invested in crypto. And those statistics only apply to America; there are obviously fintech opportunities and ventures across the globe, in markets with likely even lower personal investment penetration. Founders who are familiar with the 44% of Americans who don’t invest in equities, or the median American who is not following crypto trends, can help create products that work for everyone. All of us should think about how working with a more diverse set of peers can help us build fintech products and services that benefit a broader spectrum of the population.
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Loved reading this Ravi!