Max Levchin cofounded PayPal with Peter Thiel and built it into a Silicon Valley success with the help of Reid Hoffman and Elon Musk. They took it public and sold to eBay in 2002, then all four left the company. But Levchin couldn't let go. He'd still show up at the office. On this episode of "Success! How I Did It," Levchin talks about how he struggled to find himself after the acquisition, so much so that his girlfriend dumped him (but they later married). He has since gone on to launch a bunch of startups and now spends most of his time as CEO of Affirm, which offers small loans but doesn't charge penalties or fees. But before all of that, Levchin grew up in Kiev, Ukraine, where he learned how to write computer code using pen and paper. And in the 1980s, his life was about to change. He lived near the Chernobyl power plant.

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00:00:00this episode of success how I did it is brought to you by Chubb learn more at Chubb dot com slash be high what a powerful to eBay in two thousand two Max Levchin didn't know what to do with self he co founded this company with Peter Thiel any
00:00:17built into a huge Silicon Valley success story with the help of read Hoffman and Ilan mosque but after got acquired all for those guys laughed except Max just can look out for the first time a server key card still works why don't I just come back to work
00:00:31eventually HR told him he might be better off in a coffee shop business insider this is success how I did it I'm out since on top on this episode with Max Levchin who talks about his failures before PayPal and how he stumbled into product market fit he also
00:00:46really struggled to find himself after the acquisition so much so that his girlfriend dumped him he says going on to launch a bunch of new start ups and his girlfriend got back together with him but the one where he spends most time that is called a firm the
00:00:58firm does small loans and they don't charge any penalties or fees but the story of Max really starts in Kiev Ukraine were in the mid eighties life was about to change so troubles with we are miles a ninety miles north of Kiev so is quite close election was
00:01:13ten years old and his family was full of physicists everyone except for my dad who was a chemist was a physicist this give him an interest in science early on and it eventually led to a passion for coding but it also meant that his mother saw some early
00:01:26signs of something that was very wrong Sir her job was at randomly enough National Institute of food hygiene I think that's right translation in she man or woman to the giant spectrometer slash radiation meter and so she would test foods produced all of Ukraine for radioactive poisoning which
00:01:49of course is a nine point I'm so time or not at all radioactively poisoned except sometime in April of nineteen eighty six the star becoming a little bit more concerning even before we knew that Chernobyl nuclear explosion the surgeon I was filled with me are miles a ninety
00:02:08miles north of Kiev so is quite close as the figured out that the government was engaging in a cover up my parents my grandmother basically shipped me in my younger brother to Crimea which is kind of the southernmost point to Ukraine now along Ukraine part of Russia and
00:02:25I spent next year and a half there when I came back life began %HESITATION remaking itself %HESITATION went to school with my mom now her job was extremely portraits costly testing foods and there's all sorts of media coming out and so %HESITATION her research crime investigators holder Hey
00:02:43you need to learn how to code because writing down all these results by hand just isn't cutting it we need to start storing data using computers and so it was eleven or twelve when I got back to kia of my mom is hate the gave me a computer
00:02:59at work I need to learn how to program this thing you're coming with me and so my exposure to programming was actually sort of instigated by my mother said this is gonna be a lot faster if the two of us learn in parliament you help me and I'll
00:03:10help you at some point I actually talked my way into having one of these you eat garbage G. Eastern Bloc manufactured computers along with me and that was like the the pinnacle of my life for like now I will do nothing I'm just going to write code all
00:03:25day long on this East Germany made equivalent of a %HESITATION spectrum the axe with a slightly nicer screen yeah huge upgrade from you were writing code by hand for a time there right actually before I was able to get my hands on the computer occasionally at home I
00:03:40just couldn't get enough of it so when I wasn't able to go hang on her lab I would just write code on on a piece of paper maybe more incredibly though you would actually then plugin into computer later and it seemed to work I actually did I would
00:03:52you buy it by hand so you all moved to the United States and you were a teenager which I imagine is hard and probably but shell shocking was that like I think I took it in stride I made a very conscious decision to become an American with a
00:04:08capital a as quickly as possible so I I think I was very busy trying to Americanize or assimilate and spent a lot less time trying to realize how difficult it is totally plenty of cultural shocks were the idea of not button your shirt all the way to the
00:04:23top was something I had to learn first at school or a learning with deodorants for so it sounds like the transition went pretty smoothly and graduate from university of Illinois and probably had to soak in the alley actually hiring campus for a little while longer because one of
00:04:42my companies was %HESITATION failing and I didn't feel like feeling having it fail in transit I let it fail well see sharing but once it failed I will talk about wasn't company number three or four depending on how you count all of which had failed and right between
00:04:58Fehler number four and pay pal I finally said this would be a good opportunity to go to talk about license that's were all my friends go and sometimes our companies don't fail how did you meet those people and like what color do their this is July nineteen nineties
00:05:13right this is nineteen ninety seven nineteen ninety so I I kind of figured out that I want to code and I hadn't really changed my plans since I was twelve by times in college I just caught a lot Marcus I finally had my own computer and I could
00:05:24go to labs I think I slept a lot certainly eat snickers bars for lunch dinner in the slab all the time when these two guys stop by and said he would you do here all day long and night should come with us we're gonna start a company to
00:05:39start a company and it failed about a year later in ninety five did work primarily because we were based in Champaign Illinois and it's very hard and or basically time which off university resources to do things and that really came to a crashing halt eventually but in the
00:05:56process I became friends with these two guys one of them is the Costa cruise just until very recently apartment towers fund and since left the stars on find the other one the sky banister was a whole bunch of interesting opens his name so I certify these guys for
00:06:11Auburn wanting dated after first company failed is the move to help also because they sort of new level and I was still three years off the boat concert like well my grandma told me to graduate college I'm gonna go back to graduating college they would send me emails
00:06:23and tell me Hey politics who won who warmer to have mortgage company three all the cool kids are here well I'm gonna graduate college but as soon as the apps done I'm I'm gonna come join you guys and so that's why and how it sue you had out
00:06:37there and how do you kind of get your fighting I got there by car I didn't really make any arrangements so I just crashed on Scott's floor and it was really hot and Paul to in nineteen eighty eight which is what this was and so I had a
00:06:51habit of hanging out at Stanford during summer school because all air conditioned so I could sneak into a lecture on the back pass out and the legal and then Luke who had just started another company funded by Peter Thiel to hate Peters giving a lecture Sanford one of
00:07:10these days should go meet him because he's a really cool hedge fund manager type guy who is investing in startups in so %HESITATION had me back my mind I saw his name on the board wandered into a class that was taught by him which turned out to be
00:07:26more like a seminar with six people in the room so the very small group people when I couldn't sleep this would be obvious with two he was actually pretty interesting choice of state awakened Chatham up afterwards in the inimitable Peter Thiel fashion with his friend but twenty minutes
00:07:43talking after his lecture said what we doing second alley and I just got %HESITATION two weeks ago progress our company %HESITATION great we should be for breakfast we met the next day it art so what companies are think of starting I had two ideas that I was kind
00:07:55of concurrently thinking about describe number one number two said no one is better to do that okay elected last that was the server was less than twenty four hours later Peter was a committed investor in my new project the next month or so we were brainstorming misled starred
00:08:16for companies prior the old to some degree failed largely because I had no idea what to do in terms of raising capital and so my original serve deal with Peter was Hey I have to Kerry's money it's great that you would invest but reality is its Rogan need
00:08:32to be more help me learn how to raise money and so for time he was still running is fund and I was trying to put together pitched I can think within day or two so I have no idea are you doing with the stuff why don't I help
00:08:45you and so he started coming with me to the pitches over time it became very clear that the my role in these pages was always to answer difficult technical questions while Peter's or paint a picture and at some point my agenda became Hey he should be the CEO
00:09:00of this company like I shouldn't be a CH to go write the code which is what I know in enjoy doing and so some time by a like December of ninety eight is when I remember I called up and said so what do you think about this whole
00:09:14C. idea he was I thought about it okay sounds great so we incorporated %HESITATION so you guys get started and is it a payment company right from the get go now stupid into that we put it six times by my count but you can probably find more pictures
00:09:32if you want to the original idea was actually the idea that I pitched Peter which was in retrospect a brilliant idea before its time or asinine or both but my thesis was that at some point mobile computers who will be everyone's pockets and this wasn't entirely from the
00:09:52moon because palm pilots had just last couple years prior and everybody was twenty rows on those things was very soon people in trucks will be taking notes about their cargo and people in offices will be doing inventory so this will be a device that has a place in
00:10:13your price what I was going to have a PhD in which of course the richer realized was cryptography and so my interest was in computer security I really wanted to develop products in that space I want to cover from being an academic to being an entrepreneur and in
00:10:27computer security so the pitch to Peter was Hey all the palm pilots are gonna be very important work place this date is going pretty sensitive there's no security on the pump eyes right now restore piece of data its attacks folly regency advice to your palm pilot I can
00:10:40log and the password or trivial to break so let's build a full framework of secure everything secure storage secure communication you can plug this thing into a serial port so you can transmit data some attention cryptid into and so I had this expansive vision of security in a
00:10:59work place on mobile devices course that is kind of a role now expecting today from our iPhones and android devices but twenty years ago it was probably way too early to within a few months our essentially pretty clear bad well to cool idea is probably from too far
00:11:18in the future and we started boiling down less what we have so we we are you I recruit a couple of engineers from Illinois the New World writing code all the time somethings were writing we're not exactly sure why but we kept on building more more sophisticated here
00:11:35infrastructure part of it involved coming up here called digital I'll use were you could say I promise you ten dollars and I would usually sign it was read who was by then part of the street apartment home is the co founder of like ten on it was our
00:11:50first %HESITATION board member set second remember I think Scott was first read or second but retention became exact address president PayPal said wealth I use really cool but how about invoices you can actually settle invoices and so you need a way to pay them but then you can
00:12:06close the loop you have to rely on some other channel to pay you I %HESITATION I was not pleased about it but then I thought to be released in two in a great credit card processing because they're done it before and so one thing led to another I
00:12:20build a week of settling transactions from combine to PalmPilot using on the web you could log in and pay using a credit card with this corrupt haphazardly put together %HESITATION face but in the process of having this demo live I started noticing that people are transacting through it
00:12:36and then I got an email from someone saying Hey do you have a logo I need a logo ideally scaled down so I can embedded in my eBay auction posting and the up until that point I had to leave their personal understanding of how the baby worked and
00:12:50what it did and so I just looked it up on my caller this is like a den of illicit commerce I I need to block them from touching my product to actually spend a fair amount of time trying to push eBay users away from PayPal at some point
00:13:04you're asking would you spend your time ice house eBay user they're just trying to use our products like crazy there like cockroaches he tried to block them often to keep on coming in three different interests I think that's what they call market poll I think all these people
00:13:18trying to pay online they don't have any better choice and your haphazardly put together demo and so the last digit of PayPal was pulled into its final shape by the public and so around nineteen ninety nine your path crosses with you on mosque he had something called X.
00:13:35dot com which merged with pay pal the merger was consummated in two thousand but we knew of each other by ninety nine Fisher wouldn't really realized that X. was basically direct competitor over time it became very much an open race was going about the rivalry to the extreme
00:13:50and that at some point we realize that we're doing exactly same thing competing with each other as aggressively as we could and so %HESITATION at some point you on and Peter knight met up and basically said we we should probably consider merging companies given the fact that we're
00:14:04just gonna beat the crap out of each other in a market in some third party going to come in and take it away from us and so by me two thousand members so the pay pal goes on to do great things to you guys but to take public
00:14:15an insult to eBay to thinks the president one point five billion dollars when you're in your twenties at this point you've got a couple companies before and finally you're tasting like real success what was that process like of those two different types of exits so we decided to
00:14:32go public not quite on a whim but it was not a multi year %HESITATION when do we possibly get big enough to go public we're very focused on getting profitable Gerry focus to this March to profitability on March to scale of payments and then somewhere in the research
00:14:48at all yet would probably go public at some point after and that wasn't such a big deal at all the business goals are much reporting as we started getting really close going public all kinds of crazy stuff started happening would get sued by patent trolls every other day
00:15:02you would find through we filed a lawsuit against your infringing on this patent in our fax machine over the weekend because we get faxed in Friday night's a on Monday morning I got one more lawsuit apparently were infringing on a telephone network patent was rotary dial how is
00:15:19that possible to %HESITATION stuff was just as like constant cacophony of %HESITATION things conspiring to keep us from being public and so by the time we finally got there the night before the last printing of the prospectus half the company seem to move to the printers office I
00:15:36slept on the floor of the printers office and then got a weakened by the lawyers %HESITATION to kick me in the ribs thought that are but we got sued again and the underwriters counsel basically said if we have to reprint again we don't think we can take as
00:15:51public to the market windows gonna close whatever that really means is one of these bizarre moments were had to run to some law office and the underwriters flew in their own lawyer and I realize he really had no he was talking about in a sort of technical sense
00:16:06so I fired him in the middle of this conversation it was was extreme drama and finally were allowed to go public and it was a giant release were like we open and close and we closed off and was a big deal and then like the next week everybody
00:16:20was just very busy watching price take away that I had was only on the run up is so much better than being public by and we go back to work like we were worse so hammering at it four days ago wiser Kay now to just spend a lot
00:16:34of time staring at the price and world locked up for six months anyway is a huge run up and a big to me downdrafts in a moment we'll hear why PayPal sold to eBay just months after it went public that's coming up right after this we started making
00:16:48one nineteen forty eight one bottle at a time today we produce nearly twenty million cases a year job has helped us grow for the past thirty years they helped us preventing problems during harvest and providing guidance when we started exporting internationally now we're working with them on cyber
00:17:07security my grandfather tell me to make a wine over delivers shop over delivers learn more Chubb dot com slash beyond legend says eBay tried to buy pay pal multiple times over the years including right before they went public and then again right after it went public but each
00:17:28time pay pal said now every time we get a bid from eBay I would gather the team and basically say Hey tell me how tired are in a world tired and it will be working seven days week four years straight do you want to sell the company or
00:17:41do we fight another day and every time it seems like if I know that a we have plenty after the IPO I think was like six months or something that was another one of these meetings for us at our eBay is back this is definitely maybe a last
00:17:55time they're ever going to bed if if you're tired to the point where you don't want to handle another fight another year of just beating each other up maybe this is our time to sell the company and I can actually hear anyone say let's do it but as
00:18:08I look around the room Sir like wow these people have been just dragged through a competitive mud over and over again and they survived every time but it's gonna get harder harder and so to meet with those kind of the point is that I I think we should
00:18:20take this offer seriously as opposed to all the other ones were we we can we can do so much better than and so that that was the beginning of the sale process now that's some radical transparency there must founders are gonna their teams I don't think it's a
00:18:32like how do you guys feel about the sale it wasn't the entire team but it was basically my direct reports and their director was I think so it was pretty cool but I I really wanted to get the sense of commitment has become better dynamic between us an
00:18:45axe and an us an eBay was pretty brutal payment in general are very competitive space and so it's it's always been and so you do go through with the deal they acquire you and you're the last founder to sort of stick around to the last of the original
00:19:00gang and then it seems like we last but then felt a little bit lost after I think you might be the only person in history has quit and then return to work for a couple weeks just to hang out with her whole co worker that's that's not a
00:19:12very well known fact that yes I the embarrassment factor of having our each our head who was still there TVS and say Hey I just wanna remind you you quit rate like yeah yeah but you know I kind of miss it you may be better off hanging out
00:19:27with your work friends outside of work maybe should hang out nearby cafes instead of in the office so I own a pair of nearby cafes for awhile and then I realized maybe I should just take myself away from this for awhile the free time most of my key
00:19:39card still works why don't I just come back to work and %HESITATION I quit he was definitely time to go it was very clear to me that eBay really wanted to make their own and pay felt in many ways was a cult of personality built around the founding
00:19:54team to a lot of people in the early days that work have outsized personalities certainly Peter and Lou can I'd like to believe that the I'm somewhere in that pantheon but maybe not so I mean it is I think an emotional decision for any founder to step away
00:20:08from what they've created and sounds like it certainly was for you and it sounds like your wife you were dating at the time did she did she break up with you during this period she broke up with me very briefly I think if it wasn't for her she
00:20:20always had a plan to %HESITATION take me back once I got my head cleared out but at the time it seemed terrible but three basically said look you seem like a mess you you need to go spend a little time Erin which you know I think we were
00:20:31actually apart for about four and a half weeks but it seemed like eternity I'm glad you asked on your way back to each other and you found a new mission how did you find out like how do you figure out what do I do next we do with
00:20:40myself next I didn't actually settlers I figure out what to do next I really want to go back to work basically always work and stuff since my mom gave me that computer and so this period of wandering through the wilderness was not healthy for me at all and
00:20:56I dove in on abilities company called slide it handed a bunch of little companies want them cold yelp and other companies not heard of it got me my now wife back because you're the guy he seemed very busy creating your human being again but more to the point
00:21:14I was engaged and I have lots of interesting things and people and ideas going around me and spend the next bunch of years five or six years I think building a company called slide ultimately acquired by Google and all throughout I serve wasn't really focused on a deathly
00:21:31decision I was just enjoying the fact that I had something that it kept my brain fully engaged after %HESITATION acquired slide which was not really what I plan for it to do it all but the right of good reasons for its not old worth getting into the biggest
00:21:45one was I realize that I wasn't ultimately ever going to be thinking of slide is my long term future he was not really ever the thing for me to do after Google my wife and I sit down and she said look after PayPal I've seen you your your
00:21:59rack like you you should not be left alone without a plan so let's let's just make sure we we don't go through a day that sounds like a wonderful idea we suggest that you were so happy with that first year and so she'd seen the higher share of
00:22:12growth fall and growth and fall again you should just go back and look at financial instruments in either you all these ideas that you put on a shelf back then and not in a high I've done that and like well look what happened you love that a PayPal
00:22:25you love security love serious problems when a soul things that matter and she's complete right I'd love difficult serious problems I actually called up a bunch of my old PayPal for instance that he would leave behind during the PayPal years that we should have got on top of
00:22:41and didn't were too busy doing PayPal's off and the best answer I got was from the th and getting sued since gone on to confound pound here and was might she first guy as PayPal you know one of the most amazing things that I always thought we should
00:22:55have done and never did was lending because it's such a mess fighters course so old and it's so inaccurate in there so many people are excluded immigrants and people dropped out of school and all these groups of people that are just completely misrepresented by the four are getting
00:23:10terrible terms if you look at the products they're just been perverted into harvesting machines for fees and totally does lending honestly anymore you could get so much in data out of payment information so we can do lending better and that conversation and a couple other server similar ones
00:23:26in the old PayPal crew really triggered me to go back to look at payments and ultimately lending and start a firm and a from originally was really a math exercise to see if we can do a better credit score product by the time we got really deep into
00:23:42how lending really works in the US we serve to get from a cool math problem to a moral mission of fixing what became short of %HESITATION turn the moral and maybe worse industry of lending money to people that should be barring living in terms to keep them in
00:24:00debt letting them in ways that are not obvious to the bar or not transparent so we can do it right with math this kind of with the firm's mission point of you has has evolved to gloss over yelp but you were the very first investor and yelp which
00:24:16ended up actually being of course a huge an awesome deal and you also saw the coming to Google in there which is something that not many people get to do so I wanted to go back into those two life I'm it's really quickly first talk to me about
00:24:29selling side to Google I think it wasn't quite the exit your help for like you said it was about half the valuation when you sold even those two hundred plus million when you did so talk to me about figuring out this isn't what I am supposed to be
00:24:41doing this isn't working and then how do you then turn that sell to Google so you actually one of these very fortuitous moments where Google was just realizing that Facebook completely outstrip them in the social realm and they were looking around for a team of people and a
00:24:58set of products for adult they really did not have a fully big strategy but they knew that they need to catch up very quickly I did two Mar twenty people in the team was one of the better teams that I've assembled and so my commitment was primarily at
00:25:14that point or solely to the team and when Google came knocking saying Hey you guys are a team full of people that really understand social media we're trying to catch up we want to bring you on to help us get into social this is kind of a marriage
00:25:28made in heaven I have a team of people that really love social I'm the only one who's kind of imposter here I will come and help and I will transition it in but this is my way of helping everyone in this group people at all these places you've
00:25:41got a really strong culture you've gotten a group of really smart people and friends together how do you build this culture up it seems like you have some unique tactics I know PayPal there are some interesting interviewing tactics %HESITATION something around I Q. you'd have a certain I
00:25:54cue to work at pay pal you still do those things I'd certainly involved my approach to building teams over the years I try to learn from people whose companies cultures admire and so with a firm I realized that we're taking on an industry with lending a particular were
00:26:12morality and sense of right and wrong has given way to the sense of return on equity which is the number one metric that everybody cares about in lending and building a culture at a firm was front and center from the very very beginning at people the culture was
00:26:29incidentally was more of a work really really hard be really really smart and it worked fine the company's office is accessible but probably could have done more at a firm he was definitely something about the one I said I'm going to write on my core values I'm going
00:26:43to make sure that these values are in China print on the wall of every office we ever have in every year I'm going to review them and make sure there's crispness clean in a memorable said every member of the team can recite them from memory and know why
00:26:56we're here because if they can't we have a real chance of falling into the same trap as but the industry did were you dehumanize our customers and just think of a source of income as opposed to what credit was supposed to be helping people invest in a better
00:27:11future so I know that you use data and all sorts of parts of your life and you have in the past and I think maybe still do try to make your life in your health as efficient as possible are you are big biker I you really watch what
00:27:25you eat so what's your health routine like and what have you learned from all this self experimenting that you do to optimize these is having fairly demanding start of Kerr's a CO a family with two little kids and a few other obligations in life I do less experimenting
00:27:42but I try to ride my bike everyday and try to %HESITATION be pretty healthy as the year but if we find a routine that I like and I just stick to it obsessively for skip a day it's extremely uncomfortable with the number one power in eighty behavior is
00:27:58in turning it into a default so long as you make those defaults healthy it's very easy to surf exist in a fairly healthy universe so long as your daily default is beyond the bike some days you miss because you're traveling through sick but most the time you'll just
00:28:13get up and get on a bike for staying morning was what I did and so you had this long great career you figured out a lot about life and business and everything along the way what's the best advice you can give looking back on your career the things
00:28:24that you really did right and the things that you wish you had learned sooner %HESITATION my grandmother once told me that that's the only difference between somebody with a failed life versus somebody with two PC's is perseverance there's nothing else like and she really stressed a point like
00:28:43you just have to have enough grit to go through the parts we want to quit and don't so I think perseverance grades tenacity we fill in your favorite word for that I think that is the number one success factor for entrepreneurs and my number one internal take it
00:29:01going already motivation lying to myself is don't be lazy just go do it and the other one would I think I should have thought of twenty years ago but I think I'm better now just take more risks the younger you are the easier to take risks and I
00:29:13think what's in the habit of taking risks it becomes easier than to certain %HESITATION that it's okay Fehler isn't really that big of a deal it's helpful to fill a few times %HESITATION that occur because you know exactly how the bottom feels do you get in the habit
00:29:27of not always failing and that becomes a good default grateful Max thank you so much for your time thanks for listening to success how I did it if you like success help us spread it tell a friend who you think might like the show or leave us a
00:29:40rating and review on apple podcast you can subscribe to success and a lot of places including apple Google play radio public constituents if you have any comments or suggestions you can always email us at audio at business insider dot com I'm also Chantelle thanks for joining us for
00:29:57another edition of success hide it

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