I’ve just finished reading PayPal Wars, Eric Jackson’s 2012 recounting of the growth of the online payment company from inception to its purchase by eBay. The story is remarkable for the long list of challenges and cliffhangers the company negotiated in a short time in order to achieve success.
If you look at some of the great dot com boom failures like boo.com and webvan.com they are characterised by leadership unwilling or unable to read the tea leaves and react quickly. PayPal’s tale is a strong counterpoint, showing how acting nimbly and decisively wins the day.
To some extent the PayPal story is not one of a technology company, rather a group of people brought together by circumstance (one college friend bumps into another college friend); but united by a shared vision to change the world – in PayPal’s case, their founders saw how the ability to easily send money from one person to another could achieve political and economic change around the world. They saw PayPal as a force for good, for the disadvantaged, for small businesses who otherwise were at the mercy of behemoth financial institutions. It is also a story of the challenges any entrepreneur faces when they plunge into the great unknown to create a new business.
The entrepreneur’s journey is almost always rocky. I haven’t had a real job since 1996, and in that time I’ve faced poverty and riches in almost equal proportions. Along the way my partner and I have built and sold a couple of internet businesses, started and failed at a couple more, and started yet another that is still in its infancy, shows early potential, but will require much effort to properly realise its vision. Sometimes I find myself questioning whether I have the ‘right stuff’, the energy and will to invest my time and emotions into a venture that may or may not succeed.
We’ve had a business almost die due to a key database and its backup crashing. We’ve run out of money to the point where I couldn’t afford a tram ticket. I’ve personally made decisions that in retrospect were poor, and financially harmed my family. Working long hours without the safety net of a salary and under constant financial stress is destructive to personal relationships.
Sometimes I wince at the stupid things I’ve done, yet in the process I hope I have learnt some of the same lessons as the PayPal team.
You must be brave. You need the courage to act in the best interests of the business, even in the face of opposition from those around you. PayPal’s management and staff staged a coup against their CEO Elon Musk and forced him to resign because they were unhappy with the strategic direction, especially halting all web site feature development in deference to an attempt to build a whole new version of the site in what was believed would be a faster, more scalable packet of technologies. Yet by doing so the company sacrificed the ability to respond to the daily challenges from competitors.
You must be nimble. PayPal started as a way of sending money between PalmPilots. Eric Jackson, who was leading the direct mail efforts, identified an opportunity with auction site users and started to target them. Eventually that became the company’s main growth driver before later diversifying into activities such as enabling all web site owners to capture payments and the PalmPilot application was quietly retired. The entire business needed to pivot on a pinhead. In contrast, PayPal also owes a great deal of its success to eBay’s inability to quickly enough deploy and develop its own payments system BillPoint.
You must know when it’s time to bail out. PayPal took the deal with eBay because otherwise it was possible their prime competitor BillPoint, owned by eBay would shortly be in a winning position. In contrast the management of boo.com and webvan.com should never have even allowed the companies to progress as far as they did. But arrogance or an inability to understand and accept the signs of failure led to implosion. They should have bailed earlier – sure, they would still have failed, but the losses would have been more contained, the impact on staff and customers lessened. Instead they waited until they were overtaken by the inevitable.
It’s one of the great attributes I love about business in the USA – the permission to fail. In the land of opportunity it is expected you simply bounce back, dust off, and try again. A notion I wish more of the Australian business world would embrace. Too often I think bravery is confused with recklessness; nimbleness with flightiness; and understanding when to bailout with piking (as leaving a party early is colloquially known in Australia).
Some entrepreneurs seem to have an innate understanding of these qualities, others like me need to learn by experience. There are other qualities of course – humility is one I suspect I struggle with. But for me if you are going to succeed in your business you need to embrace them, and learning the lessons of the past from people like those who built PayPal is essential.