The Founders

Elon Musk, Peter Thiel and the Company that Made the Modern Internet

Jimmy Soni

• Publisher: Atlantic Books
• Year: 2022
• Print ISBN:
  9781786498311
• eBook ISBN:
  9781786498304
• Topic: Business
• Subtopic: Business Writing
• Index: Business

'A fascinating page-turner... An indispensable guide to modern innovation and entrepreneurship.'
Walter Isaacson, no. 1 bestselling author of Steve Jobs Perfect for readers of Elon Musk by Ashlee Vance and Zero to One by Peter Theil Out of PayPal's ranks have come household names like Elon Musk, Peter Thiel, Max Levchin and Reid Hoffman. Since leaving Paypal, they have formed, funded, and advised the leading companies of our era, including Tesla, Facebook, YouTube, SpaceX, Yelp, Palantir, and LinkedIn, among many others. Yet for all their influence, the incredible story of where they started has gone largely untold. In The Founders, award-winning author Jimmy Soni narrates how a once-in-a-generation collaboration turned a scrappy start-up into one of the most successful businesses of all time. Facing bruising competition, internal strife, the emergence of widespread online fraud, and the devastating dot-com bust of the 2000s, their success was anything but certain. But they would go on to change our world forever. Informed by hundreds of interviews and unprecedented access to thousands of pages of internal material, The Founders explores how the seeds of so much of what drives the internet today were planted two decades ago.

PART 1

SICILIAN DEFENSE

1

BUILDING BLOCKS

The February 1986 issue of Soviet Life included the ten-page glossy spread: “Peace and Plenty in Pripyat.” Pripyat was, per the article, a cosmopolitan idyll. “Today the town is made up of people belonging to more than 30 different nationalities from all over the Soviet Union,” the authors wrote. “The streets abound in flowers. The blocks of apartments stand in pine groves. Each residential area has a school, a library, shops, sports facilities, and playgrounds close by. In the morning there are fewer people around. Only young women pushing baby carriages stroll along unhurriedly.”

If the town had any problems at all, it was only that it lacked sufficient space for new arrivals. “Pripyat is currently experiencing a baby boom,” the mayor observed. “We’ve built scores of day-care centers and nursery schools, and more are on the way, but they still can’t cope with the demand.”

The demand was understandable, because Pripyat was home to a Soviet technological marvel: the Chernobyl nuclear power plant. The plant was a significant employer, and, per the article, it provided good-paying jobs and energy that was “ecologically much cleaner than thermal plants that burn huge quantities of fossil fuel.”

And what of safety concerns? A Soviet minister was asked directly about this matter, and he replied with all the confidence and assuredness of officialdom. “The odds of a meltdown,” he boasted, “are one in 10,000 years.”

Just months after Soviet Life gushed about Pripyat living, of course, the town was left a smoldering, radioactive ruin. At 1:23 a.m. on April 26, 1986, the number 4 reactor at the Chernobyl nuclear power plant melted down, causing an explosion that ripped the building’s thousand-ton roof clean off. Soon, Pripyat’s skies pulsed with more than four hundred times the radioactive material dropped on Hiroshima.

Maksymilian “Max” Rafailovych Levchin was ten years old, and he was sleeping ninety miles away when Chernobyl exploded. He’d awaken to a life transformed and shaped by the disaster. In those first anxious moments, his parents shipped him and his brother away on a train. During the trip, he was scanned for radiation with a Geiger counter—and set off the machine’s alerts. A rose thorn stuck in his shoe turned out to be the radioactive culprit, but for a moment, he panicked when he considered the possible amputation of his foot.

Levchin’s whole family was affected by the Chernobyl disaster, including his mother, Elvina Zeltsman. She was a physicist and worked in the radiology metrics lab at the Institute for Food Science.

Before Chernobyl, this was a sleepy post. According to her son, she spent her days verifying the safety of Ukraine’s (nonradioactive) bread supply. But after Chernobyl, as radioactive food began emerging from Northern Ukraine, her responsibilities grew—as did the urgency of her efforts.

To aid her work, the Soviet government sent Elvina’s office two computers: a Soviet DVK-2 and an East German Robotron PC 1715. Levchin occasionally accompanied his mother to work, and at first, he found the computers boring and clunky. That is, until a game arrived for the DVK-2: Stakan (one name given to Tetris, which was created in 1984 by engineers at the Academy of Sciences of the Soviet Union). He was hooked.

Levchin’s curiosity soon turned to the Robotron. It came with a Pascal compiler—a program that turned human code into machine commands. Also in the box was a pirated Turbo Pascal version 3.0 manual, which explained the compiler’s use. Such texts were rare in the Soviet Union, and for Levchin, the manual became scripture.

Before long, Levchin could write rudimentary programs—and he was entranced. “This notion of you can tell a machine to do things in the future that you’re only going to know about later on was this profound realization,” he said years later. “From now on, I don’t have to know everything to get stuff done. I can just start writing it down, and it’ll happen on its own later.” Before, Levchin aspired to become a math teacher; now, he boasted that he’d program computers when he grew up.

Levchin relished his early coding and gaming, but the computers weren’t there for his enjoyment. They were supposed to help Elvina report radiation in Soviet food. Seeing that her son’s technical skills surpassed her own, she put him to work and cut him a deal: the computers were all his—once her tasks were complete.

That didn’t leave Levchin much time for leisure-coding. So to preserve precious Robotron time, he devised a system: writing code with a pencil and paper. At the park near his family’s home, he’d draft and edit his programs longhand. Once his mom’s tasks were complete, Levchin transferred the contents of his notebook into the computer. Then came the machine’s verdict: “If I type it out verbatim from my notebook, does it compile and run at start—or do I have to debug it?”

This learning process left exacting standards. “My standard self-definition as a programmer had always been that I started with these decrepit computers,” Levchin said. “It was all . . . very procedural programming in various different assembly languages. . . . [It] probably made me slightly more elitist, but certainly made me very tenacious as a developer. I never really had an option to take the easy way out, I guess.”

Not taking the easy way out was a Levchin family tradition. As Jewish people living in an anti-Semitic state, they worked doubly hard for their achievements—and faced obstacles others did not. One morning, Levchin’s father awoke to find a Star of David graffitied on their front door. They told their son that because of his religion, becoming valedictorian of his high school would be his only shot at getting into a top college.

Despite these barriers, the family had accomplished much, with Levchin’s maternal grandmother leading the way. Dr. Frima Iosifovna Lukatskaya was a four-foot-eight force of nature who had earned graduate degrees in astrophysics and worked at Kiev’s Main Astronomical Observatory of the Academy of Sciences. She advanced the field of astronomical spectroscopy, the science of measuring “eclipsing variables” from stars, and her lengthy papers on the “Autocorrelative Analysis of the Brightness of Irregular and Semi-Regular Variable Stars” and “Properties of Optical Radiation of Variables and Quasars” ran in prestigious journals.

For Levchin, she was fortitude personified—a woman who triumphed in a male-dominated field and a Jewish person who succeeded in a hostile country. Her grit seemed to him almost supernatural. The year Max was born, Lukatskaya was diagnosed with a rare and aggressive form of breast cancer. “She basically said, ‘I can’t die. I have my grandson here.’ So she willed herself to live for another twenty-five years,” Levchin said. “I had this living example of someone who’d never surrender under any circumstances.”

In the early 1980s, as Levchin entered his teenage years, the Soviet economy was in freefall and the Politburo was in panic. Lukatskaya began to feel the disquieting echoes of World War II, the horrors of which she had seen firsthand. As best as the family could tell, the KGB was monitoring Levchin’s father, and the prospect of the government disappearing him loomed large.

Lukatskaya applied for funding from a Jewish refugee agency and made arrangements for the Levchins to immigrate to America. The family’s departure was kept a closely guarded secret. “It was one of these crazy years where I knew for about twelve months we were going to leave the country and I couldn’t tell anybody,” Levchin recalled.

The family left for the airport, pared-down possessions in tow. Despite the balmy July weather, the Levchins arrived at the terminal wrapped in down winter coats to avoid having to declare them. After a final exit interview with a Soviet border agent—who reminded them, in no uncertain terms, that their emigration would be final—they boarded their flight to the United States.

Still cloaked in coats, the Levchins disembarked at Chicago’s O’Hare International Airport on July 18, 1991, one day before a deadly heat wave struck the city. They sold the coats to an underground dealer for just pennies on the dollar. But the limited proceeds made a big difference. Just before leaving Ukraine, the value of the ruble had collapsed, reducing the family’s few-thousand-dollar nest egg to just several hundred dollars.

For his family, immigrating to the United States was risky, but for Levchin, who had just turned sixteen, it was the first step on an epic quest—and the adventure started right away. Levchin had been a strong student, and he wanted to get his Ukrainian high school transcripts verified by the Chicago Board of Education. Rather than ask his parents for help, Levchin hopped on a city bus by himself to complete the mission.

After getting off at the wrong stop, Levchin found himself in the middle of the Cabrini-Green housing projects, then one of the city’s deadliest neighborhoods. “I just kind of strolled through and thought, Oh, there’s no one who looks like me here. Hello, fine American people,” Levchin remembered. “I was completely oblivious . . . I was a skinny Jewish kid with a giant ’fro, and I looked like I wore clothes from the Lenin factory in St. Petersburg—which I did.”

Levchin assimilated in fits and starts. Shortly after arriving in America, he fished a broken television out of the trash, which his physicist family fixed up. He could now watch the sitcom Diff’rent Strokes, and as he told journalist Sarah Lacy years later, he modeled his English on Gary Coleman’s Harlem-raised Arnold Jackson. “Where did you learn English?” one of Levchin’s teachers asked him, curious about Levchin’s New York–meets-Kiev lilt. “Watchu talkin’ ’bout, Mr. Harris?” he replied. The teacher gently suggested Levchin broaden his media diet.

The language and culture were new, but one thing remained: Levchin’s love for all things computers. And in America, he finally got one to use at his leisure. It was a gift from a relative, and it did something his old machines didn’t: connect to the internet. Levchin soon became consumed by the world wide web and found networks and forums full of kindred digital spirits.

He found them at school, too. At Stephen Tyng Mather High School, on the north side of Chicago, Levchin joined the chess club, helped run the computer club, and played clarinet in the school band along with a friend and later PayPal colleague, Erik Klein, who played trombone. At Mather, Levchin showed the early signs of his hallmark intensity. A friend and later PayPal employee, Jim Kellas, recalled that he and Levchin were once left alone in the back of art class. Bored, they decided to hurl X-ACTO knives into the wall like darts. “Max . . . is a perfectionist. He always wants to be the best at everything he does. And so he’s sitting there, and he’s putting his finger on it and like, measuring the weight and saying, ‘Oh, this would be the perfect position to try to throw them,’” Kellas recalled. “And I’m like, ‘No, no, no. Just whip it harder.’”

Levchin excelled in his math and science classes, so when college application season arrived, he approached the Mather guidance counselor brimming with ambition: Levchin wanted to go to “MTI.” “I said, ‘I really want to get into MTI. You have to get me into MTI.’ She’s like, ‘What the hell is MTI?’”

Levchin was referring, of course, to MIT. His college counselor recommended that he apply to the nearby University of Illinois at Urbana-Champaign (UIUC) instead. Here, too, there was an issue: Levchin had missed UIUC’s application deadline. But scanning the requirements, he noticed that the deadline for international students hadn’t passed yet. He saw an opening: “I’m international-ish,” he said. “I’m not a citizen, came to the US less than two years ago, who is to say?”...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Introduction
• Part 1: Sicilian Defense
• Part 2: Bad Bishop
• Part 3: Doubled Rooks
• Conclusion: The Floor
• Epilogue
• Debts
• A Note on Sources and Methods
• Notes