John Bull Profile picture
Jul 25, 2023 31 tweets 6 min read Read on X
To understand Musk's renewed obsession with X and focus on financial services, you REALLY need to understand the X/Confinity merger that became PayPal.

And, particularly, the Peter Thiel-led coup that kicked Musk out as CEO/Chief Strategist.

Here's how that happened. 1/🧵
In early 2000, X hits the news for a vulnerability that allows money to be moved between accounts with just account details. This is fixed, but spooks investors.

Elon agrees with investor Mike Moritz from Sequoia to become CTO while Bill Harris (ex-Intuit) becomes CEO.
Meanwhile, over the road (literally), a startup called Confinity is making waves. It's funded by Peter Thiel, who is also its CEO, but is the brainchild of Ukrainian Max Levchin its CTO.

Backed by Nokia, Confinity is making a way to 'beam' money between PalmPilots by infrared.
Need to skip A LOT here. But jump forward a bit and both X and Confinity ACCIDENTALLY create the same killer product as an offshoot of their main one:

The ability to exchange money via email.

Confinity pivot to this exclusively. X don't. Musk's goal is financial superstore.
The strength and focus that HAS gone on X's email payment processor has mostly been due to David Sacks, one of Elon's hires who he trusts and who spotted the huge potential.

He keeps Musk grounded with eyes on this while Elon is ALSO pushing into riskier financial service stuff
But Harris (X CEO) sees Confinity and X are BOTH in a death spiral. They are BLEEDING cash fighting. He speaks to Thiel. Thiel suggests a merger.

Musk fights this. But ahead of another funding round, Harris threatens to quit, spooking investors

Elon: "He held a gun to my head."
The firms merge. Harris and Thiel insist the new firm (X) focus on email payments, ideally on Confinity's PayPal platform.

Elon INSISTS financial superstore is the future. When Thiel and Harris fall out over strategy, Elon persuades Thiel to help coup Harris out. Elon is now CEO
Thiel, and Levchin, are initially fine with this. Musk has promised to focus on email payments, and to improve PayPal first. Financial superstore a "future thing".

But over months Levchin realises that Elon has become obsessed with porting PayPal ENTIRELY to Microsoft not Linux.
Months of dev time, with X burning $12m a month, is lost to Musk's obsession with PayPal V2. A complete rework on Microsoft. It's BEYOND a bad plan. Microsoft servers and MSSQL CANNOT scale enough at the time. But Elon decrees it. He even decrees a launch with no rollback option.
Elon also orders the killing off the PayPal brand. He orders routed to . Logos phased out. Decrees it should now be referred to as X-PayPal and described as part of the X family of financial services. He's not letting the dream
This obsession with X as a brand causes enormous concern as it CONTINUALLY goes down terribly with consumers.

Vivien Go on focus group testing:

"Again and again, the theme of 'Oh God, I wouldn't trust this website. It's an adult website' and 'I just wouldn't trust that"
Meanwhile, Thiel finds out via X's financial wizard, Roelof Botha, that the financial superstore side stuff is WORSE than Musk has let on. X is offering credit on almost no identity checks.

Combined with the V2 fiasco, Thiel and others realise X is on the verge of failing.
Thiel and some other key figures approach Elon and BEG him to abandon Paypal V2, and his strategy of trying to become a one-stop global financial service. Thiel points out they only have $65m left in the bank.

Musk refuses.

They have to go for "the grand prize" he insists.
Thiel, Levchin, Botha and Sacks now cross the rubicon. They decide to coup Elon. They quietly gather the signatures of a lot of the Confinity loyalists on a mass-quit threat.

On 19th Sep 2000, as Elon is taking off for Europe on his honeymoon, they make their move.
Thiel and Levkin are board members. The other four are Musk, Malloy (repping another major investor), Moritz and Hurd (Chair).

As Elon is in the air, Thiel asks Hurd to summon an emergency board meeting by phone.
Over the phone, Thiel and Levkin reveal the PayPal V2 and financial issues to Malloy, Moritz and Hurd, who had no idea about them. They're sympathetic to Elon as founder and visionary, but horrified this was all done without board approval and at the mass-resignation letter.
With Elon out of the country, he can't work his in person magic. He insists over the phone that the financial superstore is the big win. All this is in service of that.

It doesn't work. Malloy, Moritz and Hurd side with Thiel and Levkin. Elon is out as CEO before he can fly back
Musk is devastated and furious.

"Sneaky Backstabbing Bastards." He describes them as, but to his credit recognises he can't fight it and presents a public image it was a mutual decision.

Thiel becomes interim (and later permanent) CEO, orders the end of V2 and a focus on PayPal
Hopefully you can see the roots of this whole X pivot thing now. Musk has decided that the way to save Twitter and regain his genius status is to fall back on his unrealised vision from 1999.

Build "the world's financial nexus" as he described it then.
I think it's a TERRIBLE idea. The world's moved on. He's doing the tech equivalent of drunk-DMing his highschool girlfriend to tell her she's still hot.

But you can see the origins now. He thinks this is the genius idea that got away. And that this time nobody can coup him.
Anyway, hope that's useful context. None of what's going on is surprising if you lived through it or have studied it. You just have to get past the hagiography Silicon Valley creates around it's "great men"

If this was useful you can buy me a coffee here:

Probably the most readable (and least hagiographic) account of all the above I've read over the years is "The Founders" by Jimmy Soni.

Available as both a book and audiobook, and if this kind of stuff fascinates you it's well worth your time.
@jimmyasoni If you're ever in London just ping me on here/bsky/mastodon, because absolutely owe you a pint and i'm sure we'd have a fun mutual nerd-out about dot com era history!
@helvetius66 (For the record I was using it heavily myself from about 2001 - 2004 and I reckon it would have struggled even in the 2002 edition)
@helvetius66 (in seriousness pinged you a DM)
@Capitalist_WS I'm surprised someone called The Capitalist doesn't have a firmer grasp on how some people are happy to exchange money for services.

Every were kind enough to commission a long-read piece on this from me. If you want the full account of events, you can find it here:…
@mbhamla You may think his plan is brilliant. I think it's very silly. Ultimately, time will tell on that.

But the future doesn't change the past, and understanding his previous relationship with X is important to understanding what's motivating him now.
@duncanwilcox Could he have done it first time round? Maybe. More of the required pillars were there.

But those pillars aren't there in 2023.
@duncanwilcox In a way, it's EXACTLY what he tried to do with PayPal (The product), which was force its userbase to instead do things the way he wanted.

That time Thiel and co. removed him, rather than see the product ruined. This time, there was no one to stop him.
@duncanwilcox Which is kind of the silly thing, really.

If he had LEGITIMATELY addressed a whole bunch of the concerns expressed about Twitter he'd have earned a bunch of trust he could have invested into an everything app.

But he didn't. He polarised himself and the platform.

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I'll NEVER tire of the fact that Uber were so desperate to avoid giving drivers sick days in the UK that they accidentally convinced a tribunal they were a cab firm.

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