False economy What’s in it for me? Understand what makes the

Losing the war over Paypal left Musk with 
millions.
Musk, with his newfound money, joined the big-
boys’ club. He used his earnings from Compaq 
to buy a McLaren sports car, a condo and a 
small prop plane. But the rest of his money went 
straight into his next business: X.com.
In those days, people were reluctant to buy 
books online, let alone share bank account 
details. But by partnering with Barclays, Musk 
succeeded in establishing X.com as one of the 
world’s first online banks, backed up with FDIC 
insurance and three mutual funds for investors 
to choose from.
Things were going well, but, soon enough, some 
major competition arrived. Max Levchin and 
Peter Thiel had been working on their own 
payment system at Confinity, before creating the 
first version of PayPal.
After a brief battle, the companies decided, in 
March of 2000, to join forces: Confinity 
possessed the sexier product (PayPal), and 

---

X.com had the money and superior banking 
products, so the merge made sense.
But Musk was soon to be pushed aside in his 
own company once again. Two months after the 
merge, Thiel resigned, Levchin threatened to do 
the same, and Musk found himself in charge of a 
divided company. Though most of his coworkers 
favored PayPal, Musk persisted in promoting the 
X.com brand. Meanwhile, computer systems 
failed regularly and the website crashed weekly.
Then followed one of the meanest coups in 
Silicon Valley’s history: as Musk and his wife 
Justine boarded a plane for their overdue 
honeymoon, the executives went to the 
company board and asked Thiel to come back 
as CEO and to demote Musk. The coup 
succeeded, and Musk was left as an advisor.
The company changed its name from X.com to 
PayPal and was finally sold to eBay, in July, 
2002, for $1.5 billion. Musk netted $250 million, 
enough to make his wildest dreams possible.