There’s a phenomenon where more than one person at the same time thinks of a big idea. It’s a thing called “multiple discovery” or “simultaneous invention.” It refers to a hypothesis. Independent minds of different individuals or groups share the same big idea. They come up with it at around the same time. This concept challenges the “heroic theory” of invention. Which attributes discoveries to singular, exceptional individuals.

Simultaneous invention has been common throughout history. Isaac Newton and Gottfried Wilhelm Leibniz came up with the formulation of calculus. Independent of each other, at around the same time. Carl Wilhelm Scheele and Joseph Priestley discovered oxygen. Independent of each other, at around the same time. Charles Darwin and Alfred Russel Wallace came up with the theory of evolution. One of them wasn’t more fit than the other. They did this independent of each other at around the same time.

Do you want more examples? A scientist named Elisha Gray had no exposure to the work of Alexander Graham Bell. Gray filed a patent for the telephone on the same day as Bell, on February 14, 1876. Simultaneous invention shows that new ideas don’t occur in a vacuum. The steamboat had five inventors from 1802 to 1807. The microscope had three inventors around 1610.

Here’s a big idea:

What if a user could send money to an email address? That would incentivize the recipient who owns that email address to sign up. The recipient would receive their payment. Sound familiar?

Last week on Methods of Prosperity.

Peter Thiel is an entrepreneur and investor known for co-founding PayPal. He’s the first outside investor in Facebook. He has a contrarian way of thinking influenced by philosopher René Girard. Girard’s concept of “mimetic desire” is that conflict arises out of desires. Humans tend to imitate desires of others. Thiel applied this understanding to realize that many people’s desires are not their own. They’re borrowed from others through cultural conditioning. He recognizes the power of memes in shaping desires. Thiel studied philosophy at Stanford. Ayn Rand’s Objectivism philosophy of rational self-interest also influenced him. He started his career as a lawyer and derivatives trader. Peter Thiel is co-founder of Cofinity, which later became PayPal. This positioned him as leader of group known as the “PayPal Mafia”. Many of whom went on to successful tech ventures.

The following is Methods of Prosperity newsletter number 29. It was originally deployed January 4, 2024. As of September 12, 2024, original subscribers have received up to issue number 65: Phil Knight (continued).

Part 29.

Elon Musk

of the PayPal Mafia

TL;DR

Elon Musk grew up in South Africa and later moved to Canada and the United States to study and work. He founded Zip2 with his brother Kimbal in 1995, which was later sold to Compaq for over $300 million. With the money from this sale, Musk founded X.com which later merged with Confinity to form PayPal. PayPal was later acquired by eBay for $1.5 billion in 2002. Musk noticed an arbitrage opportunity in developing country debt. The bank he worked for rejected his proposal. He went on to formalize his plans to build an online bank, incorporating X.com in 1999. His co-founders later wanted to take over and the company split. Undaunted, Musk attracted new funding and restructured to form the successful online bank.

Key lessons:

• Recognize arbitrage opportunities.

• Figure out which questions to ask.

• Beware of the gambler’s fallacy.

• Never bet against Elon Musk.

“I would never bet against Elon. I was a close partner of his in the late 90’s to early 2000’s, and after PayPal, Elon set off to start these two companies; an electric car company and space company, SpaceX and Tesla. The conventional wisdom on Elon was that these were completely harebrained projects. If one of them had succeeded, then you have to question it. When both of them succeed, it’s just that he knows something that other people don’t. That can’t be a matter of luck.” – Peter Thiel

In 2007, the movie Iron Man was in production. Robert Downey Jr. plays Tony Stark. Stark is a billionaire engineer who creates a unique, weaponized suit of armor. According to Downey, both Elon Musk and Tony Stark were the same type of men. Both Musk and Stark “had seized an idea to live by and dedicate themselves to, and were not going to waste a moment.”

The director of the Marvel super hero movie is Jon Favreau. He placed a Tesla Roadster in Tony Stark’s workshop. This was at the request of Robert Downey Jr. It symbolized how cool and connected Tony Stark is. He could get a Roadster before they went on sale to the public. The placement of the Tesla Roadster signified something deeper. It was the nearest object to Stark’s desk. It served as a signifier connecting the character of Tony Stark and Elon Musk.

After the audience watched the movie, Elon Musk stopped being only known as that PayPal guy. He started being the rich, eccentric guy behind SpaceX and Tesla. The sale of Zip2 gave Elon Musk a new level of confidence. This was the first startup he founded with his brother in 1995. It was an online business directory. Zip2 provided a searchable platform for local businesses. It was like an internet version of the yellow pages telephone directory. But with maps included. The company was later sold for over $300 million in 1999 to Compaq Computer. Elon Musk earned $22 million for his 7% share of Zip2. Locate a business quick. That’s what it meant – “zip to”. The world wide web was new technology accessible by the public. For that era, there was nothing else like it. That is, besides directory sites like Yahoo and the first browser, Netscape.

Zip2 wasn’t the first product made by Elon Musk. He created a video game named Blaststar when he was 12 years old, which he received $500 for. The game involved controlling a spaceship. The player dodges “deadly hydrogen bombs” and “status beam machines.” No one knows what status beam machines are. A South African magazine, PC and Office Technology, published the source code in 1985.

“Maybe I read too many comics as a kid,” Musk said, “In the comics, it always looks like they’re trying to save the world. It seemed like one should try to make the world a better place, because the inverse makes no sense.”

The most influential book for him was The Hitchhiker's Guide to the Galaxy by Douglas Adams. Written as a funny science fiction novel, it’s actually a book of philosophy. 

“He points out that one of the really tough things is figuring out what questions to ask,” Musk said, “Once you figure out the question, then the answer is relatively easy. I came to the conclusion that really we should aspire to increase the scale and scope of human consciousness, in order to better understand what questions to ask.”

Therefore, his logical mission statement is:

“The only thing that makes sense to do is strive for greater collective enlightenment.”

– Elon Musk

Elon Musk was born on June 28, 1971, to a Canadian mother, Maye Haldeman, and a South African father, Errol Musk. He grew up in an Apartheid suburb of Pretoria, South Africa. He has a brother named Kimbal, whom he started Zip2 with. Tosca is his sister’s name. After his parents’ divorce in 1980, he spent a few years in Pretoria with his mother. Elon and Kimbal moved in with their father. Errol Musk bought Elon his first computer, a Commodore VIC-20. It was an 8-bit home computer released by Commodore Business Machines in 1980. Elon stayed up for 3 days without sleep to learn the programming language. He was among the few students selected for an experimental computer program. Prep school kids learned COBOL (Common Business Oriented Language) and Pascal programming languages.

At seventeen years of age, he left South Africa for Canada. He secured a Canadian passport due to his mother’s origins as a Canadian citizen. He worked odd jobs and spent his eighteenth birthday with relatives in Canada. His brother, sister and mother joined him. Elon met his first wife, Justine Wilson, at Queen’s University in Ontario, Canada. She was an aspiring writer and he was an upper-class student. Elon transferred from Queen’s University to the University of Pennsylvania in 1992. He completed a Bachelor of Arts degree in physics and a Bachelor of Science degree in economics. Elon graduated from Penn in 1997.

Elon and Justine married in January 2000. During this time, Elon considered the three most important things. Renewable energy, the internet, and space. These would undergo significant change in the years to come. He vowed to pursue these projects as the market in which he could make the biggest positive impact.

While studying physics at Queen’s University, he was an intern at the bank of Nova Scotia. This was in the early 1990s. He left with the idea that bankers are rich and dumb. This was a massive opportunity. His boss asked him to take a look at the company’s third world debt portfolio. The bank had billions of dollars worth of “less developed country debt”. Countries throughout South America had defaulted years prior. This forced the bank to write down some of its debt value.

The U.S. had tried to help reduce the debt burden of developing countries through Brady Bonds. These are dollar-denominated sovereign debt securities issued by developing countries. They’re backed by U.S. Treasury bonds. Latin American nations defaulted on their debts in the late 1980s. This caused a debt crisis. To help restructure their debt, the US Treasury created Brady Bonds. The name comes from U.S. Treasury Secretary Nicholas Brady. Refer to Methods of Prosperity number 25 (Ray Dalio).

Musk noticed an arbitrage play. 

“I calculated the backstop value, and it was something like fifty cents on the dollar. Actual debt was trading at 25 cents. This was like the biggest opportunity ever, and nobody seemed to realize it.”

– Elon Musk, quoted from Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future 

Upon discovering this opportunity, he pitched it to his boss at the bank. Elon described the opportunity as “billions of dollars for free” from the U.S. government. The bank’s CEO rejected his proposal. Why? The bank had been “burned by Brazilian and Argentinian debt before and didn’t want to mess with it again.” The lesson here is that past performance has no effect on future opportunities. This is a logical fallacy called the “gambler’s fallacy.” It’s the incorrect belief that the occurrence of a random event is more or less likely based on previous events. It’s a false idea that past events can influence the probability of future events. When in fact, each event is independent and the probability remains the same.

“All the bankers did was copy what everyone else did. If everyone else ran off a bloody cliff, they’d run right off a cliff with them. If there was a giant pile of gold sitting in the middle of the room and nobody was picking it up, they wouldn’t pick it up either.”

– Elon Musk

In the years that followed, Elon considered starting an internet bank. He’s convinced that finance needed an upgrade. “Money is low bandwidth,” he said during a speech at Stanford University in 2003.

“You don’t need some sort of big infrastructure improvement to do things with it. It’s really just an entry in a database.”

– Elon Musk

He wanted to build a full-service bank online. Before exiting Zip2, he reached out to other developers to find out who might join him in another venture. In January 1999, Musk began to formalize his banking plan. Zip2 made a deal with Compaq the next month. By March of 1999, Elon Musk incorporated X.com. Partnering with Harris Fricker, Christopher Payne, and Ed Ho, Elon Musk held the biggest share of X.com. The idea was that the banking industry had fallen behind the times, and was ripe for disruption. The problem was that regulatory barriers were unsurmountable.

Another major problem was Fricker. Only five months after forming their company, Fricker wanted to take over as CEO. Payne and Ho took sides with Fricker. They all abandoned Elon. Undaunted, Elon attracted Sequoia Capital for funding. He recruited a new team of engineers including Scott Anderson. They formed a partnership with Barclay’s. X secured the required banking licenses and FDIC insurance. They secured mutual funds to offer their new customers. On the night before Thanksgiving of 1999, X.com went live. Musk did away with customer fees. Instead, X offered a $20 cash card for signing up, and a $10 card for every new customer they referred. This was the big idea that Elon Musk came up with: a peer-to-peer payment system. It allowed a user to send money to an email address. This gave the incentive to the recipient to sign up and receive their payment. 

Sound familiar?

To be continued…

I like you,

– Sean Allen Fenn

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.