Started From the Bottom, Now We’re Here: the PayPal Mafia

Do you know why Silicon Valley, home of the payment gateway software juggernaut PayPal, is named “Silicon Valley?”

It’s neither due to its relative close proximity to Hollywood, nor is it an ironic nod to the excess of technology in San Francisco.

Silicon Valley got its name from the titular material used to make silicon chips, responsible for powering semiconductors and microprocessors, i.e. computers and electronic devices. And while that reasoning may not sound particularly sexy, that doesn’t mean the Valley was without drama, scandal and burgeoning startup companies, even back in the late ‘60s.

In September 1957, a group of eight brilliant young men walked away from their cushy jobs at Shockley Semiconductor Laboratory. They had chafed under less-than-ideal management from their domineering, paranoid boss William Shockley. Just one year after Shockley had recruited them to work for him, they left en masse, risking all the security and benefits that came with working for a corporate organization.

They created their own company, named Fairchild Semiconductor Corp., and Shockley scornfully called them the “Traitorous Eight.” (Interestingly, Shockley himself had left Bell Labs, a research and development lab offshoot of AT&T, to “explore new market applications” for transistors and to “contribute to creating a new industry.” Sounds pretty disruptive himself.)

A Disruptive Group

Disruption is a crucial component of Silicon Valley startups and endeavors. The Traitorous Eight left an indelible legacy on the Silicon Valley landscape. That legacy is enterprising, enthusiastic and ingenious, and clashes with authority and the status quo. You don’t have to look any further than the PayPal Mafia to see the modern-day variation of the Traitorous Eight.

There have been countless editorials, feature pieces and blog posts about the PayPal Mafia — made up of such auspicious humans like Peter Thiel, David Sacks and Max Levchin — so I won’t spend too much time discussing who and what they are. In basic terms, it’s the moniker taken up by the group of men who founded PayPal.  

Thiel and Levchin hired their similarly workaholic friends to help turn PayPal into an actual company that would take on established industries like finance, tax and commercial banking. By hiring friends, the two notably and purposefully turned their backs to anyone who was “fratty,” a jock or female.

Disruption is a crucial component of Silicon Valley startups and endeavors. The Traitorous Eight left an indelible legacy on the Silicon Valley landscape.

The Midas Touch

The PayPal Mafia was both lucky and made up of incredibly determined brainiacs with unrelenting resolve. According to Techrepublic, while PayPal luckily survived the dot-com crash, the members of the PayPal Mafia can attribute their success “to the fact that they didn’t give up on consumer technology and they didn’t give up on Silicon Valley.”  

Just look at the companies whose lineage you can trace back to PayPal mafiosos:

The scattered group remains, for the most part, in Silicon Valley, headlining or investing in companies and mentoring innovators and entrepreneurs. Everything that the alumni of the PayPal Mafia touches seems to turn into the tech equivalent of gold.

According to Fortune Magazine, from 2002 until 2007, the PayPal Mafia had been “furiously building things — investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars and of course a slew of internet companies.”

That PayPal survived the dot-com bubble meant they had the capital to fund other bright minds who wanted to disrupt industries the same way the founders of PayPal had. Today, the members of the PayPal Mafia continue to work with each other, conferring about new business opportunities or filling in members of the board.

Final Thoughts

There’s a lot to unpack when discussing the PayPal Mafia — including how its members are made up entirely of white, middle-aged men who had initially sought out those who were exactly like them. (They’re the literal embodiment of “Revenge of the Nerds.”)

Additionally, just look at how the public has received the continuing golden touch of the PayPal Mafia. It’s the exact opposite of the reaction that the Traitorous Eight received after they left Shockley Semiconductor Laboratory.

While both “PayPal Mafia” and “Traitorous Eight” sound contentious, “Mafia” is arguably a much more desirable moniker. “Mafia” is also a term loaded with power and revered status. Traitors … not so much. If you’re a traitor, then you’re on the wrong side of history. You have committed a wrong and you’re being called out for that; suitably, the eight engineers who were branded as the Traitorous Eight weren’t particularly fond of that label. This is a marked difference from the enthusiasm with which the PayPal founders embraced their Mafia epithet.

However, looking at the sheer breadth of their accomplishments is astounding. These men are an incredibly formidable, experimental lot; they’ve taken lots of chances on endeavors that other industry players would not have had the guts or ability to. Members of the Traitorous Eight may have set up the model to which succeeding Silicon Valley entrepreneurs aligned themselves, but the members of the PayPal Mafia are the ones who shaped the Valley into the concentrated hub of tech startups it is today.