Elon Musk put so much of his fortune into X.com, he had a mere $4 million left in all the world.
This wasn't the 21st century X.com. This was 1999, the height of the dotcom boom. Musk had just sold his first startup, a city guide website called Zip2 — PC maker Compaq wanted it for its search engine. Musk made $22 million on the deal. He did not play it safe with his winnings. The 28-year-old South African immigrant splurged $18 million on building a rather less modest idea. X.com was to be an online hub for every kind of financial transaction in the world.
What did "X" have to do with finance? When people think X, Musk insisted, they think of treasure. They think "X marks the spot." Musk never wavered in this belief, not even when shown mounds of evidence that what most people really think of when they see "X.com" is...porn. His blind love led to a boardroom coup that overthrew him as CEO, and eventually ousted the X name — replaced by PayPal.
If you, like most of us, are still puzzling over Musk's blinkered decision to erase the name Twitter (and its multi-billion-dollar brand identity) by scrawling a big X over it, the foundational story of the PayPal mafia is where you start. There are surprising parallels between that era, now documented in multiple bestselling books, and this one. It's all there: the disdain for beloved brands; the impulsive decisions that alienated even allies; the grand "everything app"-style vision; and perhaps most tellingly, how investors would swoon every time Musk talked about it.
That last part may be what Musk is counting on now: a desperate bid to stoke curiosity, so that new investment will dig the company formerly known as Twitter out of its deepening financial hole. Or the name change may be the result of a quarter-century of stewing over the loss of X.com, which Musk bought back from PayPal for "sentimental" reasons in 2017. Either way, there are reasons to think the sting in this cautionary tale of hubris is about to strike a second time.
Muskian History X
To be fair to Musk, he was no dummy back then. The most recent bestseller to tell the story, Jimmy Soni's The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley, isn't shy about Musk's shortcomings (unlike Elon Musk, the 2017 biography that tends towards hagiography). But even The Founders paints a picture of Musk as a supremely hardworking 20-something whose fascination with finance allowed key insights in the messy process that created PayPal.
For example, Musk took an early lead in the online payments war between X.com and its rival, a startup called Confinity that worked out of the same Palo Alto office space.
Not only was Musk quicker to recognize the value of being able to pay by email (rather than by beaming it between Palm Pilots, the concept initially championed by Confinity co-founder Peter Thiel), but he paid X.com users $20 at sign up, while Thiel paid $10. Bleeding money from this competition, the companies were forced to merge in 2000 under the X.com name; Musk would be the largest shareholder of the combined company.
Musk had it all at this point. Especially after X.com's first, lesser-known boardroom coup. This was where Musk ousted his handpicked CEO, Intuit veteran Bill Harris, after Harris had done all the hard merger work. Musk took on the CEO role himself. But tellingly, he did not realize the most valuable thing in his possession was a name. The name for Confinity's payment app, the name that eBay sellers had come to love: PayPal.
The Founders goes into depth on the creation of the PayPal name, and it's worth lingering on the point. Thiel's team hired a professional naming company that considered hundreds of options, checked to see whether they'd violate trademarks, and came up with a shortlist that included MoMo, Cachet and PayPal. The team took a while to come around to the latter, but as soon as they realized it could be a verb — "just PayPal it to me" — they never looked back.
While X.com garnered 200,000 users shortly after its launch, not one of those users said "just X it to me." Worse, the pornographic-sounding name had attracted what one early female X.com employee called "so many terrible, horrible emails."
Musk didn't care. Not only was he enamored with how it sounded (and with the coolness of his personal [email protected] email address), he thought "PayPal" too limiting. "It would be like Apple calling itself the Mac," Musk told Jimmy Soni, the author of The Founders. X was going to change the financial world, so it had to come before everything.
The payment product at the merged company, he decreed, was to be called X-PayPal. According to Max Chafkin, author of the Peter Thiel biography The Contrarian, Musk "asked the marketing department to rework the PayPal logo to include an X," and was "beginning to phase out the PayPal name altogether."
Team Thiel fought hard against X. A series of focus groups revealed "again and again, the theme of 'oh god, I wouldn't trust this website, it's an adult website'," X.com marketing manager Vivien Go told Soni. "It's kind of hard to refute when people say over and over, almost in the same words, 'I just wouldn't trust that. That sounds really mysterious.'"
But Musk was adamant. He dealt with the trust problem, then as now, by ignoring it. Also then as now, he insisted on engineers rewriting the codebase his way, and seemed oblivious to the amount of cash the company was burning. It was all in service to a higher vision of X, which he described to eager investors as "the Amazon of financial services."
All of this led to the company's second boardroom coup, the one where Thiel called a meeting to oust his old frenemy while Musk was on a delayed honeymoon with his first wife, Justine. That was cold — but Musk's instinct was to cover it up, save face, and keep pushing X.com as the company name, even if he couldn't win on the PayPal product question.
Check out this CNN report from 2001 — in which Musk makes it sound like it was his decision to step back, and titles the company "X.com, now called PayPal."
Stop trying to make X happen
Why Musk still thinks he can make X happen, and do so by replacing another iconic brand a quarter-century later, remains a mystery. The world has moved on. The online payment networks of Apple Pay and Google Pay, not to mention Square, are all most consumers will ever need.
The "everything app" concept embodied by WeChat has not taken off outside China; starting in 2019, Mark Zuckerberg tried to replicate WeChat via Facebook Messenger, which has a far wider audience than Twitter ever had, and failed.
Musk has offered no details on the forthcoming X service, and no answers to the WeChat question. When challenged by Twitter employees in November about "fundamental differences" between Twitter and WeChat, according to the New York Times, Musk said the questioners didn't know what they were talking about and moved on.
But it seems more likely that Musk, surrounded by a bubble of yes-men like X.com veteran David Sacks, doesn't have as firm a grasp on gaps in the technology market as he thinks. Nor does he understand, once again, how much distrust he has sown among his user base.
But if Musk's bullheaded past is any guide, he will ride the X concept into the ground — or at least, until Twitter goes bankrupt, or he runs out of money to prop it up, or his fellow investors in the company get nervous enough to oust him.
If this latest twist in the X.com saga leaves the billionaire with just $4 million to his name once again, that irony will be too delicious for words. In that event, perhaps Musk's belief that we are all living in a simulation will deserve another look.
