The Trick Max Levchin Used to Hire the Best Engineers at PayPal

Author: Bill Trenchard - Partner

Max Levchin has built, managed and invested in some of the strongest technical teams in Silicon Valley history. While his approach to hiring engineers can be unorthodox at times, his results are undeniable. In this First Round CEO Summit interview, Max shares insights on the unconventional hiring philosophies that PayPal and Slide implemented to attract and retain great people.


Doubt = No Doubt

The first few hires at a company are the most important decisions a founder will ever make. These hires will shape company culture and vision for years to come and can’t easily be undone. At PayPal, Levchin was religious about not making the wrong hire and believed strongly in a unanimous hiring process. If one person on the team didn’t like a candidate, they wouldn’t make the hire.

Levchin shared, “There are some legendary-ish tales of me not hiring people because they used the wrong word in an interview... I'm sure we had lots of false negatives, but we have very few false positives.”  It's better to err on the side of losing a superstar here or there than make a hire that’ll disrupt or ruin a company. A quote from the movie Ronin puts it perfectly, “Whenever this is any doubt, there is no doubt.”

There are some legendary-ish tales of me not hiring people because they used the wrong word in an interview.

The Trick to Hiring Great People

Levchin and the early team at PayPal limited the number of agonising hiring decisions by bringing in people they knew. The first 10 engineers at PayPal went to school with Levchin. The first five business hires came from Peter Thiel's network at Stanford. While resumes, rigorous interviews and LinkedIn profiles provide a good proxy, the most foolproof way to recruit a good person is to know, over years of interaction, that the person is great.

Early PayPal team - Levchin is in the back left.

It’s easy to think you can’t possibly know enough good people from your network to build out an entire team. While in some ways that’s true, Levchin’s experience is that almost everyone actually knows more good people than they believe they know. The challenge is that most founders rule out top talent because they think they’ll never be able to actually get them to join their team.

Levchin learned early on not to make this mistake. When PayPal was founded, he sat down and created a list of potential engineering hires. When he was done he had a single name written down. Levchin recounts demoralizing exercise, “Peter [Thiel] sat me down and he made me write down every smart person I knew in college personally. Turned out to be a list of about 30 people and we ended up hiring about 24 of those.”

You can’t rule potential hires out just because you don’t think you can win them. He went on to note, “We had this cascading effect where our team would be forced to write down everybody smart they knew that they were absolutely confident they could never hire. We then went after them like banshees and they would eventually crack."

Diversity of Thought Can Slow You Down 

At an early-stage startup, speed is your most valuable weapon. There are always bigger companies that have more engineers, more designers, more distribution and generally more resources. But with the requisite speed, you may be able to get there faster — it’s your competitive advantage. The question becomes: How can a startup move as fast as possible?

We all recognize that working solo is the most efficient way to operate. It minimizes the amount of time spent getting everyone on the same page, reduces communication costs to zero and there aren’t any disputes about product vision. After all, you only have yourself to contend with. However, since most products are sufficiently complex that forming a team is a foregone conclusion, one of the keys to generating speed is by holding on to the magic of the early days with small teams.

In this sense, diversity of thought in an early-stage team can be an inhibitor of speed. “If you have people that went to five different computer science schools and one group knows Java as their primary language and loves it, and the other group loves PHP, and the third group was convinced that PHP is the work of the devil and Python is beautiful, you're just going to have debates.”

The moment a software team wastes a day debating which version of Python to use, it has lost it’s nimble edge. That’s not to say that the version of Python used isn’t important. It’s just that for an early-stage startup, the right tool in the absolute sense is less important than the right tool for the people in the room — it is always the tool people know how to use in that very moment.

Diversity of thought is most valuable at later stages of a company's life. “As you get into the uncharted territory where you don't actually have any intellectual background you need perspectives from people that are very different from you. At that point, it's actually quite valuable to have people that are diverse.” Levchin shares. It sounds obvious, but maintaining this balance can be difficult.

Make Your Company Different

Levchin realized the best engineers wanted to be challenged both in their jobs and in the interview process. “We cultivated a very public culture of being incredibly hard to get in. Even though it was actually very hard to get good people to even interview, we made a point of broadcasting that it's incredibly hard to even so much as get into the door at PayPal. You have to be IQ of 190 to begin with, and then you have to be an amazing coder, and then five other requirements. The really, really smart people looked at it and said, 'That's a challenge. I'm going to go interview there just to prove to these suckers that I'm better.' Of course, by end of the conversation, I'm like, 'Maybe you want to come get a job here because you're pretty amazing.'" 

Levchin’s Lessons Learned the Hard Way

Throughout our conversation, Levchin peppered in some of the biggest blunders throughout his career. The lessons he learned can be summed up here:

  • Ethics and trust are not percentage-based games. A person cannot be 99% there. Trustworthiness is either there or it’s not. 
  • Everyone remembers the good times.  It’s the bad times, the time we screw up, that are tough to remember. ”One of the greatest lessons I learned is write down the things that hurts the most as soon as it happens.” Otherwise, in a year, you’ll forget and make the same mistakes again.
  • ”Fuck up #1 at Slide: I did not spend a lot of time defining the culture of the company early on.” When a startup begins with an excessively lax culture, it is difficult to become strict later on. It’s always easier to relax it later on than try to retroactively enforce a stringent company culture.

 

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