How USA enabled PayPal : Enabling Excellence
Author : Sanjay Bhargava
Source : From LinkedIn Archives
Date first published : March 20 , 2015
Many people confuse enabling and attracting world class companies with ease of doing business. There is no doubt that ease of doing business is important but the anecdote below may explain how a country/state can truly enable world class companies.
In December 1999 , one week after X.com ( the company that later acquired Confinity and then changed its name to PayPal ) launched it got a call from the Federal Reserve that Vice Chairman Roger Ferguson wanted to meet the CEO , Elon Musk. At that time Elon was not well known and x.com was a no name company. I went for this meeting with Elon as I was the payment expert at x.com. We were worried that the Fed may want to shut us down. Roger told us that a staffer had identified x.com as an interesting company and he had used x.com so since he had just ten minutes there was no need to explain what x.comdid. He wanted to know what our plans were. When we told him we wanted to disrupt payments he was delighted and wished us good luck saying that the Fed had wanted banks to make payments cheaper and easier but banks said it could not be done. So while all this was off the record we should remember that we had a friend in Washington.
Later banks and the card companies went to regulators asking them to regulate PayPal but the regulators let PayPal grow . Once it became big they asked it to get licensed in all the 48+ states as a money transmitter. Had regulators insisted that PayPal must get licensed first and till it got licensed it could not operate it is quite likely that the PayPal entrepreneurs would have pivoted and done something else. PayPal would not have been born.
This little anecdote shows how USA actually allowed dot companies like PayPal to flourish because they were strategically important to USA. Can you imagine the #2 guy in a central bank visiting and encouraging a small start up that nobody has heard of. Can you imagine the central bank actually having staffers who were searching for interesting companies and then the #2 guy actually opening and account and using the service.
It is no accident that USA dominates innovation.