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“He’s got $13 million in.” That’s what employees of then-millionaire Elon Musk would tell recruits of X.com, the virtual bank he founded in 1999 that eventually became PayPal. Earlier that year, the sale of Mr. Musk’s first startup, Zip2, netted him roughly $21 million, much of which he invested in an effort to disrupt banking, investing and payment systems.
Back then, financial transactions looked very different from today. As Jimmy Soni writes in “The Founders,” his history of PayPal, “In the late 1990s, only 10% of all online commerce was conducted digitally—the vast majority of transactions still ended with a buyer sending a check by mail.” Think about that. At a time when the U.S. Postal Service was still a major factor in the buying and selling of goods and services, Mr. Musk and his eventual partners, Peter Thiel and Max Levchin—X.com and their firm, Confinity, merged in March 2000—foresaw today’s increasingly cashless world.
Such thinking is a key to understanding Mr. Musk’s immense wealth. He bet much of his Zip2 gains on a financial future that confused most observers or was roundly dismissed. Yet PayPal’s market capitalization is about $106 billion—a powerful indicator that few perceived this huge, untapped market. As an early X.com employee told Mr. Soni, the big credit-card companies “should have killed us when they could have.” Or the banks. Or any well-capitalized enterprise eager to pursue a lucrative business line.
But none did. What Messrs, Musk, Thiel and Levchin envisioned was seen by others as delusional. This would eventually help make them their millions, but at the outset it made financing elusive. As Mr. Musk told Mr. Soni, PayPal “was a hard company to keep alive.” If PayPal had been perceived as credible, the financing to keep it afloat would have been abundant—and so would the competition.
In 2002, PayPal went public and swiftly was bought by eBay in a $1.4 billion stock deal. Mr. Musk’s net worth skyrocketed, but only after he risked much of his wealth on a business that few thought had a chance of succeeding.
Mr. Musk again put most of his gains to work, with investments in Solar City, SpaceX and Tesla. At present, Solar City’s market cap is in the $2 billion range, SpaceX is estimated to be worth $100 billion, and Tesla is valued by investors at almost $1 trillion—but they’re all speculative concepts, like PayPal. The companies’ market capitalizations bear this out. While debate rages about markets’ efficiency or lack thereof, no one disputes that $20 lying on the ground won’t last long. Multibillion-dollar market-share endeavors disappear even faster, unless they’re unknown, ridiculed as unnecessary, or seen as impossible.
This is worth remembering when considering Mr. Musk’s purchase of Twitter. His much-publicized bid stirred little competition, perhaps because some feared getting into a bidding war with someone of his net worth. But a more realistic scenario is that Mr. Musk sees possibilities for Twitter that the rest of us don’t—possibilities so distant from the Twitter we know that Mr. Musk is taking the underperforming social-media company private—at least for a few years—to put his contrarian stamp on it.
Mr. Musk sits atop the wealth pyramid not because he’s a copycat, or because he has prudently invested in index funds, but because with each venture he has tried to usher a widely dismissed or unseen future into the present. Mr. Musk is incredibly rich because he continues to pursue the impossible.
Mr. Tamny is a vice president at FreedomWorks, editor of RealClearMarkets and author of “When Politicians Panicked.”