Peter Thiel discusses why good teams can withstand failure. PayPal's initial product was transferring money via infrared on Palm Pilots. In 1999, it was voted one of the ten worst business ideas of the year. That year, there were many bad ideas in the tech circle.

The product failed, but the team remained. They pivoted to something else. Thiel states that people have a lot of room to correct mistakes, pivot, and change direction. It's not just one chance in a lifetime. As long as you keep trying, there will be many opportunities. Being stuck in failure and believing there is no next time is what truly leads to no further chances.

This quote comes from a 2012 CBS interview, which has been repeatedly cited in startup archives. The pivot was not initially proposed by the two co-founders. David Sacks, who had just graduated from Stanford Law School and spent a year at McKinsey, persuaded a reluctant Max Levchin to abandon the infrared transfer idea. His alternative was to use email to transfer money.

The infrared solution was deemed unmarketable by early colleagues: a dining table couldn't accommodate a Palm Pilot, making it unscalable. Email moved the same transfer from face-to-face devices to account-to-account transactions. In 2002, eBay acquired PayPal for about $1.5 billion. The archives attribute the difference to multiple attempts rather than the first product hitting the mark.

Thiel did not say that failure itself has value. He emphasized the team's willingness to adapt. After the infrared device was voted as the worst idea, the company did not cling to the hardware, and the transfer relationships remained with the same group of people.

This was a product replacement, not a team replacement. The buyers were eBay sellers and buyers who needed remote transfers, while the sellers were the original team that abandoned the infrared hardware. The event was driven by the product failure in 1999. Money flowed from the transfer device to email payments, and then transformed into $1.5 billion during the acquisition. The same team that changed the transfer method benefited, while the original plan that viewed the Palm Pilot's market share as a ceiling suffered.

Source: Public Information