you are a very safe user. But by then you are also not a user, because for
every step you have to take, the dropoff rate is probably 30 percent. If you take
ten steps, and each time you lose one-third of the users, you’ll have no users by
the time you’re done with the fourth step.
The point is, the startups didn’t realize there was this risk. We didn’t really
realize there was this risk component either when we started. But we were just
lucky enough . . . Maybe I should be...

Livingston: Did you patent this technique?
Levchin: I didn’t really want to patent it because, for one, I don’t like software
patents, and, two, if you patent it, you make it public. Even if you don’t know
someone’s infringing, they will still be getting the benefit. Instead, we just
chose to keep it a trade secret and not show it to anyone.
After a while, IGOR became well known to the company, like all the other
tools that we had built early on. We had patented some of it, and some of it we...

then eventually became the manager of the whole center. When the fraud
group operations moved to Omaha, that made it a lot cheaper for us to run. She
was working on the human management part—all the investigators—and I
would be supplying her with software. Between those things, we got fraud
pretty well under control in about a year.
Livingston: So the fraud solution was a combination of humans and software?
Levchin: Depending on who you ask. I think Sarah feels that it’s probably more
humans and the coders think it’s more technology. It’s...

It’s based on the assumption of all sorts of convoluted guesses on our part, but
the guesses turn out to be mostly right.
We actually had these human investigators, like 20 to 30 human investigators,
that would try to unravel particularly large fraud cases and see if we could
recover some money or send the Feds after somebody. We didn’t really have
much success sending people after criminals. All they’d try to do is see where
the money went and see if we could recover some of it before it left the system.
...

prohibitive.
So I started freaking out over it, and this intern and I wrote all sorts of packages—
very statistical stuff—to analyze “How did it happen; how do we lose
money?” By the end of the summer, we thought, “The world is going to end any
minute now.” It was obvious that we were really losing tons of money. By midsummer,
it was already on a $10 million range per month and just very scary.
Livingston: Did the rest of the company know you were right?
Levchin: Through the summer, I think various...