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 people were slowly coming to
understand that this thing was really serious. It was pretty obvious at a certain
point. I didn’t have to really convince anyone. In the beginning some people
Max Levchin 7
said, “Yes, it’s a lot of money, but we’re really growing, too. As an absolute
amount, $5 million is a lot of losses, but, if you are processing $300 million,
whatever.”
There was actually a bit of an altercation at the very top management level,
which caused the CEO to leave. Peter came back as the CEO. The first decision
that he and I took was that my new job—in addition to technology—was
going to be this fraud thing, because I already spent so much time looking at it.
This guy Bob, the intern, and I—I convinced him to drop out of Stanford for a
year and work with me more on it—for the next year, we just worked nonstop
on trying to understand and fix these problems.
Livingston: So the CEO left and Peter came back?
Levchin: The three of us are pretty good friends now. At the time, already I had
hated the guy’s guts for forcing me to do Windows, and then, in the end, I was
like, “You gotta go, man.” My whole argument to him was, “We can’t switch to
Windows now. This fraud thing is most important to the company. You can’t
allow any additional changes. It’s one of these things where you want to change
one big thing at a time, and the fraud is a pretty big thing. So introducing a new
platform or doing anything major—you just don’t want to do it right now.” That
was sort of the trigger for a fairly substantial conflict that resulted in him leaving
and Peter coming back and me taking over fraud.
Livingston: When was the first time that you said, “This is working”?
Levchin: Bob and I built this package called IGOR. We had all these different
things that were all named after various Russian names—and they had to be
four characters long and start with an I. It was sort of a random requirement
that I came up with. We had IGOR, INGA, IVAN—at least two more. So we
built this tool—actually we have a patent on it now—and it was very impressive.

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• prohibitive.