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Something like a floppy disk design, you d give it 6 months lead time, normally, to write down all the sheets and documents of what you re going to do and get them approved by managers It s a horribly long cycle This was 2 weeks away and Mike Markkula said yes So that was my motivation I always had these little fictitious motivations that motivated me and got me to do such great work So I sat down and designed the floppy disk, and Randy Wigginton (he was the guy just out of high school) and I came in every single day including Christmas and New Years for 2 weeks I came in every single day leading up to, I think it was January 3 or 5, when we went off to Las Vegas I almost had this floppy disk done.

I got it to where it was writing data on a track, reading the data on a track Then I got it to where it was reading the data in the right byte positions Then I got it to work with shifting tracks, and we wanted a simple program where we would say run Checkbook or run Color Math, and it would run the programs that were stored on the floppy disk So we went off to Las Vegas, and Randy and I worked all night and we got it done to where it was working At the very end, it was 6:00 am and I said, We have to back up this floppy disk We had one good disk that we prepared with the data hand-massaged to get it just right So I stuck it in the floppy and wrote a little program, and I typed in some.

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4 The Price of Success 111 Unit Price $950 $1,000 Demand 1,000 500 Total Revenue $950,000 $500,000

There are tools to just say, Give me your social security number, give me your address and your mother s maiden name, and we send you a physical piece of paper and you sign it and send it back to us By the time that s all accomplished, 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 thankful for that happy year of boredom when I was expecting Windows and digging into stuff, figuring out what fraud was all about But one way or the other whatever caused that we were smart enough to realize that fraud was a huge issue very quickly, and then were successful enough combating it while the startup competitors of ours did not and got buried very quickly I remember all these companies announcing that they were going out of business and they expected PayPal to go out of business soon too, because the fraud numbers were so staggering that they could not see anyone handling this sort of thing There was one company I think it was eMoneyMail that shut down the company at a conference basically saying that the Internet is not a safe place to conduct transactions They had 25 percent fraud.

So for every $400 changing hands in the system, $100 was stolen And it was all coming out of their pocket They said, We lost a ton of money, and they just quit Then, people like Citibank and other large financial institutions that also competed with us that understood the fraud thing very well they knew from many years of practice that this was going to become a big problem didn t really approach it with the same happy abandon that we did We started with this, Fraud is going to kill us What can we do to save ourselves They started from, We have no fraud How can we build this and not let any more fraud in Which is the wrong position to start because you are limiting your users, and new users learning about a new system really don t want to be restricted..

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