Peter Thiel and Reid Hoffman hit Shanghai to talk mafias, unicorns, and China

Timothy Coghlan is a Beijing-based retail industry expert and tech writer.

Earlier this week, the China Europe International Business School (CEIBS) in Shanghai hosted an entreprenerial “master class” with Reid Hoffman, LinkedIn co-founder, author, and venture capitalist, along with Peter Thiel, the VC, hedge fund manager and author of the recent best selling book Zero to One. It was billed as a PayPal Mafia China reunion and a chance to hear the duo talk on the topic of the secret of startup unicorns.

Hoffman and Thiel, who have been friends since 1986, were part of the core team that started the Paypal business in 1998 and then sold it to eBay in 2002. Along with other famous serial entrepreneurs including Elon Musk, Max Levchin, and Dave McClure, this group of people is now known in the technology and venture industries as the Paypal Mafia.

Giving individual speeches and then taking questions from CEIBS professor Paddy Miller and the audience, Hoffman and Thiel covered a variety of topics on entrepreneurship, startups, valuations, and where China fits into the global tech industry.

Below is a summary of what the duo said at the session interspersed with direct quotes.

What are the special characteristics of the Paypal Mafia, and other “mafias” like Google’s, Amazon’s?

Reid Hoffman: The “mafia” effect is more about networks, Hoffman started by saying, and networks have different characteristics. After being acquired by Paypal, the various people from the Paypal Mafia went their own ways and participated in the broader Silicon Valley to found various other companies including Tesla, Youtube, and Yammer that have created more monetary value than what was initially created by Paypal.

At Paypal they had to constantly confront death from factors like banking and the wrong business model, and they were always worried that competitors like Visa and MasterCard would shut it down. They had to fight tooth and nail for the business to survive and it wasn’t easy, so people in the Paypal Mafia gained the specific experience of dealing with these struggles and fighting for survival.

The people in Google or other companies may have a different experience and aren’t as paranoid for survival, Hoffman said, but maybe the intensity of their technology gives them a different useful characteristic.

Another unique aspect of the Paypal Mafia is how they stayed connected and maintained a network as an entrepreneur support group to talk to each other about business models, distribution, and how to get global reach. The crew also invested in each other’s companies and learnt from being involved with each other.

Peter Thiel: “Paypal was hard but possible and that’s the lesson we all learnt,” said Thiel by way of agreement with Hoffman’s assessment. Compared with Google, where although they had hidden challenges, overall it seemed easy for them to find success.