The Secret Hiring Practice That Helped Max Levchin Build PayPal

Way before PayPal became a mafia, it was a small startup. Cofounder Max Levchin on how he picked his people.

It seems clear that Max Levchin knows the unpredictable value of connections: As we noted in our profile of Levchin for our Most Creative People issue, the PayPal cofounder is constantly harvesting ideas from random people. In a recent talk, Levchin detailed how this network thinking was a part of how he and Peter Thiel built PayPal.

"Peter sat me down and he made me write down every smart person I knew in college personally," he told First Round Capital. "Turned out to be a list of about 30 people and we ended up hiring about 24 of those."

Why hire the people you know?

For Levchin, while resumes (unless they're thoughtless) and interviews (unless they're like dates) are useful, you know a person best if you've spent years with them.

This is is why PayPal hired via networks: It was a matter of finding the best talent, vouched for via pre-existing relationships, as quickly and effectively as possible.

"We had this cascading effect where our team would be forced to write down everybody smart they knew that they were absolutely confident they could never hire," he says. "We then went after them like banshees and they would eventually crack."

But it could give you blindspots

Hiring who you know is part of why companies tend to replicate themselves. People hire people that confirm their sense of self—which reduces the time spent in the hiring process.

But it also reduces the demographic, cultural, and personality diversity within an org—a blind spot for innovating through cross-pollination or having a empathy for a range of potential users. But, as Levchin argues, a "diversity of thought" slows down the velocity necessary for an early-stage startup's survival.

Bottom Line: To nab the best talent, leverage the network you have and the one you're building. But know the possible downsides.

[Image: Flickr user Steve Snodgrass]

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