Is it possible for a young college student who hasn’t even finished their degree to create something that profoundly impacts an entire industry? The likes of Zuckerberg, Gates, and Larry Page of Google have paved the way for the “college dropout turned billionaire” narrative that has been told and retold in startup lore.
This, however, isn’t that kind of story.
This is the story of a quiet intern, who, when thrust into a group of insanely clever, unapologetically demanding entrepreneurs and engineers at Paypal, chose to rise to the occasion rather than buckle under the pressure. This is also a story about senior leadership leaning in and recognizing the potential for someone to make an impact – regardless of their title, status, or years of experience.
A Bright Young Mind
Robert Frezza was a Stanford University engineering student who scored a summer internship at PayPal thanks to a favor called in by his father. During the Summer of 2000, PayPal was merely a shadow of the ubiquitous payment processing giant that we know today and a full two years away from its massively disruptive IPO. When Frezza joined the team, the company was still a scrappy young startup run by a tightly knit group of whip-smart Stanford grads.
In a world where engineers regularly coded into the wee hours of the morning, Frezza certainly wasn’t destined for a cushy summer gig fetching coffees. But, the young intern was eager to prove himself to the senior engineers he looked up to and quickly found solidarity with the PayPal team in fighting the financial fraud that affected thousands of users daily.
In an ode to Frezza published in 2006 on Techhouse, his father (Bill Frezza) notes that his son “relished his PayPal tenure and the challenge of proving himself to his talented, skeptical, and demanding colleagues.”
Frezza was not your average intern. A shining intellect can be expected coming from a Stanford engineering student, and Frezza certainly had the chops there. But I believe it was Frezza’s willingness to learn, hunger for knowledge, and a shared sense of purpose with the PayPal team that helped him stand out to his senior leadership.
Frezza’s efforts proved to be crucial to his team’s success in launching “the Gausebeck-Levchin test”, one of the first commercial implementations of a CAPTCHA challenge-response human test”. If you’ve ever filled in a CAPTCHA field or identified pictures to access something online, Frezza and the team at PayPal were responsible for the widespread adoption of this method of protecting sensitive information.
Enabling Creative Potential
Frezza was paired up with one of PayPal’s original co-founders, Max Levchin, who begrudgingly conducted his preliminary interview. At such a crucial time for the company, Levchin was less than pleased at the prospect of spending his summer chasing around a college student. In his riveting chronicle “Founders: The Story of Paypal and the Entrepreneurs who Shaped Silicon Valley”, author Jimmy Soni details how Levchin recalled that fateful meeting: “I had one conversation with [Frezza] at University Cafe in Palo Alto,” said Levchin ,“and I realized that this was a special kid”.
Recognizing the intern’s unique potential, Levchin immediately threw him at the company’s most pressing problem, and Frezza found himself in the trenches with senior engineers, working on the front lines of Paypal’s critical fraud problem.
When Frezza joined the team in June of 2000, PayPal had been getting relentlessly hammered by sophisticated fraudsters dedicated to swindling PayPal and its users out of millions of dollars through phony transactions. An article in Fin, a financial blog, notes that at its height, PayPal was losing money to the tune of $2,300 per hour to fraudulent activity – (yes, that’s $2,300 per HOUR).
In a company that demanded every ounce of bandwidth from its senior leadership, there was little room for hand-holding junior employees – it was sink-or-swim. “Without a formal internship program, the pioneering Paypal interns defaulted to performing the work of full-time employees–and were rewarded accordingly.” says Soni. He goes on to explain that Frezza was actually given a small amount of equity in Paypal, a practice that was certainly an unusual move considering that Frezza was a temporary employee.
Where PayPal Got it Right
I’d venture to argue that the leadership team at PayPal had no idea what they were doing at the time when it came to running a company (remember these were life-long nerds who would rather code and solve brain teasers than manage employees). My hypothesis is that the inherently “flat” organizational structure at PayPal was born from necessity rather than innovation. But, whether knowingly or unknowingly, the company leadership actually helped create the kind of environment where innovation and creativity could thrive in any employee, regardless of their status in the organization.
In a 2015 article in Inc Magazine titled “Get Out of the Employees’ Way”, author Etelka Lehoczky points to three major components that are crucial to creating a flat organizational structure:
1- Remove Layers, Unleash Creativity
When an organization removes hierarchical layers, it functions more efficiently on free-flowing ideas and prevents information from being “watered down or overanalyzed along the way”, says Lechoczky.
By placing Frezza and other interns at the forefront of real company problems, allowing them to work alongside senior leadership, and empowering them to bring forward their unique ideas and perspectives, PayPal created an environment without creative restriction where innovation could flourish.
2- Hire for Character, Not the Job
At first blush, Frezza had nothing to offer the PayPal team that they didn’t already possess. Traditionally, the dynamic of an intern/company dynamic goes something like this:
A company is willing to pay an intern to be a warm body and free up bandwidth for senior team members. In return, the intern shadows these leaders and adds valuable skills to their repertoire that help bolster their resumes and enhance future career potential.
What Levchin got right in this story is that he immediately recognized the potential in Frezza to be something more, and then promptly equipped the intern with challenges and opportunities that allowed his intellect to shine.
3- Guard Your Culture
PayPal was a strongly entrenched culture of self-proclaimed nerds who sat around on Saturday nights in college solving logic puzzles and brain teasers for fun.
The team at PayPal wholeheartedly embraced their nerdy roots from Day One and would go as far as building these same puzzles and brainteasers into their hiring process as the company scaled.
A company that strongly knows and fiercely protects its culture can immediately identify that culture’s values in other people. I believe that a strong sense of Frezza being “one of us” is what Levchin picked up on right away in that fateful cafe meeting with his young protege.
Robert Frezza, an intern at an early-stage startup, didn’t just play an ancillary role in the orbit of PayPal innovation. Because of his eagerness to learn and his leadership’s willingness to listen, Robert was able to help the team at PayPal apply sophisticated mathematical models to their fraud prevention efforts.
These models helped PayPal visualize transactions and instantly identify meaningful patterns in a sea of numerical data, which allowed engineers to catch and identify fraud more easily. And more importantly, Frezza and Levchin’s mathematical insights helped PayPal finally get out of the never-ending game of cat-and-mouse with international fraudsters by fighting behavioral patterns using mathematical analysis.
In just a single summer internship, Frezza helped a now Fortune 500 company “achieve one of the lowest fraud rates in the financial services industry, reducing its fraud rate by several orders of magnitude by the end of 2001.” -J. Soni.
The story of Frezza at PayPal is not just one of an incredibly bright Stanford engineering student, nor is it just a story of strong and innovative leadership. There were no prescribed “paths to success” within the organization, and there was certainly no handbook for how to develop bright young talent. The story of Frezza at PayPal stands as a testament to what can happen when organizations choose creativity over rigid structure and ideas over titles and seniority.