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Why some institutions thrive and yours is floundering

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Facebook, LinkedIn, Zynga, Last.fm, Yammer, SpaceX, Tesla, Kaggle, Square, Tumblr, YouTube, Delicious, Sequoia Capital, Flickr, Digg, the list is endless! You might think that this is a half hearted attempt to try and name all the companies in the Valley but really what this is is a list of some of the companies founded or significantly invested in by what has now come to be known as the Paypal Mafia.

X.com and Confinity were both internet financial services firms that decided to merge in 1999. This led to the stewing of a potent brew of engineers and ruthless businessmen that led the company to grow massively in the next two years of the merger, eventually going public in that same period. Paypal then received a hefty payday later on when it would be acquired by E-bay in 2002 and so did its employees but that couldn’t keep this high energy team down. Dust from the crash of the dotcom bubble in the early 2000’s was just beginning to settle and the world was ushering in a new era of web companies, these were the early days of what we now know as web 2.0. Investors and the general public alike were badly losing faith in the internet and it was almost as if the world would now look to this group of people to save the it. After all, they were amongst the few people who had actually made something useful on the internet at the time.

Paypal founder and CEO Elon Musk is a smart guy and from the stories told of Paypal’s early days you could tell that he valued the kind of employees that he was hiring and credited them on their innovations every step of the way. Having such a saturation of smart people in one space of course doesn’t come without challenges, egos collide and tempers flare. Elon wasn’t immune from this, in what was a hostile take over from one of his co-founders Peter Thiel, he was fired as CEO and Thiel took over despite the company rapidly expanding and making profits.

One question however, despite the frailties of Paypal, that people ask is how does one institution bear so much successful spin-offs after people leave? Some schools are known to churn out great alumni, some families churn out great people, some teams churn out great players. What on earth were they feeding them there? The Paypal Mafia in particular is discussed in journalist Sarah Lacy’s book Once You’re Lucky, Twice You’re Good. According to Lacy, the selection process and technical learning at PayPal played a role, but the main factor behind their future success was the confidence they gained there. To put it simply they had a brilliant company culture that permeated itself so much through them, that even when they left they were still oozing Paypal. The purpose of leadership is not to create more followers but to create more leaders and Paypal couldn’t have done it any better.

You have companies all over the world writing unnecessary mission statements (“To be leading….”), going for useless retreats in the name of team building and hiring inneffective management consultants who in most cases rarely bring added value to the business. A billion dollar industry of doing things that do very little to increase profit margins of companies or improve the lives of companies’ employees has come of this. It could be a simple sign that there are a lot of leaders in the corporate world who simply don’t know what motivates their employees or are completely detached from what goes on in their company! Or, a simple sign of a poor leadership system and failed societal institutions, where leaders want to be the only fish in the sea. You wanna make your company, school, family something you can be proud of? Well here’s some insight for you, it’s in the culture, stupid! (don’t be offended that’s the headline of the good read that is the next article, enjoy)

By Odanga Madung

 

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