PayPal Mafia members Max Levchin and Keith Rabois joined Bloomberg’s Emily Chang (@emilychangtv) and Cory Johnson (@CoryTV) today on Bloomberg West to discuss eBay Inc (NASDAQ:EBAY)’s plans to separate PayPal unit.

PayPal Mafia's Levchin, Rabois, Sacks 'Sound Off' On eBay

Rabois tells Chang and Johnson that PayPal missed the mark over the past decade, “PayPal has missed the last decade in the United States.  Like, there’s actually literally nothing.” Levchin went on to say  “[PayPal] was founded over a decade ago and there’s still a lot of the same code base that is powering those transactions underneath.  And it becomes more and more scary to rewrite, to gut it, change it, and even splitting it out will not necessarily solve that problem because they’ll still be under the quarterly magnifying glass of the public investor.”

EBay to Split Off PayPal as Mobile Payments Gain Momentum

Also on today’s Bloomberg West was former PayPal COO David O. Sacks who said of today’s announcement that he was “surprised at the definitiveness.” To view Sacks on Bloomberg West

Earlier in the month Peter Thiel tells Emily Chang that “PayPal was a Failure” and that Icahn “shouldn’t dictate what silicon valley Does”

Thiel: Icahn Shouldn’t Dictate What Silicon Valley Does

Highlights from Levchin/Rabois:

PayPal Mafia’s Levchin on his reaction to the ‘incredible’ reversal from eBay and John Donahoe:

“I’m not sure it’s so incredible in the sense that I think, just from the clips you just played, very clear that most of us believed in one form or another that it would generally be a good thing to give PayPal its own wings and, most importantly, to give the management team directly correlated compensation to their performance.  Having said that, I’m glad that John is the one calling the shots because I think that preserves their relationship with eBay.  David’s words about single digit percentage volume ring true, but they’re true in the future. Today, eBay is still a significant component of PayPal’s volume and losing that incredible seller base, incredible volume, would be a bad thing. So I think on balance, great news.  Very, very excited that John, he decided to pull the trigger.  It remains to be seen whether the management team formed around the new PayPal is going to be able to take it to its full potential but I’m very hopeful that it will.”

PayPal Mafia on thoughts on PayPal CEO Dan Schulman:

Levchin: “Well, I think clearly the — I don’t know Dan at all; I’ve heard of him; I’ve seen his bio, obviously, but I have no personal working past with him so I am the least likely person to comment on his future potential within PayPal.  Having said that, he checks all the boxes in terms of having been inside a mobile-centric company, inside American Express, so it’s his opportunity to lose.  Obviously it would have been a romantic notion to see some — one of our own to take the helm, but obviously it’s a decision that John and the team have to make.”

Rabois: “Well, I think it was inevitable.  I think he saw from both Elon and David’s projections that this was going to happen and I’m feeling, you know, vindicated in some ways.  As you might know, we predicted when we sold the company that PayPal would be larger than eBay.  And there’s really only two executives at eBay at the time that believed that — Jeff Jordan, and the general counsel, Mike Jacobson.  So it’s — I’m very happy to see that almost certainly PayPal will trade at a higher market cap than eBay.”

PayPal Mafia on what PayPal has missed and what risks does a separate PayPal have now that might have not been evident:

Rabois: “Well, PayPal has missed the last decade in the United States.  Like, there’s actually literally nothing… Well, the growth was masked. by a lot of international growth and they have been very successful; actually expanding outside the United States has been a primary emphasis of the company and they’ve been very successful. But in the United States there has been an incredible innovation in payments over the last decade and PayPal hasn’t participated in any of it whether it’s Square or Stripe, Braintree, which they had to acquire, Bitcoin and the derivative consequences of Bitcoin.  PayPal has completely been irrelevant in all of those conversations, and basically the last decade has been sort of a big black hole.  The product is actually worse in the United States than it was 10 years ago.”

Levchin: “Well, I think in part it’s sitting on top of an automatically growing revenue stream, user base, et cetera.  It’s very hard to say something is wrong and ring alarm bells if, quarter to quarter, you’re seeing 15% growth of user base in the worst of times. So in that sense it’s understandable if not forgivable.  The flip side of PayPal is it was built — it was founded over a decade ago and there’s still a lot of the same code base that is powering those transactions underneath.  And it becomes more and more scary to rewrite, to gut it, change it, and even splitting it out will not necessarily solve that problem because they’ll still be under the quarterly magnifying glass of the public investor. But I think it’s inevitable that the new management team will have to take some relatively aggressive steps towards renewing technology, making it more flexible, offering new products and new services.  And this incredible opportunity, in particular I think in small business lending.  One of the things that we see around the world, people back — or companies that see cash flow and transactional volume of small businesses inevitably get into the cash flow management and small business lending.  And PayPal has largely stayed out of it.  They’ve recently made some moves towards that, but it’s an enormous opportunity that they just largely missed.”

PayPal Mafia on Jon Donahoe coming to him and other PayPal Mafia members about what to do

Levchin: “I think he probably in part thinks of keeping those conversations private so I can’t reveal exactly what very little I told him.  But just on a friendly level between all the PayPal Mafia, so – and to some extent, the current management team of PayPal – all of us are in agreement that it has a tremendous amount of potential still; that there’s just massive inefficiencies in payments and lending, consumer services.  Obviously I’m building a company that’s based, myself – I’m not too worried about PayPal being in the same space as my e-product, simply because it’s just such a big market.  So we’ve always been in agreement that the opportunity is very large, that the pace of innovation at PayPal is slower than we would all like, and I don’t think it’s been a secret even with eBay, certainly outside.  I think we’re all pretty happy that this was finally happening.  At least we’re hopeful that the pace of innovation will pick up significantly.”

Rabois: “Well, I agree with all of that.  I mean, I think today’s

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