Why Elon Musk Wants to Disrupt Banking Next

Elon Musk has dreamt for years about combining digital banking with social media, if not from the banking side, then from the social media side. His purchase of Twitter launched another chapter in what has been a long saga. But as a new biography of Musk tells it, his aim to remake financial services began farther back than people realized before, when he was just in his teens.

Elon Musk’s interest in — some might even say obsession with — financial services harkens way back to a wad of lost traveler’s checks.

In Walter Isaacson’s new biography of the tech titan, titled simply “Elon Musk,” the reader joins Musk, at 18, exploring Canada by Greyhound bus. The future founder of Tesla and SpaceX has left behind his native South Africa and a frequently unhappy and sometimes abusive childhood.

Musk’s parents, estranged from each other, separately gave him small stakes to start life in America, which included a detour through Canada. His father’s contribution was $2,000 in traveler’s checks.

Elon Musk biography hardcover Musk was making his way to a cousin’s house via a meandering, ultra-local bus when he took the opportunity at one stop to grab some lunch. He had to hustle to make the bus again, catching it just as it was pulling out.

One hitch: The driver thought Musk had reached his stop and removed his suitcase from the bus. It contained most of his clothing … and all of his traveler’s checks.

Musk was bereft.

“All he had now was the knapsack of books he carried everywhere,” Isaacson writes. “The difficulty of getting traveler’s checks replaced (it took weeks) was an early taste of how the financial payments system needed disruption.”

When Musk Worked for a Bank (Really!)

Musk — who took over Twitter in 2022 and has talked about turning the social media platform into a payments service and possibly a superapp — always had America as his destination.

But first came a yearslong detour in Canada, where he had relatives. He would end up attending college there, along with his younger brother Kimbal.

As part of a plan to get ahead, the two of them would pore over newspapers and pick out businesspeople they admired. Then Musk’s brother, who had better people skills, would make a cold call to see if the person would be willing to mentor them.

One of these calls — to Peter Nicholson, then the head of strategic planning at Scotiabank — led to a defining experience for Musk.

Nicholson’s background was very different from most bankers. He was an engineer with advanced degrees in physics and math, which aligned with Musk’s own interests. They also shared a strong interest in space travel.

Nicholson had lunch with the two brothers and found jobs for both. He invited Musk to work with him on a small strategic planning team.

What Musk Learned From His Banking Job:

An early mentor says Musk gained 'a healthy disrespect for the financial industry and the audacity to eventually start what became PayPal.'

Before long, Musk had a money-making idea, one that he saw as a sure thing. In 1989, the U.S. government had begun packaging hopeless loans that big banks had made in Mexico and South America into bonds. The bonds had a set price that it seemed like the government would ultimately stick by, though the market price had fallen. Musk believed the government would honor the higher price at maturity and made a case for Scotiabank buying up lots of the bonds at a low price, to cash in later. The risk didn’t faze him.

As Isaacson recounts it, the bank rejected the idea, telling Musk it already had too much Latin American debt of its own.

Nicholson told the author that this experience gave Musk the impression that Scotiabank was dumber than it really was.

“But that was a good thing, because it gave him a healthy disrespect for the financial industry and the audacity to eventually start what became PayPal,” Nicholson said.

Musk, the ‘Hardcore’ Nonbanker

Isaacson, who has also written biographies of innovators Benjamin Franklin, Leonardo Da Vinci, Albert Einstein and Steve Jobs, does a masterful job of telling Musk’s life story in more than 600 pages, covering not only his forays into financial services but also early dot.com days, electric vehicle manufacturing, artificial intelligence, space exploration, and more.

Isaacson had unusual access to Musk, including extensive opportunities over two years to tag along with him. What emerges is a portrait of a man who is both brilliant and tortured. He can be incredibly demanding of others but especially of himself.

His engineering, and his engineering of business and people, is fascinating to read about. Yet the prize — the life it leads to — hardly seems worth the price, as portrayed by Isaacson.

At the same time, wealth, power and ability to use both to make big things happen certainly appeals to Musk.

Could traditional banks compete with a Musk-driven financial services company or even a superapp? Maybe, but Musk would be doing battle at a much higher intensity level than bankers are used to. He has a pattern with many of his ventures of living at the job site, quite literally.

Isaacson writes about how, during the takeover and remaking of Twitter, Musk wound up firing 75% of the employees. He had decided the culture at the social media giant was cushy, lazy and wasteful. He was going to show the survivors what “hardcore” meant and part of that would entail living at the office. He proclaimed that survivors would include only those who were “excellent, trustworthy and driven.”

“He had slept on the floor of his first office” at Zip2, an early effort to create web-based phone directories, in 1995, the book says. “He had slept on the roof of Tesla’s Nevada battery factory in 2017. He had slept under his desk at the Fremont assembly plant in 2018. It wasn’t because it was truly necessary. He did it because it was in his nature to love the drama, the urgency, and the sense that he was a wartime general who could rally his troops into battle mode. Now it was time for him to sleep at Twitter headquarters.”

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From PayPal to Bigger Things

But the Twitter takeover is recent. After the Scotiabank days, Musk had other formative experiences in financial services. His time working with Nicholson had convinced him he could make a major mark in banking.

So when he made a killing selling off his first startup, Zip2, about a decade after leaving Scotiabank, Musk began thinking about how to disrupt the banking industry.

That’s when he envisioned “X.com.” (You’re not having déjà vu. Musk loves this name, which he has now bestowed upon the former Twitter. He even calls a son born in May 2021 — one of his 11 children, with multiple women — “X.”)

Musk intended for the original X.com to roll together banking, checking, digital payments, credit cards, investments and lending. Early on, he struck deals to obtain access to the banking and investment systems with Barclays Bank and a community bank. The deals happened around 1999 but were similar to what we’d call banking as a service today. Musk also pioneered skinny application forms resembling those used by online financial services providers today.

What Musk Learned By Sweating the Tiniest Stuff:

Personally reviewing registrations for his own service, he noticed that the leader of his biggest rival had signed up. In time this led to a merger and creation of today's PayPal.

Isaacson tells how Musk, personally reviewing X.com signups, noticed that Peter Thiel had opened an account. Thiel headed Confinity, a company that had started a narrower rival — PayPal.

The two companies later merged, though Musk initially resisted the idea. In time, the venture dropped the X.com name, because of the potential for negative perceptions, and made PayPal the name of the company as well as the name of its service.

Musk saw the service as a niche product, which didn’t hold much appeal for him. He prefers going all in and creating on a large canvas, according to Isaacson.

“He wanted to remake entire industries,” Isaacson writes.

Musk argued that digital payments should be the opening act for full-service digital banking. And, indeed, today’s PayPal has become much broader over time.

But back then, his PayPal partners, Thiel and Max Levchin (later the founder of the buy now, pay later company Affirm), preferred to stay narrowly focused. A tug of war ensued over who would drive strategy, with the friction rising quickly.

In a chapter called, “The Coup,” Isaacson describes how Thiel, Levchin and others basically pushed Musk out. “He was a visionary who didn’t play well with others,” sums up Isaacson.

Musk is often given to explosive behavior, which is documented at length and in quantity in this warts-and-all biography. However, in the case of PayPal, where a major dream got thwarted, Isaacson portrays Musk as closing things out with calm and class. Musk said that the company had become his baby and that he was willing to give it up, so it could go on, like the mother in the Bible who wanted to save her child from being divided in half. He took pains to make peace with those who had pushed him out.

When PayPal was sold in 2002, he got a $250 million check. Isaacson makes it clear that Musk is always looking for the next major opportunity to parlay such winnings into something else on his mental wish list. The author describes this as an unwillingness to take chips off the table.

His latest something else is Twitter.

Read more: In a Superapp Race, Apple’s Ahead of Twitter & Everybody Else

Musk Circles Back to X.com at Twitter

The battle over Twitter that Isaacson documents in incredible detail has many ugly moments. The narrative could cure most banking executives of any fantasies about working in Silicon Valley generally and in Musk’s universe specifically.

Musk loves Twitter as a bully pulpit. He talks a lot about free speech and the hope that Twitter can be a home for it. But Isaacson makes the point multiple times that, when it suits Musk, he quashes commentary he doesn’t like. One incident concerns tweets that he felt were endangering his family — which is understandable. But not all the incidents are like that.

What Bankers Can Learn from the Twitter Deal:

Balance the need for decisive action with foresight. A key strategy had to be delayed because the staff best equipped to implement it had been fired at Musk's behest.

The battles to bring Twitter under Musk’s control are described at length — “crazed” doesn’t do the time period justice. One lesson for banking, which seems to be at the beginning of a round of cost-cutting, is to balance the need for decisive action with foresight.

In a nutshell, one of Musk’s early plays for increasing revenue was a scheme requiring verified accounts to pay for their blue check marks. The surviving staff warned that impersonators would try to take advantage, gaming the system to the point of becoming the verified parties themselves if they could.

The plan had to be postponed because, as Isaacson explains, Musk’s massive layoffs had axed most of the humans at Twitter who had experience handling the verification process. In late 2022, Twitter Blue did become a reality, and with the rebranding of the social media platform, it is now called “X Premium.” It costs $8 per month, or $84 a year.

See all of our latest coverage of fintechs in banking.

Musk’s Other Motive for Selling Premium Accounts

The verified accounts had another purpose, of more direct interest to bankers. Musk saw the for-pay effort as a way to obtain credit card account information linked with email addresses and phone numbers. It is a foot in the door to putting ecommerce and more on the Twitter platform.

There is one more wrinkle. Musk was especially interested in signups for the Twitter app via iPhone, hoping to gain access to data Apple itself has, including card numbers. But he learned that Apple won’t share data. He also learned that Apple, at least initially, takes a 30% cut of any payments made for apps or for in-app purchases.

Isaacson recounts a late November 2022 lunch meeting Musk had with Tim Cook, Apple’s chief executive. Cook told Musk that the Apple Store charge fell to 15% eventually, which “partly mollified” Musk.

Mush decided not to push Cook on the data privacy issue, but the book makes it clear that the discussion was only postponed.

Press accounts indicate that efforts to generate revenue for X have continued, after the last act presented by the book.

But, while Musk wants to turn X into a superapp, Cook’s Apple keeps making inroads into financial services itself. The banking and payment options available inside Apple’s “walled garden” are multiplying. The tech giant enjoys a degree of trust that bolsters consumer confidence across Apple Card, Apple Pay, Apple Savings, and its buy now, pay later service, Apple Pay Later.

For now, the former Twitter remains just a social media platform with financial aspirations and a leader prone to blowups.

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