The Strategic Reorganization of Becoming Someone Else's Problem

There is a particular school of corporate therapy which suggests that if you are having trouble finding yourself, you should simply arrange to be purchased by someone else. It is a remarkably tidy solution to the messy business of existence. Rather than undergoing the exhausting process of self-improvement, one simply hands the keys, the ledger, and the slightly damp office plants to a new owner and retires to a comfortable armchair to watch them try to make sense of the filing system.

This appears to be the philosophical foundation of the latest developments at PayPal. The venerable pioneer of digital payments, having spent the last quarter-century teaching the world how to send money across the ether without the aid of a postage stamp, is reportedly in deep negotiations to sell itself to Stripe and the private equity firm Advent. The proposed figure is a rather casual fifty-three billion dollars. It is the sort of sum that sounds less like a valuation and more like a typographical error made by a very tired accountant who fell asleep on the zero key.

To appreciate the quiet comedy of this situation, one must understand the generational dynamics of the digital checkout. PayPal is, in internet terms, an ancient and slightly eccentric uncle. It was founded in the late nineties by a group of intense young men who went on to buy rocket companies and build underground tunnels, but the product they left behind has the comfortable, slightly faded feel of a high street bank that smells of damp carpets and furniture polish. It is the button you click when you cannot be bothered to find your wallet, relying instead on a password you wrote in the back of a diary in 2012.

Stripe, on the other hand, is the sleek, minimalist nephew who wears cashmere sweaters and speaks exclusively in elegant APIs. Stripe does not have a website so much as a series of beautifully rendered gradients that suggest a level of technological sophistication far beyond the mere movement of decimals. For Stripe to buy PayPal is rather like a boutique design agency purchasing a sprawling, slightly drafty Victorian department store because it turns out the department store owns the land beneath the boutique’s favorite coffee shop.

The negotiations are occurring against the backdrop of a "turnaround plan" initiated by PayPal’s new chief executive, Enrique Lores. Mr. Lores, who previously ran HP—a company famous for making printers that refuse to print black-and-white text because the yellow ink cartridge is slightly depressed—joined PayPal with a grand vision. His strategy involved splitting the company into three distinct operating models, recommitting to "the fundamentals," and cutting the workforce by a very precise twenty percent.

There is something wonderfully bureaucratic about the modern corporate turnaround. It is a process that almost always begins with a slide deck containing arrows that point diagonally upwards, and ends with a large number of people being asked to clear their desks. The announcement that PayPal would become "a technology company again" was met with the sort of polite applause usually reserved for a politician promising that the trains will run on time, provided everyone agrees to travel on Tuesdays.

But the ultimate turnaround, it seems, is to simply stop being PayPal. If the talks with Stripe and Advent succeed, the company’s operational difficulties will be solved in the most elegant way possible: by becoming Stripe’s problem. It is a strategy that deserves wider application. One can easily imagine a struggling novelist solving their writer's block by selling their unfinished manuscript to a more successful author for a modest fee, or a homeowner dealing with a leaky roof by simply declaring their house to be an annex of the local library.

During a quiet walk through the financial district yesterday, I observed a gentleman attempting to pay for a very small sausage roll with a remarkably large piece of plastic. The card machine, a stubborn little device that seemed to be running on a dial-up connection from the late Bronze Age, refused to cooperate. The gentleman stared at the screen with the quiet, desperate hope of a man waiting for a miracle, while the queue behind him grew increasingly philosophical. It occurred to me then that the entire global financial system is held together not by complex algorithms or sovereign guarantees, but by our collective willingness to stand in drafty shops pretending that the little green light will eventually blink.

If Stripe does acquire PayPal, the resulting entity will control an almost terrifying share of the world's digital transactions. It will be a marriage of Stripe’s elegant, developer-friendly code and PayPal’s massive, stubborn user base of people who still believe that "Venmo" is a Latin verb meaning "to pay for one's share of the garlic bread." It is a formidable combination, though one wonders if the sleek, minimalist culture of Stripe will survive contact with the sprawling, legacy infrastructure of its new acquisition. One suspects that somewhere in the depths of PayPal’s servers, there is a single, undocumented line of COBOL code written in 1999 that keeps the entire system online, and that any attempt to replace it with a modern API will cause several major European currencies to temporarily turn into pictures of badgers.

Private equity, of course, is the third partner in this dance. Advent’s involvement suggests that the acquisition is not merely a technological merger, but a financial extraction exercise of the highest order. Private equity firms are the corporate equivalent of those extremely efficient people who buy old houses, paint everything grey, remove the characterful fireplaces, and sell them three weeks later as "luxury executive apartments." They will look at PayPal’s twenty percent staff cuts and wonder if perhaps thirty percent might be achieved if everyone simply agreed to share a single stapler and work in the dark.

In the end, the transaction—if it occurs—will be a monument to the strange, circular nature of modern capitalism. We build companies, we make them so large and complicated that they can no longer function, and then we sell them to other companies that were built specifically to replace them. It is a beautiful, endless cycle that keeps thousands of lawyers, bankers, and consultants in very nice suits and slightly expensive lunches. And as we click the little yellow button to buy our next pair of socks, we can take comfort in the knowledge that somewhere, fifty-three billion dollars is changing hands to ensure that the button remains exactly where it is, slightly off-centre, waiting for us to forget our password once again.