Brutal Transparency: Facing Down Setbacks and Near-Failure Moments

PayPal’s leaders and teams regularly faced existential threats: codebases wiped out by accident, regulatory investigations, brutal PR disasters, and almost running out of money multiple times. Rather than hiding these dangers, the founders often leaned in—calling all-hands meetings to explain just how close the company had come to disaster, and what needed immediate triage. During one memorable stretch, the team was so close to the brink that a single backup saved months of work after an accidental server wipe. Another time, negative press coverage about a security flaw triggered a surge in sign-ups only because the team acknowledged and fixed the issue with urgency, rather than denying the problem.

These moments forged a culture where transparency about risk wasn’t just lip service but actual policy: new hires were expected to voice errors and flag vulnerabilities as soon as possible. Founders celebrated 'catching problems early' almost as much as heroic recoveries.

Research in organizational psychology shows that teams who practice psychological safety—where members can surface risks and failures without fear—are drastically more likely to avoid catastrophic errors. Both in start-ups and established companies, transparency about setbacks makes resilience possible and turns disasters into growth opportunities.

Hold time and space in your team or family to spell out what could break or is already broken, and encourage everyone to bring up issues before they spiral. Celebrate those who spot risks early, and write down the close calls so you actually remember what to fix. Build a norm where mistakes and vulnerabilities are on the table, not hidden out of embarrassment—doing so, you’ll avert most disasters and create a climate where learning (not blame) drives improvement.