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Inside Peter Thiel's mind

The billionaire on Snowden, Twitter, and why competition is overrated

Peter Thiel is best known as the billionaire technology investor who founded the e-payment giant PayPal and the massive data analysis firm (and security contractor) Palantir. Oh, and he also tried to build a libertarian utopia on a giant platform in the open sea. And he pays smart kids to skip college. And he was one of the first investors in Facebook. And he's the inspiration for the Aspergy venture capitalist on HBO's Silicon Valley.

So he's an interesting guy. And a controversial one.

Thiel's critics, who often dismiss him as just another libertarian techno-evangelist (and it says something about the Way We Live Now that "just another libertarian techno-evangelist" feels like a meaningful category), should give his book Zero to One a close look. In it, Thiel makes some points that don't quite fit with his public caricature. He argues that monopolies are good, and that it's competition, red in tooth and claw, that often destroys industries. He worries that CEOs think too much about money and not enough about moonshots. And he doesn't tweet (well, he did, once, but he doesn't now).

I spoke with Thiel a few weeks ago in Washington, DC. An edited transcript of our conversation follows.

Competition is overrated

Ezra Klein: Let me start with a question you say you ask every job applicant. What important truths do you believe that very few people agree with you on?

Peter Thiel: That as a business, you should strive for monopoly, and that competition is very overrated. We live in a world where we're always told to compete intensely. It's how we're educated. It's how so much of our system is organized. I think that if you want to compete super intensely, you should open a restaurant in DC. There'll be competition — but you won't make any money or do anything.

Competition makes us better at that which we're competing on, but it narrows our focus to beating the people around us. It distracts us from things that are more valuable or more important or more meaningful.

Ezra Klein: You have this great line in the book that monopolists can afford to think about things other than making money, and non-monopolists can't. What you seem to be arguing is that the highest good of a company is to become dominant enough that it develops the fuck-you profits needed to create a Bell Labs, or to send weather balloons up into the air, or to create worldwide internet. It’s almost like you see the point of capitalism as creating companies able to fund technological philanthropies. Is that right?

Peter Thiel: In business, you do have to think about money to some extent. If you weren't thinking about that at all, then things would go wrong in fairly fast order. But I find that companies that are simply mercenary are quite uninspiring.


(Tyson Whiting/Shutterstock)

I think a lot of meaning comes from a counterfactual sense that if we weren't working on something, this problem would not get solved. That's why I always differentiate between mission-oriented companies and social entrepreneurship. They both have a sense of doing something that transcends making money, but mission-oriented companies are often defined by a unique mission that maybe others don’t think is important, whereas a lot of the social entrepreneurship efforts gravitate towards things where you have many copycats doing relatively similar things.

The problem with the Ivy League

Ezra Klein: You're very critical about the way that we incentivize kids to win at competition in general rather than to be amazing and obsessive in particular pursuits. You’ve offered some really smart kids thousands of dollars to skip college altogether. Do you think your critique is about all, or most, kids? Or is it just about a small slice of Ivy League-aimed, hyper-overachievers?

Peter Thiel: I'm very focused on the question of what happens at the elite universities because they dominate the whole narrative. A lot of lesser colleges are trying to emulate the top ones in one way or another. And I do think there's something very odd about our talented people all going to the same short list of colleges and then, from there, going into the same narrow list of careers.

Ezra Klein: So the idea is that the Ivy Leagues are the point of leverage on the system because they’re the point of maximum aspiration not just for students, but for other colleges?

Peter Thiel: My view is if you want to actually somehow get people to rethink the system, you have to rethink the very top schools. There's all these ways we talk about education that are very misleading. I think it’s a tremendous abstraction even to use the word "education." What sort of a good is education? Is it a consumption decision, or college as a four-year party? Is it an investment decision, where you will develop skills to get a better-paying job? Is it an insurance policy, so that you don't fall through the big cracks in our society; or is it, say, a zero-sum tournament in which the intensity of the competition is what somehow validates the tournament?

I think one of the things that's deeply dishonest about it is that it mostly presents itself as an insurance policy, because people in our society are somewhat pessimistic and somewhat worried about the future. They desperately want insurance. But the reality is that it is this tournament.

Ezra Klein: In some ways, it's about who the customer is, too. I was reading Atul Gawande's new book about death, Being Mortal. One of the interesting points he makes in that book is that nursing homes are very badly designed for their inhabitants. They're really miserable. One of the reasons is the nursing homes build themselves around security, because the actual customer isn't the inhabitant but their children. The thing that the children are worried about is not really autonomy and it's not independence and it's not even happiness. It's security for their mother and father, to make sure they're not going to fall or choke.

There's an issue like that with colleges, where the customer is typically the parents, particularly at the Ivy League level where you're usually dealing with more affluent kids. What they want to be sure of is their kid is going to do well. It matters less that they do extraordinarily well than that they don’t do badly. For a lot of parents, it’s success to have a kid who is married and is making $145,000 a year at a law firm. The improvement in parental happiness if the kid becomes CEO of some great firm isn’t that high — maybe it’s even a net negative, because they’ll never call.

It seems that that's part of the issue there: as long as the customer is the parent, colleges are going to have to pitch themselves as a kind of insurance that the outcome won’t be bad. Whereas you’re more interested in a higher-risk, higher-reward scenario that’s oriented towards extraordinary outcomes but doesn’t have quite the same level of safety to it.

Peter Thiel: Yes. I agree that that's mainly what parents are concerned about. But I do think insurance is very different from a tournament, and that is an odd aspect about the way the system is geared. You could presumably have an insurance policy for more people. It's this weird combination of the two that I think really makes very little sense.

If you were president of one of the top universities, the way you would instantly get all the students, all the alumni, and all the faculty to hunt you down and fire you would be to propose doubling the enrollment over the next 20 years. But why can't Harvard double or triple its enrollment? It’s like a Studio 54 nightclub where you have a velvet rope with a very small number of people on the inside and very, very large line of people on the outside.

Why Silicon Valley is beating Wall Street in the war for talent

Ezra Klein: I want to try to draw out this idea of a company’s mission a bit more. Imagine two versions of Google. The non-mission oriented Google is, "We want to build a search engine that'll be the best search engine in the world. If we're dominant in that market, we're going to be able to extract huge advertising revenues." The mission-oriented one is, "Our goal as a company is to categorize and make accessible all the world's information."

Peter Thiel: Yes.

I think the second description is certainly far more inspiring. Maybe it starts by building a much better search engine, but then maybe over time, you have to develop mapping technology, maybe you start building self-driving cars as a way to see how well your mapping technology works. It certainly, I think, feels very different to the people working at the company. I think Google still is a very charismatic company for a company of its size.

Ezra Klein: That’s an interesting point. Google does all of these things that are not obvious profit drivers. The massive effort to digitize books, the decision to send camels across the Sahara to work on mapping the desert. A lot of that, they're losing money on. But it’s partially a recruitment tool — it makes them, in your word, more charismatic than their competitors.

Peter Thiel: One level in which these companies do still compete very much is for talent. Silicon Valley is very competitive with Wall Street banks. And there's a way in which the day-to-day jobs are similar: people sit in front of computers, the people went to similar colleges and universities, even the office floor-planning is kind of similar. There are more similarities than one might think. But the narrative at Google is much, much better than at Goldman. That's why they're beating a place like Goldman incredibly in this talent war.

Ezra Klein: It has become at this point a trope that a lot of the founders of major tech companies have these Asperger's-like tendencies. In the HBO show Silicon Valley, one of the key venture capitalists is apparently based on you, and the show really plays up the spectrum-y qualities of the character. In the book, you say that's actually a competitive advantage. I'm curious why.


Thiel at a conference in Ireland this year (Tristan Fewings/Getty Images)

Peter Thiel: It was Aristotle that said, "Man differs from the other animals in his greater aptitude for imitation." It's how we learn languages. It's how culture gets transmitted. But it also leads to all sorts of bubbles, all sorts of insane madness-of-crowds-type behavior.

So I always like to flip this around. What is it about our society that somehow talks all of the people who don't have Asperger's out of their original ideas before they're a little bit too weird? Why do we push people to do things that are much more conventional? It's an anti-Asperger's personality, and it’s often actually quite bad for innovation.

Ezra Klein: You mentioned earlier how Google is outcompeting Goldman Sachs for talent. Does it unnerve you to watch the MBAs and the law school graduates and all the high achievers from the traditional pathways streaming into Silicon Valley right now?

Peter Thiel: I do think we're at this point where Silicon Valley is extremely attractive. I think it's going to go on for a very long time. I think The Social Network movie in 2010 was a cultural moment like the Wall Street movie. They were both intended to be negative on the industries. The Social Network was as negative as the Oliver Stone movie. But they both backfired in a weird way. I knew all these people who watched Wall Street and they were inspired by it to become investment bankers.

People at Facebook — we were super nervous about how that movie was going to play out. There was a board discussion about how we've not been on the ball, and maybe we could have stopped the movie, and maybe we could have done all these things to change it. Then, when it finally came out, in fall of 2010, I believe, the whole company went to see the movie and just owned it. The movie was made to be negative on Zuckerberg, but people looked at the positive things — how hard Zuckerberg worked and how passionate he was.

Ezra Klein: Just as a journalist, I thought that movie was so insanely, grossly unethical. It really unnerved me. The idea you can take someone living and create a popularized account of their life with the real names, most of the real events, the real t-shirts that they wore, and then just make up their key motivations and some of the key stories completely. It was appropriating someone’s life in this really weird, dishonest way, and it didn’t sell itself clearly as fiction. The fact that Zuckerberg had been in a relationship with the same woman the whole way through Facebook, and she was just wiped out of the film so he could be presented as a lonely geek in college trying to get back at the pretty girls who spurned him ... I was a little shocked by that.

Peter Thiel: It was this very strange combination of fact and fiction. There was one narrow scene with me: they actually filmed the entrance outside my actual office so they got that details right, but the key thing my character asked was this question "Who was Eduardo Saverin?" Which was not ever a question I asked.

Why he doesn’t buy Silicon Valley’s obsession with failure

Peter Thiel: One of the ideas I'm very skeptical of is that people learn from failure. I think, in practice, failure's really demotivating. Hopefully, you have the character to persevere and keep going, but I think the default is that failure is powerfully demotivating. But success is very motivating.

Ezra Klein: Isn't counseling young entrepreneurs to reach for these moonshot monopolies putting a lot of people onto a path where the chance of failure is much higher, and thus the chance of demotivating all these entrepreneurs is potentially higher?

Peter Thiel: I suppose, but I'm not trying to get more people to be entrepreneurs. I would like people to start more good companies and fewer bad companies. I think that's the thing. I don’t think starting companies or starting startups is an end in itself.

I was talking to one of my friends a few years ago. I asked him "What do you want to be doing five or 10 years?" And he said he wanted to be an entrepreneur. It's a terrible answer.

The problem with Bitcoin

Ezra Klein: To talk about the companies you founded for a moment, something you emphasize about PayPal in the book is how much you guys were united by the belief that there was a space to create a new kind of currency married to a new type of payment network. I think it's fair to say that PayPal did not become a new type of currency.

There's a lot of energy now around Bitcoin. I'm curious where you think we are, or what you think today about the dream of building some type of technologically-based, non-state oriented currency.

Peter Thiel: I'm probably psychologically a little unfairly biased against Bitcoin because, since we didn't succeed at doing it at PayPal, I have this feeling that no one can do it. But Bitcoin's gotten much further than I would have thought possible. The problem is I don't actually think the payment system works all that well yet. The main use case still seems to be either currency speculation or illegal activity where you're willing to go through lots of hoops to make a payment. It's not obvious how easy it is to get seamless payment system attached to it.

When I was pitching PayPal back in the early days, I would hold up a $100 bill in front of an audience. It was this hypnotic effect, everyone paid attention to me immediately. Money is a very mysterious thing. It doesn't have much use value. It's not hygienic. So how does it work?

I think there's a link between the dollar being the world’s reserve currency and the US' military supremacy. The dollar bill says, "This note is legal tender for all debts public and private." You will not be able to pay your taxes in Bitcoin. You have to pay them in dollars. If you don't pay them with dollars, there will be people who will show up with guns to make you pay them. There are all these things that are part of what makes the US dollar the US dollar, and it's all linked together in a very deep way.

The real problem with Edward Snowden’s revelations about the NSA

Ezra Klein: You have this techno-anarchist or maybe techno-libertarian streak. You create PayPal, which is about creating an alternative to the state currency. Then, the next big company you found is Palantir, which is woven into the national security state and is vastly expanding the state's capacity to track and watch the population effectively. A lot of the time now when I hear people spin out scenarios for the super-effective Big Brother of the future, it's Palantir or a Palantir-like company that will appear in those fears. So how did you end up founding one company that is so about challenging the fundamental monopolies of the state, and another company that has made the state much more effective in one of its fundamental monopolies?

Peter Thiel: First, there’s a deep technological link between the two companies. We had this fraud problem at PayPal, and we would have teams of 20 human investigators looking for needles in a haystack. They couldn’t do that across millions of transactions. We solved it with human-computer complementarity. We realized we could do a lot by getting the division of labor right and automating certain processes and then training people to work alongside the computers. Palantir has that same technology working in the anti-terrorism context.

But then you need to think about how these technologies play out over time. As a civil libertarian, my own view is that preventing terrorist attacks is actually quite important. I was surprised that we got something as extreme as the PATRIOT Act after 9/11. The alternative to technological approaches to preventing terrorism will not be the sort of perfect world of the ACLU. I think civil liberties always lose after you have an attack. They always get replaced by things that are, as a default, very intrusive and very low tech.

I define technology as doing more with less. In the context of security and privacy, a technological solution is one that gives you more security without sacrificing privacy, or more security and more privacy at the same time. A non-technological solution is one that always involves trade-offs where you can get more security and you'll have less privacy, or more privacy but you'll have less security.

I think the alternative to something like Palantir would be a world where we're forced to make very unpleasant tradeoffs. I think that at the end of the day, the libertarians lose the trade-off war.


(Tyson Whiting/Getty Images)

Ezra Klein: What level of confidence do you really have that technology is going to lead to more security with more privacy? One way to read some of the Snowden revelations is that the amount of data and information we now pump into the world creates a capacity for surveillance and intrusion that didn't exist before. Before, you would actually have to break into their house and find people’s nude pictures under their bed. Now you just need to guess their password.

Peter Thiel: I'm not a techno-utopian. I don't think technology is automatically good. There are definitely technologies that I think could be developed that I wouldn't like. There are ways in which I think technology could get us way more security and less privacy.

But I have a slightly different cut on the Snowden revelations. I think it shows the NSA more as the Keystone Cops than as Big Brother. What is striking to me is how little James Bond-like stuff was going on and how little they did with all this information. That's why I think, in some ways, the NSA is more in this anti-technological zone where they don't know what to do with the data they find. So they just hoover up all the data, all over the world. I think it was news to Obama that he was tapping into [German Chancellor Angela] Merkel's cell phone.

One way to think about this is that if the NSA bureaucracy actually knew what they were doing, they would probably need way less information. What's shocking about Snowden is how much information they had and how little they did with it.

Ezra Klein: That's something I've wondered about a lot. So many of Snowden's documents were contractor and middle-manager presentations about what the NSA was doing. I’ve often thought after reading them that if you got a leak of contractor presentations about six months before it launched, it would be amazing. I think there's a tendency in the reporting of these revelations to assume the NSA as maximally proficient and living up to its own internal hype in a way that, in my experience, neither government agencies nor companies usually do.

Peter Thiel: It's hard to judge but my sense is they're quite good at getting data and they're quite bad at finding any meaning or knowing what to do with it. I suspect that the bureaucratic momentum has pushed towards more and more data because, perversely, if you don't know what to do with the data, the tendency is to just get more and more, even though that never actually solves the core problem.

I think "big data" is one of these buzzwords that when you hear it, you should almost always think "fraud," because the problem is actually to find meaning within data. It's to make big data small. That's actually the core challenge. It's not to collect more and more data.

Why atoms are more exciting than bits

Ezra Klein: A couple years ago, you started Founders Fund, which is trying to funnel more attention towards the atom. Do you think that's working?

Peter Thiel: There are a lot of different reasons why the focus has been on bits and not on atoms for the last 40 years. It costs $100,000 to start a new software company. It costs maybe $1,000,000,000 to get a drug through the FDA. So you're obviously going to have more video game companies than real drugs. That's the world.

But people are not just information. That’s why I prefer cryonics to uploading. If cryonics works, you can still be the same person. If you were uploaded onto a computer and you had all your information represented, it's not clear whether that's genuine immortality or not.

There were all these social networking companies that came before Facebook. My friend Reid Hoffman, who started LinkedIn, in 1997 started Social Net. It had social networking in the name, in 1997. Back then there were all these avatars in these companies. The idea was I'd be a cat and you'd be a dog and we'd interact in cyberspace. It was all this alternate Snow Crash-like reality. But it turned out that just learning more about real people was what mattered.

I think there's definitely more of an appreciation of this now then there was four or five years ago. I think it's one of the things that makes Elon Musk as charismatic as he is. Tesla and SpaceX are not IT companies. They have this very different feel and there's this sense that they're so valuable because they're so rare.

Ezra Klein: Is there an analogy here to your point about Ivy League colleges being the leverage over the rest of the system? If Musk is the charismatic CEO everybody wants to be, and self-driving cars are what everybody's excited about in Google, are we entering a period where the aspirational companies become more physical in their ambitions, and that has an effect on everyone else?

Peter Thiel: I had this conversation with Elon in 2008. Tesla has been a very touch-and-go proposition. And he was telling me the last successful car company that was started in the US was Jeep, in 1941.

Why he doesn’t Tweet

Ezra Klein: I've noticed you've only ever sent one Tweet.

Peter Thiel: Yes.

Ezra Klein: I'm curious why.

Peter Thiel: You have to be very careful when you write things. You can't take them back. And my more general thought is that once you start doing it, you have to do a tremendous amount and I'm not sure that's worth my time.

It's like all these technologies, where we see information technology everywhere except in productivity statistics. Email is the paradigmatic example where it's changed the way we communicate tremendously but it takes so much time that it's only made things, I would say, moderately more productive. Change and progress are not synonyms. You can have something that represents enormous change but only a small amount of progress.

Ezra Klein: Do you think that, over time, there is a natural tendency to convert technological change into technological progress? People always give the example of how long it took to figure out how to use steam power effectively.

Peter Thiel: I guess my default assumption would be no. We've had tremendous amounts of innovation in IT going back to the ‘70s and it's led to moderate increases in productivity. It's not a new phenomenon.

For us to really have a greater productivity gains as a society, we have to do things more in the world of atoms and not just the world of bits. The problem is reflected in the word technology itself. Normally, it means information technology, whereas in the ‘50s or ‘60s, it would have meant rockets and underwater cities and desalination plants that turn deserts into farmland.


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