Interview with Peter Thiel, the Popular Contrarian

Jerry Bowyer
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Posted: Nov 30, 2014 12:01 AM
Interview with Peter Thiel, the Popular Contrarian

This summer Blake Masters sent me a pre-publication copy of the book he had written with Peter Thiel, entitled Zero to One. Peter Thiel, as you probably know, is the founder of PayPal and Palantir and one of the earliest investors in Facebook. He is now one of Silicon Valley's most influential venture capitalists. He taught a course on business start-ups at Stanford in 2012; Masters enrolled in the class, took highly detailed notes, and worked with Thiel to turn that into the book Zero to One. Having long been an admirer of Thiel, I read the book hungrily -- underlining, marking, and circling favorite passages. And after I was done I did it again, this time reading the highlighted bits aloud for the benefit of whichever family member happened to be passing through my library at the moment.

This, I realized, was unlike any other business book I had ever read... and I've read a lot of them. Thiel's book is as much a book of social philosophy as it is one about entrepreneurship. Or, maybe a better way to put it is that it ignores the faux divisions between topics such as finance, investing, management, economics, technology, and sociology. All these things might be different subjects in school, but they are not different subjects in the real world. In this way, Thiel's book is a nice companion to Rich Karlgard'sThe Soft Edge, which is, likewise, multidisciplinary, but complements Zero to One's strategic focus with Karlgaard's culture focus.

Now, for a confession: The first thing I wrote to Peter after having read his book was that although I thought it was a very important work I did not think it would be a big seller. I looked on Amazon.com before starting this column and saw that it is this month's #1 bestseller in its category. So much for my forecasting skills. Maybe the world is ready for contrarians like Peter Thiel; maybe the received wisdom has finally failed so obviously that there is now a critical mass of readers who are ready to question the messages which have been beamed at them their entire lives. Maybe they're ready to consider the idea that college isn't for everyone (and not even for every high achiever), that an ever-increasing arc of economic and technological progress is not a birthright, that competition is overrated, that the next truly great business just might not be a social media clone, and that believing something (and staking everything on building a business around that something) might just be the most likely way to change the world. Maybe people are ready to be thinkers rather than imitators, to embrace truth as opposed to mimeses (sorry, you'll have to listen to the interview to get that one). Time will tell, but I consider the success ofZero to Oneto be a positive leading indicator about the next generation of entrepreneurs.

I chatted across a Skype line with Thiel recently from my office in Western Pennsylvania to his in Hawaii. The 90-minute conversation covered a wide range of topics from the benefits of monopoly to the importance of discovering secrets and ended (as the ultimate human conversation will) with St. John's Apocalypse. The partial transcript below barely scratches the surface-to listen to the whole thing,click here.

Jerry: "This book is kind of a big ideas book, maybe more than most business books; most business books are technique-oriented - "5 Simple Rules For This", "3 Simple Rules For That." What made you take such a kind of macro approach, where you're not just looking at business [but] at larger societal questions, macroeconomic questions, philosophical questions? Is that the way you normally think, is that sort of the normal Peter Thiel way of operating, or did you set out to write a book that's not your normal way of thinking?"

Peter: "Well, I did not want to write just another business book. And it is also, of course, the way I think about things is to look at problems from somewhat of an interdisciplinary approach, where there are a lot of details that you have to get right in the business. But then there always are these much bigger-picture questions of, "Where does the business fit into our society, or into the history of the world, even?" And I think that a lot of successful entrepreneurs are quite good at engaging on a range from a micro- to a macro-scale, and so in some ways this book is an exercise in thinking in some ways that tries to take the reader through this much wider range of topics than people normally engage in. On some level it is about how one starts a technology business in Silicon Valley, and then on another level it is about this much larger question of how we build a future, how we go back to a future that is better for the generations ahead."

Jerry:"Yeah, it seems to be a book about not just how to start a business but it's, you know, kind of how to fix the world or at least aspects of it; how to create businesses that help fix the world. Am I overstating that or is that generally what you're going for?"

Peter: "Well, certainly it is animated by my sense that the world needs a lot of fixing. I'm very pro-science and pro-technology; I believe that these have been key drivers of progress in the world in the last centuries. And at the same time, I also am concerned that they are progressing less rapidly than in times past, and since the 1970s we've been in an era of relative technological stagnation, where there still has been a lot of innovation in computers, internet, mobile internet, a lot of innovation in the world of BITS [but] a lot less innovation in the world of atoms: Things like energy or transportation, biotechnology, all sorts of other areas - I believe the rate of progress has been much less and that this has given our society a less dynamic and somewhat more stagnant feel."

Jerry:"This is a realm in particular where your contrarian impulses, I think, are most felt. Because you're in a Silicon Valley-type environment where it's not just technophilia, it's almost a Utopian technological ideology, what I would call ‘The Church of TED Talks': "Here, we've got a solution and this will fix everything and everything is just going to be great [and] it's going to be great really soon." Singularity is an idea associated with that. And that's almost kind of the religion of Silicon Valley, and you're coming along and you're knocking over what you're saying are golden calves. Do you have to be a contrarian to get there? Is it a contrarian impulse that caused you to question that tech-Utopia vision, or did you see evidence first that caused you to have that perception, and your contrarianism allowed you to say out loud what the evidence had led you to? Do you understand what I'm asking?"

Peter:"Yeah, I understand what you're asking. I think what's always important is not to be contrarian for its own sake but to really get at the truth. Now, I do think that we've lived in a world where - in nations, peoples, crowds, madness is the rule - so when you have sort of large mobs of people they often are sort of crazy."

Jerry:"They reinforce each other's craziness, right?"

Peter:"And so we've had this extraordinary era of bubbles in our society: There was the dot-com bubble in the ‘90s -- which was, of course, full of crazy and misguided optimism -- [and] the housing finance bubble in the last decade. I would argue you have a government bubble today, an education bubble, and still bubbles in various other areas where you have these sort of psycho-social phenomena. I always find myself very distrustful of intense crowd phenomena and I think those are things that we should always try to question, especially critically. But at the same time, it's not simply going against the crowd; it is always the much more important question to try to figure out what the truth of the matter is."

Jerry:"I see."

Peter:"Jerry, you're quite right that in a Silicon Valley context, the pressure - whether you're an entrepreneur or a venture capitalist or scientist - is always to sort of suggest that we have this tremendous future that's just around the corner, it's happening, it's going much faster than anyone imagines it will happen. And while I'm sympathetic to that as an ideal (and I think there are elements of it that could be true if we really worked at it), I don't think it happens on its own, I don't think it's automatic, and I think if we were to take a critical look at things we would conclude that it's not actually happened in many key areas in our society. One simplistic approximation that I always give is that [if] you look at the last 40 years, we've sort of been running really hard to stay in the same place, where in a sense the innovation in the world of computers has been offset by the lack of innovation in energy. Even with the fracking revolution today, oil prices are still, in real terms, at the highs of the Carter years in the 1970s -- and so we've not been able to overcome the oil shocks of the ‘70s because there's not been enough innovation in the energy area."

Jerry: "This is another area where I find you frequently debating people who -- some of them are friends of mine or acquaintances, and might even be friends of yours ideologically, but seem to vociferously disagree with your idea that there's stagnation: resource exploitation stagnation, general economic stagnation. I've wondered to what a degree the right, or the Libertarian right-would you safely consider yourself somewhere in that vicinity?"

Peter:"Yeah, I'm basically on the libertarian right."

Jerry:"Alright. So, libertarians [or] free market economists in general have this long-running argument with Malthusians, on the left largely (although there are Malthusians on the right as well, but socialist-Malthusians), starting really in the 1970s where they gained real sort of cultural influence in elite institutions."

Peter:"The Club of Rome, the Paul Ehrlich Population Bomb, that whole line of thinking."

Jerry:"Precisely. Right. And Julian Simon argued the other side of that debate and we can debate about who won it and the bet that they made, but I think what happened is at some point the free market libertarian supply-side movement (that's where I'm coming from) got stuck on that idea, got stuck on that debate, and therefore it sees any form of pessimism or even a lack of optimism as treason in the Ehrlich vs. Julian Simon debate. I see this in the thought of Larry Kudlow; optimism and free market economics sort of got welded together so that anybody who's free market but not particularly optimistic at the moment is seen as committing some kind of treason against the ideology."

Peter:"And what's of course always very odd about it is that when you get these same people to talk about politics in the U.S., they are often despondent: "The country's becoming socialist," they think of Obama as a terrible president. And so there is this extraordinary disconnect where they are unreflexively optimistic about economic trends, they are deeply pessimistic about political trends, and it's as though these two things are happening in separate worlds. It's a little bit unfair to debate Kudlow since he's not here, but it's always like this question of, "Does the politics matter at all or will all these problems just solve themselves or is the politics toxic?" And so I find there to be a lot of confusion about this topic."

Jerry: "Yeah, there's a complete compartmentalization of the economic scenario from the political scenario. I mean if Obama is as bad as all that, then why are we all held to the cult of optimism?"

Peter:"Yeah. So there's some sort of schizophrenia around these things I think. What I would say on the question about scarcity (or of course the sort of stark Malthusian version of scarcity) is that I don't think it's a good thing. I think it is a bad thing that we should resist. But we have to acknowledge that this is a part of what may be going on and we may be living in a world of scarcity, of constraints, and that it's a problem that we need to work really hard to resist rather than to pretend that it does not exist. And you can reframe the Malthusian thing in a more right-of-center way by saying that the opposite of Malthusianism is sort of cornucopian economics - it's a world where money grows on trees, it's Keynesianism."

Jerry:"Or stones can be turned into bread."

Peter:"Or paper can be turned into gold. You can say that in the 19th century economics more broadly was the science of how to economize, and with Keynes and the post-Keynesian world in the 20th century, economics became the science of how not to economize, how you did not need to worry about these things. And you know, Keynesian economics I think can work in a cornucopian world in which there are fundamentally few constraints. It works much less well when you have constraints - you end up with inflation or you end up with various types of things going wrong. And so this is where we have a very important--you know, the public policy debate is, "Why is someone like Paul Krugman wrong when he advocates just printing far more money and having much greater deficits? Why shouldn't we have deficits a trillion dollars a year, as far as the eye can see and print even more money?" And if you're in sort of this cornucopia world with no constraints, why not just print money and create more of it?"

The article is republished from RealClearMarkets.com

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Mr. Bowyer is the author of "The Free Market Capitalists Survival Guide," published by HarperCollins, and a Forbes contributor.