Peter Thiel at Launch 2015

We met at a show on Shark Tank. It was, Zuckerberg was 19 years old. He was still pretty introverted. Sean did most of the talking. So if you, you know, if you basically, people always exaggerate how important these pitch meetings are. Reid Hoffman and I had spent about a year looking at all these social networking sites before that. So we were, you know, we were ready to write the check before we met. It didn't really matter what people were going to say.

And take me to Palantir, because this is another one of the major companies of our generation of this last wave. What is that? It's, what, $10 billion or something in that range? Something maybe a little north of there. A little north of there. And you were an angel investor slash co-founder of this company. Yes. And how much was that company worth when you started and invested in it?

You just do venture capital now?

And so I'm ready to invest at whatever point I'm convinced it's going to be a monopoly.

And Facebook, you felt like this is going to be the dominant social network, and there'll be only one major one.

You know, I'd like to say that I had that much figured out. I thought it would be dominant on college campuses, and that would be worth a lot more than $5 million. I didn't really think it was going to be quite as big as it turned out to be.

And there are some pretty big fights going on right now. I can think of Android versus iOS. This seems like a fight worth having. Is that a fight that Google shouldn't be in or Apple shouldn't be in, or too soon to tell? Well, it's pretty core to Apple.

I would argue it's not that core to Google. Google is fundamentally just a search engine, just a search company. That's where 98% of the revenue comes from. And then I think Google always likes to brand itself as an all-purpose technology company. It's got self-driving cars. You have Google Glass, phone operating systems, balloons in outer space, but really 98% of it's a search engine. Everything else is probably a distraction.

And the fight with Microsoft you talk about in the book became a huge distraction for Microsoft. Do you think that the apps business, the Google Apps business, has been a distraction? Before, and now they have an operating system, Chrome, you think that business, like Google, is not worth them spending too much time on, they should just keep with the search? It's always, it's always complicated, and sometimes you do have to fight. Sometimes it's existential, and you have no choice, but I think we're always too prone to, like, we're always too prone to

find conflicts with other people, with other companies. We're too prone to thinking what's valuable is whatever the other person's doing, and so we have to fight them for that. And I think it's almost always a better question to ask, what can I do, what can my company do, and our company do, that nobody else is doing, versus what is somebody else doing that's cool that I want to take away from them? That's, I think, generally a much less constructive approach.

Let's see. Well, there's definitely both Tesla and SpaceX were companies where the competition was really weak. So you're competing with these decrepit car companies in the U.S. that had barely innovated in 50 years. With space, it was these really bad aerospace, half-government, half-military, industrial complex-type entities that were, again, very bad at innovating, very inefficient. So if you're starting a search company, that would be tough, because Google's a really tough company to go up against. Going up against General Motors, going up against Lockheed, you're at least picking pretty weak competition. And that was an important strategic thing to get right early on. And there were a lot of challenges in building these companies.

But that part of the strategy, I think, is very underrated.

The fact is, nobody believed electric cars were going to be viable, or very few did.

How do you feel about where Tesla's gotten as a company? And where do you think they're going to go?

Well, it's been an incredible success. I would never bet against Elon in anything. So I think that's sort of, you know, hard rule number one. It's probably, you know, if you sort of ask what is it that the innovation, what's been the innovation in SpaceX or Tesla? There are many different forms innovation takes. The most common one we're used to is sort of you launch something and then you iteratively improve. It's sort of this continuous improvement model. We occasionally have a modality of innovation where you have a big brilliant breakthrough, like maybe Bitcoin or someone who worked on it in a closet for 10 years and then released this amazing discovery to the world. But I think there's another modality of innovation that's very underrated.

And what really is interesting is how was he able to motivate all these people to build this completely new product. And you could do something incredible not by inventing any specific thing that was new, but bringing all the pieces together in just the right way. And that's what the iPhone represented. That's what Tesla represents with cars or SpaceX with rockets.

Cutting the cost of 70% to 80% to get to space. Sure. If every time you flew an airplane, you had to throw away the airplane, air travel would be kind of expensive. Yeah. A magnitude more. Well, let's talk about some of the other people that you had at PayPal, because I think what's fascinating is you were responsible, I believe—you weren't responsible for hiring Elon, you were responsible for merging PayPal and X—but you hired... Reid Hoffman, David Sacks, Jeremy Stoppelman... Dave McClure, I think I fired. Who else?

We had Chad Hurley from YouTube. We had a slew of talented people.

How old were you at that time? I was 31 when I started it, 35 when eBay bought it. The PayPal period was a very compressed four years from start to the eBay, but less than four years from when we founded the company to when eBay acquired it. I think it was probably a combination of different things. I think it was a relatively entrepreneurial, somewhat chaotic culture. We had a lot of very strong personalities. I think a lot of companies are biased towards having people who sort of more just drink the Kool-Aid, and there's sort of pluses and minuses to both. If you have a more smoothly functioning company, you'll maybe have less dissent when things are going wrong. So we were sort of less smoothly functioning, but a lot of people did feel ownership of the product, would raise their voices quite a bit if they felt things were off track.

And of that whole group, who do you think, like, I mean, they're all kind of your children, so it's a really hard question to ask, but which one impresses you most of that cohort, and why? Or is that a question you get a lot? You know, I don't want to, I don't like ranking people as like... Yeah.

75% to 80% is still IT. And there are a lot of very deep reasons why those kinds of businesses tend to work better, and why it's actually quite rational for most people to focus on those.

And what did you learn about venture capital, you know, now that you've been doing it for so long? I mean, haven't you ever? Fund four, maybe? Fund five. Fund five now?

Which was the first time for a portfolio company LP to have that thought. I'm sure venture partners have that thought.

It wasn't interesting, but the company gave a very compelling speech and said, well, it's going to be a great investment. But the investor reacted in a somewhat different way.

I think it's hard to know what's going to happen, but it's the wrong question, because I don't think the future is fixed.

I think what matters is a question of agency. And so if we decide to work on it, I think we could build it. If we don't work on it, it will never get built. It's going to get built. It's going to get built. Larry didn't buy it to shut it down. If everybody thinks it's going to get built, then nobody will feel like they need to do it, and then nobody will build it, and it won't get built. Okay.

I feel like I'm playing chess against Kyle.

No, but it's always an agency question. Okay, but hold on a second. We shouldn't think of the future as this thing that's out there. The question that one should ask, especially as an entrepreneur, early founders, what is the future you want to build? Right. And then that's a future you should try to work to make happen.

What if the person who builds that future, however, maybe doesn't have the same... regard for humanity or trying things, or what if they're just a little cavalier or immature? What if the person who decides, "I'm gonna try strong AI," is a group of Pakistani students who get flipped and start working for ISIS or something like that? It sounds crazy, I know, but so did 9/11. This technology is not going to be reserved just for Stanford grads. What if it gets co-opted and people start to realize, hmm, cyber terrorism is step one, and maybe some strong AI to disrupt the world is another?

Well, I'm not a technological utopian. I don't think technology automatically makes the world a better place. I think there has been a powerful negative story about the world at least since Hiroshima in 1945. Maybe you can go back even further, but I think one of the reasons our culture at large is so anti-technological. You know, the easy way to see that our culture is anti-technological is to just watch all the science fiction films. And they're all about technology that kills people, that doesn't work, that's dystopian, and the future is some combination of Matrix, Terminator, Avatar, Elysium. I watched the Gravity movie a year or so ago. You never want to go into outer space. You want to be back on some muddy tropical island somewhere.

I don't like this pessimism about technology, but I respect that there are reasons that people have it, and I think they go back to all the problems of the nuclear age. So I think it's part and parcel of that. I'm somewhat hopeful that the really crazy people are too incompetent to do things, but it's not absolute.

Yeah, the crazy people have their moments, but you're generally right. The criminals tend to get caught because they're stupid. But it's not absolute. But it's not absolute. We can't put that on the absolute Founders Fund list. What about jobs, efficiency, robotics? This is a very interesting area as well. Working less or working what you want to work on could be seen as a positive, right? So having to have less jobs and having more pursuits in a Star Trek kind of way to evoke a more positive, less dystopian, more utopian worldview, it seemed like everybody there was pretty happy with the fact that they didn't have a job, they had a vocation or a hobby. Is that where we're going to head as a society now?

I mean, automation is getting pretty severe, and it's happening in a rapid, but there's less people working. We have the Tesla factory, self-driving cars, et cetera. And we already have large unemployment in a lot of places in the world. As the world goes flat and there's less employment, what's the world going to look like? What do you think are the positives to that, the positive solutions to that?

Well, let's see. I do think people have been too worried about technology replacing jobs for a long time. I mean, you had the Luddites in the 19th century where they were worried that, you know, there'd be nobody left to work in textile factories and tried to break machinery. And it turned out that a lot of the automation and productivity gains freed people up to do other, you know, more productive sorts of things. So I think if we had enormous productivity gains, enormous GDP growth, it might not be perfectly evenly distributed. But if you had GDP grow by 4% a year, I think just about everybody would get better off. I think the challenge is actually that in most sectors, we're not having anywhere near those kinds of productivity gains.

And I never liked the question because it's like on autopilot, and the future is fixed in that sort of way. But I also think, at this point, I think all trends are overrated. And so, you know, healthcare IT, education software, somewhat overrated. SaaS software, pretty badly overrated. If you hear the words 'big data,' 'cloud computing,' you need to run away as fast as you possibly can. You just think 'fraud' and run away. And—and the reason you want to be really careful about these buzzwords—if I said, 'You know, I'm doing, building a mobile platform for SaaS enterprises to do big data in the cloud,' if you have like a proliferation of buzzwords, it's like, 'Introduce me to your company, I know you'll invest without asking any questions.'

If you're the investor, that's a sign that you have to walk away. But all these buzzwords, they are a tell, like in poker, that the company's bluffing and that it's undifferentiated. Because we've heard the buzzwords before. And so if you're the nth company in a category that's well-established, that's problematic. You don't want to be the fourth online pet food company or the 10th thin film solar panel company or the 1,000th restaurant in San Francisco. So it's harder to describe because there's no buzzword. That's good. Yes. So I would say, yes, so I think the things that are... Conversely, the things that are underrated are the ones where there are no buzzwords, where it doesn't actually fit into any pre-existing categories, and then you have to always be open to listening to those.

Reid Hoffman, my friend who started on LinkedIn, started a company called SocialNet back in 1997. They already had social networking in the name of the company. And it was sort of these avatars in cyberspace. You could be a cat and I'd be a dog. We'd have these weird interactions on the internet. And it turned out no different than last week. And people aren't interested in networking in the abstract. They're interested in real identity. And real identity was the key innovation that Facebook had. It was the first one to crack real identity. So I think often figuring out the correct way to think about things in categories which we don't even have the proper languages is really critical to do.

Let's talk about entrepreneurs, young entrepreneurs coming into the space. What do you think the keys are for them today in 2015? Because this is a much bigger industry than when you and I came into it. There's a lot more noise. How should they look at the entrepreneurial process and just starting their career? Should they go work somewhere like Facebook and get some time under their belt? I know that you have strong feelings about college, or your group of Thiel Fellows who drop out of college. You know, if you had a son or daughter who was 18, what would you advise them to do?

Well, you know what? I mean, I probably would still go back to college if I had to still do it, just because I didn't have any ideas on what to do instead. If I had to do it over again, I would think a lot harder about why I was doing it, not simply to go to college as a default. I don't think there's a right time to start a company. I think the critical thing is to have at least the kernel of a really good idea. And at this point, that's sort of what—if you say, 'What's the formula for a company?' it's maybe some combination of, number one, a talented team that works well together. So it's the internal dynamics that matter a lot. Number two, a good product/technology. And number three, a good business strategy.

And somehow, you want all three of those to line up. And if you have those, you can have a great company, even if you screw up a lot of stuff. There are all sorts of processes people focus on. And I think the reality is that most of the companies in Silicon Valley are somewhere between really badly managed and badly managed. And so if you focus on these companies from an MBA process, or from a Harvard Business School thing, there are all these things that are being screwed up in enormous ways. And it often doesn't matter because you have this kernel of a good idea. When I was on CNBC back in September as part of this book promotion thing, they spent all these hours trying to do these gotcha moments to get me to say controversial things.

And they sort of got me to say at one point, you know, that I thought there was a lot of pot-smoking going on at Twitter, which was sort of, you know... When I left the stage, when the president of CNBC came up and said I did a great job, they wanted me back on the show, I realized I said a little bit too much.

You should have just told them, 'I know this because I've smoked a lot of weed with them,' and that would have defused the whole situation.

Where do you stand on drug reform, legalization of pot, because that seems to be a fascinating issue? In our lifetime, we've seen so many trends where people were against gay marriage, against pot, boom, it just switched.

How do you feel about that? I'm pretty libertarian on all these issues, so I think it should be legal. I think it will be legalized. I think that, you know, we did our first investment in a marijuana-linked set of companies. Oh, so you're investing in cannabis? You know, it was, again, it was sort of a, they were doing things related to it. It was not like direct farming or something like that. Making UV lights or something on sites? It was sort of a series, it was a whole thing kind of doing a set of battery capacitors.