Peter Thiel: We are in a Higher Education Bubble

So let's humanize Peter, see if we can get him to answer a little bit of a personal question, then we'll go to the larger issues. The rundown I just gave is too full of success. There must have been some complexity about being thought of as a child prodigy or having that kind of attention focused on you. Talk about whatever that complexity was, and then tell the Supreme Court story.

Well, there's a way in which I grew up in a phenomenally tracked context, at the end of the day. In California, eighth grade, junior high school, one of my friends wrote in my yearbook, 'I know you're going to make it into Stanford.' Four years later, four years later you go to Stanford, then four years after that, Stanford Law School. Probably the final sort of tracked credential that I thought I needed to get was a Supreme Court clerkship. Got interviews with two justices. They normally interview eight people, pick four. I missed it with both. At that point, I was just absolutely devastated. One of my friends who had helped coach me through the process, years later we reconnected and he sort of asked—he didn't have to ask me, you know, 'How are you doing?'

Or, 'It's great talking to you, Peter.' First question was, 'So, aren't you glad you didn't get that Supreme Court clerkship?' And there was sort of the sense more generally that in my 20s there was a super-tracked thing. You know, I ended up at a top law firm in Manhattan. It was one of these places where, from the outside, everybody wanted to get in; on the inside, everybody wanted to get out. When I left after seven months and three days, one of the people down the hall from me said, 'You know, it was really reassuring to see that it was possible to escape from Alcatraz. And actually, all you had to do was go out the front door and not come back.' So it was a little bit easier than Alcatraz. But it was difficult because, psychologically, so many of our identities get wrapped up in these competitions we win.

And I think, often, the people in our society who are very talented, very gifted, in some ways get tracked into this even more intensely than elsewhere. And I think we all, if we're going to build a better future, we need to do new things, and we can't all do the same tried-and-true things that have worked. And so I always try to get at these things indirectly: 'What great business is nobody building?' The interview question I always like to ask is, 'Tell me something that's true that very few people agree with you on.' Somehow, how do we break the mold? How do we move out of it? These are super hard questions for people to answer, even when they can read on the internet that you're going to ask the question of everybody who comes in the door.

It's one of those questions that doesn't actually become easier when you know that it's going to be asked, because even though we all have some answers to these questions, they're very uncomfortable because, in the context of an interview or anywhere else, the answer is one that the person asking the question doesn't want to hear. If they agree with you, it's probably a bad answer. And so I do think this challenge of breaking from convention, being able to do new things, is a very acute one. Already in the time of Shakespeare, the word 'ape' meant both primate and to imitate. There's something about human nature that's very deeply imitative. It's how kids learn language from their parents. It's how culture is transmitted in our society.

But then there also are all these contexts where imitation goes badly wrong. It's the madness of crowds. It's market bubbles. It's all sorts of crazed manias that we've seen in recent decades. And so you have this very strange phenomenon in Silicon Valley where a number of the more successful people seem to be suffering from a mild form of Asperger's. And I think we always need to flip this around into an indictment of our broader society. And we need to ask the question: What is it about our society where those of us who do not suffer from Asperger's are talked out of our interesting, creative, innovative ideas before they're even fully formed? Where we sort of pick up on all these cues from the people around us and notice, 'Oh, that's a little too weird, that's too strange.'

I better just stick with that Supreme Court clerkship.

Peter, you have some evolving views on higher education. There's some wonderful quotes: 'We have a bovine attitude towards academic degrees,' 'Higher education is the next U.S. bubble,' 'University administrators are subprime mortgage brokers'—as if they were subprime mortgage brokers. Explain the argument.

Well, education is sort of seen as the absolute be-all and end-all, as the safe way to track things. And education is very good at training people to do the same things that we've done over and over again. And it's perhaps not as good at pushing some of these new ideas. I think there are a whole set of challenges that have gone wrong. The costs have escalated faster than inflation since 1980, faster than any other category. And then there are all sorts of questions whether the kind of incredible tracking where kids are getting tracked already in preschool, certainly K through 12, is in some ways narrowing things and sort of socializing our younger people in ways that are less good than they appear.

I think there's always a question what the nature of the educational good is. You can say it's an investment good—we're investing in the future. You can say it's a consumption good, like college is a four-year party. You know, I think most of the parents and students think of it actually as an insurance policy where you're buying this really ever more expensive insurance so that the students don't fall through the really big cracks in our society. And we should be asking some big questions why the insurance costs are going up and up like that. And I think that reflects some questions about our society. But then I think, from the point of view of the colleges, it's not an insurance policy at all, but it's sort of a crazy tournament.

And it's a zero-sum tournament. And if you were the president of Harvard or Stanford, if you wanted to get a lynch mob of students, alumni, faculty to come after you and try to lynch you, what you should say is something like this: 'We live in this much larger, more global world. We offer great education to everybody. And so we're going to double or triple our enrollment over the next 15 to 20 years.' And people would—they'd all be furious because the value of the degrees comes from this massive exclusion, and what you're really running is something like a Studio 54 nightclub with this incredibly long line outside and a very small number of people let inside. It's branded as positive-sum, everybody can learn, and the reality is deeply zero-sum.

Peter and I had time to talk by phone last week. It was just a phone call. It wasn't that special, frankly. But thank you. So Peter and I had time to talk last week, and I said, 'So what's the big thing you're thinking about? What's the big thing you're talking about?' And he said something contrarian. He said he's not overwhelmed by the pace of technological progress. Used words like 'stagnation,' 'Groundhog Day.' Flesh that argument out a little.

Well, I think one of the very important public policy questions in our society is how much technological progress is happening, because I think this is what's going to determine whether the quality of life is gonna get better for people in our society in the decades, in the decades ahead. And I'm not absolutely negative, but I'm probably slightly on the pessimistic end of the spectrum as Silicon Valley goes, which I think is always hyper-optimistic on this question. And I think it's been, if we look at the past 40 years, it's been the story of quite rapid progress in computers, software, Internet, mobile Internet, in the world of bits. It's been much more limited progress in the world of atoms, whether it's energy, biotech has been more challenging, there's been more challenges in everything from transportation, space travel—all these things that people would have called technology in the 1950s and '60s, I would say have been much slower.

So there's been a lot of progress in the world of bits, which have been quite unregulated, a lot less progress in the world of atoms, which, for all sorts of reasons, both good and bad, have been much more heavily regulated. And I think the upshot is that when you look at things like the productivity growth numbers in the economy, the GDP growth rate, these things are actually somehow slower. And then we have all sorts of complicated debates whether these numbers don't measure things correctly. I think they're roughly correct, or they're no more distorted than they were 40 or 50 years ago. And so I think we have to take very seriously this idea that perhaps there's not as much progress as there has been in the past.

What decade was the Golden Age?

You know, I think that in the '50s and '60s you had very rapid progress, but I think you would have had rapid innovation even in the '30s, which were a horrible decade by almost every standard. From the point of view of technology, you had phenomenal progress. You had secondary oil recovery, you had the plastics revolution, household appliances, the movie industry, the aviation industry. So if you looked at all the new industries that were started in the 1930s and you contrast that, say, the 2010s, it tells you that this is an era that's actually much worse than the '30s from the point of view of, say, technological innovations. I think we had a lot more for maybe the 150 years before, and you could pick any decade like that.

You have a now famous quote about flying cars.

Well, it's probably been overdone, but it's basically that they promised us flying cars and all we got was 140 characters. I think it always gets misread as a bit too much of a negative thing on Twitter, because I think we have had a lot of very successful companies in Silicon Valley. And Twitter is a phenomenally valuable business. It came up with a new way to narrowcast communication. But of course, there's a sense that even though it can be great as a business, it's great for the 2,000 or 3,000 people who work at Twitter. They will have well-paying jobs decades to come; there is a sense that that level of innovation is perhaps not enough to single-handedly take our civilization to the next level.

And so I think we have a lot of stories of specific success, but they don't necessarily translate into this general societal improvement.

Peter published a book, wrote a book in 2014, which was a bestseller. It's called Zero to One. I read it. It is astonishingly original, and it's just taken by storm all the young entrepreneur community. He was teaching a course at Stanford in 2012, and one of his students, Blake Masters, took notes and put his notes up online. They became a little bit of a sensation in Silicon Valley, and then David Brooks wrote a column about it, and they ended up with 2.4 million page views online on his notes. So he and his student wrote the book. Give the argument of the book.

Well, the contrast I try to start with is two different modes of innovation or progress. And I think we can have progress in the 21st century through globalization where you copy things that work. It's going from one to end. China is the prototype of that. And there are ways in which that's worked incredibly well. And we can debate how well that's going to keep working from here on out. And then there is, and I always draw that on an x-axis and describe that as horizontal or extensive progress. And then there's doing new things, copying things that work, globalization, and doing new things. That's technology. It's going from zero to one. So it's going from one to 100 typewriters, going from a typewriter to the first word processor.

That's sort of vertical or intensive progress. And the basic argument is that those are the kinds of businesses we need to be building more of. If you succeed in building them, they can be very valuable because on the inside, you often don't want to be copying things that work because you end up with super competitive businesses. You don't want to necessarily be starting the 20th pet food company, online pet food company, the 1,000th restaurant in San Francisco, which is sort of my example of what was a bad business to go into. So copying things that work is not always the best idea in business. But actually trying to do new things can often be both good for innovation and good for business. You have to try to get that intersection just right.

Many of us have children who have decided they want to be entrepreneurs, and you see them by the raft. What's your observation about what young smart people are doing? Are they headed down a right path or do you find it disappointing?

Well, it's hard to generalize in such broad brushstrokes. I'm always a little bit nervous of people who say, "I want to be an entrepreneur." So I think that's roughly in the same category of "I want to be rich," "I want to be famous." You don't start a company or start a new business for the sake of starting a business. Ideally, you start a business because there's a very important problem that cannot be solved in an existing large government, large corporate, large nonprofit structure. Why do you ever start new businesses? It's because large structures get too sclerotic, too political, they can't actually do new things. It should always be anchored in some specific substantive problem which you're going to solve.

I never liked the abstraction of starting a business for its own sake.

George Packer wrote a profile of you in *The New Yorker*. I think we can all agree that it was a disappointment to him that the magazine was *The New Yorker*. But we at *The Atlantic* take a broad view of this, and we think within another 100 years, they're going to really make something of themselves there. So George Packer said, here I'm quoting, "he might be the most successful technology investor in the world." In *Zero to One*, there's a seven-part test that Peter applies to investments that are brought to him. And what I thought we might do is just go through a few parts of that test so you get a sense of the rigor he's bringing. The field that we're going to talk about for a moment is green technology, where Peter is a little bit of a contrarian in the community of people who are enthusiastic about it.

So let's see how green technology fares against elements of the test. So, one is the question of monopoly. Could you explain the test and what your thought on green technology is?

So if you're starting a company, you always want to aim for monopoly. And you want to have a large share of a market. And so, paradoxically, it's often good if you start with small markets, if you go after small initial markets. And a lot of the—like, eBay started with Pez dispensers, and then it went to Beanie Babies, and then it gradually expanded into collectibles. And so that was sort of a very interesting way to start a business. And they often start with markets that are paradoxically too small. This has been true for so many of the great internet companies. The cleantech startups, they all started—the first slide of every presentation was, 'We have a market, it's called energy, it's measured in trillions of dollars.'

And we're like this tiny minnow in a vast ocean, and you never want to be that. So whenever you have vast markets, that's telling you the competition is going to be too intense, too indifferent, undifferentiated, you're not going to be able to do something that's really interesting. And this was a very deep, endemic problem to much of that field.

How does cleantech do against the test of durability?

You want to—a great company is not just the first mover. It's not just someone that does something new, but it's one that somehow will be a last mover, where it has some sort of a lasting advantage. There are many areas of cleantech innovation where it's been this sort of very small set of incremental improvements. So you come with a new solar panel design. It's 10%, 15% better than the next guy's. But then someone else comes along with a better design one or two years later, and you're out of business. And so it's a good form of innovation for society, but it's paradoxically quite hard to get it to work on the business level. And there are many areas of innovation that have this sort of continuous feel to them, where it ends up being very difficult to get the business to work.

Disc drive manufacturing in the 1980s. Aviation. Great for society, hard to get the business models to work. And so one of the tests I often have is, can we do something where you get enough of a breakthrough and then you somehow are able to maintain that lead? And that's often been quite hard to get that story told.

And then there's an elegant test of the secret. Will you explain that?

Well, once again, it's just some answer to the question, 'What do you believe that other people don't?' And so if there are too many buzzwords in a presentation, that's always a worrisome sign. So in Silicon Valley, people are focused on educational software, healthcare IT software—probably overrated. SaaS, enterprise software—very overrated. Big data, cloud computing. If you hear those words, you need to think fraud and run away as fast as you possibly can. And so if I gave you a startup that was a concatenation of buzzwords—'We're building a mobile platform for SaaS businesses to bring big data to the cloud'—um, my sort of pattern recognition is that the buzzwords there tell, like in poker, that you're bluffing and that there's nothing, um, undifferentiated, there's no secret that you know that nobody else does. And I think that, uh, that certainly during the cleantech bubble in Silicon Valley, sort of which was about 2005 to 2008, you had, again, the sort of concatenation of all the buzzwords. They all sounded undifferentiated. You could work really hard and, uh, try to

go beneath the surface and try to figure out, 'Okay, was this one a little bit different from this other one in some way?' But on some level, the surface of things was the heart of things. And if you just saw this litany of buzzwords, it was a good enough reason to be quite nervous.

Peter has an original view on the process of aging. He talks about people being too complacent about the inevitability of death. He talks about death as a problem to be solved. And he's done some funding, some nonprofit funding in this area. On the phone, I tried to push Peter to say, 'So how long can we live?' And he resisted the question. Let's give it one more run. Pretend we're coming in at the top 20% of outcomes. 50 years from now, how long might the species live? And 200 years from now, how long might the species live?

Well, I'm still going to refuse to answer that question. And it's because I don't agree with—this is not the right way to think about the future. The future is not this thing that is out there, that's set in stone. This is like the Ray Kurzweil "The Singularity Is Near"—we have these exponential curves of progress. There's a longevity trajectory where life expectancy has been going up by about two and a half years a decade. It's been a straight line for 150 years, so you could extrapolate that. But I think it's never set in stone like that. And I think we should talk much more about, instead of the future, we should always talk about this question of human agency. What can we do to affect these problems and shape them?

And I think on this question of aging generally, there are these deep forms of psychological denial or all these crazy psychological ways that we deal with it. And I think the combination that we have with aging is generally a combination of acceptance and denial. And acceptance is, you know, "We're all going to die, there's nothing we can do about it." Denial: "It's not going to happen anytime soon, so I'm not going to think about it." And you can sort of think of acceptance as extreme pessimism, denial as extreme optimism. But they sort of always—extreme pessimism and extreme optimism always converge. Extreme pessimism tells you there's nothing you can do. Extreme optimism: there's nothing you need to do.

And so it always sums up to doing nothing. And so I think that the question about the future should never be one of extreme optimism or pessimism where it's just going to be this way. It should always be mild optimism, mild pessimism. It's contingent. There's a lot we could do one way or another. And so on this question, if we work at it, I think we could make tremendous progress. We could cure cancer. We could cure Alzheimer's. There might be some general things that cause aging, so it may not be just these organ failures of one sort or another. I think there's a lot of general progress we could make. The question has barely been tackled, but it's something we have to choose to work on.

Peter, you did have a figure that if we defeat disease, then we die by the chance of accidents. What's the math look like there?

Well, if you solve the problem of aging altogether, that wouldn't necessarily make you immortal. You'd basically end up getting into a car crash or plane crash or something like that. You'd die after about 600 to 1,000 years. And so then those things would become much more serious, and people probably would be very nervous about driving cars.

I want to close on a memorable note. So Peter meets Mark Zuckerberg. He's 20 years old. Zuckerberg is 20 years old at the time. Peter gives him—I don't know, figuratively or how it's done, but you give him $500,000—and then you have four words of advice. Do you remember them?

Something like, "Don't mess it up."

It says something like, "Don't mess it up." He's such a gentleman.