Peter Thiel Returns to Stanford to Share Business Tips from "Zero to One"

Alumni, students, and friends, I would like to welcome you all here for this exciting evening. My name is Stephanie Young, and I'm the CFO of BASES, the Business Association of Stanford Entrepreneurial Students. We are thrilled to be co-sponsoring this evening's program with the Stanford Law School. Just as context for our organization, BASES is at the heart of student entrepreneurship at Stanford, working with thought leaders, prominent professors, and investors to unite the worlds of academia and industry. As one of the most established student entrepreneurship organizations in the world, we bring together exceptional undergraduate and graduate students from across campus, from the Department of Humanities to the School of Engineering,

who have one common interest, to tackle the world's most exciting problems through innovation and design thinking by learning from the most successful technology companies and founders in the Silicon Valley. One of our 10 programs is the BASES Challenge, Stanford's premier entrepreneurial competition that enables Stanford-affiliated startups to present their ventures to industry leaders for their share of $100,000 in prize money and mentorship opportunities. We're also excited to grow our Hackspace program, which aims to accelerate the growth of the hacker community both within BASES and Stanford through our weekly hacking hours and technical workshops. For more information to get involved with our organization, please visit bases.stanford.edu.

Now a few housekeeping items I wanted to mention. As you get ready to start our program, please turn your phones to silent, but don't put them too far out of reach. Later in the program, Peter will be taking questions from all of you. You can tweet your questions for Peter using the hashtag #ThielStanford. Now it is my great pleasure to introduce Dean Elizabeth Magill of Stanford Law School. Dean Magill is the Richard E. Lang Professor of Law and the law school's 13th dean. Before coming to Stanford, she was on the faculty at the University of Virginia School of Law for 15 years, serving most recently as Vice Dean. Dean Magill teaches administrative law, constitutional law, and food and drug law.

After completing her BA in history at Yale University, Dean Magill served as a senior legislative assistant for U.S. Senator Kent Conrad. She left the Hill to attend the University of Virginia School of Law. After graduating, Dean Magill clerked for Judge J. Harvey Wilkinson III of the U.S. Court of Appeals for the Fourth Circuit, and then for U.S. Supreme Court Justice Ruth Bader Ginsburg. Please join me in welcoming Dean Elizabeth Magill.

This is Peter Thiel. Well, welcome. In the spring of 2012, Blake Masters, who was then a law student at Stanford, did something fairly unusual for law students, although not so unusual at Stanford. He enrolled in a computer science class, CS 183, and he took extremely good notes. Blake generously shared those notes with others, also a bit unusual for law students, posting them on Tumblr, and eventually he received 2.4 million page views. Why was there so much interest in this computer science class? The class was taught by our guest tonight, Peter Thiel, who was by then recognized as almost certainly the most successful technology investor in the world. Peter grew up right here on the Peninsula in Foster City.

He attended college at Stanford, where he studied philosophy and biology. He then went to Stanford Law School, and though he moved away from the law after clerking and working at a firm, I do like to think that law school encouraged his skeptical and contrarian habit of mind and his constant questioning of conventional wisdom. Not one for modest goals, Peter Thiel first gained attention for his attempt to replace the U.S. dollar by starting PayPal in 1998, which unquestionably changed the way payments work and made it possible for hundreds of thousands of small businesses to thrive on the internet. After taking PayPal public and selling it to eBay in 2002, he found himself referred to as the leader of the Mafia.

This is a label that, in this case, is one he embraced. The PayPal Mafia have gone on to start some of the most innovative companies of our time, including SpaceX, Tesla, LinkedIn, YouTube, Yelp, and Yammer. In 2004, Peter himself co-founded Palantir Technologies, a data analytics company here in Palo Alto that makes tools for national security and global finance, and he made the first outside investment in a project then led by a Harvard sophomore known as the Facebook. Ten years later, Palantir is valued at more than $9 billion, and as you may know, the company formerly known as the Facebook turned out to be a pretty good bet. Today, as a partner at Founders Fund and in his own investing, Peter works to identify and support the next generation of technology companies.

But he's more than just a genius creating value and building companies. He is a generous and well-known philanthropist, and he is more than that. As Fortune magazine recently put it, Peter has, quote, 'drawn upon his wide-ranging and idiosyncratic readings in philosophy, history, economics, anthropology, and culture to become perhaps America's leading public intellectual today.' Most recently, with the help of his former student, Blake Masters, and those very famous class notes, Peter has reworked the material from CS 183 into a remarkable book, Zero to One: Notes on Startups, or How to Build the Future. This is the book he's talking about tonight. So please join me in giving Peter Thiel a warm welcome.

Thank you very much for that introduction. I always feel so hagiographic. I can only go downhill from there. And it's always a tremendous privilege to come back to Stanford. This is where I feel my whole career, my whole life after high school really began. And this is also where this book, Zero to One, started two years ago out of this class. And one of the challenges about teaching entrepreneurship or writing about it is that I think that the way people normally go about doing this is in one of several ways I think don't quite work. So one approach would be that you would just tell people stories about your own experiences. And so I could spend the whole evening talking about what I did at PayPal in 1998, '99, how we combined email with money.

And it's sort of all very idiosyncratic. And maybe there's some fun war stories, but you can't really generalize from that too much. And then at the other end of the spectrum, you have all these attempts to teach things where it's basically like sort of a formula. It's, 'You follow these five steps, and you will be able to build a successful company.' And I think the problem is that business—there's no formula. There's no science. And so these things end up being sort of very pseudoscientific. And it's because I think every moment in the history of business happens only once. The next Bill Gates will not build an operating system. The next Larry Page won't build a search engine. The next Mark Zuckerberg will not be building a social network.

If you are copying these people, you're in some sense not learning from them. And so the point of departure is—for my class and for the *Zero to One* book—is this idea of the uniqueness of all these great companies and how what's truly important and valuable is extremely unique. And I try to get at this through sort of a series of contrarian kinds of questions. One sort of question is always like, 'What great business is nobody building?' There's a more intellectual version of it, which I always like to ask as an interview question. And it's, 'Tell me something that's true that almost nobody agrees with you on.' And this turns out to be a shockingly hard question for people to answer. And it's hard because, for one thing, it's hard because—

We've just been taught that truth is conventional, that truth is whatever everybody agrees on. And so coming up with something new that people don't already agree on puts us in a very uncomfortable sort of a place. It sounds like it's really hard to do this. And so you have to be really, really brilliant, so we think. But the other reason it's a very tough question to answer is because you sort of think about the literal dynamic of an interview where I'm asking the question to somebody, and then if you give me an answer and it's like, 'Oh yeah, I already thought that,' or, 'I agreed with that,' that's the wrong answer. And so the right answer is one that in some sense people might not agree with. And so I think it often requires quite a bit of courage to come up with an answer that people haven't thought of.

And we're often sort of intimidated from thinking through these things. I want to today maybe give, in my brief remarks, I'll just give three answers to this question. And in some ways, my *Zero to One* book, it's like a whole series of things that I believe to be true that I think most people don't agree with. And I'm going to give you three answers to this question tonight. First answer that I believe, and this sort of falls from the uniqueness of these companies, is I think that—and the opening sentence of *Anna Karenina* is that all happy families are alike, all unhappy families are unhappy in their own special way—and I think the opposite is true of business. I think all happy companies are different.

They're doing something unique. All unhappy companies are alike because they failed to escape the essential sameness of competition. You know, when the *Wall Street Journal* excerpted that chapter in my book—the chapter's entitled 'All Happy Companies Are Different'—they retitled it as 'Competition Is for Losers,' which has kind of got people's attention. And it's, of course, because we normally believe the opposite. We believe that the losers are the people who don't compete intensely enough. And so you're a loser if you're not competitive or not really competing, but not that you're a loser if you're somehow too obsessed with competing. Because if you're too focused on competing, maybe you're losing sight of what's really important.

And the sort of way I articulate this is that I think the most important distinction in business that people don't talk about enough is that there are two kinds of companies in this world. There are companies that are competitive, and there are companies that have monopolies. If you're a one-of-a-kind company, a happy company that's doing something different, you are a monopoly. It is the goal of every founder, of every entrepreneur. It should be their goal to try to build a monopoly business. And so, or to frame this as a sort of an unconventional truth, most people believe that capitalism and competition are synonyms, and I believe capitalism and competition are antonyms. I believe that a capitalist is someone who's in the business of accumulating capital.

A world of perfect competition is a world where all the profits are competed away. And so the example I sort of use throughout of a bad type of business to go into is opening a restaurant, which is super competitive, and nobody ever makes any money doing it. And then the other end of the spectrum we have all these sort of fantastic tech companies that have been built in Silicon Valley, and sort of the, the example of a fantastic monopoly business I give is Google, which basically has had no competition in search since 2002 when it definitively distanced itself from Microsoft and Yahoo, and it's been making enormous profits for, uh, the dozen years or so, uh, ever since. And so you want to be in the monopoly.

You do not want to be in the world of competition. I think this difference is not understood for a variety of reasons. One of them is that people always distort it. So if you're running a monopoly, you normally don't talk about it. You learn not to talk about it. And you avoid talking about it normally by pretending that you're in a much larger market. So Google would never say that it's a search engine. It would say it's a technology company. It's competing with Apple on cell phones. And it's competing with Facebook on social, and Amazon, and Microsoft. And it's going to be competing with the car companies with a self-driving car. And it's in this big, big space called technology. And there's just competition everywhere.

And conversely, if you're running a super competitive business and you're trying to raise money for it, you want to tell people some unique, differentiated story. So if you're trying to open a restaurant in Palo Alto and the investors tell you, 'Well, I don't want to invest in that because restaurants are bad and I will just lose all my money,' you'll say something like, 'Well, this is a unique restaurant. It's totally different from all the others. It's the only British food restaurant in Palo Alto.' And of course, that's sort of a fictional sub-market, because it's quite possible that there are no people who eat nothing but British food. And so you're still competing with other restaurants, and maybe even some in Menlo Park, and maybe some

Mountain View, because people might actually drive a few miles or something like that. And so it's, again, you tell a story where the market's fictionally too small. And so the people who don't have monopolies pretend to have them. The people who have monopolies pretend not to have them. The apparent difference is quite small; the real difference is really big. So that's sort of intellectually why we don't understand this monopoly question. I think there's also a psychological part of this as well, though, that's very subtle but I think is very important to understand, where we sort of are taught that competition is valuable. And there sort of is this safety in crowds, that if a lot of people are trying to get something, it must be a good thing to do.

It's like if there's a long line of people waiting to get in somewhere, you just get in line. You don't even ask why people are standing in line. And we sort of—and so there is sort of like this psychology where already in the time of Shakespeare, the word 'ape' meant both primate and to imitate. And there is something about human nature that's ape-like, sheep-like, lemming-like, herd-like. We're attracted to these things where a lot of other people are doing them. I think this is always a, a challenge with a lot of the ways we're taught in school and we're educated, where you're taught to compete for all the same credentials. If you're on an athletic team in high school or college, you're competing on things there.

The competition has the effect of definitely making you better at that at which you're competing. So if you spend years prepping for an SAT test, you will get better at taking the SAT test. Or if you're on a swim team in high school, you'll get better at swimming because you're focused on beating the people around you. But it always comes at this price of possibly losing sight of broader questions, of questions of what's really valuable or what's really important. There's a crazy line from Henry Kissinger talking about his sort of fellow faculty members at Harvard where he said, you know, "The battles in academia are so ferocious because the stakes are so small." And this always seems like, well, this is sort of like a formula for insanity.

Why would the—why would the battles be so ferocious? And if the stakes are small, there's no real need to fight. And so it's just sort of like describing some sort of mass insanity. But on another level, it's also, I think, describing the inner logic of a situation, where if the stakes are small, if the differences are small, you have to fight much harder to differentiate yourself. And the competition gets more and more intense. And so we end up with these dynamics where everyone tries to go through the same tiny door when maybe there's a huge gate just around the corner that nobody wants to explore. And I think that's sort of the dynamic we're always up against. There's a version of this phenomenon in Silicon Valley where it's sort of a strange way in which there are a lot of people who seem to have Asperger's or something like that that seem to do really, really well in all these companies.

I think this should be turned around as a critique of our society, where what does it say about our society where anyone who's well adapted socially is talked out of all of their original ideas before they're even fully formed, because they sort of pick up all these social cues from people: "Oh, that's a little bit too weird. That's strange. Nobody's done that before. Maybe you should not do this." And so that the people who are not able to understand what people around them are doing are somehow able to explore some of these original ideas much further. There's this very strange set of studies that's been done at Harvard Business School. And you can think of business schools as consisting of the anti-Asperger profile of people.

So it's people who are extremely extroverted, sort of hyper-social, often don't have any really strong convictions—but I won't make this too sweeping a generalization. And you sort of have a hothouse environment where you put all these people in one place for two years, and you sort of say, "Well, what do they do at the end?" And it turns out, at Harvard, they've done these studies over 30 years now. At the end, the largest number always goes into the wrong field, because they've talked themselves into all trying to ride the last wave. So, 1989, everybody wanted to work for Michael Milken. This was one or two years before he went to jail. No one was ever really interested in, in internet or technology businesses except '99–2000, just as the dot-com bubble was about to blow up.

In the last decade, it was all sort of housing and private equity. And so there is this really deep dynamic where, even though rationally we should avoid competition and we should aim for monopoly, psychologically, we seem to always find it much more comfortable to go with the large crowds of people. But there is no wisdom in crowds. This is an anti-Malcolm Gladwell thing. There's no wisdom of crowds. There's only really ferocious competition. So think about this really hard. Second big picture contrarian thought: when I ask this question, "Tell me something that's true," or "How many great businesses are not being built?" one answer people intuitively have on this, which they don't quite articulate, but I think a lot of people have, is the sense that

You know, there aren't really very many answers to this question. We've actually discovered most things, or if there are things we haven't discovered, they're super hard to figure out. And I sort of suggest this trichotomy of three categories: conventions, things that everybody already knows to be true; mysteries, that are almost impossibly hard to figure out; and things that are in between, which I call secrets—things that are hard to figure out, nobody knows yet, but if you work at it, you can figure out. And it's my claim that a secret, or sort of some idiosyncratic body of knowledge, is often at the core of all these great businesses. It's something you're very passionate about learning about.

In the case of PayPal, we were very interested in this question of cyber-cryptography and currency on the internet. And so we had this fantasy about building the new world currency. This was our T-shirt. And it really was this area we explored in tremendous depth. And then it did actually stimulate a lot of our thinking about how to build this payment system that ultimately worked. So we failed to build the new world currency. We did build a reasonably successful payment system. But it's sort of this idea that there's something you can figure out that other people don't know yet. And there are certain common sense ways in which this used to be the case that's not the case anymore. If you were growing up

17th or 18th century, you could look at a map, and there'd be some empty spaces on the map. And you could say, "Well, who knows what's there? I could become an explorer and find out." It's a hard thing to find out. It's probably kind of dangerous to go there. But it's a secret you can actually figure out. Or in the 19th century, you could sort of do basic chemistry, and you could discover new elements in the periodic table of elements. And there's a way in which, obviously, geography or basic chemistry are not places where there are any secrets left. And so, you know, the entire map of the world's been explored. The, you know, basic chemistry's done. These are sort of closed fields. There's nothing new that you can learn in them.

But I think it's a mistake to extrapolate from that to all fields. I think there actually are many fields where there are some really interesting things left to be done. We obviously have all the fields around information technology where people have explored a lot in recent decades—computers, internet, mobile internet, that whole stream. And I also think that we could be looking at many other areas of science and technology where I think the progress hasn't been quite as fast, but it could have been faster. And I think this is energy, transportation, biomedical, all sorts of futuristic things people thought about in the '50s and '60s that haven't been realized. And I think there is sort of this self-fulfilling aspect

of this. If you think there are no secrets left to be found, then you will not be the person to find them. And if you think there are some to be found, you may very well be that person. And there is something about the way in which globalization has led to a world of 7 billion people where we always think, "Well, there's somebody else who's already thought of this problem," or, "It's an impossibly hard problem." So there's sort of the sense that the world is this very flat place where you're not going to be the one to discover it. And I think that's sort of an intuition that one always should try to resist. So, second somewhat contrarian idea is, I think there are still many, many secrets left. And therefore, there are many great things to be discovered, many great businesses to be built.

Third somewhat unconventional truth that I want to sort of frame is, and this one's sort of a little bit bigger picture. I think that in the 21st century, there will be two modes of progress. One I describe as globalization, copying things that work, going from one to n, horizontal or extensive growth. And I always draw that on an x-axis. And the other one is technology, vertical progress, discovering new things going from zero to one. And I draw that sort of on a y-axis. And I always put globalization on the x-axis and technology on a y-axis in order to underscore how these things are not synonyms, even though they get used almost synonymously and interchangeably all the time. You know, China today is sort of the paradigm of globalization.

It has a very straightforward plan for the next 20 years. It just must copy things that work from the U.S. and Western Europe and Japan. It can skip a few steps and can avoid copying some of our bad ideas. But it's just sort of straightforwardly all about globalization. But I think when you sort of look over the last 200 years, there have been periods of globalization, periods of technology, and they've sort of been somewhat different in character. The 19th century was a period of enormous globalization and technological progress. They sort of went in tandem. It sort of came to an end in 1914 with the First World War. Globalization sort of started to go in reverse. There was less trade, less connections between different parts of the world.

Technology kept going very, very fast. And then, I would argue, after 1971, when Kissinger went to China, globalization started again in earnest. But we've, in the last 40 or so years, I would argue, lived in a period of somewhat slow technological progress, where it's been a lot in computers, not so much elsewhere. And so, whereas the 19th century had both globalization and technology, the last 100 years have been characterized by, first, a period of enormous technological progress, less globalization, 1914 to 1971, and then, secondly, a more recent period with lots of globalization but somewhat less technology. And these two different periods were characterized by very different ways that we talk about the world.

So in the 1950s or 1960s, you would have described the world as consisting of the First World and the Third World. The First World was that part of the world where progress was happening. The Third World was that part that was just sort of permanently screwed up. Whereas today, we would talk about the developing and the developed world. And the developing countries are those that are copying the developed world. And so this dichotomy of developing and developed is sort of a pro-globalization convergence theory of history, where everybody will become more alike as globalization proceeds apace. But it is also a dichotomy that is somehow, I find, to be anti-technological. Because when we say that we're living in the developed world in the U.S., Western Europe, Japan, we are implicitly saying that we're living in that part of the world where nothing new is going to happen, which is done, which is finished, which should be resigned to—

—a long period of stagnation where the younger generation should not expect to be living lives any better than their parents. And I think this is a conception we should resist very, very strenuously. We should not accept this label that we're living in the developed world. And I think we should instead ask anew, how do we go about developing the so-called developed world? Thank you very much.

Thank you, Peter. I want to remind you, if you haven't asked a question through the hashtag ThielStanford, you still can. I'm going to get the ball rolling here, but Peter's agreed to take some questions from the group. Just submit them by Twitter, and I'll ask them. Thank you for being with us. I wanted to start with what you had to say up here and in the book about secrets. And it's a very admirable admonition to work on those problems that are solvable but are very hard to solve, or discoveries that can be discovered but are hard to discover. And I guess I'm wondering, are there things educational institutions can do to encourage people to work at those problems rather than competing along conventional lines?

And is there something individuals can do to force themselves to think in the way you're saying we should think?

I don't have an idea on how to reform all the existing education institutions. And I would say on an individual level, I think it's always really good if there's something that you're incredibly passionate about and just sort of find to be intrinsically interesting and that people pursue that. And so one of the, one of the resolutions I came up with a number of years ago was to always value substance over status, substance over prestige. And if I was giving my younger self advice on what to do or how to think about it, I probably would still go to Stanford. I might still go to law school. But I'd ask a lot more questions why I was doing these things. And I think if I was honest about it, too much of it was driven by prestige and status and not quite enough about really the substance of trying to learn things.

And I had sort of this—I sort of think of it as this sort of crazy, rolling quarter-life crisis, and sort of culminated in this big New York law firm where, from the outside, everybody wanted to get in; from the inside, everybody wanted to get out. I lasted seven months and three days, and and when I left, one of the people down the hall said, 'It's so reassuring to see you leave, Peter. I had no idea it was possible to escape from Alcatraz.' Which, again, and all you had to do was go through the front door. But our identity—people's identities get so wrapped up in the things they compete for that it was inconceivable for people to actually do that. And then the question was, well, how had I ended up there?

Why had I not thought about that more? And I think it was that I had taken too many of these shortcuts of valuing, sort of, what was prestigious, what was conventional, over what I really wanted to do. So I think always substance over status.

Can we talk about one of your contrarian thoughts: capitalism and competition are antonyms? Why do you think people resist that? You convinced me. Why do other people resist that, do you think? Why is that conventionally wrong?

Well, it's still—it's always, whenever I present this as an idea, it still always seems to be news to people to some extent. And there sort of are—there are all these things that get obscured in very different ways. So, you know, there's sort of a—one of the strange dynamics vis-à-vis at Google, for example—I don't want to really pick—I'm picking on Google because I think it's in some ways such a great company, but sort of all these ways we could learn from it. But you have sort of all these super-talented people at Google. It's been a remarkably small number of them who have succeeded in starting new companies. So there have not been that many great companies that have come out of Google, even though you have like 20 or 30,000 super-talented people there.

And what the people inside Google are told is, "Everything's going great because we have such talented people. People are talented, we're never rewarded enough." And so when people come out of that and start a business, they conclude, "Okay, it's just about getting some really smart people." It has nothing to do with the business strategy or the plan because that sort of got obscured. And so there are sort of—so you talk about talent when you don't want to talk about monopoly or something like that. So I think there are all these contexts where people just don't talk about it.

I'm sure a lot of people in the room would love to hear you talk about things you're thinking about investing in or you have—no proprietary information, obviously—but what's interesting right now in the startup world? If you had a crystal ball, could you tell us what you think is going to be the big developments of the coming, I don't know, five to 10 years?

So let's see. Whenever people ask about what are the themes that are going to happen, I'm always skeptical of themes. Because again, once you have a theme, you have quite a number of different companies in that theme. And so if you had a theme of online pet food companies, you don't want to be the fourth online pet food company. And you don't want to be the 10th thin-film solar panel company in the last decade. And you don't want to be the 20th pizza restaurant in Palo Alto or something like that. So I find myself to be quite skeptical of just about all the themes people talk about because they have this sort of undifferentiated feel. So it's like education software, healthcare IT—these are sort of really overwrought themes.

Or big data, cloud computing—not even clear what those words mean—really, really overdone. SaaS computing, really overdone. And what I think works really well are sort of one-of-a-kind companies where people are sort of on a mission to do something where if they didn't work on it, it wouldn't happen elsewhere. One of my colleagues from PayPal, Elon Musk, started Tesla and SpaceX. They were on a mission to go to Mars. And that's how we sort of got a lot of great rocket scientists to start. And that is really—they really are on a mission to go to Mars. And you could say, "Well, is there a theme of companies going to Mars?" No, it's just sort of this unique, one-of-a-kind thing. So I think a lot of the companies I'm excited about have aspects like that.

We're large investors in Airbnb. People have tried to frame it as a sharing economy theme, but I think it's really, again, just a one-of-a-kind company about helping free up some inventory and housing, expanding the tourism market. It sort of does something that's very unique in that sort of a way.

So let me ask you one last question about secrets. You sort of applied the theory of secrets to a whole different area than business development and innovation. This is from your chapter, chapter eight. On some level, every form of injustice involves a secret. Something is being done, it's unjust, it's happening because the society allows it to happen. The majority of people don't understand the injustice of it. Invariably, that's understood only by a small minority. Is there an important injustice today that you think only a small group of people recognize?

Well, yes, it doesn't mean I can tell you what it is, but certainly there'd be two different attitudes you could have. One would be that, yeah, in the past we know there were all sorts of injustices. Today we've discovered all of them, therefore there are none left, which would put us in a very odd position—point that there would be no hidden injustices left. And so I'm much more inclined to think that we're not at the end of history and that there still are secrets about justice left and secrets about injustices that are going on. I can speculate on some of them. They will always sound weird when you sort of put them forward because these are things people may not fully appreciate or understand.

But I think if people are looking back from the year 2100 on 2014, and they'll say, 'What was really crazy about the way things were organized in 2014?' I think one of the things people will say was really crazy is that so many of the political leaders and business leaders were sociopaths. And it's hard to know sort of quite how—borderline, not totally non-functioning, but sort of these borderline sociopaths—and that will be quite extraordinary. The stuff that's sort of like right on the cusp... This is more medical, but people in the 1960s knew that smoking was bad, even though it wasn't quite there. You sort of suspect football is sort of like where smoking was in the early 1960s. We sort of sense that it's a really bad idea, that it does a lot of brain damage, but it hasn't yet quite gotten articulated.

So I think there are sort of a lot of things like this that will be really different in decades ahead.

So, one last question on that: how do you fight against conventional thinking?

Well, I'm never sure that there's a shortcut formula. I certainly think being aware of how prone we all are to it is very important. When I ask this question, 'Tell me something that's true,' as an interview question, the answers are normally just really bad. One kind of answer that's always a little bit better than average is if you at least acknowledge that it's a bad answer and you don't know better. So if you say, 'Well, I think there need to be more education software companies,' that's a bad answer because everyone understands education should be fixed and things should be changed. But if you say, 'Well, I think there should be more education software companies, and I know this is not a very original answer'—

At that point, you're already way ahead because you're at least aware of how unoriginal you are. And so I think that's—and so I think it's always—the flip answer, another flip answer I always give to this question is people always think that originality is easy. It's incredibly hard, it's incredibly rare, and we should never lose sight of how much we're influenced by the society around us. It's like advertising, where we always think it's amazing how all these ads work on other people, but we think for ourselves, we're not influenced by them. And by the way, that's what everybody else also thinks about advertising, which somehow suggests it doesn't quite add up.

Well, let me ask you some of these questions from the crowd here. There's a question about the Thiel Fellowships. I think, are you five years into the fellowships?

We're starting the fifth year.

Starting the fifth year?

Do you have an assessment of whether they're successful so far? Is it too early to tell? What kind of metrics are you thinking about as you evaluate what you're doing?

No, I think it's, yeah, so it was this sort of somewhat unconventional program to give 20 people, 20 students a two-year stipend to stop out of school, work on a business or some non-profit or some other project that they would be interested in. It's sort of, we've had basically 83 people go through the program at this point. I think it's been a very powerful experience for almost all the people, and they've learned a lot. Some have gone back to college, so the first year we had 24. Five ended up going back to school sort of two years ago when that ended. But then a number of others have started some pretty successful companies. We've raised about 60 million in venture capital in aggregate. It's been quite successful, sort of getting more applicants each year.

We've sort of built out some peripheral programs, Summit Series for younger entrepreneurs to get involved. But it really has captured a lot around the zeitgeist. One of the things that was not expected was how much of a debate it would trigger around education. Because you always get sort of portrayed as this person who's against all college or something like this. And my perspective is just that there should not be a one-size-fits-all approach. And so it's, again, the real problem with higher education is that it's too tracked, it's too conventional. If we say that you go to Yale or you go to jail, that's not the way we really want our society to be structured. We want there to be many different kinds of options people can pursue.

And so I think the program generated a tremendous amount of debate and discussion because people do sense that there's something odd about how hyper-tracked things are. And there are many cases where people amass huge amounts of student debt. And then it's not clear; it limits their career choices in all these different ways. And so there are a lot of questions like that people are asking.

You'll have to forgive me for this question, but there are six people asking it. So, did you learn anything in law school that you thought was helpful to your later career? Or, what was the most important thing you learned in law school that was helpful?

Well, I think there are a lot of things that I learned. I'll give two things that apply in this startup entrepreneurial world. One part that I'm always very focused on is sort of the structure of these companies and how well are people aligned. And making sure that people are aligned properly, not just that they say they are. I think this is sort of a very legal kind of a framework to think about what are people's incentives, are they going to be aligned or not? And I think you want to both have formal alignment where you set the structure right, and you want to have informal alignment where the people would naturally try to work together well in one way or another. I think that somehow tends to get obscured in all these other ways.

There's always a pre-history question I like to ask founders of companies, which is, how did you, how did you meet? What's the pre-history of the company before you got started? And I find that to be a really instructive set of questions to ask. A bad answer is something like, you know, "We met a week ago at a social networking function, at a business networking function. We decided to start a company because we both wanted to be entrepreneurs." You know, that's like saying, "I married the first person I met at the slot machines in Las Vegas." And you might hit the jackpot, but it's probably a really bad idea. And a much better answer is, "We've been talking about this for a long time. Maybe one of us is more on the tech side, the other one's more on the business side."

We have these sort of complementary skills. And so I think this question of alignment and structure is incredibly important. I would say non-lawyers in business—and again, most people in business are not lawyers—but I think they sort of tend to make one of two mistakes. They either think of the law as irrelevant or they think of the law as all-important. And those are both sort of pretty... And so if you think of the law as irrelevant, you end up just breaking lots of laws and you get into trouble pretty quickly. And if you think it's all-important, you probably end up—you can very easily sort of get to a point where you just get handicapped by the law and you stop from—it stops you from doing anything.

And so I think that having sort of an intermediate perspective on it as critical but not all-important is actually a really valuable perspective to have.

A lot of questions have been provoked by your discussion of monopoly. And a lot of questions here are about: Does this, your view about monopoly, does it suggest anything about innovation policy? One way to put the question is, is Google now AT&T? Should it be broken up? Can the monopoly be too big? And do you have views about when it is too big?

Yes, there's always a political question. So from the inside, monopoly is always a good idea. From the outside, it's much more debatable. And I would say the basic distinction I give is that I think monopolies deserve the bad reputation they have in a static world where nothing changes, because that's where the monopoly is just a rent collector or a tax collector of one sort or another, artificially restricts supply, and that's sort of a bad monopoly. A good monopoly is one that actually has invented something new. So when Apple came up with the iPhone, it was the first smartphone that worked. And so it, for many years, had a monopoly on smartphones. I'd argue it still actually has it, with the brand and with a lot of network effects that's built up around it.

And in a dynamic context, that's a monopoly that actually creates—doesn't create scarcity, but creates a whole new thing. So people are lining up to get iPhones because they didn't even exist before. And so I think that's a good one. And so then there's always a question. So I'd say the question is: How static is technology at this point? I would say I think the government has gotten it wrong historically. We went after IBM in the '70s just as things were going from hardware to software anyway. I think—and people can debate this history—but I think we went after Microsoft in the late '90s when it was all going to shift to the internet anyway, and there's no reason to think Microsoft would have dominated the internet in the same way they dominated the desktop.

So I think very often, the intervention's been somewhat too late, and I also would be skeptical of the EU intervention on Google at this point, which I think people are underestimating in Silicon Valley, and there's a sense that that's building up.

So we have a couple questions about secrets and disclosure: your idea of what a secret is and how we should be pursuing it, and what is the relationship between that and when it can be disclosed. When can companies disclose their secrets? Should they do that? What's the wise thing to do?

Well, I suppose one framework is if you have a secret, on the one hand, if you tell nobody about it, it doesn't do anybody any good at that point, or there's not much you can do with it. And if you tell everybody about it, maybe that's—maybe that ends up diluting it in all these ways. And so I actually often, in some ways, I define a company as a group of people who have a secret, or a great company. That's actually what defines them. So you tell just the right number of people, and that's the people in the company or working on a particular project. I'm somewhat skeptical about how well—you know, we certainly have patent laws and all these sort of laws that give you legal monopolies in secrets you discover.

I don't think they work all that well in practice, but I think sort of the idea behind them is a good one. And so you always want to think about how do you preserve your secret in a way that's valuable for quite a long time.

I have a question here you can decline, but a request that you expand your recent comments about Twitter that you made on CNBC.

Well, there always are all these sensitive microphones all over the place in our hyper-media-saturated and Twitter-saturated society. But I had made some comments to the effect that I thought it was rather mismanaged company. I said something like maybe there was a lot of marijuana smoking going on. The CEO, Dick Costolo, in very good humor, did tweet back that he didn't have time to respond since he was busy eating a large bag of Doritos. But the context in which I put it was that I think Twitter's actually a fantastic business. They have a fantastic core idea. And one of the things that is true of these monopoly-like businesses is you don't have to be operationally that airtight. And so the 140-character idea was a really good one.

It took off like crazy. Nobody else could catch you once you had it. You could tell people about it, but then so many people adopted it that you ended up as the leading company. And so when you have a great monopoly business like Twitter, you often don't have to be run all that operationally well. And so that's sort of the context. Whereas if you're opening a restaurant, you have to be operationally super tight on everything.

I have a couple of questions about the influence of libertarian philosophy on your thinking today and over the course of your life.

Well, I describe myself as libertarian in that I'm socially liberal, fiscally more conservative. You know, I think, temperamentally, I'm more of a political atheist, though, in that I, I just don't believe that the political system is the place where we solve our problems. And so I, I, you, you get sort of caught up into these, in these political debates. And I—and while on the one hand I always believe that there are certain ways that we do better than others, realistically I actually don't think things will change that much. And that's why I end up focusing way more on, on technology as a way to change things than, than politics. One of the—you know, there is sort of one mode of the libertarian stuff where it's just you say these are just these timeless and absolute truths.

And I don't think that's—that's not quite the way I think about it. I think that it somehow is more true today than it was in the past. And for example, then again, the question I'm always most interested in is technology, science: How do we have more technology? How do we have science innovation? And then a political version of that question is, could the government be doing more to foster these things? And I think the sort of nuanced answer is it actually did a lot more in the past. And it seems much less capable of doing things today. And so you had a Manhattan Project where you built a nuclear bomb in three and a half years. And The New York Times op-ed a few days after Hiroshima was sort of anti-libertarian.

This proves how much faster science can happen when the government, led by the army, ordered scientists what to do, and if you just let prima donna scientists do whatever they wanted, it might have taken them 50 years to come up with a bomb. Now, they don't write op-eds like that at the New York Times anymore. Or you have something like the Apollo program in the 1960s, where—and you have a sense—you could not do a Manhattan Project, you could not do Apollo today. And so I do think that there's this really odd, uh, question of why there's been this decline of competence that we should explore a lot more. But given this decline, that's why I think libertarianism, in a sense, is more true, because for whatever reason, the government seems capable of doing so much less than it was 50 or 70 years ago.

Well, there's a deep question here about whether we have a meritocracy in America, but we don't have enough time, so I'll just ask you: Star Trek, Star Wars?

I think you come out pretty clearly in your book on this. Certainly, in the PayPal context, it was that we were always pro-Star Wars and anti-Star Trek, because Star Trek is the communist series; Star Wars is the capitalist one. In the Star Trek world, there is no money because you have the transporter technology, and it can sort of create anything you want. And only, sort of, mentally ill people actually want to have money in the Star Trek universe. Whereas, in the Star Wars world, the whole plotline is driven by how Han Solo needs to pay off his debts. And so it has, sort of, this whole money as a key driver of the plot. So, if you're creating a new payment system, you don't want to model it too much on a Star Trek world.

Well, I want to thank all of you for coming tonight, and let us all thank Peter for this wonderful hour.