Peter Thiel in conversation with Peter Guber at Live Talks Los Angeles

Thank you for allowing me to be here with you and to have had the opportunity to read your book and to chat with you about it. I have many considerations I hope to share with you and hear you share with the audience about it. You're known as a contrarian. And the most controversial thing you're often cited as saying is that you started a program that wants to pay college students to leave college and start their own business. And yet you've taught at Stanford, and the foundational elements for this book were really drawn from that class. So isn't that a contradiction?

No, I don't think it's a contradiction. I think that I'm always interested in reaching people wherever I can find them. I think that, I believe there's no one formula that works. So on the education question, I think that there's no one formula. Not the case that everyone should be an entrepreneur. It's not the case that everyone, you know, should go to an Ivy League school. It's not the case that everyone can go to an Ivy League school. And so part of the class was designed to try to teach everything that I knew about entrepreneurship. And then we sort of distilled. The notes went on the internet. They sort of went viral. And then we tried to distill it in this Zero to One book. And one of the really big challenges, though,

both teaching and writing about entrepreneurship is that it's one of these subjects where there's no formula, there's no process. And I think that most of the attempts to do it end up devolving into these very pseudo-scientific things, where it's like you go through these five steps and you'll have a great company. And I think that the reality is that the next Mark Zuckerberg won't build a social networking company. The next Larry Page won't build a search engine. The next Bill Gates won't build an operating system. And if you're copying these people, you're not, in some sense, learning from them. And so the point of departure for Zero to One is this idea that there is no set track. There's no set track in education.

There's no set track in entrepreneurship. And what's critical is the things that are unique, that are different. I try to get at this through these contrarian questions. So there's a question: what great company is nobody building? Or there's an intellectual version of this question, which I always like to ask as an interview question: 'Tell me something that's true that very few people agree with you on.' And this turns out to be a shockingly hard question, because we've been taught to think of truth as something that everyone just agrees on. And we think, 'Okay, you have to be really brilliant to come up with something new.' But it's hard for a second reason, which is that in the context of an interview, if I gave you an answer and I said, 'Well, I think the education system's screwed up,' and you said, 'Yeah, I agree with that,' then that's a bad answer.

So a good answer is one that people might not like to hear and that might be somewhat awkward. And we live in a world in which I think courage is in much shorter supply than genius. And so there are sort of all these reasons that we end up not doing these things. My book gives a whole series of answers to this question that I have, things that I think are true that other people don't agree with. And I'll just mention just one sort of big thematic one. And it comes out of this uniqueness idea. And I'd say the big thematic one is that most people think that competition and capitalism are somehow synonymous. They're closely related. And I think they're actually antonyms. 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 if you want to compete like crazy, you should open a restaurant. You'll never make any money. And sort of the paradigm example I give of a super non-competitive company is Google, which has had no competition in search since 2002 and makes enormous profits. And these companies are known as monopolies. And I think what you want to do as a founder or entrepreneur is you want to have a monopoly. You want to aim to build a monopoly. And this is sort of one of these ideas that, for reasons I will let you figure out, people generally don't talk about. And so the companies that do this never say, 'We were successful because we built this great monopoly.'

It sort of always gets obscured in all these different ways. And so I think it's this truth that's very, very poorly understood. Sort of the way I... You know, there's this opening line from Anna Karenina where it says, you know, '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 because they figured out something unique that they do and they're the only ones in the world that do it. All unhappy companies are alike because they fail to escape the essential sameness that is competition. And that is the fourth online pet food company, the tenth thin-film solar panel company, the hundredth pizza restaurant in Los Angeles, or whatever that might be.

And when the Wall Street Journal excerpted that chapter from my book, the chapter's entitled 'All Happy Companies Are Different,' and when you get something excerpted, they agree with you on what you write, but they always get to rewrite the headlines. And so they rewrote the headline from 'All Happy Companies Are Different' to 'Competition Is for Losers.'

Which is a little bit punchier.

But I think it sort of gets at this contrarian idea in a very powerful way because we normally think that the losers are the people who can't compete that well. So you're a loser if you're, if you're the slow person on the swim team, or you're a loser if you don't test as well on a standardized test. And so to say that the people who are hyper-competitive, who are super attracted to competition, are somehow the losers is really, really counter to sort of all the things I think we get taught all the time. And this is where it comes back to this critique of education that you started with. And this is sort of the autobiographical part of this. So I went to Stanford. I went to law school. And I was sort of super tracked in eighth grade, junior high school.

One of my friends wrote in my yearbook, 'Yeah, I know you're going to get into Stanford in four years.' And sure enough, that happened. But by the time I was done with law school, I sort of ended up at this law firm in Manhattan. And it was this strange dynamic where on the outside, everyone wanted to get in. On the inside, everyone wanted to get out. I left after seven months and three days. One of the people down the hall from me as I was leaving said that it was reassuring to see that it was possible to escape from Alcatraz, which is sort of an odd thing to say because all you had to do was go out the front door and not come back. But psychologically, the psychology of this is really intense because so much of our identity gets wrapped up in competition, in finding our identity defined by the people we beat.

The school you went to in the US is always such a big part of your identity for this reason, because it's somehow wrapped up in this competitive meaning. And competition does make you better at whatever you are competing on. I don't question that. But it always comes at this terrible price. When you focus on beating the people around you, you lose sight of what's important or what's valuable. And so this is sort of the autobiographical thing—was a sort of rolling quarter-life crisis I had in my 20s, and I've tried to move beyond.

Well, that's terrific. I went to law school, too, and the difference was the first day of law school when I was called upon, I knew immediately I didn't want to be a lawyer—the first day, the first minute. And I spent all the way through law school and graduate law school because I didn't find another path. So I understand that feeling. What I don't understand is that, at the same time, you express about education. Education and higher education is also a socializing experience. It's learning to deal with people one-on-one, breathing the same air in the same room, communicating, standing on your own two feet, being, if you will, in camera at that point. And there are other aspects to the education that develop not just your aptitude—and I think the law school is about half, three-quarters about aptitude—but develop your attitude.

So would you say that college plays no part in developing the whole human being?

Well, it does play a role in developing us. It's unclear whether this is unambiguously a good thing. And I think socialization is actually sort of an ambiguous thing. There's this very odd phenomenon in Silicon Valley where, you know, some of the most, a lot of the talented businesses, great businesses seem to be run by people who have suffered from some mild form of Asperger's. And you sort of have this question why that is. And I always think this fact should be turned around into a critique of our society, which is: what is it about our society that takes people who don't have Asperger's, and where you get socialized into thinking that your original ideas, your creative ideas are bad, they're weird, you shouldn't pursue them, you get subtly discouraged?

And I think that's a lot of what socialization does. They've done these very interesting studies at Harvard Business School, where you can think of the makeup of Harvard Business School as people who are whatever the anti-Asperger's extreme is. They're people who are super social, super extroverted, generally don't have any convictions of any sort. Hopefully, I'm not offending too many people here. But you put these people in a hothouse environment for two years. At the end of two years, it's been found systematically that they all end up deciding, or the largest cohort of them, ends up deciding to sort of try to catch the last wave that just passed you by. It's a surfing metaphor here in Southern California.

And so you're never going to catch that wave. In '89, they all wanted to work for Michael Milken a year or two before he went to jail. Never interested in tech or Silicon Valley, except '99, 2000, when they timed the end of the dot-com bubble perfectly. And then 2005 to '07, it was all real estate, private equity-type stuff. And so I think socialization is very ambiguous. The word 'ape', already in the time of Shakespeare, meant both primate and to imitate. And there is something very powerfully imitative in human nature. It's how we learn things. It's how we learn language as kids. It's how culture is transmitted, but it also leads to bubbles, it leads to herd-like thinking, sheep-like thinking, lemming-like thinking, and there are things about this that are quite problematic.

So if you make the case that aptitude, which is often very much a part of higher education, aptitude, and yet attitude is the one that drives curiosity and passion and uniqueness, how do you develop a school that develops attitude then? You have to find a way to inculcate that in people, to think outside the box, to be a contrarian. How is that developed, and where is that institute or that environment that creates that?

So I don't have answers to all these questions, by the way. I think the pedagogical—I think the attitude that I think is always a good one to have, and I'm not quite sure how you get there, but the attitude that is a good one to have is to think that you can figure out something new, that you can do something new. And so if you think there are hard problems that you can solve, intellectual problems or maybe business problems, then you will work at them and you will solve them. If you think that all problems are either easy or impossible, you know, even though easy and impossible are opposite extremes, you end up doing nothing. If it's easy, it's too easy and you're not going to really try. If it's impossible, it's too hard and you're not going to try.

So I think the sort of mindset that there are some problems that are just at the border, if you really work at them, you can solve them. You'll do you'll work at it and I think and I do think there are sort of a lot of things that you know There's always a sense the standardized testing always gives us a sense that there are all these people who are smarter There's seven billion people in the world So there are other people who are better at something but I think that's not quite true because there's so many different kinds of things to do that When we started PayPal, we were very interested in cryptography and currencies. It was a very idiosyncratic intersection of two areas, and you could actually really understand that.

We didn't succeed in building the new world currency. Maybe Bitcoin will succeed. We did not succeed at that. But that sort of substantive focus, the belief that there were things you could learn, inspired us to then come up with some creative ideas about building a payment system that actually worked.

You didn't succeed without passion, and curiosity informed your passion. So you were curious rather than critical about a problem. You weren't stymied by it. Where was that founded in you? When did you recognize that? Was it in elementary school? Was it inculcated in some experience? What was the foundation experience that made you not risk-averse, be willing to look at things without having an absolute answer, and yet aspire to a solution?

Yeah, it's always unclear where—I think risk aversion is always—risk is always a tricky thing to measure. I often think it's a really big mistake never to make any mistakes at all. So if you calibrate everything so that you get 100% on every test, you get everything perfectly right, you're probably taking really easy classes, and you're not pushing yourself very far at all. And so if you never make any mistakes, you may be running the risk of underperforming massively, and that's an enormous risk that you're taking. And so I think risk is—often gets reframed in all these—can be framed in all these very different ways. I think the, you know, I think the—I think the—I don't know, it comes from all these different perspectives, but I think I've always thought that we live in a world where there's a lot that we don't know yet and that we can figure out, and that it's not the case that all the discoveries were made in the past.

It's true there's certain areas where you can't do anything anymore. If you were living in the 17th or 18th century, there were empty spaces on the map. You could become an explorer. You could go there and you could find out what's there. In the 19th century, you could fill out the periodic table of elements. And we're in a world where you're not going to discover anything new in geography or basic chemistry. And there are other fields that are sort of complete. But I think most things are not like that. And so I'm always very skeptical of this notion that we have some sort of complete set of knowledge in any field.

But part of your thesis, at least what I read in part of your thesis, was that you can't win as being an incumbent over time. You have to be a challenger to your own incumbency, that somehow, even if you're high up on the ladder, at the very top, that's precisely when you challenge your incumbency. So, in that case, there's going to be failure. How does an individual, how does a corporation, if they're going to take this challenge, or an entrepreneur, deal with failure, which is inevitable if they're going to take chances?

I do think failure is somewhat overrated in general. So that's my—I'll give you a contrarian answer there. Because I think that we don't, you know, you want to—you don't want to risk triviality, so you do want to try things that are somewhat ambitious. But I think failure is always pretty damaging. When people fail, failure is often overdetermined. You often fail for a whole slew of different reasons. You typically don't figure them all out, and so you don't actually learn all that much from them. And so I do think we should always, you should always aim to succeed.

Yeah, but that's great. If you don't fall down and find out you can get up, you can be stymied. So the question is, part of the process of learning that, was there a particular time in your life, early in your life, where you tried something, ambitious or otherwise, and you failed, and you learned that, 'Wow, I could change course, I can get up, I can do it again,' that you understood that was part of the process?

Well, there are lots of things that you fail at. And generally, you always end up failing at things that are too competitive. So I was a competitive chess player. So at age 12, I was ranked seventh in the U.S. in the under-13 category. I was competitive at math in high school. I came within one point of making the U.S. Math Olympiad pre-qualifying things in my senior year in high school. But both the times, it was still a failure. At number seven in the U.S., I knew I could never be Bobby Fischer. It wasn't even close. If you're number 60 or 70 in the U.S. in math ability in a given year, maybe you shouldn't go into math because you're actually still not good enough to make breakthroughs in math. And so I think when we

get caught up in these super—and the law school version of this was, you try to get a Supreme Court clerkship, I failed at that. And so I think when we are set up competitively, we always end up failing. When we define ourselves in terms of some sort of tournament, it's like you lose or you win, you get to play the next round, and then chances are you'll fail at some later stage in the tournament. And so I think that is sort of why I'm such a big fan of trying to do things really differently and just saying, you know, 'Competition is for losers.' I don't want to play that game anymore. I don't want to lose.

I want to move on to another subject in the book. You talk about branding and its influence. We talk about branding as name recognition and the underlying promise and premise that makes you remember the brand. But I would ask you, is it really brand that you're talking about or bond? You're trying to make a relationship with the observer of the brand or the observer of the product or the promise that you're making. Is branding a misused name, that you're really saying it's a calling as opposed to a recognition of what the product is? It's a benefit or a value proposition that your audience is taking.

I think branding is this very mysterious kind of a thing. Advertising is this very mysterious field more generally. I think it again goes to this idea of imitation and how great a role this plays where we always say that we don't imitate people, we're not influenced by other people. And yet I think, and so advertising, we always think of advertising as something that works on other people but never ourselves. 'Look at those stupid ads. Who are the people who will fall for this?' And yet somehow there's a disturbing degree to which all this works. So I think my own sense is that branding, it's never really about the product. It's always about the other people using the product. And so it's always in terms of, 'The cool people are using this product.'

And so it's always this identification with other people in one way or another.

I see that, and yet so many corporations pursue a different philosophy: 'Get my brand out there,' as opposed to, 'My product,' or, 'My promise,' or, 'Solve the problem.' I thought that was a remarkable—for me, when I read that in the book—a remarkable thought. Somehow, though, you... don't like the word luck. You have a tendency, when I see it in the book, that you think luck is somehow not an actual reason that anything happened. At the same time, you have to believe that you're not the master of the universe. When something happens, the serendipity of all this confluence of events that you didn't even see in your vision conspired at that moment to make the thing work. Instead of an 'aha,' you have a 'ha-ha,' meaning, 'Look, I'm not the master of the universe.'

Did you ever have those kind of moments? Yes, although I think...

Well, let me just say something about this luck question, where it's, again, sort of somewhat of a contrarian idea. Because we always want to say that luck is this incredibly big, plays this incredibly big role. And I'm always interested not in the past question, 'How did we get here? Was it luck or chance or something like that?' I'm always interested more in the—I'm only interested in the future. And so, is the future something that's a matter of luck, or is it something we can control? And it's probably some of both. It's very hard to know the answer because you can never run this experiment twice, so you can't know—which is theoretically how you'd—so you can't actually scientifically prove how much is luck or how much is planning or foresight.

But what I've found is that when I think of the future as dominated by luck, that's sort of a formula, that's a mindset for making bad decisions. So as a venture capitalist, as an investor, if I say, 'Well, I have no idea if your company's gonna work or not. It might, it might not. It's a matter of luck. It's a lottery ticket.' I think it's bad to treat other people as lottery tickets. And it's also bad as an investor, because once you say something's a lottery ticket, e.g., a small probability times a big payoff, that small number times a big number, it always is a small number. Once you think it's a lottery ticket, you've already psyched yourself into losing money. And so I think this question about luck, on the one hand, it can be like, maybe this is some deep metaphysical truth about the universe.

I've sort of said, you know, luck is just like an atheistic word for God. It's just this plug we fill in. Or maybe when we use the word luck, we're just acknowledging our laziness, where we're not really willing to think that hard. And so if you say, 'Well, I have no idea what's going to happen. It's a matter of luck,' maybe that's true or maybe I'm just being lazy. And so I always want to push back on luck as an explanation and instead push to think harder. I obviously can't figure everything out, but I want to resist being lazy.

Many young folks feel that there's few secrets left to discover—or uncover, I should say, discover, uncover. Essentially, behind this is: the role of technology is so complex now, how can we ever create something new? How can we ever pull those pieces together? Why is that thinking anathema to being successful?

Well, obviously, it's self-fulfilling. So obviously, if you think that you can't find anything new, then you won't be the person to find something new. So there's a huge self-fulfilling aspect to this. I don't think it's accurate, though. So, I mean, this is obviously—if it turns out that it's impossible to do anything, then maybe it's good to know that, and maybe it's impossible to become a Renaissance painter, and we should talk you out of it before you try to do it, because there's no future in Renaissance art. But I think the reason people think this is that there are certain subjects like geography or basic chemistry where things are closed. There are other subjects where it's clear you have to work unbelievably long to get to just the beginning of the answers.

And I think physics is probably the classic one that dominates because that's what smart people go into—physics. And to get to the frontiers of physics, you know, you have to go to grad school, you have to do a postdoc. It's like, you know, it's K through, I don't know, K through 25, something like that. But there are all these other fields that are not like this. You know, you can learn how to program computers in about six months, and there are a lot of really creative things, and so you can get to the frontier pretty quickly. So there are points we can look where the frontier is super far away, but it doesn't mean that the frontier is far away in every direction. There are a lot of directions where the frontier is still really close.

That's great. Your premise is that if you focus on near-term growth in a company, in essence, you're going to miss the future. But our whole country, all the public markets, are built around quarter-to-quarter earnings, advance notices, the shareholder that says, 'I don't care about the future, I care about today, this minute,' and all the metrics are built around that. How do you change that kind of system, which fuels so much of the economy, to let companies really invest in long-term thinking, planning, designing, which doesn't have an immediate payback?

I'll just give one anecdote from PayPal and then try to answer your question. In March 2001, I did this financial analysis. We'd been in business for 27 months, and I concluded that three-quarters of the value of the PayPal business came from cash flows in the years 2011 and beyond.

Wow.

And if you do this sort of analysis, something like this is true of all these companies—Twitter, Facebook, all the sort of emerging tech companies. 75 to 85% of the value of the businesses come from what they will be doing in the years 2024 and beyond. And so one of the enormous mistakes people make when they analyze these companies or think about them is they're always focused on the growth metrics because that's the part you can measure. That's the part you can measure day to day, week to week, quarter to quarter. But the much more important variable that's a little bit less quantitative is durability. So growth is key, but then you have this durability—it's like the 5x multiple on growth, in a way.

And that's always a little bit more qualitative. And I think we end up doing a much less good job thinking about it. People have all sorts of excuses why you can't think about it. It's like, technology is changing so fast. Who knows what the world's going to be like in 10 years? And certainly, if you say you can't think about it, say it's impossible, then you won't have a clue. So I think this much longer time horizon has a lot to be said for it. The answer that I think has emerged in Silicon Valley over the last two decades is that the companies just don't go public anymore. And this is basically the shift. And there's certainly people who blame Sarbanes-Oxley and some of the regulations about public companies, but I think the much more important thing is that culturally it's seen as always this very dangerous thing.

Eventually you get to a point where you get a lot of pressure and people go public and then you try to have really strong statements that you're not going to listen to Wall Street, you're not going to be beholden to them. I think Google did a very good job at this with their IPO. But the first cut is that you don't go public because as long as you're private, you can keep reinvesting in the future. There was sort of all these subtle dynamics between Facebook and Myspace, but I think one of the really big disadvantages Myspace had was it was owned by News Corp, and so they were acquired in 2005 by News Corp, massively profitable in 2006 because News Corp had to make money as a public company.

By 2007, the growth was negative and everything collapsed, whereas Facebook just kept reinvesting in the future all the way.

One of your other focuses for success is your belief and conviction in proprietary technology. You think that's like the fulcrum. You think that's an element that can create, if you will, an accelerator for success. When you say proprietary technology, what do you mean?

Well, again, it's always this question, how do you get to monopoly as a great company? There's no absolute precision about this, but what I suggest is that you want to have something that you are 10 times better than the next best thing on. It's not good enough to be 10% better or 20% better because technology or innovation, it never sells itself. This is a delusion that engineers have. It's an insane delusion scientists have. The scientists are really crazy about this. They always think if you have something that's slightly better, the world will beat a path to your doorstep. You need things that are dramatically better to break through the clutter and drive adoption by consumers and businesses and whoever else will adopt things.

My rule of thumb is things need to be 10x better. So Amazon, when it's—and it can be sort of more technical, it'd be less technical—so Amazon had 10 times more books than any bookstore in the world when they launched. PayPal, when we launched, we were competing on payments with eBay PowerSellers, where the next best alternative was using a check that took seven to 10 days to clear versus clearing within a day. So that was like a solid 10x improvement. Sometimes it's infinite. So you could say when Steve Jobs built the iPhone, that was just a smartphone that worked. Before that, there was no smartphone that worked. That's way more than 10x. There are certain areas of technology that are very hard to do.

And it is actually maybe a political problem. You had all these sort of clean technology companies. And I actually think it is important for us to develop alternate energy technologies. But they were, you know, you could only get something that was 10% or 15% better. And maybe the way you'd get to something adopted over a long time period would be you'd have a whole series of different people make 10% improvements. But that doesn't get you to monopoly, and it didn't get you to the returns you needed to justify the risk. And so if you have an industry where the structure is such that you can't get 10x improvements in one step, it may actually be very hard to finance the innovation.

You mentioned monopoly a bunch of times, and yet our government and most of the Western European governments, they abhor monopolies. They want to tear apart a monopoly. Is there a paradox there? Is there something that we're missing? Why is the government so strongly not in favor of monopolies?

Well, it's schizophrenic. So it's against monopolies that act as toll collectors or that restrict supply or act as restraints on supply. We are obviously in favor of monopolies. There are actually legal monopolies you get in copyright or trademark or intellectual property. And so there is this idea that if you invent something, you actually should have a monopoly on it as a way to pay for that. So we sort of have these very different thoughts on this. And I think—I think the monopolies are fine as long as you're in a dynamic world where you develop new things and then they probably don't last forever. Eventually some other technology comes along. If you have a monopoly that lasts a few decades, that's pretty good.

You talk a lot in the book about creating an environment that cultivates, that creates this element of success, this environment, the culture, if you will, of success. What is necessary to have that culture? Could you define the elements in an organization that creates the culture that will help be the Petri dish, if you will, for finding those successes?

I think culture is always this somewhat strange word because it doesn't necessarily mean lava lamps or Aeron chairs or all the weird external forms. I think the companies that I really like are ones that are united by a unique mission, by a unique sense of mission. And the culture is defined by the mission of the company. So when a colleague, Elon, started SpaceX, you know, the mission is to go to Mars. And, you know, it's not just something he says. He really believes it. And the people, the people who he recruited, the rocket scientists he recruited joined because of that. And then that, and then sort of everything gets defined around that. And I think the best cultures are ones where you are—

—really, and again, I sort of have differentiation always as my theme, so it's always the monopoly idea in every form, right? So you want things where you are, everyone is really, to the outside world, it looks super different, and so it has this, it's this monolithic company, but it's completely—because that completely differentiates it from everybody else—so it's the only company where everyone's gonna go to Mars. So that's totally different. And then on the inside, I think the healthy cultures are also super differentiated, where on the inside, everybody has a role that's super differentiated. You don't have people doing things that are sort of redundant or duplicative. I've often thought that if you were a psychopathic boss and you wanted to just sort of create trouble for the people reporting to you, the simple formula for doing it is to tell two people to do the exact same thing.

And they will get into a fight. It's like clockwork. And so if you're not a sociopathic boss, you should always try to figure out ways to powerfully differentiate things. So internally, you want things differentiated. On the outside, you want the company unified in a way that makes it differentiated from everybody else. And so I think what's always very powerful is this sort of counterfactual sense of mission, where if we didn't do it, no one would do it because we're the only people in the world working on this problem. If we don't work on this, this problem will never get solved.

I have a couple more questions and then we'll turn it over to you to think about what you'd like to ask Peter. Just on that point, one more moment. I keep thinking of these companies that succeed, that continue to make projects and product that delights their audience as opposed to just another feature on the thing. Those companies tend to be more aspirational than perspirational. Are they companies that somehow aspire to something larger than just the product itself?

Well, I think there's always some transcendent sense. Generally, if you're just trying to get rich, you won't even get rich. So I think that's always this very strange paradox in this thing. One of the questions I always like to ask people when they're getting started is sort of the prehistory question. How did you meet? How long have you been working on this? How long have you been thinking about this? Sort of a bad answer to the prehistory question is, "We met a week ago at a networking function. We both decided to become entrepreneurs because it would be cool, and we started this company. We're not really sure what it's doing, but we're just going to make a lot of money." That's like saying, "I married the first person I met at the slot machines in Las Vegas."

You might hit the jackpot, but it's probably just a really bad idea. And I think the good answer is there's a long prehistory, and people have been thinking about it for a while in differentiated ways.

So, um, I drive a Tesla, and you talk about Elon Musk and you talk about Tesla. And what I'd like to know is, if you look at the characteristics of Tesla, there was another company called Fisker, which was very, very well-funded, Kleiner Perkins, a big backer of it, and Silicon Valley very, very well-funded, and yet Tesla reached escape velocity and Fisker was a fiasco. So, what were the characteristics of Tesla in the company, in the culture, in the environment, in the calling, so to speak, that in the same kind of a business, electric cars, made one successful and one not successful?

Well, there's probably a few different things that happened. But I'd say what's unusual about both Tesla and SpaceX, the companies Elon started, that's quite unusual is they involve this sort of complex coordination. So why is a Tesla a great car? And it's not that there's a single breakthrough technology. And so you can sort of say all these pieces already existed, but you had to sort of bring them together in just the right way. I think there was something very similar with the Apple iPhone. There was no single breakthrough, but it was this complex coordination of all these pieces. And we're used to—the forms innovation takes, we're used to—iterative innovation. Iteration is the modality we're very used to.

Brilliant breakthroughs is something we don't have enough of, but we still occasionally have brilliant breakthroughs. I think Bitcoin was a brilliant breakthrough. And then you have other things where you have sort of gradual iterations, which is—a lot of consumer internet businesses have that modality. Complex coordination is something we're not used to seeing, and it works because you end up with this sort of vertical integration that's very powerful. I think the formula that they basically used was that anything where there was only one person supplying a part, you had to do yourself. Because if it was only one person supplying it, that person had a monopoly. And so you had to bring all the monopoly components in-house, and then anything where there were multiple people doing it, you did it—you could buy that on the market.

And so you sort of brought all the monopoly components in-house, and you had to coordinate them. And it turned out that to do this right, you actually had to bring a little bit more in-house than people would think. You had to bring the distributor network in-house, which is a monopoly component that sort of squeezes all the car companies in Detroit today, and the sort of various other manufacturing components you brought in-house. But I think that was very powerful. And so, using my monopoly competition analysis, I would say Fisker, or for that matter most companies, underestimate this problem, and they underestimate the negotiating challenges you have. So you're negotiating with the monopoly.

They say, 'Yeah, we'll have this part for you, and it'll cost $10 million, and we'll get it to you in six months,' and then six months later, 'Oh, well, it'll cost $20 million, and it'll take 12 months,' but what are you going to do?

Yeah, I've seen that problem. Last question from me for the group, and that is, your concluding chapter, you talk about stagnation or singularity—stagnation being the drag on the economy, the drag on the company, the drag on your future, and singularity. Define for us how you see singularity and its virtue.

Well, it's just sort of continued acceleration in technology. I am—you know, I'm not a—I don't think we've had, I think we've had sort of this strange history in the last 40 years where we've had a lot of progress in the world of computers, internet, mobile internet, the world of bits. We've had, I think, less progress in the world of stuff, of matter, less in energy or transportation, space travel, or underwater cities, or all the Jetsons, or all the things people talked about in the '50s and '60s. I think even medicine has been some, but less than we might have liked. And so I would like to see sort of a re-acceleration of progress in the world of atoms. I think one of the reasons we have this sort of sense of stagnation, of relative stagnation as a society is that

is that there's been somewhat less in the last 40 years than we would like. We don't live in an unambiguously technological or scientific age. Now, the place where I disagree with someone like Kurzweil on *The Singularity Is Near* is I don't think the future is this thing that's set, and that the future just consists of these exponential curves that will happen regardless and all we have to do is sit back and eat some popcorn and it's like this movie that will gradually unfold. I think instead of the question of the future and what the future is going to be, the question I'd always like to stress much more is the question of human agency and what are we going to do and what is the future that we want to make happen.

And so I think it's up to us. It's not like stagnation or singularity is a question about the future. It's a question about us.

That's a good answer. Okay, it's your turn. Someone has to give the microphone around.

Yeah, just a reminder how questions work. They generally start with a W or an H, and sometimes a D. They are questions. We do not believe in two-part questions, and the only person tonight who gets to ask follow-up questions is Peter Guber. Also, no pitches, even if they're phrased in the form of a question. So, first question up here. Thank you very much. Good job.

Mr. Thiel, given the current economic conditions that we're inheriting from our predecessors, what ideas or thoughts do you have for this generation that we can basically grow the economic pie?

Well, I think there are all sorts of things we can say that are bad or suboptimal about the way things are, but we should never underestimate there are a lot of things that that one can do. I always think we should start by thinking about what we can do, where we can make actual progress. This is why I think it's so critical to start new companies. I think innovation, it can happen in different contexts. It can happen in government. It can happen in big organizations, big nonprofits, big companies. I think a lot of those tend to be somewhat sclerotic or somewhat bureaucratic in our world. And that's why I'm sort of a very big fan of small groups of people doing new things. I think that's the form that innovation will take in our time.

It doesn't always have to be that way. But I think there's sort of a pessimistic version of this, which is that I think sort of a lot of these other structures are not working that well. But I think the startup form is the one that we end up with. So I think it will not happen through some mass political movement. I'm very skeptical of politics as a way to change things. I think it will happen through small groups of people just doing new things and asking for forgiveness later.

When you started Palantir and PayPal and you invest in all of these companies, where do you look for inspiration? Sorry, I didn't hear the first part of your question. When you started Palantir and PayPal and you invest in all of these companies, where do you look for inspiration?

Well, there's a lot of inspiring people in the tech industry. So it's the people I work with, the people I've started. I'm always bad at the mentorship question. There are no precise mentors that people have because there is sort of always a sense that the things you're doing are new and have not been done before. But there is something incredibly inspiring about the tech industry and sort of the indomitability of the human spirit in the sense that there are all these great things people are working on.

Hi. I had a question about PayPal and a quote that you had said about bringing power back to the people, you know, the disenfranchised all over the world. And in the world of Apple payments, Google, things that are going on with Square, and then the recent news with Icahn and the kind of splitting of PayPal, I was wondering if, how much of your vision for your founding has been realized and is there more potential in the digital payment space?

Well, our vision was to create a whole new currency for the world. We didn't quite succeed at doing that. One of the challenges in payments is that it's always, there's sort of all these things you can imagine that would be somewhat better, but it requires a lot of people to adopt them. And so again, you have this very big challenge where it's maybe just 10% better, how do you get people to adopt this new thing? And you have a lot of ideas people have that are sort of an inch deep and a mile wide, where it sort of makes things a little bit better for lots of people. And those turn out to be very hard to adopt. So I think it's always critical to find some, you know, some sub-market where there's a really big need, a really big delta, a big gradient, and that drives the innovation in payments or elsewhere.

PayPal did it with eBay power sellers. Stripe is doing it with web developers for websites where it's super easy to integrate Stripe. TransferWise, a company I'm invested in, where they did it with sort of transfer payments between countries of upper-middle-class type people where you're like from Estonia or you're working in London, you want to send money back to Estonia. And there's sort of like a much cheaper way to do this than using the somewhat expensive banking system. So it always starts with some sort of focus that's smaller than people think. The thing I always find alarming is when people start with enormous markets. One other sort of monopoly idea that's counterintuitive is, to get to monopoly, you want to have a large market share.

You get to a large market share by starting with a small market. Facebook started with 10,000 people at Harvard. It went from 0% to 60% market share in 10 days. That was sort of an auspicious start. And then you sort of grew in concentric circles as you expanded to other colleges. PayPal started with eBay power sellers. There were 20,000 of them; we got to 30 to 35% market share in three or four months. The clean tech companies on the other end of the spectrum, every presentation started with, "We have a market measured in hundreds of billions or trillions of dollars." And so if you're a minnow in a vast ocean, you know, it's like there are nine other thin-film solar companies, then there are 90 other solar companies, then there's wind, then there's fracking out of right field, there's China out of left field, and it's just—it's way too big.

So I think that's the—and the thing that's always—I think there's a lot of things that can happen in payments, but I like the ones that have sort of this very high value proposition that's narrowly focused to start.

When you read the history of startups, you generally hear about founding CEOs. Starting with PayPal, we hear about teams of people, the PayPal Mafia. Do you think that that's a fundamental change? And do you think—is it the first person, the first 10 people, the first 100 people that really define the success of a company?

Well, one of my venture capital friends in Silicon Valley in 2005 was telling me he looked at investing in PayPal, but he passed. He got pitched by somebody else, and they said they were founders of PayPal, but he knew they hadn't been there. And so a pitch went kind of badly wrong. And the line was that, yeah, success always has many founders; failure only has temporary employees. And so there is sort of that aspect to these things. I think it is—I do think there is something special about the founders of these companies because there is always a need for a certain charismatic aspect where you pull other people in and get that started. And so that's typically two or three people at the start of these businesses.

But then I think—but then I do think, yeah, I do think, you know, the 20th person, the 100th person, these are all like really critical things. And so I think it's always a good—another version of my contrarian question is, why would the 20th person join your company? Because they don't get to be a founder. We always understand why people want to be founders. It sounds really cool. Why would the 20th person join? Because your company is not making money, it's still not clear it's going to work, so you have all the problems. Why not just become a founder? Why would you join another company as the 20th person? Having a good answer to that is always critical.

So what happens in so many of these founder companies, in older industries as well as the new ones, when they've succeeded and the founder dies or moves on, how successful, how difficult is it to pass the baton to the person that's going to be in the seat, he or she, of the founder?

It's incredibly hard. I would say, to first cut, it generally does not happen. Because again, the founders are charismatic and they can pivot, they can keep pushing the innovation in ways that are very hard otherwise to do. Between 1985 and '97, there were five CEOs at Apple between Jobs and Jobs. And you actually needed Jobs to come back because you had to shift Apple from being a home computer company to a consumer electronics company. Only the founder could have done that. If you had this sort of politician CEO personality that you typically get, that the boards are typically comfortable hiring, you would never be able to make those kinds of changes. And I think the great tech companies are all sort of

founder-led. I think it's like Bezos at Amazon, it's Larry Page at Google, big fan of Zuckerberg's at Facebook, Elon. And the ones that are not founder-led, I think sort of some of the magic is gone. So it's super hard. There are a few companies that have somehow done it. GE is sort of an interesting one where they've pulled it off for a long time, certainly. But it's really hard.

You know, we were talking backstage. I was sharing that I was the CEO of Sony, and Morita was the founder, and he was a visionary. You know, he was constantly curious and passionate. And when he died, the company missed the entire future. They couldn't find a way to place one major bet after another major bet after another major bet. And nobody had the vision, so they missed the computer, they missed the phone, they missed everything. Imagine this: they missed portable music. They missed MP3, and Steve Jobs ate their lunch, and they were the leader. So I think I've lived through that and seen that. So if you were going to make a change in a company, and because the founder died or got sick or couldn't be there anymore, whatever, what would you do to try to find that—I don't want to say that aspirational person, but that leadership that could at least fill the void?

How would you go about doing that?

Yeah, but you see, I'm going to challenge the premise of the question. So the word in the question—so, 'Yeah, I tried, okay, you'—is there's no 'you'. There's a board. It's a collective. And so if I were doing—if I was the dictator and I got to do it, which doesn't exist in any corporation—yeah, you try to find someone who was sort of like this, somewhat a product visionary who somehow had somewhat extreme traits and would be able to push things. Those people normally don't pass muster with the boards of these companies. And then you sort of get this question: can you reconstitute all the corporate boards? And that's also—that's shockingly hard to do. Right.

Good answer.

Hi. You talk about monopoly profit as something that is liberating for monopoly companies in that they're able to dedicate their time to more important questions and basically contributing to investing in the future, whereas competition is something that's almost burdensome to companies and entrepreneurs. You know, you can't—there's not that much profit. But my question is: what are your thoughts on monopolies as almost eradicating competition in the first place?

Well, look, there's always an internal and an external version. The internal version is, from the point of view of someone starting a company, you want to have a monopoly; you don't want to compete. From the external view, from the point of view of our society, there are cases where these things are good; there are cases where they're bad. Society—you don't want the Parker Brothers board game where you have monopolies that are just rent collectors or toll collectors or tax collectors of one sort or another. So I think the two things are quite divergent. But I do think one interesting aspect of this is that there is sort of this sense in which, in business, money is either an important thing or it is the only thing.

And if you are in a super competitive business, money is the only thing. If you're running a restaurant, you can't pay any of your workers above market wages. The wages are determined by the market. If you pay people above market, you will go out of business. And so it's only in a monopoly that money is not the only thing. And so when a company like Google says, "Don't be evil," on some level people say, oh, that's just a silly branding ploy, and that's sort of just fake. But it actually is authentic. But a company that can really prioritize other things, it's much harder for a restaurant to do that. I mean, obviously, it shouldn't be evil, shouldn't break the laws, but it's much more constrained.

Thank you. With both of your kind of divergent backgrounds, right now Hollywood, a place that I wanted to make films for 16 years, is really being intersected by technology companies and not having a monopoly on an audience. Would you foresee any solutions for how Hollywood could take its power back?

Do you have a view on this? You go first. I think it's always this critical question of what parts are super competitive, what parts can be differentiated, how to make the anti-Hollywood argument. It's always dangerous to make this in this town. One really remarkable disconnect that exists between Silicon Valley and Hollywood is that Silicon Valley, it's dominated by equity as the mode of compensation. Hollywood is dominated by cash. And I was involved in producing this one film, Thank You for Smoking, back in 2005. Jason Reitman was the director. His dad, Ivan Reitman, told David Sacks, the producer, who's my friend from PayPal, that the one lesson he learned was never put any money into movies.

And that's what people believe. And that's really different from Silicon Valley where all the people who are involved in the tech industry invest in tech companies, and they think they actually have a big edge. They think the fact that you're inside gives you a huge advantage to do it. And so, I don't know, this is sort of a very abstract answer, but I would say that Hollywood will figure out what to do when the people who are the closest on the inside put their money into things that they think will work.

Good answer. I would say my answer is a little shorter. Nobody goes to a movie to see zeros and ones, they go to see oohs and ahhs. You can't just make them through technology. Technology helps make film, helps distribute film, helps exhibit film. But ultimately, the aesthetic of the artist to create a connection between here and out there is something that can't be formularized, you can't make it with a machine, you can't make it with a computer. It's an act of daring do. It's built for failure. Eight out of ten films fail. It's the two that succeed that make them successful. If you can live in that kind of environment, you'll succeed. You can't tell as a corporate leader that people in your film company, Warner's, Columbia, here's our strategy, just make hits.

Oh, that's a good strategy. Why didn't I think of that? Just make hits. Oh my God, of course. You can't. And if you're in the pacemaker business, you may be able to do that. But you can't do it in the film and entertainment business. So there is some disconnects between them. You can't apply the same formula. Funny thing about the film, I interviewed on television Aaron Eckhart, was he the... Who was the... He was the actor. And we were talking about the idea of the disconnect on that film, by the way, a different subject, how the audience, when you looked at the title, Thank You For Not Smoking, they had trouble getting their head around the title. It was like an oxymoron. Am I seeing a film against smoking, for smoking?

I'm not sure what I'm doing. That disconnect really made the film interesting because it framed the whole experience. Sometimes when you try to apply one science and one theology to another science, another theology, the same connectors don't work. You just have to realize that each business has some part of it that's mysterious, and you can kind of codify another part that's—he doesn't like this word—luck, that's just serendipity, and it works. I mean, you just don't know.

And our final question.

Hi, Peter squared, appreciate your time. So, oh, right back here.

Yeah.

Thanks. So I'm involved with a nonprofit called Minds Matter and the Los Angeles chapter, obviously. And what we do is actually take children or actually—all right, so high schoolers who are very talented and trying to get into Ivy League, I find to be very narrow-minded, very formulaic, and it's hard to inspire them to think outside the box and actually to be aware of the world outside of them. Being an entrepreneur, I want to instill that in them. Any advice as far as getting them outside of those very stuck and embedded groups of trying to fulfill the application?

Well, you know, I've been sort of a very big critic of the higher education system as it's constituted. And I don't know exactly what is going to replace it. I think we have—we have a bubble, we have a bubble in—I believe we have a bubble in higher education. It's sort of reflected in this enormous amount of student debt that people take on. It's sort of passed a trillion dollars this last year. You can't discharge it even if you go personally bankrupt. Bush rewrote the bankruptcy laws in 2005. So the debt's attached to you as a person for the rest of your life even if you go bankrupt. And so there are sort of all these very tough questions that are being asked. You know, are people getting enough out of it?

Is it really giving—is it a good investment? Is it too expensive an insurance policy? Parts of it are more like a tournament. And I think all these things are—are getting rethought to some extent, but it's amazing how it keeps going. One of the reasons it keeps going the way it does is that we don't have a sense for any alternatives. I started this small program for people who could become entrepreneurs, but it's not a comprehensive thing. So if you ask me, what does the future of education look like, I think sort of the analogy that I've come up with is that I think the university system today is like in a crisis that's similar to that that the Catholic Church had at the start of the 16th century.

It's basically—it claims to have a universal knowledge, a universal path that everybody should follow. There are some differences internally, some differences between the Yale and the Harvard poli-sci faculties, there were differences between the Franciscans and the Dominicans. But, you know, you have sort of the costs keep escalating. You have this professorial or priestly class of people. They're sort of charging more and more through this sort of system of indulgences. You're told that salvation requires you to get a diploma. If you do not get a diploma, then you will go to hell. And the very disturbing message that I have, which is like that of the 16th century reformers, is that people have to figure out how to save themselves, which is not what people want to hear.

People want some alternate formula, and I think it doesn't exist.

Thank you very, very much. Thank you.