Peter Thiel on markets, technology, and education

Today, a successful man and a thorough contrarian. Why everything you thought you knew about business may very well be wrong. Peter Thiel, Uncommon Knowledge now. Welcome to Uncommon Knowledge. I'm Peter Robinson. A co-founder of PayPal, a co-founder of Palantir, the president of Clarium Capital, a managing partner in the Founders Fund and the first outside investor in Facebook, Peter Thiel is one of Silicon Valley's leading investors, one of its leading thinkers and, since finding himself portrayed in the movie The Social Network, one of its leading celebrities. You can't escape it now. The son of German immigrants, Mr. Thiel grew up just up the road in Foster City, California. After majoring in philosophy as a Stanford undergraduate, he attended Stanford Law School, which is where he and I first became friends.

Before returning to California to begin his career in business, Mr. Thiel practiced law, briefly. How long were you at Cravath?

It was Sullivan & Cromwell.

Sullivan Cromwell, interchangeable. Seven months and three days. Seven months and three days. Mr. Thiel's new book, Zero to One, Notes on Startups or How to Build the Future. Peter Thiel, welcome. 0 to 1. I'm quoting the book now. If you take one typewriter and build 100, you have made horizontal progress. If you have a typewriter and build a word processor, you have made vertical process. Explain.

Well, I think in the 21st century, we're going to have two basic modes of progress. One is globalization, which is basically about copying things that work. And the other one involves technology or inventing new things. And that's what Zero to One is about. It's everything I know about how we build the great new companies that will take our civilization to the next level in the century ahead.

In Zero to One, you discuss China. You consider that an exemplar of globalization. All they're doing is copying things that have already existed. On the other hand, it's quite powerful. Look what China's been able to do, lift hundreds of millions out of poverty. And yet you say, quote, 'Most people think the future of the world will be defined by globalization. The truth is that technology matters more.'

China's plan for the next 20 years is very straightforward. It is just to copy everything that works in the West. It's not that they can't invent new things. I think they might be able to. I don't think there's anything about Chinese culture that intrinsically makes it impossible for people to invent new things. But they don't really have to because it's still very poor and they can get a lot from just copying things that work. But for the so-called developed nations, US, Western Europe, Japan, we actually do have to invent new things. And that's why for us, technology matters a lot more than globalization.

We have to invent new things. Let me push that a little bit. So, from the end of the Second World War until the 1970s, as is well known, Western Europeans and Americans worked about the same number of hours per week. And at that point, in the mid-70s, once the Western Europeans had rebuilt from the damage of World War II, reestablished a high standard of living, they diverged. Americans began working harder, but Western Europeans slacked off. But isn't there something to that point of view that after a certain point, you don't have to invent new things? Leisure becomes more important. Time with friends, strolling down the Champs-Élysées, stopping at a café for café au lait or a nice Cabernet. That's the way you should live.

The Europeans are onto something.

It's not clear how well it's working, and I agree there are differences between the U.S. and Western Europe, but I would argue that the entire developed world has entered an era of relative stagnation for quite some time. We've seen progress in computers, internet, mobile internet; per capita incomes have still gone up some in the U.S. in the last 40 years, but there is sort of this sense of malaise. It's much worse in Western Europe, but people think the younger generation will not do as well as their parents. People think that, you know, and then it's very unclear how you grow an economy. And our political systems, I would argue, depend on economic growth.

Peter Robinson: So standing still is not a civilizational option. You must advance, or your civilization will flatten out, suffer malaise.

You can have, I think you can have static civilizations and, like, medieval societies or... Egypt unchanged for a thousand years. But I don't know if you can have it in a representative democracy where the give-and-take of our republican form of government depends on the pie to grow. 'There's more for you, there's more for you, there's more for you.' We craft compromises that are win-win-win. Once the pie stops growing, our system gets very polarized, and I don't think it actually works that well unless you have growth.

All right, we will return to that. First, Peter Thiel, business subversive. At one level, *Zero to One* represents a how-to book, a quite specific guide to building a company. But even in being a practical how-to manual, you engage in acts of subversion. You, being you, are engaging in acts of subversion throughout. Let's take on a couple of these. Conventional wisdom in Silicon Valley: new companies should proceed slowly, carefully. They should make incremental advances. *Zero to One*, quote, 'It's better to risk boldness than to be trivial.' What do you mean?

Well, the opening sentence of *Anna Karenina* is that all happy families are alike; all unhappy families are unhappy in their own special way. And my claim is that the very opposite of this is true in business. All happy companies are different because they found something unique that gives them a mission and that also gives them a monopoly of sorts where they're able to charge more for their products than other people can, where they don't have to compete. And all unhappy companies are alike because they fail to escape the essential sameness that is competition. So when you iterate, when you do things that are just incrementally better, you end up in a super-intense competitive dynamic. You don't want to be the fourth online pet food company.

You don't want to be the tenth thin-film solar panel company. You don't want to open a restaurant, period, in probably any city in the world. And these are incredibly competitive businesses, but they're not capitalist in the sense that they do not generate capital. They don't generate profits. They don't generate capital. Capitalism works best when you do something that is very unique, very differentiated. And I think that is something people need to think through really hard before starting.

Peter Robinson 0 to 1. Competitive markets, competitive markets. Here speaks, here sits one of the leading libertarians in Silicon Valley and the country. Competitive markets destroy profits.

Well, certainly as an entrepreneur or founder of a company, the goal is always to aim for a monopoly. It is to do something no one else is doing. You'd much rather have started a company like Google than to have started the pizza place in downtown Palo Alto or even, like, say, an airline company, which is a big company, but the airline industry in the U.S. has made no profits in 100 years cumulatively because the competition has destroyed all of them. Peter Robinson: All right.

So you argue, in fact, in... it's a how-to book. You're trying to provide concise, memorable lessons, but there's one that particularly struck me, and I wondered whether you're saying this to be memorable or whether you really mean it. You argue that there are really only two kinds of businesses: monopolies and those that never make any money.

Really? I mean pretty much everything I say in this book. Those are the two fundamental forms of business. The difference gets obscured tremendously because the people who have monopolies pretend not to have them. They don't want to get regulated by the government. And so they always pretend to be in a very competitive dynamic. And the people who have super competitive businesses always want to pretend there's something unique so they can attract investors or something like that. So if you were opening a restaurant in Palo Alto and you were trying to get me to invest in it, you might say, 'Well, it's not like every other restaurant. It's really unique. It's really different.'

Our sushi is the best sushi.

Or, 'We're the only British food in Palo Alto,' or something like that. And so people always tell fictional stories like this that end up obscuring the difference. The monopolists pretend not to have them, and the people in cutthroat competition pretend not to be. The apparent difference is much smaller than the real difference. So I think this is the fundamental difference in businesses between competition and monopoly. And you always want to be on one side of that equation.

So, apply that analysis to a company such as, say, Ford, where Henry Ford, he comes up with the assembly line, he's doing something nobody else is doing, Ford becomes immensely popular—excuse me, immensely profitable. Then along comes Alfred P. Sloan at GM, GM wakes up, and Ford... So, Ford you see becoming profitable and then hanging on. Donald Petersen in the late '80s comes along and invents this new line, the Taurus, of sort of a smoother, rounder shape. Ford becomes immensely profitable again. And then it nearly goes out of business. Alan Mulally, Ford again is now, seems to be undergoing a period of profitability, certainly by contrast with GM. So how do you explain that you can achieve over the long lifetime of a great corporation, you can achieve periods of monopoly which then get competed away?

How does your analysis fit that? Well, I would say the early Ford was a vertically integrated monopoly with enormous economies of scale. So that was the classic version of this. That worked the best. I would say in recent decades, it's been a much trickier question: how do you actually differentiate yourself? The main differentiation is something like brand, which is a weak form of monopoly that a lot of these companies have. So there are people, you know, it works very well for Mercedes and BMW, probably not as well for some of the American companies at this point. But that is, you know, there are people who like Fords more than Chevrolets, and they'll pay somewhat extra for that even if it's completely undifferentiated.

So brand is—is the weakest form of monopoly. It is a slippery concept, but it is real. Exactly. I would like to talk about brand for a moment. Coke and Pepsi. You can say on one level they are very competitive, but there are all these people who will only drink Coke or will only drink Pepsi, and so they are actually quite profitable franchises because they have this brand component to it.

Whom I've known for a long time, I know to be a very rigorous thinker. And you talk about brand in here just as you did now as a possible, as one tool you can use to achieve monopoly. And yet it sounds slippery as you describe the concept and you've just said that brand is a slippery concept. I mean, it's almost as though there's a circularity. If a company has a name that people... If a company is doing well, it must have a great brand. And yet, I know you can't be satisfied. How do you think through the question of brand as an investor?

Well, I don't understand it. So I think it's a real phenomenon, but I don't understand what makes...

But it is objectively the case that...

It's objectively the case that there are people who will pay more than products cost to manufacture because they like the brand. So marketing works, advertising works, and there are contexts where it can actually generate a real brand. I prefer not to invest in those sorts of companies. I prefer to invest in companies where there's a major technological advantage or you have the vertical integration or you have other types of monopolies that I consider to be somewhat more robust. But brand is a very major one.

All right, which leads to another tenet of conventional wisdom that you overturn here in *Zero to One*. Here it's said over and over and over, "Hire the best engineers and just focus"—laser-like focus, that phrase that comes up again and again—"focus on your product. Get the product right and it'll sell itself." And Peter Thiel says in *Zero to One*, sales matter as much as the product?

Well, it's always a combination of technology and the selling of technology. And certainly the conceit that engineers have, maybe scientists even more than engineers, is that you don't need to convince anybody of what you're doing. The world will beat a path to your doorstep to get what you're producing. And there are certainly where you have enormous lines of people that show up. You know, Apple Computer was able to do this. But the sales didn't happen in a complete vacuum. And so there is always a sales component. It always tends to be, again, something that's somewhat hidden. You know, the worst salesmen are salesmen that are transparently salesmen, a used car dealer. That's the classic salesman.

Really good salesmanship, it's always unclear. So I think Jobs was a phenomenal salesman, but he didn't look like a used car dealer.

So you as an investor, if you're investing at, consider, the earliest stage at which you would consider making an investment, must a company have sales and distribution at that stage, or is that something that you feel that as an outside investor, perhaps you get a board seat, that can be added if the product is great?

I think you'd want to have a distribution plan. And it's typically the component that people underestimate the most, especially if they're coming from an engineering background. If they come from a sales background, they probably underestimate engineering. If they come from an engineering background, they underestimate sales. People always overvalue what they do well. If you're a lawyer, you think the only thing that exists in the world is law. If you're a scientist, there's nothing but science. And so there's always this bias to overvalue what you're good at and undervalue everybody else.

Okay, one last piece of conventional wisdom that you subvert here. You hear over and over again that new companies have to remain flexible. The phrase that gets used is "retain optionality." If this market doesn't work, adapt your product and go for that market. And Peter Thiel says in *Zero to One*, "A bad plan is better than no plan."

Plan, plan, plan. Well, it's always worth thinking: How is this market going to develop? How is this product going to be rolled out? What will happen in five, ten years with our business? And so I think these are all critical questions people should think through. This doesn't mean that you can't change your plan or you can change course, but that shouldn't be the starting point. If the starting point is, "We have no idea what we're doing, we'll just figure it out as we go along," that's a very bad idea. Even if it's like, "We're going to..." You know, there's sort of the extreme versions in Silicon Valley that's been tried a few times and has never worked: "We're just going to get a few talented people into a room and they're going to keep brainstorming until they come up with a product."

And I would say good ideas, good plans for business, a good business plan is actually quite a bit rarer than talented people. And so it's quite a valuable thing when it comes along.

Does the notion of planning apply as well to an individual's life? Are you one of those people who at Stanford Law School, when at Sullivan & Cromwell, the recruiter came by and came in and said, 'Where do you want to be five years from now?' You had that answer ready?

Well, it's—we're generally brainwashed.

Because I know that you worked for them for seven months and then you got out.

Well, I would say that I was not thinking about this. And this is certainly my—if I had to give any advice to my younger self, it would be to think about these things a lot more. My bias was not to think about them. My bias was that education was a substitute for thinking about your future. 'What are you going to do with your future?' 'I don't know, I'll get an undergraduate degree.' 'What are you going to do once you have that?' 'I don't know, I'll get a graduate degree.' 'What are you going to do after that?' 'I don't know, I'll work in a law firm or a consulting firm or a banking position because that will generate options down the line.' And so when we think of our lives as just adding these line items on a resume, I think that's actually not the best way to go about it, even though that is the bias that our whole elite education system pushes people towards.

But could the 25... How old were you when you graduated from Stanford Law, 24, 25? '24, yeah.' 24. Could the 24-year-old Peter Thiel have known enough to establish as a goal the 44-year-old Peter Thiel?

Oh, I don't think that's realistic. But I think, again, I think a bad plan is better than no plan. And so I think the 24-year-old Peter Thiel had no plan whatsoever. And that was—a bad plan would have been better.

Got it. Peter Thiel, public intellectual, Zero to One. 'In the late 1960s, people looked forward to a four-day workweek, energy too cheap to meter, and vacations on the moon. It didn't happen. The smartphones that distract us from our surroundings also distract us from the fact that our surroundings are strangely old. Only computers and communications have improved dramatically since mid-century.' Only computers and communications, but since they affect every aspect of our lives, isn't that enough?

Well, I would argue that there are quite a few other things that people were expecting to improve. There's an energy issue where we haven't really moved beyond fossil fuels and they're getting more and more expensive. There are food production issues where you had a fantastic Green Revolution that sort of ran out of steam. I think there's a lot that we could be doing in medicine, biotech. We thought we were going to defeat cancer in the 1970s. We're 44 years later, not making that much progress. There are a lot of other diseases where I think we could be trying a lot harder. So I think technology has been redefined as information technology. It has a much narrower meaning today than it did 40 or 50 years ago.

And so we have this very powerful but very narrow cone of progress around the world of bits, not so much in the world of atoms. And so we have this dual—it's like this Cartesian dualism where you have all the stuff happening in this virtual reality, but the material world that we live in, not so much progress. And I think that's an important part that's missing.

Okay, but isn't it the case that computer technology is now just beginning, and it will accelerate, just beginning to affect the physical world, the physical economy? Just a little patience, Peter, and you're going to see driverless cars. Energy cheap enough is coming up. Fracking is the beginning. It's going to cause the rebirth of American manufacturing. 3D printing is just beginning. You're going to have a profusion of medical advances based on sequencing the genome and the ability to engineer new drugs at the molecular level.

Just a little patience. Well, that's what people who argue against this tech deceleration thesis always say. They always point immediately to the things that will happen a few years from now. And I certainly think that some of these things are plausible. There's no reason they couldn't happen. But I always keep coming back to this idea that over the last 40 years, it's been slower. And I think one of the reasons it's been hard to do things in the world of atoms is that it's very heavily regulated. It's hard to build a new nuclear power plant. It's hard to build a rocket. Supersonic airplanes are too loud. New drugs cost a billion dollars to get through the FDA. And so I don't think that—I don't think there's like a natural law that says that we can't do more.

But I do think there are these cultural and political issues that have slowed us down.

Okay. Larry Summers, Lawrence Summers, former Treasury Secretary and former president of Harvard, quote, 'Even though financial repair had largely taken place by 2009, recovery has only kept up with population growth and has been worse elsewhere in the industrial world than in the United States. Real interest rates may not be able to fall far enough to spur investment to lead to full employment. The presumption that normal economic and policy conditions will return at some point cannot be maintained.' So Lawrence Summers is saying, not only is Thiel onto something, but he's understating the case. New normal is slow growth and stagnation.

Yeah, although the place where I would part company very much with Summers is on what he would do about this. Summers analyzes this as a macroeconomic thing and he looks at it from a Keynesian perspective where you have to increase demand. So you have to increase money printing, you have to lower interest rates even more, you have to increase deficit spending. You have to figure out ways to get consumers to borrow even more money, extend even more credit. And this strikes me as completely crazy. I mean, consumers in the U.S. are borrowing too much as it is. You have all the baby boomers approaching retirement in an actuarially bankrupt state. So it's quite irresponsible to try to stimulate demand.

I have a much more classical view of the economy where I think the only side that really matters is supply, the overall productivity of the economy. And so we have to ask, why is it so hard to make new things, to create new things? And I think that doesn't have so much to do with what Bernanke or Yellen are doing at the Fed and has much more to do with the micro regulations that drive microeconomics, that drive the supply side.

You sound like Ronald Reagan as adjusted for some experience in Silicon Valley. Will you accept that characterization?

It's close, although I think in our time, marginal tax rates aren't as important and I think the regulations are more important.

Okay. All right. Which leads us to Peter Thiel and the United States of America: education. You yourself attended Stanford as an undergraduate, then you went on to Stanford Law School. And in recent years, you have been scathing on the topic of American education. And in fact, you've founded the Thiel Fellowships to entice bright kids to drop out of college and start their own companies. You've said that we're in an education bubble, and bubble means that there's unreality involved. People are buying things that aren't real somehow. And yet, Peter, American higher education is such that students from around the world are clamoring to get into Stanford or Harvard or, name any other, really. At quite a low level into the ranking tables, you'll find foreign students trying to get into American schools.

Explain.

Well, we have a bubble in education, just like we had a bubble in housing in the last decade or in Internet stocks in the '90s. It's reflected in the fact that people are spending more and more. College costs have gone up by 400% after inflation since 1980. You now have over a trillion dollars in student debt. And even though, in many cases, it still is—somehow it makes sense for people to do it because they get this credential that's so important for all these other things—it is a somewhat parasitic system. It's like a very, very expensive IQ test that's being administered, where an IQ test would cost $25; Harvard education costs a quarter of a million dollars. And so, yes, once you have that credential, you get a better job.

But it's an incredibly high tax that's being extracted. When people use the word 'education,' that's always an incredible abstraction already. And we should be talking about: What specifically are you learning? Is it STEM? Is it science, technology, engineering, math? Is it real liberal arts, where you're actually studying the humanities? Once you use this abstraction, it can mean anything. You can think about it economically as: Is education an investment? Is it a four-year party? Is it a consumption decision? Is it an insurance policy people are buying? Or is it, as I claim, in many cases, just a tournament where the value actually consists of the fact that these colleges exclude people primarily? And if you were president of Harvard or any of these elite universities, the one thing that would get you fired right away would be to dramatically increase the enrollment.

In a normal business, you have the entire world clamoring to get in. You'd say, 'Okay, we're going to increase enrollment by 20% or 100% over maybe a 10- or 20-year plan.' You don't have to do it right away, but because we're offering such a great education, obviously more people should have it. And I think the only sort of business that wouldn't increase it—it's like a crazy nightclub. It's like Studio 54 or something like that, where you have just a long line of people getting in, and the more exclusive you make it, the more valuable it is. So it masquerades as something positive-sum; in reality, it's very zero-sum.

I said scathing. That applies. So if it's a bubble, in what way will the bubble pop?

It's hard to say exactly how it ends because one of the reasons that we've put so many resources into the education system as it is, is that people can envision any kinds of alternatives. They can envision doing anything different. What I think will happen is that we will start to see more alternatives. And I've never said nobody should go to college or anything like this. I think we should just have more choices. It should not be that you go to Yale or you go to jail. It should not be that you have to get a college degree. And the analogy that I've suggested is that in some ways I think the universities face a crisis somewhat similar to that of the Catholic Church in the early 16th century 500 years ago where you basically have a unitary system.

There's one way, and it's sort of a secular, atheistic version of the Catholic Church. It's like an atheist church where your salvation consists of getting a college diploma. If you don't get a diploma, you will go to hell, and there's no salvation outside this university system. It's costing more and more; the indulgences are getting more corrupt. And I think the disturbing message that I have, which is similar to that of the 16th-century reformers, is that there's not any formula and that people have to figure out a way to save themselves. And that's a disturbing message because we'd like to have a formula.

So, Peter, you mentioned a moment ago, if you had any advice for the 24-year-old Peter Thiel, if you had advice for the 18-year-old Peter Thiel when you were graduating from high school up the road here in Foster City, would you have said, would you say now to your 18-year-old self, "Don't go to Stanford"?

You know, it would be, why are you going? It would be, I would say the advice would be always... That's a slightly slippery answer there. It's a little slippery, but it's so hard to rerun these experiments. Of course. But it would be: value substance more than status. Are you doing it for the prestige, for the status, or are you doing it because there really are a lot of important things that you want to learn? So go long substance, go short status.

Got it. And that's advice not just for 18-year-olds. Okay. While we're on education, so the alternatives will take what form? MOOCs? Is the internet where we're first going to see the first cracks in the edifice of American higher education?

I think it will be a whole... I think it will be just very heterogeneous. It will be many different things. It may be, it may be MOOCs, it may be amped-up vocational training, it may be academies where you learn, say, computer programming in six months and you can actually get a really good job without a four-year degree. And to what extent... It may be just a whole range of things.

To what extent is the policy of the federal government supporting the education bubble?

Well, it's encouraging people to take on all these loans. It's subsidizing the loans and then, perversely, it's making it impossible for people to ever get out of them. So you cannot get rid of your student debt even if you personally go bankrupt. It's attached. It's a form of almost like indentured servitude. It's attached to you. You're a physical person for the rest of your life.

Zero to One: “The government used to be able to coordinate complex solutions to problems like atomic weaponry and lunar exploration. But today the government mainly just provides insurance. Our solutions to big problems are transfer payment programs,” close quote. What went wrong between John Fitzgerald Kennedy saying we will put a man on the moon by the end of this decade, and we did, and Barack Obama saying the Affordable Care Act will transform American healthcare, holding down costs across the country, and it hasn't?

What went wrong? This is hard to say. Let's just start by acknowledging that something's gone wrong. And you know, I'm a pretty hardcore libertarian, and even I would not have predicted that Obamacare would not be able to get its website to work. And a website is a demonstrably inferior, simpler product to building an Apollo rocket or to building a nuclear bomb in the Manhattan Project. So there is this inability to do anything involving complex coordination. There's almost, I think, an inability to describe a future that's really different from the present. So a letter from an Einstein would get lost in the White House mailroom. And somehow, what seems to always happen is that sort of redistributionist or utilitarian considerations dominate.

So you'd much rather give Grandma a little bit more money for Medicare than really invest in the research to come up with some new drugs. Or, you know, the money that would go to the moon will get spent on some other transfer program. And so the discretionary investing is steadily going down and non-discretionary spending steadily going up. And it's somehow, we can't imagine anything else to do with the money, I think.

Okay, question about what else to do with the money. Massive change, imagining a different future, reinvigorating NASA, reinvigorating a nuclear program so that we can design, we could actually use nuclear energy. People, we could design plants that are the technologies that... Does that require huge government sums, or will your pal Elon Musk send a spaceship to Mars using private money?

I don't know if you can solve every problem with startups or small groups of people, but we live in a world where that's how problems actually will get solved. You will not do them through mass movements. Think about when was the last time a politician gave a speech in which he or she portrayed a future that looked really different from the present. You can say, like, Martin Luther King, "I have a dream," painting in black and white how the U.S. would look really different from how it did in the 1960s. Reagan, "Mr. Gorbachev, tear down that wall"—a very, that you may have had a little bit to do with, Peter. But that's actually the last speech I can remember where a really different future was described.

And it's all, at this point, it doesn't poll-test well. You know, I think people don't believe in the future. You know, every science fiction movie that gets made shows technology or a future that looks different is a bad future. It's The Matrix, it's Terminator, it's Avatar, it's Elysium. I saw the Gravity movie the other day. You'd be happy to be back on a muddy island. You'd never want to go into space. And so, in that sort of a world, you will not get any broad political support for doing something very different.

Okay. Now, in that seat, maybe four or five months ago, George Gilder said much of what you're saying now. And he said all of this—the economy, growth, all of this—could be fixed very fast if we elected a government which would address—George still believes, I think, a little bit more than you do in marginal tax rate, the importance of lowering marginal tax rates, but certainly he would agree with you on the need to roll back regulation. If we could do that, the economy would recover very fast. Do you believe—whether we could do it, whether the democratic system as it now exists will lead to such an outcome, separate question—if we had such an, if you could make Rand Paul president of the United States tomorrow and fill both chambers of Congress with libertarians,

Will the economy recover fast?

We have to always... Thought experiments are always dangerous because you sort of get into very, very speculative territory. So yes, I think there are political things we could do that would be better or that would be worse. I don't think we should wait for this. And this is why I always... This is why I spend my time in Silicon Valley and not in D.C. I find politics interesting. I think it's important. I also think it's almost endlessly frustrating. And so what's critical is to actually figure out what can you do today without waiting for political reform. And there are some things that you probably can't do, but I think there is still a lot that people could do, and we shouldn't always blame the gridlock and blame the regulations, even though they make things worse.

Okay. You spend your time in Silicon Valley because you are you. You are not suggesting that every bright student at Stanford, and across these universities we've been talking, that everyone should turn his back on the—his or her back on the system—and just concentrate. You don't want to lead a libertarian revolution which involves simply ignoring as irrelevant or contemptible the basic structure of the United States of America.

Well, I don't think that there's a unitary thing. So I don't think everybody should be an entrepreneur. I don't think everybody should be a computer programmer. I don't think everybody should be in politics. At the margins, though, I would say that one silver lining in the aftermath of the 2008 crisis is that young people are not going as much to Wall Street in New York and not going as much into politics in D.C. There was maybe a two- or three-year bubble around D.C. after 2008. That's happily ended, and I think the fact that Silicon Valley is able to attract a plurality of the talented young people is a very healthy sign.

Enrollments in Teach For America down over the last couple of years—good or bad?

It depends what people are doing instead. But I think to the extent people are coming to Silicon Valley instead, on net, that's a good thing.

New York versus Silicon Valley.

If you were investing in an index of one or the other... Oh, it's very long Silicon Valley, very short New York. Totally unambiguous. It's unambiguous. We had a quarter century that was dominated by finance. By 2007, half the profits in this country were being made by banks or financial institutions. And I'm not against banks or financial institutions, but it was too distorted. And so you're going to have regulatory headwinds and some sort of renormalization process that will go on for a long time. And I think engineering has not been a good career for many years. It's been good for computer science. Most other forms of engineering have been bad: nuclear engineering, mechanical engineering, electrical engineering, chemical engineering.

And so I think there's a lot more room to build things, to do real engineering and not just financial engineering, years ahead.

Peter, you seem not to have read the paper in the last few years of the administration of Mayor Michael Bloomberg, who was determined to make New York City entrepreneurial, and in fact, he held a kind of auction for the rights to build a campus on Roosevelt Island, I believe, right there in the middle of the East River. Cornell bid several hundred million dollars; they're building a new campus on Roosevelt Island specifically intended to make New York much more like Silicon Valley. Engineering, entrepreneurship—New York is going to rise again.

Well, I'm always—look, Peter, I'm skeptical of copying things. You know, you don't want to be copying. You know, you shouldn't try to be the next Facebook or the next Google, you know, and the next Mark Zuckerberg won't be building a social networking site; the next Bill Gates won't build an operating system. And I think, similarly, to the extent you're trying to copy Silicon Valley, you're already putting yourself in some, you know, weird derivative position. You know, you don't want to be the Harvard of North Dakota. 'The something of somewhere' is often 'the nothing of nowhere.'

Peter Thiel and the meaning of life. Let's begin with the meaning of humanness. Two quotations. John Walker writing on Ricochet, quote, 'Humans have consistently shown themselves able to build machines that rapidly surpass their biological predecessors. Biology never produced anything like a steam engine, a locomotive, or an airliner. There is every reason to suppose that artificial intelligence will surpass our abilities as much as those of a Boeing 747 exceed those of a hawk.' Peter Thiel in Zero to One: 'Computers are complements for humans, not substitutes.' What makes you so sure?

Well, I think artificial intelligence—is still, of the sort of strong variety that Walker talks about—is still extremely far away, if it will ever happen.

Is there a problem in principle? Is there some reason why in principle computers cannot replace us?

It's hard to say. It's certainly—people would have predicted this would have happened a long time ago.

Indeed they did, with those predictions you were talking about in the '60s.

So there have been a series of AI predictions that have turned out to be quite mistaken. So I think it's possible there's something in principle that makes it harder or almost impossible for reasons that we don't yet fully understand. But I think the reality is that humans and computers are just good at very different things. They are, therefore, mostly complementary. And the fears that people have that they will be replaced by computers, I think, are largely unfounded. You know, technology frees people up to do other things. It's scary if the computers were better than humans at absolutely everything. I think that's still very far away. That's somewhere between science fiction and science fiction fantasy.

Ray Kurzweil is mistaken. The Singularity is not upon us. The Singularity, defined as the moment when we have a machine that's smarter than we are.

Yeah, I think it's not as close, and I think his view of the future is mistaken. When one says that the Singularity is near, this sort of portrays the future as this thing that just happens. It's just these exponential curves. All you need to do is sit back and eat some popcorn and watch the movie unfold. And I think it's actually, rather than talking about the future in the way in which Kurzweil does, I think it often would be better to talk about human agency and what are we doing, what sort of future are we choosing to build. Because I think that's up to us.

Free will matters a great deal to you.

Well, it's... I think...

Despite your attack on the Catholic Church a moment ago, you're no Calvinist; you reject...

It was an attack on the atheist church, but I think that whenever we're too optimistic or too pessimistic about the future, I'm always nervous about those sorts of mindsets because it means that it doesn't matter what you do. If you're super optimistic, the future will take care of itself. If you're super pessimistic, we're headed to the apocalypse—nothing you can do. And extreme optimism and extreme pessimism both lead to sort of this inertia. And so I think it's always a healthier attitude to think of it as somewhat open-ended, and it's really up to us to decide what we want the future to be.

Last question. Last question or two. Peter Thiel on the meaning of life. Zero to One: 'Our task today is to find ways to create the new things that will make the future not just different but better, to go from zero to one.' Close quote. Why? Why keep at it? Surely you're not suggesting that we just, in a kind of simian overactivity, seek to acquire more and more material goods, more and more gadgets, smarter devices for the sake of smarter devices?

Well, I'm not a techno-utopian. I do not believe that technology is an absolute good. I think there are technological innovations that could be quite problematic. You can certainly cite nuclear weapons as one such innovation. But I don't think that there can be a good future in which we do not have technological progress. We have 7 billion people on this planet, and you can't go back to, you know, the Garden of Eden, you can't go back to some sort of pastoral, Neolithic existence. So, you know, we have gone on this scientific, technological trajectory, and having gone as far as we have, we have to try to go further.

So there's a difference between saying 'Zero to One'—I'm making this up as I go along, so I'm sure I'll just be ham-fisted in trying to draw this distinction—but there's a difference between saying, 'Lead your life this way because it's fulfilling.' It's simply—you talked about the humanities, the real humanities; you studied philosophy; the Greeks had an idea of excellence, the well-lived life. This is one path to a well-lived life. That's one thing you seem at moments to be saying. And then you seem at other moments to be saying, 'We are in the most terrible jam. We have 7 billion people. We're stuck with democracy. And the only way out of this jam is right here, baby, whether we like it or not.'

We need technological innovation to get out of this jam.

I don't see the contradiction. I don't see the contradiction. I think, look, I think we could be doing a lot better than we are. It's important for us to be building these technologies. It's not incompatible with people also reading Goethe or Shakespeare or Greek philosophy. And so I think you can do both. But I don't think there can be a good future without more scientific and technological progress. And this has been a motor that has driven Western civilization for the last few centuries. It would be a crazy thing for us to give this up. It's part of what's made our civilization so extraordinary. And I think to give it up would represent an incredible decline.

Last question. Clayton Christensen, the famous Harvard Business School figure, he had a very serious health problem and since then he's taken to ending his class each semester by putting a couple of questions on the board. Now, up until that moment he's talking about business theory. But on the last day, he now puts questions that include these: "How can I be sure that I will be happy in my career?" And, "How can I be sure that my relationships become an enduring source of happiness?" Now, you may want to reach over the table and slap me for trying to end on a sappy note. But how do those questions about personal happiness—"happiness" is the word the man uses. I'm not going to try to better Clayton Christensen.

How does happiness figure into Peter Thiel's plan of action here?

I always prefer meaning to happiness. But I think that—I think we have meaningful lives when—I find them to be very meaningful when we do things that otherwise, that are important, that otherwise would not get done. So you don't want to be just a cog in a machine. You don't want to be just doing something that if you didn't do it, a thousand other people would take your place. And so it's always: but for you, but for this venture or this company that you're working on, this important thing would not get done. That tends to be extremely meaningful, and I think you should always aim for that.

Peter Thiel, author of Zero to One, thank you. Thanks for having me. For the Hoover Institution and The Wall Street Journal, I'm Peter Robinson.