Binary Truths with Peter Thiel | Disrupt SF 2014

Our next guest is pretty much a genius. Not even pretty much. He's a genius for sure. He was one of the original angel investors of Facebook, founder of PayPal, author of new book Zero to One, which you can order right now. Please welcome Peter Thiel to the stage and Alexia Tsotsis.

Hi, Peter.

Thank you for coming.

How are you doing? Doing great. How are you doing?

I'm doing good. So aside from all the other accomplishments that Jordan just mentioned, you're known for being a staunch contrarian. So what's the one thing that you conform to?

Well, I think I conform on most things. I believe that 1 plus 1 equals 2. I believe the Earth goes around the sun. So I think most conventional things that people believe to be true are, in fact, true. They're just not that interesting, and they don't really give you much of an advantage. I always think that the key you need to find is something that's true that other people don't agree with you on, or the business version is you need to find a great business idea that nobody's building. And so I think most conventional things are correct. They just don't help you in business.

What's the most interesting conventional thing that you believe?

You know, I think there always are these conventional things that are true that I think are more true than people think. So I think Silicon Valley is going to be the center of the U.S. economy for the next 10 to 20 years. That's kind of conventional, but I believe it may be more than most people.

I think we're at a point in our society where we need to somehow find a way to go back to the future. We need to go back to innovating, to doing new things. This is what Silicon Valley does best. And I think you see it culturally with things like The Social Network movie. If I had a long-short position, I'd be short New York, long Silicon Valley.

So what important truth do very few people agree with you on? That's the very first question in this book. That's how you start your job interviews. So what is your answer to that, if you were interviewing yourself?

Well, I give lots of answers. The flip answer is certainly that most people think it's an easy question. In reality, it's a hard question, because originality is hard, creativity is hard, and it's never as easy as we think. But in my book, I give a whole series of different answers. Perhaps the single theme that I come back to over and over again is that most people think that business is about competition, whereas I think business is about getting away from competition. I think successful businesses are monopolies of one sort or another. Unsuccessful businesses are ones that are in some hyper-competitive context. And so, if you're the fourth online pet food company or the 12th thin-film solar panel company, that's going to be a super-competitive but not very capitalist kind of a business. You will not make money; you might as well just open a restaurant in San Francisco. So, you've actually said before that tech innovation has slowed.

In a world where you've got meatless hamburgers and a rover on Mars, do you still think that's the case?

Well, I think that the story of the last 40 years has been one of enormous innovation in computers, internet, mobile internet, but not that much in the world of atoms. We've had a lot of innovation in the world of bits, more limited in the world of atoms. And I think you're right that we're at a point where people are talking more about innovating outside of computers again in the last few years. But I think it's still a little bit too early to know whether we're really starting to see a new trend. But certainly, if you were to get a self-driving car to work, if you were to figure out all these different ways to get the world of bits and the world of atoms to reconnect, that could be a very powerful boost in the decade ahead.

Do you still think that Twitter is an innovative company?

Well, we never said Twitter is an un-innovative company. We have this tagline on our website that they promised us 140 characters. They promised us flying cars, and all we got was 140 characters. But it's not meant to be an anti-Twitter as a business. I think it will be a successful business. I've never actually used Twitter, but I thought I would use it for the first time today. Really? I will go ahead and do my first tweet: 'From Zero to One: both a first tweet and a link to my book, Zero to One.' So, I think Twitter is a fantastic communications tool. It's a way that we can reach a lot of people. It's not going to be enough to take our civilization to the next level. No single company is. And so, that's the sense in which our critique was always meant.

It's not a critique of a company. It's a critique of thinking that that's enough to take us to the next level.

So are you at Peter Thiel on Twitter?

Yes.

All right. Follow @PeterThiel on Twitter. He's getting into the game. And Andreessen, your friend, he's on Twitter. He's pretty hard to...

He's pretty hardcore.

Big shoes to fill. So you still think it's not world-changing, even though you just tweeted, and it's responsible for stuff like Ferguson or, you know, the Arab Spring or a multitude of social connections? I mean, Facebook, which you were the first investor in, is sort of the same philosophy, right?

Well, I think, look, I think these companies are—the communications revolution is incredibly important, but at the end of the day, you know, it's both about bits and atoms. There's all sorts of stuff you can do on the level of bits. You can change people's minds. You can communicate information. But we're also on the level of atoms. So there's healthcare IT, where you could have a company that helps predict whether you have genes that make it likely that you get Alzheimer's. Or we could try to find a cure for Alzheimer's, which would be on the level of atoms, not bits. And I think we need both.

You're actually a huge proponent of anti-aging technology and studies into that. You're an investor in a scientist who thinks that the first person to live to 1,000 will be alive today.

That'd be great. Yes.

Yes. How long do you think you're going to live?

Oh, I don't think that's a... I'm too superstitious to answer that question, even though I'm not that superstitious. But I think that... I think that every time I look at these areas of technology, you get the sense that there is so much more we could be doing. And so even though things are not advancing as fast as I'd like, I do actually think there's a lot that could be done. And anti-aging is this extremely under-explored field. The most common cause of death is related to aging in one form or another. You're much more likely to get cancer or a heart attack if you're 80 than if you're 30. And so I think understanding aging and seeing if there are ways to slow it or even reverse it remains one of the great scientific projects of all time.

Google is trying to get into it. Quite a few people are trying to solve it. So Google, which has a lot of different projects going on, is something that you call a monopoly in your book.

I don't think that's particularly controversial. Google has a—Google has a monopoly-like position in search. That is why it's incredibly profitable. It's something the people running the company understandably don't want to talk about. But I think that if you're trying to evaluate and understand what really makes Google work, that's a key thing one has to understand. And one of the challenges that we found on the venture capital side is that when we see entrepreneurs who come out of Google, for the most part, they don't understand what made Google work. They believe that Google works because they have a super elaborate IQ test for people, and all you have to do is find people who are smarter than anybody else, or something like that.

And they're quite unaware of the degree to which it's driven by the monopoly-like business model. And so I do think it's always a combination of getting the right people, the right technology, and the right business strategy. And I think the business strategy at Google is something that is intentionally obscured. They're, for good reason, trying to avoid the fate that happened to Microsoft in the '90s. And so the people who have monopolies, as a rule, will not talk about them.

In contrast with monopolies, you bring up the concept of competition. And that, if you're in an industry where the competition is really fierce, you're basically a commodity. So do you think that what's going on between Uber and Lyft right now, the fierce competition that Travis alluded to earlier, do you think that makes them both a commodity?

Well, I'm very biased on this. Full disclosure, I am an investor in Lyft. And I do think that this is probably at the opposite extreme. If the slogan for Google is, "Don't be evil," I think the slogan for Uber is something like, "Do a little bit of evil and don't get caught." And I think it is, without question, the most ethically challenged company in Silicon Valley. And I think it raises questions for all of us about what, if any, are the limits to what companies can do. You think it's more ethically challenged than Google? Oh, way more. I think Google's not a terribly unethical company. There are all sorts of reasons people may not like it. But I think Uber is in a class of its own. But I'm very biased.

I gave you full disclosure on this.

Yeah, Michael Arrington actually tweeted that multiple people, former friends at Founders Fund, are melting down because I dared to call Lyft's tactics whiny. I thought I'd give you the same opportunity.

Well, I think they were upset that he didn't disclose that he was an investor in Uber. So as long as he disclosed it, it's fine.

Who's upset about that? Show of hands, who's upset that Mike didn't disclose that he was an investor in Uber? OK, we could change that.

It's fine to be biased. You should disclose your biases.

Got it. No, I agree with you. I agree with you. All right, so have you watched Mike Judge's Silicon Valley?

No, I think it's a great show. I've seen some of the episodes, and it's definitely, yeah, it's funny. It's a good show.

So there's a character on the show, Peter Gregory, may or may not be based on you. May or may not be. Do you see the resemblance?

I'm like the last person in the world to ask this sort of stuff. You probably are. I think there's some level in which it's incredibly flattering. I think there is a way in which Silicon Valley is is going to become an important place for people to think about culturally in this country. Because if you're a talented young person, there's always a question, what city in the U.S. do you go to? And I think the four choices were New York for finance, D.C. for politics, L.A. for media, Silicon Valley for tech. And somehow, in the aftermath of the 2008 crisis, it sort of is sorted out to be Silicon Valley, hands down, is the place you want to go. And it is going to be defining the future in this country for decades to come, for better and for worse.

I'm always critical of Silicon Valley to the extent we're too smug, that we hype things up too much. I do think we're better than the rest of the country, but we shouldn't believe it too much, because I do think we can still improve a lot relative to what we're doing.

Do you ever—you've seen the sesame seed scene where his brain tells him that he should buy shares in sesame?

Is that the way? I've not found a sesame seed investment yet, no.

But you must get people pitching you crazy things all the time. Like, I have a time machine in the future. You've already funded it. So I'm just here to get my initial check. What's the craziest thing you've heard from people?

There's so many crazy ideas. There was a disturbing one at a tech conference where someone gave me a fictional Wikipedia entry about themselves 10 years from now. And the entry stated that they had been close to bankrupt around the time of the conference, had spent the last money to go to the conference, and they had met me. And I'd give them all the money they needed. And so that was like a vaguely disturbing one. But you get all sorts of pitches like this. I don't think it's crazy that is the thing you're looking for. What we're always looking for is unique and works. It may sound crazy in the sense that it's not been done, but we always want to be fundamental. Probably one of the craziest ones that we did invest in was Elon's SpaceX company back in 2008, which at the time, there were a number of investors who emailed us and told us they were glad never to have invested in Founders Fund, because anyone who invested in something as crazy as a rocket company shouldn't be in venture capital.

And so when you actually drill down on SpaceX in '08, they already had half a billion dollars of contracts with NASA. They had lots of trials to get the rocket to work. There were a lot of things that were very good. It was not a crazy investment, but it might have looked that way. So I think great investments may look crazy, but really not be.

So SpaceX, Tesla, LinkedIn, YouTube, Yelp, Palantir, Yammer. Why do you think the PayPal Mafia, of which you are the don, has been so successful or reported the don?

Always, it's always hard to—it's, I think, I think there was sort of a just the right constellation of different things. It's always hard to—it's hard to know how many lessons to draw from a single, single event, but I would say the early 2000s were a good time to start companies in Silicon Valley. I think there was a—there was a—there was something about PayPal where some great friendships were formed, and, and one of the key things in starting businesses is who you start them with, the initial founding moments, getting those right. And a lot of the teams that came out of PayPal were very good in that respect. But I would say the big lesson that people had coming out of PayPal was that you could build a great business, and it was neither easy nor impossible.

It's hard. And I think that's a very good mindset to have in building a business, to think that it's hard but doable. And I think the lesson people mostly learned in the '90s, and that they still mostly learn in Silicon Valley, is that it's either easy. So if you were at a fantastically successful company like Microsoft or Google, you will infer that starting a new business is easier than it is, and you will learn a lot of wrong things. If you were at a company that failed, you will tend to learn the lesson that it was impossible. And so PayPal was sort of intermediate. We weren't as successful as some of the great successes in Silicon Valley, but I think people sort of calibrated it and learned the best lesson, which is that it's hard but doable.

And if you weren't an entrepreneur or an investor, what occupation would you want to do?

I always think these counterfactual questions are hard to answer, but I probably would be—I love mentoring people. So I would actually probably be a teacher of some sort or other. Yeah, that makes sense. In this book, I am trying to convey everything that I've learned about business. It came out of a class that I taught at Stanford back in 2012. The goal was to communicate everything that I learned about tech and startups in a class. And then we sort of organized in the last two years and brought it into this one book.

But haven't you started a fellowship that encourages kids to drop out of school?

I'm in favor of teaching. I'm skeptical a lot of, I'm in favor of teaching, I'm in favor of people learning. I'm skeptical of a lot of what falls under the rubric of education. I think education is an incredible abstraction and it sort of obscures a lot of the things we're doing, where people are on these tracks, they're getting these credentials, and it's very unclear how valuable they are in many cases. In some ways, you can think of engineering as something that's very different from education, because it's like this specific substantive skill, whereas education always gets described as this sort of abstraction. But my fundamental view on this is that there is no one-size-fits-all. The most successful things to do for people are not to follow the set tracks.

The next Bill Gates won't start an operating system company. The next Larry Page won't start a search engine. And so even though you should try to learn from these people, you won't learn from them by copying them.

What does Zero to One mean? What does it actually mean?

Well, it's basically going from nothing to something. It's basically all the challenges that one encounters in doing some new things. The idea is that most business books try to give you some sort of a formula that you can follow, whereas I put much more of a stress on how it's always a unique set of facts and circumstances that come together in just the right way. So PayPal could be started in 1999 because there was this combination of enough people were on email, and there was a need for some sort of payment system, and you could combine email and payments and create a company. And the timing was right in 1999, 2000 for that sort of a company. It would not have been possible in 1985. It probably would not make sense today in 2014.

So you write in the book that four out of the six PayPal founders had built bombs before they joined PayPal. Who were the four founders?

Well, I'll just say that I wasn't one of the, I was not one of the bomb builders. It was one of these sort of strange late-night conversations where people talk about, "So what did you do in high school?" "I built a bomb," and "I built one, too," and sort of different people pointed this out. But I think there is always, in the context of my book, it sort of comes up in this question of how many extreme traits these founders have. And it's always a question whether these extreme traits help people, whether they're fictional or real. And I think they have both an aspect of, there's something very extreme about the people who tend to found businesses. It's a crazy thing in some ways to start a company, but then once you start it, you don't want to make being too crazy a virtue, because that can also destroy it.

So it's this very fine balance people need to strike.

Between founder and Unabomber. So before you became Peter Thiel, who was number one on the request list for who, who do you want to speak at Disrupt? Number one, consistently, Peter Thiel.

So thank you for coming.

Thanks for having me. Our audience really wanted to see you. But before you became you, you wanted to be a Supreme Court justice? Or you wanted to be on the Supreme Court?

Well, I had a super-tracked pre-tech things. In my eighth-grade yearbook, one of my friends said he was sure I'd go to Stanford in four years. And so yeah, sure enough, I went to Stanford. I went to law school. And I think the last tracked thing you want to do in law school was get a clerkship. The most prestigious one was to get one on the Supreme Court. I ended up getting interviews with two of the justices. They normally interview eight people and pick, pick four clerks. And I missed it in both cases. And at the time, this was just this catastrophically traumatic experience. And one of my friends who'd coached me about it, years later, we reconnected. And the first thing that Paul asked me was not, "How are you doing, Peter?"

It's good to see you. 'Peter, aren't you glad you didn't get that Supreme Court clerkship?' was sort of the first question. And so I do think there are all these conventionally competitive dynamics that we get incredibly caught up in. And when we look back on our lives, we often wonder whether those were really the most valuable things. In some ways, that's, again, the overarching message of my book, is we should really rethink competition. Competition enables you to get much better at doing something narrow. It's like if you're on a swim team in high school, you will become a better swimmer if you're very focused on beating the other people you're competing against. But what competition also does, it focuses you too much on the people around you.

And as a result, you may lose sight of what's truly important or truly valuable. And so I think it always has this strangely distorting effect.

What do you think would have happened if you had won the clerkship?

Again, you can't run these experiments twice, but I suspect I would have been very happy that day, but I would have been much less successful with the rest of my life.

Thank you. Thank you, Peter.

Thank you.