A frank conversation with legendary tech investor Peter Thiel.

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What better way to get started under 37 than having 2 40-year-olds talk to you?

But in fact, Peter was once 1 of you guys.

It was, I don't know, how old were you when you co-founded PayPal?

Was the first outside investor in Facebook, which we know changed the world.

Backed Palantir, which is, I believe they helped find Osama bin Laden as a big data play.

And invested in SpaceX, so that could change the universe and the galaxy.

My first question for you though, and this ties into the ideas in

the book, which is very much about thinking differently, and is what's the 1 thing they shouldn't listen to you about?

You have this great question in the book.

What is the 1 thing that you know to be true that most people would disagree with you?

Well, I'm sure there's a lot of things people shouldn't listen to me about.

They probably shouldn't listen to me about fashion advice, or they shouldn't listen about all sorts of things I don't know that much about.

And I do think even with respect to starting businesses or in technology, so let's even focusing narrowly on technology startups, The substance of what people do is always unique and different.

I think every moment in the history of business happens only once.

The next Mark Zuckerberg won't be starting a social networking site.

The next Bill Gates won't start an operating system.

The next Elon Musk won't start a Tesla electric car company.

And so what I always push back on really strongly is that there's some kind of straightforward formula because we're always looking for some sort of pseudo-scientific formula.

Science starts with the number 2, with things that are sort of experimentally repeatable, but great businesses are 0 to 1.

And so there is always this anti-formulaic quality.

And that's why I don't have, like, there are a lot of specific things I can't give advice on.

The 1 theme that I always come back to, though, that comes out of this anti-formula formula, out of this one-of-a-kind nature of great businesses, is this need for differentiation.

What are you doing that nobody else is doing?

What ideas do you have that nobody else has?

What great business are you working on that no 1 else is working on?

And the business idea that I come out of it from is that if you're a founder or an entrepreneur, you should always aim to build a monopoly, where you're the only person in the world doing what you're doing.

And I often think, and this is a little bit extreme, but that there really are only 2 kinds of businesses in this world.

There are businesses that are in crazy competition, and there are one-of-a-kind businesses that are monopolies.

But there's something, I mean, you've been in and among Silicon Valley for so many years, and some people criticize Silicon Valley for having this capsule-like thinking where everything has to be a gajillion-dollar company.

But everywhere else in the country, people are starting restaurants and starting warehouse companies, distribution companies that aren't going to be multibillion-dollar companies, but they're really, for those people, it's their passion, they're excited about it.

So, the idea, how do you make sure the ideas in your book don't discourage them from at least having some economic interest in what they're doing?

Well, I actually think you should think twice before starting certain types of businesses.

So I think there are probably too many bad businesses getting started and not enough good ones.

So I don't think there's anything about entrepreneurship per se that is good.

I was talking to 1 of my friends a few years ago, I was asking him, what do you want to be doing in 5 or 10 years?

Oh, it's really clear, I want to be an entrepreneur.

That's like saying I want to be rich, I want to be famous.

Those are good things, being rich and famous.

Like, if you have that as your sole goal, you're unlikely to, I think, really succeed.

And so I think you become an entrepreneur because you're working on an important problem nobody else is working on.

I think you should start a business if you have something, if you're working on a problem that otherwise would not get solved.

Without having a lot of world experience, How do you identify that which needs to be done?

It certainly is my claim that I think there are many of these sort of secrets, which I define just as problems that you can solve that no 1 else has solved yet, or ideas that are just sort of at the boundary.

So I think there are a lot of these things that exist.

And I think it's always some combination of something that's an important problem.

And often, there's some reason people have a blind spot around it or aren't thinking about it.

So I think there's always, I always like to get at it from both a sort of a foundational level, which is some, you know, maybe some substantive area that you're really passionate about, and this sort of psychological level of why is this something that so many people are missing in 1 way or another.

You know, the word, already in the time of Shakespeare, the word ape meant both primate and to imitate.

And, you know, we, imitation plays an enormous role.

But it also leads to a lot of insane behavior.

It leads to sort of the madness of crowds.

It leads to bubble-like behavior, which we've seen many in our society in recent decades.

And so I think this challenge not to just reflexively imitate and to think for yourself is it's always very trivial to say and it's always quite hard to actually do.

And you also take issue with the way a lot of young companies run.

There's been a big fad or a trend, an approach, of lean startup, where small teams put out the quickest product you can, get a look at it, get the market to look at it, fix it as you go.

I think there definitely are things that 1 can iterate on.

But the core thing is to have a great product.

And then you can always improve and iterate on that in all sorts of ways.

And I think, you know, I think even in the tech industry, what's striking is how weak on a quantitative basis so many of the successful companies were.

It was just they had a great product, and then years later, they were able to optimize it in all sorts of ways.

Whereas if you're just trying to optimize and you don't have a great product, I think that rarely works.

I think it's always worth asking where you're going to go with this business.

And so I think we're always focused on very short time horizons, because you have to figure out a way to get through the next month, the next quarter.

But it's always worth thinking ahead 5 to 10 years.

Why will this be a really valuable business in 5 to 10 years?

And how's the competitive landscape going to develop?

But I think the great entrepreneurs that I know always have some perspective on it.

And it might be wrong, but it's just, this is what's going to happen, and then it's sort of well-reasoned.

And When I was playing chess in junior high school, 1 of the early lessons I learned was a bad plan is still always better than no plan at

But Don't just pretend that you have no clue about what's going to happen and that everything about the future is random.

If you sort of say that everything's random and out of your control, that's the way you set yourself up for failure.

You talk about that as like even as a societal problem in America today.

We are a nation of optimists but without a definite idea of where we're going, unlike, say, maybe 50 years ago.

Well, it's the way the whole education system works.

You build a resume with a wide variety of activities, and then you go to college, you get some general degree, and then it's supposed to lead to various jobs that lead to other jobs, and it's sort of this random walk, where you sort of figure out what to do, what to do in your future.

And so I do think we overplay the role of luck.

When we exaggerate the role of luck in our future, I've said I think luck is like an atheistic word for God, where when we attribute too much to luck, we could be thinking a little bit more.

So you think it's, is it the old hard work, you make your own luck, that old?

Okay, so this whole idea of, because go back to, because most people in this room, you know, did all the right things.

They went to good schools, they had good extracurriculars, they were, you know, captain of the debate team, whatever.

People should be the most incredible tuba player ever?

But I think you should be doing something you're passionate about.

So the question is always, when I give my younger self advice, would I still go to Stanford, would I still go to Stanford Law School?

Possibly, but I think a lot more about why I was doing it.

Was it just, And I was on this super tract for myself.

I ended up at a big law firm in New York.

My eighth grade junior high school yearbook, 1 of my friends wrote in, I know you're going to get into Stanford in 4 years.

Ended up at a big law firm in New York, where on the outside everybody wanted to get in, on the inside everybody wanted to get out.

When I left after 7 months and 3 days, 1 of the people down the hall from me said it was really reassuring to see that it was possible to escape from Alcatraz, Which, you know, and all you had to do was really just go out the front door.

But so much of our identity gets wrapped up in the competitions we win.

And that, and when you compete, And I think a lot of the credentialing resume building is this sort of competition.

When you compete, you do get better at what you're competing at.

If you take lots of SAT test prep classes, you'll get a better score on the SAT.

And when you compete, you get better at beating people on the narrow things you need to beat them on.

But it often comes at this very high price of losing sight of what's truly valuable and important and meaningful.

Well, I think there's sort of all sorts of other – There are all sorts of things that could be that.

But I think it often ends up being something that's a little bit off the beaten path.

So I think there's obviously a financial version, where you get to have a monopoly-like business.

The meaningful version, I think, is always counterfactual, where if you weren't doing this, it's great to be working on problems where if you weren't working on them, nobody else would do them.

If you're working at the fourth online pet food company, the 10th film solar panel company, the 1, 000th restaurant in Philadelphia, there's a sense that if you weren't doing it, someone else would.

If you're working at something where it's the only thing of its kind in the world, that's very meaningful.

If we weren't, and it could be for profit, non-profit, all sorts of contexts, if we weren't doing this, this problem would absolutely not be tackled.

I think that's the kind of, that's what's meaningful.

Whereas when you're competing, you're already by definition number 2, at least, in

When you first met Mark Zuckerberg, did this, all this, I mean, looking in hindsight, did he encapsulate all the things you're talking about?

Was he doing this because no 1 else was doing it?

Was he doing it because he was passionate about it?

Was he doing it because he had an awesome product?

Well, he was incredibly passionate about it.

It was, you know, there's always our- Because

it was the Winklevoss' idea, you know that, right?

That's, well, you know that their dad was a plaintiff's lawyer.

So we have to get some of the details right in these stories.

But I think that there often are broad categories where you can say there have been social networks before.

My friend Reid Hoffman and I started LinkedIn, started a company in 1997 called SocialNet.

They already had the name in the company 7 years before Facebook.

Their idea was that you'd basically have this sort of alternate virtual reality where, you know, maybe I'd be a cat and you'd be a dog and we'd interact in cyberspace and we'd have these different rules of how we'd conduct ourselves.

And so the – and I think Facebook was the first 1 that actually cracked real identity.

It was at its core about real people in a way that none of the others quite succeeded.

Even MySpace was more, it started sort of in Los Angeles.

It was about people pretending to be someone other than who they are, which is what people do in Los Angeles.

And, you know, Facebook started at Harvard.

It was sort of basically trying to get a map of real identity.

So I think it was the first 1 to really crack that problem.

And Zuckerberg was very passionate about it.

I always say that the most important moment in the history of the company was In

in July of 2006, when Yahoo offered us a billion dollars, Zuckerberg was 22 at the time.

We had maybe $35 million in revenues, no profits.

Zuckerberg starts the meeting off saying, well, this is the formality, obviously we're going to turn this down.

And myself, Jim Breyer, the 2 investors on the board, both said, you know, we should probably talk about this a little bit more.

And so it ended up being not a 10 minute, it ended up being like a 6 hour long conversation.

But it was sort of all about like, well, Mark, you'd make a quarter of a billion dollars, there's a lot you could do with this money.

And it was, well, I don't know what I'd do with the money, I would just start another social networking site.

But I kind of like the 1 I have, so why would I get rid of it?" And at the end of the day, the key point that Mark made was that there were a whole set of products that Facebook was still planning to build.

Not just iterating, that it was planning to build, that surely Yahoo was not valuing properly.

I mean, the future is never valued in these things.

And when you talk about important moments in the lives of companies, because a lot of people here are starting companies or ventures with people they either maybe know or don't know that well?

You talk about in the book about the importance of picking the right founder, the right person to go in with, and it's not usually the 1 you might think is the right person.

Well, I think it's generally good and much better to do it with people you know well.

There's some debates about whether it's good to do with your best friends

But I think It's generally a bad idea to do it with people you don't know at all.

I always like asking people the prehistory question.

How did the 2 or 3 people who founded a company, how did you meet?

The bad answer is we met at a networking function a week ago and decided to start a company because we both wanted to be entrepreneurs.

Good answer is something like, we've been talking about this for a number of years, thinking about it in 1 way or another, and sort of pulled it together.


Speaker 0: What better way to get started under 37 than having 2 40-year-olds talk to you? Right? But in fact, Peter was once 1 of you guys. It was, I don't know, how old were you when you co-founded PayPal? 30, 31.

30, 31. Okay. Didn't quite make the cut.

Speaker 1: I would not have made the cut.

Speaker 0: Changed money with PayPal.

Speaker 2: Was the first outside investor in Facebook, which we know changed the world. Backed Palantir, which is, I believe they helped find Osama bin Laden as a big data play. And invested in SpaceX, so that could change the universe and the galaxy.

Speaker 0: My first question for you though, and this ties into the ideas in

Speaker 2: the book, which is very much about thinking differently, and is what's the 1 thing they shouldn't listen to you about? You have this great question in the book. What is the 1 thing that you know to be true that most people would disagree with you? Right. Yeah.

So what is that?

Speaker 1: Well, I'm sure there's a lot of things people shouldn't listen to me about. They probably shouldn't listen to me about fashion advice, or they shouldn't listen about all sorts of things I don't know that much about. And I do think even with respect to starting businesses or in technology, so let's even focusing narrowly on technology startups, The substance of what people do is always unique and different. I think every moment in the history of business happens only once. The next Mark Zuckerberg won't be starting a social networking site.

The next Bill Gates won't start an operating system. The next Elon Musk won't start a Tesla electric car company. And so what I always push back on really strongly is that there's some kind of straightforward formula because we're always looking for some sort of pseudo-scientific formula. Science starts with the number 2, with things that are sort of experimentally repeatable, but great businesses are 0 to 1. They're always 1 of a kind.

And so there is always this anti-formulaic quality. And that's why I don't have, like, there are a lot of specific things I can't give advice on. The 1 theme that I always come back to, though, that comes out of this anti-formula formula, out of this one-of-a-kind nature of great businesses, is this need for differentiation. What are you doing that nobody else is doing? What ideas do you have that nobody else has?

What great business are you working on that no 1 else is working on? And the business idea that I come out of it from is that if you're a founder or an entrepreneur, you should always aim to build a monopoly, where you're the only person in the world doing what you're doing. And I often think, and this is a little bit extreme, but that there really are only 2 kinds of businesses in this world. There are businesses that are in crazy competition, and there are one-of-a-kind businesses that are monopolies.

Speaker 2: But there's something, I mean, you've been in and among Silicon Valley for so many years, and some people criticize Silicon Valley for having this capsule-like thinking where everything has to be a gajillion-dollar company. We love those companies. They're great. But everywhere else in the country, people are starting restaurants and starting warehouse companies, distribution companies that aren't going to be multibillion-dollar companies, but they're really, for those people, it's their passion, they're excited about it. So, the idea, how do you make sure the ideas in your book don't discourage them from at least having some economic interest in what they're doing?

Speaker 1: Well, I actually think you should think twice before starting certain types of businesses. So I think there are probably too many bad businesses getting started and not enough good ones. So I don't think there's anything about entrepreneurship per se that is good. I was talking to 1 of my friends a few years ago, I was asking him, what do you want to be doing in 5 or 10 years? Oh, it's really clear, I want to be an entrepreneur.

That's like saying I want to be rich, I want to be famous. I don't think...

Speaker 2: Those are good things, being rich and famous.

Speaker 1: They're not good as direct goals. Like, if you have that as your sole goal, you're unlikely to, I think, really succeed. And so I think you become an entrepreneur because you're working on an important problem nobody else is working on. I think you should start a business if you have something, if you're working on a problem that otherwise would not get solved.

Speaker 2: Without having a lot of world experience, How do you identify that which needs to be done?

Speaker 1: It certainly is my claim that I think there are many of these sort of secrets, which I define just as problems that you can solve that no 1 else has solved yet, or ideas that are just sort of at the boundary. So I think there are a lot of these things that exist. And I think it's always some combination of something that's an important problem. And often, there's some reason people have a blind spot around it or aren't thinking about it. So I think there's always, I always like to get at it from both a sort of a foundational level, which is some, you know, maybe some substantive area that you're really passionate about, and this sort of psychological level of why is this something that so many people are missing in 1 way or another.

You know, the word, already in the time of Shakespeare, the word ape meant both primate and to imitate. And, you know, we, imitation plays an enormous role. It's how we learn languages as kids. It's how culture gets transmitted. But it also leads to a lot of insane behavior.

It leads to sort of the madness of crowds. It leads to bubble-like behavior, which we've seen many in our society in recent decades. And so I think this challenge not to just reflexively imitate and to think for yourself is it's always very trivial to say and it's always quite hard to actually do.

Speaker 2: And you also take issue with the way a lot of young companies run. There's been a big fad or a trend, an approach, of lean startup, where small teams put out the quickest product you can, get a look at it, get the market to look at it, fix it as you go. Everyone's doing that. You think that's wrong.

Speaker 1: I think there definitely are things that 1 can iterate on. But the core thing is to have a great product. And then you can always improve and iterate on that in all sorts of ways. And I think, you know, I think even in the tech industry, what's striking is how weak on a quantitative basis so many of the successful companies were. It was just they had a great product, and then years later, they were able to optimize it in all sorts of ways.

Whereas if you're just trying to optimize and you don't have a great product, I think that rarely works. I think it's always worth asking where you're going to go with this business. And so I think we're always focused on very short time horizons, because you have to figure out a way to get through the next month, the next quarter. How do you get some customers? How do you track?

But it's always worth thinking ahead 5 to 10 years. Why will this be a really valuable business in 5 to 10 years? And how's the competitive landscape going to develop? How's technology going to develop? How's the world going to develop?

These are hard questions to answer. But I think the great entrepreneurs that I know always have some perspective on it. And it might be wrong, but it's just, this is what's going to happen, and then it's sort of well-reasoned. And so you have a plan. And When I was playing chess in junior high school, 1 of the early lessons I learned was a bad plan is still always better than no plan at

Speaker 2: all.

Speaker 1: And so have a plan. You can always change it. But Don't just pretend that you have no clue about what's going to happen and that everything about the future is random. If you sort of say that everything's random and out of your control, that's the way you set yourself up for failure.

Speaker 2: Right. You talk about that as like even as a societal problem in America today. We are a nation of optimists but without a definite idea of where we're going, unlike, say, maybe 50 years ago.

Speaker 1: Well, it's the way the whole education system works. You build a resume with a wide variety of activities, and then you go to college, you get some general degree, and then it's supposed to lead to various jobs that lead to other jobs, and it's sort of this random walk, where you sort of figure out what to do, what to do in your future. And so I do think we overplay the role of luck. When we exaggerate the role of luck in our future, I've said I think luck is like an atheistic word for God, where when we attribute too much to luck, we could be thinking a little bit more.

Speaker 2: So you think it's, is it the old hard work, you make your own luck, that old?

Speaker 1: I like that.

Speaker 2: Okay, so this whole idea of, because go back to, because most people in this room, you know, did all the right things. They went to good schools, they had good extracurriculars, they were, you know, captain of the debate team, whatever. A little bit of everything. That's the wrong approach? People should be the most incredible tuba player ever?

Speaker 1: No, not necessarily. But I think you should be doing something you're passionate about. So the question is always, when I give my younger self advice, would I still go to Stanford, would I still go to Stanford Law School? Possibly, but I think a lot more about why I was doing it. Was it just, And I was on this super tract for myself.

I ended up at a big law firm in New York. My eighth grade junior high school yearbook, 1 of my friends wrote in, I know you're going to get into Stanford in 4 years. I went to Stanford 4 years later. I went to Stanford Law School. Ended up at a big law firm in New York, where on the outside everybody wanted to get in, on the inside everybody wanted to get out.

When I left after 7 months and 3 days, 1 of the people down the hall from me said it was really reassuring to see that it was possible to escape from Alcatraz, Which, you know, and all you had to do was really just go out the front door. But so much of our identity gets wrapped up in the competitions we win. And that, and when you compete, And I think a lot of the credentialing resume building is this sort of competition. When you compete, you do get better at what you're competing at. If you take lots of SAT test prep classes, you'll get a better score on the SAT.

And when you compete, you get better at beating people on the narrow things you need to beat them on. But it often comes at this very high price of losing sight of what's truly valuable and important and meaningful. Which is passion? Well, I think there's sort of all sorts of other – There are all sorts of things that could be that. But I think it often ends up being something that's a little bit off the beaten path.

So I think there's obviously a financial version, where you get to have a monopoly-like business. The meaningful version, I think, is always counterfactual, where if you weren't doing this, it's great to be working on problems where if you weren't working on them, nobody else would do them. If you're working at the fourth online pet food company, the 10th film solar panel company, the 1, 000th restaurant in Philadelphia, there's a sense that if you weren't doing it, someone else would. If you're working at something where it's the only thing of its kind in the world, that's very meaningful. If we weren't, and it could be for profit, non-profit, all sorts of contexts, if we weren't doing this, this problem would absolutely not be tackled.

I think that's the kind of, that's what's meaningful. Whereas when you're competing, you're already by definition number 2, at least, in

Speaker 2: a category. When you first met Mark Zuckerberg, did this, all this, I mean, looking in hindsight, did he encapsulate all the things you're talking about? Was he doing this because no 1 else was doing it? Was he doing it because he was passionate about it? Was he doing it because he had an awesome product?

Speaker 1: Well, he was incredibly passionate about it. It was, you know, there's always our- Because

Speaker 2: it was the Winklevoss' idea, you know that, right?

Speaker 1: I looked into that. That's, well, you know that their dad was a plaintiff's lawyer. So we have to get some of the details right in these stories. But I think that there often are broad categories where you can say there have been social networks before. My friend Reid Hoffman and I started LinkedIn, started a company in 1997 called SocialNet.

They already had the name in the company 7 years before Facebook. Their idea was that you'd basically have this sort of alternate virtual reality where, you know, maybe I'd be a cat and you'd be a dog and we'd interact in cyberspace and we'd have these different rules of how we'd conduct ourselves. And so the – and I think Facebook was the first 1 that actually cracked real identity. It was at its core about real people in a way that none of the others quite succeeded. Even MySpace was more, it started sort of in Los Angeles.

It was about people pretending to be someone other than who they are, which is what people do in Los Angeles. And, you know, Facebook started at Harvard. It was sort of basically trying to get a map of real identity. So I think it was the first 1 to really crack that problem. And Zuckerberg was very passionate about it.

I always say that the most important moment in the history of the company was In

Speaker 0: 2006,

Speaker 1: in July of 2006, when Yahoo offered us a billion dollars, Zuckerberg was 22 at the time. He owned a quarter of the company. It was just a college site. We had maybe $35 million in revenues, no profits. We had a board meeting.

3 of us met Monday morning. Zuckerberg starts the meeting off saying, well, this is the formality, obviously we're going to turn this down. And myself, Jim Breyer, the 2 investors on the board, both said, you know, we should probably talk about this a little bit more. And so it ended up being not a 10 minute, it ended up being like a 6 hour long conversation. But it was sort of all about like, well, Mark, you'd make a quarter of a billion dollars, there's a lot you could do with this money.

And it was, well, I don't know what I'd do with the money, I would just start another social networking site. But I kind of like the 1 I have, so why would I get rid of it?" And at the end of the day, the key point that Mark made was that there were a whole set of products that Facebook was still planning to build. Not just iterating, that it was planning to build, that surely Yahoo was not valuing properly. And he was right. I mean, the future is never valued in these things.

Speaker 2: And when you talk about important moments in the lives of companies, because a lot of people here are starting companies or ventures with people they either maybe know or don't know that well? You talk about in the book about the importance of picking the right founder, the right person to go in with, and it's not usually the 1 you might think is the right person.

Speaker 1: Well, I think it's generally good and much better to do it with people you know well. There's some debates about whether it's good to do with your best friends

Speaker 2: or not.

Speaker 1: But I think It's generally a bad idea to do it with people you don't know at all. I always like asking people the prehistory question. How did the 2 or 3 people who founded a company, how did you meet? How did it come together? The bad answer is we met at a networking function a week ago and decided to start a company because we both wanted to be entrepreneurs.

Good answer is something like, we've been talking about this for a number of years, thinking about it in 1 way or another, and sort of pulled it together.

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