PETER THIEL:
How does someone become a billionaire? Well, the most popular option is to
start a company, maintain as much equity as you can, and scale the business to the moon. This is
precisely what all of the most famous billionaires did including Jeff Bezos, Mark Zuckerberg, Elon
Musk, Steve Jobs, Bill Gates, and so on. In fact, a lot of them only own single-digit percentages
of their company at this point, but it still translates to a massive fortune. Jensen Huang for
example only owns a little more than 3% of Nvidia, but that itself translates to over $70 billion.
A less common way is to invest yourself up there. Legendary investors like Warren Buffett and
Jim Simons were able to compound a modest amount of money in tens of billions over
a lifetime of investing. More recently, we’ve also seen some employee billionaires pop
up here and there like Tim Cook, Sundar Pichai, and Steve Ballmer. No matter how these guys made
their fortunes though, one common thread is that they all worked extremely hard. Most of these
people worked to live for decades and still work to live even though they’re already rich.
But what if I told you that there was someone who not only made $1 billion but $10 billion
and never really any real earned income? Well, that’s exactly what Peter Thiel did. You
see, Peter never really had a job at his own company or any 3rd party company. And
no he didn’t inherit his money either. What Peter actually did was align himself with
people who did have money and people who did have businesses and he connected the two and
made billions in the process. He was basically a trillion-dollar real estate estate agent. And
that’s by no means a knock on Peter. In fact, it’s the exact opposite. Peter basically worked
smarter, not harder. While Peter was never really working to the bone, he did take on insane
amounts of risk, stress, and responsibility, and he made it such that billions of dollars
were working for him so that he never had to. So, here’s the insane story of Peter Thiel, the
man who made $10 billion without ever working. COMPLETELY LOST:
If you're interested in deeper dives, interviews with insiders, and exclusive tech
analysis, consider subscribing to our free weekly newsletter. But anyway, taking a look back, the
story of Peter Thiel takes us back to October 11, 1967, to Frankfurt, West Germany. This was during
the peak of the Cold War and the race to the moon, so tensions between West Germany and East Germany
were at an all-time high. In an effort to create a better environment for his family, Klaus Friedrich
Theil, Peter’s father would moved the family to Cleveland, Ohio when Peter was just 1 year old,
but this was by no means a permanent arrangement. Peter’s father worked as a chemical engineer
for various mining companies, so the family was regularly on the move. At one point, the
family even lived in modern-day Namibia. In fact, Peter switched elementary schools 7 times meaning
that he didn’t even average 1 full year at any school. By the time that Peter reached middle
school though, the family finally settled down in Foster City, California, giving Peter the
space to excel, and let’s just say, Peter more than excelled. He was a natural mathematician. In
fact, he would place first in a state-wide math competition in California. He would also graduate
valedictorian. Hearing this, I don’t think you’d be surprised to hear that Peter would be accepted
into Stanford, but you might be surprised at what he chose to major in. He didn’t major in computer
science or engineering or anything STEM-related. He actually chose to major in philosophy. And
this was during the era in which identity politics and political correctness were first starting to
make their rounds which stirred up quite a bit of controversy on campus. Peter was very much against
these new ideologies, so much so that he created his own libertarian campus newspaper for Stanford
called the Stanford Review. Peter would go on to serve as the newspaper’s editor-in-chief for the
rest of his undergraduate studies. Seeing this, you might think that Peter went on to pursue
journalism but that’s not quite how things played out. After graduating in 1989, Peter would
turn around and enroll in Stanford’s Law School and earn his law degree in 1992. With that big
of a commitment, you would think that Peter would pursue a career as a lawyer but that couldn’t
be further from the truth. Peter barely lasted a year in the world of law. His first job was as
a clerk for a judge on the US Court of Appeals in Alabama. He wasn’t a big fan of clerking though.
He thought that some finance might make things a bit more interesting, so he quickly switched over
to being a securities lawyer for a financial firm in New York but he only lasted here for 7 months
and 3 days. And by 1993, he was completely done with the law citing a lack of transcendental value
in the job. So, at age 26, Peter would decide to make a complete pivot to the finance industry.
He would straight up take on a job as a currency derivatives trader at Credit Suisse. But while
there was a lot of money to be made in this field, this too did not fulfill Peter’s need for purpose
and meaning. So, he once again left this job and took on a role that was well below his pay
grade. He became a speech writer for then US Secretary of Education William Bennett, but this
too was not what he was looking for. Eventually, in 1996, Peter returned to California completely
lost. He had all the intelligence and education in the world, yet somehow, he didn’t have
a career. This is when Peter first realized that maybe the traditional 9 to 5 just wasn’t
for him leading us to Peter’s insane pivot. THIEL CAPITAL MANAGEMENT:
While law school didn’t give Peter a career that he actually wanted, it did set him up with
an insane amount of connections. Just think about it. He knew dozens of lawyers from Stanford Law
School and dozens of finance bros from his time in New York. In other words, he was surrounded
by multi-millionaires and even deca millionaires, and that gave him an idea. What if he opened up
an investment firm, and not just a value investing firm like Warren Buffett or a trading firm like
Jim Simons, but the riskiest of all investing firms: a seed venture capital firm. If you’re not
familiar with seed venture capital, it’s basically when a bunch of college kids and young adults come
to you with a PowerPoint and ask you to give them hundreds of thousands if not millions of dollars
to grow their business. Naturally, a majority of these startups will fail, but the idea is that
a few of them will end up becoming the next Microsoft or Apple and make all the losses worth
it. Usually, seed and angel investing is a game of billionaires. Once founders make a crap ton of
money, they like to get into VC investing, not necessarily to make money but basically to pay it
forward for the next generation of entrepreneurs. A perfect example of this is Shark Tank. All
of the sharks are multi-centi millionaires or straight-up billionaires and they’re for the most
part retired. Investing in all these startups is just something they do for fun, and if it turns
out to be profitable, even better. Peter, however, wasn’t doing this for fun, he was doing it for
profit. Also, Peter didn’t have any money to burn either, so he would end up asking all his wealthy
friends for money. The pitch was basically, give me some money so that I can invest
it in the riskiest places in the world, and by the way, there’s a 90% chance that you lose
everything. The only reason this pitch worked was because his friends had money to burn. Really
goes to show the importance of building up a strong and powerful network. But anyway, Peter
managed to raise $1 million from his network, and with that, he would establish Thiel Capital
Management in 1996. Now, you might be wondering, how does Peter make money from all of this? Well,
it’s not clear what structure Peter used exactly, but the traditional approach is 2
and 20. Basically, the fund manager, which in this case was Peter, charges a 2% fee
on the total assets under management every year along with a 20% fee on all profits generated
from the fund. Peter is often known to charge no annual management fee a make his entire
compensation performance-based. For example, one of his later funds, Clarium Capital, charged
0 and 25. When you’re only dealing with a million dollars, this doesn’t translate to very much
money, but if you hit some winners and grow into the tens of millions and hundreds
of millions or especially billions, you start making bank. And let’s just say, Peter was
about to have the winning streak of a lifetime. WINNING STREAK OF A LIFETIME:
Peter naturally started off by investing in his friend’s ideas. His first investment was $100,000
in his friend Luke Nosek who was building out a web-based calendar similar to Google Calendar.
Unfortunately, this company went bust and Peter would lose the $100 grand, but the investment
into Luke was by no means a waste. You see, after the calendar project flopped, Luke would
team up with one of his tech friends, Max Levchin, and together, they would create a new company
called Fieldlink using capital from Peter. The company was trying to become a cybersecurity
company for handheld devices but this didn’t go anywhere either. So, Luke and Max would pivot
once again into the digital wallet industry with a company called Confinity. You might not be
familiar with Confinity but you’re definitely familiar with what it became. Confinity would
go on to merge with another fintech company called x.com founded by Elon Musk and a few
others and together, they would create PayPal. Now technically, after the founders had a falling
out and Elon Musk got fired from his role as CEO, Peter would take over as CEO of PayPal in October
of 2000, but he was by no means your typical CEO. Peter’s job as CEO was not to build out the
company or invest in the team or scale profits, but rather find PayPal an exit, and that’s exactly
what he did. He would take the company public in early 2002, and later that same year, he would get
eBay to buy the company for $1.5 billion. Due to all the failures, pivots, mergers, and dilution,
Peter was watered down to 3.7% by the time the deal closed, but this itself resulted in $55
million for Peter. At this point, most would count their lucky stars and retire, but Peter was just
getting started. Now that he actually had capital of his own and status as the don of PayPal, Peter
would simply double down on investments. In 2002, he founded a hedge fund called Clarium Capital and
in 2003, he founded Palantir which you’ve probably heard of if you were part of the 2021 investing
boom. By far his biggest play though didn’t come till 2004. This is when Peter cemented himself
as a legendary VC investor by becoming the first outside investor of Facebook. In August of 2004,
he gave Mark $500,000 in exchange for 10.2% of Facebook. Let me just remind you that Facebook
is now worth $1.3 trillion. Now, of course, Peter’s 10% stake got heavily diluted with newer
investors and stock compensation plans. Also, Peter didn’t just hold his entire stake forever.
He did cash out over time, but despite all that, Peter’s $500,000 investment would turn into
billions. Peter would use all these returns to invest in a slew of Silicon Valley startups
including Asana, Lyft, Yelp, Airbnb, Zynga, Twilio, Spotify, SpaceX, and Stripe just to name
a few. Peter has over a hundred such investments, so it’s no wonder he made a killing. But
more than all of his startup investments, the investment that sticks out to me the most is
his bet on cryptocurrencies. If you didn’t already know this, I think this will blow you away.
Peter Thiel is arguably the reason that Ethereum, the $400 billion cryptocurrency exists. Roughly
10 years ago, Peter gave Vitalik Buterin $100,000 to drop out of college and go full-time on
developing Ethereum. And this was by no means Peter’s first dabble in crypto. In fact, Peter has
been predicting that some sort of digital currency will take over the world since 1999. And I think
that right there tells you everything you need to know about how Peter made $10 billion. Peter never
worked to the bone coding or doing physics or any of that traditional stuff. But he didn’t need to,
because that’s not where his talents really laid even though he was good at stem. Peter was and
is a philosopher a true visionary just like his degree suggests. He foresaw the internet boom and
the social media boom and the cryptocurrency boom. He’s heavily invested in the AI space as well.
Now, of course, Peter had tremendous resources to be able to turn his visionary thinking into
profit, but that doesn’t change the fact that Peter is one of the most unique billionaires
out there. He worked smarter, not harder and that’s how Peter Thiel made $10 billion without
ever really working. If you're interested in having companies pay you, check out our bond
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