Peter Thiel Returns to Stanford to Share Business Tips from "Zero to One"

alumni students and friends I would like to welcome you all here for this exciting evening my name is Stephanie young and I'm the CFO of basis the Business Association of Stanford entrepreneurial students we are thrilled to be co-sponsoring this evening's program with the Stanford Law School justice context for organization basis is at the heart of student entrepreneurship at Stanford working with thought leaders prominent professors and investors to unite the worlds of academia and industry as one of the most established student entrepreneurship organizations in the world we bring together exceptional undergraduate and graduate students from across campus from the Department of humanities to the School of Engineering who have one common interest to tackle the world's most exciting problems through innovation in design thinking by learning from the most successful technology companies and founders in the Silicon Valley one of our 10 programs is the basis challenge Stanford's premier entrepreneurial competition that enables Stanford affiliated startups to present their ventures to industry leaders for their share of $100,000 in prize money and mentorship opportunities we're also excited to grow our hoc space program which aims to accelerate the growth of the hacker community both within bases and Stanford through our weekly hacking hours and technical workshops for more information to get involved with our organization please visit bases at stanford.edu now a few housekeeping items I wanted to mention as you get ready to start a program please turn your phones to silent but don't put them too far out of reach later in the program Peter will be taking questions from all of you you can tweet you tweet your questions for Peter using the hashtag teal Stanford now it is my great pleasure to introduce Dean Elizabeth McGill of Stanford Law School Dean McGill is a Richard e Lang professor of law and the law schools 13th Dean before coming to Stanford she was on the faculty at the University of Virginia School of Law for 15 years serving most recently as vice dean Dean McGill teaches administrative law constitutional law and Food & Drug law after completing her BA in history at Yale University Magill served as a senior legislative assistant for US senator Kent Conrad she left the hill to attend the University of Virginia School of Law after graduating Dean McGill clerked for Judge Jay Harvey Wilkinson the third of the US Court of Appeals for the Fourth Circuit and then for US Supreme Court Justice Ruth Bader Ginsburg please join me in welcoming Dean Elizabeth McGill this is Peter teal well welcome in the spring of 2012 Blake masters who was then a law student at Stanford did something fairly unusual for law students although not so unusual at Stanford he enrolled in a computer science class CS 183 and he took extremely good notes Blake generously shared those notes with others also a bit unusual for law students posting them on tumblr and eventually he received 2.4 million pageviews why was there so much interest in this computer science class the class was taught by our guest tonight Peter teal who was by then recognized as almost certainly the most successful technology investor in the world Peter grew up right here on the peninsula in Foster City he attended college at Stanford where he studied philosophy and biology he then went to Stanford Law School and though he moved away from the law after clerking and working at a firm I do like to think that law school encouraged his skeptical and contrarian habit of mind and his constant questioning of conventional wisdom not one for modest goals Peter Thiel first gained attention for his attempt to replace the US dollar by starting PayPal in 1998 which unquestionably changed the way payments work and made it possible for hundreds of thousands of small businesses to thrive on the internet after taking PayPal public and selling it to eBay in 2002 he found himself referred to as the leader of the Mafia this is a label that in this case is when he embraced the PayPal mafia have gone on to start some of the most innovative companies of our time including SpaceX Tesla LinkedIn YouTube Yelp and Yammer in 2004 Peter himself co-founded Palantir technologies a data analytics company here in Palo Alto that makes tools for national security and global finance and he made the first outside investment in a project then led by a Harvard sophomore known as the Facebook ten years later Palantir is valued at more the nine billion dollars and as you may know the company formerly known as the Facebook turned out to be a pretty good bet today as a partner at Founders Fund and in his own investing Peter works to identify and support the next generation of technology companies but he's more than just a genius creating value and building companies he is a generous and well-known philanthropist and he is more than that as Fortune magazine recently put it Peter has quote drawn upon his wide-ranging and idiosyncratic readings in philosophy history economics anthropology and culture to become perhaps America's leading public intellectual today most recently with the help of his former student Blake Masters and those very famous class notes peter has reworked the material from CS 183 into a remarkable book zero to one notes on startups or how to build the future this is a book he's talking about tonight so please get what join me in giving Peter Taylor a warm welcome thank you very much for that introduction always filled so heya graphic it can only go downhill from from there and it's always a tremendous privilege to come back to Stanford this is where I feel my whole my whole career my whole life after high school really began and this is also where this book zero to one started to two years ago out of this class and one of the one of the challenges about teaching entrepreneurship or writing about it is that I think that the way people normally go about doing this is in what one of several ways they think don't quite work so one approach would be that you would just tell people stories about your own experiences and so I I could spend the whole evening talking about what I did at PayPal in 1998-99 you know how we combined email with money and and it's sort of all very idiosyncratic and it's maybe there's some fun war stories but you can't really generalize from that too much and then at the other end of the spectrum you have all these attempts to teach things where it's where it's basically like sort of a formula if you follow these five steps and you will be able to build a successful company and I think the problem is that that business it's there's no R is no formula there's no science and so these things end up being sort of very pseudo scientific and it's because I think every moment in the history of business happens only once the next Bill Gates will not build an operating system the next Larry Page won't build a search engine the next Mark Zuckerberg will not be building a social network if you are copying these people you're in some sense not learning from them and and so the point of departure for my class and for the 0 to 1 book is this idea of the the uniqueness of all these great companies and and how what's what's truly important valuable is is extremely unique and I try to get at this I try to get at this through sort of a series of contrarian kinds of questions one one sort of question is always like what great business is nobody building there's a more intellectual version of it which I always like to ask as an interview question it's tell me something that's true that almost nobody agrees with you on and this turns out to be a shockingly hard question for people to answer and it's and it's hard because for one thing it's hard because we've just been taught that truth is conventional the truth is whatever everybody agrees on and so coming up with something new that people don't already agree on puts us in a very uncomfortable sort of a place it sounds like it's really hard to do this and so you have to be really really brilliant so we so we think but the other reason it's a very tough question answer is because you sort of think about the literal dynamic of an interview where where I'm asking the question is somebody and then give me an answer and it's like oh yeah I already thought that or I agree with that that's the wrong answer and so that the right answer is one that in some sense people might not agree with and so it I think often requires quite a bit of courage to to come up with with an answer that that people haven't thought of and we're often sort of intimidated from from thinking through these things and so um I wanted today maybe give in my brief remarks I'll just give three answers this question and in some ways my zero to one book it's like a whole series of things that I believe to be true that I think most people don't agree with and and I'm going to give you three answers three answers this question tonight um first answer that I I believe this is uh this sort of falls from the uniqueness of these companies is I think that on in the opening sentence of Anna Karenina is that all happy families are alike all unhappy families are unhappy in their own special way and and I think the opposite is true of business I think all happy companies are different they're doing something unique all unhappy companies are alike because they fail to escape the essential sameness of competition and the the sort of the you know the when the Wall Street Journal excerpted that chapter in my book the chapters entitled all happy companies are different they they retitled it as competition is for losers which is kind of a kind of sort of got people's attention and it's and of course because we normally believe the opposite we believe that the losers are the people who don't compete intensely enough and so you're a loser if you're not competitive or not really competing but not that you're a loser if you're somehow too obsessed with competing because if you're too focused on competing maybe you're losing sight of what's what's really important and and the sort of the sort of way I articulate this is that I think the the most important distinction in business that people don't talk about enough is that there are two kinds of companies in this world they're companies that are competitive and they're companies that have monopolies if you are one of a kind company a happy company that's doing something different you are a monopoly it is the goal of every founder of every entrepreneur it should be their goal to try to build a monopoly business and and so or to frame this as a sort of an unconventional truth most people believe that capitalism and competition are synonyms and I believe capitalism and competition are antonyms I believe that a capitalist is someone who's in the business of accumulating capital a world of perfect competition is a world where all the profits are competed away and so the the example I sort of used throughout a bad type of business to go into is opening a restaurant which is super competitive and nobody ever makes any money doing it um and then the other end of the spectrum we have all these sort of fantastic tech companies that in built in Silicon Valley and so that the example of a fantastic monopoly business I give is is Google which basically has had no competition in search since 2002 when it definitively distance itself from Microsoft and Yahoo and it's been making enormous profits for the dozen years or so ever since and so you want to be in the monopoly you do not want to be in the in the world of competition the the difference is on I think this difference is not understood for for a variety of reasons one of them is that people always distort it so if you're running a monopoly you normally don't talk about it you learn not to talk about it and you avoid talking about it normally by pretending that you're in a much larger market so Google would never say that it's a search engine it would say it's a technology company it's competing with apple on cellphones and it's competing with Facebook on social and Amazon and Microsoft it's going to be competing with the car companies up with its self-driving car and it's in this big big space called technology and there's just competition everywhere and conversely if you are running a super competitive business and you're trying to raise money for it you want to tell people some unique differentiated stories so if you're trying to open a restaurant in Palo Alto and the investors tell you well I don't want to invest in that because restaurants are bad and I will just lose all my money you'll say something like well this is a unique restaurant it's totally different from all the others it's the only British food restaurant in Palo Alto and and of course on and of course that's sort of a fictional a fictional sub market because it's a quite possible that there are no people who eat nothing but British food and so you're still competing with other restaurants and maybe even some in Menlo Park and maybe some in Mountain View because people might actually drive a few miles or something like that and and so it's again this a you tell story where the markets fictionally too small and so the people who don't have monopolies pretend to have them the people have monopolies pretend not to have them the apparent difference is is quite small the real difference is is really big so so that's sort of intellectually why we we don't understand this monopoly question I think there's also a psychological part of this as well though that's that's a very subtle but I think is very important to understand where we sort of are taught that competition is valuable but sort of is this there's a safety in crowds that if a lot of people are trying to get something it must be a good thing to do it's like if there's a long line of people waiting to get in somewhere you just get in line you don't even ask why why people are standing and line and and we sort of um and so we you know in there is sort of like this psychology where you know ready already din time of Shakespeare the word eight meant both primate and to imitate and there is something about human nature that's ape-like sheep like lemming like herd like we're attracted to these things where a lot of other people are doing them this is you know I think this is always a a challenging with a lot of the ways we're taught in school and were educated where you're taught to compete for all the same credentials if you're on a athletic team in high school or college you're competing on things there the competition has the effect of definitely making you better at that at which you're competing so if you spend you know years prepping for an SAT test you will get better at taking the SAT test or if you're on a swim team in high school you'll get better at swimming because you're focused on beating the people around you but it always sort of comes at this price of of possibly losing sight of broader questions of questions of what's really valuable or what's really important there's a there's a crazy a line from Henry Kissinger talking about it sort of fellow faculty members at Harvard where he said you know the battles in academia are so ferocious because the stakes are so small and and this always on it always seems like well this is sort of like a formula for insanity why would the why would the battles be so ferocious and if the stakes are small there's no real need to fight and so it's just sort of like describing some sort of mass insanity but but on another level it's also I think describing the the inner logic of a situation where if the stakes are small if the differences are small you have to fight much harder to differentiate yourself and the competition gets more and more intense and and and so and so we end up with these dynamics where everyone tries to go through the same tiny door when maybe there's a huge gate just around the corner that nobody wants to nope nobody wants to explore and I think that's that's sort of the dynamic we're always up against um there's a there's a there's a version of this phenomenon in Silicon Valley where we're sort of a strange way in which there are a lot of people who seem to have Asperger's or something like that that seemed to do really really well and in all these companies and I always think that should be turned around as a as a critique of our society where what does it say about our society anyone who's well adapted socially is talked out of all of their original ideas before they're even fully formed because they sort of pick up all these social cues from people oh that's a little bit too weird that's strange nobody's done that before maybe you should not do this and and so that the people who are not we're not able to understand what people around them are doing are somehow able to explore some of these original ideas much further this is very strange set of studies that's been done around Harvard at Harvard Business School where they which even anything of sort of business schools as consisting of the anti Asperger profile of people so it's people who are extremely extroverted sort of hyper social often don't have any really strong convictions but I will make this too sweeping of generalization and make sure I've have a hothouse environment where you put all these people in one place for two years and they sort of say well what do they do at the end and the clew end and they sort of end and it turns out sort of at harvard they've done these studies over 30 years now at the end they always go into the largest number always goes into the wrong field because it sort of talked themselves into all trying to ride the last wave so you know 1989 everybody wanted to work for Michael Milken this was a one or two years before he went to jail no one was ever really interested in in internet or technology businesses except 99 mm just as the dot-com bubble was about to blow up in the last decade it was all sort of housing and private equity and and and and so there is this you know this is this really deep dynamic where even though rationally we should avoid competition and we should aim pro monopoly psychologically we seem to always find it much more comfortable to go with the large crowds of people but there is no wisdom in crowds this is an anti I'm glad we'll think there's no wisdom of crowds it's there's only really ferocious competition so think about this really hard second on second big-picture contrarian thought when I asked this question tell me something that's true or how many great businesses are not being built one answer people off intuitively have on this which they don't quite articulate but I think a lot of people have is this sense that um you know there aren't really very many answers to this question we've actually discovered most things or if they're things we haven't discovered they're super hard to figure out and I I sort of suggest this trichotomy of three categories of conventions things that everybody already knows to be true mysteries that are almost impossibly hard to figure out and things that are in between which I call secrets things that are hard to figure out nobody knows yet but if you work at it you can you can figure out and it's my claim that a secret or sort of some idiosyncratic body of knowledge is often at the core of all these great businesses is something you're very passionate about learning about in the case of PayPal we were very interesting this question of on cyber cryptography and currency on the Internet and so we had this fantasy about building you know a new car the new world currency this was our t-shirt and it really on sort of what was this was this area we explored in tremendous depth and then it did actually stimulate a lot of our thinking about how to build this payment system that ultimately worked so we fail to build the new world currency we did build a reasonably successful payment system but it's sort of this this idea there's something you can figure out that other people don't know yet um and and there are sort of certain common sense ways in which this used to be the case that's not the case anymore if you were growing up in the 17th or 18th century you could look at a map and there'd be some empty spaces on the map and you could say well who knows what's there I could become an explorer and find out it's a hard thing to find out it's probably kind of dangerous to go there but it's a secret you can you can actually figure out or in the 19th century you can sort of do basic chemistry and you can discover new elements in the periodic table of elements and and there's a way in which obviously geography or basic chemistry are not places where there are any secrets left and so you know the entire map of the world's been explored the basic chemistry is done these are sort of closed fields there's nothing new that you can learn in them but I think it's a mistake to extrapolate from that too to all fields I think I think there actually are many fields where there are some really interesting things left to be done we obviously have all the fields around information technology where people have explored a lot in recent decades computers internet mobile internet that whole that whole stream and I've also think that we could be looking at many other areas of science and technology where I think the progress hasn't been quite as fast but it could have been faster and I think this is energy transportation biomedical all sorts of all sort of futuristic things people thought about in the 50s and 60s that haven't been realized and I think there is sort of this self-fulfilling aspect of this if you think there are no secrets left to be found then you will not be the person to find them and and if you think there are some to be found you may very well be that person and and there is something about the way in which globalization has led to a world of you know 7 billion people where we always think well there's somebody else who's already thought of this problem or it's an impossibly hard problem so there's sort of the sense that the world's a very flat place where you're not going to be the one discovered and I think I think that's sort of an intuition that that when all we should try to try to resist so second second somewhat contrarian idea is I think there are still many many secrets left and therefore there are many great things to be discovered many great businesses to be built third a third somewhat unconventional truth that I want to sort of frame is in this one's this one sort of a little bit bigger picture um I think that I think that in the 21st century there will be two two modes of two modes of progress one I sort of described is globalization copying things that work going from 1 to n horizontal or extensive growth and I always draw that on an x axis and the other one is technology vertical progress dot discovering new things going from zero to one and I draw that sort of on a y axis and I I always put globalization on the x axis and technology on the y axis in order to underscore how these things are not synonyms even though they get used almost synonymously and interchangeably all the time you know China today is sort of the paradigm of globalization it has a very straightforward plan for the next 20 years it just must copy things that work from in the US and Western Europe and Japan can skip a few steps and can avoid copying some some of our bad ideas but it's um it's just sort of straightforwardly all about globalization on and I think um but I but I think when you sort of look over the last 200 years um there have been periods of globalization periods of Technology and they've sort of been on somewhat different in character that the 19th century was a period of enormous globalization and technological progress they sort of went went in tandem it sort of came to an end in 1914 with the first world war globalization sort of started to go in reverse there was less trade less connections between different different parts of the world technology kept going very very fast and then I would argue after 1971 when when Kissinger went to China globalization started again in earnest but we've in in the last 40 or so years I would argue live in a period of somewhat slow technological progress where it's been a lot in computers not so much elsewhere and so the where the 19th century had both globalization and technology the last hundred years have been characterized by first a period of enormous technological progress but less globalization 1914 to 1971 and then secondly a more recent period with with lots of globalization but somewhat less technology and these two different periods were characterized by very different ways that we talk about the world so in the in the 1950s or 1960s you would have described the world as consisting of the first world and the third world the first world was that part of the world where progress was happening the third world was that part that was just sort of permanently screwed up whereas today we would talk about the developing and the developed world and the developing countries are those that are copying the developed world and so the sty kata me of developing and developed is sort of a Pro globalization convergence theory of history where everybody will become more alike as globalization proceeds a pace but it is also a dichotomy that is somehow I find to be anti technological because when we say that we're living in the developed world in the u.s. Western Europe Japan we are implicitly saying that we're living in that part of the world where nothing new is going to happen which is done which is finished which should be resigned to a long period of stagnation where the younger generation should not expect to be living lives any better than their parents and I think I think this is a conception we should resist very very strenuously we should not accept we should not accept this label that we're living in the developed world and I think I think we should instead ask a new how do we go about developing the so-called developed world thank you very much thank you Peter I want to remind you if you haven't asked a question through the hashtag teal Stanford you still can I'm going to get the ball rolling here but Peters agreed to take some questions from the group just submit them by by Twitter and I'll ask them thank you for being with us I wanted to start with your your what you had to say up here and in the book about secrets and it's a it's a very admirable admonition to work on those problems that are solvable but are very hard to solve or discoveries that are can be discovered but are hard to discover and I guess I'm wondering are other things educational institutions can do to encourage people to work at those problems rather than competing competing along conventional lines and is there something individuals can do to be to force themselves to think in the way you're saying we should think um yeah I you know even though I I don't have all I don't have an idea on how to reform all the existing education institutions and and I would I would say on an individual level I think it is always it's always really good if if there's something that you're incredibly passionate about and and just sort of our fine to be intrinsically interesting and and that that people pursue that and so that you know one of the one of the the resolutions I came up with a number of years ago was to always value substance over status substance over prestige and you know if I serve it was giving my younger self advice on what to what to do or how to how to think about your ones one's life I you know I probably I think I you know I probably still go to Stanford you know I might still go to law school but I'd ask I'd ask sort of I'd ask a lot more questions why why I was doing these things and I think I think if I was honest about it too much of it was driven by by prestige and status and not quite enough about really the substance of trying to learn things and the other heads for this I sort of think of it as this sort of crazy rolling quarter life crisis and sort of culminated in this in this you know big New York law firm where you know from the outside everybody wanted to get in from the inside everybody wanted to get out you know after I lasted seven months and three days and after and when I when I when I left one of the people down the hall said you know it's so reassuring to see you leave Peter I had no idea it was possible to escape from Alcatraz which which again and you know and again I and all you had to do was go through the front door but our identity people's identities get so wrapped up and the things they compete for that it was inconceivable for people to actually do that and and then the question was you know well how had I ended up there why had I not thought about that more and and I think it was on that I had taken too many of these shortcuts of valuing sort of what was prestigious what was conventional over what I would I really want to do so I think I think always substance over status can we talk about one of your contrarian thoughts capitalism and competition or antonyms why do you think people resist that you convinced me why do other people resist that do you think um why is that a conventionally wrong well it's um it's it's still it's it's always um whenever whenever I present this as an idea it still always seems to be news to people to some extent or and they're sort of are there all these things that get obscured in in very different ways so you know we sort of a one of the strange dynamics um these are the at Google for example a big I'm picking on Google's I think it's in somewhat such a great company but the sort of are all these um all these ways we could learn from it but you have sort of all these super talented people at Google and they've had a remark it's been a remarkably small number they've succeeded in starting new companies so there have not been that many great companies that have come out of Google you know you have like twenty or thirty thousand super talented people there and um and you know what what the people inside Google are told is your everything's going great because we have such talented people it's you know people are talented we're never rewarded enough and so when people come out of that and start a start a business they conclude okay it's just about getting some really smart people it has nothing to do with the business strategy or the plan because that's sort of God obscured and so on and so there are sort of so you talk about talent when you don't want to talk about monopoly or something like that so I think there are all these contexts where people people just just don't talk about it I'm sure a lot of people in the room would love to hear you talk about things you're thinking about investing in or you have no proprietary information obviously but what's what's interesting right now in the startup world would you have if you had a crystal ball could you tell us what you think is going to be the big developments of the coming I don't know five to ten years so let's see so I I always whenever people ask about like what are the themes that are going to happen I'm always skeptical of themes because again once you have a theme you have quite a number of different companies in that theme and so like you had a theme of you know online pet food companies you don't want to be the the fourth online pet food company and you don't want to be the you know tenth thin-film solar panel company in the last decade you don't want to be the 20th pizza restaurant in Palo Alto or something like that so um so I I find myself to be quite skeptical of just about all the themes people talk about because they have this sort of undifferentiated feel so it's like education software healthcare IT these are sort of in a really overwrought themes or big data cloud computing not even clear what those words mean really really overdone SAS computing really overdone and what what I think works really well are sort of one-of-a-kind companies where where people are sort of on a on a mission to do something where if they didn't work on it it wouldn't happen elsewhere this mean one my one of my colleagues from PayPal Elon Musk started you know Tesla and SpaceX SpaceX they were on a mission to go to Mars and that's how he sort of got a lot of great rocket scientists to start and and that is really they really are on a mission to go to go to Mars and you could say well is there a theme of company's going to Mars not not it's somehow no it's just it's just it's just sort of this this unique one-of-a-kind thing and I think so I think a lot of the companies I'm excited about have aspects like that we're large investors in Airbnb it has you know people try to frame it as a sharing economy theme but it's I think it's really again just a one-of-a-kind company about helping free up some you know inventory and housing expanding the tourism market it so does something that's that's that's very unique in that in that sort of a way so let me ask you one last question about secrets you you sort of applied the theory of secrets to a whole different area than business development and innovation this is from your chapter chapter eight on some level every form of injustice involves a secret something is being done it's unjust it's happening because a society allows it to happen the majority of people don't understand the injustice of it invariably that's understood only by a small minority is there an important injustice today that you think only a small group of people recognize um well yes it doesn't mean I can tell you what it is but but certainly on certainly there'd be two different attitudes you could have one would be that yeah they're all in the past we know the role Schwartzman justices today we've found discovered all of them therefore there are none left which would put us in a very odd point that there would be no hidden and justices left and so I'm much more inclined to think that we're not at the end of history and that they're still you know there's so our secrets about justice left and secrets about in justices that are going on I can you know I can speculate on on some of them and those they will always sound weird when you sort of put them forward because these are things people may not may not fully fully appreciate or understand but um I think you know what if people are looking back from the year 2100 on 2014 and they say you know what was really crazy about the way things were organized in 2014 I think one of the things people will say was really crazy is that so many of the political leaders and business leaders were sociopaths and and you know it's it's it's hard to know sort of quite how borderline you know not like not totally non-functioning but sort of these these borderline these borderline sociopaths and and that that will be that'll be quite quite extraordinary if the stuff that sort of like right on the cusp you know this is not like more medical but you know people in the 1960s knew that smoking was bad and even though it wasn't quite there he sort of suspect football is sort of like where smoking was in the early 1960s we sort of sense that it's it's a really bad idea that it does a lot of you know a lot of brain damage but but it hasn't yet quite gotten articulate so I think there are sort of a lot of things like this that will be really different in you know decades ahead so one last question on that how do you fight against conventional thinking um well it's I'm I'm never sure there's like a shortcut formula I certainly think being aware of how how prone we all are to it is is very important you know I when I when I ask this question tell me something that's true as an interview question the answers are normally just really bad but but but sort of one one kind of answer that's always a little bit better than average is if you sort at least acknowledge that it's a bad answer and you don't know better so if you say well I think there need to be more education software companies that's a bad answer because everyone understands education should be fixed and things to be should be changed but if you say well I think there should be more education software companies I know this is not a very original answer um at that point you're ready way ahead because you're at least aware of how unoriginal you are and and I think and so I think that's uh and so I think it's always you know the flip answer either flip answer I always give this question is people always think that originality is easy it's incredibly hard it's incredibly rare and and we should never lose sight of how much we were influenced by the society around seen it's like it's like advertising where we we always think it's amazing how all these ads work on other people but we're we think for ourselves we're not influenced by them and by the way that's what everybody else also thinks about advertising which somehow suggests it doesn't quite add up right let me ask you some of these questions from the crowd here there's a question about the teal fellowships you're I think are you five years in to the fellowship starting the fifth year starting the fifth year at the end of this year yes do you have an assessment of whether they're successful so far is it too early to tell what kind of metrics are you thinking about as you evaluate what you're doing no I think it's on yes so it was it was this uh it was a sort somewhat unconventional program to give 20 20 people 20 students a two-year stipend to stop out of school work on a business or some nonprofit or some other project that they they would be interested in we it's it's sort of you know I we've had basically eighty-three people go through the program at this point I think it's been a you know very powerful experience for almost all the people and it they've learned a lot you know some have gone back to college so the the first year we had twenty four five ended up going back to school sort of two years ago when that ended but then you know a number of others have started some pretty successful companies we've raised about sixty million in venture capital in aggregate so it's it's been you know it's been um it's been quite successful sort of getting more applicants each year we've sort of built out some peripheral programs you know Summit Series for younger entrepreneurs to to get involved it really has captured a lot around the zeitgeist I think it um you know one of the things that was not expected was how much of a debate it would trigger around education because you know I'm not you know it's always you always get sort of portrayed as this person who's against all college or something like this and and my my perspective is is just that this should not be a one-size-fits-all approach and so it's again the the real problem with higher education is that it's to track it's too conventional you know if we say that you go to Yale or you go to jail that's that's not the way we really want our society to be structured we want we want there to be you know many different kinds of options people people can pursue and I think and I was and so I think the program generated a tremendous amount of debate and discussion because people do sense that there's something odd about how how hyper tracked things are and there many case we're going people amass huge amounts of student debt and then it's not it's not clear it limits their career choices in all these different ways and so the arts are a lot of questions like that people people are asking you'll have to forgive me for this question but there are six people asking it so I did you learn anything in law school that you thought was helpful to your later career what was the most important thing you learned in law school that was helpful well I think they're I think are there are a lot of things that that that I learned I'll give I'll give to to to things that apply in this startup entrepreneurial world one part that I'm always um very focused on it's sort of the structure of these companies and how well are people aligned and so you can and making sure that people are you know aligned properly not just that they say that I think this is sort of a very very legal kind of a framework to think about what are people's incentives you know are they going to be aligned or not and I think you want to both have formal alignment where you set the structure right and you want to have informal alignment where the people would naturally try to work together well in one one way or another and I think that's somehow tends to get obscured in all these other ways um you know there's always a there's always a there's always a prehistory question I like to ask founders of companies which is how did you how did you meet what's the prehistory of the company before you got started I find that to be really instructive set of questions to ask a bad answer is something like you know we met a week ago at a social networking function at a business networking function we decided to start a company because we both wanted to be entrepreneurs you know that's like saying I married the first person I met at the slot machines in Las Vegas and you might hit the jackpot but it's probably a really bad idea and a much better answer is you know we've been talking about this for a long time you know maybe one of us is more on the tech side the other one's more on the business side we have these sort of complementary skills and and so I think this question of alignment and structure is is incredibly important I would say on non-lawyers in in business and again most you know most people in business are not lawyers but I think they sort of tend to make one of one of two mistakes they either think of the law as irrelevant or they think of the law is all-important and and those are both sort of pretty and so if you think the law as your relevant you end up just breaking lots of laws and you get into trouble pretty quickly and if you think it's all important on you probably end up you can very easily sort of get at a point where you just get handicapped by the law and you you stop from it stops you from doing anything and so I think I think that having sort of intermediate perspective on it as as critical but not all-important is actually a really valuable perspective to have a lot of questions have been provoked by your discussion of monopolies and a lot of questions here are about does this your view about monopoly does it suggest anything about innovation policy one way to put the question is is Google now AT&T should it should be broken up can the monopolies be too big and you have views about when it is too big yes there's always a there's always a political or a question so from the from the inside monopolies always a good idea from the outside that's it's much more debatable and and I would say the the basic distinction I give is that I think monopolies deserve the bad reputation they have in a static world where nothing changes because that's where the monopoly is just a rent collector or a tax collector of one sort or another artificially restrict supply and that's sort of a bad monopoly a good monopoly is one that actually has invented something new so when Apple came up with the with the iPhone it was the first smartphone that worked and so it for many years had a monopoly on smart phones I'd argued still actually has it with the brand and with you know a lot of network effects that's built up around it and that's um that's a in a dynamic context that's monopolies that actually creates you know doesn't create scarcity but creates like a whole new thing so it's people are lining up to get iPhones because they didn't even exist before and and so I think that's a that's a that's a good one and and so then there's always a question you know so I'd say the question is how static is technology at this point I would say I think the government has gotten it wrong historically saying we went after IBM in the 70s just as things were going from hardware to software anyway you know I think and people can debate this history but I think we went after Microsoft in the late 90s when it was all going to ship to the internet anyway and there's no reason to think Microsoft would have dominated the internet in the same way they dominated the desktop so I think very often the interventions been somewhat too late and I'm I'm also would be skeptical of the EU intervention on on on Google at this point which you know I think people are under estimating in Silicon Valley there's a sense that that's that's building up so we have a couple questions about secrets and disclosure your your idea of what a secret is and how we should be pursuing it and what is the relationship between that and when it can be disclosed when can companies disclose their secrets should they do that what's what's the wise thing to do well um well you know I suppose serve just a you know one framework is you know if you if you have a secret um it's on the one hand if you tell nobody about it it doesn't do anybody any good at that point or there's not much you can do with it and if you tell everybody about it maybe maybe that's you know maybe that's maybe that that ends up deluding in all these ways and so I I actually often I in some ways I define a company as a group of people who have a secret there's a great company you have that's actually what defines and it's just so as you tell just the right number of people and that's the people in the company or working on a particular project um I am I'm I'm somewhat skeptical about how well you know we certainly have patent laws and so all these sort of laws that give you legal monopolies and secrets you discover they don't I don't think they work all that well in practice but but I think so the idea behind them is a good one and so you always want to think about how do you how do you preserve your secret in a way that's valuable for for quite a long time have a question here you can decline but a request that you expand your recent comments about Twitter you made on CNBC well it's on you it's there always are all these sensitive microphones all over the place in our hyper media saturated and Twitter saturated society but um I I had made some comments the effect that I thought it was a rather mismanaged company I said something like you know that maybe there was a lot of marijuana smoking going on the the CEO and Costello and very good humor did tweet tweet back that he didn't have time to respond since he was busy eating a large bag of Doritos but but but the the context in which I put it was that was that that I think Twitter's actually a fantastic business that you know they have a fantastic core idea and and one of the things that is true of these monopolies like businesses is you don't have to be operationally that airtight and so and so you know the one 140-character idea was a really good one it took off like crazy nobody else could catch catch you once you had it you could tell people about it but then you know so many people cop adopted it that you you end up as the leading company and so when you have a great monopoly business like Twitter you often don't have to be run all that operationally well and so that's that's sort of a that's sort of the context whereas if you're if you're opening a restaurant you have to be operationally super tight on everything a couple of questions about the influence of libertarian philosophy on your thinking today and over the course of your your life well I describe myself as as a libertarian in that you know I'm socially liberal fiscally more more conservative I you know I think temper mentally I'm more of a political atheist though in that I just don't believe that the political system is the place where we solve our problems and so I you get sort of caught up into these in these political debates and I and while on the one hand I always believe that there are certain ways that would be better than others realistically I actually don't think things will change that much and that's why I end up focusing way more on on technology as a way to change things then then politics one of the you know there is sort of a wone mode of the libertarians stuff which it's just you say these are these timeless and absolute truths and I don't think that's that's quite the way I think about it I think I think that it somehow is more true today than it was um it was in the past and and you know that for example then again the question I'm always most interested in is technology science how do we have more technology how do we have science innovation and then the a political version that questions could the government be doing more to foster these things and and I think the sort of nuanced answer is it actually did a lot more in the past and it seems much less capable of doing things today and so you know you had a Manhattan Project where you build a nuclear bomb in three and a half years you had and you know the the New York Times op-ed a few days after Hiroshima was sort of anti libertarian it was sort of this proves how much faster the science can happen when the government led by the army order scientists what to do and if you just let pre-madonna scientists do whatever they want it might have taken 50 years to come up with a bomb now they don't write op-eds like that at the New York Times anymore or you have something like you have something like the Apollo program in the 1960s where and you have a sense you could not do a Manhattan Project you could not do Apollo today you know and and so I do think that there's this really odd a question of why there's been this decline of competence that that we should explore a lot more on but given this decline that's why I think libertarian is in a sense is more true because for whatever reason the government seems capable of doing so much less than it was 50 or 70 years ago well there's a deep question here about whether we have a meritocracy in America but we don't have enough time so I'll just ask you Star Trek Star Wars you come out pretty clearly in your book on this yes we are well this was the the was certainly the the PayPal context was that we were always Pro Star Wars and anti Star Trek because Star Trek is the Communist series Star Wars is the capitalist one in the Star Trek world there is no money because you have the transporter technology and it can sort of it can sort of create anything you want and only sort of mentally ill people actually want to have money in the in the Star Trek universe whereas the Star Wars world the whole plot gets line is driven by you know how Han Solo needs to pay off his debts and so it has sort of this whole money as a key driver of the plot so if you're creating if you're creating a new payment system you don't want to model it too much on a on the Star Trek world well I want to thank all of you for coming tonight and let us all thank Peter for this wonderful hour

Channel: stanfordlawschool

Views: 162,203

Rating: 4.8981018 out of 5

Keywords: Peter Thiel (Organization Leader), Stanford University (College/University), Zero to One, Startups, Stanford Law School, Venture Capitalist

Id: 6kGND-uZolY

Length: 55min 1sec (3301 seconds)

Published: Fri Oct 03 2014

Reddit Comments

[u/junseth]

When I hear someone say this, it occurs to me that you are too young to have seen a world without paypal. It was very different. Paypal ushered in the era of modern payments. When I was a kid, my parents (most parents) paid for things with paper checks. Credit cards were not ad common as they are today, and walking into a bank wad a minimum of a once per week activity. That was only 20 years ago. Now, everyone has a credit card, most places don't accept checks, and you and I buy everything online. Paypal and Thiels team were the coinbase of the early internet. People may not love them now, but do you remember how hard it was to pay for things online before paypal? Because I do.