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Life After Facebook

Publication Date: 
January 26, 2011
Source: 
Forbes
Author: 
Brian Caulfield and Nicole Perlroth

Lecturer Peter Thiel is the focus of the following semi-biographical piece by Brian Caulfield and Nicole Perlroth of Forbes:

Peter Thiel wants to save the world. Or, at the very least, to "take our civilization to the next level," as he frequently puts it. Almost every problem--the shortcomings of our political and educational systems, the lingering financial disaster, market bubbles, energy crises, the failed promises of the developing world, resource-based wars--stems from what he calls "stalled technological innovation." What a better place this would be, he often muses, if we could press the reset button and go back to the late 1950s and '60s and realize the predictions of science fiction that failed to materialize: ubiquitous space travel and colonization, robots à la the Jetsons, underwater cities, desalinization, reforestation of deserts and much more. Because we're all running harder and harder just to stay in place, the only salvation is big scientific breakthroughs.

It would be easy to write off Thiel as a "wackaloon," as one political blogger has called him. Indeed, Thiel is putting serious money behind companies and groups bent on extending life, colonizing on ocean platforms, commercializing space, promoting so-called friendly artificial intelligence and leapfrogging DNA sequencing, among other causes. Freedom, he has said, is incompatible with democracy. In one of his most provocative acts, he has offered hundreds of thousands of dollars to college kids if they drop out of school and start a business or pursue a breakthrough. "People think of the future as something other people do," Thiel says backstage at a December philanthropic fundraiser in San Francisco. "But there's something weirder about a society where people don't think about the future."

...

Thiel made the first sizable investment in Facebook. That $500,000 check is now a 3% share of the social network, a stake reduced by selloffs and dilution that is still worth $1.5 billion. Its cofounder Mark Zuckerberg still considers Thiel a valued consigliere. "Whenever I am not psyched about the way things are going and there don't seem to be a lot of good choices, I can get some advice by talking to him," says Zuckerberg. "He's most helpful . . . when he calls you because he sees something."

Investors in Thiel's Clarium Capital Management may not feel so charitable. Assets in the hedge fund, once as high as $6 billion in mid-2008, have been chopped down to $460 million (a quarter of that is Thiel's own money). Clarium has had three consecutive losing years--down 23% in 2010, 25% in 2009 and 4.5% in 2008--by betting wrong, variously, on rising oil prices and a sinking dollar. Oddly enough, Thiel's forecasts were right; his timing was punishingly off. It's as if he were so fixated on his vision of the future that he couldn't let go, even in the face of market realities. "It was a crazy ride up and ride down," says Thiel. Investors who have stuck with Clarium since mid-2008 have lost 65% of their money.

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Obviously, Thiel loves matching wits with friends and enemies, and is fanatical about winning. He is just as obsessive about playing by the rules--his rules. He sometimes raced in his 1978 VW Rabbit ("my Jimmy Carter car") to chess matches, where he would show up five minutes before having to forfeit the game just to psych out his opponents, recalls high school friend Norman Book, now an executive VP at the conservative website WorldNetDaily. Later on Thiel would write his own playbook when it came to investing--or hiring people. After deciding to bring on Keith Rabois (a law firm chum) to handle lobbying and dealmaking for PayPal, Thiel gave him an ultimatum. "You've got to be in my office on Monday. If you can't start Monday, forget it." Rabois had to sell his house and move from Washington, D.C. to San Francisco in four days. "That's classic Peter: If it can't happen now, it doesn't count," says Rabois, now chief operating officer at mobile payments startup Square.

But Thiel bristles under other people's rules. His buddy Book points to Monopoly games in high school. Thiel, as usual, was winning. "So, I sold all my properties to my brother for a dollar," Book recalls. "Peter didn't like that, but he couldn't find anything in the rules" prohibiting the move. Nor did Thiel like the way Valleywag, an arm of the media and gossip site Gawker.com, played when it wrote the post "Peter Thiel is totally gay, people." Thiel later called Valleywag the "Silicon Valley equivalent of al Qaeda."

Some of Thiel's contentious thinking was forged at Stanford University, where he majored in philosophy and minored in political incorrectness. In 1987 he and Book, disgusted at what they called Stanford's "culturally liberal ethos," launched the Stanford Review, a libertarian paper that was, mildly put, unpopular. One student told Thiel he loved the Review--for wiping his butt.

After getting his law degree from Stanford in 1992, Thiel took a job with the white-shoe firm Sullivan & Cromwell. He quit after seven months, six days. He lasted slightly longer as a derivatives trader at Credit Suisse First Boston. Thiel came home in 1996. "I think California was and remains a much better place to do something entrepreneurial than New York," he says.

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Few are deliberately imitating Clarium Capital, which is bleeding executive talent as well as assets. Thiel says the hedge fund now has no equity exposure. It is "slightly short" the dollar, fixed income and commodities, and long on oil. "We're basically in a holding pattern," says Thiel. "The fundamentals have to be fixed, but this radically decoupled market may last for a while."

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Far better to create new, like-minded communities by trying to escape the laws of gravity, nationalism, even biology. Through his Founders Fund, Thiel has invested more than $30 million in Elon Musk's SpaceX (Space Exploration Technologies Corp.), a nine-year-old transportation company. "The SpaceX vision was to start by trying to build a basic, functionally cheap rocket," says Thiel. "Once you shift the economics from $20,000 for a pound of payload to $1,000 for a pound of payload there are all kinds of things you can do"--giving a kick, perhaps, to space tourism, Mars exploration, maybe even lunar colonization. In December SpaceX became the first private outfit to send up and recover a spacecraft.

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For a consummately educated guy, Thiel is derisive about American colleges and universities. In his view they've become too politically correct (he and David Sacks argued as much in their 1997 book, The Diversity Myth), hobbling the hard sciences as well as the humanities. Schools have created a classic bubble, says Thiel: Inflation-adjusted spending on administration per student jumped 61% between 1993 and 2007, while the number of administrators per 100 students rose 39%, reports the Goldwater Institute. Student debt levels fill Thiel with disgust. "It is pretty much the only form of indentured servitude in the U.S.," he says.