Over the past 20 years Peter Thiel has been one of the most unusually influential figures of our era of technological change. We at Marcellus have learnt a lot from Thiel’s outstanding bestseller “Zero to One” and his seminal Youtube video “Competition is for losers” (you should see it right now if you haven’t seen it before: https://www.youtube.com/watch?
Thiel does not run a large company. Nor does he run a massive Private Equity or Venture Capital fund. Nor is he – by the standards of modern tech billionaires – mega rich. “Thiel… has become a center of gravity in the culture of Silicon Valley, and his infrequent talks and essays are circulated and analyzed by both admirers and critics. In “The Contrarian: Peter Thiel and Silicon Valley’s Pursuit of Power,” the Bloomberg journalist Max Chafkin argues that Thiel “has been responsible for creating the ideology that has come to define Silicon Valley: that technological progress should be pursued relentlessly—with little, if any, regard for potential costs or dangers to society.” Thiel’s devotees see him differently—as a techno-libertarian who associates technological advancement with personal freedom, scientific progress, and even salvation.”
So why is this eccentric man who is also a very public supporter of right wing politics in America so influential?
Let’s start with the good stuff before we get into the controversial stuff. Thiel studied in Stanford in the mid-1980s and was drawn towards the work of French philosopher Rene Girard. Wiener says, “Thiel was particularly taken with Girard’s concept of mimetic desire. “Man is the creature who does not know what to desire, and he turns to others in order to make up his mind,” Girard wrote. “We desire what others desire because we imitate their desires.” Mimetic desire involves a surrender of agency—it means allowing others to dictate one’s wants—and, the theory goes, can foster envy, rivalry, infighting, and resentment. It also, Girard wrote, leads to acts of violent scapegoating, which serve to preclude further mass conflicts by unifying persecutors against a group or an individual. Thiel would later use this framework to develop his own theories about politics, tech investing, and culture.” Thiel’s understanding of Girard’s work influenced his thinking on how firm’s should compete and this fusion of high philosophy and business strategy is one of the reasons “Zero to One” is such a impactful book.
Secondly, as per Ms Wiener, Thiel practices what he preaches. The foundation of his fortune and the beginning of his fame lay in PayPal. “….then, in 1998, met a young cryptographer, Max Levchin, and invested in his startup. Within a year, Thiel was the C.E.O. of Levchin’s company, Confinity, which offered a money-transfer service called PayPal. For Thiel, the service had revolutionary potential: a digital wallet, he said, could lead to “the erosion of the nation-state.”…
For a time, PayPal shared a floor with another digital-payment company, X.com, founded by Elon Musk. Like X.com, PayPal began to offer incentives to new customers—ten dollars to every new user, and ten dollars for every new user referred. PayPal was not registered as a bank, and did not collect information about its users; as a result, Chafkin writes, it could be used for illicit transactions that many banks and credit-card companies did not tend to support (porn, gambling), and which the company later banned. Meanwhile, Levchin created an eBay bot that contacted sellers, expressed interest in their wares, and then asked that they implement PayPal in order to be paid. (The company donated the items that it bid for and won to the Red Cross.) Thanks to these ethically dubious techniques—which might now be referred to as “growth hacking”—PayPal’s user base boomed.
By early 2000, PayPal and X had roughly the same market share, and both were losing money. After some discussion, the two companies merged under the X name, with Thiel as the executive vice-president and Musk as the C.E.O. According to Chafkin, Thiel disappeared from the company after the 2000 market crash. (Thiel denies quitting at this time.) But, months later, while Musk was on his honeymoon, a group of senior PayPal employees launched a coup, ousting Musk by threatening to resign, and having Thiel instated as the C.E.O. Citing sources close to the negotiation, Chafkin writes that, a year after the takeover, as PayPal prepared to go public, Thiel offered the company’s board an ultimatum: he wanted more equity or he would quit. (Thiel denies any ultimatum.) The board granted him the equity. Shortly after PayPal began trading, in 2002, Thiel flipped the company, selling it to eBay for one and a half billion dollars. As soon as the acquisition closed, he issued a press release announcing his resignation. Rather than continuing to lead PayPal, Thiel planned to start another hedge fund.
Dodge the rules, skirt the law, shiv your business partner, abandon your friends: Chafkin argues that the Silicon Valley edition of this playbook was written at PayPal. Perhaps for this reason, the company’s early executives and employees became known as the “PayPal mafia.”
And finally, Thiel has not only been a successful investor in start-ups, he is able to fuse his thinking on investing with politics and philosophy like no one else: “In 2004, Thiel invested in Facebook, loaning it what would later translate to a ten-per-cent stake in the company. Around the same time, he organized a small symposium at Stanford on “Politics and the Apocalypse.” Thiel’s contribution, later published as an essay titled “The Straussian Moment,” was built on the premise that September 11th had upended “the entire political and military framework of the nineteenth and twentieth centuries,” demanding “a reexamination of the foundations of modern politics.” The essay drew from a grab bag of thinkers—it meditated on Thomas Hobbes and John Locke, then combined ideas from the conservative political theorists Leo Strauss and Carl Schmitt, who wrote about the inadequacies of liberal democracy, with the work of Girard—to offer a diagnosis of modernity. “A religious war has been brought to a land that no longer cares for religious wars,” Thiel wrote. “Today, mere self-preservation forces all of us to look at the world anew, to think strange new thoughts, and thereby to awaken from that very long and profitable period of intellectual slumber and amnesia that is so misleadingly called the Enlightenment.”
The social contract had proved inadequate, Thiel argued; because “the West” had become secular, rational, and capitalist, there was seemingly no ideologically consistent mode of retaliation for September 11th. Thiel hypothesized that Schmitt, a legal scholar and member of the Nazi Party, would have called for “a new crusade”; such a response was incoherent, however, in a secular culture that disavowed its own violent nature. Thiel quoted Strauss, who wrote that the United States owed its greatness “not only to her habitual adherence to the principles of freedom and justice, but also to her occasional deviation from them.” Acknowledging such deviations was considered “politically incorrect,” Thiel wrote, but the U.S. could still use invisible, unaccountable, extralegal, and extrajudicial channels of transnational power. Finally, he drew on Girard’s mimetic theory to lend his ideas greater urgency: countries, racing to acquire nuclear weapons for mimetic reasons of “prestige,” were raising the likelihood of “unbounded apocalyptic violence.” The “destiny of the postmodern world,” Thiel concluded, would be either “the limitless violence of runaway mimesis, or the peace of the kingdom of God.””
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
