Peter Thiel: A Gay Libertarian Billionaire on How to Fix the Country

BY Lucas Grindley

August 22 2011 4:00 AM ET

I was reading
about a study that examined whether you need to have experience and a college
education or whether entrepreneurs are born that way. It said the probability
of a start-up surviving was 7% for a company started by an entrepreneur with no
college education and experience. But once that person has education and
experience, it rises to a 77% probability. Does that sound accurate to you, or
is it some sort of misunderstanding of reality?


The Babson College study; it is possible that it’s accurate.

You have to remember most entrepreneurs are nontechnological.
The most common thing people do on an entrepreneurial basis is start a
restaurant or start a small business or a shop, and there are millions of these
small businesses that get started every year. It’s a very small subset of these
companies that are actually really innovating technology companies, where
people are trying to build some new technology. And my sense is that’s probably
quite a different kind of a set. Be that as it may, the numbers sound too
extreme. But even if they are right, I am never sure if this is causation or
correlation. It is similar to all the studies that show that people who
graduate from college make more money than people who don’t — by a pretty
decent margin.

I think that’s accurate. But it’s not clear what the causal
question is. Is it because of things you learned in college or is it just
because the colleges were very good at selecting people or giving people a
certain amount of status that helps them. The studies I’ve seen on this suggest
it’s something like 50% selection, 40% signaling, and 10%
education. So if you make $80,000 a year and you went to Harvard, you get to
$60,000 just because they pick good people, you get $76,000 because you get the
Harvard degree and people pay a premium for that, and then you get to $80,000
because of what you’ve learned. There is sort of this
selection-status-credentialing complex that is very different from a learning
complex.

The analogies aren’t perfect. It’s like people who live in
Manhattan earn maybe one-and-a-half, maybe twice as much, as people who live in
Brooklyn. But people in Brooklyn wouldn’t do better if they just crossed the
bridge into Manhattan.

 That’s not the magic?

It’s not quite the magic. And if you believe that, I can
sell you a bridge or something.

Are people misunderstanding you? People are painting you
as anti–getting a higher education. Are you just
pro–people starting businesses?


I am pro–people doing entrepreneurial things. I am in favor
of people taking a little bit more risk. I don’t think it’s binary.

To go back to the program, the initial idea was it was just
going to be 20 people. There are 6 million people a year who graduate from high
school or start college, so it would be sort of weird if there aren’t 20
talented people who should do something other than college.

It was a little against the one-size-fits-all mentality. The
thing that’s strange is that people sort of admit that people from less-good
backgrounds, or grew up in an inner city, that maybe college isn’t right for
them and maybe it’s vocational training or something like that. But for the
most talented people with the most solid academic credentials, it seems that
people are getting tracked much more narrowly. And I think it’s worth asking
whether the most talented people in our society are doing the right things or
whether perhaps we should be expecting more from them and not just more from
everybody else.

In some ways that was the very narrow genesis of [the
scholarship program]. College debt forces people to take relatively high-paying
jobs that might track people the wrong way. This is certainly true of something
like law where you accumulate large amounts of debt.

 They end up going to big firms just to pay the bills?

People go to big law firms and then you look at the numbers
and see that lawyers make more money. It’s sort of true. To some extent it’s
because they have to.

I think a lot of people would rather do something
meaningful, interesting, different, and the money wouldn’t be as critical if
they didn’t have all of these debts. You can’t start a business if you have
tremendous debt. We would be nervous about investing in someone who was
starting a company if they had a big house and a huge mortgage payment because
it’s hard to be frugal, it’s hard to build a business doing that, and there is
something very similar with the college debt situation.

It’s changed over the last 20 to 25 years when I went to
college. I probably would still go back to Stanford, and Stanford Law. It costs
a lot more. But one thing I would have liked to have done differently is just
think about it more. And I didn’t. I did: It’s senior year in high school, what
do you do? You go to college. Senior year in college, what do you do? You go to
grad school. There is something sort of perverse where education becomes a way
to avoid thinking about your specific future.

Those are some of the general thoughts we had. Our initial
idea behind the program was we are just going to identify 20 talented people.
Then it triggered this much larger conversation about education and it was
controversial because it turned out a lot of people agreed. Something is
controversial not because it’s weird or contrarian. If something’s weird, it
doesn’t even get to the level of being controversial. For something to be controversial it needs to actually
strike a chord.

I was surprised that this very idiosyncratic program
targeted for inventor- and engineer-type people would strike such a broad chord.
That’s led me to believe there is at least a much broader dissatisfaction with
education, with the hopes and expectations people have for education, than is
widely acknowledged.

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