The September issue of Details boasts on its cover "A RARE INTERVIEW WITH ELUSIVE BILLIONAIRE PETER THIEL." The gay cofounder of PayPal and early investor in Facebook can be hard to get hold of. So we thought you deserved an extended look at The Advocate's interview with the man who predicted the bubble would burst in the financial market, and then also in the housing market.
Thiel was named to our September list of eight innovators who are changing the world with their ideas. One of Thiel's is a scholarship program that paid 24 young people $100,000 each to skip or drop out of college and build a company instead.
For Thiel, a staunch libertarian who is the top financial contributor to GOProud, an ove emphasis on higher education has contributed to the country's disappointing progress in a number of areas, including research into a cure for HIV.
The Advocate: I'm figuring the thing people would want to ask you is how someone stays so far ahead of the curve so often.
Peter Thiel: I don't have any great answers on it. I spend an awful lot of time just thinking about what is going on in the world and talking to people about that. It's probably one of my default social activities, just getting dinners with friends. And so there are always these questions: What important things are going on? What's happening in the world? What does the future look like? These are a set of questions I keep coming back to. There is a lot of value in thinking about the future and trying to make sense of things.
I believe that people are too complacent about technology. The standard thinking is there is a lot of technology going on. I tend to think there is a modest amount going on and it would be good if there were a lot more. I actually think there is a little bit of a problem that there is not enough technology, and we have to try really hard to figure out ways to accelerate it.
Isn't technology the one thing the U.S. has going for it?
We have a lot going on in the computer and Internet side, but there are a lot of other areas where things are surprisingly stalled out. If you look at energy policy, the U.S. hasn't really succeeded in reducing its energy dependency in 40 years. The clean technology stuff feels -- some things are happening -- but it feels very stalled. There's been some progress in biotech but not as much as one would have thought 20 years ago.
If you look at transportation, it doesn't seem to be changing that much. In some ways, with all of the crazy airport security stuff, things got slower than they were three years ago.
And there are more narrow ones. You take something like HIV -- there has been some progress in sort of managing the disease and turning it from something that is lethal to something that is more chronic. But on the other hand, we seem to still be incredibly far away from a vaccine and much less secure. If we had been having this conversation in 1985 and said that a quarter century later there would be no vaccine, there'd be no cure, and people wouldn't be talking about that stuff anymore, that would have been a pretty pessimistic assessment.
So there are a lot of these areas that have done less well than people think.
So you thought that beginning to fix all that came down to education, or people starting companies early?
Our thesis was that there are some people who are inventors, who are sort of engineering-type personalities, who have ideas for building things. And when those people try to do something new, the credentials are not really the key thing. Credentials are critical if you want to do something professional. If you want to become a doctor or lawyer or teacher or professor, there is a credentialing process. But there are a lot of other things where it's not clear they're that important.
It's not clear to me, for example, that credentials are very important to becoming a writer. You become a great writer by writing. There are some things you can definitely learn. But the real way people improve is by having the opportunity to write thoughtful and long pieces as quickly as possible.
In a similar way, I think something about starting businesses and doing something entrepreneurial is very praxeological. You learn it by doing it. And if people have great ideas, they should do it whenever they have it. I don't think there is anything about people having to be young or old.
They should do it whenever they have it?
I don't think you should put these things on hold.
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.