The respected start-up investor prefers to avoid hiring graduates of top universities
Despite being a co-founder of PayPal and one of the first investors in Facebook, tech entrepreneur Peter Thiel is deeply critical of Silicon Valley’s record on innovation and the education system that feeds into it. His targets for criticism have been the narrow ambitions of some companies over recent years; in the manifesto for his venture capital arm Founders Fund, he famously said: “We wanted flying cars and instead we got 140 characters.”
The 47-year-old also believes that rapid technological innovation is needed to keep up with the growing demands of consumers in the developing world.
“People throughout the world would like to have a living standard comparable to that of the West,” he says. “If everyone in China had a car, we would run out of gasoline and we would have far worse problems with climate change and carbon dioxide emissions than we have today. So for the six billion [people] in developing countries to converge on a Western living standard, I actually think that you need new technologies in things as basic as energy, probably in food production and maybe in materials for constructing housing.”
Known for his libertarian views, the 47-year-old has invested in diverse sectors including space travel and the establishment of communities at sea, living away from the laws of any government – known as “seasteading”.
When recruiting staff, Thiel has in recent times tried to choose those who did not go to the top universities. In some disciplines such as computer science, it is now possible to learn the content of a degree in a fraction of the time through condensed coding classes, he says. The Thiel Fellowship awards US$100,000 each year to 20 people under the age of 20 to give up education and pursue their own projects. His latest work is Zero to One: Notes on Startups, or How to Build the Future, a book based on a start-ups course he taught at Stanford University in 2012.
“The question is, does our education system provide you with that substantive base of knowledge, or does it [make] you simply a trained robot in a lab? Are you really not doing that much creative work, are you mostly just doing menial labour?” he asks. “I think people do need to learn some things very substantively. The question is always how much of our education system produces that.”
Another target of his ire has been the concept of luck. When he invests in companies, Thiel, who has an estimated net worth of US$2.2 billion, wants to create circumstances in which “serendipitous things are likely to happen”.
“In some ways [luck] is a cop-out for not thinking hard enough about things,” he says. “When I invest in companies and think to myself ‘I don’t really know what is going to happen, maybe it will work, maybe it won’t’ – when I treat the people or the start-up as a lottery ticket – I think that is a bad way to treat people and it is also a bad way to invest, because you often psyche yourself into losing money. What I think one should be doing instead is thinking why you think it is a lottery ticket. What is it that you don’t understand?”
Thiel’s enterprises have included data analytics firm Palantir, which is used by banks and drug enforcement agencies and was reportedly involved in tracking down Osama bin Laden. Founders Fund also invested in the British artificial intelligence company Deep Mind Technologies, which was sold to Google last year for £240 million (HK$2.8 billion). He says his greatest missed opportunity was not investing in the second funding round of Facebook when fewer than 10 people worked there.
In Zero to One, he argues that successful companies are those that have created a monopoly by solving a single problem, while those that fail have not successfully avoided competition. He is similarly sceptical about attempts to emulate Silicon Valley and its success around the world.
“There are a few different problems with it. One is that it is not even clear why Silicon Valley works. It is a singular thing; it is one time, one place. It’s very hard to figure out what are the factors which drive it. Is it the fact that it has good weather? Is it the fact that you have this whole network effect of people and some very successful companies that have been built over years? Is it the unenforceability of non-compete agreements so that employees can leave from one company and go and work in another in the state of California?”
The idea that companies should embrace failure is a dangerous idea, he adds. “I try to go against many of these bromides that people have in Silicon Valley, and one of the ones that I really dislike is that somehow failure is this great learning experience or something like that.
“Every time a company fails it is not a beautiful working out of the Darwinian free market, and it is not a fantastic educational experience for all involved. Every death is a tragedy and that is even true of deaths of companies. I don’t think we should be setting people up for failure in all sorts of ways, and that is something that should be avoided, a lot.”
