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a16z Podcast | The (Definite) Optimism of Peter Thiel

What is Silicon Valley’s greatest reigning monopoly? How did PayPal manage to emerge from the dotcom implosion? Can you build a great tech company and keep it private forever? And how did Elon Musk manage to wreck an uninsured, million-dollar car with Peter Thiel in the passenger seat speeding on the way to a VC meeting? Marc Andreessen and Thiel discuss all of it in a wide-ranging conversation that toggles off the topics in Thiel’s new book “Zero to One.”

Marc AndreessenhostPeter Thielguest

Jan 2, 201946mWatch on YouTube ↗

Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.

EVERY SPOKEN WORD

50 min read · 10,300 words

0:01 – 4:20
Introducing Peter Thiel and the Optimistic Angle
1. MAMarc Andreessen
  Come on in, have a seat. Woo! There we go.
2. PTPeter Thiel
  [cheering]
3. MAMarc Andreessen
  Um, if you're looking for a seat, um, it's just like church. There's two more up here in front.
4. PTPeter Thiel
  [laughing]
5. MAMarc Andreessen
  Four more over here. Um, the closer you get to the stage, the more likely you go to heaven. Um, so, uh, for those of you [laughs] who don't know me, um, I'm, uh, my, uh, my name is Charlie Rose Jr.
6. PTPeter Thiel
  [laughing]
7. MAMarc Andreessen
  Um, I, uh, will be interviewing, uh, Peter Thiel today. Um, uh, everybody here probably is aware of Peter by background. Um, I will quickly recap, uh, his professional accomplishments, uh, as follows. Um, tech founder, CEO, venture capitalist, hedge fund manager, derivatives trader, corporate attorney, chess champion, political activist, book author, public speaker.
8. PTPeter Thiel
  [cheering] [applauding]
9. MAMarc Andreessen
  We are thrilled to have him with us today. I'm really thrilled to be doing this. Um, uh, Peter is one of the people... I'm gonna run the risk of embarrassing, uh, him. He's one of the people I respect the most in the world. Uh, and there's really three reasons for that. Um, uh, one is, uh, Peter is, those of you who have followed him over the years or have known him or have read his book, is a truly interdisciplinary thinker. Like, he really draws threads together across fields. Um, and, uh, or you might describe lateral thinker. Um, y- he always has an original viewpoint. Um, and, and, and you always end up learning something. Um, two is, uh, Peter, I give Peter a lot of credit for what's happening in the Valley, uh, right now, 'cause I think Peter really raises the bar on the people around him. Um, he raises the expectations of the companies that he works with, uh, and the founders he works with, and he raises the expectations, I think, of the thinking, um, that we all do in the Valley. He's really, you know, s- substantively elevated a, a number of debates. Um, and then third is just sheer intellectual generosity. Um, he's a teacher. Um, and he was a teacher before the book. He was a teacher in his Stanford class, uh, that resulted in the, the sort of bootleg notes, uh, uh, Blake Masters' notes that went viral. Um, and now he is a teacher, uh, through the form of, uh, of this book. Uh, the book has come out. The book is called Zero to One. Um, uh, the book tour has been very highly publicized. Uh, if you haven't, definitely go on Google News and type in Peter Thiel, and you will get a cornucopia, uh, of excitement. Um, uh, w- the book tour has gone highly viral, uh, itself. Many things Peter has said has gone viral, uh, in part because for some reason, uh, when Peter says something, uh, pessimistic or negative, it immediately goes viral. Um, but, uh, Peter, uh, also, uh, is an enormously optimistic person about, about many things. Um, and so what I'd actually like to focus on today, uh, is the optimistic Peter Thiel. Um, and so the things that Th- Peter thinks are, are going well, um, the areas where Peter thinks that things could clearly be improved. Um, and then in particular, given the nature of, of this audience, um, a little bit more of the how-to, which is like, okay, uh, I got the basic idea, but, like, how do I actually do X? How do I make the world a better place? How do I build a fantastic company? How do I build a monopoly? Um, so we will go through, uh, a number of those topics. [laughs] Um, I would like to start, though, by going, uh, back in history, um, to one of my favorite topics, which is, which is PayPal, uh, which is the company that Peter founded and ran. Um, uh, the PayPal story is amazing. I think everybody here, uh, has a general sense of the PayPal story. Uh, in particular, the founding story of PayPal has been quite well told, I think, and then also the fact that PayPal, of course, got bought by eBay and is now... actually will become a public, uh, separate, uh, public company again very shortly. Uh, when it goes, when it splits, estimates are it'll be on the order of a $40 billion public company. Uh, so it's a, it's a, a very significant entrepreneurial achievement, business achievement. Uh, and then of course, the PayPal Mafia has become central, uh, to Silicon Valley, and the people in, who were at PayPal have become, you know, really formative and foundational people, uh, for the modern Valley. Um, what I'd really like to focus on is what I think is the really dramatic part, which is the middle part, um, which is what happened after the founding, before the sale, um, because the world was a pretty exciting place. PayPal was an exciting company. Um, so I'd like to set the stage by asking everybody to recall, um, if you're old enough, some of you were in, uh, uh, elementary school at this time, but some of you will recall, uh, March of 2000, um, which was the high of the NASDAQ, uh, and the dot-com bubble, uh, which was possibly the most exciting month of all time, um, because everything was going up into the right. Everything was working. Everything was wonderful. All companies could raise infinite amounts of money at higher and higher valuations. Um, the new economy had arrived. Silicon Valley was going to win everything, um, and all was gonna be glorious. Um, and so I'd like to start March of 2000, um, by asking you to describe what was the state of PayPal, uh, in March of 2000?
4:20 – 8:43
PayPal in March 2000: Fundraising at the Bubble's Peak
1. PTPeter Thiel
  Well, we, uh, we, at the start of the month, we merged, um, Confinity and X.com, which was the company started by Elon Musk. Uh, PayPal was myself and Max Levchin, and, uh, and the combined company had, uh, $15 million in the bank. Um-
2. MAMarc Andreessen
  I'm sorry, one five or five zero?
3. PTPeter Thiel
  One five.
4. MAMarc Andreessen
  $15 million.
5. PTPeter Thiel
  We had a, uh, uh, we had a exponentially growing customer base because we had these referral programs where we, um, you got a new, um, uh... If you signed up, you got $10. If you referred someone who signed up, you got $10. So we had a $20 customer acquisition cost. The customer base was growing at sort of a 5 to 7% daily compounding rate. It had hit 100,000 users in, on February 3rd, 2000, and got to a million by mid-April of 2000.
6. MAMarc Andreessen
  Right.
7. PTPeter Thiel
  And with the exponentially growing customer base was also an exponentially growing burn rate since, um, we had no revenues and certainly, uh, no profits. Um, and so the CFO had the projection that, uh, the $15 million was gonna run out in about six weeks. Uh, people, people did not seem especially worried about it at the time. Um, um, but, uh, but we, we did, um-
8. MAMarc Andreessen
  Well, the reason they wouldn't be worried is because everybody knew you can always raise more money.
9. PTPeter Thiel
  You could always raise more money.
10. MAMarc Andreessen
  At a higher valuation every time you want, right?
11. PTPeter Thiel
  I think, I think in fairness, Elon and myself were, were a little bit worried. Uh, and, uh, we, we sort of, um, we managed to, uh, yeah, we managed to raise some money that month, which was fortunate.
12. MAMarc Andreessen
  So what was that, so what was that like? What was fundraising like in March of 2000 for a company like this?
13. PTPeter Thiel
  Well, um, it was, uh, it was, it was much crazier. And then, you know, there's always this talk, are we in a bubble again today? And, um- And it's a complicated question. I don't think we are, but, but I think, uh, compared, uh... It's, it's nothing compared to what it was at that time. So we had this round-the-world trip. There was one, one day we were in South Korea, there were three competing investor groups we met with. There was a professor from a university who was hiding behind a palm tree in, in the hotel to spy on us and steal internet business models from the US. So it was this frenzy thing, you know? Th- everybody was trying to get in on the action. Um, I was, uh... One group then took me to the airport and, uh, and I was, you know, I was running this new payment system, this new payment technology, uh, and I was not able to buy a plane ticket. My credit card didn't work. I probably just didn't have enough credit on it or something. Um, they immediate- and this was not disturbing at all. Um, it was, uh, it was... They, they were really excited. They bought me a first class plane ticket on the spot. Um, the next day, they called the law firm and said, you know, "Where do we wire the money?" Um, and the law firm figured, "Okay, he must have signed all the paperwork," so they gave him the, the account. So they wired $5 million in. They had signed no paperwork.
14. MAMarc Andreessen
  [laughs]
15. PTPeter Thiel
  Um, [clears throat] and then the, um, and then sort of the opening negotiation was, um, you know, "We're, we're not telling you where the money came from. Um, you have to take it. We're not telling you where you can send it back."
16. MAMarc Andreessen
  [laughs]
17. PTPeter Thiel
  And so, you know, and so we... I mean, we did, uh, we did end up taking them as investors, but, but so... But I, I sort of, um... And, you know, there had been this, this period for a year and a half, two years where things had been getting crazier and crazier, but there was sort of a sense in March 2000 that it was hard to imagine how it could go any crazier.
18. MAMarc Andreessen
  Yeah.
19. PTPeter Thiel
  So, you know, people sending $5 million without paperwork. Okay, hard... And, and South Korea was a country where it was really hard to get money out at the time.
20. MAMarc Andreessen
  Yeah.
21. PTPeter Thiel
  They still had, like, all these capital controls, so it was, it was phenomenal they got the money out. And, um, and so we closed on, yeah, we closed on 100 million on Friday, March 31st, and the following Monday, the bottom fell out of the market.
22. MAMarc Andreessen
  Okay.
23. PTPeter Thiel
  So-
24. MAMarc Andreessen
  Hmm
25. PTPeter Thiel
  ... then we had, uh, some time to, to build the business.
26. MAMarc Andreessen
  [laughs]
27. PTPeter Thiel
  [laughs]
28. MAMarc Andreessen
  So the bottom falls out of the market, um, I know it's always hard to think about these th- things in retrospect-
29. PTPeter Thiel
  Right
30. MAMarc Andreessen
  ... but kind of the bottom falls out of the market in March or April. Um, a lot of people, I just remember from the time, a lot of people... You know, there were sort of equal arguments of, like, "Okay, this is it." And I remember, like, Roger McNamee, I think in particular, came out and said, "This is it." Like, "You guys don't understand," like, "The end is here."
8:43 – 13:39
Surviving the Crash: Fraud, Burn, and Finding the Business Model
1. PTPeter Thiel
  There was, there was a sense, um... We did dial back the marketing pretty quickly, although there was, um, there was, uh... The, the, then, there then emerged this very big fraud problem in rapid succession, um, and so the burn stayed over $10 million a month, um, all the way through September 2000. So we had, um, sort of seven months in a row of, uh, $10 million plus burn. Um, we kept raising some more money in these additional tranches and, um, and there was... You know, there, there was a sense, I think, in the few weeks afterwards that everything was over. But then I'd say the, that by the summer there was sort of a sense that, you know, there was actually still a lot of time left, and I remember, I remember having conversations. The two conversations I remember was, were, um, were mid-April. It was, uh, it was a group of friends, um, and we had this event on a Sunday, and it was, "Let's take a picture of everybody on the day the internet ended."
2. MAMarc Andreessen
  Right. [laughs]
3. PTPeter Thiel
  And, um, and so... And that was actually, that day was the low. It went from 5,000 to 3,100, and then it recovered-
4. MAMarc Andreessen
  Right
5. PTPeter Thiel
  ... um, that, the next Monday. But then, um, sort of end of August 2000, I was talking to one of my friends, and it was like, "You know, the Nasdaq was back at 4,200. You know, it's gonna go all the way to 6,000." And, um, and then it was after Labor Day 2000 when it just went straight down-
6. MAMarc Andreessen
  Right
7. PTPeter Thiel
  ... for, you know, month after month for two years. Um, uh, and, um, and so, so yeah, we, we... I mean, we had sort of all these blocking and tackling problems to deal with. It felt, uh, it felt really, really chaotic on the inside. Uh, uh, we got on top of the fraud problem starting in, um, fall of 2000. We had all this money, so, um, you know, there's always, it's always good to have more capital rather than less. But, uh, but certainly one downside was perhaps we didn't move quite as quickly in figuring out the business model.
8. MAMarc Andreessen
  Mm.
9. PTPeter Thiel
  We had, uh, you know, the business model in early 2000 was you were gonna upsell people on financial services. Um, and you know, online banking customers were valued at $50,000 a customer, and so if we could acquire customers for $20 apiece, that was a great arbitrage.
10. MAMarc Andreessen
  Yes.
11. PTPeter Thiel
  Just upsell all of them to $50,000 online banking customers. Um, and then, um, and then sort of by fall of 2000, we had sort of zeroed in on, uh, on just payments being the thing to do, and you had to, you had to just take a slice of all the money you, that went through the system.
12. MAMarc Andreessen
  And is that when the really, the, like, the eBay kind of attach happened? Was that at that stage, or had that already happened?
13. PTPeter Thiel
  They were, they were sort of, um-
14. MAMarc Andreessen
  Well, you were, were you at that point the, the default payment system on eBay, by that point?
15. PTPeter Thiel
  Yeah. We, we'd started, uh, targeting eBay January 2000. I'd say it was 30, 35% of the s- sellers on eBay were using us by April or May, so it was, it was fairly heavily embedded. They had an alternate, um, payment system called Billpoint. It was sort of a partnership, a joint partnership between eBay and Wells Fargo. Wells Fargo didn't wanna take any fraud risk, and so, um, the product was... You can always get a product to be, uh, fraud proof if it's unusable.
16. MAMarc Andreessen
  Right. Right.
17. PTPeter Thiel
  And so the bank had a bias to have a, have a-
18. MAMarc Andreessen
  Well, it's kind of on both sides.
19. PTPeter Thiel
  It's-
20. MAMarc Andreessen
  You can always, you can always take all the customers if you're willing to take all the fraud. You can always shut off all the fraud if you're willing to shut off all the customers.
21. PTPeter Thiel
  Yes. So-
22. MAMarc Andreessen
  One, one could argue there was a little bit of that, you know-
23. PTPeter Thiel
  Yeah
24. MAMarc Andreessen
  ... a little bit of both of those happening.
25. PTPeter Thiel
  So we, we were, we were sort of on the customer side and, um-
26. MAMarc Andreessen
  Sure
27. PTPeter Thiel
  ... eBay was on the anti-fraud side.
28. MAMarc Andreessen
  Yeah.
29. PTPeter Thiel
  Um, but so yes, there was, it was this very, uh, co- But then you had this very weird dynamic with eBay for the next, uh, two and a half years where, uh, it was sort of symbiotic, but it was sort of like they owned, ran this big store, and there was a different company that ran the cash-out registers, and the people running the store could never figure out how to get their cash machines to work. If they just figured it out once, we'd be in trouble. They never seemed to quite be able to figure it out, though, and eventually they bought the company.
30. MAMarc Andreessen
  So it's, so it's fall of 2000 going into winter of 2000, spring of 2001. It is now clear that the, you know, the world, the nuclear winter has arrived, um, and the money is shutting off.
13:39 – 19:30
Monetizing, the IPO, and the eBay Acquisition
1. PTPeter Thiel
  Well, we just, um, we just dialed up the, the amount we charged to people. So we, we'd had this tagline in early 2000, uh, "Always fast, free, and secure."
2. MAMarc Andreessen
  [chuckles]
3. PTPeter Thiel
  And so the, the, and so there was a question, how do you charge customers if you say that your product's always gonna be free?
4. MAMarc Andreessen
  Yeah.
5. SPSpeaker
  [laughs]
6. PTPeter Thiel
  Um, and so, um, and so, uh, David Sacks, who, uh, uh, ran the, the product team, came up with this idea of, um, upgrading people. And so you were upgraded from a customer to a business account. You own... And then there were all these extra benefits, and you just had to just pay a small 2.9% fee on every payment. Uh, uh, you just had to click one button to be upgraded. And, uh, one of the things that did work, uh, with the payments company is once you had all these customers, you could actually upgrade people because you already had all the payment information. So there had been all these other companies that had been built on acquiring lots of customers and then upselling them later, and it turned out the day you tried to upsell them, they all left.
7. MAMarc Andreessen
  Right. Right.
8. PTPeter Thiel
  Um, but in our case, uh, we, we had very little attrition.
9. MAMarc Andreessen
  Right. And then you took the company public.
10. PTPeter Thiel
  We took the company, um... So yes, we, we got to breakeven in September 2001. We were the first company in the US to file after 9/11. Filed end of September. Uh, we took it public in February of '02, uh, and then eBay bought it in, uh, July of that year.
11. MAMarc Andreessen
  So what was it like doing an IPO in February of 2002? It was, it was probably the sky was sort of still falling, but a lot of the sky at that point was on the floor.
12. SPSpeaker
  [laughs]
13. PTPeter Thiel
  Well, there's, uh, there's a lot of, yeah, there are a lot of crazy things. So there was, um, certainly, um, certainly the press had become much more hostile-
14. MAMarc Andreessen
  [laughs]
15. PTPeter Thiel
  ... in all these, uh, all these strange ways.
16. MAMarc Andreessen
  That's like the understatement of all time.
17. PTPeter Thiel
  So, so there was, um-
18. MAMarc Andreessen
  [laughs] Had gotten out the flamethrowers
19. PTPeter Thiel
  ... so there was, I'm not gonna get the quotes exactly right, but there was this article, um, this, um, sort of this column in, I think it was the San Jose Mercury News around, uh, October of 2001 after we'd filed our IPO, and it was, uh, the title was Earth to Palo Alto.
20. MAMarc Andreessen
  [laughs]
21. SPSpeaker
  [laughs]
22. PTPeter Thiel
  Um, and, "Has anyone sent, uh, told these people that, um, you know, um, you can't have a company in which the average age of the executives in the S1 is 29 years old? You can't have, um, you know, we don't, we need, uh, money, a company that people think might be used for terrorist money laundering as badly as we need an anthrax epidemic."
23. MAMarc Andreessen
  Right.
24. PTPeter Thiel
  And on and on and on. Um, we, uh, we had, uh, we ha- Um, as we, you know, when you, when you file for an IPO, you, you get, uh, these S1 forms, um, that you have to, um, you have to do with the SEC, and you get a reviewer from the SEC and, and, uh, there's sort of a spectrum of people. Some are better, some are worse. Um, and we had this, uh, one person named, uh, Gottlieb, who the, our lawyers in advance was, "Oh, yeah, there's one person who's just terrible if you get this Gottlieb guy." And we, and he sort of ideologically believed companies should not go public. They were all run by crooks. And so it was this, this crazy open-ended process where, uh, it would be things like, "You have to disclose that, um, you're not allowed to do business in Louisiana anymore."
25. MAMarc Andreessen
  Hmm.
26. PTPeter Thiel
  It's like, "Oh, well, that's news to us." Um-
27. MAMarc Andreessen
  Right.
28. PTPeter Thiel
  "Yeah, well, I just talked to them," and, you know, so he, he like-
29. MAMarc Andreessen
  Oh, geez. He was seeking out reasons to block it. Yeah.
30. PTPeter Thiel
  So he'd be like, "Uh, I'm calling from the SEC to the state banking officials in Louisiana. Uh, is, is PayPal allowed to do illegal banking activity in Louisiana?" Answer, "No. If they're engaged in illegal banking, they're not allowed to do that."
19:30 – 21:30
Whether to Sell PayPal
1. MAMarc Andreessen
  so, uh, what do you think would've happened had you not sold PayPal? Um, if PayPal had continued as an independent company, what would've happened?
2. PTPeter Thiel
  It's hard to say. You know, the, the... Certainly, um, certainly if you'd been able to keep it going as an independent company, it would be a lot bigger 10, 12 years later. Uh, there were, you know, there were sort of a lot of crazy risks. There was a, there was an investigation Spitzer started for vice-related payments we were doing.
3. MAMarc Andreessen
  Well, he would know.
4. PTPeter Thiel
  Um-
5. SPSpeaker
  [laughs]
6. PTPeter Thiel
  Um-
7. MAMarc Andreessen
  [laughs] He's, he's, he was-
8. PTPeter Thiel
  Um, and-
9. MAMarc Andreessen
  He, he, he was undoubtedly running personal experiments.
10. SPSpeaker
  [laughs]
11. PTPeter Thiel
  Uh, yeah, it was, it was... We did more, not so much the adult, it was more the, the, uh, the, the, the, the, the, the, the offshore sports, uh, betting sites. Um, and, um, and, uh, we got the notice, the, the a- acquisition was announced on, uh, Monday, July 8, 2002. We got the notice on, uh, Tuesday, July 9. Um, and so if you sort of had the counterfactual experiment, you know, it would've been, like, you know, probably the stock would've been hit 20 to 40%. And, um, and then the question is, would eBay have tried to take advantage of that, of that to hurt the company? So there sort of are all these scary scenarios had it stayed, um, had it stayed, uh, stayed, um, a standalone company. Um, but certainly there are all these postmortems and, um, we've, you know, we've debated, uh, many times whether it was the right thing to sell or not. Um, you know, it's, it's always a somewhat sad thing when you sell your company because you don't, you d- you, you sort of no longer are running it, you no longer have control of it. It's like, you know, um, you wanna sell your kid or something like that.
12. SPSpeaker
  [laughs]
13. MAMarc Andreessen
  [laughs]
14. PTPeter Thiel
  Um, but it's, um... I'm, I'm still of the view it was, it was the right thing to do.
15. MAMarc Andreessen
  Mm-hmm.
16. PTPeter Thiel
  I think, I think most tech M&A deals don't make sense because most of the time there's no, there are no synergies. This is one where it made tremendous sense.
17. MAMarc Andreessen
  Yeah. It was because of the dependency, because of the-
18. PTPeter Thiel
  Yes
19. MAMarc Andreessen
  ... you said the bilateral.
20. PTPeter Thiel
  Yeah, and the volume increased tremendously after the acquisition.
21:30 – 26:19
The PayPal Mafia and Lessons from a Hard-Won Success
1. MAMarc Andreessen
  So, um, so of course, PayPal now is famous for the PayPal Mafia, and so, you know, just to list names, you know, you and Reid Hoffman and Roloff and David Sacks and, you know, a whole g- a cast of... I mean, the, the Yelp, you know, the Yelp guys, uh-
2. PTPeter Thiel
  Mm-hmm
3. MAMarc Andreessen
  ... you know, j- uh, the YouTube guys, kind of Aunt Max. Um, and you know, everyb- basically, like, you know, there's, I don't know, what, 10 or 12 people who have gone on to do really foundational things, right? And, and, and for, and o- one indication of that, like, the, the most, like, amazing venture capital portfolio of all time would be if you just simply invested [laughs] in all the PayPal founders, uh, or all the PayPal, uh, people for all the new companies. Um, but, you know, that's how we know these people now, and now they're out and about, they're doing their things. At the time, they were all working for you. Um, so what was it like, what was it like with all those personalities, uh, in that place at that time?
4. PTPeter Thiel
  We had a lot of strong personalities.
5. SPSpeaker
  [laughs]
6. PTPeter Thiel
  Um, and, uh, there were... You know, I, I think, um, and I think the company had its share of challenges. So, you know, one, one, one cut I have on... There's always this question, why was, why were there so many successful companies that came out of PayPal? And I think it's a hard question to answer, but, but s- sort of one of the lessons you learned at PayPal was it was hard but possible to build a great company, and there were sort of a lot of ups and downs, a lot of, uh, challenges, um, regulatory fraud, marketing, business model, you had to sort of work out over the two and a half, three years. Um, the, uh, I think that's actually not the lesson people normally learn in these companies, um, uh, because most of the time people are either in companies that fail, and then the lesson you learn is that it's impossible to build a great company, and so the next time around you try for something that's less ambitious. And so, and then you certainly will not build a great company. Or you are in a, a company where everything works just phenomenally-
7. MAMarc Andreessen
  Yeah
8. PTPeter Thiel
  ... from day one, sort of like Microsoft or Google-
9. MAMarc Andreessen
  Yeah
10. PTPeter Thiel
  ... where you then learn the lesson that it's easy to build a great company. And there's a way in which, um, um, both the lesson that it's easy and the lesson that it's impossible are sort of equally wrong because, uh, both lessons, uh, tell you that you don't, there's no point in working hard or you don't need to work hard. You know, impossible, no point. Easy, no need. And so you end up not, uh, not doing what it takes.
11. MAMarc Andreessen
  Right.
12. PTPeter Thiel
  So I think there was sort of this intermediate aspect where even though PayPal was not as successful as some other companies have been-
13. MAMarc Andreessen
  Mm
14. PTPeter Thiel
  ... um, it was a context in which people, uh, got a very good perspective on what, what you needed to do.
15. MAMarc Andreessen
  Yeah. So I think when people, when founders today who are, you know, have read about you guys or, or met you guys, I think they view that you guys must have been an incredibly harmonious, organized team, um, that probably worked in lockstep and kind of probably completed each other's sentences, um, and got along really well at all times. Is that how it was?
16. PTPeter Thiel
  Uh, not sure if that's precisely correct.
17. SPSpeaker
  [laughs]
18. PTPeter Thiel
  Um, I mean, there's certainly, there's, uh, certainly always an aspect where, um, all's well that ends well.
19. MAMarc Andreessen
  Right.
20. PTPeter Thiel
  And, um, and, uh, but, but certainly there were sort of all sorts of crazy, uh, points of, uh, points of conflict. You know, I, I always think, um- Conflict happens when different people wanna do the same thing.
21. MAMarc Andreessen
  Mm.
22. PTPeter Thiel
  And one of the challenges in... It's not when different people want different things, it's when people want the same thing.
23. MAMarc Andreessen
  Okay.
24. PTPeter Thiel
  And, um, and in a s- and so the challenge you have as a boss is to try to have people do different things. If you're like a sociopathic boss, what you, you know, what you do is you tell two people to do the exact same job, and you'll generate a fight out of nothing.
25. MAMarc Andreessen
  Right.
26. PTPeter Thiel
  Uh, and so if you, if you don't wanna-
27. MAMarc Andreessen
  So, and, and there are bosses who do that.
28. PTPeter Thiel
  And there are pro- there are some bosses who do that. And so if you wanna avoid that, you should always have people do d- different things. The challenge in a startup is that there's a lot of fluidity in the roles, and so people end up doing a lot of different things. There's sort of ways these roles overlap. Um, uh, David Sacks, our head of product, uh, liked to say that the, uh, product was a single seamless whole, which was certainly true on one level, but then of course was a recipe for the product team being in conflict with absolutely everybody in the company-
29. MAMarc Andreessen
  Mm
30. PTPeter Thiel
  ... since, um, the fraud team thought the product should be different, or the customer service team thought, you know, there's certain customer questions that should be answered, um, and on and on down the line. Um, uh, but, uh, but yeah, no, there were, there were a lot of, a lot of crazy challenges.
26:19 – 31:31
Working with Elon Musk and the McLaren Crash
1. MAMarc Andreessen
  what was, what was Elon like to work with at PayPal? Like, how long did you guys actually work together, and what were the jobs, and what was he like to work with?
2. PTPeter Thiel
  Well, he was, uh, incredibly, um, smart, incredibly, um, hardworking, and, um, incredibly ambitious. So he was definitely not the person you wanted to compete against. So this was the first encounter we had with him was as this competing company four blocks down the street on University Avenue in downtown Palo Alto. And so, um, and so I, I do think one of the really good things we did was to, was to join forces in, in March, uh, 2000. Uh, there were all sorts of challenges in, in getting this work, worked out in, in all these different ways. Uh, you know, and there's so many different Elon stories I can tell. Um, there was, there was one, um, I believe this was literally the day of the market peak in March of 2000, um, and we were, we were, uh, driving up to Sand Hill Road to meet with, uh, one of our VCs to brainstorm on how to raise some money. Um, Elon had made, um, a fair bit of money in his previous startup. Most of it had gone into, had gone into X.com. $1 million had been spent on McLaren X1 sports car. We-
3. MAMarc Andreessen
  For those of you, th- th- this is worth a Google search, this car. Well, this, it was the, it was the m- it was the first million-dollar sports car. It was-
4. PTPeter Thiel
  Some- something like that.
5. MAMarc Andreessen
  It was, it, it was basically the supercar of its... It's like, just take the most extreme idea of what a car could be, and this was it.
6. PTPeter Thiel
  And we, you know, and we, uh, we were driving up, uh, Sand Hill. Um, we, we were supposed to prepare for the meeting. We just talked about the car. You know, it goes zero to 100 miles per hour in six seconds. He'd taken it up to 180 on the Highway 280. It's pretty fast, miles per hour. Um, you know, we, um, we got to the part of Sand Hill right past Santa Cruz, where it's sort of a, a four-lane, two-lane each way, uh, 35 mile per hour zone, and it was sort of time for a demo, and we can sort of debate who goaded who into, uh, doing the demo. Um, but, um, it, the car was taken from 45 to 85 miles per hour in two seconds flat while changing lanes. Uh, Elon, the driver, lost control. It skidded. There was enough torque, because he sort of turned the wheel while accelerating really hard, that as it hit the side of the road, we sort of achieved, uh, uh, the car went up in the air. There was about four to six feet between the car and the air. We did a 360-degree rotation in the air, you know, horizontal, not vertical, but horizontal, and then it, uh, and then it crashed into the road, and it was sort of a, it was sort of like an unidentified flying object over Sand Hill Road. The, uh, the, the first, uh, the first person who stopped, uh, told us that she, uh, didn't really wanna stop that day. She figured the people in the car were just dead, and she didn't really wanna deal with that. Um, um, but it had a, you know, had a, it had a crash resistance driver compartment that Elon had told me all about as we were driving, uh, up the road. So it had sort of this Hitchcock-like feel. Um, and as we, uh, and, uh, and the, and the first thing Elon said was, uh, you know, "Wow, that was really intense." And then, um, and then it was, um, "You know, I'd read all these stories about people who made a lot of money and bought sports cars and crashed them, but I knew this would never happen to me." And so, um, and so I, uh, I of course had no insurance on the car. And then, um, and then we actually, you know, uh, we both had a little bit of whiplash, but we first, uh, hitchhiked and went to the VC meeting, and then, um, and then sort of went to see a chiropractor afterwards. Um, but anyway, we were both, we were both ended up being, we both ended up quite fine. But, uh, but there was sort of, so there was always this sense that, um, and this is what I think is sort of remarkable about the, the Elon story in retrospect, uh, was there was always a sense that Elon really pushed the envelope.
7. MAMarc Andreessen
  Yeah.
8. PTPeter Thiel
  And certainly, you know, certainly, uh, on the, uh-
9. MAMarc Andreessen
  Well, by the way, I just wanna go back, 'cause it wasn't just the driving, it was, it, you, he put his, this was his liquid net worth? Is that, that he put into the car?
10. PTPeter Thiel
  I think he had, it was, like, one-third of it.
11. MAMarc Andreessen
  Yeah. It was, like, a significant part.
12. PTPeter Thiel
  There was, one of the investors, um, I talked to years later who talked to us in summer of 2000 and said he didn't wanna invest in the company because the CEO, Elon was living in a one-bedroom condo in Palo Alto at the time, and the CEO was clearly lying to him, because he told him that his car was worth more than his house. [laughs]
13. MAMarc Andreessen
  Which, of course, was not true.
14. PTPeter Thiel
  It was totally true.
15. MAMarc Andreessen
  Right, right.
16. PTPeter Thiel
  Um-
17. SPSpeaker
  [laughs]
18. PTPeter Thiel
  And so anyway, there were sort of, um, there were sort of a lot of, uh, a lot of crazy stories like this. But, but I think... Yeah, so I think, I think, um... And so I think the, I think certainly when Elon, um, went on to start Tesla and SpaceX, um, in sort of '02, '03, '04 timeframe, um, you know, with respect to both companies, I think the conventional wisdom was that they were not going to succeed.
19. MAMarc Andreessen
  Oh.
20. PTPeter Thiel
  It was, it was, uh, way too ambitious.
21. MAMarc Andreessen
  Oh, the conventional wisdom was he was out of his mind.
22. PTPeter Thiel
  Yes, something like that.
23. MAMarc Andreessen
  I mean, either one... You knew two things. You knew two things in life. You knew there would never be another American car company, and you knew that. You knew that because they made a movie about it, right? The, the, the, the last major American car company was called Tucker, and they made a movie-
24. PTPeter Thiel
  Hmm
25. MAMarc Andreessen
  ... about what a disaster it was and why you never, ever start a car company in the United States. And then SpaceX, there hadn't been a new, I mean, a rocket ship company in-
26. PTPeter Thiel
  Yeah, I-
27. MAMarc Andreessen
  ... 60 years?
31:31 – 34:58
Tesla and SpaceX: Weak Competition and Coordination
1. PTPeter Thiel
  Yeah, so there's always, there's always sort of a half full, half empty version. I had a conversation with Elon in 2008 when it was still... the jury was still far from clear on either Tesla or SpaceX. Um, and we ended up investing in SpaceX as Founders Fund in '08. It was sort of six years into the process, and people thought we were crazy to invest, um, six years after they'd gotten started. And, um, on the Tesla side, um, yeah, Elon's comment was, yeah, there hadn't been a new car company in the US... The last successful new car company in the US had been Jeep, which was started in 1941.
2. MAMarc Andreessen
  Right.
3. PTPeter Thiel
  Um, and so, you know, the standard interpretation would be, "Well, you can't start a new car company." Elon's interpretation was, you know, "It's about time for a new car company."
4. MAMarc Andreessen
  Right, right.
5. SPSpeaker
  [laughs]
6. PTPeter Thiel
  And so there's always a half full, half empty version of these things.
7. MAMarc Andreessen
  Yeah.
8. PTPeter Thiel
  But I think, you know, I, I would say if you take both SpaceX and, uh, Tesla, what, what I think did work, um, and was, was perhaps very underrated for, for many years, um, in both cases, um, you know, uh, I always have this sort of anti-competition bias, and the competition was really weak.
9. MAMarc Andreessen
  Mm-hmm.
10. PTPeter Thiel
  And so, um-
11. MAMarc Andreessen
  And describe what you mean. Like-
12. PTPeter Thiel
  Well-
13. MAMarc Andreessen
  ... which competition?
14. PTPeter Thiel
  Well, I think, I think you wanna, you know, you wanna aim, um... You, you don't wanna go for the things that are the most competitive. Um, you know, um, you know, y- y- sort of opening a restaurant is my, sort of the paradigm example of an intensely competitive and really bad business idea. Um, and, uh, and so to the extent you're competing, you wanna compete against, um, industries that are somehow... where something's sort of off, and you can do something that's very, very different. And certainly, the US car companies were very off. They weren't gonna build an electric car ever.
15. MAMarc Andreessen
  Mm-hmm.
16. PTPeter Thiel
  And so there was a way in which he picked really weak competition there. And then aerospace was where these sort of weird government, quasi-government conglomerates that were pretty badly managed by the 2000s as well. So I think there was sort of an opening to, to, to do this. Um, the, the thing that's... You know, most of the innovation that we do, um, involves some combination of brilliant breakthroughs and sort of step-by-step iteration. We're sort of very good at iteration. We're pretty good at occasionally coming up with brilliant breakthroughs. Um, but I think both Tesla and SpaceX were stories that involved complex coordination, where you needed to get a lot of different pieces, uh, to fit together in just the right way. And so if you ask, you know, what was the real breakthrough with Tesla or the real breakthrough with SpaceX? It was actually that you had everything coordinated. I think something similar is probably true with the iPhone, with Apple. There was, you know, no single part that was massively better than anything that had come before, but it was actually getting all these pieces together in just the right way. And, um, and there was sort of a vertical integration to that that, uh, people generally did not do, and that, that I think he pulled off in both cases.
17. MAMarc Andreessen
  Mm-hmm. So we have, um... I wanna leave time for audience Q&A, but I wanna hit a few more topics, uh, before we go to that. So, um, you alluded earlier... Let's just do a kind of a situation check on where we are in Silicon Valley right now. So you alluded earlier to, I mean, obviously there's the high con- there's been high concern for some time that there's a new bubble forming. Um, even some of th- some of us who have said there's no bubble have, have now started expressing-
18. PTPeter Thiel
  Mm-hmm
19. MAMarc Andreessen
  ... public concerns about burn rate, um, and loss of discipline. You know, money, you talked about the, you know, the-
20. PTPeter Thiel
  Mm-hmm
21. MAMarc Andreessen
  ... the $5 million sitting in the account. I haven't heard that specific story happen yet, but I wouldn't be surprised-
22. PTPeter Thiel
  Mm-hmm
23. MAMarc Andreessen
  ... um, given some of the activity, especially from money coming in from outside Silicon Valley. So what's your assessment? Well, it's a bubble... W- why do you say... W- why are you confident when you say not a bubble? Like how do you think about that?
34:58 – 37:49
Is Silicon Valley in a Bubble?
1. PTPeter Thiel
  I'm, I'm not sure you can ever be fully confident. Um, but I think, I think these... And we've had certainly a history of all these crazy bubbles for a few decades now. You know, there was the, uh, Japan had this crazy bubble in the '80s. Um, you had the tech industry in the late '90s. You had the housing finance one in the last decade. So it's definitely reasonable to ask the question, is there another bubble? Um, I tend to think, um, the bubbles always required the public to be involved in a very big way, and there were these psychosocial phenomena on some level. And, um, and this, the public is not really involved because the companies are not going public till extremely late in the cycle. I mean, there may be... I haven't looked at the exact numbers, maybe 30 or 40 tech IPOs a year versus something like 300 in the late '90s. And so, um, in this entire boom, the public has in some sense, uh, not really been involved. Um-
2. MAMarc Andreessen
  And is that more because they haven't been able to get involved?
3. PTPeter Thiel
  Well, they haven't been able, they haven't been able to-
4. MAMarc Andreessen
  Or because they haven't wanted to?
5. PTPeter Thiel
  Well, they probably haven't wanted to. They're probably still burned. They probably haven't wanted to.
6. MAMarc Andreessen
  Right.
7. PTPeter Thiel
  The companies haven't wanted them.
8. MAMarc Andreessen
  Right.
9. PTPeter Thiel
  You know, it's all, all sorts of different factors. Um, but I would say the other, the other thought on this bubble question is I think, I think if you identi- if... My candidate for where the bubble is today is it's the government printing money. It's the government bonds. Um, it's, um, minus 2% real interest rates. And, um, and so the things that are bubble-like are the things that are most like government bonds. So that's corporate bonds. It's, um, probably housing, which is linked to, very powerfully linked to the interest rates. Um, and then to some extent it's stocks that act like bonds. So it's stocks that pay very high dividend yields. Um, it's a lot of the old tech stocks, like Oracle or IBM or Microsoft, where you, um, you financially model them like government bonds, and the most important variable in evaluating them is the discount rate. Um, most of the kinds of companies we invest in are actually- The, the main variable that dominates is growth. How fast do they grow? And so if the, if the bubble is centered on the risk-free interest rate, then you have to be careful of assets that, um, are linked to the risk-free interest rate. Um, and things that are actually linked to growth are very different. And so, so I don't know, sort of one, one way I've put it is, you know, I have probably three-quarters of my net worth is in illiquid tech stocks in Silicon Valley, and it's because I believe there's a giant bubble centered on government bonds, and this is the furthest I can get from it.
10. MAMarc Andreessen
  Government bonds.
11. PTPeter Thiel
  Yes. Furthest from government bonds.
12. MAMarc Andreessen
  Interesting. Um, so that actually leads me to another... You mentioned, uh, companies like Microsoft and Oracle. So you, you said you've been talking a little bit publicly on this topic. So, um, take us through w- your theory on what's, you, um, I think s- I think your, your, I think your nomenclature is tech companies and is it anti-tech companies? Um, or how do you describe that? You s- like define-
13. PTPeter Thiel
  Well, there are-
14. MAMarc Andreessen
  ... define a technology company and then describe w- your view of some of the large incumbents like Microsoft and Oracle, and why you don't necessarily view them as technology companies.
37:49 – 39:28
Tech Companies vs. Bets Against Technology
1. PTPeter Thiel
  Well, when you, um, when you invest in a company, um, there's always a question, are you investing on the creation of new technology or are you, or are there cases where you're betting against the creation of new technology? And so, um, so I would say that, um, there's a whole set of companies in the Nasdaq-100 that are actually bets against technological innovation. So Microsoft is a bet that there will never be anything like Linux. It's a bet that there will be, uh, that the operating system won't shift to mobile platforms. It's a bet that nothing will change. You know, IBM is a bet that we'll keep the same kludgy software from the '70s and '80s and need lots of service people to support it. Um, Oracle is sort of a bet against cloud computing. Um, and so, uh, um, there are sort of a lot of... It doesn't necessarily make these bad investments, but, uh, the fundamental thing you're doing is you are, uh, betting against technological innovation. And this is always obscured because the companies themselves have this pro-tech narrative because there was some point in history when they were actually technology companies. Microsoft was a technology company in the '80s, probably still in the '90s, um, you know, much less so in 2014, but that's, you know. When, when Microsoft recruits engineers in 2014, it doesn't say, you know, "You're working at a bank where we're just, you know, money's just flowing as long as nothing happens elsewhere in the world."
2. MAMarc Andreessen
  Mm-hmm.
3. PTPeter Thiel
  Um, and so, you know, Ge- General Motors was a technology company in the 1920s.
4. MAMarc Andreessen
  Right.
5. PTPeter Thiel
  Um, by the '70s and '80s, uh, investment in GM was a bet against Japanese and German, uh, innovation in cars.
6. MAMarc Andreessen
  Right.
7. PTPeter Thiel
  And so there's always this, the, you always have this sort of an arc.
39:28 – 43:51
Monopoly vs. Commodity and Why Monopolies Decay
1. MAMarc Andreessen
  Right. Well, let's, let's probe on that from one more direction. Um, so, uh, you, you talked as, in your book and on the book tour, you've talked a lot about your theory of monopoly versus commodity. And in a nutshell, right, Peter's thesis, two kinds of businesses, monopoly, commodity. Monopolies are sort of infinitely profitable and can go on to do all kinds of amazing things, but-
2. PTPeter Thiel
  Infinitely, but-
3. MAMarc Andreessen
  Oh, very profitable
4. PTPeter Thiel
  ... infinitely is a lie.
5. MAMarc Andreessen
  But very profitable. As a consequence of being profitable, he would argue can go on to do very amazing things. Commodities inherently are zero profit, and the enemy of innovation is therefore, um, is, is being zero profit because you can't afford to fund innovation. So commodity companies are not gonna innovate. Um, and so, you know, sort of the re- sort of revised thesis, monopoly is better than commodities. Um, on the East Coast, you know, the reaction to that has largely been panic and freak out. Um, on the West Coast, the reaction to that among founders has been, "Hell yeah, let's go build monopolies." Um-
6. PTPeter Thiel
  Well, this is certainly the advice that... This is certainly on the how-to advice side. If you're an entrepreneur-
7. MAMarc Andreessen
  Yes
8. PTPeter Thiel
  ... founder, you always wanna build a monopoly.
9. MAMarc Andreessen
  Yeah.
10. PTPeter Thiel
  Now, there's a public policy question as to when these things are good or bad. That's a somewhat separate question.
11. MAMarc Andreessen
  Right, which is why you get the East Coast reaction.
12. PTPeter Thiel
  But so, and those are two different questions.
13. MAMarc Andreessen
  Right.
14. PTPeter Thiel
  Just to be clear. But I think, uh, from the point of view of someone starting these companies, you always wanna go for monopoly.
15. MAMarc Andreessen
  Right. So let me ask you this, though. So you describe, you describe companies, you describe companies that basically have become, as you said, sort of bank-like, uh, bets against technology, Microsoft, Oracle, um, and, uh, General Motors. And, um, I forget there was a fourth one in there. Um, um-
16. PTPeter Thiel
  IBM.
17. MAMarc Andreessen
  Sorry?
18. PTPeter Thiel
  IBM.
19. MAMarc Andreessen
  IBM, IBM. And, and so you could describe, like, I think you could describe it, there was a point at which all four, four of those companies had become monopolies. Microsoft's, Microsoft certainly, uh, um, obviously. General Motors at one point was some giant market share of US auto, auto production. Um, Oracle is some giant share of databases with enormous pricing power. Um, and IBM obviously is like... It, IBM's at, at one point actually... Well, [laughs] IBM went through decades of actually antitrust prosecutions over being a monopoly, and even today has a very large monopoly position in sort of, uh, its, the Fortune 500-
20. PTPeter Thiel
  Mm-hmm
21. MAMarc Andreessen
  ... uh, in terms of global services. So how do you reconcile your view that monopolies are the enabler to competition? Like, what, like, w- w- how do you sustain that view in the face of the observation that these companies that, that were monopolies, um, are no longer innovative?
22. PTPeter Thiel
  Well, I think there's always a, a challenge with these companies staying innovative over time. Whether, and that doesn't... You know, so, um, my claim, actually, um, my claim is not necessarily that monopolies are more innovative for all time.
23. MAMarc Andreessen
  Okay.
24. PTPeter Thiel
  It's, um, you get to monopoly if you do something really innovative at some point. So, um, so the goal should be to do something super innovative, where you're so differentiated that you get a monopoly.
25. MAMarc Andreessen
  Right.
26. PTPeter Thiel
  And then hopefully you keep innovating, and you, you build on that monopoly.
27. MAMarc Andreessen
  Can we talk about the hopefully part? What's, what's the hopefully? What's the... If somebody becomes a monopoly, arguably today Google and Search, um, or, you know, take your pick of the next big company.
28. PTPeter Thiel
  Well, there's, um-
29. MAMarc Andreessen
  What's the hopefully? Like, what has to happen-
30. PTPeter Thiel
  Well, you, you-
43:51 – 46:00
Technology, Environmentalism, and Nuclear Power
1. MAMarc Andreessen
  That I would agree with. Well, it depends on the restaurant. The food supply chain in the world right now is responsible for, like, up to half of all carbon emissions for the current level of food output and the current kinds of food we consume. Like, a, a hamburger consumes 350 gallons of water in its production cycle. I mean, just these, these crazy kind of out of control, uh, you know, food supply chain, energy supply chain things that clearly lead to, you know, just massive... I mean, Beijing is already drowning in smog, right? You can imagine how much worse it could get if these trends continue. Um, it seems like there should be a natural alliance of sort of, uh, sort of very radical, innovative technologists with environmentalists. It seems like it's, there's a shared agenda there, and yet that doesn't exist at all. Um, do you think that that's a bridge that can or should be crossed?
2. PTPeter Thiel
  Well, people should be trying to do a lot more on it. You know, certainly I think the, uh, I think always the people who are concerned about, uh, climate change and global warming, I always think they should be much more open to nuclear power-
3. MAMarc Andreessen
  Right
4. PTPeter Thiel
  ... as sort of like the-
5. MAMarc Andreessen
  Well, typically they're the opposite. Typically they wanna go... At, at least it seems to me-
6. PTPeter Thiel
  Yeah
7. MAMarc Andreessen
  ... typically they wanna rever-
8. PTPeter Thiel
  Yeah
9. MAMarc Andreessen
  ... they, they, they want less-
10. PTPeter Thiel
  So I'm, I'm, I'm hopeful it's a bit of a generational issue-
11. MAMarc Andreessen
  Mm-hmm
12. PTPeter Thiel
  ... where the, the anti-nuclear people are these boomers, these baby boomers who came of age in the '70s. Um, and once they lose grip on power in the next decade or so, um, we may be able to have a nuclear renaissance in this country.
13. MAMarc Andreessen
  Is that a hangover from Three Mile Island, or is that-
14. PTPeter Thiel
  You know, it's-
15. MAMarc Andreessen
  ... something else?
16. PTPeter Thiel
  I, I think it was not so much the accidents as it was the, uh, dual use of nuclear power for both peaceful and military purposes. So people always cite Three Mile Island 1978 as a, a critical turning point. I think it might have actually been, um, when India got the bomb in, I believe, '74 or '75, where we had given India all this reactor technology. We thought it could never be weaponized. It turned out it could be weaponized. And so there was something, there was something, you know, very scary about nuclear bombs, and it somehow didn't fully register till the late '60s and '70s, and I think that's, that's what really triggered the anti-nuclear stuff.
17. MAMarc Andreessen
  Are you making nuclear investments?
18. PTPeter Thiel
  We've, you know, we've started, uh, we've started to look at, we've started to look at this, yeah.
19. MAMarc Andreessen
  Yeah, yeah.
20. PTPeter Thiel
  It's definitely... Yeah, it's, it's-
21. MAMarc Andreessen
  That'll be-
22. PTPeter Thiel
  ... all these challenges with it-
23. MAMarc Andreessen
  Yeah
24. PTPeter Thiel
  ... but we've started to look at it.
25. MAMarc Andreessen
  Yeah. Okay, good. So let me thank Peter very much.
26. PTPeter Thiel
  Thank you.
27. MAMarc Andreessen
  And thank you all for coming. [audience applauding]
28. PTPeter Thiel
  Great. Thank you very much.
29. MAMarc Andreessen
  Let's go. Good. Okay