Peter Thiel on competition, brainwashing and forging your own path

PayPal co-founder Peter Thiel is often known for his ability to understand what makes a company successful and for having some contrarian points of view. Following the sale of PayPal to eBay (EBAY) in 2002, Thiel founded global hedge fund Clarium Capital Management, technology company Palantir and venture capital firm Founders Fund, which has invested in companies like Spotify, Oculus and SpaceX. Thiel was also Facebook’s first outside investor and currently sits on its board. Through his Thiel Foundation, four years ago, he created the Thiel Fellowship for up-and-coming entrepreneurs under 20, who are each given $100,000 and two years to eschew higher education and work on a venture of their choosing.

Known for his strong opinions about hot-button topics like education, company culture and competition, Thiel has been in the news of late promoting his new book Zero to One: Notes on Startups, or How to Build the Future, which he co-wrote with former student Blake Masters, and was based upon the notes that Masters took while taking Thiel’s computer science course at Stanford. The authors aim to rebuff the notion that innovation is dead and instead delve into how entrepreneurs can explore new technologies and create fresh inventions in current fields and “uncharted frontiers.” We caught up with Thiel to talk about the value of being naïve and finding inspiration off the beaten track.

Q: Knowing what you know now, what would you have done differently when you were first starting up? How did you learn this lesson?
A: When I was starting out, I followed along the path that seemed to be marked out for me — from high school to college to law school to professional life. When I was working at a New York law firm, that path came to a dead end. All the aspiring lawyers on the outside wanted to get in but all of the people I worked with wanted to get out. It was like Alcatraz but all you had to do to escape was walk through the front door. So I left. And that experience helped me realize how many things in the world might be possible and valuable, yet ignored by most people, simply because they are not found on any conventional track.

Q: What do you think would have happened if you had had this knowledge then?
A: If I’d realized how arbitrary it was, I might have gotten off the track a lot sooner. I know I would have thought about it more carefully. But there’s no way to run the experiment twice.

Q: How do you think young entrepreneurs might benefit from this insight?
A: An entrepreneur must deal with more uncertainty than a professional with a well-defined role. Because of that uncertainty, there’s always a temptation to reach out for some kind of guide, whether it’s old business school case studies, or, more likely, the most recent moves of the firms that you perceive to be competitors. Reacting to them can at least give some idea of what to do. We’re so used to competing on tracks that entrepreneurs can quickly get caught up in incremental battles with each other, almost without realizing it. But defining yourself by a competitor means giving up the most important reason to be an entrepreneur: You can do something new in the world that won’t be done unless you are the one to do it.

Q: Besides inventing a time machine, how might they realize this wisdom sooner?
A: I don’t know. How to teach people to do what hasn’t been done is a great riddle. It’s because schools tend to breed a kind of process-oriented conformity that I started a fellowship for young people who want to learn by getting something done in the real world — precisely so they can begin charting their own path as early as possible.

I taught a class at Stanford for the same reason — because I wanted to tell students that they don’t have to accept the paths laid down by their schooling or by their competitors. But fundamentally it’s something people have to figure out for themselves.

Q: What are you glad you didn’t know then that you know now?
A: If I had known how hard it would be to do something new, particularly in the payments industry, I would never have started PayPal. That’s why nobody with long experience in banking had done it. You needed to be naive enough to think that new things could be done. And it turned out to be true: PayPal worked. But if I’d had more experience, I’m sure I would have shied away from the risk and done something much more boring. This is one of the reasons that young people can have a strange advantage in technology in that they haven’t yet been brainwashed into thinking that current methods are inevitable.

Q: What is your best advice for aspiring entrepreneurs?
A: The most important thing is simple: Start with a small market and dominate that first. Big markets are tempting because they seem full of opportunity but most of that opportunity will be for others to compete with you. Instead focus your ambition on a definitively superior solution to a specific problem.

This interview has been edited for brevity and clarity

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