Who is Peter Thiel?
From risk capitalist to Facebook’s first outside investor, Peter Thiel’s name stands tall in Silicon Valley. His business conquests brim with business development and tenacity, new some to view him as a trailblazer in the tech industry. But, as promised, we will take a disquisition approach to investigate the man behind the name.
Early Life and Education
Thiel was born in Frankfurt am Main, then part of West Germany, on 11 October 1967, to Klaus Friedrich Thiel and his wife Susanne Thiel. The family emigrated to the United States when Peter was one year old and lived in Cleveland, Ohio, where his father worked as a chemical engineer. Klaus worked for various mining companies, which created an itinerant upbringing for Thiel and his younger brother, Patrick Michael Thiel. Thiel’s mother became a U.S. citizen, but his father did not. Thiel eventually became a U.S. citizen as well.
Before settling in Foster City, California, in 1977, the Thiel family lived in South Africa and South West Africa (modern-day Namibia). Peter changed elementary schools seven times. He attended a school in Swakopmund that required students to wear uniforms and utilized corporal punishment, such as striking students’ hands with a ruler. He said this experience instilled a distaste for uniformity and regimentation later reflected in his support for individualism and libertarianism.
Thiel played Dungeons & Dragons and was an avid reader of science fiction, with Isaac Asimov and Robert A. Heinlein among his favorite authors. He is a fan of J. R. R. Tolkien‘s works, stating as an adult that he had read The Lord of the Rings over ten times. Six firms (Palantir Technologies, Valar Ventures, Mithril Capital, Lembas LLC, Rivendell LLC and Arda Capital) that Thiel founded adopted names originating from Tolkien.
Thiel excelled in mathematics and scored first in a California-wide mathematics competition while attending Bowditch Middle School in Foster City. At San Mateo High School, he read Ayn Rand and admired the optimism and anti-communism of then-President Ronald Reagan. He was valedictorian of his graduating class in 1985.
Thiel studied philosophy at Stanford University. The replacement of a “Western Culture” program at Stanford with a “Culture, Ideas and Values” course that addressed diversity and multiculturalism prompted Thiel to co-found The Stanford Review, a conservative and libertarian newspaper, in 1987. The paper received funding from Irving Kristol. Thiel was The Stanford Review’s first editor-in-chief until he graduated in 1989. Thiel has maintained his relationship with the paper, consulting with staff, donating to the newspaper, and placing graduating students in internships or jobs within his network.
Thiel enrolled in Stanford Law School and earned his juris doctor degree in 1992. While at Stanford, Thiel met René Girard, whose mimetic theory influenced him.
Career Launch: PayPal and Past
“The tech behemoth you know as PayPal was not serendipitous – it was the result of tactical choice-making by a futuristic mind – it was Peter Thiel’s vision.” – Ramón Rodríguez
PayPal
With Confinity, Thiel realized they could develop software to bridge a gap in making online payments. Although the use of credit cards and expanding automated teller machine networks provided consumers with more payment options, not all merchants had the necessary hardware to accept credit cards. Thus, consumers had to pay with exact cash or check. Thiel wanted to create a type of digital wallet for consumer convenience and security by encrypting data on digital devices, and in 1999 Confinity launched PayPal.
PayPal promised to open up new likelihoods for handling money. Thiel viewed PayPal’s mission as liberating people from the erosion of the worth of their currencies due to inflation. Thiel spoke in 1999:
We’re definitely onto something big. The need PayPal answers is monumental. Everyone in the world needs money—to get paid, to trade, to live. Paper money is an ancient technology and an inconvenient means of payment. You can run out of it. It wears out. It can get lost or stolen. In the twenty-first century, people need a form of money that’s more convenient and secure, something that can be accessed from anywhere with a PDA or an Internet connection. Of course, what we’re calling ‘convenient’ for American users will be revolutionary for the developing world. Many of these countries’ governments play fast and loose with their currencies. They use inflation and sometimes wholesale currency devaluations, like we saw in Russia and several Southeast Asian countries last year , to take wealth away from their citizens. Most of the ordinary people there never have an opportunity to open an offshore account or to get their hands on more than a few bills of a stable currency like U.S. dollars. Eventually PayPal will be able to change this. In the future, when we make our service available outside the U.S. and as Internet penetration continues to expand to all economic tiers of people, PayPal will give citizens worldwide more direct control over their currencies than they ever had before. It will be nearly impossible for corrupt governments to steal wealth from their people through their old means because if they try the people will switch to dollars or Pounds or Yen, in effect dumping the worthless local currency for something more secure.
When PayPal launched at a press conference in 1999, representatives from Nokia and Deutsche Bank sent $3 million in venture funding to Thiel using PayPal on their PalmPilots. PayPal then continued to grow through mergers in 2000 with Elon Musk‘s online financial services company X.com, and with Pixo, a company specializing in mobile commerce. These mergers allowed PayPal to expand into the wireless phone market and transformed it into a safer and more user-friendly tool by enabling users to transfer money via a free online registration and email rather than by exchanging bank account information. PayPal went public on 15 February 2002 and was bought by eBay for $1.5 billion in October of that year. Thiel remained CEO of the company until the sale. His 3.7% stake in the company was worth $55 million at the time of acquisition. In Silicon Valley circles, Thiel is colloquially referred to as the “Don of the PayPal Mafia“.
Clarium Capital
Thiel used $10 million of his proceeds to create Clarium Capital Management, a global macro hedge fund focusing on directional and liquid instruments in currencies, interest rates, commodities, and equities. Thiel stated that “the big, macroeconomic idea that we had at Clarium—the idée fixe—was the peak-oil theory, which was basically that the world was running out of oil, and that there were no easy alternatives.”
In 2003, Thiel successfully bet that the United States dollar would weaken. In 2004, Thiel spoke of the dot-com bubble having migrated, in effect, into a growing bubble in the financial sector, and specified General Electric and Walmart as vulnerable. In 2005, Clarium saw a 57.1% return as Thiel predicted that the dollar would rally.
However, Clarium faltered in 2006 with a 7.8% loss. Thereafter, the firm sought to profit in the long-term from its petrodollar analysis, which foresaw the impending decline in oil supplies. Clarium’s assets under management grew after achieving a 40.3% return in 2007 to more than $7 billion by the first quarter of 2008, but fell later in the year and again in 2009 after financial markets collapsed. By 2011, after missing out on the economic rebound, many key investors pulled out, reducing the value of Clarium’s assets to $350 million, two thirds of which was Thiel’s money
Ahead-of-the-crowd Analysis
When discussing tech startups, it is difficult to not draw comparisons with other industry stalwarts. How does Thiel’s approach compare with an Elon Musk or a Jeff Bezos? What lessons can we gather from their success stories?
Episodes from Silicon Valley: Musk, Bezos, and Thiel
“If you wish to find differences, you’d find many – Bezos’s retail obsession, Musk’s Mars dream, and Thiel’s Liberta- what was that again? But, on closer inspection, you understand they all sail the rough sea of business development on the ship of tenacity.” – Asha Patel
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