At the end of his sophomore year, in June 1987, Thiel and a friend leaped into the ring by founding a conservative publication called The Stanford Review. They had funding and intellectual guidance from a national organization that had been started in 1978 by Irving Kristol, the father of neoconservatism, to help just such right-wing student efforts. Though Thiel rarely wrote for the Review, every issue carried its editor’s stamp—a mix of high-minded, rational-sounding attacks on leftist ideology and mischievous ridicule of political correctness among students, faculty, and administrators.
Because it was Stanford, and because it was the latest setting of a decades-long culture war, the fight went national. In early 1987, Jesse Jackson, preparing a second run for president, came to Stanford and led students in a march with the chant, “Hey hey, ho ho, Western Culture’s got to go!” A year later, William Bennett, Reagan’s education secretary, was invited by Thiel’s publication to speak on campus about the revisions Stanford was making to its core curriculum, which included new courses on non-Western cultures and books by nonwhite or nonmale writers. “A great university was brought low,” Bennett said, “by the very forces which modern universities came into being to oppose—ignorance, irrationality and intimidation.”
In his last piece as editor in chief, just before graduation in 1989, Thiel wrote, “I’ve learned a great deal as editor, but I still don’t know how one convinces people to listen … To those committed leftists who would like to politicize and wreck Stanford (if you’re reading this, then you probably don’t belong in this category), we’ll continue to fight you at every turn.” Unsure what else to do, he entered Stanford Law School.
The culture war continued into its fourth decade. Under its new editor, Thiel’s friend David Sacks, the Review moved on to speech codes, gay rights, and sex (in 1992 an entire issue was devoted to rape and the university’s widening of its definition of unlawful coercion to include “belittlement” and “verbal pressure without threat”). In 1992, Thiel’s friend and fellow law student Keith Rabois decided to test the limits of free speech on campus by standing outside the residence of an instructor and shouting, “Faggot! Faggot! Hope you die of AIDS!” The furious reaction to this provocation eventually drove Rabois out of Stanford. Not long afterward, Thiel and Sacks decided to write a book exposing the dangers of PC and multiculturalism on campus, with Thiel handling the heavy analytical lifting and Sacks doing the journalistic legwork. The Diversity Myth was published in 1995, with praise from well-known conservatives. The book included an account of the Rabois incident, championed as a case of individual courage in the face of a collective witch hunt. “His demonstration directly challenged one of the most fundamental taboos,” Thiel and Sacks wrote: “To suggest a correlation between homosexual acts and AIDS implies that one of the multiculturalists’ favorite lifestyles is more prone to contracting disease and that not all lifestyles are equally desirable.”
Sacks and other friends didn’t consider the deeper personal implications behind Thiel’s taking a hostile view of homosexuality, because they didn’t know that he was gay. No one knew. He wouldn’t come out until 2003, when he was in his midthirties, and only then to his closest friends, explaining to one that his identity would have gotten in the way of his work. And anyway, he never thought of being gay as the core of who he was. Perhaps it helped make him a contrarian, but perhaps it didn’t. “Maybe I’m more of an outsider because I was a gifted and introverted child,” he said—not because he was gay. “And maybe I’m not even an outsider.” It was a subject that he never liked to discuss, even with those closest to him.
The Diversity Myth remained Thiel’s only book, which chagrined him a little, since, after all, it was of its moment, and over the years the urgency of its polemics faded considerably, and Thiel’s views of identity broadened as he got older, until he began to wonder if the target had been worth the effort. Even as the book was published, Stanford was undergoing an immense cultural change that would soon leave the humanities courses that had been the object of so much contention forgotten, rendering the era of curriculum wars quaint, if not ridiculous.
Thiel always harbored the ambition to be a public intellectual, while doubting that such a career was even viable in an age of academic specialization. He wanted to dedicate his life to the spirit of capitalism, but he wasn’t sure if that meant defending it intellectually, or getting rich, or both. If he defended capitalism without making money, his commitment might be questionable; if he just made money (and not a little—he wanted enormous sums of it), he would merely be one more capitalist. Sacks believed that Thiel could be the next William F. Buckley and a billionaire, though perhaps not in that sequence.
Just before graduating from Stanford Law School, Thiel wrote a final editorial for the Review that mocked the liberal aversion to lucrative careers, the preference for “‘public interest law,’ which, as far as can be discerned, is neither for the good of the public nor very interesting nor particularly law-related.” He diagnosed the causes: “The PC alternative to greed is not personal fulfillment or happiness, but anger at and envy of the people who are doing something more worthwhile”—such as a career in management consulting, investment banking, options trading, or real estate development, with an emphasis on golf courses. (He also mentioned joining a start-up—still unusual at Stanford in 1992, though not for long.) Thiel concluded that “greed is far preferable to envy: It is less destructive (I’d rather live in a society where people don’t share than in one where they try to take what belongs to everybody else) and it is more honest.”
After seven years at Stanford, Thiel left for a clerkship in Atlanta (he had interviews at the Supreme Court with Justices Antonin Scalia and Anthony Kennedy but wasn’t hired—the first setback of his life, and a traumatic one). Then he went to New York to practice securities law at the white-shoe firm of Sullivan & Cromwell. That was when things began to get away from him a bit. He later called his time in New York “a rolling quarter-life crisis.”
The job was boring. If he were a Marxist, he would have called it alienated labor—working eighty hours a week at something he didn’t believe in so that eight years on he might make partner, with the next forty years of his life laid out before him. His chief rivals were under the same roof, working right next to him, competing like crazy for stakes that were all internally assigned, with no transcendent value. And that was the deeper problem: Thiel was beginning to question the competitive life. In law school he hadn’t worked quite as hard as usual and hadn’t quite made his usual superior grades, because he didn’t know precisely what they were for anymore. In high school he had known—good grades were for good colleges—but now he was no longer so quick to think, “This is why you are still a high school teacher.” His last editorial for the Review had struck a posture of contemptuous certainty that masked unease.
After seven months at the law firm, he quit and went to work as a derivatives trader—currency options—at Credit Suisse. It was mathematically challenging, and he lasted longer on Wall Street than at the law firm, but not much. There was the same problem as at Sullivan & Cromwell: he was competing feverishly with his coworkers, and with little conviction in the socially designated stakes. The economic value of the work wasn’t at all evident—financial innovation seemed to have reached diminishing returns—and he harbored doubts that he could ever master the game enough to win at it. He lacked the political skills, which included schmoozing and backstabbing. And the older generation in both institutions, law and finance—men who had come on in the midsixties and gotten their big reward in the seventies—was totally oblivious to the fact that it had become much harder for young people to move up.
There was a philosophical dimension to his rolling quarter-life crisis, too. At Stanford he had attended a lecture given by a French professor named René Girard, which had led him to Girard’s books, and he became a devotee. Girard had developed a theory of mimetic desire, of people learning to want and compete for the same things, w
hich attempted to explain the origins of violence. The theory had a sacred and mythic aspect—Girard, a conservative Catholic, explained the role of sacrifice and the scapegoat in resolving social conflict—which appealed to Thiel, offering a basis for Christian belief without the fundamentalism of his parents. Mimetic theory was also a challenge to Thiel’s worldview, because its explanation of human behavior by group attraction ran counter to his libertarianism. He was both intensely competitive and averse to conflict—he never gossiped, avoided the infighting that was part of working with other people, and presented such a rational demeanor that it became a barrier to intimacy. He also had a horror of violence. In the end, he recognized himself in Girard’s ideas: “People compete hard for things,” he said, “and once you get them you are sort of disappointed, because the intensity is driven by the fact that all these people want it, but it is not necessarily a good thing. I was very open to the Girard theory because I was more guilty of it than most.”
There was a contemporary word for what Girard described: status. In New York the struggle for it was ubiquitous and ferocious. Everyone was on top of everyone else in an infinite skyscraper—you looked down and it went as far as you could see, you looked up and it went as far as you could see, you spent years climbing the stairs, all the while wondering if you had moved up at all or if it was just an optical illusion.
In the summer of 1994, Thiel, his roommate, and some other friends rented a time-share in the Hamptons. It turned into a nightmarish weekend, with everything costing too much, the service bad, the whole vacation a fight with other people from start to finish—a classic example of something generated without regard to its real value. New York was too expensive—that was what it came down to. Lawyers had to wear good suits and ties, bankers had to eat and drink really well. In 1996, Thiel was making about a hundred thousand a year at Credit Suisse, and his roommate was making three hundred thousand. The roommate was thirty-one years old, three years older than Thiel, and he ran out of money. He had to call his dad for a loan.
That was when Thiel left New York and moved back to Silicon Valley for good.
* * *
The Valley was no longer the place Thiel had left four years earlier. What had happened in the meantime was the Internet. Between the midseventies and the early nineties, the personal computer had spawned countless hardware and software companies in Silicon Valley, and in other high-tech centers around the country; during the seventies and eighties the population of San Jose doubled, approaching a million, and by 1994 there were 315 public companies in the Valley. But none of the newer ones had been as important as Hewlett-Packard, Intel, or Apple. In the years since the Macintosh, the computer industry had seen more consolidation than innovation, and the undisputed winner was in Seattle.
The most important Silicon Valley company to come along since Apple was originally called Mosaic, started in 1994 by Jim Clark, a former Stanford professor and founder of Silicon Graphics, and Marc Andreessen, a University of Illinois graduate who, at twenty-two, had just the year before developed the first graphical browser for the World Wide Web. In 1995, the year that the last restrictions on commercial use of the Internet were lifted, their company went public as Netscape, headquartered south of Stanford in Mountain View. Its breakthrough product was a Web browser called Netscape Navigator. Over the next five months, while the company remained unprofitable, Netscape’s stock rose tenfold. Between 1995 and the turn of the millennium—the period of the browser wars—the number of Web users around the world doubled every year. Yahoo! went public in 1996, Amazon in 1997, eBay in 1998. Netscape set in motion a tidal wave of technology companies in Silicon Valley, companies that didn’t require prohibitive amounts of capital to get going, because they were based on the Internet—companies that could be started by college grads, students, and dropouts.
The dot-com boom was just beginning when Thiel returned in 1996. He moved into an apartment in Menlo Park and set up a hedge fund, Thiel Capital Management, raising a million dollars from friends and family. But something else was in the air. People he knew were getting involved in start-ups, and Thiel wanted to do the same. He wanted, he said, “to build constructive noncompetitive relationships with people. I didn’t want to work with frenemies, I wanted to work with friends. In Silicon Valley it seemed possible, because there was no sort of internal structure where people were competing for diminishing resources.” Unlike New York, Silicon Valley wasn’t a zero-sum game.
It took two more years. In the summer of 1998, Thiel gave a guest lecture at Stanford on currency trading. It was a hot day and around six people showed up. One of them was a twenty-three-year-old Ukrainian-born computer programmer named Max Levchin. Just out of the University of Illinois, he had come to Silicon Valley that summer with a vague notion of starting a company, sleeping on friends’ floors—on the day of the lecture he was looking for an air-conditioned room to cool off in. As Levchin listened, he grew excited. Thiel was young, smart, he dressed in a T-shirt and jeans, he was more than a step ahead of the game, what he was saying sounded more like chess than investing. And he was a libertarian, like Levchin. Afterward, Levchin went up and introduced himself, and they agreed to have breakfast the next morning and talk about Levchin’s ideas for companies.
They met for smoothies at a greasy spoon across El Camino from Stanford Stadium called Hobee’s, a hangout for students and young dot-com entrepreneurs. Levchin, who annoyed Thiel by arriving late, pitched two ideas—one having to do with online retailing, the other with encryption for handheld digital devices. Thiel quickly tossed aside the first pitch, but the second interested him—cryptography was harder, not a lot of people could do it. He asked Levchin how much money he’d need to get started, and Levchin said two hundred thousand dollars. Thiel revised it upward to half a million. In their next conversation, he said that he would invest two hundred forty thousand and help Levchin raise the rest.
They began to spend time together, getting to know each other by trading puzzle challenges, mostly math puzzles. How many digits did the number 125100 have? (Two hundred ten.) One of Thiel’s puzzles involved a hypothetical table in the shape of a circle: In a game in which two players took turns placing a penny anywhere on the table without overlapping the others, with the winner the last one to put down a penny that didn’t hang over the edge of the table, what would be the best strategy for winning? And did you want to go first or second? It took Levchin fifteen minutes to figure it out—the key was that the best strategy depended on disrupting the other player’s strategy (disrupt was one of Thiel’s favorite words).
The two puzzle jockeys were trying to figure out if the other guy was smart enough to hang out with. One night, at Printer’s Inc. Café on California Avenue in Palo Alto, the duel went on for four or five hours, until Thiel threw out a puzzle that was so hard Levchin could solve only a small part of it. That ended the marathon evening, which cemented the friendship and partnership. (Even Thiel’s constructive noncompetitive relationships were pretty competitive.)
Combining confidence and infinity, they named their new company Confinity. Levchin’s cryptography idea was a little vague, but Thiel, who soon joined the company as its CEO, refined it: Confinity would store money—essentially in the form of digital IOU notes—on devices like the Palm Pilot, which seemed to be on the verge of taking over the world. With the necessary password, the infrared of one Palm Pilot could beam the note, linked to a credit card or bank account, to another Palm Pilot, using a software application called PayPal. It was a cumbersome and perhaps pointless service, but at a time when venture capitalists were pouring money into kibu.com, an online community for teenage girls, and DigiScents, which tried to transmit smells through the Web, the idea’s weirdness made it seem innovative and therefore attractive. One angel investor heard the pitch over Chinese food near Hobee’s and, with only the foggiest understanding of what the company did but a keen interest in the identities of other investors, came on board (his fortune cookie sealed the dea
l).
In July 1999, Thiel scored $4.5 million in financing. Levchin and his engineers stayed up coding for five nights to get ready for the announcement, which took place in front of a dozen journalists at Buck’s, a restaurant in Woodside that was already a legendary site of big Silicon Valley deals. As the TV cameras rolled, venture capitalists from Nokia successfully beamed their preloaded millions from one Palm Pilot to another. “Every one of your friends will become like a virtual, miniature ATM,” Thiel told the press.
His strategy was to scale up as quickly as possible, in the belief that the key to beating competitors on the Internet was viral growth. Each new customer was given ten dollars for signing up and another ten dollars for every referral. Confinity kept track of users via a counter linked to its database that the company called the World Domination Index—every few minutes, a pop-up box on company computers would refresh the number with the sound of a ding—and by November 1999, just a few weeks after its launch, it was growing by 7 percent a day. But it became clear that setting up an account on the PayPal website, which enabled transactions with anyone who had an e-mail address, was a far more popular way to send money than trying to get Palm Pilots to mate on a restaurant table (the mobile Internet was in its earliest, glitch-ridden stage). The e-mail idea seemed so simple that it would be only a matter of time before competitors figured it out. The pace grew even more frantic, with hundred-hour workweeks. The most dangerous competitor, X.com, founded by a South African immigrant named Elon Musk, was located just four blocks up University Avenue. Confinity held daily meetings on the war with X.com. One day, an engineer displayed a schematic of an actual bomb that he’d designed. The idea was quickly shelved.
The Unwinding Page 15
