Peter Thiel is a billionaire venture capitalist, entrepreneur, and political activist. Born in 1967 in Frankfurt am Main, West Germany, Thiel is best known as the first outside investor in Facebook and the co-founder of PayPal.
Read Also: PayPal Mafia
Early life
Thiel and his family moved to the United States when the entrepreneur was twelve months old.
However, with his father a chemical engineer, Thiel also spent part of his childhood in Namibia and South Africa before settling in California in 1977.
As a child, Thiel enjoyed reading science fiction and fantasy, with The Lord of the Rings a particular favorite.
Some of the companies he founded later in life such as Palantir Technologies, Rivendell LLC, and Valar Ventures are named after objects and locations from the books.
Education
Thiel later enrolled at Stanford University where he studied philosophy and founded the libertarian newspaper The Stanford Review. He remained as editor-in-chief until he graduated with a Bachelor of Arts in 1989.
He then enrolled at Stanford Law School and, upon completion, received his Juris Doctor degree three years later in 1992.
Whilst at Stanford, Thiel met French polymath René Girard and was influenced by his mimetic theory.
Girard believed that human behavior and culture could be explained by people who desired things simply because other people also desired them.
Thiel applied mimetic theory to business, positing that competition stifled progress because competitors were too focused on each other and lost sight of what was meaningful or important.
Early career
Post-university, Thiel worked briefly as a securities lawyer in New York but quit after seven months because the work lacked transcendental value.
Before returning to California in 1996, he also worked for Credit Suisse as a derivatives trader and was the speechwriter for United States Secretary of Education William Bennett.
Once ensconced back in the Bay Area, Thiel noticed the proliferation of personal computers and emergence of the internet itself.
To take advantage of the subsequent dot-com boom, he founded Thiel Capital Management with $1 million provided by friends and family.
PayPal
Thiel’s first investment of $100,000 in a web-based calendar was a failure. But the calendar’s owner, Luke Nosek, put him in touch with friend and cryptographer Max Levchin.
Thiel then invested in Levchin’s company Confinity and its money transfer service known as PayPal.
For Thiel who wanted to make a meaningful impact, PayPal and its revolutionary digital wallet had the potential to cause “the erosion of the nation-state.”
More specifically, Thiel believed PayPal could liberate people from the erosion of the value of their money due to inflation and what he considered the loose or frivolous monetary policy of some nations.
When PayPal was sold to eBay in 2002, Thiel became an instant multimillionaire and used the funds to invest in Facebook.
He also founded the hedge fund Clarium Capital Management and, as we mentioned earlier, the data analytics firm Palantir Technologies.
Let’s delve into these events in the next two sections.
Clarium Capital Management
Thiel founded Clarium Capital Management LLC in 2002 as an employee-owned company that invested in micro-cap companies, fixed income, and hedging markets.
At its peak, Clarium Capital had $7.2 billion in assets under management (AUM). But in the wake of the 2008 GFC, the company suffered three straight years of decline and the value of its assets shrunk 90% by 2011.
While Thiel claimed to have predicted the housing crash that precipitated the GFC, Clarium Capital nevertheless lost most of its value in 2009 after betting that a deflationary environment would take hold in the United States.
With Clarium Capital shorting the S&P 500 over this time, it missed an opportunity to profit from the subsequent stock market rally and investors pulled their money in droves.
The company went defunct in 2013.
Palantir Technologies
One year after starting Clarium, Thiel co-founded the big data analytics company Palantir with Joe Lonsdale, Stephen Cohen, Alex Karp, and Nathan Gettings.
Palantir quickly established itself as the go-to company for mining massive datasets for law enforcement and intelligence purposes. To that end, some of the company’s notable customers include the FBI, NSA, CIA, and various other military and counterterrorism agencies.
Over time, Thiel saw that the analytics software could also be useful in the corporate world. While Palantir tends not to disclose its clients, it has worked with pharmaceutical companies to analyze drug data and the tech has also been used by JPMorgan Chase to address mortgage-related cyber-fraud.
By 2013, the same year Clarium ceased to exist, Thiel’s Palantir saw around 60% of its $450 million in annual revenue come from private-sector deals.
Mithril Capital
In 2012, Thiel launched the growth-stage venture firm Mithril Capital Management with partners Jim O’Neill and Ajay Royan. In a Forbes article announcing the launch, Royan noted that the company’s focus “was on that inflection point dealing with companies that are beyond a startup stage and ready to scale and achieve dominance.”
Thiel’s decision to start another venture fund came at a time when investor interest in tech companies like Facebook and Zynga was low, with both performing poorly since their IPOs. Nevertheless, Royan said that Mithril would have a “different and broad” focus on transformative companies within the tech space.
In practice, this focus has led to investments that have, for example:
- Re-imagined the future of robotic surgery.
- Pioneered treatments designed to eradicate diabetes.
- Revolutionized supply chains with real-time AI and robotics, and
- Developed compact, non-ignition fusion systems.
Investment philosophy
Thiel is a successful investor and venture capitalist with a net worth approaching $10 billion. One of the keys to his success is an ability to find value in expected places and use first-principles thinking (as opposed to formulaic thinking) in business.
He also considers the quality of a potential investment. In other words, does the company have a sound dividend policy, strong balance sheet, and returns?
What’s more, Thiel believes passion for (and dedication to) the investment process increase the likelihood of making a profit and that the act of investing should be prioritized and not pushed to the side.
Founders Fund and philanthropy
In 2005, Thiel launched the Founders Fund, a VC firm with notable investments including Airbnb, SpaceX, Yelp, Spotify, Asana, and Lyft.
The following year, he founded the private Thiel Foundation to further his philanthropic endeavors. Chief among these are initiatives that support science, tech, and long-term thinking about the future.
A more recent addition to Thiel’s philanthropy is the Thiel Fellowship, a two-year program that awards $100,000 to visionaries under the age of 20 who want “build new things instead of sitting in a classroom.”
Key takeaways:
- Peter Thiel is a billionaire venture capitalist, entrepreneur, and political activist. Born in West Germany in 1967, Thiel is best known as the first outside investor in Facebook and the co-founder of PayPal.
- Whilst at Stanford, Thiel met French polymath René Girard and was influenced by his mimetic theory. Thiel applied mimetic theory to business, believing that competition stifled progress because competitors were too focused on each other.
- Thiel’s break came after a chance meeting with Confinity founder Max Levchin. When PayPal was acquired by eBay, Thiel became a multimillionaire and used the funds to make a number of successful investments and set up his philanthropic causes.
Key Highlights
- Background and Early Life:
- Peter Thiel is a billionaire venture capitalist, entrepreneur, and political activist.
- Born in 1967 in Frankfurt am Main, West Germany.
- Moved to the United States with his family when he was twelve months old, eventually settling in California in 1977.
- Influence of Literature:
- Thiel enjoyed reading science fiction and fantasy, particularly “The Lord of the Rings.”
- He named some of his companies, such as Palantir Technologies, after objects and locations from these books.
- Education and Influence of Mimetic Theory:
- Enrolled at Stanford University, where he studied philosophy and founded the libertarian newspaper The Stanford Review.
- Met French polymath René Girard, whose mimetic theory influenced Thiel’s views on competition and progress.
- Early Career and Observations:
- Worked briefly as a securities lawyer and derivatives trader.
- Founded Thiel Capital Management to take advantage of the dot-com boom.
- Co-Founder of PayPal:
- Thiel’s investment in a web-based calendar led to his involvement with Max Levchin’s Confinity, which later became PayPal.
- Believed PayPal’s digital wallet had the potential to impact the value of money and challenge the role of nation-states.
- After PayPal’s sale to eBay, Thiel used the funds to invest in Facebook and founded other ventures.
- Clarium Capital Management:
- Palantir Technologies:
- Co-founded Palantir Technologies in 2003, focusing on big data analytics for law enforcement, intelligence agencies, and corporations.
- Palantir’s platforms, Gotham and Foundry, offer integrated intelligence services.
- Palantir has also ventured into commercial applications and worked with various industries.
- Mithril Capital Management:
- Thiel launched Mithril Capital Management in 2012, focusing on growth-stage tech companies.
- Mithril’s investments aim to transform industries and technologies.
- Investment Philosophy and Success:
- Thiel’s investment success stems from finding value and using first-principles thinking.
- He emphasizes the importance of a company’s quality, dividend policy, balance sheet, and returns.
- Founders Fund and Philanthropy:
- Founded Founders Fund in 2005, investing in transformative tech companies.
- Established the Thiel Foundation for philanthropic efforts supporting science, technology, and the future.
- Created the Thiel Fellowship, a program for young visionaries to build new projects.
Read Also: PayPal Mafia
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