Peter Thiel, PayPal, Palantir Technologies, Zero to One

Peter Thiel on what works at work (from the Washington Post)

Peter Thiel is often described in techno-hyphenated words: Techno-philosopher. Techno-libertarian. Techno-utopian. Technology, after all, is how he first made his name and built his billions. Yet his reach has since stretched beyond that, with his political opinions now getting him nearly as much notice as his tech investments.

Thiel, 46, was born in West Germany and moved to California at age 10. He was the first outsider to invest in Facebook ($500,000 for a 10 percent stake), the co-founder and chief executive of PayPal, and now serves as chairman and co-founder of data-analytics company Palantir Technologies. He’s also the author of Zero to One, a manifesto on how to create American progress.

This interview has been lightly edited for length and clarity. You can also listen to the conversation with Thiel in the latest episode of our new On Leadership podcast. (You can listen on the Post's site or on iTunes.)

Q. What’s a question you always hope you’ll be asked in interviews, but no one ever seems to ask you?

A. There are all these questions about what’s working in Silicon Valley today, what’s not working, that I think are really interesting. There’s something about the software businesses built in the last 30, 40 years that works incredibly well for actually capturing value. And I think it’s interesting to explore how unusual that is relative to many other areas of technology, because there are so many innovations that were good for society but the people who came up with them ended up with very little. The Wright brothers built the first airplane—they didn’t make any money on that.

Q. So is this something we’ve cracked the code on now?

A. I don’t know if we’ve really cracked the code. Innovation is a very strange thing in general, because it’s so hard to know what to learn about it or how to study it. Every moment in the history of business, in the history of technology, happens only once. And so there’s no formula.

A lot of business books are these pseudo-scientific books that say, “These are the five steps to follow and you will make a lot of money.” But if you have no formulas, you will be open to some new possibilities, some new ideas.

Q. Some people outside Silicon Valley see it as a place that is not really in touch with the rest of the country. Does that ring true to you in any way?

A. There is a big disconnect, because you have this sense of stagnation and slow growth in many other places, and you have this incredible boom in Silicon Valley.

Also, I do not think we live in a scientific and technological age, as a society. I think most people do not like science and technology. They’re scared of it. All you have to do is watch science-fiction movies — they all show technology that doesn’t work, or they’re dystopian. I watched "Gravity" last year, and it’s like you’re so glad to be back on a muddy island. You never want to go into outer space.

There’s something about our society that’s incredibly conservative, in the sense of not wanting things to change. So I think there’s a cultural disconnect with Silicon Valley that’s pretty big.

Q. You’ve written that you doubt the efficacy of MBA programs to prepare future business leaders. What would an effective MBA program look like?

A. The question is, what substance of business are you focused on? The conceit of the MBA is that you don’t need to have any substance at all. It’s just this management science, and you can apply that equally well in a software company or an oil drilling company or a fashion company or a rocket company. That’s the bias I’d want us to cut against. So for the degree, people would learn substantive things and then on the side you’d pick up some business skills. But you wouldn’t treat the business degree as the central thing.

I think one challenge a lot of the business schools have is they end up attracting students who are very extroverted and have very low conviction, and they put them in this hot house environment for a few years — at the end of which, a large number of people go into whatever was the last trendy thing to do. They’ve done studies at Harvard Business School where they’ve found that the largest cohort always went into the wrong field. So in 1989, they all went to work for Michael Milken, a year or two before he went to jail. They were never interested in Silicon Valley except for 1999, 2000. The last decade their interest was housing and private equity.

So there is something about the way in which business school is decoupled from anything really substantive that I’d want to rethink.

Q. Even though you don’t agree with teaching management in and of itself, were there any lessons you learned as CEO that you would share with others?

A. One is that competition is overrated. People should try to do unique things. As a business, you want to have a monopoly, not be in a company where you have cutthroat competition. Google is a better business than opening a restaurant, for example.

The internal management application of this is that it’s always a bad idea to set one’s employees too much against one another. You want to find ways to differentiate people’s roles. Frame it this way: If you were a sociopathic boss who wanted to create trouble for your employees, the formula you would follow would be to tell two people to do the exact same thing. That’s a guaranteed formula for creating conflict. If you’re not a sociopath, you want to be very careful to avoid this.

We have this ideological understanding of conflict, where we say it happens when people want different things. But I think it actually happens when people want the same thing — the same promotion, recognition for doing the same job well, the same toy as a kid.

One of the rough rules I had at PayPal was that people were responsible for one primary thing. I wanted to be really clear that the job descriptions for everybody were different, so you would not have this endemic conflict. I think that was very powerful.

You still end up having conflicts in all these startups because the roles are very fluid and things change a lot, but it’s something you want to really avoid. For a lot of these businesses, the most common cause of failure is that they blow up internally when people don’t get along.

An executive once told me she thought that if you had three good friends at your office then you’d never leave. If you had no good friends, you were a very at-risk employee. It’s a really good question: How do you build a company culture where people have strong friendships with at least a few people at work? That’s healthier than having a super professional approach where there’s this low-level chronic dislike everybody has of everybody else, and it somehow functions but people are unhappy — which I think is true of a lot of law firms or investment banks.

Q. Did you figure out any good ways to support that fostering of friendships? Aside from some of things we immediately associate with Silicon Valley companies, like ping-pong tables and free food.

A. You try to hire people you think you could become friends with. I’m personally very skeptical of the ping-pong tables and all these corporate perks. I think the company culture is always best organized around the mission of what the company does.

Q. What did you find the hardest part of being CEO?

A. As CEO, you’re somehow both the total insider and the total outsider at the same time. In some ways you’re at the center of the organization. In other contexts, you’re like the last person to know anything.

Q. What’s your basic philosophy on how to effect change in a society?

A. I’m biased to the model that change happens in small groups, in small organizations. I’m skeptical of solo efforts, and I’m skeptical of mass movements. This is why I like the Silicon Valley startup, or the Constitutional Convention of the United States. You have a small group of people who come together, united by a purpose.

In theory, everything should be solved within large existing organizations — governments, large companies, large nonprofits. They have more resources, they have longer time horizons. Yet there’s always a need to start small new organizations, because the politics in these large organizations slow things down too much.

Q. What’s a trait you possess that you really value?

A. I’ve built some great friendships over the years with people I’ve worked with. And I think that’s a really important part of what enables one to be successful in the long run in our society. There are ways people can succeed without doing that, but I think it’s very underrated. My friend Reid Hoffman always says it’s hard to know what the meaning of life is, but he thinks it has something to do with the people you spend time with.

Q. What about the flip side? Is there anything you’ve had to work at over the years, some trait you’ve had to tweak?

A. There are all these things that you never know whether they’re features or bugs—in a company or organization, or even in a personal trait. I’m interested in lots of different things. I’m interested in business but also economics and philosophy and literature. I always like to rationalize that as helping me think about things better, or that these things are interdisciplinary. But maybe it’s just being a dilettante or procrastinating and not ever really getting focused.

Q. When you were young you were a U.S.-rated chess master. Has chess influenced your strategic thinking outside of the game?

A. When I was in high school, one of the intermediate learnings in chess is that you should always have a plan. Even having a bad plan is better than no plan at all. I think something like that is true in a lot of business contexts, where even a bad plan is better than randomly going from day to day. But I suspect in general it’s a mistake to try to say that life is too much like chess. It’s a lot more complicated.

Q. Who has had the biggest impact on shaping you?

A. I grew up in this very middle-class context where there was sort of this mindset that if you worked hard, you could get ahead. That was a sensibility that I powerfully picked up from my parents.

Q. What’s it like to be a billionaire?

A. Well, you have a lot of money, and there are sort of good things and bad things that go with that. You certainly have a lot more freedom. There are fewer financial worries. On the other hand, one of the strange dynamics with extreme wealth is you always have these questions — are people interested in talking to you because of your money? — and all this second-guessing that can happen to varying degrees. I try not to worry about that stuff too much. My experience was not that different from many people in Silicon Valley, where it happened virtually overnight. It was this very fast and very strange change.

Q. What’s your concept of what it will mean to have lived your life well?

A. People always say you should live every day as though it's your last. I sort of have taken the opposite tack, where I think you should live every day as though it's going to go on forever. You should treat people like you're going to see them again in the future. You should start working on projects that may take a long time. And so I want to live every day as though it's going to go on forever.

Q. What’s your best piece of advice?

A. Always prioritize the substance of what you're doing. Don't get caught up in the status, the prestige games. They're endlessly dazzling, and they're always endlessly disappointing.