The Peter Thiel Worldview

In his 2007 speech at the Singularity Summit (this year’s event is coming up in October in San Francisco), Peter Thiel offered insight into how he makes sense of the world. Worth reading. I’ve bolded certain sections of my excerpts below.

(Here’s my post about Thiel’s Hoover article on "The Optimistic Thought Experiment." Also, at the TechCrunch 50 conference Thiel was widely quoted as saying the best predictor of a start-up’s success is low CEO pay.)

His fundamental premise, vis-a-vis the Singularity:

I suppose the basic intuition that I have about it is very simply, this is a world in which there is a possibility of things going extraordinarily well or extraordinarily badly, where both the good things and the bad things are bigger than people think. If you have a bell curve distribution of possible futures for the world, the tails on that bell curve are much fatter than people think. There is far more that can happen at the far edges. This would lead to a very different behavior in markets from a normal bell curve of distributions where nothing that interesting or extraordinary is going to happen. In particular, the Singularity will either be very successful, in which case we are going to have the biggest boom ever, or it is going to blow up the whole world and there will be nothing left to invest in whatsoever.

Something that resonates more than ever after these past few crazy days on Wall Street, about the bottom falling out of economic textbooks:

The alternative to a good Singularity is the apocalypse, and we don’t really know where it is going to happen. You would expect the world to be full of massive manias, booms, and busts on a scale unprecedented in all of history. Interestingly, if you actually look at the world’s financial markets over the last 25-30 years, that is exactly what they have manifested. It is one of things that I think is very striking. All of the conventional theories say that markets should be getting more smooth and efficient as there is more and more information out there. Somehow everything smoothes out, the volatility gets suppressed, and stocks should move up like 6% a year in a smooth, monotonic function. Instead, we’ve seen bigger booms, busts, bubbles than ever before.

On the internet boom, Thiel wonders whether the late 90’s mania actually represented enlightened thinking:

What if March 2000 in some sense represented not a peak of insanity but a peak of clarity, and that at the peak of the boom people could actually see the furthest, and what they could see was that in the long-run, in the next 20 years, 30 years, the entire old economy was going to be doomed and that all sorts of businesses and ways of doing business were no longer going to work? Therefore, and this is the tricky part, you had to bet on this one way that was going to be the way out. And that was the internet.

Want to make money? Thiel says predict the next boom:

It is very difficult to know where one necessarily goes from there, but the point that I would stress is, probably the best thing to try to focus on are these sort of incipient booms that people have not yet realized. My guess is that we will see a whole series of booms, bubbles, and busts for the next ten, twenty years as we are getting closer to this. It’s not at all clear that it will be any of the ones we’ve seen. If you look at the historical info, we had Japan, the internet, we now have financial engineering on Wall Street, we have emerging markets, even the boom in the late 1960’s, it was outer space. It was basically thought that the Singularity was going to be driven by whoever controlled outer space. Maybe we’ll have a combination of all of those. If I had to bet, I think it will probably be something completely different that people are not expecting at all. That makes it quite difficult to figure out. I would say that as a baseline, it’s going to happen and it will be none of the above.