The Self-centered Political Economy of Peter Thiel
As the tech billionaire retreats from politics, we revisit his famous book “Zero to One”
Peter Thiel is one of the most prominent investors and conservative political donors in the country. He funds projects as diverse as Elon Musk’s Neuralink which hopes to build a fully-implantable “brain-computer interface”; Web3, a decentralized, blockchain-powered internet; conservative video-sharing platform Rumble; and conservative dating website The Right Stuff. He’s also been funding conservative politicians for decades, including Ron Paul, Carly Fiorina, Donald Trump, and most recently J.D. Vance and Blake Masters. But now he’s announced that he is taking a step back from politics. Regardless, his economic ideas will remain influential. Now’s a good time to recall what they are and why so many people branding themselves as “right wing populists” subscribe to the Thiel school of business.
To best grasp Thiel’s economic insights, one has to read his famous book on startups, “Zero to One”. While ostensibly about how to successfully grow new startups (by becoming the first and only competitor in a market that previously had zero, hence the title), the book also provides takes on issues that would be only tangentially useful to a startup founder: brief ramblings on the biographies of prominent billionaires, philosophical discussions on definite versus indefinite societal optimism, and a basic lesson on how profitable venture capital firms operate. More than anything, the book serves as an outlet for Thiel to give his views on a wide range of issues, where he continually assumes that what’s good for the startup founder is good for the world.
The most well-known instance of this tendency is his defense of monopoly. As Thiel points out, creating a market and cornering it is an incredibly profitable business strategy. But that’s not a new insight. Warren Buffett has been promoting his “moat-building” strategy of investing for decades. Thiel takes these insights a step further by arguing that “creative monopolies'' (as distinguished from rent-seeking ones) promote the public good by making previously unavailable goods available. After all, every new market initially begins as a monopoly. The first-mover has a distinct advantage, and capitalizing on that advantage is critical. And by creating a new market, the monopolist’s success is to all our benefit.
But Thiel doesn’t seriously wrestle with the implications or possible criticisms of his view. Perhaps some innovations would’ve gone uncreated if certain monopolists were only motivated by starry-eyed visions of indefinite future monopoly profits. But that doesn’t seem entirely convincing. Most great inventions came not from a sole greedy genius (or team) but from a mix of passion, investment, and short-term thinking. It’s hard to believe that Larry Page would have abandoned Google if he thought that its monopolistic practices would be challenged 20 years down the line. When he began, it was difficult to even imagine how to make his company profitable. Furthermore, Thiel’s assumption that most monopolies are “creative” is never justified. While they might be in their first few years, most eventually opt to focus on stock returns and acquiring potential competitors in order to rent seek, rather than continue the innovation that initially made them great.
Thiel also doesn’t wrangle with the negative effects of monopoly at all or the virtues of competition. In his view “Competition is for losers.” While he prides himself on holding this supposedly uncommon truth (which is not all that uncommon among America’s elite businessmen), he seems to have not considered it very thoroughly. What Thiel knows is that competition is inconvenient for him. He then simply assumes that it’s bad for society as well. Examine this quote from “Zero to One”:
“We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it— even though the more we compete, the less we gain.”
Read that sentence closely, and notice how many times the definition of the word “we” has to change in order for it to make any sense.
Thiel also laments the indecisiveness, pessimism, and incrementalism of the American economy today, and blames these factors for America’s slowing growth and lack of economic direction. I think there’s truth in this, and Thiel even levels a passing critique of finance, claiming it “epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.” This would be a great time for Thiel to discuss how government policy has ruined American dynamism over the last few decades. One could cite the government’s promotion of financialization, its ridiculously expansive notion of intellectual property rights that disincentivizes real innovation, the deregulation of finance that crushed decentralized banks and limited access to capital, its many trade agreements, its revision of the tax code to incentivize finance over production, its decision to rely on cheap imports instead of a well-paid middle class for prosperity, and many other policy failures. Thiel does not discuss these failures at all. Instead, he believes that “We have to find our way back to a definite future, and the Western world needs nothing short of a cultural revolution to do it.” In other words, there’s no mention of policy; just change your outlook and mindset. Ironically, the very monopolization that Thiel calls for has played a major role in creating the economic stagnation he laments. It’s cheaper for monopolies to rent-seek than participate in the often suicidal act of creative destruction, so that’s what they do.
In Thiel’s politics, this preference for “cultural revolution” over smart policy or true economic populism is a constant. It motivates his incessant battles over issues like wokeness, immigration, abortion and contraception, claims of election fraud, and the power of Big Tech. It’s not that Thiel doesn’t have views on economic policy. His views are just standard libertarianism (with a nationalist exception for tariffs) and they look unappealing if not dressed up as part of a culture war or as advice to an aspiring businessman. Thiel’s extreme libertarianism does occasionally shine through and expose the facade of his populism, like the time when he explained that he “no longer believe[d] that freedom and democracy are compatible”, because voters would reject his libertarian worldview. And in fact they probably would. For instance, 64% of voters want to see greater government regulation of Big Tech companies. You might say that Peter Thiel is a populist whose ideas are not popular. And this awkward blend can make for amusing moments of aloofness, in which Thiel forgets he’s supposed to be on the side of the everyman.
One of those moments in his book is when Thiel insists that man and computers are complementary in the process of production. Any labor economist knows this is true, but only for skilled workers. Yes, no computer will likely put a Palantir engineer out of work. But there are millions of people who aren’t so unthreatened. Thiel seems unable to fathom this or at least didn’t find it worth mentioning. It’s yet another instance where he assumes that the circumstances that are good for him are good for everybody.
Some might think it ironic that a pro-monopoly libertarian and frequent attendee of the Bilderberg Group could become a great hero-financer and Big Tech opponent for the Trumpist Right. But it shouldn’t be all that surprising. Like many wealthy individuals, Thiel has a hero complex, and in a world where big companies have an overwhelming say over American life and policy, he doesn’t want to be a villain. The Trumpist right offers him a comfortable narrative. Yes, big companies have too much power, but not because they have a tight grip over our economic fortunes, but because they have a supposedly outsized impact on the culture. Thus, there can be good elites, namely, the ones like Thiel that promote elite dominance but object to liberal social causes. This aligns perfectly with Thiel’s call for a “cultural revolution.” Will it change anything for America's declining middle class? No. But it can be useful branding for someone who wants to emote outrage without actually changing the societal structure that benefits him so well.
Peter Thiel claims to not be like the other elites, but he is. He only differs in his willingness to put his preference for monopoly and corporate power more plainly than his colleagues. He’s not shy about his support for oligarchy and by dressing it up in anti-woke language he’s duped some members of the supposedly-populist right into coming along for the ride.
Thiel’s associates are suggesting that he is now privately critiquing the Republican party’s obsession with culture war issues. This is ironic, as Thiel came onto the political scene in 2016 contending that political correctness is “the biggest political problem we have” and spent 2022 bankrolling two of the biggest culture warriors of that year’s midterm elections, both of whom significantly underperformed. Perhaps this has convinced Thiel that has libertarian ideology is not best foisted onto Americans via the culture war. Thiel’s break from politics is welcome; his departure from economic thought would be even better.
I detest Peter Thiel. What he did to Gawker was disgusting.
I wonder if he's stepping out of politics or back into the shadows of anonymous donations to overly influential Super PACs. He's an example of self-disillusionment at its finest.