The first word processer, the first smartphone, the first car, the first plane, it has this connotation of a breakthrough investigation thats in essence a quantum leap. And my book is about how we as a society need to be innovating more and how the really significant innovations that move the dial are these breakthrough zero to one companies. Host is Silicon Valley a zero to one, does that have a zero to one mindset . Guest theres, theres definitely Silicon Valley at this point is the center of innovation in the u. S. , and i would argue the center of innovation globally. Its, there are certainly a number of companies that have involved significant break throughs, i would say google, amazon, facebook are significant ones in recent years, apple with the iphone. Theres always a bias to make things very incremental. Successful companies in cig con valley are all Silicon Valley are all zero to one companies. Most Companies End up being much less valuable. The tenth solar panel company, thats not a zero to one, thats a one to end. Thats copying other things and that, i think, moves the dial much less. Host peter thiel, how is your company, paypal, a zero to one company . Guest the first one to combine email with money, and then it turned out that to make this product work, you had to solve some very tricky fraud issues so that people could transact in a way that was fast, easy and secure. And it was definitely the First Company of its kind. It grew very quickly, so it represented a real breakthrough in payment. Its often one sort of measure i often give for these companies are things where you have an order of magnitude improvement on some dimension. So amazon had more than ten times as many books as the next biggest bookstore. Paypal, the alternative to paypal was to send checks to these ebay power sellers which took seven to ten days to clear. With paypal you got the money unstand town yously instantaneously. Host where did you come up with the idea about Electronic Payments . Guest its often not that you come up with the whole idea in a single flash of inspiration. I was very interested in this question of digital currency, of all these ways, the nature of money, how could it be shifted, and so we were focused on this intersection of clipping cryptod money. And in the course of the year with all these different challenges one struggles with, even if you can come up with a new technology, how will people adopt it . And then we stumbled onto this idea that email was something everyone already had. I think the idea of these companies, the idea is not fully formed on day one, but its a subject that people are extremely passionate about, and in the process of that you refine the Business Model and come up with a great strategy. Host and you write when i was running paypal in late 999 1999, i was scared out of my wits. Not because i didnt believe in my company, but it seemed like everyone else in the valley was ready to believe anything at all. Guest well, certainly, there was an extraordinary bubble in the Tech Industry in the late 90s which in many ways were still suffering from the hangover of that. People are skeptical of the it technology, of Silicon Valley. But the bubble was driven by Unrealistic Expectations about growth, cash flows, and basically it ended up collapsing in the course of the next three years as the nasdaq went from 5,000 back to just over 1,000. People often ask whether we have a bubble today in Silicon Valley, and i dont think thats the case. I think these bubbles whether in tech stocks in the 90s or housing and finance in the last decade, these bubbles are psychosocial phenomena in which you need to get the public involved. You had somewhere on the order of 300 tech ipos a year. Today 20132014, the public is far less involved, the ipos are happening much later. Part of it is sarbanesoxley, part of it is the Tech Companies themselves want to be able to build their businesses privately, and because the public is not involved, i do not think we have a bubble this time around. I think whats actually happening this time is its a long boom that i would expect to go on for many, many years to come. Host you further write that the overwhenning importance of future 3r069s is counterspewive even in Silicon Valley. For a company to be valuable it must grow and endure, but many entrepreneurs focus only on shortterm growth. Guest well, if you we did this exercise at paypal in march of 2001. We looked at our future discounted cash flows, and we concluded that about threequarters of market capitalization, threequarters of the value of paypal as of 2001 came from cash flows in the years 2011 and beyond. And that sort of math, i think, is true for almost all these high growth stocks. Most of the value exists a decade or more in the future. Investors and entrepreneurs tend to be very focused on the growth variable because thats what we measure in the near term, how much did we grow over the last week, the last month, the last quarter. Whereas the question will your Company Still be around in the next decade is more important, the durability, why do you have a permanent lead, why will your company be something of near permanent valuable is an extremely important one for entrepreneurs and investors to think about. Host peter thiel, what makes for a good, successful Venture Capitalist mindset . Guest well, i always have a somewhat, slightly contrarian approach to the conventional wisdom. I think the conventional wisdom is its somewhat of a portfolio theory, invest in a lot of different companies, you sort of treat them as though they were lottery tickets of one sort or another. And i think its a bad way to treat people. You never want to treat the entrepreneurs, the founders as lottery tickets, but its also a bad way to invest. When you think things are a lot i ticket lottery ticket, that youre multiplying small probability with a big payoff, you typically just end up with a small number. When you think in terms of lottery tickets, youve psyched yourself into losing. So instead what ive tried to do over the years is only invest in things where i have a very high level of conviction. It ends up being a somewhat more concentrated approach. And so instead of the rule dont put all your eggs in one basket, i think its often a good idea to put your ideas that you understand really well and that youre going to guard really well. Host what made you, what convinced you to invest then early on in facebook . Guest well, facebook in 2004 was, it was something of a nobrainer. The site was alive at 20 colleges, they had 100,000 users, they only needed money to buy computers to go to more colleges. People werent focused on the college market, so it was a reasonable valuation for something that had tremendous momentum. I think in todays context i invested at a time when facebook was valued at about 5 million. In todays context a company with symmetrics would be valued easily at Something Like 100 million. So i think people were, in 04, simply were too pessimistic about the internet generally having an acute sense of this hangover from the 90s. The Engineering Team at facebook was already quite good, they were going to build a scaleable product. Zuckerberg was extremely focused and extremely passionate about it and, you know, it turned out to be a great investment, much better than i would have even thought at the time. So i thought it was a good investment, never would have thought it would become the 200 billion company its become today. Host peter thiel, from where did this book stem . You talk about a class you taught at stanford. Guest well, the zero to one book came out of a class i taught at stanford in the spring of 2012. It was taught to, basically, i tried to convey everything ive learned about technology, business, startups in a single course. One of the students in the course, Blake Masters, took these notes, posted them on the internet. Somewhere on the order of 300400,000 people read these notes on the internet, and we thought it would be a great followup project to try to distill these notes, improve them and put them into this 2 00page book which is what we ended up doing. Host on the first day of class, what did you want your students to know . Guest well, theres no single, theres probably no single lesson. I think there are many different lessons to teach people. But i would say the single, overarching theme of my class and of the book, zero to one, is that people should rethink competition. Most Business Books tell you how to compete more effectively. Mine tells you perhaps you should not compete at all and that as a founder or entrepreneur, you should always aim for Something Like a monopoly, a zero to one company thats such a breakthrough that you have no competition at all. And i think we often appeal to do things that other people are doing. So the classic example of a bad business is to start a restaurant which is brutal competition, nobody ever makes any money. And then the great examples are these businesses that often no ones even thought of doing like google and search or facebook and social networking that when they work, end up being incredibly valuable. I try to get at this through these somewhat contrarian questions, like what great business is nobody building, or the intellectual version of this question which is like asking an interview question. Tell me something thats true that very few people agree with you on. And this turns out to be a shockingly hard interview question because in an interview people think you have to come up with something really brilliant. But even when people have answers, its often uncomfortable to articulate these truths. And to me, i think some insight but also a great deal of courage to come up with these truths or to build some of these zero to one businesses. Host well, you ask that question, you return to it throughout zero to one, and one of the example answers you give is that god does not exist or there is no god, and you say that is, a, a bad answer to that question. Why is that . Guest well, because thats either the answer that god exists or does not exist is a bad answer because those are simply two different sides of a conventional debate. And theres a lot of people on both sides of that debate. And so i think the, you know, so the interesting, the really interesting answers are things that very few people agree with you on but that are also true. Its not simply a matter of going against the conventional wisdom, its equally important to come up with something that is true in one way or another. I give a whole set of my answers to these questions in the course of the book. I think, for example, a monopoly over competition question is one thats very underexplored. I think that were in a world where people are very focused on globalization, and im copying things that work. E think that actually for those of us living in the United States or western europe the question of technology is more important than globalization. So i think there are sort of many answers to this question, but theyre never trivial to find. Host the best startups, you write, might be considered slightly less extreme kind of cults. The biggest difference is cults tend to be fanatically wrong about something important. Guest well, i think a great startup is always united by a sense of mission, of what the company is going to do that nobody else in the world is doing. And my paypal colleague, elon musk, started spacex back in 2002, the goal was to be the First Company to build rockets powerful enough to send human beings to mars. This was a very inspiring goal. Nobody else in the world thought it was possible. Most people wouldnt even think this made sense, but its inspired a really talented group of rocket scientists to come together and help build that company over the last 12 years. So i think its always this sense of if we did not do this, if we were not working on this, nobody else would. Thats very powerful. And it is sort of like a cult in that you have, you have some privileged knowledge or you have some insight into the world thats not shared by other people. But in a good startup unlike in a bad cult, that knowledge turns out to be true, and youre working on something thats real or that becomes real in the course of working on it. Host peter thiel, what is the power law you write about . Guest well, the power law is this distribution of the sizes of these technology companies. And so if you look at the, if you look at the Tech Industry in the u. S. , the top dozen Tech Companies have a market capitalization of about 2 trillion, and theyre probably as big or bigger than all other Tech Companies combined. And so you end up with these radically unequal outcomes in terms of company size. Sort of unlike the u. S. Declaration of independence where all men are created equal, in the case of business, not all companies are created equal, and some end up being vastly more successful than others. As a Venture Capital investor, its typically the case that your single best investments end up being worth more than all the others combined. So this is a very strange dynamic, and its worthying through a great deal. And sort of an application of the power law to entrepreneurs, to founders is that its perhaps not always the right thing to start a company. You may be much better off joining a company thats going to be very successful. The 100th person at google, no matter what you did, was better off than the average founding ceo of the average venturebacked startup in Silicon Valley. So we sometimes privilege Founding Companies too much, and we undervalue the potential scale. And so we overvalue founding undervalue scaling. So i think its always worthying really hard about whether youll be able to build a Great Company or whether you might be better off joining another company thats doing something truly great. Host you spend quite a bit of time in your book on the u. S. Educational system. Is it assisting, is it promoting this type of entrepreneurship . Guest well, ive been a big critic of the u. S. Education system, focus a lot on Higher Education where you have this runaway student debt. We now have over a trillion dollars of student debt. I think we have a bubble in Higher Education, and i think that it is i do not think that it is actually helping people do more entrepreneurial or more risk taking things. When you graduate from college with 100,000 of debt, you will take a safe, reasonably well paying job to pay off your debt, and you will be much less likely to do something entrepreneurial or creative or artistic which may pay less but ultimately create more value. And so i do think, i do think that theres a big problem with the debt, and theres a big problem with the way education generally is somewhat overvalued. The analogy that ive given is that the colleges today are many a crisis in a crisis similar to the crisis the Catholic Church faced at the start of the 16th century. Theyre charging more and more, you have this priestly or prof sor yall class thats extracting a lot of the rent just like the Catholic Church had in the early 1500s. And were told that the only way to go, you go to yale or you go to jail, that basically if you do not get a diploma, if you get a diploma, you will be saved, if you do not, you will go to hell or something the secular modern equivalent of that. And i think thats very wrong. And we need to find a wider range of Different Things for people to do. I think the posteducation bubble world will be a world in which theres not a single track, a suckle path, but there are single path, but there are many Different Things people will be able to do. Host what did we learn, how significant was the tech bubble of the late 90s, early 00s . Guest it was, well, it was, it was extremely big, it was extremely distorting. You know, i think, i think as so often happens with these things, people learn a lot of things, but they often learn very much the wrong lessons. I think the main lessons people learn in the immediate aftermath was to be less ambitious with, to try less big projects to get to profitability immediately. And so the aftermath of the tech bubble was to push us even more towards incrementalism. It was, of course, to discourage a lot of people from going into technology at all. You had business to consumer, business to business were these buzz words in the 90s, b to c, b to b, in the 2000s they were jokingly referred to b to b was back to banking. So the aftermath of the tech bubble was that people, basically, went away from tech. And so we had this enormous misallocation of resources into tech and then out of tech. I think we would have been better off with much less volatility on the upside and the downside. Back to your stand farred class, was stanford class, was that done in the Computer Science d. , Economics Department . Which department . Guest we did it through the Computer Science department. We thought this would be the best way to reach a lot of these people starting these companies. There was a strong bias toward engineering, product. At the core of these Tech Companies, it was really open to people across the board in the university and got a lot of attention far beyond the campus. Host peter thiel, youre quoted in several different places as saying we wanted flying cars, we got 140 characters. What does that mean . Guest well, its a tag line on our Venture Capital web site, and its basically that we, you know, if you sort of think about the promises of the jet softens of the 50z, 60s, all these fantastic ideas people had about