How Peter Thiel Used Elon Musk's Ruthless Business Strategy

I think there was an Elon metaphor he told me once, maybe 2010 or 2011. It was sort of like there were these three or four aerospace companies in the US that were really badly managed and badly run. They were these very fat cows on this grassy enclosed field, and if you ever got in there, there was just going to be a bloodbath.

Oh yeah. So it's like there's this carnivore and there's a big fence, and you got to climb this really big fence. Eventually you get in there. But this is a very optimistic thing though, because both Elon and what we built together with Palantir were able to be great enough and persistent enough to overcome unnatural barriers and do something very optimistic and fix things.

It is worth trying in a lot of areas. Look, I always think it's better to be optimistic than pessimistic. The place where I quibble with the name of your show is that I don't think it's good to be insanely optimistic or insanely pessimistic. At the extreme, optimism and pessimism are the same thing, because if you are extremely pessimistic, there's nothing you can do. If you're extremely optimistic, there's nothing you need to do. You just need to, you know, the singularity is near. It's the Kurzweil book title, very optimistic title, and all you need to do is sit back and eat some popcorn and watch the movie of the future unfold. So both extreme optimism and extreme pessimism converge on laziness and on people not doing anything. So I think moderate optimism is the correct thing, and then you have to always pick your battles.

The part that's more difficult about education and healthcare, or historically was more difficult, was that these were areas that lots of people were trying to reform and there were lots of different attempts people had. Whereas let's say in 2003, 2004, 2005 when we started Palantir, the idea of trying to do a military-related software startup, nobody even wanted to give you money as a venture capitalist. People thought we were insane.

And so there was sort of an element where if you could get through, you would have no competition. And then a decade later we still had no competition. There's probably a lot more going on in the defense space now than there was in the mid-2000s. But again, having zero competition, it's good if it works, maybe it just tells you you're insane. So even that's an ambiguous thing.

But then the place where I've had, we probably, the two areas where I've had the, you know, we've tried to invest, I at this venture capital thing we started Founders Fund in 2005, in different ways I've been at this and I'd done some angel investing before that, but I've been doing this for 20-plus years. And the area where we've probably had the least success from a returns basis is in software. The two worst areas are educational software-related companies and healthcare IT companies. And education we felt was so hard we didn't even, we did very little. Healthcare we tried a few more things, but the rough version of what's gone wrong in the healthcare sectors, we've done so little in education I feel I can't even comment on it. But healthcare, what's roughly gone wrong is you have all sorts of things that sound like a pretty good plan for reforming the system, and it's okay, it's this one angle on the pricing model that you need to change. But then there are 10 different ways you can do it, and it's these complicated ways you have to get the payments to shift from the insurance companies or the government or the hospitals, which are very cludgy. If you can just get consumers or doctors to change, that might be easier, but they typically are not the people who pay. And so there's this, you know, very cludgy, messed up system. Lots of people try to do it. My sociological model is always that I'm deeply skeptical of investments where a lot of VCs would go to some silly VC networking event and want to brag about it. And I feel there's a lot of that with the healthcare and education startups.

The green tech stuff. Yeah. I mean at some point it loses money and then it's not popular anymore. But while it lasts it's very popular because there's no fast-term accountability in venture capital. You know, sometimes you have momentum and the valuations go up and that does give you a feel whether things are working. But in practice, it's five, ten years later you get liquidity on these businesses or even longer. It takes incredibly long, and so people tend to overindex on these sociological factors and what's popular. And so there was a way that the healthcare and education sectors, even though they're very broken, people have these often too conventional ideas on how to fix them. And so yeah, it's, I know another trend where I've tried investing some over the last decade is all these marijuana-related businesses, and it's like, yeah, it's obviously a big trend. But it's an obvious trend, and then it turned out to be extremely hard to figure out what to do with.

Yeah, if you have an unpopular take on it, that might work.