Peter Thiel and thinking for yourself

Peter Thiel is asked the formula for starting great businesses at every talk he gives. His answer is every time the same: “There is no formula. You have to figure it out for yourself.”

In his interview, Tyler offers a summary of Thiel’s thought. (Search for the paragraph that mentions Tocqueville.) I haven’t read enough Girard to follow the part about original sin, but Tyler describes Thiel as someone who is trying to get us to break free of socially-derived opinions and to see the world without distortions.

I was still in Europe when I read this, and it prompted me to think about the social environment there. It’s not at all hard to find people beating up on Europe as a bad place to start a tech company; you’ll find no lack of grievances about its regulatory attitude, its taxes, its anti-trust initiatives, its punitive bankruptcy codes, and so on. Still, I think that it’s underrated in one significant way. I submit that from a Thielian perspective we might expect great entrepreneurs to be better developed in Europe, especially in Germany, because it’s easier to be independent there.

My favorite review of Zero to One argues that despite appearances the book is not about how to found startups, but that instead it’s a book of ethics. Thiel thinks that we live in a society of deep conformism and constrained imagination. For him, the key to doing something great (of which starting a company is just one example) is to uncover insights hidden from popular opinion, or in other words to think for yourself.

Tyler has written that there’s an enormous sense of freedom in Sweden: “Autonomy reigns… Sweden is the land of the true individualist, sometimes verging on atomism.” I think it’s easier to be individualistic in Germany too. When I lived there I felt a freedom that’s unavailable in America, a social one not related to regulations or government expenditures. First you’re more free from pursuing status markers; second there are fewer pressures to conform. I’ll make this case focusing mostly on education.

Moving from Canada to go to an American suburban high school and then an American college was distressing in one particular way: It was hard to meet the need to keep up. In college especially you feel these irresistible pressures to seek and display prestige, most of which were earned by going through ever more grueling tournaments. When you enter college you’re with this big pool of students more or less like you, all trying to distinguish themselves in four years or so. That creates an environment that breeds the most intense mimetic pressures. The more that people wanted something (anything), the more it became desirable. This would work its way through until those with only marginal interests get sucked in too.

I think that’s how you’re led to situations where something like 45% of the graduating Harvard and Princeton classes in 2007 entered finance. (That figure is 31% for the Harvard class of 2014.) Toss in consulting, tech, and medicine and you’ll probably claim over a majority of the career aspirations of graduates from elite colleges. Now step back; isn’t that odd? For all of the talk about training people to think critically, somehow you find everybody trying to enter one of very few career paths.

Thiel has asked: “Is this a reason that we ended up sometimes underperforming because we are insecure about things, we want to get validated by winning various competitions?” Now I’m skeptical of the claim that all of us secretly dream of ditching finance to become marine biologists. But I think that these paths are so common because they offer not only prestige, but also assurance that others want this highly-desirable thing too.

Everybody in the world feels these pressures to some extent. I think though that in Germany this is less pronounced; there are fewer markers of social prestige, and it’s more normal to go on different career paths.

Start with schools. There’s no designation of an elite stratum of universities; no “Ivy League,” no “Oxbridge,” no “Grandes écoles,” no “zhongdian daxue.” While certainly some schools are better regarded, choosing a university better resembles a lifestyle choice. If you want to be in a big city, maybe you’ll go to the University of Munich or Humboldt in Berlin. If you want to be in a sunny area and be surrounded by hippies, maybe you’ll go to Freiburg or Heidelberg. Each of these have specialties of course, but they’re all about ranked the same, and they cost the same too (free except for a small administrative fee).

It’s not just postsecondary. Germany is often praised for its system of apprenticeships. From fifth grade on, students are separated into grammar schools (Gymnasiums and Realschulen) and vocational schools (Hauptschulen). Grammar school students are prepared for college work, while Hauptschule students are taught more work-related skills. After school they move on to apprenticeships in fields like construction and IT. It may be most desirable to enter a grammar school, but early on kids are aware that different paths are possible.

When I say that growing up in Germany helps bestow independent thinking skills, I’m not saying that it’s because they’re all taught Straussian art of close reading. Instead I’m arguing that society has suppressed the value of certain status indicators, and that encourages people to think for themselves. To put it another way, there are fewer tournaments for kids to go through, and the value of winning them is not so high. Germans I’ve met are incredibly humble. Nobody feels the need to perpetrate an international hoax about how desirable they are. In addition, people aren’t all drawn to the same fields like finance and consulting. They take up professions like baking or manufacturing, and work with the earnestness that comes from knowing that their work is dignified; it’s easier for them to do the equivalent of moving to Dayton to study widget machines.

Let me end with one last speculation. Germans are taught about the crimes of the Nazi state since elementary school. The Holocaust is mentioned in no fewer than three subjects: biology, history, and German language. People are taught that crowds can be wrong, and that it’s a duty to stand apart if you disagree. Maybe these frequent exhortations to avoid groupthink increases independent thinking on the margins.

Time to summarize. Thiel thinks that great businesses are built by people who discover secrets hidden by conventional opinions. I submit that you can become that sort of person more easily if you grow up in Europe, particularly in Germany. Put aside the question of taxes and regulations, and consider the social environment. America holds dear a lot of status symbols. Germans have fewer elite reference points and makes it common for people to pursue non-prestigious work; those in the services aren’t all trying to earn their masters’. Therefore we should expect more independent thinking to come from Germans.

Thiel himself thinks that Germany is too pessimistic and too comfortable. The best argument against everything I’ve said is to point out that, in fact, Germany has not produced any Facebooks or Airbnbs. Actually, the best-known German tech entrepreneurs may be the Samwer brothers, who are notorious for copying successful ideas from Silicon Valley to try to scale them in other markets. So much for originality.

So maybe taxes and regulations matter more after all; I also don’t want to pass over cultural norms that stigmatize failure. But if the limiting factors to great entrepreneurship is independent thinking combined with courage (as Thiel has said, courage is in shorter supply than capital or genius), then maybe it’s better to be away from America. After all, policies are easier to fix than the social environment, and original minds may grow up over there and start companies over here.

P.S. This column appeared in the Times just yesterday on why so few tech companies have emerged from Europe. At the end there’s this quote: “In Europe, stability is prized,” Professor Moser said. “Inequality is much less tolerated. There’s a culture of sharing. People aren’t so cutthroat.” I think that everything except the part about “stability” would be positives for Thiel.

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7 thoughts on “Peter Thiel and thinking for yourself

  1. Hey Dan

    Do you think “originality” is one of the extraneous morals that smart people in the US have imposed on themselves, to the detriment of creative potential?

    I wonder if the Shoah reminders also discourage entry into crypto-political liberal arts, with German philosophy so nastily implicated therein. In contrast, our victory over the Nazis may have seemed to vindicate the “arc of history” for Americans, so that we could continue to pursue talking cures for social problems and study talking disciplines. Smart people may thus b diverted, in the US, toward the production of novel arguments

    Your question seems important, and it seems important that we figure out where the best entrepreneurs come from so we can plug them into the US

    @Kilgore I wonder, too, whether Dan might explain more thoroughly what he means by “humility”

    This is all portfolio theory style serial speculation, on my part

    • Yes, empirically false. But perhaps there’s something to salvage.

      First, maybe the propositions are right but I’m wrong to say that they’re embodied by Germans.

      Second, maybe good German entrepreneurs leave to start companies elsewhere. I can’t name many off the top of my head, but perhaps Thiel qualifies; also the tech company I used to work for was run by a German who left as a teenager and started his now-public company in Canada. There’s certainly more, perhaps a number that can be called disproportionate.

      Or maybe I’m just wrong.

      • Taught independent thinking skills yes, but also ingrained with an incredible propensity to avoid all forms of risk. Starting a company is an incredible gamble and not something that’s pumped into the German psyche like it is in the US… especially where it’s tech and difficult to scale out of existing revenue. Failure doesn’t have the shiny sparkles around it like it does in SV.

        If you look at where all the German VC firms invest they tend to mirror the Samwer brothers in their behavior. Don’t want to get too off topic talking about the financial side of things but this would be an interesting topic to take a deeper look at.

  2. Interesting essay, which I tend to agree with. (I grew up in Germany, currently live here again, am have lived for a long time in the UK, USA and China in btw). A few notes-cum-corrections, tho’.

    1) Your focus on “tech” (meaning basically software/IT companies oriented, it seems for you, primarily towards B2C biz) is very misleading if you want to measure German entrepreneurship. There is actually a lot of technology/engineering-heavy entrepreneurship around in Germany, but it tends to focus on A) B2B sectors much more than B2C, B) tends to involve more “traditional” engineering/machinery sectors than pure IT/software (tho’ of course there is lots of IT within the machines, often locally produced). Moreover, these firms are often based in places one has never heard of. So yes, there is not so much “tech” in Germany, but there are lots of engineering/technology companies, and a lot of entrepreneurship. Only, unless you are in the industry, you’ll most likely never have heard of the firms (Beckhoff Automation, anyone? Plasmatreat?) (Incidentally, I don’t think Samwer is taken particularly seriously in German industrial circles.)

    2) I think it is true that competition for status is less intense, but rather than saying that there are no status markers , I think it would be more accurate to say that conventional material status markers (pay check) count for much less than in the States (or in China). Cultural and scholarly attainment for instance matters as least as much.

    • Thanks for your note, Nicholas.

      1. That’s definitely a good point. I think it’s definitely lamentable that “tech” mostly refers to IT/internet, and more broadly to say chemicals, transportation, energy, etc. I guess I’m guilty of perpetuating that narrow notion. It seems common though to believe that it’s the future. I remember reading that Merkel complained that the country wasn’t producing any Googles or Facebooks.

      And yeah, I know what you’re referring to about high-tech being situated in unexpected places. I was passing through I think it was Donaueschingen when I saw beautiful offices of some sort of technology company. Later I found out that it was one of the few providers in the world of some medical component, and that’s generated lots of wealth for the small area.

      As another side note I remember an appealing argument that the Black Forest area is a center for precision engineering because of its history building very intricate cuckoo clocks. I don’t know if it’s true, but it’s pretty to believe so.

      2. I said that there are *fewer* markers for social prestige, not that there are no status markers. And to add to your second remark, I wonder if in China and the US scholarly attainment is barely valued, and that it is the credential that really matters.

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