The Unwinding, by George Packer

The Unwinding is a book by New Yorker staff writer George Packer, who profiles various American lives over decades.

Peter Thiel was one of subjects. Here are some of the interesting parts about Thiel:

In a philosophy class his sophomore year, Mind, Matter, and Meaning, Thiel met another brilliant student, named Reid Hoffman, who was far to the left of him. They stayed up late arguing about things like the nature of property rights (this was how Thiel made friends, at Stanford and all his life). Hoffman said property was a social construct, it didn’t exist without society, while Thiel quoted Margaret Thatcher: “There is no such thing as society. There are individual men and women.”

In 1992, Thiel’s friend and fellow law student Keith Rabois decided to test the limits of free speech on campus by standing outside the residence of an instructor and shouting, “Faggot! Faggot! Hope you die of AIDS!” The furious reaction to this provocation eventually drove Rabois out of Stanford.

After seven years at Stanford, Thiel left for a clerkship in Atlanta (he had interviews at the Supreme Court with Justices Antonin Scalia and Anthony Kennedy but wasn’t hired – the first setback of his life, and a traumatic one).

After seven months at the law firm, he quit and went to work as a derivatives trader – currency options – at Credit Suisse. It was mathematically challenging, and he lasted longer on Wall Street than at the law firm, but not by much. There was the same problem as at Sullivan & Cromwell: he was competing feverishly with his coworkers, and with little conviction in the socially designated stakes.

He wanted, he said, “to build constructive non-competitive relationships with people. I didn’t want to work with frenemies, I wanted to work with friends. In Silicon Valley it seemed possible, because there was no sort of internal structure where people were competing for diminishing resources.”

(Thiel and Levchin) began to spend time together, getting to know each other by trading puzzle challenges, mostly math puzzles. How many digits did the number 125^100 have? (Two hundred ten.) One of Thiel’s puzzles involved a hypothetical table in the shape of a circle: In a game in which two players took turns placing a penny anywhere on the table without overlapping the others, with the winner the last one to put down a penny that didn’t hang over the edge of the table, what would be the best strategy for winning? And did you want to go first or second? It took Levchin fifteen minutes to figure it out – the key was that the best strategy depended on disrupting the other player’s strategy.

Zuckerberg matter-of-factly described Thefacebook’s dramatic growth while making no effort to impress Thiel, and Thiel took that as a mark of seriousness.

There was a hundred-dollar penalty for arriving late at the weekly 10:30 a.m. trading meeting. One Tuesday morning the subject was Japan. Eleven men in blue, white, or striped shirts without ties sat around a long conference table. Thiel presided from the end.

“The secret of Japan is that nothing ever happens,” he said. “If I were Japanese I’d be fed up with years of stagnation, but I’m not Japanese, so who knows?”

Thiel’s top trader, Kevin Harrington, a former Stanford Ph.D candidate in physics, weighed in. “The old people in Japan are satisfied. Their assets have been going up. It’s like the boomer class in the United States that thinks everything’s going to be fine.”

“Do you think we should be short?” another trader asked.

“It’s been a mistake to be short Japan for the past twenty years,” Thiel said. “I don’t have a strong view on it. But if something goes wrong it could keep going. The political question is: Is Japan an authoritarian country, or is it a country where there’s no government at all? I don’t think it’s a democracy – you can set that aside. Is it the Japan of the seventies, an authoritarian corporate state where you can force people to save a lot of money? Or is it like California and the United States, where the deep secret is there’s nobody at the steering wheel at all? People pretend to be in control, but the deep secret is there’s no one.”

For half an hour the meeting turned into a seminar on Japanese history and culture. Finally, Thiel asked, “What are people optimistic about?”

“Enhanced oil recovery in the United States and Canada,” a young trader said.

A young trader named Patrick Wolff, who was participating by speakerphone, said, “I will betray my libertarianism, but the state’s monopoly on energy is rapidly eroding.”

“Next week,” Thiel said, “it would be useful for people to think about what they are optimistic and hopeful about.”

Over dinner they did not talk about sex, religion, or other people’s lives. Instead, they talked about ideas, world events, and the future of technology. Asked to name the investor he most admired, Thiel posted to the billionaire recluse Howard Hughes.

With everybody else in a panic, Thiel tried to catch a falling knife, but this time contrarianism became his enemy. Expecting coordinated intervention by governments to calm the global economy, he went long on the stock market for the rest of the year – but stocks continued to plummet, and his fund lost a lot of money. In 2009, when he shorted stocks, they rose, and Clarium’s losses grew.

A university education had become the equivalent of a very expensive insurance policy, like owning a gun. “The future is so-so, but you can sort of navigate it if you have a house with a gun and an electric fence and a college degree. And if you don’t, you’re just screwed. What’s gone wrong? Why is that? If all the debates are about how we get everybody to have a gun, that might be ignoring the crime problem.”