Why Peter Thiel Thinks Social Entrepreneurship Is Broken

And how to fix it.

Why Peter Thiel Thinks Social Entrepreneurship Is Broken
[Photo: Celine Grouard for Fast Company]

This is an interview with Peter Thiel, an outspoken entrepreneur who and cofounder of PayPal and Palantir, an early investor in Facebook, venture capitalist, and hedge fund manager. His book Zero To One was released this week.


What’s wrong with social entrepreneurship?

Let me focus on the business tension. Great businesses do something that’s very unique. And when something is seen as good by society, it has a very conventional feel. You have the fourth online pet food company or the 10th thin-film solar company, those are often not great businesses because there are too many people doing similar kinds of things. One space that borders on social entrepreneurship involves all the education-related startups. I find they’re often hard to differentiate; they all have a story that what they’re doing is really good, but they’re often similar to one another.

So as an investor, rather than look for something people already love, how do you identify an innovator?

I prefer to focus on the mission of a company. And the mission has a story that is about more than making money, some transcendent purpose. But I distinguish mission from convention; if it involves an idea that’s totally different than what I’ve seen before, that’s what feels very powerful. The creative part of the process is to think really hard: What are the great new things that we can develop today in 2014?

If you ask, is Space-X a form of social entrepreneurship? Because Elon would say that it is good for humanity to move onto another planet, and we should become a planet-traveling species and go to Mars. But that’s an idiosyncratic view; if you took a poll, that wouldn’t be high up on peoples’ list of what they think is good for society.

People have all sorts of reasons to be critical of tech. They will say that it’s either too big, has too much hubris, or its too small; it’s people throwing a sheep at one another on the Internet. There are a lot of critics who will not be happy no matter what. We should make technology more ambitious. I’d like to bring the definition of technology back to all these things, rather than what we have today, which is just IT.


Can’t events in the world of bits radically change human behavior of people in real life?

All the IT has been extremely important for cultural causes. We have this instantaneous transmission of information; there’s a degree of transparency that has changed things a lot. If you look at things like the Arab Spring, Twitter made transparent the corruption inside the governments. Once you know what’s going on in the sausage making factory, it doesn’t work anymore. There are places where just having knowledge changes things [and] a lot of social institutions that only work when people don’t understand them. I suspect every form of injustice involves people not understanding something that’s going on. When they come to understand, it forces a different response. It’s one of the reasons that Facebook is so powerful, because it goes to peoples’ real identities.

How do you see our concept of personal identity shifting with things like Oculus Rift?

I think it’s generally still about general identity. I always think of Facebook versus MySpace. Facebook starts at Harvard; it’s about putting your real self online. MySpace starts in Los Angeles, and it’s all these actors who pretend to be someone other than who they are on the Internet. It’s a simplification, but Facebook was about real identity, and the other ones were about fake identities. And somehow the real ones dominated. PayPal did the same thing on the level of money.

But when we’re using our real identities online, don’t we feel forced to moderate ourselves?


I agree that is definitely a concern. You don’t want ideas to get shot down immediately. I would like people to work on more breakthrough technology companies, and then the question is, why aren’t more people doing that? Is it that they just don’t have ideas? Or is it just objectively hard to do it? My theory is that there are a lot of good ideas out there, but people sort of get discouraged from them, and there are all these social cues people pick up on that discourage them from pursuing ideas.

There’s this very strange phenomenon in Silicon Valley where so many of the great entrepreneurs seem to be suffering from a mild form of Asperger’s, or something like that, and I always want to flip that around and say: This is really a critique of of our society. What sort of society is it when, if you don’t have Asperger’s, you’re talked out of your best ideas by the people around you before they’re even fully formed?

The sociological part of it is very strange. I remember at Stanford Law, the first day of orientation, people had all these cool ideas of what they were going to be doing. All these great causes people were going to work on. And within a year and a half, it was this super homogenized [group] working in large law firms. What actually happened? My rough cut is: Things like that always happen if you have people who have no strong convictions, who are very extroverted, who are looking to what other people are doing.

There’s a way in which, yes, competition does always make you better at something. But it comes at a high price. You might lose sight of what’s important. It’s crazy in a way.

What’s the psychological impact of doing something wildly different? Is it more conducive to happiness?


I think it’s definitely better, even though in practice people often experience it the other way around, where it’s like… this is really weird and uncomfortable! Nobody knows what I’m doing! Even though I think that’s the right thing. We think the key to happiness is to win at these conventional things, even though in practice you often get much less out of them than you’d think.

About the author

I've written about innovation, design, and technology for Fast Company since 2007. I was the co-founding editor of FastCoLabs.