The Unwinding: An Inner History of the New America (20 page)

Because it was Stanford, and because it was the latest setting of a decades-long culture
war, the fight went national. In early 1987, Jesse Jackson, preparing a second run
for president, came to Stanford and led students in a march with the chant, “Hey hey,
ho ho, Western Culture’s got to go!” A year later, William Bennett, Reagan’s education
secretary, was invited by Thiel’s publication to speak on campus about the revisions
Stanford was making to its core curriculum, which included new courses on non-Western
cultures and books by nonwhite or nonmale writers. “A great university was brought
low,” Bennett said, “by the very forces which modern universities came into being
to oppose—ignorance, irrationality and intimidation.”

In his last piece as editor in chief, just before graduation in 1989, Thiel wrote,
“I’ve learned a great deal as editor, but I still don’t know how one convinces people
to listen … To those committed leftists who would like to politicize and wreck Stanford
(if you’re reading this, then you probably don’t belong in this category), we’ll continue
to fight you at every turn.” Unsure what else to do, he entered Stanford Law School.

The culture war continued into its fourth decade. Under its new editor, Thiel’s friend
David Sacks, the
Review
moved on to speech codes, gay rights, and sex (in 1992 an entire issue was devoted
to rape and the university’s widening of its definition of unlawful coercion to include
“belittlement” and “verbal pressure without threat”). 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. Not long afterward, Thiel and Sacks decided to write a book exposing
the dangers of PC and multiculturalism on campus, with Thiel handling the heavy analytical
lifting and Sacks doing the journalistic legwork.
The Diversity Myth
was published in 1995, with praise from well-known conservatives. The book included
an account of the Rabois incident, championed as a case of individual courage in the
face of a collective witch hunt. “His demonstration directly challenged one of the
most fundamental taboos,” Thiel and Sacks wrote: “To suggest a correlation between
homosexual acts and AIDS implies that one of the multiculturalists’ favorite lifestyles
is more prone to contracting disease and that not all lifestyles are equally desirable.”

Sacks and other friends didn’t consider the deeper personal implications behind Thiel’s
taking a hostile view of homosexuality, because they didn’t know that he was gay.
No one knew. He wouldn’t come out until 2003, when he was in his midthirties, and
only then to his closest friends, explaining to one that his identity would have gotten
in the way of his work. And anyway, he never thought of being gay as the core of who
he was. Perhaps it helped make him a contrarian, but perhaps it didn’t. “Maybe I’m
more of an outsider because I was a gifted and introverted child,” he said—not because
he was gay. “And maybe I’m not even an outsider.” It was a subject that he never liked
to discuss, even with those closest to him.

The Diversity Myth
remained Thiel’s only book, which chagrined him a little, since, after all, it was
of its moment, and over the years the urgency of its polemics faded considerably,
and Thiel’s views of identity broadened as he got older, until he began to wonder
if the target had been worth the effort. Even as the book was published, Stanford
was undergoing an immense cultural change that would soon leave the humanities courses
that had been the object of so much contention forgotten, rendering the era of curriculum
wars quaint, if not ridiculous.

Thiel always harbored the ambition to be a public intellectual, while doubting that
such a career was even viable in an age of academic specialization. He wanted to dedicate
his life to the spirit of capitalism, but he wasn’t sure if that meant defending it
intellectually, or getting rich, or both. If he defended capitalism without making
money, his commitment might be questionable; if he just made money (and not a little—he
wanted enormous sums of it), he would merely be one more capitalist. Sacks believed
that Thiel could be the next William F. Buckley
and
a billionaire, though perhaps not in that sequence.

Just before graduating from Stanford Law School, Thiel wrote a final editorial for
the
Review
that mocked the liberal aversion to lucrative careers, the preference for “‘public
interest law,’ which, as far as can be discerned, is neither for the good of the public
nor very interesting nor particularly law-related.” He diagnosed the causes: “The
PC alternative to greed is not personal fulfillment or happiness, but anger at and
envy of the people who are doing something more worthwhile”—such as a career in management
consulting, investment banking, options trading, or real estate development, with
an emphasis on golf courses. (He also mentioned joining a start-up—still unusual at
Stanford in 1992, though not for long.) Thiel concluded that “greed is far preferable
to envy: It is less destructive (I’d rather live in a society where people don’t share
than in one where they try to take what belongs to everybody else) and it is more
honest.”

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). Then he went to New York to practice
securities law at the white-shoe firm of Sullivan & Cromwell. That was when things
began to get away from him a bit. He later called his time in New York “a rolling
quarter-life crisis.”

The job was boring. If he were a Marxist, he would have called it alienated labor—working
eighty hours a week at something he didn’t believe in so that eight years on he might
make partner, with the next forty years of his life laid out before him. His chief
rivals were under the same roof, working right next to him, competing like crazy for
stakes that were all internally assigned, with no transcendent value. And that was
the deeper problem: Thiel was beginning to question the competitive life. In law school
he hadn’t worked quite as hard as usual and hadn’t quite made his usual superior grades,
because he didn’t know precisely what they were for anymore. In high school he had
known—good grades were for good colleges—but now he was no longer so quick to think,
“This is why you are still a high school teacher.” His last editorial for the
Review
had struck a posture of contemptuous certainty that masked unease.

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 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. The economic value of the work wasn’t
at all evident—financial innovation seemed to have reached diminishing returns—and
he harbored doubts that he could ever master the game enough to win at it. He lacked
the political skills, which included schmoozing and backstabbing. And the older generation
in both institutions, law and finance—men who had come on in the midsixties and gotten
their big reward in the seventies—was totally oblivious to the fact that it had become
much harder for young people to move up.

There was a philosophical dimension to his rolling quarter-life crisis, too. At Stanford
he had attended a lecture given by a French professor named René Girard, which had
led him to Girard’s books, and he became a devotee. Girard had developed a theory
of mimetic desire, of people learning to want and compete for the same things, which
attempted to explain the origins of violence. The theory had a sacred and mythic aspect—Girard,
a conservative Catholic, explained the role of sacrifice and the scapegoat in resolving
social conflict—which appealed to Thiel, offering a basis for Christian belief without
the fundamentalism of his parents. Mimetic theory was also a challenge to Thiel’s
worldview, because its explanation of human behavior by group attraction ran counter
to his libertarianism. He was both intensely competitive and averse to conflict—he
never gossiped, avoided the infighting that was part of working with other people,
and presented such a rational demeanor that it became a barrier to intimacy. He also
had a horror of violence. In the end, he recognized himself in Girard’s ideas: “People
compete hard for things,” he said, “and once you get them you are sort of disappointed,
because the intensity is driven by the fact that all these people want it, but it
is not necessarily a good thing. I was very open to the Girard theory because I was
more guilty of it than most.”

There was a contemporary word for what Girard described: status. In New York the struggle
for it was ubiquitous and ferocious. Everyone was on top of everyone else in an infinite
skyscraper—you looked down and it went as far as you could see, you looked up and
it went as far as you could see, you spent years climbing the stairs, all the while
wondering if you had moved up at all or if it was just an optical illusion.

In the summer of 1994, Thiel, his roommate, and some other friends rented a time-share
in the Hamptons. It turned into a nightmarish weekend, with everything costing too
much, the service bad, the whole vacation a fight with other people from start to
finish—a classic example of something generated without regard to its real value.
New York was too expensive—that was what it came down to. Lawyers had to wear good
suits and ties, bankers had to eat and drink really well. In 1996, Thiel was making
about a hundred thousand a year at Credit Suisse, and his roommate was making three
hundred thousand. The roommate was thirty-one years old, three years older than Thiel,
and he ran out of money. He had to call his dad for a loan.

That was when Thiel left New York and moved back to Silicon Valley for good.

*   *   *

The Valley was no longer the place Thiel had left four years earlier. What had happened
in the meantime was the Internet. Between the midseventies and the early nineties,
the personal computer had spawned countless hardware and software companies in Silicon
Valley, and in other high-tech centers around the country; during the seventies and
eighties the population of San Jose doubled, approaching a million, and by 1994 there
were 315 public companies in the Valley. But none of the newer ones had been as important
as Hewlett-Packard, Intel, or Apple. In the years since the Macintosh, the computer
industry had seen more consolidation than innovation, and the undisputed winner was
in Seattle.

The most important Silicon Valley company to come along since Apple was originally
called Mosaic, started in 1994 by Jim Clark, a former Stanford professor and founder
of Silicon Graphics, and Marc Andreessen, a University of Illinois graduate who, at
twenty-two, had just the year before developed the first graphical browser for the
World Wide Web. In 1995, the year that the last restrictions on commercial use of
the Internet were lifted, their company went public as Netscape, headquartered south
of Stanford in Mountain View. Its breakthrough product was a Web browser called Netscape
Navigator. Over the next five months, while the company remained unprofitable, Netscape’s
stock rose tenfold. Between 1995 and the turn of the millennium—the period of the
browser wars—the number of Web users around the world doubled every year. Yahoo! went
public in 1996, Amazon in 1997, eBay in 1998. Netscape set in motion a tidal wave
of technology companies in Silicon Valley, companies that didn’t require prohibitive
amounts of capital to get going, because they were based on the Internet—companies
that could be started by college grads, students, and dropouts.

The dot-com boom was just beginning when Thiel returned in 1996. He moved into an
apartment in Menlo Park and set up a hedge fund, Thiel Capital Management, raising
a million dollars from friends and family. But something else was in the air. People
he knew were getting involved in start-ups, and Thiel wanted to do the same. He wanted,
he said, “to build constructive noncompetitive 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.” Unlike New York, Silicon Valley wasn’t a zero-sum game.

It took two more years. In the summer of 1998, Thiel gave a guest lecture at Stanford
on currency trading. It was a hot day and around six people showed up. One of them
was a twenty-three-year-old Ukrainian-born computer programmer named Max Levchin.
Just out of the University of Illinois, he had come to Silicon Valley that summer
with a vague notion of starting a company, sleeping on friends’ floors—on the day
of the lecture he was looking for an air-conditioned room to cool off in. As Levchin
listened, he grew excited. Thiel was young, smart, he dressed in a T-shirt and jeans,
he was more than a step ahead of the game, what he was saying sounded more like chess
than investing. And he was a libertarian, like Levchin. Afterward, Levchin went up
and introduced himself, and they agreed to have breakfast the next morning and talk
about Levchin’s ideas for companies.

They met for smoothies at a greasy spoon across El Camino from Stanford Stadium called
Hobee’s, a hangout for students and young dot-com entrepreneurs. Levchin, who annoyed
Thiel by arriving late, pitched two ideas—one having to do with online retailing,
the other with encryption for handheld digital devices. Thiel quickly tossed aside
the first pitch, but the second interested him—cryptography was harder, not a lot
of people could do it. He asked Levchin how much money he’d need to get started, and
Levchin said two hundred thousand dollars. Thiel revised it upward to half a million.
In their next conversation, he said that he would invest two hundred forty thousand
and help Levchin raise the rest.