The Unwinding: An Inner History of the New America (62 page)

In Thiel’s eyes, this frantic education chase in a stratified society was another
sign of things not working. He thought highly of Stanford, had studied there for seven
years, now taught the occasional course. But the university seemed strangely separate
from Silicon Valley—the new companies were started by students, not professors, who
were more and more specialized in esoteric fields. He disliked the whole idea of using
college to find an intellectual focus. Majoring in the humanities struck him as particularly
unwise, since it so often led to the default choice of law school. The academic sciences
were nearly as dubious—timid and narrow, driven by turf battles rather than the quest
for breakthroughs. Above all, a college education taught nothing about entrepreneurship.

Thiel thought about starting his own university, but he concluded that it would be
too difficult to wean parents off the prestige of Stanford and the Ivies. Then, on
a flight from New York back to San Francisco, he and Luke Nosek came up with the idea
of giving fellowships to brilliant young people so that they would leave college and
start their own technology businesses. Thiel liked to move fast and make a splash
(he did it on a regular basis). The next day, at Tech Crunch, an annual conference
in San Francisco, he announced the Thiel Fellowships—twenty two-year grants of a hundred
thousand dollars each to young people under the age of twenty who had an entrepreneurial
idea that would make the world a better place. Critics accused him of corrupting youth
into chasing riches while short-circuiting their educations. He pointed out that the
winners could return to school at the end of the fellowship, but no small part of
his goal was to poke a stick in the eye of top universities and steal away some of
their best.

*   *   *

After Thiel’s visit to the biotech start-up, he drove up the peninsula to Clarium’s
offices in San Francisco. He had a round of interviews scheduled with a few fellowship
applicants from the group of fifty that had made the final cut out of an original
six hundred. The first candidate to sit down at the dark-stained conference table
was a Chinese American grad student from outside Seattle named Andrew Hsu. A nineteen-year-old
prodigy, he still had braces on his teeth. At five he had been solving simple algebra
problems; at eleven he and his brother cofounded a nonprofit group, the World Children’s
Organization, that provided schoolbooks and vaccinations for kids in Asian countries;
at twelve he entered the University of Washington; at nineteen, as a fourth-year Ph.D.
candidate in neurosciences at Stanford, he decided to leave his education behind to
start a company that made educational video games based on the latest neuroscientific
research. “My core goal is to disrupt both the education and the game sectors,” he
said, sounding like Peter Thiel.

Thiel expressed concern that the company would attract people with a nonprofit attitude,
who felt that “it’s not about making money, we’re doing something good, so we don’t
have to work as hard. And I think this has been an endemic problem, parenthetically,
in the clean-tech space, which has attracted a lot of very talented people who believe
they’re making the world a better place.”

“They don’t work as hard?” Hsu asked.

“Have you thought about how to mitigate that problem?”

“So you’re saying that might be a problem just because the company has an educational
slant?”

“Yes,” Thiel said. “Our main bias against investing in these sorts of companies is
that you end up attracting people who just don’t want to work that hard. And that,
sort of, is my deep theory on why they haven’t worked.”

Hsu caught Thiel’s drift. “Yeah, well, this is a game company. I wouldn’t call it
an educational start-up. I would say it’s a game start-up. The types of people that
I want to bring in are hard-core game engineers. So I don’t think these are the types
of people that would slack off.”

Hsu would get a Thiel Fellowship. So would the Stanford sophomore from Minnesota who
had been obsessed with energy and water scarcity since age nine, when he tried to
build the first-ever perpetual motion machine. “After two years of being unsuccessful,
I realized that even if we solved perpetual motion we wouldn’t use it if it was too
expensive,” he told Thiel. “The sun is a source of perpetual energy, yet we’re not
harnessing that. So I became obsessed with cost reductions.”

At seventeen he had learned about photovoltaic heliostats, or solar trackers—“dual-access
tracking mirrors that direct sunlight to one point.” If he could invent a cheap enough
way to produce heat using heliostats, solar energy could become financially competitive
with coal. At Stanford he started a company to work on the problem, but the university
refused to count his hours on the project as academic units. So he went on leave and
applied for a Thiel Fellowship.

“I think I’m getting the best possible things out of Stanford,” he said. “I’m staying
in this entrepreneurial house called Black Box. It’s about twelve minutes off campus.
And so that’ll be really fun, because it’s really close to our office, and they have
a hot tub and pool, and then just go to Stanford to see my friends on the weekends.
You get all the best of the social but get to fundamentally work on what you love.”

A pair of Stanford freshmen—an entrepreneur named Stanley Tang and a programmer named
Thomas Schmidt—came in next, with an idea for a mobile phone application called QuadMob,
which would allow you to locate your closest friends on a map in real time. “It’s
about taking your phone out and knowing where your friends are right now, whether
they’re at the library or at the gym,” Tang, who came from Hong Kong, said. He had
already published a book called
eMillions: Behind-the-Scenes Stories of 14 Successful Internet Millionaires
. “On Friday night, every single week, I go to a party, and somehow you just lose
your friends—people roll out to different parties. And I always have to text people,
‘Where are you, what are you doing, which party are you at?’ and I have to do that
for like ten friends, and that’s just like a huge pain point and it’s just really
annoying, and I think this is the reason why we’re solving a pain point that we personally
have experienced and probably most college students.”

Schmidt, another Minnesotan, explained the name of the app. “Back in the eighties,
in the seventies, before Facebook, before the Internet, the Quad Center was the place
to hang out—like, people would just chill there, talk to their friends, and now the
Quad is totally deserted except for tourists and people biking through it, and so
we feel like it’s kind of silly, it’s wrecking social interaction. There are so many
cool people here and you really don’t get to meet that many people.”

Tang was asked how QuadMob would change the world. “We’re redefining college life,
we’re connecting people,” he said. “And once this expands outside of college life,
we’re really defining social life. We’d like to think of ourselves as bridging the
gap between the digital and the physical world.”

Thiel was skeptical. It sounded like too many other venture start-ups looking to find
a narrow opening between Facebook and Foursquare. It certainly wasn’t going to propel
America out of the tech slowdown. The QuadMob candidates would not get a Thiel Fellowship.

*   *   *

That night, Thiel hosted a small dinner party at his mansion in the Marina. A chessboard
and a bookcase full of sci-fi and philosophy titles were the only indicators of who
lived there. The elegant blond assistants in black refilled wineglasses and called
the guests to dinner. A menu at each place around the table announced a three-course
meal, with a choice of poached wild salmon with grilled asparagus, spring onions,
forbidden rice, and a Meyer-lemon-scented ravigote sauce, or pan-roasted sweet pepper
polenta with sautéed winter mushrooms, braised dino kale, caramelized cippolini, and
niçoise olive puree.

Thiel’s guests seemed as out of place in this candlelit formality as their host. There
was David Sacks, Thiel’s friend from Stanford and PayPal, coauthor of
The Diversity Myth
, and the founder of Yammer, a social network within organizations. There was Luke
Nosek, another PayPal mafioso and the biotech specialist at Founders Fund—he was a
member of the Alcor Life Extension Foundation, a nonprofit devoted to cryonics, and
had signed up to have his body filled with liquid nitrogen upon his official death
so that it could be restored to full health upon the invention of new technology.
There was Eliezer Yudkowsky, an artificial-intelligence researcher who had cofounded
the Singularity Institute—an autodidact who never went past eighth grade, he was the
author of a thousand-page online fanfic called
Harry Potter and the Methods of Rationality
, which recast the original story in an attempt to explain Harry’s wizardry through
the scientific method. And there was Patri Friedman, the founder of the Seasteading
Institute. An elfin man with cropped black hair and a thin line of beard, he was dressed
in the eccentrically antic manner of Raskolnikov. He lived in Mountain View in an
“intentional community” as a free-love libertarian, about which he regularly blogged
and tweeted: “Polyamory/competitive govt parallel: more choice/competition yields
more challenge, change, growth. Whatever lasts is tougher.”

Over dinner, Nosek argued that the best entrepreneurs in the world were seized with
a single idea to which they would devote their lives. Founders Fund backed these visionaries
and kept them in charge of their own companies, protecting them from the meddling
of other venture capitalists, who were prone to replacing them with plodding executives.

Thiel picked up the theme. There were four places in America where ambitious young
people went, he said: New York, Washington, Los Angeles, and Silicon Valley. The first
three were tired, used up. Wall Street lost its allure after the financial crisis;
the D.C. excitement of the Obama presidency was over; Hollywood hadn’t been a cultural
mecca for years. Only Silicon Valley still attracted young people with big dreams.

Nosek recalled that he had failed a high school English class in Illinois because
the teacher said that he couldn’t write. If something like the Thiel Fellowships had
existed, he and others like him could have been spared a lot of pain. Too many gifted
people passed through college and grad school with no plan for the future. The Thiel
Fellowships would find these talents and allow them to become entrepreneurs before
they had a chance to lose their way or be snuffed out by the establishment.

Education, Thiel said, was like a “tournament,” with successively difficult stages
of competition. “You keep trying to be number one. The problem with the university
is what it does to your confidence when you find you’re no longer number one.”

There was wine on the table, but the guests did less drinking than talking. Throughout
the meal the two subjects remained the same: the superiority of entrepreneurs and
the worthlessness of higher education. At 9:45, Thiel suddenly pushed back his chair.

“Most dinners go on too long or not long enough,” he said.

His guests went out into the cool San Francisco night. The Palace of Fine Arts was
brilliantly lit, its rotunda reflected in the pond. Thirty miles south, the labs of
Silicon Valley were burning with fluorescent light. Thirty miles east, people weren’t
doing well. Thiel retreated upstairs to answer e-mail alone.

JEFF CONNAUGHTON

Connaughton moved to Savannah. He wanted to live in the South again, near the ocean,
so he bought a turreted three-story late-nineteenth-century Victorian—twice the size
of his Georgetown house for half the money—near the pretty squares lined with live
oak and Spanish moss.

Beneath its quaint stylishness, Savannah was just another city hit hard by the crisis.
In his neighborhood there was a sign for a ten-thousand-square-foot house that was
marked down from $3.5 to $1.5 million. The guy who gave tours of historic Savannah
was an unemployed mortgage banker. Soon after Connaughton’s arrival, his neighbors
invited him to a monthly potluck gathering, where the host that month was a prosperous-looking
man in his sixties with holdings in real estate. A week later, he heard that the man
had killed himself—the rumor was that he’d gotten overextended.

Connaughton volunteered once a week at the local legal services office. He acquired
a shelter dog, part chow and part golden retriever, and named her Nellie. She was
a stressed-out creature with a rough past and a bad case of heartworm. After a round
of shots he brought her home and put her on antibiotics. One night, Nellie’s breathing
sped up to three or four times a second, and he spent the whole night by her crate,
keeping her calm. After ten days of convalescence in the house, he took her out for
a walk to a nearby park. Within a few weeks, Nellie settled down as his constant companion.

In Washington, Connaughton used to spend every Sunday morning flipping between the
TV talk shows, like everyone else in town, while reading the
Times
and the
Post
during commercials. The ritual exchange between high-profile hosts and guests became
essential conversation fodder for the D.C. week. In Savannah, it seemed completely
absurd. All but his closest Washington friends dropped away, as if he’d moved to the
other side of the earth. As long as he had money it would be easy to insulate himself
from the country’s problems—to give up on changing Washington and enjoy his life far
from the morass, while America went about its long-term decline. He could feel that
temptation, and the other one, too—the itch of public service, the Biden itch. It
was still there. Every now and then someone sent a feeler his way, an opening at the
White House, a good nonprofit job. Each time he said no.

He wanted to burn his ship so that he would never be able to succumb and sail back
to his former life. With Nellie lying at his feet, he spent each morning writing a
book about what had happened to Washington in his years there. It would be called
The Payoff: Why Wall Street Always Wins.
It would say everything.