Peter Thiel’s Thoughts on Capitalism, Macro and Entrepreneurship

Peter Thiel has been in the media quite a bit in recent days following the release of his new book Zero to One.  I haven’t read the book yet, but I do have some brief thoughts so far based on some media interviews I’ve heard:

• Thiel takes a rather alternative approach to capitalism.  He says capitalism isn’t about competition, but rather monopoly.  This is similar to what I say in my book.  Capitalism, if left to its own devices, veers towards monopoly.  What Thiel doesn’t spend time discussing is how this can be negative in addition to being a positive.

• The core message of the book is that if you want to be a successful entrepreneur you need to focus on creating entirely new businesses rather than competing with existing businesses.  Thiel focuses on the ability to create a monopoly rather than take existing market share.  In other words, Thiel says real entrepreneurs should seek to create entirely new markets.

• The fact that Peter Thiel has released a must-read business book is great news for competing authors like myself who just so happen to also be book-ended earlier in the year by Thomas Piketty’s book, which basically blew the doors off the field of economics….

• I was intrigued by Thiel’s comments in this excellent James Altucher interview in which he says that we’re in the midst of another bubble, but that it’s not quite ready to burst.  Specifically, he says government bonds are in a bubble.  He takes the highly contrarian view that bonds won’t protect investors in the next downturn as the bubble bursts.   I do wonder though, if this isn’t based on some political biases as well as some macro misconceptions (see below, for instance).

• Thiel, who also runs a macro hedge fund, doesn’t seem to have a very good grasp on some macro concepts.  For instance, at one point in the interview he says that the Fed has “printed money” and that banks just aren’t “lending it out”.  Of course, as I’ve hammered on for years, this is not quite right and is based on the money multiplier view of banking.  Banks don’t lend money they obtain.  They create loans endogenously which means that they expand their balance sheets from thin air.  This misunderstanding is so common that even the most high profile macro investors seem to believe it….

Anyhow, I’ll be looking forward to reading Thiel’s new book.  He’s obviously one of the most successful living American entrepreneurs and from what I’ve heard so far it sounds like there’s a lot to learn from the book.

Cullen Roche

Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.

He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.