searching they will let say if they have a daughter dressed as a son so there is no statistics. >> i am sorry. we're out of time. >> they queued to the three of you. [applause] thank you. there were so many questions. the kids of the elite --

. .

ipeter thiel, what does the title of your book, "zero to one" mean? >> guest: well, "zero to one" refers to innovation or anything new where you do the first thing of it kind. the first word processor, the first smartphone, the first car, the first plane. it's -- connotation of a break-through innovation such as a quantum leap. my book is about how we as a society need to be enmotivating more and the significant innovations are the breakthrough zero to one companies. >> host: is silicon valley --

does that eave a zero to one mindset? >> guest: there's definitely silicon valley at this point is the center of innovation in the u.s., and i would argue the center of innovation globally. there are certainly a number of companies that have involved these significant breakthroughs. i would say google, amazon, facebook are significant ones. apple, with the iphone. there's always a bias to make things incremental. take successful companies in silicon valley are all zero to run companies. most companies end up being more incremental, more me, too, and less value. the fourth pet food company, the tenth solar panel company is not a zero to run, it's companying other things and moves the dial less. >> host: how is your company, paypal, zero to run company? >> guest: well, it was the first one to combine e-mail with money, sort of a very much of a

breakthrough product idea, and then it turned out that to make this product work you had to solve some tricky fraud issues. so that people could transact with a fast, easy, and secure. and it was definite he the first company of it kind, grew very quickly, and it represented a real breakthrough in payment. it's often -- one sort of measure i give force companies are things where you have an order of magnitude improvement on some important dimension. amazon had more than ten times as many books as the next biggest book store. paypal, the alternative was to send a check to ebay power sellers which took seven to ten days to clear. we paypal you got theman instantly, minute faster process. >> host: where did you come up with the idea about electronic payments? >> guest: well, it's often not

that you come up with the whole idea in a single flash of inspiration. i was very interested in this question of digital currency, ways -- the nature of money, how it could be shifted, and we're focused on the intersection of cripping tograph and then money. and then there are challenges, how will people adopt new technology, and then we stumbled on the idea that e-mail is something that everybody had and perhaps we should link money with e-mail. a lot of these companies -- people are passion and not you refine the business model and the idea and come up with a great strategy. >> host: in your book "zero to run" you write: when i was running paypal in late 199 i was scared oust my wits. no because i didn't believe in

our company but because it seemed like everyone necessary the valley was ready to believe anything at all. >> guest: well, certainly there was an extraordinary bubble in the tech industry, in the late 90s, which in many ways we're still suffering from the hangover of that. people are skeptical of technology, skeptic cool of silicon valley. the bubble was driven by unrealistic expectations at growth and cash flows, and ended up collapsing in the course of the next three years, as the nasdaq went from 5,000 to 1,000. people ask whether we have a bubble today in silicon valley, and i don't think that the case. i think these bubbles, whether in tech stocks of the '90s or housing and finance in the last decade, these bubbles are psychosocial phenomenon ya in which you need to get the public involved. the public was very much involved in at the tech bubble in '90s because you had on the

order of 300 tech ip os a year. now the publics his involved, part of is it sarbanes-oxley, part of it is the tech candidate don't want to go public. they want to build their businesses privately and because the public is not involved i do not think we have a bubble these time around. what is actually happening this time is a long boom that i would expect to go on for many, many years to come. >> host: you further write that the overwhelming importance of future profits is counterintuitive even silicon valley. for a company to be valuable it must grow and endure but many entrepreneurs focus only on short-term growth. >> guest: well, if you -- we do this exercise at paypal in march of 2001. we looked at our future discounted cash flows and concluded three-quarters of the -- of market capitalization,

three-quarters of the val our of paypal as of 2001 came from cash flows in years 2011 and beyond. and that sort of math is true for almost all these high-growth stocks. most of the value is just a decade or more in the future. investors and ontrip nears are focused on the growth variable, how much do you grow over the last week, the last month, the last quarter, whereas the question, will you company still be around a decade from now, is more qualitative but is actually more important. i think the durability of this question of why do you have a permanent lead, why will your company be something of near permanent value, is extremely important one for entrepreneurs and investors to think about. >> host: what makes for a good successful venture capitalist mindset? >> guest: well, i always have a somewhat contrarian approach to conventional wisdom. i think conventional wisdom in

venture capital it's a port foalee theory. invest in a lot of different companies and treat them as though they're lottery tickets. and i think it's a bad way to treat people. you never want to treat the entrepreneurs, the founders, as lottery tickets. also a bad way to invest because when you think that things are a lottery ticket, you're multiplying small probability with a big payoff, when you multiply a mall number with a big number, you just end up with a small number. when you think in termed of lottery tickets you psyched yourself into losing. instead what i tried to do over the years is only invest in things where i have very high level of conviction. ended up being a somewhat more concentrated approach, and so instead of the rule, don't put all your eggs in one basket, i think it's often a good idea to put your eggs in one basket you understand well and are going to guard well. >> host: what convinced you to invest early on in facebook?

>> guest: well, facebook in 2004 was -- it was something of a no-brainer. the site was already alive at 20 colleges. they had 100,000 users. only needed money to buy computers to go to more colleges, and peep were skeptical of social networking, were not focused on the college market and it was reasonable valuation for something that had tremendous momentum inch today's context, i invested at a time when facebook was valued at $5 million. in today's context, a company of similar metric would be valued at $100 million. people in '04 were too mess -- pessimistic before the internet, having a hangover from the '90s. facebook was already quite good engineering. they were going to build a scalable product. zuckerberg was focus expected passionate about it, and it turned out to be a great

investment. much better than i thought at the time. i thought it was a good investment. never thought i would back $200 billion company it is today. >> host: peter thiel, where did this book -- prom where disthis book stem? you talk about a class you taught at stanford. >> guest: well, "zero to one" came out a class i taught at stafford in spring of 2012, taught to -- basically i tried to convey everything i've learn about technology business, startup in a single course. one of the students in the course, blake masters, took these notes, posted them on the internet. somewhere on the order of 300,000 to 400,000 people read these notes on the internet and the without it would be a great followup project to try to distill these notes, improve them and put them into this 200 page book, "zero to one." >> host: on the first day of class what did you wand your students to know?

>> guest: well, there's no single -- there's probably no single lesson. i think there are many different lessons to teach people. but the -- i would say the single overarching theme of my class and of the book, "zero to one" is that people should rethink competition. most business boxes tell you how to compete more effectively. mine tells you that perhaps you should not compete at all and that as a founder or entrepreneur, you should always aim for something like a monopoly, zero to one company that is such a breakthrough you have no competition at all. i think we often overrate competition for all sorts of reasons. we find it appealing to do things other people are doing, and so the classic example of the bad business is to start a restaurant, which is brutal competition, nobody ever makes any money, and then the great examples are businesses that often no one has even thought of doing, and like google and

facebook and social networking, that when they work, end up being incredibly valuable. i try to get to these somewhat contrarian questions, like what great businesses nobody building, or the version of this question -- interview questions, tell me something that is true that very few people agree with you on, and this turns out to be a shockingly hard interview question, because in an interview people think you have to come up with something really brilliant. even when people have answers from the things they think are true that most people don't agree with them on, it's often uncomfortable to articulate these truths, and some insights and also a great dole of courage to come up with these truths for build these zero to one businesses. >> host: you asked that question and return to it throughout "zero to one" and one of the example answers you give is that god does not exist or there is no god, and you say that is, a.,

a bad answer to that question. why is that? >> guest: because either the answer that god exists or does not exist is a bad answer because those are simply two different sides of a conventional debate. and there's a lot of people on both sides of that debate. and so i think the -- the interesting -- the really interesting answers are things that very few people agree with you on, but that are also true. not simply a matter of going against the conventional wisdom. it's equally important to come up with something that is true in one way or another. i give a whole set of my answers to these questions in the course of the book, and so i think that, for example, a monopoly over competition question, one that is very underexplored. i think that we're in a world where people are very focused on globalization, and on copying thingses that work. i think that actually for those of us living in the united states or western europe, the

question of technology is more important to globalization. so i think there are sort of many answers to this question, but they're never trivial to find. >> host: the best startups, you write, might be considered in less less straightly extreme cults. cults tend to be fanatically wrong about something important. >> guest: i think a great startup is always united bay sense of mission -- by a sense of mission, what the company is going to do that nobody necessary the world is going to do. when my paypal colleague, elon musk, started space ex-in 2002, the goal was to be the first company to build rockets that would be powerful enough to send human beings to mars. very inspiring goal. nobody necessary the world thought it was possible. most people wouldn't even think this made sense. but it inspired talented group of rocket scientists to come

together and help build the company. it's a sent of if we did not do this, if we were not working on this, nobody else would. it's very powerful and it is sort of like a cult in that you have some privileged knowledge or you have some insight into a world that is not shared by other people, but in a good startup, unlike in a bad cult, that knowledge turns out to