>> by the age of 10, i was already reading all kinds of crazy stuff. >> don quixote ivanhoe. >> and trash too -- >> harriet the spy. how appropriate. >> a faraway look comes into a child's eyes his or her mouth drops open and you know that the child is lost in the story. >> to me, that's the ideal childhood. >> i like to pick up a book at my local neighborhood bookstore, because i like a random encounter. ..

>> penguin random house.com/agreed upon or just search a national read-a-thon day. it's the first thing that comes up. >> thank you very much. >> thank you. >> host: peter thiel from what does the title of your book "zero to one" mean? >> guest: zero to 101st to any sort of innovation or doing anything new where you do the first thing of its time. so the first word processed for the first smartphone the first car the first plane. it has its connotation of a breakthrough innovation that involve some sort of quantum leap rather than just a small innovation. my book is about how we as a

society need to be innovating more and now the really significant innovations that move the dial are these breakthrough zero to one companies. >> host: is silicon valley a zero to one does have a zero to one mindset? >> guest: there is 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 in recent years. apple with the iphone. there's always a bias to make things very incremental. i would say the successful companies in silicon valley are all zero to one companies. most companies end up being more incremental, and most less viable. the fourth online pet food country, the 10th solar panel company, that's not a zero to

one. that's copying of the things and that's i think most of the don't much let's. >> host: how is your company paypal a zero to one company? >> guest: it was the first one to combine e-mail with money which is sort of a very much a breakthrough product idea and then it turned out that can make this product work you had some very tricky fraud issues. so that people could transact anyway that was fast, easy and secure and was definitely the first of its kind. it grew very quickly and it represented a real breakthrough in payment. one sort of measure often give these companies are things where you have an order of magnitude improvement on some important dimension. and so amazon had more than 10 times as many books as the next biggest star. paypal, the turn to paypal was then to check these ebay power sellers which take seven to 10

days to clear. with paypal you got the money instantaneously which was a much faster process. >> host: what did you come up with the idea of the electronic payment? >> guest: it's often not that you come up with the whole idea in a single flash of inspiration. i was interested in this question of digital constancy of all these ways, the nature of money, how can it be shifted. we were sort of focus on the intersection of cryptography and money. and in the course of the year they were all these different challenges and struggles, even if you come up with new technologies, how will people adopt it. we stumbled those on this idea that you know something everybody already had and perhaps we should try to link money with e-mail. i think a lot of these companies, the ideas are not fully formed on day one but it sort of a subject people are extremely passionate about. think about really hard and in the process of that you are

applying both the business model and the idea and come up with a great strategy. >> host: in your book "zero to one" you write when i was running paypal in late 1999 i was scared out of my wits. not because i didn't believe in our company because it seemed like everyone else in the valley was ready to believe anything at all. >> guest: certainly there was an extraordinary bubble in the tech industry in the late 90s which in many ways we're still suffering from a hangover of that. people are skeptical of technology. they're skeptical of silicon valley, but the bubble was turn my very unrealistic expectations about growth sometimes unrealistic expectations about cash flows and basically ended up collapsincollapsin g in the course of the next three years as the nasdaq went from 5000 back to just over 1000. people often ask whether we have a bubble today in silicon valley and i don't think that's the case but i think these bubbles

whether in tech stocks in the '90s or housing and finance the last decade, these bubbles are all phenomena in which we need to the public as all involved. the public was very much involved in the tech bubble in the '90s. 300 ipos a year. today 2013 2014 the public is far less involved. he ipos are happening much later. part of it is sarbanes-oxley, part of is the tech companies themselves don't want to go public. they want to build their business privately. because the public is not involved i do not equip a bubble this time around. what's happening this time is it's a long boom that i would expect to go on for many many years to come. >> host: you for the right that the overwhelming importance of future profits is counterintuitive, even in silicon valley, for a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth. >> guest: well we do this

exercise at paypal where we looked at future discounted cash flows and we concluded that three quarters of market capitalization of the valley of people as of 2001 came from cash flows in the years 2011 and beyond. that sort of math it's true for almost all these high-growth stocks. most of the value is a decade or more in the future. investors and octopus tend to be very focused on the growth variable because that's what you can measure in the near term how much it will grow over the last week last month, the last quarter. whereas the question, will your company still be around a decade from now is more qualitative but it is more important. the durability of this question of why do you have a permanent, why would a company be something of near permanent value is an extremely important one for entrepreneur's and investors should 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 the conventional wisdom in venture capital it is in somewhat of a portfolio three to invest in a lot of different companies, treat them as though they were lottery tickets in one sort or another. i think it's a bad way to treat people. you never want to treat the entrepreneur as lottery tickets. it's also bad way to invest because when you think things are lottery ticket, you're multiplying small probability with a big payoff when you multiply small number with a big number like that you end up with a small number. when you think in terms of lottery tickets, you are losing. instead would've tried to over the years is only invest in things were i a very high level of conviction. it into being a somewhat more concentrated approach.

and so instead of the role don't put all your eggs in one basket, i think it's often a good idea to put your eggs in one basket that you understand very well and you regard -- you guard really will. >> host: what convinced you to invest early on in facebook? >> guest: well, facebook in 2004 was something of a no-brainer. the site was already at 20 college. than 100,000 users. they only give money to buy computers to go to more colleges. people are skeptical of social networking. they were focused on the college market and so it was a reasonable valuation for something that had tremendous momentum. in today's context i invested at a time when facebook was down at about $5 million. in today's context a company with similar metrics would be valued easily at something like $100 million. i think people in 2004 separate too pessimistic about the internet generally having a very a cute sense of its hangover from the '90s. the engineering team of facebook

was already quite good. they're going to build a very scalable product. zuckerberg was focused and passionate about it. it turned out to be a great investment, much better than i would've thought at the time but i thought it was good investment, would have never thought of the typhoon becoming $200 billion company it has become today. >> host: peter thiel where did this book, from where did this book stem? you talk about a class he taught at stanford. >> guest: "zero to one" came out of the class i got at stanford in the spring of 2012. that was taught, basically i tried is everything i've learned about technology business, startups in a single course. one of the students in the course, blake masters took these notes, post them on the internet. 300, 4000 people read these notes on the internet and we thought that would be a great

follow-up project to try to distill these notes, improve them and put them into this 200 page book "zero to one" which is what we ended up doing. >> host: on the first day of class what did you want your students to know? >> guest: well there is no single there is probably no single lesson. there are many different lessons to teach people. but i would say the single overarching theme of my class end of the book is that people should rethink competition. most business books tell you how to compete more effectively. mind tells you that perhaps she should not be at all and as an entrepreneur you should always aim for something like a monopoly. zero to one company that such a breakthrough that 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 class example of a

bad business is to start a restaurant which is brutal competition from nobody ever makes money. the great examples are businesses that offer no one has thought of doing. like google and search for facebook and social networking, but when they work into being incredibly valuable. i try to get at this through the somewhat contrary and questions like what great businesses no one is building what or they always like asking into question, is tell me something that is true that very few people agree with you on. this turns out to be a shockingly hard interview question because in an interview, people think you're to come up with some really brilliant. even when people of answers things they think are true that most people don't agree with them on it's often uncomfortable to articulate these truths. some insight but also great deal of courage to come up with these truths or to build some of these

zero to one businesses. >> host: you ask the question to you 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 bad answer to that question. why is that? >> guest: will because either the answer they can't exist or that god does not exist is if the answer because those are simply two different sides of the conventional debate. there's a lot of people on both sides of that debate. so i think, i think so the inner resting -- interesting answers are the few people agree on what are also too but it's not something that is going against the conventional wisdom. it's important to come up with something that is true in one way or another. i get the whole set of my answers to these questions in the course of the book and so i think, for example a monopoly

over competition question is very underexplored. i think that we are anywhere where people are very focused on globalization and i'm copying things. i think for those of us living in the united states or western europe, the question of technology is more important than globalization. so i think there are sort of many answers to this question but they are never trivial to find. >> host: the best startups might be considered slightly less extreme kind of cold. the biggest difference is that colton to be fanatically wrong about something important. >> guest: i think a great start is always united by a sense of mission, of what the company is going to do that nobody else in the world is doing. my paypal college elon musk started facebook back in 2002 the goal was to be the first company to build rockets powerful enough to send human being to mars.

a very inspiring goal. nobody else in the world thought it was possible. most people wouldn't even think this made sense but it inspired a really talented group of rocket scientist to come together and help build that company over the last 12 years. something is always a sense of if we did not do this, if we're not working on this, nobody else would. that's very powerful. it is like a cult in that you have some privileged knowledge or young some insight into the world that's not shared by other people but in a good start up unlike in a bad trend for that knowledge turns out to be true and you work on something that is real or that becomes real in the course of working on at. >> host: peter thiel what is the power law you write about? >> guest: the power law is the distribution of the size of the stability companies. if you look at the tech industry in the u.s. the top dozen tech

companies have a market capitalization of about $2 trillion they are probably as big or bigger than all other tech companies combined. and so you end up with these radically unequal outcomes in terms of company sizes. sort of unlike the u.s. declaration of independence where all men are created created equal. indicates that this is, not all companies are created equal and some end up being vastly more successful than others. as a venture capital investor typically the case that your single best investment ends up being worth more than all the others combined. so this is a very strange dynamic, and it's worth thinking through a great deal. sort of an application of the power law to entrepreneurs is the founders, or have not always the right thing to start a company. you may be much better off joining a company that would be very successful. the 100th person at google, no matter what he did, was better

off than the average founding ceo of the average venture started back in silicon valley. so sometimes the privileged founding companies too much and we undervalued the potential scale, and so we overvalue founding undervalue stealing but i think it's always worth thinking hard about whether you be able to build a great company are whether you might be better off joining another company that is doing something truly great. >> host: you spend quite a bit of time in your book on the u.s. educational system. is it assisting, is a promoting this type of entrepreneurship? >> guest: i have been a big critic of the u.s. education system, focus a lot on higher education we have this runaway student debt. we have no over $1 trillion of student debt. i think we have a bubble in higher education, and i think that it is, i do not think that it is actually helping people do

more entrepreneurial or more riskrisk-taking things. when you graduate from college, with $100,000 of debt, you will take a safe, reasonably well-paying job to pay off your debt and you'll be much less likely to do something entrepreneurial or creative or artistic which may pay less but ultimately create more value. so i do think that there's a big problem with the debt and there's a big problem with the way education generally is somewhat overvalued. the analogy that i've given is that the colleges today are in a crisis similar to the crisis the cow the church faced at the start of the 16th century. they are charging more and more, have classes are extracting a lot just like indulgences the catholic church had in the early 1500s. we are told the only way to go is to go to yale or go to jail

that basically if you do not get a diploma, get a diploma, you will be saved to if you do not get a diploma you will go to hell or some equivalent of that. and i think that's very wrong and we need to find a wider range of different things for people to do. i think the post education bubble world will be a world in which there's not a single track, not a single path for many different things that people will be able to do a. >> host: what did we learn how significant was the tech bubble of the late '90s early 2000? >> guest: well it was extremely big, it was extremely distorting. i think as often happens with these things, people aren't a lot of things but they often learn very much the wrong lesson. the main lessons people learned in the immediate aftermath was to be less ambitious to try less big projects to get to

profitability immediately. and so the aftermath of the tech bubble was to push us even more towards incrementalism. it was a course to discourage a lot of people going into technology at all. business to consumer, business-to-business were the buzzwords in the '90s. and 2000s they were referred to as b. to c. which was back to consulting, back to banking. the aftermath of the tech bubble was that people basically went away from tech. we had this enormous misallocation of resources into tech and out of tech. i think we would have been better off with much less volatility on the upside and downside. >> host: back to your stanford class was that done in the economics department, computer science, which department? >> guest: we did it to the computer science department. we thought that it would be the best way to reach a lot of the people who are starting these

companies. there is sort of a strong bias towards engineering product as the core of the new tech companies. although is really open to the people across the board in the university, got a lot of attention. >> host: peter thiel, you're quoted in several different places as saying we wanted flying colors we got 140 characters. what does that mean? >> guest: well, it's a tagline on our venture capital website and it's basically that if you so think about the promises of the jetsons of the '50s '60s, all the fantastic ideas people have the technology. there is a sense something like twitter is not enough to take our civilization to the next level. so i've had this view more generally that we are living in an era of relative technological stagnation. we've got a lot of innovation in the world of bits computers,

internet, mobile internet, all those sorts of things. without much less innovation in the world of atoms, whether it's energy food production, underwater cities flying cars supersonic aircraft of all the kinds of things people would've talked about in the '50s and '60s. this is reflected in the way which the word technology today doesn't mean rockets or flying cars. it means just information technology. there's been a narrowing of focus. we've had a narrow cone of innovation around this world of bits i think to really improve the quality of our society we need innovation, all these other dimensions as well. hope is that we'll have some widening of this in the decade ahead and we will once again start innovating in many different areas. >> host: what is palantir? >> guest: palantir is a company that i cofounded back in

2004. it's a data analytics company which enables people both in government large corporations to analyze a lot of the data by national security threats or criminal activity fraud. it helps you with cybersecurity comes with a large corporate concepts, and it basically comes out of this idea we had a paypal that a lot of the problems in the world are not going to be solved argument alone or by computers alone. what you have to do is to figure out ways to get the division of labor to be right between the two of them. palantir is basically way for human investigators, human analysts to work much more effectively with computers to analyze large amounts of data. this is sort of an underexplored paradigm because the dominant idea that we have in the computer world is that computers are substitutes for people. that computers will replace people in one way or another.

the palantir paradigm is much more computers and humans or complement, they are different, but different kinds of things and the key thing about building a lot of great innovation is not to figure out how do we replace people but how do we get computers and people to work together for more effectively. i think that's sort of a general template that can be used in different contexts. >> host: given some of the topic areas that palantir works on come have you worked with the federal government on some of these issues such as cybersecurity? >> guest: we have worked with a number of the three letter agencies in d.c. we worked with various law enforcement, various defense organizations in d.c. it's always a very long procurement cycle to break into the federal space but i think after 10 years palantir is made a lot of results. >> host: what makes you a libertarian? why do you donate to republicans? >> guest: well you know it's

always hard to fully characterize one's views politically. i would say that i'm socially more liberal fiscally more conservative which sort of such a note if you have a litmus test of there is political issues i'veihave come down a libertarian on a lot of different things. in general, i'm always a little bit skeptical about how much our political system will fix things. i think it's important and very broken in this country and so i spend most my time working on technology which is a place where thing people can really move the dial and really make the difference. i find politics incredibly interesting in this area. i find in practice to be endlessly frustrating which i think is not even in unconventional view of. >> host: does washington understand silicon valley? doesn't get in the way? >> guest: i certainly think

that there's too much regulation of certain areas of technology. and one of the reasons we've had his tail of two tracks of innovation which were unbreakable and in very slow in other areas with would cost you $100,000 to start a new software company, cost you about $1 billion to get a chart to the fda on average. that told you we will have fewer biotech companies and more software companies. i think d.c. is extreme important for what happens in silicon valley. i think the two cultures are quite different in that they don't understand each other terribly well. i think washington d.c. in separating focus very much on process it's dominated employers and a certain framework people with that sort of background bring to ideas. silicon valley is more focused on substance, more dominated by engineering or you have a very

different kind of mindsets of how to approach things. i was the one generalized people in washington, d.c. have is that technology is not that important, not something people are experts in. i once looked at the people in congress, 535 senators, pakistan. a generous account, they be 35 have a background in science or technology or engineering and the rest of them are really clueless and they wouldn't understand that windows doesn't work when the wind is not blowing or solar panels don't work at night. they're uncomfortable about science, uncomfortable about technology. so joe it something people want to stay away from here. >> host: in your book you're critical of the educational testing system. how did you create your students at stanford? >> guest: we did have a single test at the end of the course as well as a presentation people had to give on a company they would try to build. i don't think you can avoid

testing. i don't think you can avoid greeting. if you're going to have an educational system. i think it becomes a problem when everyone has to do the same thing, everyone evaluated in exactly the same way. because the end product is not that everyone should be going to the same schools are studying the same subjects. i do think the critique an individual class you great people. i don't know if we need to be grading people as much in our society as a whole and put quite as much weight as we don't sat tests and all the standardized aptitude tests that are used to track people. >> host: do you see yourself teaching another class? >> guest: you know, i've done this every few years so i will do so again at some point in the future. one of the things that's always fantastic about teaching is that it does force you to pull together an enormous amount of

material and organize it in a way, if you end up you hope the students learn a lot. certainly as a teacher you end up learning a tremendous amount, and so even though i'm a critic of the universities, i'm not at all a critic of learning. i think learning is good even a lot of what is put on the education rubric is more problematic but am a big fan of learning. not just in college but throughout life. >> host: the book is called "zero to one: notes on startups, or how to build the future." peter thiel with blake masters is the author. thank you. >> you were watching the tv television for serious readers. you can watch any program you see here online at booktv.org. >> here's a look at some books are being published this week.