Entrepreneurship Is Hope of American Economy Says PayPal Founder

Nov. 10, 2008| CHARLOTTE, NC. PayPal founder, Peter Thiel, said American entrepreneurship is the way out of the current economic crisis.  His talk, “The Business Model of the United States” was given at the opening reception of the Collegiate Network’s East Coast Editor’s Conference held in Charlotte, NC on Nov. 7.  He crafted a view of American business for the seventy undergraduate editors of independent newspapers and magazines gathered for the weekend conference.  Premised on the idea that the most fundamental business principle is “not to compete,” he described the type of business which defines America on the world stage given the current political, international, and economic climate.

Thiel spoke from his experience as a successful American entrepreneur, hedge fund manager, and venture capitalist. After founding PayPal in 1998, he certainly enjoyed his share of the financial boom of yesteryear selling the successful internet commerce business to eBay for $1.5 billion in 2002.  The person-to-person (or P2P) transaction manager was a groundbreaking concept which allowed safe financial transactions online between individuals.

Peter Thiel as appearing in Fortune Magazine (Image Link)

The Chinese and Japanese have the “corner market on labor,” India is “chief of services,” and “France and other European countries control the market on luxury goods,” he said.  America, however, is defined by the “frontier,” an important concept he finds unique, saying that “in most countries, people are not of the nature to do new things.”  This nature of Americans to innovate or participate in an entrepreneurial capitalist system works, he said, “so long as there is some sort of frontier.”  He fears that the mistaken belief that the metaphorical frontier is closed might lead to “ordinariness” and the positioning of United States commerce against countries that are “simply better” at manufacturing, labor, services, and luxury goods.

No matter how Americans fall on issues of politics or religion, he said, most still believe that the country retains the ability to do unique and extraordinary things. This industriousness is what unites Americans above race or creed and ensures that, while the economy may get worse before it gets better, it will indeed bounce back.

Thiel believes that recent implosions in the financial market and pending failure of large automobile manufacturers will lead to a return to a spirit of entrepreneurship on the local and industry-specific level “not just in Silicon Valley and Los Angeles, but across the country, wherever a frontier in business can be found.”

He argued that the current financial crisis is indicative of the problem of change on a policy level due to special interest groups and lobbyists. A firm believer in the power of the market, he conjectured that “maybe the way for the right change to occur is for the whole thing to break.”

While these are alarming words, they were couched in a deep sense of optimism in that which he does not think can be broken or changed—the American spirit of inventiveness, productivity, and industriousness. Of course, Thiel himself serves as the prime example of what inventiveness brings.  President of Clarium Capital Management, LLC. and Managing Partner of The Founders Fund, he invests in other small and start up businesses with the more than $6 billion in management capital the company has control over.  One such business was Facebook,  a phenomenon he instantly recognized as “frontier-type thinking,”and he still serves on its Board of Directors.

Read more from Peter Thiel:
Policy Review, The Optimist Thought Experiment, Feb/Mar 2008