“He was a nobody.” Peter Thiel didn’t stand out amongst the horde of bankers at Credit Suisse. But somehow, this unlikely man became a tech icon worth $8.6 billion.

“The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside.”

Peter Thiel, Zero to One

In The Contrarian, Max Chafkin tells the story of how Thiel became one of the best known, and most controversial, technologists of our time.

How Peter Thinks

Whenever someone makes an argument to Thiel, he runs through an exercise: what if what they’re saying is false?

This is a great way to evaluate ideas. I often use it myself.

If I can’t invalidate an argument, I have to accept it. But Thiel’s technique makes sure that I carefully examine every idea.

Independent thinking has led Thiel to some of the biggest scores in Silicon Valley history. They weren’t obvious picks — a social network for a handful of college kids, or esoteric software for the Pentagon.

But they worked.

Missing Tesla and YouTube

One thing about The Contrarian that shocked me was how many mistakes Thiel made.

He passed on YouTube, now the world’s biggest video sharing site. He also passed on Tesla, despite knowing Elon Musk personally!

These investments would have made him billions in gains. But they slipped right through his fingers.

Even the best make huge mistakes. But in venture capital, what matters are your wins, not the companies you missed.

Valuations Aren’t Everything

Thiel’s investment in Facebook could not have gone better. Growth was vertical and now the social network was raising money again.

Surely he’d want to double down, right?

Wrong. Thiel thought the $500 million valuation was outrageous, and declined to re-invest.

Facebook is now worth $788 billion. Thiel’s mistake cost him a fortune.

This is something I’ve heard time and time again from investors — “I passed on the next round because it seemed too expensive.” Every time, they live to regret it.

I’m keeping this in mind for my own investments.

Idiot Insurance

If that wasn’t bad enough, Thiel also dumped all his Facebook stock shortly after the IPO. The stock went on to soar, nearly quadrupling in just five years.

Thiel saw none of those gains.

This is why some investors take out “idiot insurance.” They sell half their position, keeping the other half.

This way, they’ve taken meaningful cash off the table. But if the stock rips in the future, they can still benefit.

It All Comes Out in the Wash

With all these mistakes, Thiel looks like a huge failure, doesn’t he?

But of course, he’s anything but.

That’s the nature of our business. If you hit one big winner, it makes up for all the mistakes.

Facebook alone would’ve made Thiel an icon. To it, he added Palantir, SpaceX, Anduril and many more.

Whatever Thiel did wrong, he also had the courage to back companies few people would touch. That conviction has earned him billions.

Wrap-Up

The Contrarian also goes into great detail on Thiel’s misadventures in politics. While I don’t share his political views, I’ve learned a lot from Thiel’s business career.

We don’t have to agree with everything a man does in order to learn from him.

What have you learned from Peter Thiel? Leave a comment and let us know!

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More on tech:

Zero to One

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