The paradox of founders: outsiders who become insiders

The co-founder of PayPal and Palantir identifies the characteristics that distinguish a founding entrepreneur from the rest of the pack

Peter Thiel: ‘Almost all successful entrepreneurs are simultaneously insiders and outsiders.’ Photograph: Chip Somodevilla/Getty Images

Peter Thiel: ‘Almost all successful entrepreneurs are simultaneously insiders and outsiders.’ Photograph: Chip Somodevilla/Getty Images

 

Of the six people who started PayPal, four had built bombs in high school. Five were just 23 years old or younger. Four of us had been born outside the United States. Three had escaped here from communist countries: Yu Pan from China, Luke Nosek from Poland, and Max Levchin from Soviet Ukraine. Building bombs was not what kids normally did in those countries at that time.

The six of us could have been seen as eccentric. My first conversation with Luke was about how he had just signed up for cryonics, to be frozen upon death in the hope of medical resurrection.

Max claimed to be without a country and proud of it. His family had been put in diplomatic limbo when the USSR collapsed while they were escaping to the US.

Russ Simmons had escaped from a trailer park to the top maths and science magnet school in Illinois.

Only Ken Howery fitted the stereotype of a privileged American childhood. He was PayPal’s sole Eagle Scout. But Kenny’s peers thought he was crazy to join the rest of us and make just a third of the salary he had been offered by a big bank. So even he wasn’t entirely normal.

Are all founders unusual people, or do we just tend to remember and exaggerate whatever is most unusual about them? More important, which personal traits actually matter in a founder?

Some people are strong, some are weak, some are geniuses, some are dullards – but most people are in the middle.

Normally we expect opposite traits to be mutually exclusive: a normal person can’t be both rich and poor at the same time, for example. But it happens all the time to founders: startup chief executives can be cash-poor but millionaires on paper. They may oscillate between sullen jerkiness and appealing charisma.

Insider outsiders

Almost all successful entrepreneurs are simultaneously insiders and outsiders. And when they succeed they attract both fame and infamy.

Where does this strange and extreme combination of traits come from? It could be present from birth (nature) or acquired from an individual’s environment (nurture). But perhaps founders aren’t really as extreme as they appear.

Might they strategically exaggerate certain qualities? Or is it possible that everyone else exaggerates them? All of these effects can be present at the same time and, whenever present, they powerfully reinforce each other.

The cycle usually starts with unusual people and ends with them acting and seeming even more unusual.

The most famous people in the world are founders, too: instead of a company, every celebrity founds and cultivates a personal brand. Lady Gaga, for example, became one of the most influential living people. But is she even a real person? Her real name isn’t a secret, but almost no one knows or cares what it is. She wears costumes so bizarre as to put any other wearer at risk of involuntary psychiatric committal.

Lady Gaga would have you believe that she was “born this way” – the title of both her second album and its leading track. But no one is born looking like a zombie with horns coming out of her head: Gaga must therefore be a self-manufactured myth. Then again, what kind of person would do this to herself? Certainly nobody normal. So perhaps Gaga really was born that way.

The lesson for founders is that individual prominence and adulation can never be enjoyed except on the condition that it may be exchanged for individual notoriety and demonisation at any moment – so be careful. Above all, don’t overestimate your own power as an individual.

Bringing out the best

Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best from everybody at his company.

That we need individual founders in all their peculiarity does not mean that we are called to worship Ayn Rand- like “prime movers” who claim to be independent of everybody around them.

In this respect, Rand was a merely half-great writer: her villains were real but her heroes were fake. There is no Galt’s Gulch. There is no secession from society. To believe yourself invested with divine self-sufficiency is not the mark of a strong individual, but of a person who has mistaken the crowd’s worship – or jeering – for the truth. The single greatest danger for a founder is to become so certain of his own myth that he loses his mind.

But an equally insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom.

This is an extract from Peter Thiel’s new book, Zero to One: Notes on Startups, published by Virgin Books

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