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25-05-2011, 08:08 AM
Not sure if he qualifies to be a "guru", but he seems like more than a savvy investor, he's also good with emotions!
Business Times - 25 May 2011
Contrarian investor shuns hot idea
EVELYN M RUSLI finds out why Peter Thiel is not putting his bets on shares of social media darlings.
AS investors clamour for shares of social media darlings, Peter Thiel is avoiding the frenzy. 'Is Twitter worth US$7 billion?' the venture capitalist said.
'The broader question is, Is it going to help people have a much higher quality of living? And I think on that score, its benefit is a lot less.'
Mr Thiel - Facebook's first outside investor and a co-founder of PayPal - is not just knocking the competition. He has a visceral aversion to market exuberance. By the time an idea like social networking is widely accepted, Mr Thiel, 43, thinks it is passe.
'He's always starting with the premise of, What does everyone else believe that's erroneous?' said Keith Rabois, a friend of Mr Thiel's and former PayPal executive.
Mr Thiel, an entrepreneur turned investor, is more than a simple iconoclast. He is also the founder of the hedge fund Clarium Capital Management and a full-time prognosticator who says he makes 'determinant views of the future'. His macro perspective defines his investments in start-ups and securities.
He's focused on what he sees as a lack of innovation in the US. Although the past 40 years have brought advancements in computers and the Web, Mr Thiel is nostalgic for the 1960s, when people were still dreaming of putting a man on the moon. He describes the decade - and the 200 years that preceded it - as a 'golden era' for technology.
'Innovation slowed down dramatically after the 1960s,' Mr Thiel said. 'We are not focused enough on getting back to a culture of innovation - people are just trying to figure out ways to coast.' Mr Thiel is shunning the most popular Internet start-ups because they are not 'taking civilisation to the next level'. Instead, he's placing bets in health care, biotechnology and artificial intelligence companies - areas most of his peers have shied away from. His venture capital firm, Founders Fund, has made investments in Halcyon Molecular, a DNA sequencing start-up; Practice Fusion, an electronic health record system; and SpaceX, a spaceship builder.
A great bubble
According to Mr Thiel, not enough energy is spent tackling big, challenging problems, like space exploration. Instead, many people are chasing incremental progress and short-term gains.
Part of the problem, he says, is society's faith in higher education, which he has long called 'a great bubble'. Colleges and universities, Mr Thiel argues, are lulling the younger generation into a false sense of security and chaining them to hefty student loans, which pushes them into low-risk jobs.
'Universities are like the General Motors of the 1970s,' said Mr Thiel, a graduate of Stanford University and Stanford Law School. 'They're incredibly dominant, incredibly arrogant and impervious to change.' His non-profit organisation, the Thiel Foundation, is vetting candidates under the age of 20 for 20 fellowships. Each recipient will be awarded a US$100,000 grant to leave college and pursue entrepreneurial projects.
Although the initiative has caused controversy among staunch supporters of higher education, the programme has attracted 400 applicants, many from top-tier schools. Mr Thiel, who plans to announce the winners next week, says he's not advocating that everyone drops out. But he does want students to consider their options more carefully.
'I don't think there's anything controversial about an education bubble,' he said. 'Price is up by a factor of 10; quality hasn't really changed. There's something really crazy going on here.'
Consistent approach
What is intriguing about Mr Thiel is that for all his titles - and there are many, including entrepreneur, movie producer, lawyer and derivatives trader - his approach is generally consistent. According to several friends and former employees, Mr Thiel ponders major societal and economic issues and then identifies the contrarian strands. He also places a huge premium on intellectuals who think about the big picture. Mr Rabois, who worked at Clarium in 2003, recalls a wave of new employees, 'brainiacs', who were hired at the hedge fund without specific roles.
'People would show up for work, and nobody had any idea what they were supposed to do,' Mr Rabois said. 'Peter is a people investor. His basic philosophy is that you wouldn't just sit there, you would create value.'
Despite his consistent strategy, results have been mixed. As a venture capitalist, he has realised outsize gains, but as a hedge fund manager, he has struggled to stay in the black.
His singular stake in Facebook, a US$500,000 investment, is worth roughly US$1.5 billion, based on conservative estimates. Mr Thiel, an investor in Zynga and LinkedIn, sold PayPal to eBay for US$1.5 billion in 2002.
In stark contrast, Clarium, based in San Francisco, has posted three straight years of declines. The macro fund surged in the first half of 2008 to more than US$7 billion in assets, according to several former employees who were not authorised to talk publicly. But it tumbled soon after. In late 2008, Mr Thiel bought stock futures too soon amid the panic.
'When the financial markets were collapsing, Peter thought that since all the problems were now out, the authorities would throw everything they could against it,' said Patrick Wolff, a former managing director of Clarium. 'He was right, but he made that bet at the wrong time.' By the end of 2010, the fund had about US$680 million, the bulk of it from his personal assets. Mr Thiel declined to comment on Clarium's performance.
'When you make a venture capital investment, no one values it day to day,' said Tammer Kamel, a hedge fund adviser whose clients include former Clarium investors. 'The liquid financial markets have little patience for contrarian investors.'
Philanthropic pursuits
Mr Thiel is still active at Clarium, but those close to the company say his daily involvement has diminished. He says he is logging more hours in the office, but admits to spending more time on his venture capital and philanthropic pursuits.
Today, the fund is operating under the assumption that the macro picture is in a 'holding pattern' and it is primarily executing 'short-term tactical trading', he said. It also has a sizable stake in Palantir Technologies, a data analytics start-up co-founded by Mr Thiel. Palantir recently raised US$50 million from a group of investors at a multi-billion-dollar valuation.
When asked which investor he most emulates, Mr Thiel did not name any venture capitalists or hedge fund masters, like George Soros or Stanley Druckenmiller. After some thought, he named Howard Hughes, the aviator, movie producer and business mogul, who died a recluse. 'He was very underrated,' Mr Thiel said. -- NYT
Business Times - 25 May 2011
Contrarian investor shuns hot idea
EVELYN M RUSLI finds out why Peter Thiel is not putting his bets on shares of social media darlings.
AS investors clamour for shares of social media darlings, Peter Thiel is avoiding the frenzy. 'Is Twitter worth US$7 billion?' the venture capitalist said.
'The broader question is, Is it going to help people have a much higher quality of living? And I think on that score, its benefit is a lot less.'
Mr Thiel - Facebook's first outside investor and a co-founder of PayPal - is not just knocking the competition. He has a visceral aversion to market exuberance. By the time an idea like social networking is widely accepted, Mr Thiel, 43, thinks it is passe.
'He's always starting with the premise of, What does everyone else believe that's erroneous?' said Keith Rabois, a friend of Mr Thiel's and former PayPal executive.
Mr Thiel, an entrepreneur turned investor, is more than a simple iconoclast. He is also the founder of the hedge fund Clarium Capital Management and a full-time prognosticator who says he makes 'determinant views of the future'. His macro perspective defines his investments in start-ups and securities.
He's focused on what he sees as a lack of innovation in the US. Although the past 40 years have brought advancements in computers and the Web, Mr Thiel is nostalgic for the 1960s, when people were still dreaming of putting a man on the moon. He describes the decade - and the 200 years that preceded it - as a 'golden era' for technology.
'Innovation slowed down dramatically after the 1960s,' Mr Thiel said. 'We are not focused enough on getting back to a culture of innovation - people are just trying to figure out ways to coast.' Mr Thiel is shunning the most popular Internet start-ups because they are not 'taking civilisation to the next level'. Instead, he's placing bets in health care, biotechnology and artificial intelligence companies - areas most of his peers have shied away from. His venture capital firm, Founders Fund, has made investments in Halcyon Molecular, a DNA sequencing start-up; Practice Fusion, an electronic health record system; and SpaceX, a spaceship builder.
A great bubble
According to Mr Thiel, not enough energy is spent tackling big, challenging problems, like space exploration. Instead, many people are chasing incremental progress and short-term gains.
Part of the problem, he says, is society's faith in higher education, which he has long called 'a great bubble'. Colleges and universities, Mr Thiel argues, are lulling the younger generation into a false sense of security and chaining them to hefty student loans, which pushes them into low-risk jobs.
'Universities are like the General Motors of the 1970s,' said Mr Thiel, a graduate of Stanford University and Stanford Law School. 'They're incredibly dominant, incredibly arrogant and impervious to change.' His non-profit organisation, the Thiel Foundation, is vetting candidates under the age of 20 for 20 fellowships. Each recipient will be awarded a US$100,000 grant to leave college and pursue entrepreneurial projects.
Although the initiative has caused controversy among staunch supporters of higher education, the programme has attracted 400 applicants, many from top-tier schools. Mr Thiel, who plans to announce the winners next week, says he's not advocating that everyone drops out. But he does want students to consider their options more carefully.
'I don't think there's anything controversial about an education bubble,' he said. 'Price is up by a factor of 10; quality hasn't really changed. There's something really crazy going on here.'
Consistent approach
What is intriguing about Mr Thiel is that for all his titles - and there are many, including entrepreneur, movie producer, lawyer and derivatives trader - his approach is generally consistent. According to several friends and former employees, Mr Thiel ponders major societal and economic issues and then identifies the contrarian strands. He also places a huge premium on intellectuals who think about the big picture. Mr Rabois, who worked at Clarium in 2003, recalls a wave of new employees, 'brainiacs', who were hired at the hedge fund without specific roles.
'People would show up for work, and nobody had any idea what they were supposed to do,' Mr Rabois said. 'Peter is a people investor. His basic philosophy is that you wouldn't just sit there, you would create value.'
Despite his consistent strategy, results have been mixed. As a venture capitalist, he has realised outsize gains, but as a hedge fund manager, he has struggled to stay in the black.
His singular stake in Facebook, a US$500,000 investment, is worth roughly US$1.5 billion, based on conservative estimates. Mr Thiel, an investor in Zynga and LinkedIn, sold PayPal to eBay for US$1.5 billion in 2002.
In stark contrast, Clarium, based in San Francisco, has posted three straight years of declines. The macro fund surged in the first half of 2008 to more than US$7 billion in assets, according to several former employees who were not authorised to talk publicly. But it tumbled soon after. In late 2008, Mr Thiel bought stock futures too soon amid the panic.
'When the financial markets were collapsing, Peter thought that since all the problems were now out, the authorities would throw everything they could against it,' said Patrick Wolff, a former managing director of Clarium. 'He was right, but he made that bet at the wrong time.' By the end of 2010, the fund had about US$680 million, the bulk of it from his personal assets. Mr Thiel declined to comment on Clarium's performance.
'When you make a venture capital investment, no one values it day to day,' said Tammer Kamel, a hedge fund adviser whose clients include former Clarium investors. 'The liquid financial markets have little patience for contrarian investors.'
Philanthropic pursuits
Mr Thiel is still active at Clarium, but those close to the company say his daily involvement has diminished. He says he is logging more hours in the office, but admits to spending more time on his venture capital and philanthropic pursuits.
Today, the fund is operating under the assumption that the macro picture is in a 'holding pattern' and it is primarily executing 'short-term tactical trading', he said. It also has a sizable stake in Palantir Technologies, a data analytics start-up co-founded by Mr Thiel. Palantir recently raised US$50 million from a group of investors at a multi-billion-dollar valuation.
When asked which investor he most emulates, Mr Thiel did not name any venture capitalists or hedge fund masters, like George Soros or Stanley Druckenmiller. After some thought, he named Howard Hughes, the aviator, movie producer and business mogul, who died a recluse. 'He was very underrated,' Mr Thiel said. -- NYT
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