Why Is a Savvy Investor Like Peter Thiel Investing Millions in Ron Paul’s Doomed Presidential Campaign?

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Feb. 20 2012 4:41 PM

Ron Paul’s Billionaire

Peter Thiel made a fortune investing in the right ventures at the right time. So why is he investing millions in a doomed presidential campaign?

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Peter Thiel has invested heavily in Ron Paul's presidential campaign

Chip Somodevilla/Getty Images

The previous 24 hours had been rough on the political tycoons. Foster Friess, the cowboy-hat wearing backer of Rick Santorum, appeared on MSNBC twice: once to joke about women preventing pregnancy by putting Bayer aspirin “between their knees,” once to apologize. Sheldon Adelson, whose previous $10 million investment in Newt Gingrich hadn’t netted much, spun the media ‘round again by promising $10 million more. Frank VanderSloot, a national finance co-chair of Mitt Romney’s campaign, was filleted by a Salon report on his Bond villain-esque habit of hushing up critics with lawsuits.

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

This news cycle was sputtering out when Peter Thiel, the billionaire founder of PayPal, the $2.6 million-angel for a Ron Paul Super PAC, arrived at the Grand Hyatt in Washington, D.C. His audience: hundreds of young libertarians, most of them dressed as if they expected to be ambushed by job interviewers, overcrowding every inch of hotel carpet. They were trapped in America’s least libertarian city for the third annual Students for Liberty conference. Thiel was the first-night keynoter, assigned the heavy task of pulling college kids away from the hotel bars.

This proves to be easy. Thiel, athletic and intense, moves quickly through the crowd, rarely recognized. He’s guided by Alexander McCobin, the president of Students for Liberty, dressed in a three-piece suit, grinning and small-talking as he walks. McCobin had co-founded the group in 2007, when he was one of the dozens of Koch Summer Fellows (yes, that Koch) who live, intern, and network in D.C. [Disclosure time: He interned at Reason when I worked there.] Tonight, he’ll give Thiel an alumnus of the year award, even though Thiel had graduated from Stanford Law School 20 years ago. By the time SFL was producing alumni, Thiel was on the board of Facebook and extraordinarily wealthy.

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“We take a broad-based view of what ‘alumnus’ means,” says McCobin.

A better description might be “role model.” Thiel is what the hard-working objectivist wants to be when he grows up. When he’s introduced at last, and the students hear how much Thiel made from the PayPal sale—“$1.5 billion”—they ooooh with respect. Thiel, as he wrote in 2009, is  “committed to the faith of my teenage years,” and now he’s rich. That’s heady stuff for a teenager to hear.

It’s what makes Thiel’s support so important to Paul. The Endorse Liberty PAC, the one that Thiel supports, is as idiosyncratic as everything else in the Paul sphere. While Adelson and company have plowed their cash into TV ads, Endorse Liberty has focused on long YouTube documentaries about Paul—the latest runs more than 13 minutes—that explain his entire philosophy. In Nevada this month, when I asked Paul about his support from Thiel, he says he’d never actually met the guy. For someone he had never met, Thiel is incredibly generous. In January, the billionaire forked over $1.7 million to Paul’s PAC; this was on top of $900,000 he gave a month earlier. All of this is oddly believable. Thiel doesn’t even say that he’s trying to elect Ron Paul.

“The campaign really is for 2016,” says Thiel, chatting for a little while before his speech. “I think we’re just trying to build a libertarian base for the next cycle.”

Thiel sits through a short program. His name is mispronounced as THEEL—it’s  supposed to sound like the color, teal—but he doesn’t react, and he takes his podium, a standing ovation before he even speaks.

“It’s an unusually libertarian movement,” he says. “For the first time in perhaps 80 years, we have a chance to move the country in a more libertarian direction, with a less intrusive government, in both social and economic areas. … It’s an interesting counterpoint to debate in the 1930s, which the libertarian side, the laissez-fair side, lost very badly, about what caused the Depression. Somehow the New Deal won, and it keep building on its victories.”

Thiel talks for 20 minutes, without notes. Unlike the other candidates’ “sugar daddies,” he likes to write at length about what he thinks. He repeats some of the concepts from a four-month-old essay he gave National Review. “Clean technology has been an increasingly toxic term in Silicon Valley,” he says, “for companies that don't work.”

Lots of politicians will say that about “clean technology.” Thiel goes much further. Bad stimulus investments have only been the latest of several bubbles, all phony, all distractions from a slowdown in innovation. “The only way we have progress in the advanced countries is through technological innovation,” he says. “If you want to contrast computers with biotech, well, take a video game—take Farmville, for a random example—and let’s say you say, well, we have to make this game subject to FDA scrutiny. We have to determine whether they are safe and effective. Does it do anything bad to your brain? Does it actually improve your brain function? We have to do a 10-year study, with a control group, and if you change one line of code you have to start all over again. I would submit if you apply the standards you have in biotech to video games, you would not have a video game industry.” The government is wrecking the future and putting off the apocalypse with phony bubbles. “The current bubble,” he says, “is probably big enough to get Barack Obama re-elected.”

It’s a downer of a speech, but when it’s over, students sprint to a microphone to lob questions. Thiel takes them while holding an arm over his face to block out the blinding stage lights. A bunch of the questions are about the possibility of starting competing currencies. Thiel likes one of the concepts he hears—an alternative, gold-backed money produced by a company like Google.

“If you really wanted to create an alternate currency, it would have to be gold-based,” he says. “There are enough people who already believe in gold that you could probably get it to the tipping point. Starting completely from scratch is a lot harder to do. I have a lot more thoughts, but I’d say—you probably want to go with gold.

Woo-hoo!

Another student wants Thiel to answer for something. When he created PayPal, one of the goals was to take financial transactions out of the government’s greedy paws. What happened to that?

“What I think is true of the way we negotiate with terrorists is also true of the way companies negotiate with governments,” says Thiel.

WOO!

“Yeah: You never compromise, except in every specific instance. So, when you look at PayPal or Amazon, or Vis, or all these people, the question you have is: Were they doing this because it was a deeply felt ideological thing, that they had to do this? Or was it because the government had its screws on them? There’s sort of this liberal/libertarian argument: Companies are bad, and not to be trusted. I tend to think we need to put it against the background of insane regulation.” How insane? “The average American commits three felonies a day.”

Some Ron Paul supporters talk about the election as a choice: salvation or doom. Paul wins, and we survive. Paul loses, and Chinese Communists sell us off for parts. Thiel, who is ostensibly doing more than anyone else to help Paul win, is already looking past the election. It is teaching moment, maybe, that can convince more people to drop out and innovate. He is serious about that. If you want to drop out of college to innovate, he has a scholarship for you. If you want to try to fix the current American system, well, best of luck.

“I’m sort of skeptical of how much voting actually works in the first place,” says Thiel. “I used to think that it was really important to directly change the political system, to convince people of things. I still think it’s intellectually very important. Occasionally, you get some converts that way. But it’s really an inefficient way of doing things. One of the things I like about technology is that when technology’s un-regulated you can change the world without getting approval from other people. At its best, it’s not subject to democratic control, and not subject to the majority, which I think is often hostile to change.”

Thiel has invested in a presidential campaign; he’s also invested in a plan to build floating sovereign island nations. This is a donor who likes to plan for the future.