By Robert Wenzel
It has often been hinted that Thiel is a libertarian. This book raises serious questions about that notion. If Thiel does consider himself a libertarian, the book reveals he is not a very well read libertarian, especially in the area of economics. The book reveals that he has no understanding of libertarian favored Austrian School economics. When it comes to Austrian theory, he is stuck as zero.
In the book,Thiel discuses booms and busts that have occurred in Silicon Valley, but not once does he link the booms and busts to Federal Reserve money printing activities. It seems almost as though in Thiel's view that the booms and busts are simply deus ex machina events without connection to economic cause and effect.
In a chapter titled, All Happy Companies Are Different, he argues from the neoclassical framework of pure competition and monopoly. A framework that was soundly critiqued by the Austrian school economists Ludwig von Mises, Friedrich Hayek and Murray Rothbard.
In the chapter, Thiel doesn't appear to be completely satisfied with the neoclassical perspective on monopoly, but he gives no indication that he is aware of the criticisms made by Mises, Hayek and Rothbard.
When he discusses entrepreneurship, he links entrepreneurship in Schumpeterian fashion solely with technology advances (Schumpeter's "creative destruction"). He seems to have no awareness of the critique of this approach by Austrian school economists such as Murray Rothbard who wrote:
Under the stimulus of the late Professor Schumpeter, it has been thought that the essence of entrepreneurship is innovation the disturbance of peaceful, unchanging business routine by bold innovators who institute new methods and develop new products. There is, of course, no denying the importance of the discovery and institution of more productive methods of obtaining a product or of the development of valuable new
products. Analytically, however, there is danger of overrating the importance of this process. For innovation is only one of the activities performed by the entrepreneur. As we have seen above, most entrepreneurs are not innovators, but are in the process of investing capital within a large framework of available technological opportunities. Supply of product is limited by supply of capital goods rather than by available technological know-how.
Entrepreneurial activities are derived from the presence ofThiel hails the advances of Silicon Valley, but fails to notice the enormous restrictions placed by government on money raising efforts that provide an enormous edge to the big dollar funders in the valley, who can hire the lawyers to get around the restrictions.
uncertainty. The entrepreneur is an adjuster of the discrepancies
of the market toward greater satisfaction of the desires of the
Aside from the failure of economic understanding, Thiel also makes observations throughout the book that run counter to reality. Indeed, he starts the book out by making the absurd statement that "Every moment in business happens only once." By this he means that top entrepreneurs never copy the sectors started by others. He writes:
The next Larry Page or Segey Brin won't make a search engine. And the next Mark Zuckerberg won't create a social network.But this is flat out wrong, There were plenty of search engines before Page and Brin entered the field. And there were plenty of email services before Page and Brin entered that sector. There certainly were plenty of pizza shops before Domino's Pizza entered the pizza sector. And Burger King wasn't stopped because McDonald's was in the fast food hamburger sector first.
It is absurd to advise that once someone is operating in a sector there is no opportunity for development in that sector.
Thiel does make a few important observations in the book. He correctly attacks the notion that success for a startup must come by disrupting a current business and he has a solid chapter on the importance of sales and marketing. But, overall, on a scale of zero to one, I give the book a zero, which is exactly where my view of his libertarian credentials are, after reading his book. He may have some libertarian leanings in some areas, but there is no indication of those leanings in this book and the economic discussions in the book indicate no understanding of the Austrian school of economics, which is linked closely with libertarianism.
Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics