No it's not. The article seems to imply that if you pick a very select group of people, and give them money and access to a network of very wealthy people that it's surprising that they will be able get those people to invest in their ventures.
The article is also comparing this very small group with university student _on average_. If we look at university performance at the margin, we would really be expecting some of these people to have won a Fields Medal or a Nobel Prize-winning discovery.
The article calls out the same thing is happening in colleges - Rhodes scholarships, incubators, scholarships galore - and does not match the success of Thiel’s programs for generating successful startups (11/900 is a pretty amazing success rate).
No look, the point is that people widely lampooned Peter Thiel for encouraging smart and ambitious students to drop out. So many people predicted this was guaranteed to fail. And the Thiel Fellowships have been a resounding success. I was one of those people who didn't think Thiel Fellows would accomplish much and I was wrong.
Has it actually accomplished much for the fellows? A few posts up /u/prepend wrote this:
> and does not match the success of Thiel’s programs for generating successful startups (11/900 is a pretty amazing success rate)
That may be an amazing success rate for generating startups, but it would also mean that 98.8% of the startups weren't successful. Was dropping out actually good for the fellows aside from a few? Couldn't many argue that for most of these "smart and ambitious" students it really did fail?
I'm not really taking a position here because I don't think failure alone means something wasn't worth it. Also I haven't followed Thiel's program that much so can't speak to the specifics. But given the numbers in this thread, I certainly wouldn't recommend students drop out.
That’s 11 multibillion startups. Not that everyone else was a failure.
Although even it meant 11 unicorns out of 900 and the rest were zero, those are amazing odds that many would gamble 1-2 years of their life on. Especially at 20.
But the article talks about how the others were also successful, just not multi-billion dollar company successful.
I’d be curious of the median (as well as other quantiles) earnings (less university costs) say over 10 years for the individuals involved compared to peers that didn’t drop out. Obviously this isn’t the sort of information that’s easy to obtain. But without it I don’t share your rosy outlook on the program. It seems to me like this easily could be a net negative for most of the students engaging in it.
You would be right if the choice set was drop out and never come back but have a 2% chance of becoming very wealthy or stay in school and have a higher chance of being middle class but much lower chance of becoming very wealthy.
The actual choice set is drop out and spend several years trying to become very wealthy and then go back to school and be delayed by those several years on the path well traveled, or just take the path well traveled right away.
It seems extremely unlikely to me that it would be possible for this to be a net negative on average at any point in time past the first few years. average[0.02(mega wealthy)+ N(success but not mega wealthy) + (1-N-0.02(regular path delayed 5 years)] should always be larger than average(regular path) and it should get more pronounced over time and the spread between regular path and regular path delayed 5 years will likely diminish over time.
On the society level, unless you are so cynical that you think all the benefit that causes the value of those companies to be in the billions is coming from some sort of market power abuse and none of it is coming from creating something that is so much better than what was there before that people are buying it in a big way, it would be a massive benefit as well because you just increased the conversion rate of ideas into product that benefits society by a massive multiple.
What's wrong with considering whether those who argued against something in the past may have been wrong? Unless, of course, you were one of those who turned out to be wrong.
If there are people who could be adding a billion dollars in value to their society and choose not to... that would be worth reforming a lot of things to improve on.
At the end of the day there is a lot of meat behind a real unicorn company. It is possible to do more for humanity than a billion dollar company - names like Gauss and Euler sprint to mind - but such names are rare.
First, I don't think that society is best when optimizing for adding as many dollars of value to society as possible. This is easy to measure, but there are a great many other incredibly valuable things that don't involve large visible changes in the economy.
Second, I don't think that unicorn startups are necessarily providing economic value to society. A company can become worth an absolute mountain of money while making society materially worse.
> This is easy to measure, but there are a great many other incredibly valuable things that don't involve large visible changes in the economy.
Technically there is still an implicit money transfer in those cases, it's just the debt is settled immediately. Remember, money is an IOU – used when you promise to give something that you cannot deliver on right now.
Business seeks to deliver value at a scale that would make it impractical for all the debts to be settled in the moment, thus money (promises owed to the business) does become a reasonable measure of how well it is scaling. Things that are incredibly valuable to society do benefit from being scaled up to provide that benefit to more and more people.
> A company can become worth an absolute mountain of money while making society materially worse.
No company becomes worth mountains of money without making society better in some way. Every act comes with negative externalities, of course.
> No company becomes worth mountains of money without making society better in some way.
A pharmaceutical company that concludes that they can increase the price of their drug by 10x and only lose 3/4 of the sales is going to be a more valuable company. It will have increased revenue and profit and that will be reflected in its stock price.
This decision makes the world materially worse. It only looks like an improvement when we measure based on revenue and profit rather than the amount of health improvement that the business provides to the world.
A pharmaceutical company raising their prices 10x indicates that there is some kind of scarcity. That may be scarcity of a natural resource that cannot be overcome, but in this case I expect the scarcity is in not having other people providing the same drug. So, we're back to someone withholding value that they could be providing to society.
What I expect you are really trying to get at is that society has created rules that prevents others from providing that value, thus creating artificial scarcity. That is definitely true, but that's on society who created those rules and not truly related to the discussion taking place.
> So, we're back to someone withholding value that they could be providing to society.
The point OP is making is that value to society and money are only loosely correlated. Sometimes it correlates well but often not so well. That’s because there’s externalities in any marketplace that aren’t captured by the marketplace itself.
So in the presented hypothetical case, the externality of “provide life saving treatment” is not captured in the costs side of the drug company’s balance sheet, so treating 75% fewer people for 10x more per unit cost makes the company look even more financially positive even though the change is a societal negative. And this externality shift in the balance sheet need not be a conscious “evil” decision. It could simply be market dynamics and competition playing out with the players not even realizing that they’re just making money from an externality and not providing any benefit.
Your argument that it’s the legal system is flawed on several counts:
1. The US (and many places) have regulatory capture so the legislation preventing future competitors is written by today’s competitors. So while it’s the law on one hand, it’s the current set of players that’s the real problem.
2. There’s no collective buying power in places where this is a problem (eg you don’t see the cost of penicillin being an issue in countries where single payer healthcare is a thing). We’re starting to see this with insulin where non profits and California are getting into the game, but it takes a while to ramp up production so even if the price does come back down, the companies involved have managed to make a lot of money in the short term at the cost of lives and financial health of many households.
Yes, that's right. Because others who could be playing cannot, in this case because society has decided they don't want more players, for whatever reason.
However, the original premise still holds true given the constraints the actors are operating in. The 10x represents the additional value offered to society to operate within those rules created by society.
So while, again, all acts have negative externalities, we cannot deny that society sees great value in having a limited set of players. In fact, society sees so much value that, in this example, it is willing to pay 10x more and accept that some people will not have access to drugs in order to maintain the benefits.
The discussion is about how the world is. Our feelings about the merits or failings of that world have no place in the discussion, and even if we were to share them what purpose would they serve? That is where you would find us going off the rails.
Sure, we could improve society by changing how intellectual property laws work and being far more aggressive about anticompetitive behavior. I'd like that. In the limit, this would mean perfectly correlating monetary value with human value and then we'd live in a world where it really was the case that every unicorn company was providing significant value to society.
But I don't think the presence of these broken systems means that we can conclude that every company that is worth billions is necessarily making the world a better place today. It is evidence in the other direction! Our society does not perfectly align wealth creation with providing value to society.
There would be no reason to make promises to these companies if they do make the world a better place in some way. A company worth billions cannot possibly get there without making society better.
But there are always tradeoffs. Something that makes society great in some way is also likely to make society not great in some other way. As before, every act comes with negative externalities.
See I just don't agree with this at all. We've clearly seen an example where a company can grow its net worth while making the world worse. It requires our current system of laws - but that's the world that we live in. This isn't a property of negative externalities. This is a property of social value being entirely disconnected from cash.
Saving a rich person's life and a poor person's life has the same value to society. But a rich person can pay far more money to have their life saved than a poor person can.
Said laws are created by society to benefit society. A pharmaceutical company is able to create an apparent 10x more value under such laws because they are delivering on the value of that regulated market along with the value of their product.
Of course, as before, no benefit is consequence free. We see in the example that said benefit means that some people may not have access to drugs, which negatively affects society in other ways. That doesn't mean society sees no benefit. There are always tradeoffs. Something can be a benefit and detriment at the same time.
Perhaps what you are trying to say is that you think that society should see better access to drugs as being a higher priority than the benefits it expects from the regulated market? But clearly society, which is free to repeal or change said laws as it sees fit, disagrees. Society will certainly never please all individuals. That's a tradeoff of having a society.
Society is better for seeing the pharmaceutical market regulations it desires carried out. Yes, that does mean individuals who cannot access/afford drugs will be worse off, but thems the breaks of living in a society. Society can never cater to everyone. Someone will always be harmed by society.
After all, society can repeal the regulation if it wanted to – it created the regulations! But clearly it doesn't want to, because society recognizes it as a benefit and is willing to pay, perhaps as much as 10x more according to previous comments, to see that value delivered. That may not suit your or my fancy, but, again, society cannot cater to everyone.
Naturally, even society itself is both beneficial and detrimental, just like everything else. Tradeoffs, as always.
That’s just a “we’re in the best of all possible worlds” argument. The market should be shaped by people towards human aims. That means it’s useful to compare and contrast different regulatory captures and advocate for change. You’re basically saying there shouldn’t be discourse.
The market is shaped by human aims. The laws we speak of were not handed down by aliens. They were specifically created by society for the benefit of society.
There is no such thing as a best possible world. Not two people would ever be able to agree what that even is. Every benefit comes with a detriment. It's just a matter of what tradeoffs do you want to accept. Society has made its choice, seeing a regulated market as being more important than access to drugs for all (for now; that choice is fluid and able to change in the future should society change its views, but trying to predict the future is well beyond this discussion).
>At the end of the day there is a lot of meat behind a real unicorn company. It is possible to do more for humanity than a billion dollar company - names like Gauss and Euler sprint to mind - but such names are rare.
Are they? I notice you only picked mathematicians. What's the value to society of a Mozart, a Picasso, a Dostoevsky, a Michelangelo ... ?
Massive value. But I think those are also arguments against college as it’s not like the goal of college is to produce those.
And of course it’s very difficult to evaluate the impact along these types of values. Saying college is good because Mozart is valuable and not STEM seems like a reach.
This assumes that the more money a company makes, the more beneficial it is to society. Seems dubious to me. For example, there's a case to be made that the large social media companies are doing irreparable harm to our societies. In which case, even the most unproductive citizen does way more for humanity than those "unicorns" do.
As a guy whose startup is listed on NASDAQ I’m not sure I agree. Is cool that there’s a sustainable team dedicated to keeping my dream alive, and when things go well (eg airlines and supply chain running smoothly) it’s nice to take some credit. But in tens of impact it’s the open source users etc that I think of first, they aren’t really correlated to the billion dollars part.
There was a time where FTX, Theranos, and WeWork were all unicorns and none of them had real “meat.”
Uber is/was a unicorn and the gig economy has proven awful for society. (Underpay what amount to employees while giving them no benefits or recourse and at the same time destroying taxi companies that did)
Facebook was also a unicorn…
I think billion dollar companies that “do more” (eg. be a net good) for humanity are as rare as individuals who do, especially if they are profit driven.
Even more interesting to think about: if so, then do governments like Germany, which have severely restricted Uber, bear any responsibility for the lives not saved from alcohol-related traffic fatalities?
>could be adding a billion dollars in value to their society
Lets be real, I'm sure many of people here have jobs where they have to insist this is true, but that billion number is inflated nonsense. Most startups are not adding that much value to society. Maybe finding a way to middle-man extract that from society, yeah, but not adding it.
We talk about Peter Thiel here. He is in a different league, money and network wise, than your average scholarship or university incubator when it comes to start-ups.
Yeah, most aspiring entrepreneurs don’t want to pause for graduate study at Oxford.
It’s like saying Y Combinator has failed to produce a single National Book Award nominee, or judging Juilliard by how many future dentists studied there.
Look, turn the question around: how many of Thiel's "graduates" turned out to be university chancellors, notable academics or leaders in government or civil society?
> Than Rhodes scholars? Than Stanford’s incubator? Than the MIT media lab?
Yes. You're essentially talking about academic organizations there, with diffuse industry involvement. That's a world away from direct access to a tech billionaire's network.
They're also not that much bigger - Rhodes is perhaps 2x larger when you restrict it to the anglosphere. And it naturally doesn't include the investment money you're basically certain to also get from Thiel alongside the $100k award.
Thiel's program is designed to generate startups. It should not be surprising that it generates more startups than other programs designed to reward endeavors other than generating startups.
It really does seem that plain of a truth to me, too. What % of Rhodes scholars enter with dreams of founding a “unicorn”? Probably a negligible fraction of that same % of Thiel fellows, which I’d imagine is ~100%. That the non-Thiel group then goes own to found a negligible fraction of those companies isn’t awkward for colleges; it’s a reflection of the different values held by members of our society.
Meanwhile, whose interests are served by future unicorn founders being plucked away from the liberal arts, or from the connections and experiences they would’ve had in college with people very unlike Peter Thiel?
Yeah. Another obvious point of comparison would be Ycombinator (or more specifically early Ycombinator when it took fewer startups with traction and more recent grads the YC partners really liked even if their ideas weren't fully formed)
In comparison to that, Thiel's success rate looks a bit more ordinary.
Rhodes scholarships etc on the other hand are a fair bit more successful at generating academics and researchers and mid level managers from backgrounds that don't usually become mid level managers, because that's what they're for
> pick a very select group of people, and give them money and access to a network of very wealthy people
> 11/900 is a pretty amazing success rate
But completely unscalable. It seems perfectly reasonable to think you can take a select group of people give them resources that allow them to succeed (at a certain level) better than people who went to college. You could probably get similar results by just giving a select group of people a million dollars to start with.
Or am I misunderstanding something about the situation.
11 billion+ startups in 10 years out of a thousand has already demonstrated scale.
There are tons of people giving $1M to groups of people who don’t have these returns.
Also, this is a comparison of working vs college. So it’s an opportunity cost experiment. Giving $1M to skilled management teams is completely different.
You could probably get similar results by doing nothing.
College, for all its trumpeting about better outcomes, has shown no actual change in the financial success of the population. Incomes have held stagnant the entire time.
Thiel's experiment really just goes to reiterate what we already knew: That successful people are born that way.
To it into perspective, his native country—Germany—only produced about double that number of unicorns over the same time frame, and he invested in many of those as well.
The Ivy League has produced most of the supreme court, most presidents, most senators. Very few of them ever led startups or became billionaires, but that is far from the only measure of success.
That is aside from the fact that I don't see any way, fundamentally, to become something like a scientist or a physician outside of the university system. You can't run controlled experiments, especially if they require any kind of specialized lab equipment or human subjects, without fairly strict oversight, and you certainly can't go into a hospital and put yourself into rotation getting clinical experience with patients outside of being supervised by a teaching physician.
There are other ways to meet these sort of dynamics outside of universities in principle. Guilds serve this purpose in some professions. But for many modern professions, the university system is the guild. It's where scientists train other scientists. It's how you get an apprenticeship.
Nonetheless, not every profession is like running a business, where anyone with money is at least allowed to try.
You can do science outside the system. That is easy. Go track something. If you can reproduce your own results, it will be interesting enough for others to join in. I've done this, I have a few hundred thousand followers that might lean tech/engineering.
Getting accredited to be a Physician in the US is a political thing controlled by the Physician Cartel(AMA and ACGME).
That line about Ivys and Presidents just seem to line up more with the political situation of Physicians. Heck, residencies and med school are all tied up in special points.
> The article seems to imply that if you pick a very select group of people, and give them money and access to a network of very wealthy people that it's surprising that they will be able get those people to invest in their ventures.
Don't elite colleges do the same? Select a small slice of society and give them opportunities beyond what society at large has?
The difference between what Thiel is doing and what colleges are doing seems to be a difference in degree and not in kind. That difference in degree is exchanging a larger reward for a smaller pool of candidates.
The same criticism of the Thiel Fellows could be leveled at college, from the perspective of someone who didn't attend college.
> If we look at university performance at the margin, we would really be expecting some of these people to have won a Fields Medal or a Nobel Prize-winning discovery.
At the highest-level universities, nearly every applicant is already exceptional before they're even accepted, and yet:
Even if you carefully selected 100 or so people out of nearly any university, it's statistically unlikely that a Fields medal winner, Nobel prize laureate, or unicorn founder would come to fruition out of any of them, even if we allow more than a decade.
The article is also comparing this very small group with university student _on average_. If we look at university performance at the margin, we would really be expecting some of these people to have won a Fields Medal or a Nobel Prize-winning discovery.