Life After Facebook

Obviously, Thiel loves matching wits with friends and enemies, and is fanatical about winning. He is just as obsessive about playing by the rules--his rules. He sometimes raced in his 1978 VW Rabbit ("my Jimmy Carter car") to chess matches, where he would show up five minutes before having to forfeit the game just to psych out his opponents, recalls high school friend Norman Book, now an executive VP at the conservative website WorldNetDaily. Later on Thiel would write his own playbook when it came to investing--or hiring people. After deciding to bring on Keith Rabois (a law firm chum) to handle lobbying and dealmaking for PayPal, Thiel gave him an ultimatum. "You've got to be in my office on Monday. If you can't start Monday, forget it." Rabois had to sell his house and move from Washington, D.C. to San Francisco in four days. "That's classic Peter: If it can't happen now, it doesn't count," says Rabois, now chief operating officer at mobile payments startup Square.

But Thiel bristles under other people's rules. His buddy Book points to Monopoly games in high school. Thiel, as usual, was winning. "So, I sold all my properties to my brother for a dollar," Book recalls. "Peter didn't like that, but he couldn't find anything in the rules" prohibiting the move. Nor did Thiel like the way Valleywag, an arm of the media and gossip site Gawker.com, played when it wrote the post "Peter Thiel is totally gay, people." Thiel later called Valleywag the "Silicon Valley equivalent of al Qaeda."

Some of Thiel's contentious thinking was forged at Stanford University, where he majored in philosophy and minored in political incorrectness. In 1987 he and Book, disgusted at what they called Stanford's "culturally liberal ethos," launched the Stanford Review, a libertarian paper that was, mildly put, unpopular. One student told Thiel he loved the Review--for wiping his butt.

After getting his law degree from Stanford in 1992, Thiel took a job with the white-shoe firm Sullivan & Cromwell. He quit after seven months, six days. He lasted slightly longer as a derivatives trader at Credit Suisse First Boston. Thiel came home in 1996. "I think California was and remains a much better place to do something entrepreneurial than New York," he says.

He moved to Menlo Park, started Thiel Capital with $1 million from family and friends, and hired fellow Stanford alum Ken Howery. They took the cheapest space they could find in Silicon Valley's financial epicenter, Sand Hill Road: a windowless storage closet. "The developer hung a picture of an outdoor scene for us," Thiel deadpans--an affect that comes naturally to him.

Thiel reconnected with his political and academic roots, in particular the intellectual circle around Stanford professor René Girard. His chief explanation of human motivation centered on a literary theory that all desire is "mimetic," or imitative, sparked by the desires of other people. Conflict arises not when individuals are different but when they're similar, when they want the same thing. The theory particularly resonated with the brushfire creation of startups in the dot-com boom, "the bubble that was going on a few blocks outside of campus," Thiel recalls.

He wanted to ignite his own fire and didn't have long to wait. After a talk on political freedom and economic globalization he gave at Stanford in the fall 1998, Thiel was approached by Max Levchin, a young Ukrainian émigré and computer scientist who'd sold his company, NetMeridien Software, which developed marketing tools.

They started Confinity, an e-payments company with Thiel as CEO, in December 1998. Its first application was called PayPal, which let PalmPilot users beam money to one another; that service broadened out, eventually allowing you to send money to anyone with an e-mail address. After eBay users embraced the service, customers piled in. But for Thiel, PayPal was a libertarian's dream: It had the potential to become an independent monetary system that could weaken government control over economies and exchange rates. Like everything else he has created or backed, it was a service with a cause.

But lesser struggles trumped higher aspirations. By early March 2000 the PayPal service had 150,000-plus users but was burning through cash because it offered a $10 bounty to any customer who signed up a new customer. Thiel merged it with X.com--a competitor to PayPal that similarly targeted online auctions but also wanted to branch out into other financial services--and demoted himself to executive VP of finance. Just before the dot-com bubble popped, Thiel hustled to close $100 million in private offerings from venture capitalists and investment bankers. There was tension inside: Thiel clashed with X.com's CEO, Bill Harris, the former chief of Intuit, according to The PayPal Wars, by Eric Jackson, an ex-employee. While customers complained about PayPal (funky log-ons, trouble accessing accounts and so on), Harris focused on business deals. Thiel quit in May. The board ousted Harris days later, replacing him with X.com's founder, Elon Musk. Thiel became chairman.