At the beginning of his keynote address at Thursday night's Vator Splash, Peter Thiel held up a $100 bill and mentioned that holding up a $100 bill in a room was the quickest and easiest way to get everyone's attention. It got mine (as I realized I had no cash for the parking garage).
But Thiel went on to ask, "What does $100 actually mean?"
In short, it means different things to different people. He went on to flesh out this concept, and at a certain point in his address, he casually mentioned that before PayPal got serious about its security measures, it lost some $46 million to fraud. I actually felt myself gag a little bit when I heard that. $46 million! And that wasn't money that was just lost in the natural life cycle of a company. That was money that just slipped through the cracks. Vanished. And here I am, wallowing in tens of thousands of dollars of student debt because I made the not-so-smart decision to go to a private undergrad institution AND a private grad school. And then I had an epiphany: I realized that this is exactly what Thiel's "20 Under 20" program is all about. Eureka.
I need to backtrack a little bit. Ever since Thiel announced the "20 Under 20" program earlier this week, I've been debating with myself over its merits and whether the program should be denounced as an outrageous plot to steer teens away from college, or if it is actually a brilliant and remarkably pivotal new way to train young entrepreneurs.
The last time I discussed the program, I fundamentally disagreed with it on several levels. Firstly, I didn't agree with the fact that it pits entrepreneurship against college in a binary opposition (it's a two-year program for under-20s, so applicants essentially have to choose between college and the program).
Secondly, I didn't think that Thiel was truly appreciating the value of a college education--my reasoning being that students gain much more from college than a marketable skill-set; they learn major life lessons, civic responsibility, cultural awareness, an understanding of social and environmental issues and their contexts, etc. etc.
I've been grappling with this a lot, weighing the different arguments for and against. I've thought about it in the car, in the shower, standing in line at the grocery store (I don't have a lot going on right now). And then on Thursday morning, I thought about my own student debt and had to admit that no one pays $40,000 a year for a life experience. People pay $40,000 a year for a marketable skill-set and a degree that will act as a coupon for big bucks further down the road. The unparalleled life lessons one receives in college are invaluable, but they're corollary. The degree is the main point; the life lessons happen along the way.
Big ideas require big investments
And then on Thursday night, Thiel was speaking about what makes an idea truly transformative. It has to be fundamentally big, and it has to be an idea that no one else has had. But more importantly, a truly meaningful, world-changing idea takes money -- lots of it -- lots of money that may be lost in the process. Like any project that takes time and money (I keep thinking about the metaphor of baking a pie or studying for an exam, both of which take time, but neither requires that much money...), the best results come from a complete commitment of oneself to the process.
Thiel mentioned that when someone pitches an idea to him and says that the business will be profitable within six months, a red flag goes up for him. If it's going to be profitable in six months, then what real value is it going to bring to the world? If it's that easy, then everyone will be doing it. A really good idea takes time--five to seven years, according to Thiel. It's a commitment.
And then came the part about the vanished $46 million, and that was where I choked. Thiel mentioned that early on in PayPal's development, banks were hesitant to get on board because of the potential for fraud. According to Thiel, "we just kind of ignored it." And then someone asked about PayPal's security measures and how they would protect against fraud, and Thiel remarked: "we decided that clearly he was just being a pessimist."
And then what happened? Rampant fraud on PayPal -- that's what happened. Thiel very nonchalantly remarked that by the year 2000, the company lost $46 million to fraud, and while I was having a violent physiological response to the number, Thiel moved on to discuss how the company made and burned through money rapidly.
But I was thinking about all of my student debt, and how at this point I don't even know how much money I owe because every time I start to calculate it all up, I get halfway through and then start crying before I can finish. Occasionally, I wake up in a cold sweat in the middle of the night when I realize how much debt I've accrued. Like sleep apnea, my debt is slowly crushing my windpipe and periodically reminding me that just when I think it's safe to go back to sleep, it's going to jolt me awake.
And then the little proverbial light-bulb over my head clicked on.
I realized that this is the whole point of Thiel's "20 under 20" program. The reason it has to be pitted against a traditional college is because by the time a student graduates, he or she has already spent four years being conditioned to have a fundamentally conservative attitude towards money. You take out as little as humanly possible in loans, you work nights, you frequently have to choose between dinner and shampoo, and if you run out of cash, your last remaining option is amateur night at Showgirls.
If Thiel set up the grants to be distributed after a student graduates from college, no student would actually take risks with that money or try something new because they've spent too long without money. It's like growing up in a famine--when you you've spent so many years going hungry, you develop a freakish hording complex and next thing you know, you have a garage that's stocked like a bomb shelter with canned beans and ketchup.
The same holds true with attitudes towards money, and the objective of Thiel's program is to change the way young entrepreneurs approach money. They need to learn how to take risks and be able to lose $46 million due to a totally preventable lack of oversight, and they need to learn how to adapt, because if they spend all their time trying not to lose money, they're never going to have the confidence to develop a truly groundbreaking idea.
So... I have had a change of heart regarding Thiel's program. It's not exactly a 180--maybe more like a 160, as I still think that college is vitally important, and students shouldn't have to choose between entrepreneurship and a college education (rather than avoid the system, we should be thinking of ways to change it), but I think that at this point, the fault lies with higher education and how the tuition system operates. Thiel can't change that, and no amount of free money is going to change a hard-wired system--you're still just feeding it.
If Thiel made his grants available only to students to pay off their tuition, the system still remains what it is and no entrepreneurial lessons have been learned. In true entrepreneurial fashion, Thiel's "20 Under 20" program approaches the problem from a different angle and offers an innovative and never-before-attempted solution.