The Unwinding: An Inner History of the New America (33 page)

Clarium Capital was doing every bit as well. Thiel’s was a global macro fund—it depended
on analysis of world markets and government actions at the highest level. In 2003,
its first full year, with $250 million under management, it returned 65 percent on
investments. Thiel’s strategy was to take the big-picture view of long-term trends
and place bets that went against conventional wisdom: long on Japanese government
bonds when others were selling; long on energy, because he was convinced that peak
oil was real and global supplies were running out; long on U.S. treasuries, because
he foresaw an anemic economy following the Bush recession of 2001. Year by year, Clarium
enjoyed meteoric growth, topping out around seven billion dollars by the summer of
2008, a seven-hundred-fold increase in six years. The financial press began to talk
about Thiel as an investing genius of a contrarian. To him, that only meant he thought
for himself. Most people outsourced their thinking and deferred to the majority, the
herd. There weren’t enough Robinson Crusoes in the world.

Clarium moved to the fourth floor of a brick-and-glass building at the edge of Presidio
Park, with splendid views of the Golden Gate Bridge and the Pacific. From his corner
office Thiel could see Alcatraz and the Marin hills. The building was on the grounds
of the San Francisco headquarters of Lucasfilm, the first floor decorated with statuary,
from Thiel’s favorite movie, of Darth Vader and Yoda. Clarium’s sitting area was divided
by bookcases of dark hardwood containing leatherbound editions of Madame de Sévigné,
Dickens, Darwin, and George Eliot, along with books on structured finance and quantitative
research. At the center stood a table with a chessboard that awaited players.

There was a hundred-dollar penalty for arriving late at the weekly 10:30 a.m. trading
meeting. One Tuesday morning the subject was Japan. Eleven men in blue, white, or
striped shirts without ties sat around a long conference table. Thiel presided from
the end.

“The secret of Japan is that nothing ever happens,” he said. “If I were Japanese I’d
be fed up with years of stagnation, but I’m not Japanese, so who knows?”

Thiel’s top trader, Kevin Harrington, a former Stanford Ph.D. candidate in physics,
weighed in. “The old people in Japan are satisfied. Their assets have been going up.
It’s like the boomer class in the United States that thinks everything’s going to
be fine.”

“Do you think we should be short?” another trader asked.

“It’s been a mistake to be short Japan for the past twenty years,” Thiel said. “I
don’t have a strong view on it. But if something goes wrong it could keep going. The
political question is: Is Japan an authoritarian country, or is it a country where
there’s no government at all? I don’t think it’s a democracy—you can set that aside.
Is it the Japan of the seventies, an authoritarian corporate state where you can force
people to save a lot of money? Or is it like California and the United States, where
the deep secret is there’s nobody at the steering wheel at all? People pretend to
be in control, but the deep secret is there’s no one.”

For half an hour the meeting turned into a seminar on Japanese history and culture.
Finally, Thiel asked, “What are people optimistic about?”

“Enhanced oil recovery in the United States and Canada,” a young trader said.

A trader named Patrick Wolff, who was participating by speakerphone, said, “I will
betray my libertarianism, but the state’s monopoly on energy is rapidly eroding.”

“Next week,” Thiel said, “it would be useful for people to think about what they are
optimistic and hopeful about.”

As at PayPal, Thiel hired people who were like him. Clarium developed the reputation
of a Thiel cult, staffed by young libertarian brains who were in awe of their boss,
emulating his work habits, chess playing, and aversion to sports. Because Thiel saw
a housing bubble, he was adamant that his employees not own their homes. He rented
a ten-thousand-square-foot white wedding cake of a mansion in the Marina, a short
drive from Clarium, with a terrace view of the illuminated dome and arches of the
Palace of Fine Arts.

He began to live the life of a Silicon Valley billionaire. He employed a staff of
two blond, black-clad female assistants, a white-coated butler, and a cook, who prepared
a daily health drink of celery, beets, kale, and ginger. At his private dinner parties,
guests were given a menu printed with a choice of entrees. He flew everywhere on private
jets. One year he took his closest friends on a surfing trip to Nicaragua, another
year on a river rafting trip to Zimbabwe, security guards in tow. Thiel was emotionally
opaque, in an amiable way, but he showed a taste for decadent display while keeping
his personal indulgence to a minimum, like Gatsby making phantom appearances at his
own parties. He bought a Ferrari 360 Spider for fun and speed (his everyday car was
a Mercedes SL500), paid for driving lessons at the Las Vegas Motor Speedway, and started
a magazine called
American Thunder
, dedicated to stock car racing and the “NASCAR lifestyle” of hunting, fishing, and
country music. (Despite being carried in two-thirds of Wal-Mart stores and featuring
Dale Earnhardt, Jr., on its first cover,
American Thunder
folded after four issues.) He bought a San Francisco restaurant-nightclub called
Frisson, where he hosted Facebook’s million-users party. He threw other parties—fundraisers,
book or company launches—at his mansion, for fifty or a hundred guests, and at the
most outré the male servers sometimes went shirtless or wore nothing but aprons. He
contributed millions of dollars to conservative causes and candidates. After the housing
bubble burst, he bought the San Francisco mansion for $6.5 million, then an oceanfront
spread on Maui for $27 million, and he rented a loft above Union Square in Manhattan.
His houses were decorated in impeccably contemporary fashion for no one in particular.

“There is this strange way in which the amount of inequality just kept growing,” he
later said. “In the seventies, I didn’t know anyone who was a millionaire. That would
have been really rich, that was unusual. In the late eighties at Stanford, there were
a few people who were wealthier, but something like the twenty-to-thirty-million range
was colossally wealthy. Their parents had that much money—that seemed really extraordinary.”
Then, in 1997, a Silicon Valley novel called
The First 20 Million Is Always the Hardest
was published. “Twenty million seemed like a crazy amount of money. The theory I
had was that it would seem counterproductive to have more. Maybe twenty million would
be good, but way more would create all these problems.” But, year after year, “somehow
it just kept going.”

In a really unequal world, if you tried to keep up with the Joneses (defining the
Joneses as the average of the people who were better off than you), then you would
surely get lost, always feeling that you were falling farther behind—because, no matter
how much you had, the Joneses would always be ahead by an ever-increasing amount,
forever eluding you, a fata morgana on the desert horizon. In a really unequal world,
you needed a place to anchor yourself.

As a libertarian, Thiel welcomed an America in which people could no longer rely on
old institutions or get by in communities with longstanding sources of security, where
they knew where they stood and what they were bound for. All that was anathema to
Thiel’s worldview. He believed in striking out into the void alone, inventing oneself
out of ambition, talent, and abstractions—so the unwinding allowed him to thrive.
But he also stood at the center of a tight-knit group of friends, almost all men,
most of them young, like-minded Silicon Valley successes who had gotten rich around
the same time, in the binary-step-function way of the Valley—one day they suddenly
had more money than God, but they kept wearing jeans and T-shirts—though none as rich
as Thiel. These friends kept him connected to his old reality and screened out the
more ephemeral and toxic status markers. When an online gossip sheet outed Thiel in
2007, he called it “the Silicon Valley equivalent of al Qaeda” and continued to keep
his personal life private, disdaining intimate conversation even with his closest
friends. Over dinner they did not talk about sex, religion, or other people’s lives.
Instead, they talked about ideas, world events, and the future of technology. Asked
to name the investor he most admired, Thiel pointed to the billionaire recluse Howard
Hughes.

During the 2008 presidential campaign, Thiel was interviewed by
Reason
, the libertarian magazine. “My optimistic take is that even though politics is moving
very antilibertarian, that itself is a symptom of the fact that the world’s becoming
more libertarian,” he said. “Maybe it’s just a symptom of how good things are.” In
September, having passed the milestone of seven billion dollars, Clarium moved most
of its operations and 90 percent of its staff to midtown Manhattan. Thiel was approaching
the level of the world-class hedge fund managers, and he wanted to be closer to the
action on Wall Street.

That same month, the financial markets collapsed. With everyone else in a panic, Thiel
tried to catch a falling knife, but this time contrarianism became his enemy. Expecting
coordinated intervention by governments to calm the global economy, he went long on
the stock market for the rest of the year—but stocks continued to plummet, and his
fund lost a lot of money. In 2009, when he shorted stocks, they rose, and Clarium’s
losses grew. Investors began redeeming their money. Some of them grumbled that Thiel
had brilliant ideas but couldn’t time trades or manage risk—he’d been predicting a
crash in real estate for years, but when the moment came he was unable to take advantage.
In mid-2010, with the bleeding unstanched, Clarium had to close its New York office
and return to San Francisco. The moves were costly disruptions. By 2011, the fund’s
assets were down to $350 million, two-thirds of it Thiel’s money, the entirety of
his liquid net wealth. Clarium became a de facto family office.

For the first time in his life, Thiel had failed at something he prized, publicly
and spectacularly. He was humbled by it, and unlike at PayPal, where setbacks had
triggered outbursts, he took losing well and kept an even keel with his staff. During
the same period, his view of America began to darken. As he reconsidered the years
since the seventies, years that had seemed so bright and hopeful, especially in Silicon
Valley, even Facebook lost its glow. But Thiel’s pessimism also led him to form radical
new ideas about the future.

2008

BAM SLAMS HILLARY IN HISTORIC VICTORY
He’s First Black to Win Iowa Caucus as Voters Embrace Message of Change
 …
REAL ESTATE APPRAISED: FROM MALAISE TO CRITICAL
 …
GM POSTS RECORD US AUTOMOTIVE LOSS OF $38.7B FOR 2007
Offers Buyouts to 74,000 US Workers
 …
OIL SHOCK: ANALYST PREDICTS $7 GAS, “MASS EXODUS” OF US CARS
 …
DEPRESSION QUESTIONS RETURN IN NEW CENTURY
 …
IN WEEK OF IRAQ WAR ANNIVERSARY, OBAMA’S RACE SPEECH DOMINATED MEDIA COVERAGE
 … Obama’s entire campaign is built on class warfare and human envy. The “change”
he peddles is not new. We’ve seen it before. It is change that diminishes individual
liberty for the soft authoritarianism of socialism.…
that there is something happening in America, that we are not as divided as our politics
suggests, that we are one people, that we are one nation
 …
LEHMAN FILES FOR BANKRUPTCY, MERRILL SOLD, AIG SEEKS CASH
 …
BUSH ASKING FOR $700 BILLION BAILOUT
 …
McCAIN PICKS FAILING OHIO FACTORY TO LAUD FREE TRADE
He used his own recent political fortunes—a dramatic fade followed by an unexpected
comeback to secure the Republican presidential nomination—to illustrate that depressed
Rust Belt cities such as Youngstown can rebound.
…
PALIN REIGNITES CULTURE WARS
 … We believe that the best of America is in these small towns that we get to visit,
and in these wonderful little pockets of what I call real America, being here with
all of you hard working very patriotic … I bet bin Laden feels like a real asshole
now, huh? “What? I bombed the wrong America?” …
Heath Ledger passed away on Tuesday, sources reveal exclusively to
PerezHilton.com
.…
SILICON VALLEY BARELY TOUCHED BY FINANCIAL CRISIS—SO FAR
 …
How
are
you?
You
gotta
love
Face
Book!
YOU
LOOK
WONDERFUL.
Hopefully
I
will
get
some
pics
of
me
and
family
downloaded
soon
 …
I
can
only
imagine
how
anxiously
you
are
awaiting
election
day?
Are
you
still
a
strong
Republican?
Regardless,
I
always
cherish
our
friendship
 …
“CHANGE HAS COME”
Barack Obama Elected First Black President; Economic Anxiety Propels Democrat to Electoral
Landslide
 …
and together we will begin the next great chapter in the American story with three
words that will ring from coast to coast, from sea to shining sea: Yes. We.

INSTITUTION MAN (2): ROBERT RUBIN