Faux Contrarians, Faux Libertarians

Bloomberg

Peter Thiel Gamed Silicon Valley, Donald Trump, and Democracy to Make Billions, Tax-Free

In an exclusive excerpt from The Contrarian, a new biography, the disruption-preaching power broker is revealed as just another rich guy desperate to keep his fortune from the IRS.

Until the Trump Tower meeting, in December 2016, he’d been known as a wealthy and eccentric venture capitalist—a key figure in Silicon Valley for sure, but hardly someone with political clout. His support of Trump, starting in May 2016, when fellow Davos-goers were mostly bedded down with other candidates, had changed that...

But Silicon Valley also reflected the values of the man who’d organized the meeting, and Thiel .. [who] seemed to value the expansion of his own wealth above almost all else...

The Trump administration, of course, ended badly for many of the participants in the meeting.. But Trump’s presidency would not end badly for Thiel. Thiel’s companies would win government contracts, and his net worth would soar—and it would, crucially, remain in the legal tax shelter that he’s spent half his career trying to protect...

As impressive as this entrepreneurial résumé might be, Thiel has been even more influential as an investor and backroom dealmaker. He leads the so-called PayPal Mafia, an informal network of interlocking financial and personal relationships that dates to the late 1990s. This group includes Elon Musk, plus the founders of YouTube, Yelp, and LinkedIn; the members would provide startup capital to Airbnb, Lyft, Stripe, and Facebook...

The ambitions of these men have often gone hand in hand with Thiel’s extremist libertarian political project: a reorganization of civilization that would shift power from traditional institutions—e.g., mainstream media, democratically elected legislatures—toward startups and the billionaires who control them. Thiel secretly funded the lawsuit that destroyed Gawker Media in 2016...

A week later [after 2016 win], Thiel reported to Trump Tower with a half-dozen aides... The group, led by Blake Masters, a longtime aide who’d served as Thiel’s Zero to One co-writer, was given the job of suggesting appointees who could drastically limit the scope of “the administrative state.”

Thiel wasn’t playing for influence. He was playing for money

As a political animal, Thiel possessed instincts that could seem almost comically bad. His list of 150 names for senior-level jobs included numerous figures who were too extreme even for the most extreme members of Trump’s inner circle...

For Trump’s science adviser, Thiel suggested two climate change deniers, Princeton physicist William Happer and Yale computer scientist David Gelernter. For the head of the Food and Drug Administration, Thiel offered, among other names, Balaji Srinivasan, an entrepreneur with no obvious experience in government, who seemed skeptical that the FDA should exist at all. “For every thalidomide,” Srinivasan had tweeted (and later deleted), “many dead from slowed approvals.”...

Invites to that Trump Tower meeting had been given out to the tech companies with the largest market capitalizations, but Thiel made two exceptions. Musk, who runs SpaceX, where Thiel is a major shareholder, got to come even though both SpaceX and his other company, Tesla, were much smaller than the next largest company at the time. So did Alex Karp, CEO of an even smaller company, Palantir, which Thiel had co-founded in 2004...

But inside Palantir there were questions about to what extent—or even whether—the technology worked. The company had struggled during President Barack Obama’s second term as enthusiasm for its offerings dimmed among intelligence agencies and big corporate customers... “We had nothing.” Another senior executive called Metropolis, Palantir’s main product, a “disaster.”..

[T]he new administration presented an opportunity for Palantir—and for Thiel, who had much of his net worth tied up in the company. Just before Election Day in 2016, a federal judge had ruled in a lawsuit brought by Palantir that the Army would have to rebid its database contract and consider Thiel’s company. The court order didn’t mean the Army would buy Palantir’s software, only that it would give it a “hard look,” as Hamish Hume, the company’s lawyer on the case, put it.

Now Karp (and Thiel) had a chance to make a personal appeal to the commander in chief. During the meeting at Trump Tower, Karp promised Trump that Palantir could “help bolster national security and reduce waste.” Karp would later say he had no idea why he’d been invited; all he knew was that his friend had organized it. Of course, Thiel didn’t invite any other defense contractors, such as Raytheon Technologies, Palantir’s main competitor in the bidding on the Army deal, to the meeting...

[Soon] the NIH would give Palantir a $7 million contract to help the agency keep track of the research data it was collecting. There would be many more contracts...

The strategy was legal, even if it was, from the standpoint of any normal sense of fairness, outrageous. Thiel had parked much of his wealth inside an investment vehicle known as a Roth IRA. Roths are tax-free retirement accounts that were designed for middle-class and lower-middle-class workers, not billionaires—contributions are capped at just $6,000 per year. (You can also convert a traditional IRA into a Roth if you pay taxes on the old account.) It’s illegal to use a Roth account to buy stock in a company you control. And yet, starting in 1999, Thiel used a Roth to buy stock in companies with which he was closely associated—including PayPal and Palantir—for prices that were as low as a thousandth of a penny per share. All the capital gains since then have been tax-free...

This was scary to Thiel, according to several longtime employees. They say his vulnerability to a change in tax policy or a shift in IRS enforcement seemed to dominate how he related to people around him. Anxiety about a potential crackdown seemed to be part of his motivation to acquire New Zealand citizenship in 2011 and to support Trump in 2016, according to these sources...

After Trump’s loss in November, Thiel’s employees and allies were abuzz with rumors about secret uncounted votes in key swing states and how the election’s outcome was somehow in doubt. Eric Weinstein, a podcast host and longtime Thiel adviser, tweeted videos of a purported Postal Service whistleblower. (The claims, which turned out to have been fabricated, were distributed by conservative journalist and provocateur James O’Keefe, another Thiel ally who has received funds from him in the past.)...