Peter Thiel is finally admitting there's a big blotch on his resumé that needs to be cleaned up. Becoming Facebook's first institutional investor was brilliant; thinking he was smart enough to predict big economic swings was incredibly dumb. Six billion dollars dumb. So Thiel will retreat into tech investing.
For a capital manager who's lost $6 billion in assets, Pete Thiel has an awfully rosy worldview: The Facebook investor is calling baby boomers the "dumbest generation" and, we hear, infuriating co-workers by calling for patience at his foundering fund.
Insiders at Clarium Capital, the $5.3 billion hedge fund run by Facebook investor Peter Thiel, are buzzing about their boss's $1 million donation to NumbersUSA, an anti-immigrant group. The donation is an open secret within Clarium, and it has enraged several staff members who joined Clarium because they believed Thiel shared their libertarian ideals. When I asked Thiel if he'd made the donation, an underling passed on a nondenial saying the company didn't comment on "gossip and heresy." A typo — he meant to say "hearsay" — but a suggestive one. Thiel has fallen under the sway of Robertson "Rob" Morrow III, a Christian right-wing thinker who has personally donated to NumbersUSA, and persuaded Thiel to make his own, much larger donation.Morrow is a controversial figure within Clarium, a hedge fund Thiel founded after leaving PayPal, the payments company he cofounded and sold to eBay for $1.5 billion. Morrow was once chief investment officer at the San Francisco-based company, but was pushed out of Thiel's inner circle after he had a nervous breakdown on the trading floor. Morrow slowly worked his way back into Thiel's good graces, and was assigned to run the company's then-small New York office. Recently, his influence over Thiel and Clarium has grown. Earlier this year, Morrow wrote a paper called "The Bull Market in Politics." His thesis was that "government influence — over trade policy, social programs, decisions of war and peace — becomes much more important" to investors. One key policy area: immigration, where Morrow thinks there is a rising consensus for restrictions. A politically driven drop in immigration has broad economic implications, especially on the housing market; with less population growth, housing prices will continue to suffer for much longer than most anticipate. But Morrow is not merely forecasting the market. He has cajoled his influential boss to spend money to make his forecast a reality. A NumbersUSA spokesman called me to deny that Thiel had made a donation. But the money trail out of Clarium is clear, insiders say, and it would be a simple matter for Thiel to have arranged to make his donation through a third party like DonorsTrust, a conservative foundation through which charitable grants can be directed. The reason why Thiel would want his donation to be anonymous is simple: Even while he's betting against immigration with his hedge fund, he's making money off of immigrant-run startups in Silicon Valley. However Thiel is getting the money to NumbersUSA, it has specific goals: upgrading NumbersUSA's computer system; hiring a full-time fundraiser to solicit large donations from the wealthy; and hiring Luntz Maslansky Strategic Research to run focus groups on public attitudes toward immigration. So Thiel, like many wealthy sorts, is getting into politics. What's interesting about this is his shift from outspoken Libertarian. At PayPal, he had ambitions of using his payments startup to undermine illiberal economies and create a new world financial order. Many of his employees, first at PayPal and then at Clarium, were attracted by this powerful (if outlandish) vision. That he's now fallen under the sway of a right-wing Christian conservative is a bit crushing to the true believers Thiel attracted to his cause. Thiel once aimed to overturn the system. Now he just wants to work within it. As much as his anti-immigration views render him noxious to the Northern California mainstream, his turning away from an embrace of freedom make him an enemy to the rebellious thinkers he's hired.
Remember Clarium Capital, the $7 billion hedge fund run by former PayPal CEO Peter Thiel? Oops: Make that the $5.2 billion hedge fund run by Thiel. The fund was down 18 percent in October alone. August was also a disastrous month, as Thiel's bets on the economy went sour. After running up 58 percent from January to June, it's now down 3 percent for the year. Thiel is also an investor in Facebook, but that doesn't seem like much of a hedge right now.
A source within Clarium Capital, Facebook investor Peter Thiel's multibillion-dollar hedge fund, claims that Thiel has just donated $1 million to NumbersUSA, the largest anti-immigration group in the U.S. Another source denies that Thiel made the donation — but Rob Morrow, a principal at Clarium and close Thiel associate, has backed the group with a small donation of $1,000 or less. NumbersUSA likes to position itself as an "immigration reduction" organization; it seeks to roll back legal immigration limits to pre-1965 levels. Morrow's support of the cause is inevitably embarrassing for Thiel.That's because Thiel, who practically makes a fetish of finding the best talent wherever he can, has benefitted from immigration personally. He was born in Germany, and his tech fortunes are due in large part to the genius of Ukrainian-born programmer Max Levchin, his cofounder at PayPal who is now CEO of Slide. But Morrow is unlikely to suffer any consequences from his support of the cause. A right-wing intellectual and financial analyst, Morrow, too, has made a lot of money for Thiel. Much of Clarium's breathtaking performance over the years stems from his prescient thinking on the decline of the dollar and the mortgage bubble.
Peter Thiel, the billionaire hedge-fund manager, Facebook board member, and ex-CEO of PayPal, hopes that Wall Street's crisis will prompt "more talented people going into things like real engineering, as opposed to financial engineering." Thiel should be careful what he wishes for: His fund lost $1 billion in August, thanks to wrongheaded financial engineering. [Fortune]
Everyone's so gentle with Peter Thiel, the fabulously wealthy Facebook investor and hedge-fund manager. Even Bloomberg: The news service recently reported that his $7 billion firm, Clarium Capital Management, saw its funds drop 13 percent in August, thanks to a costly bet against a rallying dollar. We'll do the math, since Bloomberg was too polite: That's roughly $900 million gone in a month — a loss bigger than the paper value of his 5 percent stake in Facebook. Thiel just lost orders of magnitude more money than most of us might ever dream of making.The loss comes after a stunning track record of the firm's biggest monthly loss, beating an 11 percent drop in March 2004. Strangely, this topic went uncovered in TechCrunch editor Michael Arrington's interview of Thiel on Monday. Arrington let Thiel repeat, unchallenged, his assertion that there is no bubble in technology. To which we would add: Perhaps so. But there may be a bubble in a certain hedge fund. (Photo by VentureBeat)
PayPal's CEO is talking up the company's business handling payments on websites other than eBay. Where have I heard this before? Oh yes: In April 2002, when I had coffee with Peter Thiel, then the CEO of PayPal as an independent concern. He talked up the prospects of growing PayPal's business on other websites. He agreed to sell PayPal to eBay for $1.5 billion that July, and left three months later. And then I heard the story again, and again, and again, as eBay pushed a number of forgettable executives through the revolving door of PayPal's executive suite.The swift executive rotation was a deliberate strategy of former eBay CEO Meg Whitman, a management consultant by training. She called it "repotting" — moving executives around through different parts of the business. While it may have helped her charges' careers, it did nothing for PayPal. The latest potted plant to occupy PayPal's C-suite, Scott Thompson, is bragging to investors that PayPal will soon derive more than half its revenues from websites other than eBay. A good thing, considering how growth in eBay's core auction business is grinding to a halt. Thiel saw this as a problem back in 2002. eBay was growing fast at the time, but PayPal's investors — the company was briefly publicly traded before eBay bought it — were worried about its dependence on another company. After eBay bought PayPal, executives spent years grinding away at "integration" — even though PayPal, as an independent concern, had managed to neatly fit its payment service with eBay's auctions, without much help from eBay — in fact, with eBay actively trying to replace it with its own BillPoint payment service. In the years since, what has eBay done with PayPal? It's recycled ideas from the Thiel era, and tried to tout them as "innovatons." It has swollen the size of the PayPal unit to some 7,000 employees. ("What do they do?" a former PayPal executive asked me.) And it has leaned on PayPal to mask slow growth in its core business. How much would PayPal be worth now on its own, without eBay's bloated management? Would Amazon.com and Google even be trying to challenge it in the payments business? Perhaps it's a question that shouldn't remain abstract. eBay tried to buy PayPal several times; every time eBay returned to the bargaining table, PayPal's price went up. It finally took the workings of a liquid market to determine PayPal's worth; after PayPal's IPO, eBay had to pay a fair price for the payments company. Yes, it's time for another PayPal IPO. Too bad Peter Thiel isn't available to run the company — he's making far more money on his hedge fund than he ever did from PayPal. (Photo by David Orban)