Investing in Trump
I’ve always been a fan of Peter Thiel. His musings on the ideology of competition (from his book Zero to One) is in my view a must read for anyone interested in business.
As the quintessential Silicon Valley elite, his vocal endorsement of Donald Trump came as a shock to many, including yours truly.
And it has paid off handsomely. Thiel is now the only Silicon Valley elite inside Trump’s inner circle and an appointee to Trump’s transition team. In binary terms, Thiel’s influence on the in-coming Trump administration is now “one” compared to “zero” for his Silicon Valley counterparts.
I will put forward here that this was no gamble of an eccentric billionaire – but rather an incredibly rational and calculated contrarian investment underpinned by sound investment principles.
As a starting point let’s make the reasonable assumption that Thiel’s end game is to be in a position to influence and shape future US government policy.
Competition is for losers
Thiel views competition as being for losers and that the goal of any business ought to be to get as far away from perfect competition as possible. From his book below:
Competition means no profits for anybody, no meaningful differentiation and a struggle for survival … More than anything else, competition is an ideology – the ideology – that pervades our society and distorts our thinking. We preach competition, internalise its necessity, and enact its commandments; and as a result, we trap ourselves within it – even though the more we compete, the less we gain.
Here’s a great WSJ summary of Thiel’s thoughts on competition.
So when 99.9% of Silicon Valley take the position of “anyone but Trump” (total contributions to the Clinton campaign came in at 114 times the level they did for Trump), where is the wide open space with no competition?
Seek asymmetric returns
We do not know whether Thiel really had the foresight to have predicted a Trump landslide, but even at odds of say 5-1 it presented a compelling asymmetric returns profile for Thiel.
If Hillary had won, Thiel would not be in a materially worse place and the whole saga would have simply compounded his personal reputation as an iconoclast.
If Trump wins however, Thiel would win big and acquire a monopolistic level of influence on the new administration.
In other words, heads I win big, tails I don’t lose very much.
Invest where others won’t
Many of you would be so disgusted by Trump’s politics that you would have nothing to do with Trump no matter what the returns may be – and that is more than fair.
However, if you make the assumption that your support for Trump would not materially alter the electoral outcome and that the underlying politics are simply a source of cognitive dissonance in relations to your end game – then a different set of calculus begins to emerge. Besides, Trump’s lack of policy depth actually presents a huge opportunity, essentially a blank canvas, for someone seeking to shape it (in contrast, Hillary had already published a 7,000 word tech policy document).
Whether you agree with his politics or not, Peter Thiel has evidently hit a home run on his investment in Trump akin to his much admired original investment in Facebook.