Did Peter Thiel Make The Single Best Investment In History?

http://chrisyeh.blogspot.com/2010/09/did-peter-thiel-make-single-best.html

by turoczy • 16 years ago

25 26 16 years ago

chrisyeh.blogspot.com

riffer• 16 years ago

It's not that he made one of the best investments in history.

It's that he has one of the best investment processes.

kiba• 16 years ago

How do we know that if he got very lucky or that he's very good at what he do?

bl4k2• 16 years ago

because it's Peter frickin' Thiel - http://en.wikipedia.org/wiki/Peter_Thiel

1va• 16 years ago

> That's a 6,000x return on his capital in 5 years. > I'll put it this way--if you made a $250 IRA contribution in 2005, it would have to be worth $1,500,000 today to match that return.

If you invested one penny that investment would now need to be worth $60 to match that return. Maybe it is just me, but $250 to $1.5M doesn't help me visualize a 6000x return at all. This analogy reminds me of an old Dennis Miller bit from Saturday Night Live where to illustrate the size of the national debt he takes out a dollar bill and says "it would take stack of these 3 trillion high to pay it back".

rmorrison• 16 years ago

It's not the best investment in history: there are people who have won more than $100,000,000 on a single $1 lottery ticket.

robryan• 16 years ago

Hmm, best informed investment? I think in this case there is a little more in play than just extreme luck.

gojomo2• 16 years ago

We can be sure, mathematically, that a lottery ticket is a bad investment overall even if it pays off. For example, repeating it 100,000,000 times is nearly certain to leave you with less than you started.

Plausibly, the decision to invest in Facebook (and similar opportunities when they present themselves) had a positive expected return at the time. Even knowing Facebook is an outlier result -- like a winning lottery ticket -- its payoff actually gives us a hint that the original decision was positive-expectation, and its magnitude. (The fact that a lottery ticket happens to win changes our idea of the original expectation not at all.)

Also of note: Thiel didn't just invest money, he invested his expertise and network. That, which almost certainly helped Zuckerberg aim higher and avoid pitfalls/compromises that took down other companies, was one of the best non-monetary investments ever.

ww520• 16 years ago

What happened to the guys who bought Manhattan for beads way back? Did they make it ok?

BerislavLopac• 16 years ago

Not quite -- they were expunged by the Brits a few years later... ;)

aberkowitz2• 16 years ago

The keyword here is "estimated value". It is very likely that Peter Thiel did very well, but a 2-3 billion dollar return is not guaranteed.

gojomo2• 16 years ago

You're right... but it could also be more!

aberkowitz2• 16 years ago

Good point; thanks for opening my mind to further possibilities. Either way, it's either underly or overly sensational at the moment.

ghshephard2• 16 years ago

I'll point out the blindingly obvious that nobody else can bring themselves to point out - future rounds have likely reduced that original 10% to a somewhat smaller number. There is also a pretty good chance that Thiel has taken some off the table, further reducing his stake.

Still a great investment.

staunch• 16 years ago

You're right about dilution, but it's very unlikely that he's taken money out.

ghshephard2• 16 years ago

Interesting - Facebook has had a pretty active secondary market - I've had a couple opportunities to invest, but couldn't afford the minimum buy in. What's your information that he hasn't taken some off the table? Seems like a reasonable move once it went north of $10 Billion.

aseem• 16 years ago

Do people really believe that if Facebook goes public that it will be worth more than Google when it went public? I want to know the details of how people (i.e. Forbes Magazine) came up with the $33B valuation.

wyclif• 16 years ago

Problem: Facebook is not worth $33 billion: http://37signals.com/svn/posts/2585-facebook-is-not-worth-33...

ankimal• 16 years ago

I think Ram Shriram's Google investment was probably better. Here is a list of some more http://www.suite101.com/content/greatest-venture-capital-inv....

Also, there is some debate over the $24 the dutch bought Manhattan for from the Indians. Jury is still out on that one.

rms2• 16 years ago

Yup, as article commenters point out, this blog post is wrong for comparing Google VCs to a Facebook angel investor instead of comparing the Google angel investors.

bretthellman• 16 years ago

Time will tell. At this time... it's safe to say it wasn't the worst investment.

btucker• 16 years ago

If I had $500K lying around in Fall '04 I would have been chasing down Mark Zuckerberg trying to get him to take it for whatever tiny piece of the company I could get.

Being at one of the first set of "facebook schools" it was very clear where things were headed. The amount of mindshare facebook had on campus within the first couple weeks of the semester was absolutely staggering.

huhtenberg• 16 years ago

> Today ... his stake is worth between $2-3 billion

That's 2-3 billion Zuckerbucks as some banking people call 'em :)

Did Peter Thiel Make The Single Best Investment In History?

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