Author and investor Michael Gibson joins Brian Anderson to discuss the work of the 1517 Fund and the Thiel Fellowship, why real technological progress has stalled and how elite universities contribute to that stagnation, and what some promising new educational models and institutions look like. His book, Paper Belt on Fire: How Renegade Investors Sparked a Revolt Against the University, will be published November 29.
Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is Michael Gibson. Michael is the co-founder and general partner of the 1517 Fund, and before that he was the vice president for grants at the Thiel Foundation and a principal at Thiel Capital. His new book, out this month, is called Paper Belt On Fire: How Renegade Investors Spark To Revolt Against the University. It's a terrific new book and Michael, always good to see you, and thanks for joining us.
Michael Gibson: Thanks for having me, Brian.
Brian Anderson: All right, so to start, I'm going to read a quote from your book. "This book is our story", you write, "an unlikely account of how two outsiders, a charter school principal and a defrocked philosopher are now fortunate to preside over one of the most successful early-stage funds in the business. I do not write as a disinterested outsider, but as a crazed participant gone berserk."
Now the book is an excellent read and as Arnold Kling recently described it, it's part memoir, part manifesto about education. So why don't we begin just by giving us the journey that you chronicle in the book. What is the arc of the books?
Michael Gibson: Yeah, that's right. So when I was first approached about writing a book, and sent it out to all the big publishing houses, some of the original pushback was interesting. Some of these editors were saying, "Why do you want to tell a story? Maybe you should be presenting more of a policy argument."
So the issue of higher education, I think we can all agree that the debt situation is out of control, $1.7 trillion in debt. The costs are high, there are concerns that people aren't getting the skills they need, and I wanted to address that. But I just love storytelling. All right, so the quote you read, “defrocked philosopher.” I think the university system can be characterized as the secular church, maybe the atheist church of America. I dropped out of my Ph.D program, and one of the moments for me when I dropped out was, I was in the basement of a bookstore, and I came across an old copy of Tom Wolfe's collection The New Journalism.
And in the introduction of that book, it's just so wonderful because Wolfe is talking about this aha moment that he had reading Gay Talese, Talese's profile of Joe Louis. And it's written like a short story. He uses all the techniques of the novel, the memoir, whatever, and he tells a story. And so going back all the way then I thought if I ever wrote a book, I wanted to tell stories. So it's like who am I to write a book about what we did? Well it's a pretty unusual business story in my mind.
We, Danielle Strachman, my co-founder, and I run a venture capital fund, but we primarily invest in people who don't have college degrees. So we're backing the uncredentialed. That would be unusual enough. Next is that yes, Danielle and I have no background in finance, and the fact that we have managed to start one of the more successful pre-seed funds despite not having the background, despite constraining ourselves to people without credentials, is pretty impressive.
My line is always we've returned more money to our investors to date than the Ocean's Eleven team steals from the Bellagio and MGM Grand, and in the movie that's $163 million, we've returned $200 million to date, we have companies maturing, and so on.
So we are successful. I think that's a story. It was interesting. A third of publishers’ rejections were, “You work for Peter Thiel. Peter Thiel is an evil conspiracist. We can't possibly publish anything by someone who works for him.” Another third was “I went to Yale University, I studied English lit, and I think college is just terrific.” And then the last were like, “Hey, who are you to tell a story?” So I thought that was a wonderful, exciting business story, and then I thought I could use that as a springboard to address things like the higher education issue.
Brian Anderson: Well, you describe in the book how the 1517 Fund in a sense grew out of the Thiel fellowship, and you point to the kind of underlying crisis that Thiel has talked about quite explicitly on a number of occasions, and that really inspired both of these projects, and that is that real technological progress has stalled for decades.
And you make this point several times in the book. So can you sketch out, because most people would say, well look, our world is transforming constantly technologically. What is the core of that Thiel argument about progress, technological progress, and how do elite universities contribute to that stagnation?
Michael Gibson: So I think the best way to get a sense for the stagnation argument is actually qualitatively. So my mom was raised by her grandmother. Her mama was born in the 1890s, which meant when she was born there was no radio, there was no television, there were no airplanes. She lived to 1980. So across that time she saw the invention of those things, movies, television, she died having seen a man on the moon. So the amount of progress, it's tough to measure the rate of progress and even what counts as progress. But when we think of big, the electrification of America and so on, the time period from let's say the Civil War to 1973 is just extraordinary in terms of the rate of change. We could point to specific numbers like life expectancy at birth in 1900, that was somewhere around 45 years of age. By 1980 that had reached 73.
So that's quite a lot of gains since then. Okay, now we get into the stagnation piece. So since the early seventies, we've added maybe three or four years to our life expectancy. So if you look at everything outside information technology, communications, if you look instead at let's say energy creation, we've had major innovations with fracking. But when it comes to really abundant sources of energy like nuclear fusion, maybe even tapping into the heat of the earth with geothermal, we have not made progress there. To go back to healthcare, we have not cured cancer despite 40, 50 years of embarking on a war on cancer. We're making advances, but they just seem to be little incremental steps. Every new drug that comes out seems less like a magic bullet and more like a cloud of concerns about side effects and efficacy. So the gains just seem to be coming slower.
Transportation, we seem to be moving slower than we used to. The Concord was retired in the early 2000s. Education, so despite spending at the higher education level, four times more per student in real terms, no one would say the education is four times better than it was in the 1970s, and then K-12, I mean that's even worse, probably.
We spend more and more than we ever have in history, and I don't think the results, I think we can all agree they're not great. One stat I point to is just literacy. Something like 23% of all adult Californians are functionally illiterate. So the advances in these other areas are coming slowly. What I think is true is that people don't consider those technologies, because when they think of technologies, they think of smartphones. But the ancient Greek term Techne meant craft, a way of doing things, ship building, governing.
And so just the way we do things has not improved in those major industries. So Thiel makes that argument. The book you mentioned, yes, it's part memoir, but part manifesto. The manifesto does address college, but I think the larger question is these deeper issues and problems that I don't think we have a good handle on, which is why are some nations more creative than others?
And that could be the arts, it could be science and technology. Why is the same nation less creative than it used to be in the past? And then we could look at institutions within nations, why were they more productive in the past compared to now? And then individuals. The book sort of telescopes out and touches on these issues, because the stagnation piece is important, and I want people to sort of wonder why is it the case that maybe America used to be more innovative?
And what's slowing us down? Or why was a city like San Francisco—I arrived there at 2010 and it seemed like it was on the cusp of becoming the Athens of the new Renaissance. And when I left in 2020, it was a dystopian nightmare, and the streets were empty. So what happened there? That was a major blow to American dynamism because it could be the case that in the ideal world we'd see Elon Musk and Peter Thiel at some cafe debating the future like drunken poets in Paris but in San Francisco, and instead they're all spread to the wind.
So yeah, I think these ideas about how do we measure progress, why aren't we making it? I think these are the big questions. I think the universities play a big role because they're part of this slowdown.
Brian Anderson: Well you have an interesting quote. You say one problem is that students, including at elite colleges are coming out with pretty heavy debt burdens, and that encourages these graduates to take sort of safe bets with their careers. You say they become “krill for too-big-to-fail corporate leviathans,” which is a great line. And so the idea behind the Thiel fellowship and your own fund is maybe to find some of these people and give them a different career path.
Michael Gibson: One line we like to say is that courage is in shorter supply than genius. There's a lot of really smart people out there, but they seem to be conformist, and for certain reasons. One of them could be the financial piece that you graduate having paid maybe a $100,000 to $200,000 in tuition. You need to pay that off. And a lot of people prefer to become management consultants or investment bankers. And those are safe, well-paying jobs, great, but maybe they're not taking the risk that they might otherwise have to try something different. And it doesn't have to be a tech company, it could be small business, it could be becoming a novelist. But the chances that you're going to strike out and become an epic poet with $100,000 in debt is just absurd. So when we started the fellowship, we could have picked any age, but there were two conditions on the Thiel fellowship.
It was a $100,000 grant, but you had to be 19 or under when you first applied, and you had to not be in school when you received the grant. That age was originally set because we thought it would be interesting to switch people off that path before they accumulated too much debt. For a lot of the people who came through the program, the debt issue wasn't as big, so the age range changed.
Maybe it's not just the finance piece. What we realized is maybe it's because things are prohibited or just things aren't happening. Like if you major in nuclear engineering, it's only in the last decade or so where new efforts have been started, it would be foolish to try to find a job. So it's almost like a lot of the exciting careers were actually prohibited and banned. So maybe that meant the paper economy was the only thing left open to a large majority of that Ivy League class. It's like 40, 50 percent will go off goes off into those professions.
Brian Anderson: Well you got a lot of pushback about the fellowship. I think Larry Summers, former treasury secretary, called it one of the worst philanthropic ideas that he'd ever heard. Something like that.
Michael Gibson: Of the decade.
Brian Anderson: Yeah, well maybe that was it. But there's been some impressive projects that have grown out of both the fellowship and the funds. So maybe just sketch a couple of those. Your book includes several of these personalities.
Michael Gibson: The most famous is probably Vitalik Buterin who is the creator of Ethereum. He had some contact with us in 2012, but we really got to know him in 2013. In the course of looking back and researching the book, I discovered that we actually had lunch with Vitalik five days after he originally wrote the Ethereum white paper outlining his ideas.
When I first met him, I mean he still is a gaunt Russian young man. He is just extraordinarily brilliant. I saw him texting at one point in Chinese on his smartphone in Mandarin. And I asked Vitalik, I said, "How did you learn Mandarin?" And he says, "Oh, I taught myself so I could communicate with the Ethereum engineers on the mainland of China." And I was like, okay, wow, he is a special person. But yeah, we helped him. I mean back in 2013, no one really cared about blockchain besides Bitcoin, and we helped launch Ethereum in 2014 with Vitalik just providing advice and mentorship and stuff along those lines, and wow, that's incredible.
Despite the fluctuations, obviously crypto is going through a lot, but as it stands, I think the whole sector is still growing, and I think Ethereum will play a pivotal role in providing the infrastructure for Web3. So that's probably the biggest thing. The next most recent success is probably Dylan Field. In 2012, we helped Dylan launch a company called Figma. It's a design tool for engineers, helps them get started in whiteboarding what products will look like, and then all the way down to specific design and user interface features.
And they've done extraordinarily well, especially over the last few years. And Adobe just acquired Figma for $20 billion. So extraordinary success there. We had a lot of people where it's like modest success would be like they made a few million dollars, it's not a big success by the venture industry’s standards. But then some people went back to school, a handful, and others just found jobs or got acquired, and they're still out there. So what we wanted to show was that a credential wasn't necessary to a fulfilling and rewarding career. And when we started the program in 2010, yes Jacob Weisberg, Newsweek, eventually Larry Summers, criticizing us, but it seems like now it's not such a big deal. Either the program or the idea that someone might prefer to take a different path rather than getting a university degree.
Brian Anderson: I mean things have really changed in recent years in the public perception of the worth of college degrees. And people I think are taking a more critical look at university world. Others who've got a similarly critical view as you do of the credentialist-industrial complex of the university world, they've sought to change it with different means.
So you have policy initiatives looking to beef up vocational programs and apprenticeships to find different paths for people to economic productivity. And then you have the proliferation of some new educational institutions, most notable probably being UATX, this alternative university in Austin that we've written about a bit at City Journal that seeks to really return to a different kind of model of higher ed by offering a legitimate free area of intellectual discussion and debate. So, how do you view those kinds of projects?
Michael Gibson: I'll go down the list there. Starting with the last, I'm excited for the University of Texas at Austin because I think the level of polarization in the academy is just, I mean really it's a one-party state by any measurement. So in terms of allowing or creating a sanctuary or safe space for moderate thought, even—I think that could be very valuable.
My one concern would be that the standard story about why graduates of college earn a wage premium over people who just have a high school degree is that colleges impart skills to their students, and then those students have these skills, and they're rewarded in the labor market.
But I’m of the camp, Bryan Caplan is probably the most famous in recent years, where what's going on, how to understand the wage premium is an open debate. And I think there are some things that Caplan and others have shown where actually maybe students aren't learning skills in college.
In fact they're just finding a way to signal something about the type of person they are to the labor market. So it's not just intelligence because you could give IQ tests and so on and try to determine that, but what you're really showing is intelligence, cognitive ability and so on, but also a number of other traits like the willingness to undertake a four-year project and complete it. The willingness to receive assignments and complete them. And the biggest sign in this—anecdotally, we all have forgotten what we learned in school. I took so many years of French, and my French is terrible. And so many people will have jobs that have nothing to do with what they learned in school. So the direct application of the skills, we all have a sense where that seems a mismatch. But in the economics literature, the biggest thing is this what's called the sheepskin effect.
So if we're learning skills across all four years of college, you would assume that if someone dropped out in year 1, 2, 3, 4, that the number of skills they acquire across that time would be rewarded in the labor market. But you don't see that. If someone completes senior year that's worth three times more than the other three years combined. So that doesn't make sense on the skill story. The most dramatic thought experiment would be, I'm on my way to my final exam, it's the last credit and I get hit by a car, I have to go to the hospital, and my professor's mean, and he is like, "Oh, you can't make up the exam so you fail." On the skill model, I should be able to go find a job and make pretty much the same amount of money.
But what we don't see in the labor market is that's the case. In fact, dramatically less. So for any of those new college efforts, if they're not tackling that signaling issue and not pretending that it's all skills, then I'm going to be worried about what they're doing even if it's the University of Austin, Texas.
Now back to the first one you mentioned, I was just in Switzerland, and I was introduced to their apprenticeship program, and it is very robust. Something like 70 percent of all teens are part of their apprenticeship program. Now those jobs range from everything from retail to manufacturing to even banking. And people can spend years in that, and then maybe go back and get some post-professional degree. But I was shocked at how robust their system was. I don't know the details about how the government is involved with that monitoring and regulating it, but it just shocked me how robust it was compared to the United States where, quite frankly, we denigrate the trades.
You have a dunce cap on your head if you want to depart from the higher education track and maybe focus on becoming a contractor or electrician. So one thing I think we could do better as a country is finding ways to expand this idea of apprenticeship.
And then I get pushback on the fellowship and what we do as a fund that, “Hey, you're talking about the NBA, the Olympics. That's not for the average American.” But I think what we can do, the replacement is okay, we can get in the policy thickets of debt, tying debt to employment or holding schools accountable. But one thing I think we could try to do more is just help people establish their careers through some kind of network of authentication.
If you can first get a job somewhere and then that person is willing to recommend you for other jobs, I think that would be a good place to start. I see it in the tech industry on the engineering side where there's a website called GitHub. You can post your code in this repository, your peers all vote on it. It could be five-star code, you could be an avatar. People don't even know who you are, but they will hire you because your reputation is established. So I think those things could be really exciting and I wish we could move in that direction as a country and maybe state by state as well.
Brian Anderson: The book’s longest section, it's almost a book within the book, is the coda called “The Invisible College.” What's the theme of that, and what's it in the book for?
Michael Gibson: What I realized was with our fund and the fellowship, it was all about getting people out to the frontier of knowledge as fast as possible in the sense of, if you're 20, and you're already able to understand the cutting edge of something, you should work on that. And then it dawned on me that a lot of our education is structured in a way to scaffold knowledge so that maybe you start with the simple fundamental techniques, and then you build on that, and you get to the more complex things.
But what I saw instead was that had been perverted in a sense. So it's like yes, you have to spend all this time learning Newton before you get to Einstein, and then maybe after 10 years, 12 years, you're ready to make a contribution at 32, 33, but you won't know what's out there on the frontier until you're 30, 32, right?
So what I decided was, can I flip that on its head? I started researching and it's really hard, there are no books out there that tell you what are the top five unsolved problems in each of these fields. So when I was going through the stagnation like, well how do we know where the stagnation is? Okay, let's look at fusion energy. What are the top three or four unsolved issues in that? And so I thought it'd be interesting to canvas that in the hopes of inspiring people, because I wanted to end on a positive note.
I don't care who you are, 12, 15, if you're from Europe or Africa or wherever, just start working on these problems, and you will find your way to the edge, and you will find your way to the new economy. Because if you have a concern for hydro or geothermal power or freshwater creation, that's where the jobs of the future are going to be, because it doesn't exist yet.
And it was surprising to me that I couldn't find in layman's terms, Reader’s Digest version, okay, go through these things. So that's why I wanted to include that. I think it's kind of interesting to look at each sector like that. I could have gone on, but you're right, it is almost like a book in a book. But my aim was to inspire people to say, “Hey, I can work on this, and I don't have to scaffold these lessons.” I could go right to the frontier, and then I'm going to have to figure out what I need to learn after that.
Brian Anderson: That's certainly the manifesto part of the book. I mentioned earlier that it's also, and this is coming through a bit in our conversation part memoir, you open the book with a surprising personal story about your family history, which you had conveyed to me in person before. I wonder if you could just recount that briefly here?
Michael Gibson: So this was my meditation on creativity, starting at the highest level with the nation, and then down to the city, institution, office. I have a chapter where I describe what it's like to work in Peter Thiel's office through an anecdote. Peter is an exceptional spotter of talent. I joke he's like the Ezra Pound of Silicon Valley because Ezra Pound worked with T. S. Eliot, James Joyce, all these people. Peter has worked with the greatest entrepreneurs of this last generation.
And when we are picking Thiel fellows, and when we're making investments, a lot of our assessment is about what is the character of this team, and what is the source of their creativity. And one of the smaller theories in the book inspired by Peter seems to be the case that creative people tend to live in a polarity. In Girard's terms, they tend to be insiders and outsiders at the same time.
Peter has this heuristic he uses where, if you have been targeted as a scapegoat by a community, Rene Girard has a theory about scapegoating and social dynamics and mob mentality. The mob chooses a certain type of person as a scapegoat. It's not just some complete outsider who happened to be there, nor is it a deep insider who is within the system necessarily.
It's always someone who's both insider and outsider. Weird enough to be strange enough to cause the social issues at hand.
Brian Anderson: Strange but not a stranger.
Michael Gibson: Strange but not a stranger. And so I reflected, I'm pretty weird as a person. I grew up, I thought one person was my dad and then when I was 20 I discovered that he wasn't. And I had a different biological father. And then learning about who that person was, he died, my biological father died when I was a year and a half old.
And yeah, I opened with this anecdote because it's been this mystery in my life that my mom, three days before he died, my mom says she had a conversation with him where he said he feared for his life, that he was involved in intelligence work, and then three days later he was found dead in his apartment. So that was always this mystery.
I talk about how I interviewed with the CIA and almost became a case officer and not because I wanted to become a spy, but I just wanted to know who my dad was. And maybe it's tough to connect these things, but for me it's almost like I've just been, I am an insider and outsider. I have a weird history, and maybe that does lend itself to my view of talent in the world. That's why I wanted to make it a personal story because I do think we need to telescope these things out. What makes people creative, what makes them unusual? Nietzsche has this line, “What doesn't kill me, makes me stronger.” I'd like to amend it to stranger. What doesn't kill me makes me stranger.
Brian Anderson: Well that's great. It really is a fascinating book and filled with interesting asides.
Michael Gibson: Yeah, as I said, the Wolfe stuff, I love his journalism and the storytelling, and he talks about one of his first articles, it was just like this ragtag mix of stuff, and he's just one of my heroes. And I guess these unconscious influences, I'm not afraid to go on digressions or have a telling anecdote or something. So I hope people hold on for the ride because I think in the end I think it all comes together and is pretty fun.
Brian Anderson: Last question, what are you reading these days? Anything interesting coming across your desk?
Michael Gibson: I did just pick up this short story by Claire Keegan, this book Foster. I heard the novelist Karl Ove Knausgård speak well of her, and I just picked it up, and it cracked my heart. It's a tender tale. It's called a novella. I think it's a short story. They stuffed it in 90 pages. But I do recommend people pick that up and give it a read. And then I just read Richard Reeve's book Of Boys and Men, which I think is an interesting center-left take on some of the educational issues involving boys struggling.
Brian Anderson: Right, we've just published a big essay, talks a bit about that book by Kay Hymowitz on the struggle.
Michael Gibson: I look forward to that because it is a big issue, and I thought it was good to see someone on the center-left take a cut at it.
Brian Anderson: Well anyway, Michael, thank you very, very much. Don't forget to check out Michael Gibson's work on the City Journal website. He's written for us several times. That's www.city-journal.org, we’ll link to his author page. And of course the book, Paper Belt on Fire, which again is original, compellingly written, that will also be in the description. So you can find City Journal on Twitter @CityJournal and on Instagram @CityJournal_MI. And as always, if you like what you've heard on the podcast, please give us a five-star rating on iTunes. Michael Gibson, great to see you.
Michael Gibson: Brian, thanks for having me.