Walk of Shame: Peter Thiel

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Leave it to a billionaire to tell talented college students to call it quits. Peter Thiel, Facebook's first outside investor, is using a portion of his estimated $1.5 billion fortune to fund young entrepreneurs who drop out to start a business.

Specifically, Thiel has created a fellowship in which 20 entrepreneurs under the age of 20 have received $100,000 over two years to work on their business ideas. The Thiel Foundation will oversee the program, connecting students with a network of innovators to learn from.

Bad idea, Mr. Thiel. Really bad idea.

But it doesn't seem so at first. In an interview with USA TODAY, Thiel makes several important and cogent points. Student debt can be an albatross for twentysomethings. And while it's nice to have a college degree, having one certainly doesn't guarantee you a great job upon exiting school -- especially in today's economy.

I'm dating myself here, but when I exited college in 1991 (was it really that long ago?), the economy was in recession and the U.S. was at war. Grad school was my first and best option. Today, I'm glad for the additional degree, but would it really have hurt to be out exploring a Big Business Idea? Probably not.

Some great tech companies were born the year I decided to go back to school, including Broadcom (Nasdaq: BRCM  ) , Open Text (Nasdaq: OTEX  ) , and RF Micro Devices (Nasdaq: RFMD  ) . Today, these businesses account for more than $21 billion in market value. They've enriched their founders and investors.

Thiel, to his credit, wants to encourage more of this type of entrepreneurship. His mistake is to think that ideas and youthful energy matter more than life experience. Yet I can understand why he thinks that. Silicon Valley's great mythology is built upon the shoulders of dropouts, including Facebook's Mark Zuckerberg, who helped make Thiel a billionaire.

The truth about college
Far as I can tell, Thiel is erroneously equating college with vocational school. We don't send kids off to school just to learn a trade. We send them off to school to learn what it's like to be on their own while preserving just enough of a safety net so that mistakes made on campus lack the permanency they otherwise would if made out in the "real world."

Surely there are cases of young men and women who are wise beyond their years. But if you've seen the movie The Social Network and followed the history of Facebook, you also know that genius and immaturity mix all the time -- sometimes with devastating results. Funding genius before it has a chance to mature isn't necessarily a panacea.

Just ask Google (Nasdaq: GOOG  ) , one of the world's most successful tech companies. Co-founders Sergey Brin and Larry Page both have undergrad degrees, and both left the Ph.D. program at Stanford to pursue Google as a business. More importantly, their company has a legendary reputation for emphasizing academic achievement in the recruiting process. Dropouts need not apply.

The truth about innovation
We also shouldn't forget that everyday need is just as big a driver of entrepreneurship. And it takes life experience to know what you need.

Consider Nike (NYSE: NKE  ) . Track coach Bill Bowerman didn't dream of changing the running world before using rubber and a waffle iron to create the waffle-sole shoe that helped make Nike a must-have brand. He just wanted better equipment for his runners, which included Olympic distance star Steve Prefontaine. Bowerman was probably 60 when he invented the waffle-sole.

So what say we leave the kids alone to be, you know, kids for a while longer? There will always be outliers -- and if Thiel's program provides a home for these rebels, good -- but as a broad policy, I'm going to encourage my kids to go on to college, get some life experience, and earn a degree. They grow up too fast as it is.

Do you agree? Disagree? Let us know what you think about Thiel's plan and the value of college using the comments box below.

The Motley Fool recently introduced a free My Watchlist feature that allows users to stay ahead of the curve and keep up to date on innovators such as Broadcom and Google. Add these companies to your watchlist today:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google, Nike, and Open Text. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 26, 2011, at 3:56 PM, DarrenShearer wrote:

    Respectfully, I think you missed the point of Thiel's program and philosophy. Thiel isn't encouraging these kids to drop out of college so they will turn out to be better employees at Google, etc. He's encouraging them to start building their own businesses now, while they're young, single, and energetic, before they settle into a lifetime of indebtedness and working for "the man." Unlike the American higher education system, Thiel is trying to produce wealthy entrepreneurs--not indebted employees. Once you get strapped with college debt and the employee mentality perpetuated by most professors, the chances of launching a great company have significantly diminished. That's why I'm dropping-out of my MBA program.

  • Report this Comment On May 26, 2011, at 8:43 PM, martianrealist wrote:

    First of all, he is not funding everyone who shows up with an idea. This incentive is being provided only to a select group of young individuals, which clearly means that you have to have a very good idea with a compelling narrative. I am an MBA degree holder and I am glad that I chose that route to be successfull because, if someone offered to fund me, I wouldn't have any good ideas at the age of 20 (most people don't either). Also, these individuals can start at an age when there is no literally no baggage (student loans, mortgage, spouse and children to feed etc.). If they fail, worst case, they may have lost a few years and they can always go back to school if they choose to.

    My take on entrepreneurship is; you either have it or you don't. And if you do, it's better to identify it early and act on it. The rest of the world (including me) can get a degree and hope to work for the ones who went on and started something on their own.

  • Report this Comment On May 27, 2011, at 10:34 AM, woozlewozle wrote:

    Life experience? You're sending your kids to college to get life experience? You really have missed the point. College is a kindergarten for the rich. If you want real life experience get a job or start a company. Pay some taxes, pay some bills and learn what the real world is like. If you have to go to college get a degree with an obvious career track like engineering or nursing. Pay as little as you can for it and graduate debt-free. If you can't do these things you're not ready for college. Take it from this PhD in Neuroscience working at Duke University. The letters after your name are not worth the expense and they won't get you a career or give you any real life experience.

  • Report this Comment On May 27, 2011, at 11:03 AM, livinglearning wrote:

    I'm really starting to question the value of a college education. I went to a state university about the same time the author did and it cost about $1000 per semester plus room and board. Fortunately, I had an ROTC scholarship to assist even more. Now, most people graduate college w/ upwards of $50,000 in debt that they can't begin to pay off. Community college, technical school and good old fashioned work experience seems like it's the right combination. You can always go back and get a degree.

    I'm more surprised that large Fortune 500 companies do not create their own "college". Why not bring in a group of smart, dynamic high school grads and give them a 2-4 year internship grooming them to become programmers, marketers, sales, etc. They could essentially pay them minimum wage while attending classes part of the day. Then tie it to "X" number of years of full time employment afterward. It could definitely work in the world of technology at the very least.

  • Report this Comment On May 27, 2011, at 11:31 AM, DukeTG wrote:

    I'm willing to give Thiel the benefit of the doubt and assume that he's trying to shake the country out of the catch-22 we've built for ourselves.

    We all know that college costs too much (I started my son's 529 the month he was born, and my guess is that he'll still need a couple loans), but employers who offer the "good" jobs are not going to look at you if you don't have a degree. And I'm guessing that includes companies that were formed by successful dropouts. It's pay-to-play.

    Maybe by encouraging people to consider that college is not the only way to go, he can change the mentality that not having a college degree automatically means you're unqualified.

  • Report this Comment On May 27, 2011, at 11:48 AM, XMFRosetint wrote:

    I have to give Thiel major props for this.

    He's putting his money where his mouth is and giving a handful of young people the opportunity to make themselves a fortune and possibly change how we live our day-to-day lives. There is absolutely nothing wrong with that, as far as I am concerned.

    I also dropped out of college, but I'm no tech wizard and am instead allocating the money I was throwing at an education towards investing in high-probability, high-return situations. It's worked out well for me so for, and so long as that continues it's senseless to even consider going back.

    I hope that at least some of these young men and women are successful and make something phenomenal out of their opportunity. Even if they don't, what better education is there than running a business and failing?

    We all hear the talking points from certain political groups that many in government or aspiring to be in government have never had to make payroll.

    After this opportunity for these kids, that's something that can never be said about them and that's worth a college education by itself, in my opinion. Even if they fail, they're going to learn so much during the process that it will make them better, more-educated people, even if it's not the type of education most of us think about on a day to day basis.

    If they fail, they've learned a lot and can just go back to college then. I see this as a win-win and wish them the best of luck.

    Best wishes,


  • Report this Comment On May 27, 2011, at 4:25 PM, 5000monkey wrote:

    @ livinglearning

    I've often wondered why large companies don't do the same. And along with every one else, good job theil I only hope it works

  • Report this Comment On May 27, 2011, at 4:33 PM, Duke5343 wrote:

    Have for last 15 years made more money than a degree engineer in my field, trade school was good to me with No debt when i got out, BUT most are not willing to Travel to 18 countries, 4 were 3rd world, 48 states, offshore, pipelines, rigs and production oil platforms. work 7 days a week 12 horus per day for 5 months straight. Be away from wife for 7 years total out of 23 years of marriage when all added together

    "I Fight Poverty I work" has changed to I can collect USG checks or get from mom & dad

  • Report this Comment On May 27, 2011, at 4:47 PM, Duke5343 wrote:

    Most companies run with directors / owers that have STREET Smarts are MUCH better run in my experience

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