Washington Monthly - September/October 2012 - (Page 42)

Nolan restates Thiel’s thesis like this: Most of the money and talent and energy have focused on things that Thiel describes as “1 to N”—in other words, taking an existing thing and making it better or distributing it to more people. Thiel (and, thus, Founders Fund) is interested in “0 to 1”—creating something amazing that genuinely didn’t exist before. There is a rough parallel in this to genuinely disrupting education as opposed to simply expanding it to new people or getting rich fixing or exploiting one of its many manifest inefficiencies or absurdities. I grow curious about how someone who’s not very old—I’d guess late twenties or early thirties—ends up helping Peter Thiel invest money. So I ask, and Nolan’s story proceeds from undergraduate and graduate degrees in aerospace engineering at Cornell to a job working for another formidably smart and unconventionally minded guy, Elon Musk, who founded PayPal along with Peter Thiel. Musk used his vast PayPal fortune to start three different companies, including Tesla motors, which makes high-performance electric roadsters that Harvard’s founding of edX smacked of an industry leader finding itself in the unfamiliar position of being left behind. are currently owned by the likes of Matt Damon; a solar energy company; and SpaceX, which recently made its first flight to the International Space Station and that aims to reduce the cost of carrying stuff into space to roughly one-tenth that of NASA’s shuttle. The scale model of this rocket is what you see in the waiting room of Founders Fund. I ask Scott which job is harder: rocket scientist or venture capitalist? He smiles and says it depends. What exactly did he do for SpaceX? I ask. “Do you really want to know?” he replies. Sure—it’s been a long day, my head is swimming, and people keep comparing start-up investment to “building a rocket and lighting the fuse.” So he walks over to the whiteboard that makes up the entire wall of the conference room and deftly sketches out the inner workings of a rocket engine, showing what happens when thousands of gallons of rocket fuel are sprayed into a chamber of fire, thus igniting and creating fantastic amount of force, the eddies and whorls of which need to be predicted and calculated in minute, down-to-the-millisecond detail, so that the force can be directed down through the closed chamber in which 42 September/October 2012 the initial combustion occurs and out the bottom of the rocket in the form of enough thrust to take something the size and weight of, say, a telecommunications satellite, up and away from the gravitational bonds of our planet. Any flaws in design or misunderstanding of the precise nature of the whorls and eddies result in what Scott calls a RUD—a “rapid unscheduled disassembly,” meaning the rocket blows up. This is, in and of itself, a design challenge daunting enough to keep an engineering geek in bliss. And there’s more. The whole point of SpaceX is to make space flight both reliable and cheap. You can get to cheap with cheaper materials—but cheaper might mean weaker and less reliable and thus more likely to cause a RUD. So the real holy grail is a more efficient use of fuel to create thrust. The amount of thrust needed to liberate X amount of weight from the Earth’s gravity well is a brute math problem. It’s inescapable. And, crucially, as Scott explains it, when the rocket is sitting on the launching pad, most of the weight is fuel. Most of the weight is fuel. That stays with me, even after we finally leave Founders Fund, dodging the sprinklers again, and I catch a taxi a few blocks from the gates of the Presidio and head back to SoMa and my hotel. Because when most of the weight is fuel, Scott explains, a reduction in the amount of fuel you need to create thrust increases the payload weight you can move from Earth into orbit along a logarithmic scale. It’s not a linear, one-to-one thing. The less fuel you need, the less fuel you need. It’s exponential. This, I realize, is pretty much what’s happening to the basic math undergirding the Silicon Valley economy and, with it, the likelihood of higher education encountering some kind of dramatic disruption at the hands of a Musk-like figure. As access to the Internet grows and the cost of everything technological moves toward zero, the amount of money needed to start a company that can grow to scale and just possibly change the world—that can go from 0 to 1—drops along the same kind of exponential scale. When does that cost become functionally indistinguishable from nothing? In the admittedly much less complicated business of photo sharing, it got there nine hours before I arrived at Founders Fund. That’s Instagram, the billion-dollar company that consisted of nothing more than a handful of ramen eaters (on the day it was purchased, Instagram had fewer than twenty employees) armed with ergonomic black chairs, wi-fi, and MacBook Airs. During a meeting on Sand Hill Road, the fabled home of Silicon Valley venture capitalism, one investor told me that the basic model of firms like his making huge startup bets was ripe for disruption. A new breed of venture firms has taken to investing small amounts in start-ups, in the range of $25,000 to $50,000. These firms recognize that the cost of starting a new company

Washington Monthly - September/October 2012

Table of Contents for the Digital Edition of Washington Monthly - September/October 2012