Thiel’s doomsday predictions also prompted an unusual request. In preparation for a summer 2000 board meeting, Thiel had asked Musk if he could present a proposal. Musk agreed. “Uh, Peter’s got an agenda item he’d like to talk about,” Musk said, handing the reins to Thiel. Thiel began. The markets, he said, weren’t done driving into the red. He prophesied just how dire things would get—for both the company and for the world. Many had seen the bust as a mere short-term correction, but Thiel was convinced the optimists were wrong. In his view, the bubble was bigger than anyone had thought and hadn’t even begun to really burst yet. From X.com’s perspective, the implications of Thiel’s prediction were dire. Its high burn rate meant that it would need to continue fundraising. But if—no, when—the bubble truly burst, the markets would tighten further, and funding would dry up—even for X.com. The company balance sheet could drop to zero with no options left to raise money. Thiel presented a solution: the company should take the $100 million closed in March and transfer it to his hedge fund, Thiel Capital. He would then use that money to short the public markets. “It was beautiful logic,” board member Tim Hurd of MDP remembered. “One of the elements of PayPal was that they were untethered from how people did stuff in the real world.” The board was uniformly aghast. Members Moritz, Malloy, and Hurd all pushed back. “Peter, I totally get it,” Hurd replied. “But we raised money from investors on a business plan. And they have that in their files. And it said, ‘use of proceeds would be for general corporate purposes.’ And to grow the business and so forth. It wasn’t to go speculate on indices. History may prove that you’re right, and it will have been brilliant, but if you’re wrong, we’ll all be sued.” Mike Moritz’s reaction proved particularly memorable. With his theatricality on full display, Moritz “just lost his mind,” a board member remembered, berating Thiel: “Peter, this is really simple: If this board approves that idea, I’m resigning!
Jimmy Soni (The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley)