Please don't presume that I'm confused. I've worked to develop a fairly good sense for when I don't understand, and I believe (even if I'm not completely certain) that Thiel, here, is conveniently ignoring the most important counter-arguments to his thesis.

First, I'd like to note that I agree with Thiel about the value of examining popular assumptions concerning the costs and benefits of competition v.s. monopolies. The question of whether entrepreneurs are intrinsically driven, or if instead they actually require rewards in the hundreds of millions (instead of mere single-digit millions) is an important and reasonable one.

According to the notes, he claims monopolies are better for everyone ("Perfect competition is arguably psychologically unhealthy. Every benefit social, not individual.") He does not, however, note for whom such competition is psychologically unhealthy, nor does he address the psychological impact to the victims and perpetrators of the anti-social, value destroying behavior that monopolies inevitably engage in (e.g. the closed standards of MS Office; the falsehoods marketed to physicians about in-patent drugs; etc.).

Since it makes little sense to engage in exegesis from hearsay, I'll try to be as charitable as I can with what appears to be Thiel's principal claim: that perfect competition is unhealthy for entrepreneurs, that competition is a "race to the bottom", and that the vast majority of the benefits are social rather than individual."

Throughout this section of his lecture, Thiel gets considerable leverage by creating a false dichotomy between monopolies and pure competition. For example, his claim Apple is a monopoly may immediately make his Stanford audience sympathetic his pro-monopoly position, but this does not change the fact that Apple, decidedly, is not a monopoly -- certainly it's no more a monopoly than, say, the French Laundry (a restaurant that charges $270/head, sans wine pairings). Monopolistic competition is not perfect competition, but it's not a monopoly, either.

Continuing in the effort to be as charitable as possible, it seems that Thiel, here, is at best being "hazy" as to the costs and benefits of monopolies v.s. competition. On the one hand he seems to be claiming that perfect competition is worse and monopolies better for everyone ("Monopolistic firms can also conduct better long-term planning and take on deeper project financing, since there’s a sense of durability that wouldn’t exist in perfect competition where profits are zero."). But I suspect, were he pressed on this position, he would equivocate, saying that his perspective is that of the individual entrepreneur. Come on, Thiel: cui bono?

While Thiel seems to be claiming that durable, monopoly-level rewards are required for the psychological well-being of entrepreneurs, Thiel himself claims that money is a poor motivator.

But Thiel's biggest omission is perhaps in failing to give credit to the benefits of a highly competitive (but far from perfect or pure) market. It is only thanks to extreme competition that Apple can manufacturer iPads for $300 in the first place. Wal-Mart's (and Apple's) power and profits are both derived from competition among their suppliers.

Ironically, PayPal itself serves as a strong counter-example to Thiel's claim. Was PayPal's monopoly necessary in order to support the service it provides? Would those running it have been adequately compensated if there had been more competition? On the whole, have consumers been better served by a monopolistic PayPal, or would everyone have been better off (in total value and in rate of growth) if there had been quickly agreed-on open standards for online transactions? Was the near monopoly of Internet Explorer a boon for the internet? Has TicketMaster's monopoly been a net benefit?

Contrast this with the markets in which competition is fierce -- in Hollywood, in web design, in chip manufacturing. In meme generation, in indie music and art, in blogs. Do we see a lack of innovation in these areas? Apart from a lack of out-sized rewards, and the poor "psychological health" of the participants, where is the downside? (... and why Thiel seems to believe that we should treat mental health problems by propping up monopolies is a question only he can answer).

Apart from Thiel's recommendation that we ought to have businesses doing something that other people aren't, what are we supposed to take away from his advocacy of monopolies? Should entrepreneurs advocate the dismantling of anti-trust legislation? When they end up running large companies should they advocate for closed data standards? To what kind of ethics should business owners adhere?

Yes, Peter Thiel is a brilliant and innovative thinker. But when it comes to his claims about economics his convenient notions crumble under slightest weight of objective scrutiny.