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Peter Thiel on why Apple is a ‘good monopoly’

Entrepreneur and author of the new book, “Zero to One: Notes on Startups, or how to Build the Future”, Peter Thiel, makes a strong case against the popular concept of free market capitalism, but he also wouldn’t invest in China due in part to the Communist party’s control and the opaque business environment.

So what does he favor? Monopolies. But only “good monopolies.”

In his book, Thiel explains what he defines as “zero to 1” this way:

                              “Doing what we already know takes us from 1 to n, adding

                               more of something familiar. But every time we create something

                               new, we go from 0 to 1.”

Thiel says, in no uncertain terms, that capitalism is the enemy of creativity, and creative monopolies aren’t just good for society, they are also a powerful way to make the world a better place.

In an interview with Yahoo Finance’s Jeff Macke, Thiel said, “I think there are good monopolies when they create something new for the world.” He went on to explain that, “Monopolies become bad when they act as rent collectors or tax collectors.”

Good Monopolies

As an example of a “good” monopoly, Thiel offers up Apple (AAPL). “When Apple creates the iPhone, which didn't exist before-- it has a monopoly: the only smartphone that works for a number of years, and it deserves to have that monopoly,” he says. “That's good for society as a whole. I think the zero to one type companies - that are these breakthrough technologies that change the world are the ones that people should always aim to build.”

In addition to Apple, Thiel offers Microsoft (MSFT), Google (GOOGL) and Facebook (FB) as examples of companies that took the world from zero to 1 with fresh, innovative ideas.

Now, despite rapid improvement in information technology, Thiel believes the world has entered a period of technological stagnation.

Don’t invest in China

China is racing headlong into technology, making a splash last week with the biggest IPO in U.S. history when e-commerce giant Alibaba (BABA) went public on the New York Stock Exchange. (Yahoo is one of Alibaba’s biggest investors.) But while Thiel does believe Alibaba will be a “successful monopoly business,” he will not be rushing to invest in China.

“China thinks of information technology as less important economically and more important politically, and so all the large Chinese internet companies are very heavily tied in with a politics in China,” he said. “I personally would not invest.”

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