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Why Peter Thiel's Philosophy on Hiring Is Hurting Silicon Valley In a talk at Columbia University, the PayPal co-founder and venture capitalist discussed why startups need to go 'beyond professionalism.' But that may be the problem.

By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

PayPal was started by two groups of friends. Max Levchin had attended a lecture by Peter Thiel at Stanford University in 1998, and the next morning pitched him his idea for a startup. Thiel was immediately onboard, so much so that he decided to join Levchin as a co-founder.

"It basically started by hiring all these people in concentric circles," Thiel told Fortune in 2007. "I hired friends from Stanford, and Max brought in people from the University of Illinois." According to the article, they were looking for guys with a specific set of criteria: competitive, well-read, multilingual, with a proficiency in math. Men, in other words, like Levchin and Thiel.

"The goal Max and I had when we started PayPal [was] we wanted to create a company where some incredibly strong friendships would be formed," Thiel recalled, speaking this past Wednesday at Columbia University to promote his new book Zero to One (Crown Business, 2014). "We didn't only hire our friends, but [the question] was: Could we be friends with these people?"

Related: More Diverse Corporate Boards Leads to Less Risk Taking

This mentality – hire people you'd want to grab a beer with after work– is now de rigueur in Silicon Valley, a place where company culture is often touted as the key to success. Last week The New York Times ran a feature on the rise of 'tryouts' in the startup world, wherein job candidates are required to work for a week or two on a trial basis so the company can determine whether or not they are a good 'cultural fit.' "Now we're at about 150 employees, and just about every single one of them has gone through a trial week," web-hosting startup Weebly's CEO, David Rusenko, told the outlet. "It's turned into a cornerstone of our culture."

On the surface, hiring for 'cultural fit' is pretty innocuous. Early-stage startup employees exist in tight proximity, and work long hours: getting along is essential, and the existence of a 'company culture' appears to help on this front.

Related: Apple Fares Better in Diverse Hires, But There's More Work to Be Done

And yet, if you pause to consider the term, it's dangerously slippery and hard to pinpoint. What does 'company culture' mean, exactly? In Silicon Valley and the tech space more generally, it appears to mean hiring a workforce that looks and acts eerily the same.

Diversity is often thought of in terms of gender and ethnicity, but it runs deeper than that. If companies only hire people with the same educational background, the same hobbies, or the same opinions on big issues, diversity is lost. The pervasive and often unquestioned idea that companies can and should hire for 'company culture' or, as Thiel advises, hire based on whether or not a candidate is 'friend-material,' is the enemy of diversity, both in terms of ethnicity and less tangible traits.

Thiel, for example, implied that he wouldn't really consider investing in a company whose founder strayed too far from typical 'startup' wardrobe. "I think that if you are pitching a startup in Silicon Valley and you're wearing a suit, it looks like you're bad at sales and worse at tech," he told the audience.

Related: Why Inclusive Workplaces Drive More Innovation and Better Performance

Evaluating candidates by whether or not their clothing fits into the standard Silicon Valley uniform or by how well they'd chum it up with the company's founders is exclusionary and leads to a homogenous workplace. (Research indicates that we tend to form friendships with individuals who remind us of ourselves, with whom we share similar experiences, hobbies, even clothing choices. For better or worse, this is human nature; it does not, however, make a solid hiring principle.)

Unfortunately, this tactic isn't often presented as discriminatory; instead, it's extolled by one of Silicon Valley's most prominent investors to a room full of aspiring student entrepreneurs.

In a recent essay for Quartz, former Facebook engineer Carlos Bueno, who noted he probably couldn't get hired today because he doesn't fit the 'startup guy' mold, said it best: "We've created a make-believe cult of objective meritocracy, a pseudo-scientific mythos to obscure and reinforce the belief that only people who look and talk like us are worth noticing."

Silicon Valley, you can do better.

Related: When Company Culture Becomes Discrimination

Laura Entis is a reporter for Fortune.com's Venture section.

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