The PayPal of today—a convenient means of paying for the antique cocktail shaker you scored on eBay—bears only scant resemblance to the company's early, proto-Bitcoin vision. "Peter's goal was very subversive and disruptive," says Book, whom Thiel tapped to be the company's financial-systems manager and who is now executive vice president of operations at the conservative news aggregator WorldNetDaily. "He wanted to introduce a currency that wasn't tied to a nation-state." Early fund-raising presentations trumpeted the company's mission as "enabling monetary sovereignty," according to Howery. Company T-shirts proclaimed THE NEW WORLD CURRENCY. Thiel believed "that people should be able to store their money in any currency they wanted, without fear of governments devaluing it," Howery says. Here again was the techno-cool libertarian ideal: a way of emancipating money from government's monopolistic clutches.

A few unforeseen things happened along the way, of course. Chief among them were 9/11 and the fears about terrorist funding that followed in its wake. "When we were thinking about this in 1999, we were still living in a different reality," Thiel says. "There are definitely ways in which it was a very successful company, but there are other ways in which that question—Could someone change the system to give people more freedom in how they spend their money?—shifted radically."

As a libertarian raid on the currency system, PayPal flopped. As a company, however, it thrived. After one of the rare successful post-dot-com-bubble IPOs, in 2002, eBay bought PayPal for $1.65 billion. Thiel pocketed $60 million on his initial $240,000 investment. "After that sale," Howery recalls, "a number of us were burned out. I went and traveled around the world for a year. But Peter took, like, a week off, then went back to work for a hedge fund."

That fund became Clarium Capital, which has proved to be the single blotch (aside from a doomed Nascar magazine in 2004) on Thiel's résumé. After an early surge that brought Clarium's assets to as high as $6 billion, in 2008, the hedge fund has floundered ever since, losing 23 percent in 2010 and 25 percent in 2009; at one point, assets were down 90 percent from their peak, forcing Thiel to shutter the fund's New York City operations and consolidate back in San Francisco. "We've got some things wrong," he admitted to BusinessWeek earlier this year. "But over time, I think we've gotten more right than we've gotten wrong. . . . It's not the right thing to focus on a six-month horizon. The future happens over a very long period of time." That may be so, but as Forbes noted earlier this year, "It's as if he were so fixated on his vision of the future that he couldn't let go, even in the face of market realities."

Thiel's reputation for contrarianism is well founded. Forever the chess player, he revels in trying to outthink the competition, in devising the unexpected move—the seemingly absurd but devastating maneuver that no one sees coming. "Most people think that if something's written, if it's shared by the majority of people, then you'll look like a black sheep for challenging it," says his friend Gary Kasparov, the Russian chess grandmaster. "Peter doesn't have any problem with that." A devoted J.R.R. Tolkien fan from an early age, Thiel is equally enamored with Kirill Eskov's The Last Ringbearer, a retelling of The Lord of the Rings in which Sauron is a beleaguered victim and the elves are bellicosely bent on world domination. "Gandalf's the crazy person who wants to start a war," Thiel explains, "and Mordor is this technological civilization based on reason and science. Outside of Mordor, it's all sort of mystical and environmental and nothing works. Anyway, it's really clever." He's willing to cite Howard Hughes as a role model, with certain caveats ("It's not worth emulating him . . . all the way to the last years in Las Vegas"): "There was this incredibly powerful visionary aspect, a sort of risk-taking, a new-frontier aspect to Hughes that it would be good for us to look up to without having misgivings about how it all ended."

Thiel may never succumb to the Aviator's fate, but like Hughes, he's rigorously guarded about his personal life. After Owen Thomas, as the editor of Gawker Media's Silicon Valley satellite, Valleywag, outed him in 2007 with a post titled "Peter Thiel Is Totally Gay, People," Thiel bided his time then struck back, calling Valleywag the "Silicon Valley equivalent of Al Qaeda," an analogy that Thomas says he still doesn't understand. A friend of Thiel's, however, says Thiel remains "conflicted about" the juxtaposition of his homosexuality and his Christian religious beliefs. If that's true, Thiel appears to have made some peace with himself since being outed. He's a donor to GOProud, a gay Republican organization, and last fall he hosted its "Homocon 2010" at his apartment overlooking Union Square in New York City, where guests were ushered into the elevator by beautiful young men wearing FREEDOM IS FABULOUS T-shirts and treated to an uproarious speech by Ann Coulter.