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Thiel: We disagree on the weighting. You get to very different political outcomes. I think thats what actually happens a great deal: People dont actually disagree that much on the issues. They disagree on how important different issues are, how to weight them.
Should Facebook go public and when?
Thiel: If you want to segue back to the political economy of it, its that people are too focused on the economics question and not enough on the technology question. So we have lots of debates in the U.S. about whats going to happen to the economy in 6 months, 12 months: Are we going to have a double dip recession? Are we going to have a recovery in 2012? Is there not going to be? But not very much about whats going to happen over the next decade, which is more of a tech question.
Unirly tried to avoid?
There is a way in which a lot of libertarian Democrats and libertarian Republicans may not disagree about specific issues, but disagree about how heavily to weight various issues. Its more of a weighting disagreement than an issue-by-issue disagreement. This issue, this civil liberty issue, gets a weighting of 10. The marginal tax issue gets a weighting of 1.
Untethered tech: Wireless sensors monitor brain wavesIt used to be that electroencephalography required users to sit still for a computer to track the brains impulses. New advances have made that technology wireless and mobile.
My sense is that its very overvalued if you take into account that most of it isnt about learning. Its about credentialing. If you take into account that people are amassing this massive amount of debt, which destroys a lot of future optionality in terms of what they can do with their careers and their lives. Parenthetically, its very hard to get out of debt. Its worse than housing in the sense that a house you can always walk away from. Debt is typically nonrecourse.
Thiel: I self-identify as a libertarian. I dont know if that makes me a libertarian either. I describe myself as a libertarian politically.
Law would probably be an interesting one to look at. Look at what fields are still stuck in the 19th century, and could they be automated in powerful dramatic ways.
I would say the way the countectual narrative was made in the 1990s, however, is very different. People would say that there was tremendous value in having liquidity. The back of the envelope estimates I remember hearing in 1998, 1999 is that it it roughly doubled the value of your company.
I think that probably the worrisome versions deal with things like food production. The green revolution of the 50s and 60s and 70s increased food crop yields by about 125 percent from 1950 to 1980. Theyve only gone up by 46 percent since 1980, slower than population growth in the last 31 years.
Apple, Google under scrutiny over no-poaching chargesAt issue is whether some of the titans of tech conspired not to hire each others employees. Attorney Joe Saveri argues the alleged conspiracy kept workers salaries artificially low by stifling competition.
As a first ballpark, its Amazon to LinkedIn. The valuations for IPOs have gone up by a ctor of 10. You need to have a company that was 10 times as valuable as it was in the 90s, maybe 7 times after inflation, for it to go public.
Thiel: I think its at least worth thinking about why the question is different. There may be some differences, but I think there are some very interesting parallels between the two questions. And I think thats what attracted Patri, as an engineer working at Google, with libertarian interests and an interest in technology. He saw the two as very parallel. And I tend to think there are a lot of parallels it raises.
The reason the seasteading questions been so interesting is that a lot of people do think that we can do much better as a society. And if you run the thought experiment, could we be doing things better in our society, people may disagree on the particulars, but an awful lot of people think things can be done dramatically better.
Thiel: ...It depends on how you define the tech industry. So if we define it as just the Internet, the amount of regulation has been relatively modest to date. We can be hopeful that it will remain modest. We can have different views on that. But Id flip the whole causation around, and say the reason the Internet has been the one area of technological growth is because its been the one unregulated area.
Yes, there was a private equity illiquid secondary market. But if you had a liquid public market, there were r more investors. Youd be more comfortable buying a share in a company if you knew you could sell it the next day than if you knew you might not be able to sell it for a few years. There was a liquidity premium attached to having a company be public. And in the late 90s the ballpark numbers that one heard was that the liquidity premium was 100 percent.
Youre saying that journalists might be economically illiterate?
The one that I think is a very good market price that people arent paying attention to are 10-year TIPS yields. This is a market thats bigger than Greek bonds or European bank credit or gold. It is the Treasury inflation protected securities. Its hundreds of billions of dollars. Its basically the yield youre guaranteed to get after inflation. As of today, the yield on 10-year TIPS is zero.
What regulations will screw over the tech industry? Things like data retention...
Thats not the view we have anymore. The LinkedIn IPO, which was a reasonably high profile company that people were pretty aware of, two months pre-IPO the secondary valuation was $2.5 billion. It went public at $5 billion. Its worth quite a bit more since its IPO. You could certainly use LinkedIn as a data point for the 90s version of this rather than the 2011 conventional wisdom. The liquidity issue is a very big issue for going public. There are all these other reasons that militate against it.
Is there a way to somehow recapture this? Even if you dont want to move to a boat or platform, which may or may not get built and may or may not be a pleasant place to live in, it is nevertheless a worthwhile question. Whether there are elements of our society that can be refounded, or whether its like were living in a company that was created in 1789 where very little has changed. It would be interesting to look at what companies were started in the late 18th Century, and which ones in that category are still extremely dynamic and entrepreneurial? If they are, theyve probably changed radically.
In May, the Thiel Foundation announced the first 24 recipients of a fellowship that awards $1corporate bond quotes Talking tech with Peter Thiel, investor and philanthropist (Q&A00,000 each to youth under 20 years old--essentially encouraging them to drop out of college to become entrepreneurs. TheFounders Fund, where Thiel is a managing partner, has invested in aerospace, robotics, and biotechnology, in addition to consumer Internet companies including Slide and Spotify.
I likeTyler Cowens ideathat were in this prolonged period of very slow growth. One of the ways to ask the economic question--you can always have opinions about whats going on in the economy that are independent of the markets--but you could just start with what the markets are saying. Today the markets are saying theres a 91 percent chance that Greece deults in the next five years. The spreads on many European banks are uncomfortably high. Italian, Spanish sovereign, uncomfortably high. The gold price of $1,850 an ounce is probably telling you something about people having no good ideas of what to do with their money. These are all these very straightforward stories about these various prices.
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You have these questions about the point of origin. There is a sense where you have a lot of freedom at the point of origin. The point where you start something new you have a great deal of freedom. Once things are set, you have less freedom. Going back to the origin, back to the founding moment, is very, very important. The founding moment of a company is important. The founding moment of a country is important.
One scenario is more economic. One is more environmental in nature. In practice these two things have gotten hopelessly confused and conflated. As the technology and politics have gotten confused, the economics without a concern with the environmental stuff has gotten confused.
How did you reach your political views?
And air traffic control, which is still using 1950s-era technology.
If I recall your investment portfolio correctly, you stayed away from this.
Its also easier to say: Look! People areorganizing on Facebook,or Twitter.
Thiel: I think a lot of the engineers tend to be pretty libertarian in Silicon Valley. A lot of the nonengineering people tend to be more Democratic, if I had to give the cultural split.
There is a certain lack of freedom that we have. The founders, when whey wrote the U.S. Constitution in 1789, had the freedom to set all these basic parameters. They got most things right. There are a few things we might not entirely agree with. In California, we have two senators. Alaska has two senators. Is that really a completely just system? Its not something that can conceivably be changed at this point. There is a certain lack of freedom we have in thinking about our society thats very different from what the founders of the U.S. enjoyed.
Even the people at the very top who get into the best colleges--there is sort of the great expectation that this will set them up for life. Im not sure thats correct. When youre 17 or 18 and if you get into a very good university, its important to have the perspective that youre still at the very beginning of your life and youre just getting started. The idea that you have burned out from all the piano lessons and school sports and community service and SAT prep classes that you had to take from grades K through 12, thats probably not even healthy.
Thiel: I think its a bad idea. Theres a looking-backward and looking-forward question. Looking backward over the last decade, the question is how badly clean tech has worked out. I think theSolyndra ilureis--you normally cant read too much into one company iling. It certainly is dramatic. The amount was large. It was st. The expectations changed pretty quickly.
Althoughfederal student loans...
How worried are you about the economy? It seems like we never got out of the recession--can we call it a small-D depression yet?
Why have so many prominent figures in Silicon Valleyembraced the Democratic Party? Is it revulsion against the Bush era? Why dont you have more libertarians who are out of the closet?
You can believe that the role of government should be reduced without going anywhere near the extreme point that it should be eliminated altogether. We have so much government in our society that you can reduce it a lot. Hong Kongs not really libertarian in the purist sense but from a 15 or 18 percent marginal tax rate, (going in that direction) that would be a very different country from what the U.S. is today.
corporate bond quotes Talking tech with Peter Thiel, investor and philanthropist (Q&A,Peter Thiel, speaking at a recent event in Aspen, Colo.
There are all these other areas that we dont even think about as technological areas because theres not been a lot of progress. And thats because regulations have badly stalled it out. Energy is probably the most dramatic. There probably are versions of this that extend--I believe there is a big set of issues in biotechnology, where it could be moving st if its less heavily regulated.
What are you investing in now? What are you investing in next?
So we need entrepreneurs starting not just companies, but countries?
I think its also that the left in the U.S., the Democratic Party, is not socialist in the other sense in that there is actually no plan for the future. What socialism and communism was characterized by were five-year plans, these development plans of what youre actually going to do. Whats remarkable is how little of a plan theres going to be.
We focused on inventor-engineering people, who had passions about specific ideas and wanted to build them out. What struck me when pulling this together is how widespread the anxiety around education is. Which is why I think there is a bubble and its also close to breaking. It is like housing in 05 and tech in 99. Were very late in this bubble.
Most of the issues, if you had various libertarian-type questions, Id tend to come out on the correct side of all of them. You might be smart enough to come up with some where I would not.
That includes company executives, it includes people who are lawyers, it includes people who work in other capacities, for all sorts of complicated reasons. The actual Silicon Valley demographic, the engineering part of it, is actually quite libertarian. The nonengineering part is more demographic. I think theres a pretty big split between the technical or engineering people and everyone else.
My top, my only candidate in the U.S. is education as the be-all and end all. It has become the solution to all of our problems. And so my candidate is that there is a higher-education bubble. If you look at the costs, theyve gone up a ctor of four in real terms, over 10 in nominal terms. The qualitys probably about the same. And so there is a very interesting question about whether its overvalued, and the intensity of belief about it is very, very high.
Probably the area that Im most confident of that this will happen--its worth exploring many different areas and weve looked at everything from space to robotics to bioinformatics--is the next generation of computing and where the information age gradually gets applied to more and more different disciplines. Weve looked at a lot of medical IT companies. Its very screwed up. Its been screwed up for a long time. It doesnt mean that its going to get fixed now. But theres an argument that this is a good time for this to start shifting. Maybe medical records will finally go online, doctors will move from the 19th to the 21st century, something like that. Weve looked at applying computers to education, applying computers to health care, applying computers to X where you fill in the blank for the field.
Nanotech - The Circuits Blog
If you were earning 4 percent after inflation, thats roughly like the economy is growing 4 percent a year. If youre expecting to earn zero percent after inflation, to a first approximation that reflects an implicit view that theres going to be zero percent economic growth in the U.S. for the next decade. That strikes me as a shocking market ct that people should make much more of. The thing that strikes me as different from the 30s is that in the 30s, the collapse was much more cataclysmic. There was no social safety net. You had much crazier political ideologies that came to the fore.
I dont think most of the economy should be planned. But I think to the extent youre going to have large government, it would be good if the government should be planned rather than unplanned. If youre going to invest in alternate energy, you should have a plan of what kind of alternate energy you should be investing in, and you shouldnt be randomly buying lottery tickets. Planning is preferable to buying random lottery tickets or politically motivated lottery tickets, which is the concern with the clean-tech stuff. Thats levels worse than having a rigorously centrally planned economy a laKrushchev.
Q: The stimulus legislation spent something like $120 billion on clean-energy tech. Googles previous director of climate change, an assistant secretary of energy under Clinton,called for a new government agencyto fund clean-tech companies. Good ideas or corporate welre?
Would you agree?
The most opposed, the opposite pole of left-wing totalitarianism, is libertarianism. Thats what naturally attracted me to that position.
You endorsed Ron Paul for president and youve written for theCato Instituteand have been affiliated with thePacific Research Institute. Does that make you a libertarian?
In ct, we have a very cynical public at this point. People dont believe in very many things. If you think one of the necessary ingredients for a public is to have an intense belief, the question would be: What do people believe in as intensely today as they believed in housing in 2005 or technology stocks in 1999? Maybe not technology, but technology stocks.
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Thiel: Its gone negative in the last few months. The five year is at something like minus 90 basis points. The 10 year is zero. What the TIPS curve is telling you on a risk-free investment, you can expect zero percent return after inflation for the next decade. Theres not a lot of inflation thats being predicted. The 10 year bonds are at 2 percent. Were basically predicting an average inflation rate of 2 percent for the next decade. So its not clear that theres a worrisome buildup in inflation happening.
That being said, with respect to the energy issue, the what is that there has been a remarkable ilure as well as a reduction of expectations. Its both a backward-looking ilure--if you look back over the last 40 years, there has not been a great deal of progress. You look at real oil prices, today theyre greater than they were during the Carter catastrophe of 1979-1980. If you look at oil dependency, energy dependency, its way above where it was anytime during the 70s in the U.S. You can look at things like the mous Simon Erlich bet. [Ed. Note: awell-known wageron the lling price of commodities.] Erlich would have probably been winning for the last quarter century, something like 1985 onwards. Thats again not just energy but a ilure of innovation on a lot of the upstream commodities and resources.
SAN FRANCISCO--Peter Thiel believes technology will make the world a much better place. Hes simply frustrated at how long its taking.
Cutting Edge
Its a very parallel question that comes up when people start companies versus working in large existing companies. In a large existing company there are set ways things have happened. Sometimes theres a sclerotic bureaucracy thats taken things over. You can change things at the margins, but you often cannot change the fundamental bric. The reason people start new companies is because theres a need to have a certain amount of freedom to explore doing new things. Thats why youd start a new business. Theres a question: If you can start a new business, why can you not start a new country?
Declan McCullaghDeclan McCullaghis the chief political correspondent for CNET. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other Peoples Money column for CBS News Web site.
Thiel: Its all a little bit complicated because it all involves these countectual debates about what would happen if companies were public and if they were private, and in practice you cant do the experiment both ways.
But the public at large is not really involved in this. There arent hundreds of IPOs like in the 1990s. If youre a dentist in New Mexico, you cant just call up your broker and buy a portfolio of 50 different Web 2.0 stocks. Theres no sense in which the public is involved.
What attracted me to seasteading is, its linked to the technology question. We have this question about: Where in the world can one do new things? Theres a technological version of that, and theres also a Where can we build new communities and new societies? All the critiques of utopianism apply to seasteading, just as they do to a lot of people in the tech industry. At the same time, I think theres also a problem of giving up on all utopian ideas and having no theories about how things can be different or better. And saying that, This is how things are, nothing can ever be different or better.
Youre quoting politicians, though, and their promises...
Thiel: Its certainly at least a Great Recession with a capital G and a capital R. I think its a depression even if its not the Great Depression. The 30s was the Great Depression--it wasnt just a depression. I think it definitely puts the lie to the notion that there are no economic cycles left and we were in a world of theGreat Moderation. That was sort of the 2005 optimistic view that people had. It turns out that its more like a Great Stagnation.
You dont have to name names.
Thiel: Yes. I think there is an incredible ith in capitalism--that you can put any burdens on business, and people will just work. Its like people are hardwired to make money and theres nothing you can do to change that, irrespective of politics. In that sense it is an incredible ith in capitalism that I dont quite share.
Thiel: The threshold for IPOs has gone way up. Amazon.comwent public in 1997at a market cap of $460 million. LinkedIn is more paradigmatic. There are some companies that do it, but now you go public when you have a valuation of something on the order of $5 billion. Thats what people are expecting around the bigGroupon,ZyngaIPOs, assuming those happen.
Thiel: Its certainly been weirdly exaggerated. Ive been a supporter of (Seasteading Institute founder) Patri Friedman. I knew his grandther Milton Friedman. His grandsons been very interested in this question about how does one start new communities, where would one start one? Do you look at oceans? Do you look at other parts of the world? How do we get back to this question of the frontier?
The question about a tech innovation slowdown, the remarkable question is really why this question is not at the suce. If you were to take a very Socratic method, and start with just what are the common opinions people have, not in Athens but in America, the common opinion is that things are on the wrong track. That their kids, that the next generation, will not be as well off as the current generation. These common opinions, while they may be right or wrong, are completely at odds with the sort of techno-optimism that is so prevalent in these discussions. And its at least worth asking why are people wrong to think this.
I do think if you get the economics wrong, you can screw things up very badly. So its not like you can do without (an economy). But at the same time, there is a way in which this focus on economics has distracted us from these technological and regulatory-type questions, which are microeconomic in character but I think are best thought of as technological in nature.
As a society, to come back to where we started, we dont think of most things as being technological. We think of technology as being areas where theres a lot of innovation happening. In most areas of our society there hasnt been a lot of innovation. We dont think of airplanes as technological anymore, even though in the 50s or 60s, people did, because you went from propeller planes to jet planes to the Concorde in the course of 20, 25 years. At this point theres been no meaningful change in air travel. Its gotten slower since the Concordes been decommissioned and because of the nightmarishly low-tech airport security measures that we have post-9/11. You can think of travel as a very specific example of technological ilure.
You oncetold The Wall Street Journal, referring to President Obama: Im not sure Id describe him as a socialist. I might even say he has a and touching ith in capitalism. He believes you can impose all sorts of burdens on the system and it will still work. Is that still true?
The thresholds gone way up. What that means as a venture capitalist is that you have to invest in these companies and assume youre going to be holding these for a very long time. And that has both good and bad things to it.
Its also that a lot of the libertarians tend to be socially liberal, fiscally conservative, and so if youre in that quadrant, which set of issues do you prioritize? If you prioritize social issues, you tend to become Democratic. If you prioritize economic issues, you tend to be Republican.
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Thiel: Education loans are fully recourse. And they typically, post-2005 with the bankruptcy law changes,even survive bankruptcy. So the education bubble is the one that strikes me as very serious.And I think its close to the point of breaking with the sort of long recession that this country is in, where if people are graduating from college and theyre not getting the really good jobs--the high paying jobs that were the implicit quid pro quo for the ridiculously high costs--thats starting to call the whole thing into question.
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Youve got personal information scattered all over the Web and in company databases. But how private is your private information, and how much does everyone else know about you? CNETs Declan McCullagh and others keep you in the loop.
Is this why you created the20 Under 20 Thiel Fellowship, which gives $100,000 grants from the Thiel Foundation? Did you intend this to be a bit of a poke in the eye to the education establishment?
Apple
At the same time this has also, and quite naturally, led to a reduced set of expectations about the future. Nixons1974 State of the Union speechwas, basically, we would make the U.S. 100 percent energy independent by 1980. Obama, 2011, its one-third oilindependence by 2020.
And thats because I think that weve defined technology as being just the Internet.
The Warren Buffet rhetorical point is his$34 billion investmentin late 2009 in a railway, the single biggest investment by Berkshire Hathaway outside of finance. It is an all-out bet against clean tech. It was described as a bet on America, but 40 percent of what gets transported on railroads is coal. You have to look at Buffetts railroad investments as an all-out bet that clean tech is going to il.
Thiel: The how was basically free market, anticommunist. Communism seemed like a bad thing in the 80s. A lot of it was anchored in anticommunism, and the view that it was very bad because there were no free markets and there were no civil liberties. That was probably formative in the late 70s and early 80s. As I became politically aware, the first thing I became aware of was the great evil of totalitarianism, which at the time was primarily totalitarianism of the left.
Thiel: Its pretty high! There arent very many bubbles. Because I think to get a bubble, you need to have something thats overvalued and thats believed with incredible deep intensity by a lot of people. I dont think theres a bubble in Web 2.0. Its possible that companies are somewhat overvalued, Im not sure theyre much overvalued--I dont want to speculate too much on valuations here.
Thiel: Its not exactly clear to me whether Paypal could be built as a business today. That may be too strong.... As a startup, these kinds of regulations are much more onerous. Paypal was able to be built at a time that was pre-9/11 on a regulatory basis. Post-9/11 it would be much more difficult to build. It makes the franchise more valuable. I think no competitors will ever be built.
Thiel: I cant answer that.
I think Google did a very good job by staying private as long as they did. It was a critical piece in Googles winning the search wars in 2002 to 2004. Nobody paid attention. The regulators didnt pay attention. Competitors paid no attention. There are all these issues that happen once companies become public companies that are difficult. Theres an argument that this is what companies should ultimately do. The correct decision that people have made in the last decade in Silicon Valley has been to try to defer the IPO process as long as possible.
The people youre giving grants to are under 20 years old--youre essentially trying to convince them to drop out of college!
Thiel: It was not actually intended as that. We didnt even think it would...
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The specific ilures is that there are all these great expectations people have at all these levels. Its people who went to subprime diploma ctories and didnt learn a thing. Its people who went to second or third tier colleges and got a diploma but worried that its kind of a dunce hat in disguise because theyre asked for the rest of their lives, Why didnt you get into a better school? We have this brutal great chain of being thats known as the US News & World Report univercorporate bond quotessity ranking system. Which ranks with brutal precision where you ll on the great chain of being. It sets you for life. Its something like a feudal caste system.
I think this is also true on the right, where most of the thinking is around the economy, and it is about reducing marginal tax rates, and things of that sort. And much less on, say, the micro, on all the regulatory issues, which are perhaps much more serious, and will have much more of a tech impact over the next decade.
CNET interviewed Thiel early last month in his offices in San Franciscos Presidio to talk about the pace of technological change, a possible Facebook IPO (hes on the companys board), and the state of tech startups today. Below is the transcribed interview, lightly edited for clarity.
Yourspeech in Aspen last monthargued that technological change was stagnating, especially in energy. Whats the solution? Is it that progress in energy is more difficult than progress in, say, chip design, so we have to be more patient?
Its a bet that were going to send coal to ships in Long Beach and send it to China to power Chinese ctories to send us stuff. Thats not the clean-tech vision of the 21st century.
Cutting Edge
But it has generally been the correct strategy for companies to defer IPOs for as long as possible. This has certainly been an area where theres been a lot of regulation,Sarbanes-Oxleystuff. But way more than Sarbanes-Oxley, theres simply a degree to which public companies are given a scrutiny that is much greater and much more heavily regulated than private companies.
Thiel: No, I dont think its a problem specific to journalists. The economic illiteracy question isnt specific to journalists.
Apple Talk
There are all these great expectations that people have around education. Theyre very different for different people. But theyre united in that the expectations are impossible to meet across the board. And thats why I think we have this broad disappointment with it. Its all the way up from the subprime diploma mills to the Ivy League schools.
The billionaire entrepreneur is best known for co-founding PayPal, and, more recently, for his very early investment in Facebook. He foundedClarium Capital Management, a hedge fund, created the philanthropicThiel Foundation, and co-produced the irreverent 2005 comedyThank You for Smoking.
I wrote aretrospectivepiece for CNET recently about how significant the post-9/11 regulatory shift was, especially when it comes to privacy.
Thiel: On the technology side, the question is always: What are the breakthrough technologies that will take our civilization to the next level? And that is the question I keep coming back to. There are certain types of things that are very underinvested in. I think people find it hard to invest in anything that takes more than a year. Anything with a long time horizon is very hard to invest in. We try to find things that represent somewhat of a quantum leap and that are a somewhat longer time horizon and have some sort of reality check against the sanity of some of the people involved in it. And how well the team dynamics work, and if the technology works, and if the market works, and things like that.
You were right about the dot-com bubble becoming a housing bubble, and maybe a financial bubble as well. Wheres the current bubble? It cant be gold. Its not high enough yet.
Could you rate the IPO market for tech startups?
Digital Media
Is improving agriculture a subject thats fit for technology? Is that a technological area? If you were to look at the Middle East issues, you could give an interpretation thats bullish on technology. Its theArab spring, ahappy byproduct of the information age.
Thiel: You have certainly a lot of different kinds of communities people would start. They could be socialist. Thekibbutz movementin Israel was people moving to a new place, and it was kind of utopian in a socialist way. It is an indictment of the left in the U.S. that people can no longer imagine any sort of utopianism of the left. And so people do not actually think of joining a kibbutz, as one example. I dont know if theres any analogue of that. Theres no reason theoretically it couldnt be any number of things.
Technically Incorrect
Thiel: I think its very easy to tell the other story: It started with avegetable dealer in Tunisia. It was a food problem. People couldnt buy and sell food at the right prices. And so we could very easily tell the food story too. Thats not the right paradigm.
Thiel: I think Ive had them mostly since I was in high school. Its changed, some pieces (moved) around, some thoughts, some issues. Its an autobiographical version of the why question.
Thiel: Im not sure its unir. Because as soon as you get to the why question, it gets much more controversial. It makes people lose sight of the what, which is the thing I want people to pay attention to. I think that if we could get people to agree that theres a really big problem in innovation, then we can have a constructive conversation on what to do about it. As soon as we fixate people on why theres been an innovation slowdown, if youre on the right you can blame environmentalism, if youre on the left you can blame Reagan and financial engineering. And we dont even get to the question of whether a slowdown has happened. Thats why Im somewhat resistant to going straight to the ideological or political question.
Theres aheadlinein the UK Daily Mail, referring to yourfinancial support for the Seasteading Institute: PayPal billionaire plans to build a whole new libertarian colony off the coast of San Francisco. OK, so wheres this colony? Or did it get a bit mischaracterized along the way?
But on most of them, Id come out on the generally less restrictive government, more capitalism, more civil liberties, and so on. You can be pretty libertarian without being a purist. The question is not whether were going to privatize roads or prisons or the military or things like that. Its directionally, theres a directional question. Is there too much regulation, is there too much government, is there too little freedom?
Thiel: But theyre reading polls. And the polls tell them what people reasonably expect. And the interesting thing is that, I think, Obama captures the zeitgeist today in the same way Nixon did in 74. And people realistically in the U.S. expected full energy independence in six years. Today they might realistically expect 30 percent independence in nine years. Theres been a historic ilure, and as a result we have dramatically reduced expectations in the future.
Thiel: It goes back to the why-things-have-slowed-down question, which is the one that Ive tried to avoid.
Thiel: It was 20 people. It was just 20 people. You have something on the order of 6 million people a year in the U.S. who graduate from high school. If youre saying that of the top 60,000, the top 1 percent lets say, are there 20 of those 60,000 who should perhaps not go to college--that does not seem like a terribly controversial statement. That the more talented you are, the more narrow the set of choices you should make? And that if youre a really smart person, the only thing in the world you can do is to go to Harvard? That certainly is an odd state for the world to be in, even though its surprisingly close to the state we find ourselves in today.
Social-network update: Facebook up; Twitter slow?Hackers did not take down Facebook today, as they had earlier claimed they would. Meanwhile, the pace of tweets appears to have slowed amid an ongoing Twitter boycott. And Twitters lawyer responds.
Its a whole complicated combination of regulatory, cultural shifts--people dont want to go public. Its not necessary to go public when youre not competing with other public companies. There arent companies people want to acquire. The M&A model has iled. Tech IPOs have a higher threshold. Tech M&A is even, it feels, more stalled out--its so difficult to get these things to work. Most of these companies do make sense as a standalone business.
Thielsunorthodox takeon philanthropy, and keen interest in the pace of technological change, led him to organize a Breakthrough Philanthropy event last year at San Franciscos Palace of Fine Arts. Just as entrepreneurs pitch venture capitalists, tech-oriented nonprofits were given a few minutes each to tell the audience why ideas like artificial intelligence, nanotechnology, life extension, and seasteading deserved their financial support.
The question about clean tech is not whether the government is picking winners, but whether the government is only picking losers. Thats the worry people have. There would be no issue with Solyndra if we had just a few things that were just working that you could point to. Even in the tens of billions of dollars, if you could get a few winners that would be worth it. It is not clear what they are. It is certainly not clear where they are on the Silicon Valley venture capital side. I think the people who invested in clean technology have a lot of incentives to talk about the winners. There has been a deafening silence.
All theKeynesian kind of thinkingsuggests that macroeconomics is important independent of the micro stuff. So it doesnt matter what the regulations are--it matters whats necessary to get the animal spirits back. It matters to print the right amount of money for the monetary policy. Get the fiscal stimulus right.
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Its gone negative in the last few years.
Thiel: You have all these areas where we dont think of problems as being technological. This is where I want to quibble with the economic illiteracy point. We think of the problem as economic and not technological. So the people we have solving all of our problems are economists. This is the dominant paradigm.
But the thing thats worrisome is not that we have deflation or inflation. Two percent expected inflation is actually very good. Its that we have no growth at all. The real yield after inflation is often, I think, a pretty good proxy for the expected growth rate in the economy.
Ron Paul got a verywarm welcome at Google during the 2008 campaign, I think especially from the engineers.
Thiel: I dont know the politics at Google specifically, but I suspect that most of the people on the engineering side would be quite libertarian. They might be Democratic in terms of political party affiliation but ideologically theyd be libertarian. The nonengineering people would mostly be party line Democratic, with all sorts of exceptions.
A self-driving car, but thankfully a BMWBMW has revealed that it, too, has entered the self-driving car arena, inserting self-driving technology in a 5 Series car.
Its striking how little one hears about clean tech on the venture capital side over the last year or so. I wouldnt say they are always the smart money. They tend to be the less dumb money. And so that seems to me to be a useful indicator. Theres a question about whats gone wrong with clean tech and a question about what goes wrong.
It was incredibly conflated with investment and ideology. Its sort of like social entrepreneurship, where people try to do well by doing good and end up doing neither. Theres a strong argument that we needed to develop alternatives to oil. There may be a climate change argument. But that becomes a very dangerous point when you start thinking that you dont need to pay attention to the technology because the government will bail you out.
Gates sent dying Jobs a letter he kept bedsideAn interview with Microsofts Bill Gates in The Telegraph is just the latest to show he and the late Steve Jobs had a strong relationship at the time of the Apple leaders death.
Or you could say we have a political green revolution that is the result of the ilure of the true green revolution, which is agriculture. As the true green revolution has iled, we have a lot of people in that part of the world, a lot of desperate people who have become more hungry than scared. And thats basically been triggered by food price increases on the order of 30 to 50 percent in the last year. Its really not a story of technological success but technological ilure. There are obviously political and social dimensions to this. But if you want to look at it through the prism of technology, its interesting that we always look at this through a prism of technology success, and never technological ilure.
Thiel: We have not made any investments in it. One of the other things thats been very strange about the clean tech question--there are all these things about it where I think the thinking hasnt been disciplined, youve heard all these ideological conflations and commitments that confused the thinking.
Even though in theory we might agree on both, we disagree on the weighting?
You said should. If investors and founders can get cash when they want it, including offering on the nonpublic markets, then delaying makes sense for them.
Thiel: Im always nervous about the why questions because youre asking me to speculate on peoples motivations, why theyre doing things.
One of the basic questions about clean tech is: Is it driven by a shortage of conventional energy or is it driven by climate change worries? They are somewhat linked. But they may be very different in nature. You could have a scenario where you have plenty of oil and plenty of coal, and you could just produce the coal but its too dirty. Or you could have a scenario where youre running out of oil and you need to develop alternatives.
And of course seasteads may not be libertarian. You can imagine a religious seastead--this is what traditionally has prompted people to move to the frontier. So there may be very nonlibertarian groups as well.
Theres a question of how important is macroeconomics as a category independent of everything else. Whats very different today from the 30s is we believe in macroeconomics as an unbelievably important independent category. And its not clear thats true.
But theres something this time along that it feels like its going to go on for a very long time. And theres no obvious way out of it.
The worry is that wed like to see some real successes too. Theres a question of whether theres something wrong with government picking winners, or picking winners and losers, but theres definitely something wrong with the government only picking losers.
Its really a how question...
