Peter Thiel is a grump, but a special kind of grump. He is a dystopian utopian (if such a person can exist). The investor who wrote the first check for Facebook both believes in the power of technology to transform our lives, and is perennially disappointed by it.
It is an argument he’s made before. Last September, at Disrupt SF he made the case that innovation is dead across most of the economy (you can watch the video of the session below). He is co-authoring a book on the subject with Max Levchin and Gary Kasparov, called The Blueprint.
But what about something like the iPhone? ”I don’t consider this to be a technological breakthrough,” he tells the New Yorker. Technology simply isn’t creating enough jobs or moving the needle in areas like transportation, health, or energy.
From the article, here is his assessment on the impact of the Internet, Apple, and Twitter:
Thiel is a natural contrarian who is never satisfied with the status quo, which is a good thing in a venture capitalist and startup mentor. But I think he dismisses the global impact of technologies like the iPhone and social networks a bit too easily.
Having a fully functioning computer in your pocket opens up entirely new experiences—and markets. Was it predictable? Yes. But that doesn’t make it any less transformative. Social media, combined with mobile technologies, are powering protests and revolutions around the world and changing the way people consume information.
But will these technologies improve living standards? The fact that the companies creating the technologies are capital efficient shouldn’t be a mark against them. What about the economic value created by the people who use the technologies. Putting a computer in the hands of business people away from the office, or a farmer in the field could yield significant improvements in productivity. It all depends on what kind of value you place on staying connected.
Are you both Founders Fund?
No.
No, your not familiar with Founders Fund. Okay, so, Peter is an investor. Was the first investor in Facebook. Correct. And you invest with several vehicles Clarium Capital, which is a hedge fund and a Founder Fund, which does more of a venture capital fund and Max, met Peter at Pay Pal, right? You were both at Pay Pal together?
and you've had a long, long friendship after Pay Pal. Max, he was the founder of Slide which is sold to Google and Google recently shut Down Slide except for one product. Max is now on the the next thing. In fact, the next thing for Max is a book you've been working on for two years with Peter, call The Blueprint and Gary Kasparov, the chess champion.
Great.
So, welcome. Thank you for joining us. Tell me a little bit about off this book. What's the prep basic premise of the book Blueprint?
The book is vaguely controversial, but that's how we like it. The fundamental premise is that, despite of what the popular media and other such people might tell you, innovation, specifically technology innovation, in this country is somewhere between dire straights and dead. And we felt the need to call that out and sort of layout the argument for why it is in such bad shape or what we thought were the causes of it's decline with some notable exceptions.
And also attempt to create sort of a blueprint, pardon the pun in the name for what to do about it and and how to go forward.
That's an interesting position for an internet entrepreneur and, you know, an investor in many internet start ups including FaceBook Are you saying that that's not innovation? A slide not innovative...?
I think there is a great deal of ferment and activity in Silicon Valley. There has definitely been some innovation, so it would be an exaggeration to say that nothing has happened. But if one looks outside of computers and the Internet, there has been...we've had 40 years of stagnation. And take the most literal instance: we are no longer moving faster.
Travel speeds kept getting faster in the 16th, 17th, 18th century with faster sailing boats, faster railroads in nineteenth century, faster cars, faster planes in the twentieth century. It peaked with the Concorde in 1976. It was decommissioned in 2003. And when you then, you know, and then when you include the strikingly low-tech post 9/11 airport security even a decade after 9/11, we're probably back to travel speeds of something like 1960.
And then, you know, you sort of expand from the failure of innovation in transportation points to a larger failure in energy, where, you know, we have not been able to move off fossil fuels. The clean tech area is this increasingly large disaster. The people in Silicon Valley are not even talking about it anymore.
There's been a failure in commodities more generally. There's some progress in bio-tech and bio-medicine, but even there, there are sort of concerns that things may or may not be stalling out. So I think when one... as soon as you widen your focus beyond this, you start to see that there are some serious problems.
And, of course, you know, if we were to say that California is the center of technology in the world, which I believe it is true, and you then looked at the health of the state of California and you saw the people were moving from California to Oklahoma, tho opposite of what was happening in, say, the 1930's, you'd say something's not quite right, and we have to ask some serious questions about how much is happening, and how it all should be calibrated.
How much do you think that the reason for this decline in innovation is because in these areas like transportation, energy,etc. The technology are long in the tooth and you know, all the big gains, traditionally, are you get the game's early on in the early life cycle of technology. Do you buy that argument or do you think that there's still a lot of advancements that we can make in those areas and there's other reasons why it's not moving forward.
There's several causes and unfortunately, part of a theme of the book is that, there isn't a single thing you can stick a finger in and say you just fix bad and everything's going to be ok again. One problem that I think we identified correctly is the overall risk taking culture in this country in particular has declined.
The famous speeches that sent us to the moon or otherwise inspired us are few and far between these days. The space program is basically on its last legs. Now the great highlight of privatization of the space program with the Space X...Our third Beetle missing here, Elon, is building a company that's going to privatize space travel.
So that's pretty amazing and awesome and that is in fact transformative innovation. In the past, however, you would see multi-billion dollar, sometimes tens of billion dollars being allocated by the government towards extreme transformative revolutionary innovation without much of a plan at all. And there's kind of a famous quote that I think appears in a book or we certainly ran into it when we were doing our research saying, you know, "If you're trying to create a budget for your space travel plan, you're not innovating." You can't forecast some of these expenses.
And so, of course, not being able to forecast expenses is a crazy risk taking proposition, and so as the appetite for risk overall declined, so did the innovation.
And you see this as a global problem or you're identifying this as a problem specifically in the United States.
I tend to think it's a global problem. I tend to think it's a problem that's particular to the US because the US of the country where people do new things and so, if the US does not innovate. This is actually a serious problem for the US. There are a lot of emerging market countries where people don't really need to do anything new.
They can just, they have plenty of room to just copy things and catch up, and so you can have a story in China of twenty years of progress where you just get nineteenth century rail roads and twentieth century cars and maybe, you improve them a little bit then you skip a few steps and its a much more serious problem for the developed world, and indeed when people we'll talk even about the developed and developing worlds.
That's sort of the globalization terminology. Is implicitly an anti tech term. Because when you part of the world developed. You're implicitly saying there's nothing more really forward to do except these small things at the margins. Coming back to your previous question about, you know, is it just that we're at the end of the cycle and there aren't things to do.
I think, I think it's hard to say. Certainly people in 1985 would have said that Apple was at the end of the cycle and that it was simply a matter of selling computers was like selling Pepsi, and that's what you needed to do. And it turned out that was not entirely correct, and that there was still room for tremendous risk taking and innovation and Apple is a striking instance of significant risks being directed in an innovation direction over the course of the last fourteen, fifteen years.
And, it's not clear why that's not true in many other domains.
Let me challenge a little bit your exceptionalism, you know, that there's no innovation except for in technology. I mean I think we can talk, you can point to innovations in technologies like what Apple has done, but there's also the counter-argument that some people have been making and I think Nathan Mergold wrote an article a year ago or something about how innovation is dead in Silicon Valley, which I completely disagreed with.
But people do point to the, you know, the frivolous nature, say, of social networks and they say, "That's not real innovation." Like what is the...is Facebook innovative? Is that the type of innovation you're talking about? Or are you talking about like hard science problems that need to be solved?
Well, I wouldn't separate them out. I think that all of the larger Web 2.0 companies involve real innovation and the creation of real value. And the question around a company like Facebook or any of the other half a dozen companies people always mention is not weather the specific company's not innovating or not doing enough, it's that there aren't that many companies.
And so when people think of innovation in the US, they automatically talk about Facebook. And and I think it's a great company. I'm bullish on them. I'm a little bit biased obviously, but at the same time the social and political question is, how many companies like that should one being producing in very divergent fields?
And, so, I think, I think you can say there was important innovation on social networking and there has not been in many other areas.
So, Max, you've been spending the past few years on social software, right? Which you know, is open to same types of criticisms. What's your argument for you know the fact that social is, is innovative. Is it? or was just fun?
I am not sure social is a segment or certainly not a company name or a company. I think innovation is slightly deeper in a stack [xx] things to think about. It's a slightly long-winded answer, but here's what I think about the matter. In the nineties, when Peter and I met, I was a hard-headed engineer and he was a fresh-off-the-bench lawyer and a financier and the lesson that he taught me very early on was the causality and correlation between hard and valuable.
So, all I wanted to do right after college is start companies that solved really hard problems because I was absolutely certain that we would build something very, very valuable and to change the world and everything would be amazing. And at some point, Peter took me aside and you don't have to beat your head against the wall every time.
It's not particularly valuable. But it turns out that I think, anyway, I took that lesson to heart. We built a pretty good company together. The flaw of a lot of companies today, social or otherwise, they've completely gone to the other side. They've basically said, "You know what? Hard, is not that valuable at all." In fact, the because we have lamp and we have all these great technologies and all these things that allow us to turn through ideas in a couple hours time must in fact mean that starting a company that's really hard is just a dumb idea.
That's solve simple problems. Let's make things that are trivial because hard doesn't correlate to valuable at all. And that's also not true. Innovation ultimately winds up being quite frequently, about solving very, very, hard problems. So, if you're in social and you're solving your really hard problem by [xx] innovating.
If you are trying to build one more wrinkle on the Angry Birds idea with, you know, pigs versus gerbils instead of chickens, you're not solving a hard problem and it's not really an issue.
So, what's the hard problem, say, Google is trying to solve a social versus Facebook. Is it the same problem or are they different problems?
Given the fact that I'm actually technically still on Google payroll right now, it's probably a really bad idea for me to reveal the very secret plans that Google has.
Peter, do you have a point of view. I think that. Well, I think that it's core Google is a search engine and that's the hard problem Google solved. That was extremely valuable. People thought of search in the late 90s as not a particularly difficult problem. And when Google reconceptualized that as a difficult problem and looked at the many additional layers that one could tackle in solving that problem, that's where they created this phenomenal company.
And I think one should not be too distracted by the many other initiatives that Google is doing and not ever lose sight that it is a monopoly search company with a more powerful monopoly than Microsoft ever had on the operating system in the 1990s. And it was driven by a great set of technological innovations and insights that they have.
Let me ask you this. You know, the cycle of disruption seems to be accelerating. And even if you're just thinking just in technology, right, if Google disabled Yahoo and all the first generation search engines and Facebook is disrupting who or what is going to disrupt Facebook?
Well I, I would quivel with the claim that things are going simply faster. There certainly are aspects where they're going faster, to the extent things are extremely thin. And, it's just, you can substitute one design for another very quickly. Or fashionable restaurant in San Francisco can shift very quickly, and just put a new sign on the door and things of that sort.
But I do think one has to always differentiate the idea of change and progressband what's desperately needed did in our society, and what I am interested in investing in, and I think the greatest companies that one can build are those that represent genuine progress as opposed to ones that merely represent a sort of frantic change of going from one passion to another.
So, you've identified the problem, and we haven't gotten to the solution. The name of the book is "The Blueprint." So you've got about 50 seconds, what is the blueprint?
What is the solution? The solution is actually very simple. You have to aim almost ridiculously high. A huge amount of innovation that has been productized and capitalized on and ultimately, made lots of people very wealthy or otherwise, created value was, for example, fell out of the space program.
The space program was this incredibly insane, and almost a useless idea of let's put the man on the moon. Why the hell not? What are we gonna do there? We'll see, but we got fuel efficiency, composites, Tang. All kinds of crazy stuff you might the space program that ultimately made billions and billions of dollars worth of economic value in the long and short term.
So aiming very high creates residual opportunities for value creation. While, aiming here, you know, if you look at the target for today or tomorrow, you'll have acceleration that you pointed out but you won't have long term lasting revolutionary in the bay.
But are you calling for the government to fund that innovation or for private enterprise to fund that innovation?
We're calling for Americans to wake up to the fact that they're isn't much going on. And so the government should do it. If you're in position to allocate capital in the government you should absolutely do that, if you're a private investor like Peter you should invest in it, if you're an entrepreneur like me you should start companies that aim very high.
If you're non-profit, you should redirect the money towards technologies of non-profit.
How many founders companies are not internet related? I would say on capital allocations bases were probably half internet half non-internet.
Really? Interesting. And you're looking for more non-internet?
We're looking for innovation in both areas.
So I think there will continue to be the next generation of computer technology is an important area, but it is very important to look at what are the problems that are both hard and valuable. Not just hard, which was the mistake people might have made forty years ago, and not hard, which is the worst mistake people are probably making today.
Peter, I'd like to give you a chance to answer the question. How do we go faster? I think we re-frame the question not as a political or a social question but a question about what people individually do and so it's a question about a recession today in the US. What should be done about the recession?
There are all sorts of ideological debates about that. I would say the way the question should be re-framed is, what are you doing to end the recession? And the question about technology is, what are you doing to try to help accelerate technology? And as long as it's a problem that's seen as a problem that will simply be solved by other people it's not going to get done.
And so the future it's not something that's undefined or that is determined by other people or to the extent everybody believes that, we will not, we will certainly give up our ability to impact the future. And I think the, we need to somehow go back to the future and back to the idea that we have some mastery over it.
And take some responsibility but with that I think we'll leave it. Thank you very much. I can't wait to read the book. It sounds fascinating and maybe next time we'll have Gary join us as well, see if he argues with you. Please give Max and Peter a round of applause. Thank you very much.
Thank you. So, we're gonna break for lunch. We're gonna try and get back on track and back on time. So, come back here at 2:00. We have, I believe, it's Dustin Moskovitz for a quick Fireside Chat. The we're going right into the, the Battlefield. We have an amazing set of companies. I've been working with them pst few weeks and I'm really excited about them.
So, break for lunch and back here at two. Thank you.
