Peter Thiel To Eric Schmidt: Admit It, Google Is No Longer A Technology Company

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Google Executive Chairman Eric Schmidt and PayPal co-founder Peter Thiel offered wildly differing views on the state of the technology industry last night at the Fortune Brainstorm Tech conference. During their after-dinner panel, the tone remained amiable, but Thiel, in particular, managed to get some memorable jabs in.

For example, when talking about Google, Thiel said the “intellectually honest thing to do” would be to admit that “Google is no longer a technology company.” After all, he notes that Google has $50 billion in cash. Why isn’t it investing all of that money in new technology? Thiel’s conclusion: The company is out of new ideas and is coasting on search.

Schmidt’s response: First, that there are “limits that are not cash” such as recruiting, real estate, and government regulation. He also pointed out a few examples outside of search where Google innovations seem to be paying off — Chrome, Android, and the company’s enterprise tools.

The argument over Google was indicative of a larger divide. Schmidt offered a positive view of what technology has accomplished in the last few decades, and what it will accomplish in the near future, arguing that it will allow people in the developed world to lead “extraordinarily long lives that are very productive” while improving the lives of those in developing nations too.

Thiel, on the other hand, said that Schmidt was doing “a fantastic job as Google’s minister of propaganda” and that recent technological progress has been limited to a few narrow areas. Yes, there has been “incremental but relentless progress on the computer side,” but on the other hand, there’s been a “catastrophic failure of energy innovation.” As an outspoken libertarian, Thiel puts much of the blame at the government’s feet, saying that the government has “outlawed everything to do with the world of stuff,” so that “the only things you’re allowed to do are in the world of bits.”

(To be clear, Thiel isn’t targeting Google specifically. In fact, he said that with investments in projects like self-driving cars and asteroid mining, Google is doing a better job than most other companies.)

From that fundamental disagreement, Thiel and Schmidt covered an impressive number of other topics, including the Arab Spring and other political matters (Thiel suggested that the fact that they kept returning to politics was itself a sign that “technology is no longer the driver”) before ending on education. Thiel, who offers a fellowship program encouraging people under the age of 20 to drop out of college and start companies, portrayed an “education bubble” where the expense of a higher education is increasing far more quickly than its benefits, and college students are being turned into “indentured servants.”

Schmidt countered that education is one of the main ways that the U.S. can maintain its competitiveness against other countries. It sounded like Thiel would be more open to this idea if it was limited to engineering degrees.

“I believe there’s some role for the liberal arts, however small,” Schmidt said. Then he added: “That was a joke.”