The World According to Peter Thiel

How growth has stalled and how we can push forward again

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When we look at the technological progress each of us has seen in our respective lifetimes, the consensus is that we’re doing great and everything is moving super fast. Almost too fast. We can sit around and debate whether it’s utopian or dystopian, but it's happening nonetheless. 

Contrary to popular belief, Peter Thiel believes that technological growth has stalled, and that it has been this way for a while. Below is his summarized perspective, paraphrasing and quoting his interviews and writings:

His claim is that we've had this narrow cone of progress around the world of bits—around software & IT — but not atoms. The iPhones that distract us from our environment also distract us from how strangely old & unchanged our current environment is. If you were to be in any room in 1973, everything would look the same except for our phones. This explains his old Founders Fund tagline: “We wanted flying cars, instead we got 140 characters.”

In the 50s and 60s, technology meant atoms and bits. It meant biotech and medical devices. It meant nuclear power, new forms of energy, underwater cities, the green revolution in agriculture, space travel, supersonic aviation, flying cars, etc. But, today, our only progress is in the realm of computers.

For one, we're no longer moving faster. Take travel speeds as one example — sailing ships became increasingly fast in the 16th through 18th centuries, so too did railroads in the 19th century, and still-faster cars and airplanes were being created in the 20th century. But this macro trend reversed in 2003 with the Concorde failure.

Our space progress has stalled as well. In 1969, Neil Armstrong became the first person on the moon. We haven't been back to the moon since 1972, and with the final Shuttle flight in 2011, the US will be without the ability to send an astronaut into orbit for the first time since it began its manned space program.

The 1969 narrative was: we landed on the moon in July of 1969 and Woodstock started three weeks later. In fact, that’s actually a good way to describe the cultural shift.

Today, we live in a world where we've been working on the Star Trek computer in Silicon Valley, but we don't have anything else from Star Trek. We don't have the warp drive, we don't have the transporter, and we can't re-engineer matter in this cornucopian world where there is no scarcity.

Zooming out, people don’t understand how important economic growth is. It’s the only thing sustaining the planet. Without it, we go into a malthusian war

Indeed: The only way our societies have worked for at least 250 years is by economic growth. Parliamentary democracies are built on an ever-expanding pie that they can continue subdividing. Once the pie is no longer expanding, everything turns zero-sum. (Remember the 1930s? Yeah… Not a good decade for growth...)

This is how governments work — everyone compromises: more for you, you, and you. But this only works when the pie is growing. If there’s no economic growth, then we have gridlock — a zero sum game, with a loser for every winner.

Since the 1970s, the rate of economic growth has declined. From 1932 to 1972 average income in the US went up 350%. From 1972 to 2001, average income went up only 22%. So what accounts for this drastic discrepancy?

Thiel argues there has been too much globalization, or horizontal progress, at the expense of true innovation, or vertical progress . Horizontal progress would be like taking the typewriter and copying it all over the world. Vertical progress would be turning the typewriter into a word processor. Or, to use a Thielism, going from zero to one.

We haven’t had enough technological progress to make up for the slowdown. While the computer revolution has been significant, it’s not enough to make a dent in California, let alone the global economy.

Another issue? People are making money betting against progress. For example, Warren Buffet’s single best investment is in the railroad industry — which is a bet that the 21st century will look more like the 19th century than the 20th century, bringing us back to the days of rail and coal, instead of the new cleantech future.

Decline has not only been felt economically, it’s been felt culturally. We’ve lowered our expectations in many different ways. 

Consider healthcare: Nixon declared the War on Cancer in 1970 and said that we would defeat cancer in 1976 by the bicentennial. Today we couldn’t declare war on Alzheimers, even though 1/3 of 85 year olds suffer from it.

Consider infrastructure: The Golden Gate Bridge was built in three-and-a-half years in the 1930s. Today, it’s taken seven years to build an access road that costs more than the original bridge, in real dollars. We expect less from our governments than ever before. 

Consider entertainment: Name one sci-fi film in the last 25 years in which tech is portrayed in a positive light, in which it’s not dystopian, it doesn’t kill people, it doesn’t destroy the world, etc. Instead, we have one sort of catastrophic, anti-technological scenario after another.

It’s hard to remember this, but our government was once high tech, too: The Apollo program put a man on the moon. But today our government is broken. Our newest fighter jets can’t even fly in the rain. That is a staggering decline for the country that completed the Manhattan project.

We’ve absorbed it in our perceptions of ourselves too. We used to refer to the first world and the third world. Now we call them developed and developing countries — the implication behind developed being that there is no more growth to go.

The Google propaganda is that we have runaway technological progress, and that many people will be left behind — we need to take care of them. But this doesn't show up in any of the data. We have 3.5% unemployment and the productivity numbers are still anemic. We've actually had *less* automation: kindergarten teachers, nurses, yoga instructors — all these non tradable service sector jobs — are fairly immune to automation.

If we truly had this sort of runaway automation, you could get to 3 or 4% GDP growth, and at that level, we would be able to solve these social problems. Then there would be a lot more room for various social programs. If automation is happening, then we'll see it in the productivity numbers. And, given sufficient automation, then eventually maybe we’ll need something like UBI. 

On the flip side, if automation is not happening and you try to implement something like UBI, then you just blow up the economy. Even a Marxist thinks you have to first get the capitalists to do things before you can redistribute stuff.

Depending who you ask, there are different explanations for this economic slowdown: The libertarian explanation is that we’ve regulated too much, and as a result it’s too expensive to innovate. The liberal explanation is that we need to invest more in education and training scientists and engineers. The conservative explanation is that a military arms race drove innovation.

Thiel thinks it’s regulation: If we think back to the days of the Cold War, why did brilliant people in the Soviet Union become grandmaster chess players? Because they weren’t allowed to do anything else... Same with why so many brilliant rocket scientists went into Wall Street; because, as Thiel argues, they couldn't use their skills due to overregulation.

Today, we’re "not allowed" to develop new drugs with the FDA charging $1.3 billion per new drug. We're not allowed to fly supersonic jets because they’re too noisy. We're not allowed to build nuclear power plants. We've outlawed the world of atoms, so people focus on bits.

Thiel also thinks it’s culture: We’ve stopped believing in the future. We’ve become either too optimistic or too pessimistic about the future, either way it means there’s nothing we can do: if you're optimistic, the future will take care of itself. If you're pessimistic, we're headed to the apocalypse. When really it's up to us. Extreme optimism and extreme pessimism are both equally wrong. We should always come back to the question of individual agency and not these large historic forces. There's always room for history, for new ideas, and these things are never definitively decided either way.

“Think a lot harder about the future...try to think concretely about what you want to do...there's always a question: where is the frontier? Where are some pockets of innovation where you can do some new things and not be in a crazed competition?”

Three possible technological frontiers:

Cyberspace: The hope of the Internet is that these new worlds will impact and force change on the existing social and political order. The limitation of the Internet is that these new worlds are virtual and that any escape may be more imaginary than real. Still TBD.

Outerspace: Because the vast reaches of outer space represent a limitless frontier, they also represent a limitless possibility for an escape from world politics. But we are still ways away from being ready for this.

Seasteading: Between cyberspace & outer space lies the possibility of settling the oceans. The tech involved is more tentative than the Internet, but more realistic than space travel. We may have reached the stage at which it will soon be economically feasible...

In conclusion, quoting Thiel: “We’ve spent 40 years wandering in the desert, and we think that it’s an enchanted forest. If we’re to find a way out of this desert and into the future, the first step is to see that we’ve been in a desert.”


Read of the week: David Shor’s Unified Theory of American Politics

Listen of the week: Bruno Maçães on Palladium

Watch of the week: Harry Mack freestyling

Cosign of the week: Anirudh Pai is a fascinating thinker. I just had him on the podcast.

Until next week,

Erik