Peter Thiel: The US as we know it depends on us rediscovering our innovation

By Niv Dror, Guest Contributor , written on May 16, 2014

From The News Desk

[Editor’s note: This is a guest contribution by Niv Dror, analyst at DataFox. The post went through Pando’s usual editorial process and Mr. Dror was not paid for his work.]

If there's one video everyone should watch but far too few people have, it's Peter Thiel's* talk at TEDx Stanford about the singularity, the concept of a hypothetical moment in time when artificial intelligence progressed to the point of a greater-than-human intelligence – radically changing our civilization. When people talk about the singularity they imagine runaway technology and think about it as a very bad thing. Thiel, on the other hand, named his 2-slide presentation: "All We Need is a Singularity." (Full video below)

To start things off he listed seven different disaster scenarios and asked the audience: What are you most worried about?

  1. Robots killing or enslaving humanity? (Skynet)
  2. A pandemic wrecks civilization? (Plague)
  3. Runaway nanotechnology? (Grey goo)
  4. Nuclear war? (Existing technology, Middle East, conflicts)
  5. Government using computers to control everyone? (One world government, totalitarian dictatorship)
  6. Global warming wrecks civilization? (climate change, resource depletion, economic collapse)
  7. The singularity takes too long to happen.
A quick poll of the audience, a couple of hands raised, and it looked like nuclear war was perceived as a bit more worrisome than the rest. Then Thiel reached the seventh and last point: nothing happens. A clear consensus emerged. People figured that even if a singularity did occur it would take too long to happen; the other scenarios were perceived as too distant in the future. The audience was not all that worried at all.

Thiel was most worried about the fact that we’ve stopped innovating.

Perhaps Thiel spoke too soon, maybe he’s still ahead of his time, but today many of these disaster scenarios are no longer hypotheticals – their early signs are reported on the news as current events. Thiel’s talk was given at Stanford University in December of 2009.

We Depend on Accelerating Technological Change

People routinely think about technological progress as something that’s great if it happens, but no big deal if it doesn’t happen. Thiel believes that little could be further from the truth. Innovation isn’t just for the tech world and conferences like TED; our entire culture and society is predicated on accelerating technological change.

For example, we have a financial system where people plan for retirement. They go to a financial planner who tells them they will earn 8.5 percent per year and they’ll need to save X number of dollars each month so they can retire at age 65. If they live until they’re 90, they’re going to be just fine.

But where does that 8.5 percent figure come from?

The 8.5 percent comes from looking at studies over the last 100 years where that’s roughly what you earned. The problem is that the last 100 years were years in which we’ve had incredible progress. We’ve experienced incredible technological change. In 68 years, we progressed from the Wright Brothers’ embarking on the first flight to Alan Shepard (commander of Apollo 14) playing golf on the Moon.

Then the Internet came along and we got distracted.

One cannot overestimate the importance of the Internet. It has been and will continue to be an incredible driver of growth. But these assumptions about continuous compound growth that are reflected in things as basic as retirement planning only work in a world with rapidly accelerating technological change. Thiel’s point is not intended to discredit all that we’ve achieved with the invention of the Internet and now the smartphone, but rather, to ask, what’s next? Financial planners are not in the business of uncovering or even knowing what the next thing may be, but we as a society should be aware that it’s already factored into our retirement planning and many other areas of our society.

Thiel argues that this is worth worrying about by citing the fact that the median wage in the US has not gone up since 1973 and average wages have not increased that much – in spite of enormous globalization. With all the global trade we’ve had the past few decades, one would have expected significant progress in living standards even with zero technological progress. But that hasn’t been the case.

What Does Rapidly Accelerating Technological Change Look Like Today?


One way to benchmark today’s level of innovation is to go back to the 50s and 60s and see what people at that time imagined the future would look like. In the mid-20th century, we lived in an determinant and optimistic society. We knew where we were going and we were confident we’d get there. JFK’s speech at Rice University in comes to mind:

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard.

It would be unthinkable for a statement like that to be made today (at least not by the government). We are still optimistic, but we don’t know why. People assume that innovation – finding solutions to the hardest problems – is something that other people do. That it will just get done. That “they” will get it done.

They will find a cure for cancer.

They will solve global warming.

We beat the Russians.

We went to the moon in 1969.

Society needs to believe in the future, and for that to happen they must feel like they’re a part of it. Over 500,000 people worked on the Apollo Program. NASA met Kennedy’s challenge as a collective. Being first to land a man on the Moon was, and still is, a source of great national pride. There is innovation happening today but the majority don’t feel like they’re a part of it. It’s not about patriotism or about being particularly well informed; it’s about being able to answer the question: What doesn’t exist today that you’re excited about?

According to Star Trek, which was released in 1967, the future would include: a permanent lunar base by 1980, the first manned mission to Mars by 1990, and by 2000 we should have been exploring the stars. The Jetson’s predicted a future full of robots and flying cars.

The iWatch has yet to be released…

Why do we still have auto dealers?

And what about those flying cars? (more on this below)

In 1968, a French author by the name of Servan-Schreiber wrote the classic bestseller called The American Challenge. Schreiber argued that the United States was an accelerating technological civilization, and that as time would pass, America would run away from the rest of the world and would actually have to compete less and less with other countries. He predicted that by the year 2000 the average person in the US would be working 4 days a week, 7 hours a day, and that we’d have 13 weeks per year of paid vacation. All within a single generation and all because of accelerating technological change. Instead, Thiel notes that:

We’ve since gone in a way where people seem to be working harder, they are running really hard just to stay in place.

If running harder to just stay in place was reminiscent to Thiel’s earlier point about people’s indifference for new technology; then what happens when people are running harder and harder in a race they did not choose to enter yet must go on? What happens when they can no longer keep up?

What do companies do when new market entrants reinvent their business model and reach a scale that poses a threat? They do what they need to do to survive.

When a new technology disrupts the incumbent, when a person believes that technology is responsible for them no longer being able to afford the roof over their head, they stop being indifferent. They become against. It’s not about tech companies, political parties, or any individual. It’s human nature to protect when threatened, and to keep moving when you’re ahead. People are not against innovation, but they are also not for it when they perceive themselves as having nothing to gain from it’s success.

The Apollo Program was a united effort. If you watched the Moon Landing on TV you felt like you were a part of it. The benefit was national pride. Elon Musk plans to colonize Mars; because of him it’s already possible to drive on pure sunlight. Google seems to be taking care of the robots. Twitter is democratizing the protests of which Google is at the center (and also the others around the world). People outside the tech world don’t feel like they’re a part of the good that can come from that, so they’re indifferent to innovation. While the people that are directly impacted (SF tenants), or incumbents that feel threatened (taxis, hotels, dealer, etc.) will of course focus on (or pencil in) the negatives. Their hierarchy of needs is no longer being met.

Self-Interest and Optimism


One of the things that we need to question is whether the story of technological progress has been quite as rapid as people have thought. Thiel admits that it’s extremely difficult to answer the question of how fast things are happening. But on a meta level, it’s hard to be sufficiently knowledgeable about the many different areas of science and technology – not to mention considering the politics of it all.

For example, if you’re a university scientist working on superstring theory in physics you’ll say something like, “if we just get that billion dollars for the next particle accelerator we’re going to discover so much about the world.” The nearby scientist that argues spending that much on the next particle accelerator is a waste of money is unlikely to get heard. It comes down to looking out for people’s own self-interests; disregarding the optimal choice for society. Kind of like how every entrepreneur thinks their idea is the next billion dollar company. Thiel says that VCs are even more guilty of this than the entrepreneurs.

Assuming a finite amount of capital can go towards research and innovation (leading to zero-sum decisions) the logical option is to have an independent member or group make the final decision. This requires individuals who can fully understand the implications of such a decision, are sufficiently well versed on the issue(s), and are otherwise qualified to make the decision. All of these go out the window if DC politics truly mirrors House of Cards. But in the spirit of optimism lets focus on the understanding the implications/qualified part. According to Thiel:

In 2009, of the 538 representatives in the House and the Senate, only 11 have degrees in engineering or a background in science.

Our elected officials are trained as lawyers and executives. Maybe, then, it’s time to start thinking of diversity as people’s backgrounds – their collective breadths of experience.

The Need for Accelerating Technological Change

Can society function without rapidly accelerating technological change? Yes. But in our case, it’s just not the way we are geared. According to Thiel, for our society to function without technological progress, it would mean that people would have to:
  • Save 40% of their income
  • Work until they are 75 years old
  • Radically cut down on consumption
Most people would not be able to save 40% of their income.

Thiel points to the emerging markets as an example of the real dangers we’ll face as a society in the next 20 years if there is not enormous growth. Let’s compare the developing world and the developed.

When people talk about the future in the emerging markets, t’s always a 20 year story. China will be a lot better off in the next 20 years, and will look a lot like America. China’s population will be 1.3 billion people, which means they’ll need 2.6 billion socks, 2.6 billion shoes, there will be sock factories, and shoe factories, etc. This will look like progress All that has to happen is for China, India, and all these countries is to copy what’s happened elsewhere; there needs to be zero new innovation (10:00). It sure seems like it will be really easy for these countries.

In the developed world, people typically talk about the future and ask what will happen in the next 6 months? Is the financial crisis over? Does the stock market go up or does it go down?

Companies in the developed world think about the future through the eyes of Wall Street, which operates on a quarterly basis. It’s when executives know if they can keep their job. The exception being people working in state capitals and Washington DC whose job directly/indirectly depends on the election cycle. But given that 4 years is far too long of a timeframe to contemplate; they use traditional media like printed newspapers and broadcast news channels as the gauging stick.

Using Twitter as an example, when the company’s post-IPO share lock-up expired for the first time on May 6th, 2014, the stock took a big hit, and Youssef Squali went on CNBC to say that his firm, Cantor Fitzgerald, was upgrading the stock to a Hold from a Sell in-part, because they were optimistic in the “long-term, i.e. over the next several quarters."

The question of, “where will things be in the next 20 years, and are we going to be dramatically better off in 20 years or not?,” does not get asked nearly enough. Thiel believes that the answer to this question has very little to do with finance, or the banking system, or various regulatory and legal issues, but it has everything to do with how much of a focus there is on science and technology. He says that as a citizen, he is concerned that this is not an area that we are spending enough time on.

The question of “how do we get 8.5 percent returns a year?” should also be asked.

Thiel reiterates his earlier point – the mentality that other people will always do it means that the question never gets asked. In general that works; we’re not all responsible for figuring out the toughest problems. But it doesn’t work if everybody thinks that way. Unfortunately, this is the world we live in (outside of Silicon Valley and the major tech hubs).

Thiel tells a joke about the two economists from the University of Chicago who are walking along the street and one of them sees a $100, while the other turns to him and says:

It’s not possible for there to be a $100 bill on the street because there’s an efficient market and people walking on the street picking up $100 bills.

Are We Living in a Society of Accelerating Technological Change?


There are critical factors for technological progress in the next few decades – alternative energy being an obvious one (as well as many others). Using this example, Thiel believes that moving the world off of fossil fuels and toward renewable energy will happen in the next few decades if enough people work really hard on it. People have to believe that this is the most important thing in the world. Tesla is a prime example that comes to mind. But this will not happen if people think that alternative energy is a problem that just automatically gets solved. Thiel believes that we’re still very much stuck in the second mindset – and changing that mentality is critical.

If I had to describe what I think we need to do to get things restarted in the next few decades, my basic model is that we should go back to the late 1950s and 1960s, and look at all the science-fiction books that were written at the time and look at all the things that did not happen, and make a concerted effort to make those happen.

Thiel mentions that in the 50s and 60s people partially predicted the computer revolution and the invention of the Internet; but the other predictions have not happened. He goes on to say…

“We don’t really have space travel” (yet)

“We don’t have the robots.” (we do)

“We don’t have the underwater cities” (true, but Thiel is funding the floating ones)

In some sense, while there has been a lot of progress in many fields in the last four decades. We haven’t been standing still. But we need to go back to a society where accelerating technological progress is emphasis number one – the number one focus – and move as quickly as we possibly can to figure out a way to get back to the future.

Of course, this is all leading up to Thiel’s Founders Fund Manifesto.

The Flying Car is already here.

Watch Thiel's full TEDx talk below:

[*Disclosure: Peter Thiel is an investor in PandoDaily.]

[Editor’s note: This is a guest contribution by Niv Dror, analyst at DataFox. The post went through Pando’s usual editorial process and Mr. Dror was not paid for his work.]

[images via JD Hancock]