Question: Bill Gates believes that the free market fails to encourage innovation in areas where there’s a long timeframe. Do you agree?
Peter Thiel: Well, I think that markets classically fail in cases where there are public goods that provide benefits that people cannot capture. The big debate is how big these public goods are, where they exist, things of that sort. I do tend to think that things that have incredibly long time horizons often do involve market failures. So if you think about basic science or coming up with new theories of mathematics, these are not the kinds of things which are necessarily a well-defined market to pay people.
At the same time, I think one of the places where I would disagree with Gates is that it is not at all clear that we have a government that is doing this much better. And so even though I think markets are often not thinking on a long-time horizon, I think that our government structurally is doing even less so. When we have a government where we have people who are up for election at most once every six years for a U.S. senator, that’s a time horizon that is much shorter than in a market that, you know, a company is looking at 10, 15, 20 years which is a time horizon over which a stock price is typically valued.
Question: Is there a better way to encourage long-term innovation?
Peter Thiel: There is a lot that could be done with the market. I think, we want people to have long term time horizons and so I think to some extent it is... there’s a cultural question, there’s people should be thinking of their life, you know... life is long. It doesn’t end in six months or three years or whatever the next line on your resume is, it’s something that for most of us we can expect to go on for quite a number of decades ahead. And so I think somehow people should be encouraged to think about a very long time horizon and I think this is true for businesses, it’s true for governments and it’s true for people doing things in the non-profit sectors.
Recorded November 15, 2010
Interviewed by Victoria Brown
Directed / Produced by Jonathan Fowler