Peter Thiel: Regulation Stifles Innovation

"The critical thing is to figure out a way to get the technology engine restarted," says the venture capitalist. "And we should have less government regulation to enable that."

Governments cannot encourage the sort of technological innovation that is necessary to keep the U.S. economy growing, says PayPal founder and Clarium Capital President Peter Thiel. To illustrate this, he compares heavily regulated sectors like transportation, health care, and energy—which have been slow to progress—to the relatively unregulated and booming IT sector.

Technology and free markets reinforce one another, says Thiel, who is a minority investor in Big Think. Technological progress creates growth, and as economies grow, governments tend to deregulate. But if progress gets stalled, you end up with a zero-sum situation, where one person's gain is another's loss. That, in turn, creates a vicious cycle of even more regulation and less innovation, which necessitates even more politics to redistribute a pie that's no longer growing, he says.

At a recent conference, Microsoft founder Bill Gates doubted the free market's ability to encourage innovation in the long term. But Thiel doesn't believe that governments do any better. U.S. senators focus only on their six-year terms, whereas companies are looking at least 10 to 20 years down the line, the time horizon over which a stock price is typically valued.

"The critical thing is to figure out a way to get the technology engine restarted," Thiel says. "And we should have less government regulation to enable that."

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