Does the Free Market Encourage Long-Term Innovation?

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

The venture capitalist agrees with Bill Gates that the free market often fails to encourage long-term innovation. But governments are not the solution.

LinkedIn meets Tinder in this mindful networking app

Swipe right to make the connections that could change your career.

Getty Images
Sponsored
Swipe right. Match. Meet over coffee or set up a call.

No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.

Keep reading Show less

In a first for humankind, China successfully sprouts a seed on the Moon

China's Chang'e 4 biosphere experiment marks a first for humankind.

Image source: CNSA
Surprising Science
  • China's Chang'e 4 lunar lander touched down on the far side of the moon on January 3.
  • In addition to a lunar rover, the lander carried a biosphere experiment that contains five sets of plants and some insects.
  • The experiment is designed to test how astronauts might someday grow plants in space to sustain long-term settlements.
Keep reading Show less

A world map of Virgin Mary apparitions

She met mere mortals with and without the Vatican's approval.

Strange Maps
  • For centuries, the Virgin Mary has appeared to the faithful, requesting devotion and promising comfort.
  • These maps show the geography of Marian apparitions – the handful approved by the Vatican, and many others.
  • Historically, Europe is where most apparitions have been reported, but the U.S. is pretty fertile ground too.
Keep reading Show less

Love in a time of migrants: on rethinking arranged marriages

Arranged marriages and Western romantic practices have more in common than we might think.

Culture & Religion

In his book In Praise of Love (2009), the French communist philosopher Alain Badiou attacks the notion of 'risk-free love', which he sees written in the commercial language of dating services that promise their customers 'love, without falling in love'.

Keep reading Show less