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.

Develop mindfulness to boost your creative intelligence

Sharon Salzberg, world-renowned mindfulness leader, teaches meditation at Big Think Edge.

Image: Big Think
Big Think Edge
  • Try meditation for the first time with this guided lesson or, if you already practice, enjoy being guided by a world-renowned meditation expert.
  • Sharon Salzberg teaches mindfulness meditation for Big Think Edge.
  • Subscribe to Big Think Edge before we launch on March 30 to get 20% off monthly and annual memberships.
Keep reading Show less

Why modern men are losing their testosterone

Research has shown that men today have less testosterone than they used to. What's happening?

Flickr user Tom Simpson
Sex & Relationships
  • Several studies have confirmed that testosterone counts in men are lower than what they used to be just a few decades ago.
  • While most men still have perfectly healthy testosterone levels, its reduction puts men at risk for many negative health outcomes.
  • The cause of this drop in testosterone isn't entirely clear, but evidence suggests that it is a multifaceted result of modern, industrialized life.
Keep reading Show less

For a long time, the West shaped the world. That time is over.

The 21st century is experiencing an Asianization of politics, business, and culture.

Videos
  • Our theories about the world, even about history or the geopolitics of the present, tend to be shaped by Anglo perspectives of the Western industrial democracies, particularly those in the United States and the United Kingdom.
  • The West, however, is not united. Canada, for instance, acts in many ways that are not in line with American or British policies, particularly in regard to populism. Even if it were united, though, it would not represent most of the world's population.
  • European ideas, such as parliamentary democracy and civil service, spread across the world in the 19th century. In the 20th century, American values such as entrepreneurialism went global. In the 21st century, however, what we're seeing now is an Asianization — an Asian confidence that they can determine their own political systems, their own models, and adapt to their own circumstances.
Keep reading Show less