Policy Makers: "Living in the Dark Ages”
Question: Why do we value financial innovation over technological innovation?
Peter Thiel: I believe that we've been living in a – we live in a technological society, but we constantly act as though it is a financial society. Everything is going to be of critical importance in the next 20 or 30 years is whether there is a lot of progress from technology and science and yet our priorities are massively geared towards saving the financial system rather than making sure the technological system works better.
So, for example, we had a $700 billion bailout for the banks in late 2008 even though it would have been unthinkable to give $700 billion to internet companies in 2000 or 2001. I think that's sort of double standard reflects the ways in which our priorities are skewed towards finance and away from technology even though it should be the other way around.
Question: Are you still convinced of this misguided preference one year later?
Peter Thiel: Nothing has changed in the last year since this financial crisis has unfolded to reflect the change of view on this. If you look at the policymakers in Washington D.C., of the 538 people in the Senate and House, only 11 have backgrounds in engineering or science and so we have people who do not understand that windmills don't work when the wind doesn't blow, or that solar power doesn't work when it's dark. You basically have policymakers who are effectively living in the dark ages in terms of the way they are thinking about the most important questions of our time.
Question: Has financial innovation been a waste of time?
Peter Thiel: Financial innovation and technological innovation are both good to the extent they involve real innovation and bad to the extent they do not involve real innovation. The thing that is very tricky about financial innovation is that it is often hard to know whether it's innovation or whether it's something that's dependent on some kind of temporary and unsustainable trajectory. So, innovation in housing, in financial engineering around that was probably ultimately unsustainable because it depended on ever increasing debt, ever increasing leverage.
Diversions of technological innovation that may be unsustainable as well, so if you have some innovation that leads to extraordinary environmental damage, it may look like you're making a lot of progress, but it turns out not to have sort of long term compounding aspect to it. Some forms of financial innovation have involved a misallocation of resources. To my mind, people are being scapegoated a bit too much in the finance industry and I think the question we need to be asking is not whether there's been too much financial innovation, but why there has been so little innovation in other areas.
Question: Who has financial innovation helped the most?
Peter Thiel: Well, financial innovation – true financial innovation, I think, ultimately helps many different aspects of society, it creates deeper capital markets, it makes capital accessible to people who would otherwise not have it. So, I think true financial innovation actually helps a lot of people. Again, I think the critical question one needs to ask is whether we've been seeing genuine innovation, or a temporary detour driven by policies and a culture that had a preference for ever increasing debt and leverage.
Question: Will this crisis be good for innovation?
Peter Thiel: I think it is far too early to tell what kinds of innovations are going come out of this crisis. I'm not personally convinced that crisis, or instability is always the best context for great economic growth or anything of that sort. To the extent that certain kinds of business models have been discredited or thrown into question, that obviously may open the door for other things to be done, but I think that we'll only know the answer to the question of what exactly is being created as a result of this crisis in 20 years time.
Question: How will innovation have changed our lives ten years from now?
Peter Thiel: The question about what sorts of innovations we are likely to see in the next 10 or 20 years depends a great deal on what people do. The pessimistic view is that we are living in a society that depends on innovation and science and technology, but that is actually not focusing on these things nearly enough and that as a result, we are headed towards an extended period of stagnation and very slow growth throughout all the nations of the developed world.
The more optimistic view is that we somehow figure out a way to restart the innovative engine that's probably gotten stalled. And my version of this would be that we go back to where the '50's and '60's ended and look back at the great technologies people were pursuing at the time; space, robots, artificial intelligence, the next generation of biotechnology and sort of look at where people thought the future of the world was going to be in 1968 and we try to take off from where things got detoured at that time.
Recorded on December 7, 2009
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