During the next 20 years, the plan for China and India is basically to catch up to the U.S.—to get 19th century plumbing and 20th century railroads. That is not a strategy that will raise living standards in the developed world.

Question: Is technological innovation more important for developed countries than developing ones?

Peter Thiel: Technology is probably the single biggest driver of productivity gains over a period of several decades for the developed countries.  For example, I think it’s much more important than free trade.  I’m in favor of free trade, but I think if you had to make a choice between having technological progress versus free trade, you had one or the other, you should always pick technological progress.  I think it’s an incredibly important variable for creating more prosperity. 

The developing world does not really need to develop new technologies.  For China or India, the next 20 years, the plan is basically to catch up to the U.S., to get 19th-Century plumbing and 20th-Century railroads and to basically just to copy.  That is not a strategy that works for the developed world if we’re going to try to improve living standards in the developed world. 

So the developing world can just do things that are extensive or horizontal, that basically copy.  The developed world needs to do things that are intensive or vertical, where we take our civilization to the next level.  And to the extent people don’t believe this is going to happen, you see a lot more pessimism about the future.  When you have these surveys of people and they ask, you know, will the next generation of Americans be better off than the current one or worse off?  More and more people believe that it will be worse off than... and it’s a lot more than say would have thought this in the late 1960s when people believed there was incredible technological progress and people would be on the Moon by 1980 in a permanent lunar base, and Mars by 1990.  By 2001, Space Odyssey, would be at Jupiter and from there it would be on to the stars.  And that’s not the kind of future people expect and I think that’s one of the reasons they’re so pessimistic. 

It’s not articulated in quite this way, but if people were super-optimistic about technology there would be no reason to be pessimistic about the future.  A lot of the political debates we have in the U.S. today, for example, about debt suspending, the debt austerity would not be problems if we had technological progress.  If you doubled the debt over the next 20 years in the U.S., and the size of the economy doubled because of technological progress and growth, the two would roughly cancel out and it would all be a totally manageable situation.  

On the other hand, one of the reasons I think people are increasingly nervous about all this borrowing is because they think that we are not actually digging ourselves out of the hole, but instead are digging ourselves into a deeper and deeper hole and will not be able to pay it back because we’re not actually creating the new technologies that will enable us to pay back and the money somehow is not really being invested in the future or in progress.

Question: Are we headed toward a more authoritarian government?

Peter Thiel:  It’s quite unclear where we are headed.  We certainly had a bit of an experiment of going towards more government over the last... the last few years.  The experiment doesn’t seem to be working... to be working terribly well.  On the other hand, it’s also quite unclear if we go back towards less government if that’s going to work. 

Question: Can the government do things to better spur innovation? 

Peter Thiel: In the U.S., we fundamentally need to do new things, which I think is harder for the government to do. And moreover, it is not something our government actually is inclined to particularly do.  You know, our government is not dominated by engineers, it is dominated by lawyers.  Engineers are interested in substance and building things; lawyers are interested in process and rights and getting the ideology correctly blended.  And so there is sort of no really concrete plan for the future. 

It is, I think, a striking failure on the part of the left especially, which is pushing for more and more government, that there actually is nothing specific that the money would be spent on.  If you had Obama go on TV and say that we need to have a manned base on the Moon, or that we will defeat cancer in five years, a la Kennedy or a la Nixon, this would just strike people as bizarre.  And so this sort of... the governing class in the U.S. is not focused on technology, does not believe it.  So even if you need government to create technology and to build it in the most developed countries and even if it’s the space race where it was heavily government funded is the correct paradigm, the fact of the matter is that our political leadership does not believe in this.  

Recorded November 15, 2010
Interviewed by Victoria Brown

Directed / Produced by Jonathan Fowler