What is America's place in the world?

Topic: America’s standing the world

Peter Thiel: There’s a very open question about how the U.S. is going to fit in with the rest of the world; how that relationship is going to evolve in the years ahead.  And you have a lot of big debates about whether the U.S is a declining power or wether its decline has been way too much foretold and is not at all the case. 

I do think it is the case that the U.S. will be moving towards a more competitive situation than it has found itself in for a very long time.  And that for much of the 20th century, the U.S. was sort of this unwitting beneficiary of the rest of the world doing crazy things and blowing itself up.  Sort of all the smart people fled to the U.S.  We had all the factories, and we’re, on a relative basis, in very good shape. 

That’s started to change.  I think the rest of the world has got a lot of crazy stuff going on in many places; but the absolute insanity level seems to have lessened quite a bit from what it was for much of the 20th century.  In that competitive world, it’s likely that we’ll end up with very, very different policies. 

One counter-intuitive instance of this is that I don’t think you will have a collapse of the dollar or massive inflation like we had at various parts of the 20th century. 

In 1971, when Connelly, the [Richard] Nixon Treasury Secretary, took the dollar off the gold standards, he famously remarked to the press, “Well it’s our money, but it’s the rest of the world’s problem”--because the rest of the world was stuck having no choice but to have dollars. 

Now that we’re in a more competitive world – and that includes competition between currencies, dollars, euros, and to a lesser extent pounds, and Swiss francs, or maybe even renminbi in China one day – you will not be able to take that sort of a cavalier policy, and there will be no hyper inflation I think. Instead we’re going to have a much tougher monetary policy. 

And that of course suggests that you have all sorts of bubbles.  Like the housing bubble in the U.S. at this time is probably a symptom in part of a belief that housing prices always go up.  That sort of expectation was bred by this 20th century history of inflation which was structurally linked to a world in which the U.S. wasn’t competing with anybody else. 

So I think there are sort of all these ways these big picture things intersect with some smaller ones.

Topic: Boom, bubble, bust.

Peter Thiel: I’ll give you a third example of something where I think is not at all been thought through very carefully, and that I think is a very strange fact about the financial markets. 

If you look at the markets over the last quarter century, there have been more booms, and bubbles, and busts than in all of previous history put together.  And they’ve been bigger in scope. 

So the first big one probably since Japan in the late 1980s where the emperor’s palace was deemed to be worth more than the state of California at the peak. 

You had another one in Asia in the mid-90s. 

You have the long term capital disaster in ’98 which was so bad that the mathematical models predicted it would not happen in a trillion times the history of the universe – much less.  Of course _________ nothing like that ever happened in the human history. 

Within two years you get the Internet bubble, NASDAQ hit 5,000, then again probably higher than any other stock market in history making all sorts of adjustments relative to GDP, relative to other measures. 

By 2003, you have a 10-year bond in Japan yielding 0.43 percent, the lowest in history.  Again a multi-trillion dollar market at extremes never before seen in history. 

Fast forward to today, and you have a housing bubble, a finance bubble, an emerging market bubble, all of which are, again, bigger than anything you’ve ever seen. 

So one thing that’s very, very strange when you have these enormous booms, bubbles, busts that are going on – and this is in complete contradiction to the prevailing theory that markets are becoming more and more efficient over time, and that the world is becoming a smoother and sort of more homogenous place – that it seems to me this mere fact suggests that the efficient market theory is, at best, very, very deeply incomplete. 

And one should think about why are we living in this world that’s prone to all these booms, and bubbles, and busts?  My best cut at an answer for why that is, is that it goes back to globalization. 

Every single bubble or boom in the history of the world has been linked to globalization in the last 300 years in the history of the modern world.  You can start in 1720 with the South Sea bubble, which was trade between Britain and the South Seas, the opposite end of the pole, literally the other end of the globe. 

Or the Mississippi Land Scheme in France in 1720. 

You had the railroads of the 19th century that were going to connect the world. 

In the 1920s, the boom was centered on car companies, of which there were 300 in the U.S.; and on radio, which was the new communications device which was going to connect people all over. 

And we’ve sort of seen this, and all of them had this element of globalization.  Even things like Japan, which is a completely insular country, the bubble was described as Japan Incorporated [sic] running the whole world because Japan had come up with a sort of ________ final synthesis of harmonious management-labor relations; and this represented the end of history. 

And the reason I think globalization is so prone to booms, and bubbles, and busts is that it’s very difficult to know how globalization is going to happen.  And you can look at it one way, and it looks like it’s going to be Japan running the world; or it looks like it’s going to be the Internet; or now it looks like it’s going to be a global market for labor – therefore the emerging markets, especially China and India, or global finance like hedge funds.  And you shift your perspective a tiny bit and you get something totally different. 

Like in the 1960s, for example, the bubble was not as big; but to the extent there was a major boom in the ‘60s, it was centered on outer space.  And the thesis would have been that the way you run the world would be that you control outer space. 

You change your perspective a tiny bit, you get to a very different account of how globalization is going to happen.  And I think we’re living in a world where one version of globalization is going to happen.  We don’t know which one it is.  And what we’ve seen over the last quarter century is this wild oscillation between these different accounts of globalization. Most of them, I think, have been largely fraudulent.  There definitely have been elements of reality to all of them.  Some are probably more real than others. 

And I think one of the challenges for investors, for informed citizens, for college students trying to figure out where they’re going to work in this world, is to try to make sense of this larger context.  I think you will do extremely well if you identify which of these is going to be the real trend that will lead to genuine globalization.  If you can figure that out, you’ll be set for the 21st century.

Recorded on: Sep 05, 2007

The U.S. will be in a more competitive situation with other countries than it has been for a very long time.

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Freud is renowned, but his ideas are ill-substantiated

The Oedipal complex, repressed memories, penis envy? Sigmund Freud's ideas are far-reaching, but few have withstood the onslaught of empirical evidence.

Mind & Brain
  • Sigmund Freud stands alongside Charles Darwin and Albert Einstein as one of history's best-known scientists.
  • Despite his claim of creating a new science, Freud's psychoanalysis is unfalsifiable and based on scant empirical evidence.
  • Studies continue to show that Freud's ideas are unfounded, and Freud has come under scrutiny for fabricating his most famous case studies.

Few thinkers are as celebrated as Sigmund Freud, a figure as well-known as Charles Darwin and Albert Einstein. Neurologist and the founder of psychoanalysis, Freud's ideas didn't simply shift the paradigms in academia and psychotherapy. They indelibly disseminated into our cultural consciousness. Ideas like transference, repression, the unconscious iceberg, and the superego are ubiquitous in today's popular discourse.

Despite this renown, Freud's ideas have proven to be ill-substantiated. Worse, it is now believed that Freud himself may have fabricated many of his results, opportunistically disregarding evidence with the conscious aim of promoting preferred beliefs.

"[Freud] really didn't test his ideas," Harold Takooshian, professor of psychology at Fordham University, told ATI. "He was just very persuasive. He said things no one said before, and said them in such a way that people actually moved from their homes to Vienna and study with him."

Unlike Darwin and Einstein, Freud's brand of psychology presents the impression of a scientific endeavor but ultimately lack two of vital scientific components: falsification and empirical evidence.


Freud's therapeutic approach may be unfounded, but at least it was more humane than other therapies of the day. In 1903, this patient is being treated in "auto-conduction cage" as a part of his electrotherapy. (Photo: Wikimedia Commons)

The discipline of psychotherapy is arguably Freud's greatest contribution to psychology. In the post-World War II era, psychoanalysis spread through Western academia, influencing not only psychotherapy but even fields such as literary criticism in profound ways.

The aim of psychoanalysis is to treat mental disorders housed in the patient's psyche. Proponents believe that such conflicts arise between conscious thoughts and unconscious drives and manifest as dreams, blunders, anxiety, depression, or neurosis. To help, therapists attempt to unearth unconscious desires that have been blocked by the mind's defense mechanisms. By raising repressed emotions and memories to the conscious fore, the therapist can liberate and help the patient heal.

That's the idea at least, but the psychoanalytic technique stands on shaky empirical ground. Data leans heavily on a therapist's arbitrary interpretations, offering no safe guards against presuppositions and implicit biases. And the free association method offers not buttress to the idea of unconscious motivation.

Don't get us wrong. Patients have improved and even claimed to be cured thanks to psychoanalytic therapy. However, the lack of methodological rigor means the division between effective treatment and placebo effect is ill-defined.

Repressed memories

Sigmund Freud, circa 1921. (Photo: Wikimedia Commons)

Nor has Freud's concept of repressed memories held up. Many papers and articles have been written to dispel the confusion surrounding repressed (aka dissociated) memories. Their arguments center on two facts of the mind neurologists have become better acquainted with since Freud's day.

First, our memories are malleable, not perfect recordings of events stored on a biological hard drive. People forget things. Childhood memories fade or are revised to suit a preferred narrative. We recall blurry gists rather than clean, sharp images. Physical changes to the brain can result in loss of memory. These realities of our mental slipperiness can easily be misinterpreted under Freud's model as repression of trauma.

Second, people who face trauma and abuse often remember it. The release of stress hormones imprints the experience, strengthening neural connections and rendering it difficult to forget. It's one of the reasons victims continue to suffer long after. As the American Psychological Association points out, there is "little or no empirical support" for dissociated memory theory, and potential occurrences are a rarity, not the norm.

More worryingly, there is evidence that people are vulnerable to constructing false memories (aka pseudomemories). A 1996 study found it could use suggestion to make one-fifth of participants believe in a fictitious childhood memory in which they were lost in a mall. And a 2007 study found that a therapy-based recollection of childhood abuse "was less likely to be corroborated by other evidence than when the memories came without help."

This has led many to wonder if the expectations of psychoanalytic therapy may inadvertently become a self-fulfilling prophecy with some patients.

"The use of various dubious techniques by therapists and counselors aimed at recovering allegedly repressed memories of [trauma] can often produce detailed and horrific false memories," writes Chris French, a professor of psychology at Goldsmiths, University of London. "In fact, there is a consensus among scientists studying memory that traumatic events are more likely to be remembered than forgotten, often leading to post-traumatic stress disorder."

The Oedipal complex

The Blind Oedipus Commending His Children to the Gods by Benigne Gagneraux. (Photo: Wikimedia Commons)

During the phallic stage, children develop fierce erotic feelings for their opposite-sex parent. This desire, in turn, leads them to hate their same-sex parent. Boys wish to replace their father and possess their mother; girls become jealous of their mothers and desire their fathers. Since they can do neither, they repress those feelings for fear of reprisal. If unresolved, the complex can result in neurosis later in life.

That's the Oedipal complex in a nutshell. You'd think such a counterintuitive theory would require strong evidence to back it up, but that isn't the case.

Studies claiming to prove the Oedipal complex look to positive sexual imprinting — that is, the phenomenon in which people choose partners with physical characteristics matching their same-sex parent. For example, a man's wife and mother have the same eye color, or woman's husband and father sport a similar nose.

But such studies don't often show strong correlation. One study reporting "a correction of 92.8 percent between the relative jaw width of a man's mother and that of [his] mates" had to be retracted for factual errors and incorrect analysis. Studies showing causation seem absent from the literature, and as we'll see, the veracity of Freud's own case studies supporting the complex is openly questioned today.

Better supported, yet still hypothetical, is the Westermarck effect. Also called reverse sexual imprinting, the effect predicts that people develop a sexual aversion to those they grow up in close proximity with, as a mean to avoid inbreeding. The effect isn't just shown in parents and siblings; even step-siblings will grow sexual averse to each other if they grow up from early childhood.

An analysis published in Behavioral Ecology and Sociobiology evaluated the literature on human mate choice. The analysis found little evidence for positive imprinting, citing study design flaws and an unwillingness of researchers to seek alternative explanations. In contrast, it found better support for negative sexual imprinting, though it did note the need for further research.

The Freudian slip

Mark notices Deborah enter the office whistling an upbeat tune. He turns to his coworker to say, "Deborah's pretty cheery this morning," but accidentally blunders, "Deborah's pretty cherry this morning." Simple slip up? Not according to Freud, who would label this a parapraxis. Today, it's colloquially known as a "Freudian slip."

"Almost invariably I discover a disturbing influence from something outside of the intended speech," Freud wrote in The Psychopathology of Everyday Life. "The disturbing element is a single unconscious thought, which comes to light through the special blunder."

In the Freudian view, Mark's mistaken word choice resulted from his unconscious desire for Deborah, as evident by the sexually-charged meanings of the word "cherry." But Rob Hartsuiker, a psycholinguist from Ghent University, says that such inferences miss the mark by ignoring how our brains process language.

According to Hartsuiker, our brains organize words by similarity and meaning. First, we must select the word in that network and then process the word's sounds. In this interplay, all sorts of conditions can prevent us from grasping the proper phonemes: inattention, sleepiness, recent activation, and even age. In a study co-authored by Hartsuiker, brain scans showed our minds can recognize and correct for taboo utterances internally.

"This is very typical, and it's also something Freud rather ignored," Hartsuiker told BBC. He added that evidence for true Freudian slips is scant.

Freud's case studies

Sergej Pankejeff, known as the "Wolf Man" in Freud's case study, claimed that Freud's analysis of his condition was "propaganda."

It's worth noting that there is much debate as to the extent that Freud falsified his own case studies. One famous example is the case of the "Wolf Man," real name Sergej Pankejeff. During their sessions, Pankejeff told Freud about a dream in which he was lying in bed and saw white wolves through an open window. Freud interpreted the dream as the manifestation of a repressed trauma. Specifically, he claimed that Pankejeff must have witnessed his parents in coitus.

For Freud this was case closed. He claimed Pankejeff successfully cured and his case as evidence for psychoanalysis's merit. Pankejeff disagreed. He found Freud's interpretation implausible and said that Freud's handling of his story was "propaganda." He remained in therapy on and off for over 60 years.

Many of Freud's other case studies, such "Dora" and "the Rat Man" cases, have come under similar scrutiny.

Sigmund Freud and his legacy

Freud's ideas may not live up to scientific inquiry, but their long shelf-life in film, literature, and criticism has created some fun readings of popular stories. Sometimes a face is just a face, but that face is a murderous phallic symbol. (Photo: Flickr)

Of course, there are many ideas we've left out. Homosexuality originating from arrested sexual development in anal phase? No way. Freudian psychosexual development theory? Unfalsifiable. Women's penis envy? Unfounded and insulting. Men's castration anxiety? Not in the way Freud meant it.

If Freud's legacy is so ill-informed, so unfounded, how did he and his cigars cast such a long shadow over the 20th century? Because there was nothing better to offer at the time.

When Freud came onto the scene, neurology was engaged in a giddy free-for-all. As New Yorker writer Louis Menand points out, the era's treatments included hypnosis, cocaine, hydrotherapy, female castration, and institutionalization. By contemporary standards, it was a horror show (as evident by these "treatments" featuring so prominently in our horror movies).

Psychoanalysis offered a comparably clement and humane alternative. "Freud's theories were like a flashlight in a candle factory," anthropologist Tanya Luhrmann told Menand.

But Freud and his advocates triumph his techniques as a science, and this is wrong. The empirical evidence for his ideas is limited and arbitrary, and his conclusions are unfalsifiable. The theory that explains every possible outcome explains none of them.

With that said, one might consider Freud's ideas to be a proto-science. As astrology heralded astronomy, and alchemy preceded chemistry, so to did Freud's psychoanalysis popularize psychology, paving the way for its more rapid development as a scientific discipline. But like astrology and alchemy, we should recognize Freud's ideas as the historic artifacts they are.

Why are so many objects in space shaped like discs?

It's one of the most consistent patterns in the unviverse. What causes it?

  • Spinning discs are everywhere – just look at our solar system, the rings of Saturn, and all the spiral galaxies in the universe.
  • Spinning discs are the result of two things: The force of gravity and a phenomenon in physics called the conservation of angular momentum.
  • Gravity brings matter together; the closer the matter gets, the more it accelerates – much like an ice skater who spins faster and faster the closer their arms get to their body. Then, this spinning cloud collapses due to up and down and diagonal collisions that cancel each other out until the only motion they have in common is the spin – and voila: A flat disc.