Peter Thiel and George Gilder debate on "The Prospects for Technology and Economic Growth"

I'm Chris long and I want to thank everyone for coming out tonight I'm the president of the intercollegiate Studies Institute that was founded in 1953 by libertarian journalist Frank Cho Durov and a young William F Buckley Jr from Yale University since then is is hosted events like this like this one tonight on college campuses around the country its mission is to inspire students to discover and embrace in advance the principles and virtues that make America free and prosperous what are the principles that make America free and prosperous well it's not a simple question especially these days generally we think America's core principles include free enterprise and private property rights an understanding of limited government and the rule of laws articulated in the Constitution and Declaration and the concepts of personal responsibility and the sanctity of the individual is embodied in Western tradition what is the relevance of these principles today's to today's topic if America is to advance to new levels of freedom and prosperity so that the next generation is better off than the last it's hard to deny that we must have it's hard to deny that we must have both technological progress and economic growth these are big interesting questions Wednesday Peter Thiel has brought to center stage and the current intellectual debate along with Tyler Cowen the influential economist at George Mason University who wrote the great stagnation I'm happy to report that both these thought leaders were involved with ISI students Peter here at Stanford and Tyler received a graduate school fellowship from ISI to attend Harvard University I especially want to thank Kailua and all the students at Stanford who were involved with the Stanford conservative society and the Stanford review which is one of the many successful legacies of Peter Thiel these students are the ones will be leading America in the world in the decades ahead and the fact that they are examining important societal questions like tonight's topic should give us all reason for tremendous hope in fact I just learned this afternoon that Stanford review editor Lisa Wallace was awarded an iSight journalism intern and we'll be working at one of our partners like the hill the Weekly Standard or Tucker Carlson's of the Daily Caller the summer theis debate is less won between optimism versus pessimism and future outlooks and perhaps more about the kind of world we will live in and Peter Diamandis is a new book abundance he points out that today a Maasai warrior on the Serengeti Plain where cell phone penetration will reach 70% by next year fairly likely has in the palm of his hand a smartphone with access to Google and thereby more information at his fingertips than the President of the United States had just 15 years ago at the same time that Masai warrior may be hungry diseased and with no education or job prospects other than dancing or begging for handouts from a passing western safari tourists we might do well to ask at a time when unemployment exceeds 30 percent in Portugal 50 percent in Spain and more than 25 percent underemployment among youth in the United States where the jobs lost in the information economy where's the prosperity lost in those jobs the worldwide web of glass and light has been called the triumph of mind over matter by George Gilder does that beg the question of whether and to what extent matter anymore matters in a world of virtual prosperity and what are the culprits neo mercantilism that ships manufacturing jobs to China a lack of big R&D programs like Bell Labs the Apollo program in the Manhattan Project the sclerotic impact of layering upon layering of government regulation of the decades a Fed driven monetary policy that has for a generation encouraged money to be mal invested in dot-coms real estate and now perhaps a bond bubble little politically correct universities that have distorted the study of science the growth of the entitlement state the miss allocates resources away from entrepreneurs and into the hands of government bureaucrats to answer these questions we have three of the smartest most thoughtful insightful technology gurus on the planet in order to help connect the dots we have a legend in Silicon Valley is the moderator bill David al wrote over-connected the promise and threat of the Internet as a high tech executive and venture investor he helped build Intel Rambis and Vitesse among other great companies here at Electrical Engineering degrees from Dartmouth Caltech and Stanford I highly recommend over-connected as an insightful examination of how the Internet has created a world of positive feedback loops operating at a speed and with the complexity which frequently does not allow the human participants to think or reflect before what started as a good thing overshoots and becomes a potential calamity so here to help us through the discussion and to introduce the debate speakers Bill David L thank you Chris we have two of the most perceptive and greatest commentators on the Internet age that I could think of the first of these is Peter Thiel till he's that was the founder of PayPal he was the serves as chairman and CEO he's a legendary investor had a big position in Facebook or has one was the motivating force between Palantir and when I asked everybody that I talked to and I mentioned that I was coming here to moderate this and I said Peter was going to be here the first words out of their mouth were the smartest person I ever met Peter's on have been honored by the World Economic Forum as a young leader by Businessweek is one of the 25 most influential people on the web he's the supporter of the singularity Institute and that's the group that worries about the effects of when machine intelligence becomes smarter than we are he's an overseer of Hoover has pointed out a founder of the Stanford review he's a conservative and libertarian a supporter of Ron Paul and a graduate of Stanford both in philosophy and law George Gilder was somebody I met in my days well when he was writing for release one I used to read George's material to find out if what I was doing was important George is the chairman of the George Gilder fun George Gilder fund management the senior fellow of the Discovery Institute he's been a speechwriter for Nelson Rockefeller the other Romney George and Richard Nixon he was one of the pioneers of supply-side economics if you will build it they will come he served as a fellow of the Kennedy Institute he's an author of 15 books and is about to publish his 16th knowledge and power the infirm the information theory of capitalism it's going to be out in June yesterday I picked up the San Francisco Chronicle the ultra-conservative publication and I discovered that George was a techno optimist so Peter does not consider the iPhone to be a breakthrough just good packaging of the status quo and if our new technologies are not generating breakthroughs economic growth is sure to slow so this is a real debate tonight peter is going to talk for 15 minutes then George will talk for 15 minutes and then there will be five minutes where they will each rebut one another and the question basically is is technology accelerating or decelerating and what are the implications for economic growth so let's welcome Peter thank you thank you very much I'm very honored to be here tonight I as a bill saying I'm on the side that there's been less technological progress than people often advertise in recent decades and that unless something is done to fix this situation we're likely to have even less in the decades ahead it is my position that there was tremendous technological progress in the world from about 1750 to about 1970 and that since the early 70s it has slowed down precipitously there's one major exception to this on the exception is computers and computer technology and the various spin-offs from that and I think we will have plenty of time to discuss how important computers are but the the question I want to to start by tackling in these opening comments is to get people think a little bit about all the other areas of technology where things have decelerated very very badly and I would submit that almost everywhere else there's been deceleration and this is whether we look at whether we look at transportation energy commodity production food production agro tech on all sorts of technologies that didn't even happen nanotechnology cognitive enhancement life extension technologies and and that that with the exception of computers we've had tremendous slowdown on on I will not disagree with my my my sort of friendly arrival George Gilder here if he if he's to say that computers have been getting better and cheaper I fully agree with that but what I what I would submit to you is that that's not the most important vector or the only vector of us to look at and let me solo meet again with making some comments about some of these other areas I think if we we start with the most literal version of the question are we accelerating or decelerating or how fast are we moving the most literal version is to look at transportation and if you looked at transportation people moved faster every decade probably from 1500 on they had faster sailboats in the 16th 17th 18th century faster railroads in the 19th century faster cars faster planes it culminated with the Concorde in 1976 it was a decommissioned in 2003 and if you add in the sort of very low-tech Airport security systems we have these days you could say that transportation speeds are back to 1960 levels and it's been literally flat the space age is more or less over it sort of ended in 2011 with the decommissioning of the space shuttle even though if truth were to be told it probably already ended with of the last Apollo and landing in 1972 and the space shuttle program was sort of extraordinary program that costs more and did less and was probably more dangerous than the original space program of the 50s and 60s the most common reason people give for this a slowdown in technology in transportation is that it simply costs too much and it took too much fuel to fault lies supersonic planes and this I think points to the much larger failure in energy innovation where we're in very important ways we have not succeeded in undoing the oil price shocks of the 1970s in oil prices on a per barrel basis in inflation-adjusted dollars were around $8 a barrel in 1973 by the end of the 70s they were up to close to $100 a barrel there was a big period in the 80s 90s where prices came back down but they've rebounded and over the last four years have basically taken out the highs of the 70s and we basically have an energy situation today that is worse than the Carter catastrophe of the late 70s with oil prices at about $125 a barrel as if as of today on this whole question of technological optimism versus speciman parenthetically there was a very famous tibet in 1980 between Julian Simon and Paul Ehrlich where they sort of looked to the basket of 5 commodities and it was a bet on you know would things get cheaper or less cheap and the argument was you just look at are these things can get cheaper and that will tell us whether we have technological progress or not and Erik picked five different ones and he ended up winning on all five famously in 1990 if Yuri ran the same bet on a rolling decade basis from 93 to 2003 94 to 2004 air licks won the bet every decade since 1993 and he's wanted by such a big margin in the last decade that he's more or less undone the price gains of the previous century so there is something very very strange about about energy innovation within the Silicon Valley context we have we've had this extraordinary failure of clean tech in the last decade where we're and you can sort of diagnose and there all sorts of debates to what happened it's a very important question what went wrong but on the most fundamental basis it it costs too much it didn't quite work the technologies didn't work as advertised and and it basically was this enormous black hole that probably destroyed a lot of you know venture capital firms a lot of businesses along with it and at this point you could basically say that units it sort of has become an increasingly toxic word for for things for for money losing investments if you look at you know nuclear power of course has been basically decommissioned I think it would be it would be unkind to encourage any young person to study nuclear engineering it hasn't had much of a future since probably the 70s and although certainly Fukushima last year did not help in a world that is becoming increasingly hostile to any sort of innovation on if you look at warren buffett is arguably one of the great investors of all time his single biggest investment is in is in the railroad industry in the US and it's basically a bet against technology and it's on two levels it's a bet that people will be traveling more on railroads and if you look at the main thing railroads transport it's about 40% by volume is coal and so he's basic but is basically making the bet that the US will that the 21st century will look more like the 19th people go back to railroads and instead of having clean tech from oil all the clean tech will fail the oil will run out and we're going to go back to dirty coal as we sort of broaden scope from energy we see the same in food production where you have seen incredible run-up in food productivity there was a famous Green Revolution of the 50s and 60s which increased worldwide food production by something like 125 percent in those decades from 1950 to about 1980 in the decades since then it's decelerated tremendously there's been about 46% increase in food production since 1980 barely keeping pace with a worldwide population growth and so when you look at things like the Arab Spring the so-called green revolutions going on in the Middle East today you can sort of optimistically always gets described as the byproduct of the Information Age of people twittering and and as for how great technology is but but it I think can equally be attributed to a case of technological failure I think the immediate trigger was not democracy or Islam but that people were just hungry food prices had gone up between fifty and a hundred percent in the previous year and you could basically summarize what's happening the Middle East in last year is people who basically become desperate people have basically become more hungry than scared a biotechnology is another area where by all rights we should be seeing tremendous progress and we have not seen them there's been there are only about 1/3 as many drugs in the FDA approval process today as there were 15 years ago I think a lot of it has to do with a bad regulation in that area but but there's also sort of a increasing sense that that it's not even possible or worth trying to pursue these things so you know you could say in 1970 the US Congress still believe that we could declare war on cancer and defeat cancer within six years was a resolution that we were defeated by the Bicentennial in 1976 it's 42 years have elapsed since 1970 and in some sense we're 42 years closer to the goal but most people think it's more than six years away before we defeat cancer so the journeys taking longer has taken longer and therefore the expected journey is going to take longer than people think and of course all kinds of other major diseases like Alzheimer's which probably afflict somewhere between a third and a half of the population at age 85 are are not even on it's not even part of a public discussion to have a major effort to cure these diseases people simply no longer believe in technology um I think if you look at the big pharma companies they basically in the last few years simply started firing all the scientists and researchers who've produced so little for the last 15 years so I think you sort of have all these different details one can piece together on on what's been what's been happening now I will concede and have conceded there is a lot happening on the on the computer and internet side but I think the economic and political question is how how big that is as an aggregate value relative to everything else and I think the the easiest way to look at this is looking at the economic data median wages in the US have been stagnant since 1973 if you say this is because of rising wealth inequality even if you factor that in average wages the mean has gone up by maybe 20 percent which is still pretty pathetic it's like 0.3 0.4 percent a year and you could say that basically to first approximation the innovation and computers has been offset by the depletion in in energy and that we're sort of like Alice in Wonderland where people have had to run harder and harder simply to say stay in the same place so the computers been going faster and it's been offset by relentless depletion and energy which has basically kept kept the economy in roughly the same place now I think I think one of the things that's very important about this debate is I I want to you know I want to say it I'm not happy like sort of giving a negative story here on you know I work as a venture capitalist I'm interested in trying to reverse and undo this trend and so I think we always need to separate the tech slowdown thesis on it as a fact and as a problem and I try to solve it as a problem because I would like to see the next few decades see a lot more progress than we have seen in the last 40 years I would like to see some of these sort of this trend towards stagnation and decline a reverse itself but it is also a fact and when one denies the fact and one tells utopian stories about a cornucopia new church that's just around the corner on you will encourage people to make a lot of mistakes to miss allocate a lot of capital and I believe that that one of the most extraordinary economic facts of the last few decades has been the series of extraordinarily big and extraordinarily destructive bubbles that have led to the incredible misallocation of a lot of capital it was the I think was the first one was sort of the Japan bubble of the 80s which was centered on a text story there was the there was of course the tech bubble in Silicon Valley in the 90s which was most directly centered on a tech story that turned out to be untrue but even things like the housing finance bubble of the last decade were predicated on the idea that house prices would always go up and it was because the economy would always grow and in a advanced country economic growth is driven by it is driven by um it's driven by technological improvement I think we have an education bubble we probably have a government bubble there would be no problem on the government taking on all the debt that it's taking on if you had lots of growth if if the if the underlying economy was growing and was going to double in the next 20 years there's no problem in doubling the debt that's and that's sort of the Krugman Keynesian argument is we can print money because uh because things grow on trees and I think I think the people who are on the right in the 20s and 30s were wrong about technological progress and if they had someone like George Gilder encouraging on the Fed to print more money in 29 30 31 32 that would have been good and the Fed at the time believed you couldn't print money because you get inflation and it turned out in the 30s it was incredible technological progress and there was no inflation could take the country off the gold standard you could print money money literally grew on trees because there was all this cornucopia in progress that the politics got screwed up but the technology was great in the 30s and 40s that's not the world we're living in today we're living in a world where people believe this utopian story they believe that you can print money that things grow on trees the technology is easy that it's automatic that it's relentless and and as a result of believing this we've gotten trapped in one bubble after another on you know I think they're sort of you know sort of a number of different directions one can explore politically if you look at why there's so much on our political systems as fragmented as it is and as polarized I think a big part of it is that it's become very hard to craft solutions where everybody comes out ahead if you look at the Obamacare legislation a few years ago people can disagree or agree on it but what's remarkable is I believe it was the most important piece of legislation which was passed on a pure party line vote in the history of the u.s. there was no way to craft it where everybody could come out ahead you could give uninsured people insurance but only by reducing the quality of health care for everybody else and that's the kind of solution you find in a world where there's no growth and where everything's zero-sum there will be a loser for every winner and people will start to suspect that the winners are involved in some sort of a racket that's not the kind of world that I want to live in um I'd like us to find a way out but I think you know if there is going to be a way out of the wilderness we've been wandering in for the last forty years but we have to start by acknowledging that we're lost in a desert and that we're not in some sort of enchanted forest thank you very much has progress plateaued well I came to Stanford a few years back 20 years ago to interview professors about the future of wireless technology I'd become enthralled with Qualcomm CDMA and I consulted the leading figure at Stanford on radio technology his name is Bruce Lusignan he had 16 patents and signal processing he was a Titan of wireless and he told me that CDMA violated the laws of physics and that Qualcomm was very responsible in promoting this untenable technology and he at the time he said that in fact it would be better to invest more in analog technology because of the laws of physics actually favored analog you used the whole of wave in order to transmit information rather than just sampling the wave a couple times a second that the Nyquist rate to get an approximation of the signal and so we really should continue in analog and actually invest more in analog and as I studied this subject I came to the conclusion that Lusignan was right that analog was preferable it did accord with the laws of physics but the laws of physics no longer determined the prospects of tech ecology cdma-based on Shannon's information theory trumped the laws of physics and as a result we have this incredible proliferation of wireless technology today there are 300 billion smartphones now there will be I mean three 300 million smartphones and which is expanding to 2 billion in four years with some 200 billion apps projected these smartphones are not just phones they are full Turing machines they reflect the full insights of the information revolution that was instigated by Shannon and and all the other great leaders of information technology over the years including John Hennessy was a major contributor and matter of fact one of the exciting facets of Stanford is that it is oriented toward information technology rather than toward further exploitation zuv academic physics which is increasingly fruitless as Peter understands but information theory is not merely applicable to computer technology it Springs from computer technology and but it is a powerful theory that also explains and provides huge promise for biological technology genetics is based on information theory and so understanding of information theory can be extended into major breakthroughs and and bioengineering now bioengineering is one of the areas that has floundered in Peters vision but I believe that we're just turning a corner in bio engineering because we're moving away from the kind of experimental a random model of how biology works to an understanding that biology is an intelligent system based on on DNA and a few hundred lines of nucleotides in DNA have more information in them than all the current laws of physics as we understand them it's information theory is more powerful than physics and its impact of will extend across all the the various fields and it's it's transforming them as we speak when I I've recently I recently read a paper about a time which I think resembles our current era and that was a paper by William Nordhaus of Yale on the history of lighting and he he than the millions of years of history of lighting starting with cave fires moving through candles and whale oil and the finally electricity and lighting and now white lighted light-emitting diodes the whole history and he showed that the tremendous benefits that lighting conferred and the complete blindness of all the experts to what was being accomplished before their eyes all through most of the experts on the Industrial Revolution thought it was actually a misery ting workers of when workers at the beginning of it especially spend most of their time in the dark and by the end they had you know tremendous candle power and and heating and just huge advances in their standards of living and capabilities and and the dimensions of their lives but and indeed an or dose calculation he shows that the price of lighting of lighting at night had dropped just millions and millions of fold it's down to you know virtually too small to count now and the only bad period was when they in Britain in the early 18th century they imposed a 30% tax on candles and that caused a brief dark age that was accompanied by protection of the domestic gin production so everybody drank tremendously in the dark but but the fact is we're in a period of incredible advances across the board everywhere you look and and we are really entering a golden age of technology and it's looking at failures and big valley hood government programs of IDI like the space program or carping about TSA in the airports is really beside the point I've just flown from Bangkok or visited my daughter deep in the boondocks where she had better internet connections than I do here and and it's us and the air flight is because of these airplanes suffused with computer designed with computer technology the CAD programs and CAE programs and programs redesigning the materials the the whole love means that air travel is cheaper than ever before safer than ever before and while you fly while you're in Bangkok there was a sign there was a billboard I pass that said at this very moment there is 500 million people in the air and as I discovered many of them are on the air they all had Wi-Fi on my plane and and they're in cocoons of productivity and entertainment and it's it's air travel is one of the most stupendous successes technologically that I've experienced in my life and it's invented still improving rapidly and in that mass I you know nanotech it has failed because partly because of a false model introduced by richard fineman nearby and he had a mistaken view of nanotech that imagined a kind of continued predominance of physics that that physicists could go in and build new molecules atom by atom and bottom up and create a kind of mechanical nanotech but nanotech that's a Drexler Ian fineman's nanotech is is a delusion you have Brownian motion functioning in the gigahertz you got tremendous sticky Reynolds numbers you you it's just not a feasible project to do nanotech the way of fine men and Drexler envisage it but I've been investing in a nano tech company in Vermont that is bringing water to the Masai it just got a ten million dollar investment from a company called eco net that has 70 percent of the cell phone service in Africa and has discovered that when you sell cellphones you also want to sell water because the people need water as much as they do cell phone service and so this company in Windsor Vermont Selden technologies has figured out how to use carbon nanotubes manufacture them is an old paper mills old paper mill technology and filter water without any chemicals without any power usage and remove both bacteria and viruses in a tunable way they can tune these nanotubes papers to focus on different kinds of filtration and they're about to engineer a real transformation of all filtration technology based on using carbon nanotubes in a ordinary chemical kind of process that doesn't produce some magical new revelation of physics uber alles but does allow people to drink water through a straw out of a septic tank and get not only potable water but delicious water and this is the kind of advanced that's underway and it's it's a lot of it is is not happening in the United States I spend a lot of time in Israel these days because the real Silicon Valley in my judgment has moved to Israel but that doesn't really matter Israel is so closely linked to Silicon Valley that it's breakthroughs are immediately transmitted here and it's saving American technology at a time of doldrums for many of the reasons that that Peter mentions but again water technology is vital to the Egyptians and Iranians who are the two biggest importers of water in the form of grain and but Israel is completely beaten the water challenge while nobody was looking Israel and since the foundation of Israel its population is increased tenfold its agricultural production is increased sixteen fold it's industrial production has increased fifty to sixty fold and it's use of land has increased threefold and its use of water it's net use of water has declined 10% it's down 10% they now get half their water from desalinization plants they recycle 95% of their sewage they used incredibly refined drip irrigation techniques that direct the water directly to the plants hundreds of times more efficiently than then ditches this is an amazing world out there you should go out and investigate it let me let me say three make three quick comments one on this question of who is an expert and I do not question that you are an expert on all the specific technologies you described but who is really an X first who's really an expert on this question of technology more broadly and I think as you rightly noted a lot of the experts in the early twentieth century were too pessimistic I believe a lot of the experts today are too optimistic and they generally think that innovation is something that happens on its elements obvious subject worthy of study and it's just sort of an automatic variable that gets thrown into the macroeconomic equations that dominate everything I think if we if we are somewhat skeptical of experts on these bigger questions if you look at what average people think on they certainly seem to be having much less optimism about the future and if you took a survey of how many people in the u.s. think the next generation of Americans will be better off in the current generation on that percentage has steadily gone down for the last 40 years and the optimism about the future has gradually come out of the system the experts will tell them about all sorts of incredible things that are just around the corner but after 40 years of waiting of fewer and fewer people believe it and I think there is there's a lot to be I think the sort of common sense experience that a lot of people had should not be simply dismissed out of hand people find they have to work much longer hours than they than they did 40 years ago you know there's a zubon Schreiber's is french writer who 1967 wrote a book called the american challenge and said that the US had annexed elk technological accelerating civilization by the year 2000 the average work week in the u.s. for the average person would be four days a week seven hours a day with 13 weeks a year of paid vacation time and and people like to say well he was French but but but I think I think I think we have to really take seriously how does the Common Sense experience differ if you're if you're looking at the world from outer space and you listen to George Gilder and you're saying well everything's great in Silicon Valley you know maybe it's great in California general is place that's sort of that sort of separate and this was a great place to go in the 1930s it was one of the best place in the world because that's where technological progress was happening was the aerospace industry the you know the movie industry all the new industries were happening in California and people moved from Oklahoma to California that's what the grapes of wrath' if you have if you actually looked at them graphic trends today people moving from California to Oklahoma which I would submit again is not a great tech trend on the the question of how we measure all these things I think is endemic to it on endemic to it much of our debate I would submit you measured in economic terms our people are better off economically but I think there's also sort of this philosophical question that's linked to the economic question let me just sort of highlight that and sort of a is a little bit related to some of the points Chris long made in his opening comments and it's sort of this question what is more important is the world fundamentally driven by bits and information or is it fundamentally stuff and sort of real things in the real world physical objects and I I believe that I believe we are in a world where innovation and stuff was outlawed it was basically outlawed in the last 40 years part was environmentalism part of it was risk aversion on and and all the engineering disciplines that had to do with stuff have basically been outlawed one by one I went to Stanford in the mid-80s if one had engineering was not a great field to go into in general if you went to Computer Engineering that was good financial engineering was also good that's the one other area where there's been a lot of progress because that's simply a world of bits but everything else was outlawed um you know petroleum engineering nuclear engineering Electrical Engineering Chemical Engineering mechanical engineering on bio engineering these were terrible decisions people made who went into these into these fields and and it was sort of and and then if you say well you know it doesn't matter all that matters is the world of bits and not the world of stuff on there's sort of a question whether this is actually true and whether we really should have this sort of ghost-like reductionism where we simply think of the world as consisting of a virtual computer if that's sort of our model for the universe or something like that whereas again the Common Sense experience is that we're physically embodied we live in this world we need to eat food just take the most basic thing and it is it is perhaps you know on and you know if people need to eat bread or something like that every day it's not adequate to respond to them and tell them on you know let them eat iPhones well I certainly agree that matter is important and the question is is how you address matter and whether you uphold the materialist superstition or whether you understand that matter is ultimately subordinate to mine and that technologies that enhance human mental capacity and capability are ultimately the most human technologies and the most important ones Tyler Cowen grouses that the Internet is chiefly favors the cognitive elites well of life favors the cognitive elites the the whole economy is ultimately dependent on a very small cognitive elite and and the world economy is dependent on a cognitive elite and as the internet converges this cognitive elite and brings it to a critical mass and makes it more capable of addressing all these material problems they will look a lot less serious now Peter's worried about energy I'm not worried about energy at all I never imagined that clean tech was was a reasonable project for America when we have oil and gas and huge quantities as we're increasingly discovering and in the last several years enough natural gas has been developed to hundreds of trillions of cubic feet enough to support the economy for the next 200 years it's a new techniques are constantly being developed for tapping deep oil and oil shale and other forms of oil and and you know we can block a pipeline from time to time but the inexorable advance of these technologies is very impressive and this is all information tools that made this possible this is a further consummation of the information age that has permitted us to discover a gas gas and oil that was previously regarded to be inaccessible you know we've got a kind of Maxwell's demon at large in the world uncovering new material capabilities through our ever advancing information technologies and and I think and these cover all the fields of science they are physics now isn't is chiefly devoting its hopes to something called quantum information theory Christopher Hughes is a great figure in it my daughter wrote a book about it called the age of entanglement and this really is the great hope in physics this the American commitment to it to information theory is a great strength of our economy now on these other points I agree with Peter I don't want to seem to be too much a pushover but I completely agree that that culturally we had this massive revulsion toward technology we we started worshipping trees again and and we became druids creating these sun hinges around the country and it's where we really had a mania and I think this mania probably is coming to an end now but it is still a problem it's still a problem at Stanford University thank you George and Peter I I'm going to ask a few questions and then by me doing it you're all going to gain a tremendous amount of nerve and you're going to start holding up your hands so I looked at a little data for this before I came here and I discovered that the gross national product of the United States was fifteen trillion dollars we had a hundred and thirty million non-farm jobs in the United States which came out to be about one hundred and fifteen thousand dollars of economic productivity per employee then I went around and I looked and I discovered that Google revenue was around 1.2 million employee and then I looked at Walmart and found out that they had two million associates and were delivering two hundred billion in sales and they were doing about a hundred thousand dollars an employee and I looked at Amazon and they had 48 billion in sales and they had 56,000 employees and they were producing about eight hundred thousand dollars in income and employee and what I concluded by this is that before we had the virtual economy a million dollars in economic growth created eight to ten jobs and with the virtual economy it's creating maybe on the order of one or two so I would like to know what are our prospects for economic growth and how is this going to affect the middle class in the coming years and George why don't you take a first shot at this I think this is a false problem it's a false way to view technological progress to imagine that increasing productivity which is what you're describing actually translates into less employment product of employers want productive workers the more productive workers become the more readily they can be employed and more employment will occur I think at present we are in the middle of a global recession following an appalling financial hypertrophy that of governments panicked about and I think it was a mistake and so people who have dismal projections of employment once again have their day in the Sun they had their day in the Sun in the 70s they had their day in the Sun throughout history but here we are in a depression of comparable to the 30s depression from some points of view and we have radically less unemployment and I think that the productivity of the new technologies that are emerging will actually increase employment I think it is absolutely critical that the US actually gets serious about technology that it that it not to force immigrants to the United States to return after they complete their Stanford education I mean we are absolutely doing utterly self-destructive stupid things day after day after day and we're paying for it you can tell that there are other policies that work better by visiting Israel and other countries China and Israel or two countries I visited that show that this is not a world of lessening opportunities it's a world of exploding New Horizons uh like I generally agree with you at least in theory I think that if you have technological progress it frees people up to do more productive things and that's how we should think of it you know when you shut down the horse buggy factory the um a lot more jobs building cars and and people are generally generally better off as you have these things happen I think the at the same time on you have to reflect on the fact that if you gave that sort of a speech in Detroit and people who are working in car factories asked you well what you do and you said you have one word for them computers you probably put this would not be good advice if you say we're running for Congress or something like that and and I think this would be true this would be true not just in Detroit but in in most of the US and so the while I agree with you that there have been on a few jobs that have been very productivity enhancing and there is a there is a there is a thin tip of the spear of the computer revolution that continues apace it is not clear it's enough to drive the whole economy and no political leader can comfortably say you should look to Silicon Valley because there is some sense in which it's not actually creating enough wealth to really really transform things and that I think that's why that's why even though I agree with you in theory I think in practice it's not a compelling argument because people sense there's something a little bit fishy about the numbers don't quite add up but you know that the Google analysis is of course the Google's of monopoly it's a monopoly search engine company it only works as long as there's nobody else doing it and and so by definition it is a company that only works as long as you have a few thousand people that can do it it's by definition not scalable and and I think that's what I that's sort of that's sort of a question that one should explore a lot more and that's why you can't say everybody should be like Google okay so I began looking around and I discovered that something was kind of interesting when the railroad came along we completely rebuilt the infrastructure of the world I mean we created the industrial city and then we had suburbs it stretched along the railroad tracks and things like that and then the automobile came along and society went from being linear to being two-dimensional and we ended up with shopping malls and things like this so the internet comes along and it's a new level of interconnectivity in these levels of interconnectivity Society has always been optimized around them so what kind of a physical society do we end up with in the internet and do we end up with a construction room a construction boom we should it's almost it's very difficult to erect buildings in the United States because we do have a national campaign against carbon footprints and unfortunately we're all made of carbon which makes it difficult to decarbonize our impact but but I think that that we will have a new economic boom that will resemble previous economic booms all of them do reflect technological advances some of these attempts will fail and there will be crashes and there will be new periods of dismal reflections and prophecies but I think that the incredibly bad policy we've been following explains the current situation and there's a great vanity in government to imagine that if we retrenched current levels of government spent it'll be a catastrophe and all history tells us that when you cut government spending it's all upside it releases new energies it results in new employment it improves the lives of everyone and I my new book is full of examples of where countries life radically reduce their government spending with tremendous upside and and reducing tax rates first is perfectly a tenable strategy I remain a supply-side ER and I think that the this is a good stance that the Republicans are taking today to refuse to raise tax rates now I think that the current tax system is a disgrace to the human race so it should be radically simplified and flattened and but all these policy changes will have the same kind of effects that they've always had and so the depressed psychological depression we're undergoing today I think is misconceived I guess where I was trying to get to George was I would picked up The Wall Street Journal today and I was looking at it and they were talking about the shopping centers going away and I began scratching my head saying gee what happens to all this physical space in an Internet driven world do we end up with shopping centers being repurposed do we end up saying people want to live in cities because they can connect differently I don't know do you have any thoughts about that Peter well I I think in in theory there is a lot of there are you need less physical buildings if to the extent it makes things more efficient and I think I think there definitely are parts of that where that's that is the case certainly on my intuition on the other hand again is that maybe computers are 20% and the other 80% of the economic value consistent things in the physical real world as opposed to virtual world of bets and and so I think the constraints on on construction are quite serious and it took in the 30s people were able to build the Empire State Building from start to finish in one and a half years it's taken over ten years to replace the World Trade Center my off the back of my office is the Golden Gate Bridge in San Francisco it was built under FDR in three years in the 30s on at this point they're in the process of building an access ramp onto the bridge it's costing about as much as the original bridge and it's taking seven years to build now now if you if you say that if you say that these physical things don't matter these are not problems you need to worry about and and I I think they do matter quite a bit and I think that's they're definitely you know you definitely would free up a lot on this one place I I do disagree with George on is on height no I am certainly I like I don't like paying taxes on and I'd like taxes to be lower but I don't really think that lower taxes are this panacea at this point and I think that if I had to give a policy recommendation I think I think most of it is is micro regulatory and I think that you know if if I could actually spend the money I earn on buying drugs that are not legal right now on by the FDA and otherwise or if I could if I could build a house that's not zoned in crazy ways or if I could do any of a number of things on I'd be fine paying more in taxes if I actually got to keep and spend the other half of my money as I saw fit and and so in effect we have we have a very we have a very low we don't have a super high tax rate in certain ways but we have a very high tax rate if you sort of say that you can't really do all that much with your money because so much innovation has been has been effectively a micro regulators death so that's sort of where I would focus the I would focus on the effort I want to focus on that too I mean I think regulation is absolutely maniacal and and out of control and it's destroying our economy I mean I don't disagree with you on that at all okay I'd like to hear from some of the people in the audience how about you okay I'm going to try and rephrase that so everybody can hear me but Stanford students have app mania and the question was is this part of the revolution or or not so George at mania yeah and I guess implicit in that is it is smart thing for Stanford students to be fiddling with well it's it's a it's it's an amazing development and I think the skills that are formed and tapped in producing these new apps are valuable and the disciplines incurred are valuable so that I think it's a good phenomenon I think it has it's obvious limits and and these you know this projection of 200 billion downloaded apps and four years suggests that most of the world will do nothing but download apps and I think that's probably of an unwise use of time well if if you you know I don't think it's on a good idea to necessarily judge what people are doing and so so and so that there's sort of a question whether it's the right thing people to do individually as an economic decision and one can have a lot of debates about it I suspect too many people are doing it I suspect that the actual ratio of these things really working to the amount of effort isn't all that great but I think the question that's that's worth asking is sort of on is why are they not doing anything else I sort of take I don't of it that's the only thing people doing boys so much that and I would again submit that there's no obvious path for other things that that make sense so you know there's is it like there's a version of this with the the anti-wall street bias wearing us we have all these rocket scientists they went to work on Wall Street and sort of the bias is well we shouldn't have all these people working on Wall Street but but I would say you know I would say part of the problem is they were no longer allowed to build rockets or do things in the aerospace industry and so you have to sort of that sort of the half-empty version of this that we live in a world we're doing things in the real world is heavily restricted there isn't that much you can do in the world of bits in the virtual world you know finance computers that's where you can do things but then it may be it may be on and I think there's enough to it's probably enough for 1,500 people at Stanford to get decent paying jobs doing that it's not clear it's enough to really take our civilization to the next level on its own terms Peter you've had this project where you've been giving I want to say sort of $100,000 fellowships to kids before they graduate from college and are most of those things in the information area are they in other areas maybe you could tell people what you are doing yeah this is a we we we started a program about a year and a half ago to give $100,000 of fellowships to people to stop out of school for two years and work on something technologically intensive that have the potential to really on to really improve things and and so we've generally not funded people who are just doing apps we think you know people are do that anyway and there's spare time we don't it is my judgment that it's for the most part not really going to take our civilization to the next level um I think that but I think that's that's obviously there's the sort of a common sense intuition and you know it's like again if you had I don't like picking on individual companies but if you take a company like like Twitter on this standard wrap on it is you know it's you know how is this really valuable you just have 140 characters on an SMS basis it's valued at about eight billion dollars in the secondary market at this point and I think the debate about something like Twitter is always framed as a debate of specific success or specific failure on and on my view is that Twitter is actually a tremendous specific success they're about seven hundred people who work there I think they will have I think the company will be around for decades to come they will have well-paying jobs for the next twenty years or so I don't however believe I believe however that may be also symptomatic of some sort of general failure and so I think you can have specific success but in a context where there are not enough companies that really move the dial being built on the specific success may still be masking this general failure and that's that's the way I think a lot of this needs to be thought of okay is there another question yeah so the question is is teaching entrepreneurship productive well I have to be somewhat biased on this since I'm teaching a class on that next step so I I think I think it is I think the question I would I would tackle on this is on and the way I'm going to orientate it towards is that it is it is probably wrong to frame it as entrepreneurship though so it's a it is on and so you know it's one of the people who worked for me it's time a few years ago say well you know what you want to do with your life and what's clear in ten years I want to be an entrepreneur and it's sort of like if you're a writer it's like saying you know I want to be famous or on you know what's your plan I want to become rich and and and I think that people become entrepreneurs because they have important problems to solve and and starting a company turns out to be the best format they find for solving problems they could also solve these problems in big companies they might solve them in universities and government and nonprofit I personally believe that a lot of important problems can be solved in the context of creating new businesses but I think the question it's not around some mania for starting new businesses where you sort of narcissistically look into yourself and say what can I do to be an entrepreneur and I can bake chocolate chip cookies so I'm going to start a chocolate chip cookie company it's it's it's it's it needs to be oriented towards what it were are important problems that need to be solved and I do think there are a lot of important problems that need to be solved and that can be solved and the people are not working on and as long as it's framed within that context I think there's a lot to be said for it so you're really saying no though right I mean you're saying that studying entrepreneurship in itself is really oshi Oates that's that's not the right target you should be mastering some particular skill some particular set of tools that allow you to accomplish something that other people need to have done and it's the development of these tools that really is important and in studying entrepreneurship in itself takes you one step away from the actual substance of your business and I think it's probably amiss yes I agree I think I think that um I think there is I think there's room for both learning things about process and substance but I think it should be about 80% substance and 20% process and there's a way to get the process and do things right and a way to do the things better but we you know it's there's price one of those four diagnostics of what's gone wrong is that we've substituted process thinking perception of thinking in many different domains in our society over the last 40 years where we think and it's a lot easier processes a lot easier and so in a world where everyone thinks substantively there may be some procedural shortcuts where you just um you know if you have a lot of people substantively thinking about how to invest in the stock market the procedural shortcut is to buy an index fund but it doesn't it may not work if everyone does process and and we probably in a world where things are way too weird towards process and away from substance and or even patenting business processes or business methods I mean it's it's just really ludicrous I mean what do businesses do they experiment with methods and processes they don't need a patent for it I don't know I mean it's this kind I mean the patent system is another problem that's gotten out of hand in the United States over the last decade or so a recent study by bu a really scrupulous systematic study of the impact of software and business method patents showed that after litigation the loss and the defendants the people who've been sued by the patent trolls is a total of a half a trillion dollars over a decade this is a really just absurd abuse in the United in the United States and it's a beaut and abuse of litigation which i think is kind of a case serve capitalism we're lawyers studying entrepreneurship exploit the law to the advantage of lawyers and luckily all the judges or lawyers and all the congressmen or lawyers and the senators are all lawyers so they get to have this absurd racketeering legal profession in America that is very destructive and it's manifested in the abuse of the patent system so right over here okay so the if I had to restate the question it is that the government made really long term technology investments and venture capitalists just go for the gold tomorrow and so we aren't going to be inventing the internet and things like this because we are so short-term oriented and what's going to replace this so Peter well I don't I don't know if I know of it I don't know if I entirely agree with your darkly pessimistic thesis that that is uh that it is it is all basically on that war is the sort of father of all things or something like that and and the driver of all all innovation there's certainly there's certainly certainly one if that premise is true sort of one you know one things I didn't talk about that much is why things have slowed down I sort of gave my bias tends to be libertarian which is that it slowed down because of government regulation there's obviously a liberal argument which would be that we haven't been investing enough in science and engineering degrees and sort of the schools are broken and you can sort of have sort of debate along those lines I think this was a conservative argument which is that it was driven by military spending but I think the problem with the conservative account of the driver of innovation is that clearly we have a point now where the weapons are strong enough to blow up the world and so it's not it doesn't motivationally work and so you could say that you know the space race ended really ended in 1975 when you had the Apollo Soyuz docking if we were just going to die via spaceships and all be friends why should people work 80 or 100 hours a week to build us rockets are really being designed to launch missiles at the other side and so I think that's that certainly is a line of inquiry that's worth pursuing but but the problem is that you know when you're in a world where technology is powerful enough to destroy the world several times over you are not going to motivate additional technological work that's simply designed to kill people and so the motivation has you have to have some you have to have some on some way that you motivate people to to sort of sacrifice their time and work on projects that that is that's not motivated by war I think that's sort of the correlation I want to tear doing it say well it is it is a I would say it's a big data company that is it has certainly a defensive military application as well as a as well as a sort of corporate companies preventing fraud break-in theft I think there's there's some room for that on but I think I I don't I don't think the offensive military stuff is is a way that that you cannot you can really motivate things at this point in our in our society on and I you know in again the history is obviously there's a lot of other things that have changed with this history so so I would say even if we grant your premise that it was military spending that drove technology it's also the case that our government today would no longer do this and so if you had a letter from Einstein to the White House he would be treated as a joke and get thrown in the wastepaper basket we would assume that nobody has that sort of expertise to to push for something like that on you know I think we still have the DARPA program in place the amount of money that's spent by DARPA is probably as as great as it was in the 50s and 60s the money somehow being spent much less well and so there's this question about the bureaucratization of these processes that's very bad and so if I could give a libertarian account of what's gone wrong with government spending on science it would be that you know in the 20s and 3rd we had you know very talented scientists working in a and technologists working in a decentralized way on and it was possible to take that ecosystem and give it a one time tremendous acceleration you could pump money into it and you could you could basically tremendously on accelerate the innovation for about 20 or 30 years but it came at the price of politicizing science and making science something where it be subject to political decisions of who gets the money peer reviews for for grants and the sort of whole complicated a political process and just as in on you know Platonic theory the philosopher king is an oxymoron because philosophers are bad at being Kings so the scientist politician is also an oxymoron maybe it's even the exact same oxymoron and and great scientists are fundamentally really different from great politicians and and so we have a world today with about a hundred times as many scientists as the war in nineteen twenty if my deceleration thesis is correct the productivity per scientist is less than one percent of what it was in nineteen twenty okay I the George we I think what we have to do is wrap it up here so I'm going to ask Chris to come on up

Channel: Intercollegiate Studies Institute

Views: 47,665

Keywords: Thiel, Gilder, Davidow, Technology, Economic Growth, Stanford University

Id: XRrLyckg8Nc

Length: 76min 26sec (4586 seconds)

Published: Thu Mar 15 2012