Peter Thiel on Innovation and Stagnation

welcome back to conversations our guest today is Peter Thiel one of America's leading investors and entrepreneurs and also very as you'll see a very interesting thinker about American the American economy American business American society American politics Peter thanks for being with us to have me on the show my pleasure Peter we met but a little over 25 years ago I guess when you were an undergraduate at Stanford I think and you were active in politics and looking forward to going to law school and here you are you're not a politician you're not a lawyer what what happened well I'm still I'm still very interested in all all these sorts of questions but yeah I probably started as a very conventional attract career Stanford undergrad Stanford Law School worked in a big law firm in New York for a number for a while and then a big bank in New York and and sort of had this rolling quarter life crisis where I finally concluded that that I should that it made sense to try to do something where with your life where if you wouldn't do it it wouldn't happen versus these tracked careers where you know if you don't do it there are a hundred other people who will take your place do the exact the exact same thing and in the in the late 90s I moved back to California got involved in the in the internet boom started a company called PayPal four years later was bought by eBay and then since 2002 I've been sort of investor helping people get started with a number different tech companies but it's been it's been a wild wild 25 years that's great that's great it's not to talk a little bit more about how this you're there in New York you're in the legal financial world and what was dissatisfying about that and what was the attraction of going to Silicon Valley and was there anything ticular thing that spurred the move well it was it's it's it is what's what's amazing about these top US institutions in the u.s. whether academic or you know law firms banks is that from the outside there are places where everybody wants to get in and then once you're once you're in them it turns out that it's always fairly constricted you have enormous numbers of very talented people so that's that's the that's the aspect that's very positive but then it's also it ends up being involving a ferocious amount of competition for what I think are often relatively small stakes where you know it solvent in Cromwell the New York law firm I was at you'd have 80 very talented people start every year four or five might make partner after seven or eight years and and it was very unclear even for the people became partner how much impact they would have on the on the broader world so it had sort of these people who are incredibly ambitious going in and sort of gradually gets wrung out of them over time and entrepreneurship struck you is different I think I do think that Silicon Valley the technology industry is still an exception to this where you know we are we're living in a society where the frontier is not as wide open as it was in the 19th century geographically it's maybe you can still go to Alaska but there aren't that many places one can move to Withers through a wide-open space left technology I think is is one place where where that still exists and where it is possible for a small group of people to start something new that has a big impact on the world as a whole so how did that happen with PayPal did you sort of decide I want to go to Silicon Valley and you've been of course at Stanford and reconnect with friends there and then figure out what you wanted to do or did you actually have the idea for PayPal first and then certainly the fact that I was at Stanford was quite helpful since it is probably the university that's most embedded in this and there were a lot of friends I had were getting involved in the in the internet boom of the of the 90s we had these things are always totally somewhat of a process there's some serendipity there's some some planning we had a we had this idea of I think from very early on to create a new payments company it was and there was sort of all sorts of questions what won't have to do to make that work a number of these efforts had already failed by 98 and so we learned from some of the things we in this as we're myself Max Levchin was my co-founder and three or four other other people involved early on in the team and and it was it was a crazy process coming up with the right idea head-on the idea of linking with the email which was a simple idea it turned out to be very hard to implement because of all the fraud challenges one had and then and then you then it gradually sort of scaled very quickly we started with 24 people using PayPal and October of 1999 was the 24 people working at our company and it grew by about 7 to 10 percent compounding daily so we were at a thousand people by mid-november twelve thousand by December 31st a hundred thousand by February 3rd 2016 today the PayPal service has probably on the order of a hundred twenty million people people using it so you know I think Einstein apocryphally said that compound interest was the most powerful force in the universe and and if you can get something that has this snowballing effect going it's it's very powerful whether it's in technology or culture politics all sorts of aspects you want to get positive feedback things like that not things where as you make progress every incremental step gets much harder you don't want to have sort of trench warfare on the Western Front in World War one where you can make a push for maybe a hundred feet you want to do something where as you make progress it Cascades and what was the core insight was people are going to want to pay for things online obviously um but that was already happening or not really it was they were the core the core insight was that most people are not set up to accept credit card payments in the u.s. they're about three million people who have a are set up to accept credit cards there were about 150 or 200 million people with email addresses so if you could link money to email than anyone with an email could could receive the payment and it was a way to start a payment system from scratch normally as an enormous counterparty challenge where you need to get both sides involved simultaneously so so by linking money to email you could send money to someone with an email address who's not yet signed up with PayPal and then they'd click on various links and then they'd be incentive to sign up so they could collect their money and so so you want to have sort of a one-way payment system where it can people who are not yet officially part of it these are people selling things on ebay mostly or a burst or it it took off on eBay and then we sort of corrected a lot of the focus on the product towards eBay very very very quickly there were a lot of competitive challenges one ran into eBay had its own competing service sort of uncomfortable things it was like this giant store that couldn't get its own cash register machines to work and with competing service ours that was offering the cash register machines that work better there were you know there were fraud challenges there were regulatory challenges but but there was there was um the underlying need for the product was very great and that enabled us to sort of power through a lot of that stuff and defeating other competitors I mean how does that work in this guy's trail the other people thought gee I can do that too or is it you you just have to get the snowball going fast enough that you become dominant in the field I'll say just but that is that will year it's uh I do think in business one of the critical things is that you don't want excess competition so if you have lots of people doing the same thing it's very hard for you to have a good business so if you're the 20th person selling pet food on the internet it's unlikely you will have a fantastic business or opening a restaurant in DC or San Francisco is a terrible business and so good businesses I think always have this extremely unique character you can certainly get it by being sort of a first mover where you grow incredibly fast so if you are the first one and you grow quickly enough that no one can catch up that that can work and that was I think that was our original plan was just to have this exponential growth and so even if people copied us six months or a year later they would never catch up um in practice I think it's more important to be the last mover than the first mover sort of a kappa blanka line and chess that you know - um to begin you must study the endgame because that's you know you win if you're the last mover not if your first movers atactic last movers is what really matters um and I think the key a key component there is often to have some kind of technological edge it was not obvious what that was initially with PayPal it turned out there was an enormous amount of fraud on the internet and there were some technological solutions we came up with and the existence of this fraud deterred a lot of the large competitors from entering the space a large banks large institutions where other consultants would tell them there's too much fraud you can't do this and they ended up launching products that just didn't work yeah but Stephanie I mean I don't know much about it but just stepping back and thinking about you'd think that the credit card companies and/or the bank so I guess some of whom own the credit cards would have thought yeah we can do this and we're pretty used to processing payments why should we let some upstart company sees a huge market here you know it's it's large large corporations are probably better than the government but in many cases are are quite dysfunctional and so yes in theory if the large corporation were a monolithic institution with a singleness of purpose that's how you'd respond and and the CEO of Visa might say now why is this happening but then in practice you have you have incredibly incredibly many bureaucratic levels on the inside there was a Citigroup was a try to launch a competing service but the people inside it sort of sensed this was unlikely to work and so you end up with less talented people working on it the smarter people in these organizations always know not to work on things that are unlikely to succeed and so you have all these complex internal politics that that make it surprisingly possible for small companies to emerge and not to be just squashed by larger larger organizations and that you all envision it you sort of envisioned obviously exponential growth and you don't instead that would be key to your success but you pretty much envision did filling the niche of filled or was it something you've adjusted in a big way as you went forward people each other's read about these business books and people say oh it's totally under to Cepeda it worked out totally differently I was very agile and had to adapt to circumstances yes I I always um you know it was definitely a lot of adaptation at the same time I think there was this this founding vision of creating a new payment system on the internet and that that that sort of drove it all the way through and so I I'm a little bit more partial to the side of having a long term plan and using that as something you you build around versus the sort of random walk theory that that dominates where you you iterate very quickly and you have no overarching vision you know when I was a when I was a chess player intermediate level chess lesson was always that a bad plan was better than no plan and and I think something like this is true in business we always say that you can't have a plan you can't have a plan especially in technology because things will be so different in five or ten years who's to know what it's going to be like but I think it's always worth asking those questions most of the value of these businesses accrues over the very long term there was a financial model we did on PayPal in March of 2001 we've been in business for twenty seven months and we included that about 80% of the value of the company came from profits in years 2011 and Beyond and that's that's sort of that's analytically true of almost all these businesses the value exists far in the future and so one of the critical questions is really will you still be around ten fifteen years from now because that's where where most of the value exists and so it is even though the long term questions have a qualitative nature durability is at least as important as growth what I've heard you talk about business the bad you use the term founders and co-founders maybe a little more than most people do and maybe the term entrepreneur a little less I guess entrepreneur has a certain needn't be this way as buzz but has a certain feel of making it up as you go along right you know without dress a little more of a feel of you know setting up an institution that's there to last yeah so definitely like founder more than entrepreneur I think I think entrepreneur has it's a bit of a overused term so it's a had a conversation with a friend number of years ago asked what do you really want to be doing in five or ten years it's very clear I want to be an entrepreneur and so it has sort of the same quality I want to be rich I want to be famous and I think I think a better mindset for for these businesses is that there are some very important problems that you're trying to solve and it turns out that a new business is is a form which you solve that problem you could also solve it perhaps in a large corporation if it's not too dysfunctional you can solve in a government context and nonprofit context but but that it's driven by important problems you're trying to solve rather than say having a line item on your resume that says entrepreneur once you've found it that I guess the as you say the continuity is so important or the durability I guess and that you hadn't I'm this amazing you did this you did you all have much experience with managing people things I mean you had been a lawyer and you did a in a practice in practice most of the founders in Silicon Valley have shockingly little previous experience the the dynamics that tend to be very important is whether the initial teams work together really well so there's often some sort of prehistory where the people had known each other or work together for a while that was that was certainly the case at PayPal there's a but that there is there is sort of this very strange element where talent often seems to be experience that when people are experienced there's certain things they know better but they've also learned many many mistakes and lessons they've developed a lot of anti theories eg theories on why things can't be done why certain ways can't be done and when we started PayPal we were told that the fraud problem is going to be overwhelming and we sort of ignored that advice it turned out to be very big but then you could sort of get on top of it whereas the someone who'd come from a conventional payments background would have said something like this was never going to work and you would not even try so do you think I do think there's an element an element of that that's that's very big I do think the you know I think the founding moments of these of these businesses are quite important because there's a degree of freedom you have at a founding moment that you do not have later so you can say that the the founders of the United States the Constitutional Convention had a degree of freedom in deciding what to do that is not clear whether we have later so you know it's you know you now have you know Alaska has same number of senators calles California you know California has 50 times as many people and we can sort debate whether that's a feature or a bug but it's not going to change and and I think something very some sort of a lot of the key DNA in these companies Get Set get set very early and so there is an extraordinary degree of freedom around these founding moments and then and then sort of and then years later if you set it up well it can last for a long time if not it probably won't right constructing the things I've been involved their government and then really magazines weekly standard hiring the right people is the single most important thing I think one of the very most important things one does it's not something that people focus on much though and often it's almost to consider the tenth most you know you focus much more on all kinds of other things and then incidentally you have an interview job interview which you put off till 5:30 in the afternoon because it's you know you're so busy all day yes I mean young people pay lip service to talent being important but certainly certainly it's it is probably the all important thing in these in these early organizations and what I think is quite different from a say in academic context where it's always individual talent and it actually in a corporation or when you're founding a new institution it's often very critical that people be able to work together reasonably well and so it's it's not good enough to have a group of brilliant professional people who all intensely dislike each other that maybe that can work in a law firm but it probably does not work in something where you need sort of a very intense cooperation to do something I think the only you know the only rough and now analog is something like team sports but that's that's that's sort of you know the rules are very set and that sort of much more controlled context and so so getting a group of very talented people to work together is is quite important I I think the prehistory ends up being a very important question that I like to I like to focus on is how long had the people known each other how often have they worked together in the asked in a few if you decide to start a company with someone you met a week earlier it would be like getting married to the first person you met at the slot machines in Las Vegas you know you might you might hit the jackpot but it's probably a bad idea and I think in hiring people you had sort of your own distinctive questions you'd like to ask I remember hearing that once well we we um you know there's sort of our different ways I've iterated on this over time but but we certainly we certainly focused on on all these uh on a group of original talented thinkers the the question I only was asking this one a time of paper with one I've come to like asking is tell me something that's true that very few people agree with you on and it's a it's a surprisingly difficult question because it requires you know we've been taught that all truth is conventional that it's simply what everyone knows to be true universally and so it sort of very much cuts against the grain of the way people think about things but but it's also the case that you know brilliance is hard courage is even an even shorter supply than other than brilliance in some sense the correct answer to that question is one that the interviewer would presumably disagree with right and so it always answers you usually get that seems like an interesting question to ask young people you end up with you you generally I'm not even sure it's that good a question because people are so bad at answering it and only one questions where people are are better better or worse um you you often um you occasionally get good answers but most most the time it's it's some conventional truth that people say is even more true than anybody thinks so it's like I'm worried about climate change I'm even more worried than everybody else but we're not worried enough or or you get answers you know you sort of get very trivial esoteric answers where it's something that is is certainly an unusual truth but perhaps not a very important truth about things I do think the the strongest ones are ones that somehow um cut against this the screen and I think I think one of the things that that I've come to sort of really appreciate over the years is how powerful these psychosocial forces in our society are that basically push people's thinking into a you know homogenizing kind of direction and you know it's in you know on the level of the of the larger economy in the u.s. we've had this extraordinary history of bubbles in the last few decades which which clearly had a psychosocial component where people were not thinking very much for themselves you got a house internet bubble in the 90s and even crazier and more destructive Housing and Finance bubble in the 2000s and I would argue a even dumber and bigger and worse government bubble in the in the 2010s but but all these things were sort of characterized by extreme lack of critical thinking assuming that other people had figured things out and and deferring to that in one way or another and so whenever whenever you see a situation where it's very hard for people to think critically on their own you have to sort of wonder whether whether there's something very off on this there was a you know and I think you can often get at these unconventional truths through a means that you know maybe you could the right terminology but you sort of described it as a political approach where you sort of ask the question what are the things people can't say or can't think and maybe there's sort of a natural or metaphysical approach we just try to figure out the fundamental truth of things and I always have a preference for the political approach because I think it's so much more straightforward as a kind of a shortcut so by way of example in the in the last decade in Silicon Valley 2002 to 2008 there were basically two major things one did as a venture capitalist you invested in the next generation of Internet companies or you invested in clean tech and the next generation Internet companies generally worked pretty well clean tech was sort of an unmitigated a disaster and the critical question was how could you have figured this out early and the sort of the the scientific natural metaphysical type of approach would have been to evaluate every single clean technology on its merits and then you have to figure out where people lying about where they distorting the results how far were things off and one could have done that but it would have been would have been extremely hard to figure this out the political approach was to realize that there were sort of a set of intensely held conventions that people could not question there was um and there was something you know things rounded involving social status it seemed cool for people to be involved in this they were not that interested in whether it made any sense and and that's sort of that's sort of why clean tech was not just an initial set of bad investments but why maybe ten times as much a good money was thrown after bad in the 2005 to 2008 period you have the sense that this psychosocial conform is a herd mentality or whatever you want to call it is stronger now than it was 20 years ago 40 years ago 60 years ago or is it just the way democracy is kind of a tuck villian you know I don't have a it's always hard to compare I I do worry that they're elements of it that are that are somewhat stronger where we're living in a sort of more globally connected more transparent world it often seems more dangerous for people to express unconventional ideas because there's a record of that and so you people sort of maybe are censoring themselves more than they were more than they were 50 years ago there's um and so it is there's sort of a lot of things where I find that somewhat worried something there's the not gonna get this quote exactly right but there's the Nietzsche line that you know madness is rare and individuals but in nations and crowds of people you know it's sort of the rules poorni to himself when mad but yeah but I think I think there is so I do I do think there's something um there is something very peculiar about the history of the bubbles that we've been experiencing in the last in the last few decades which is which is quite anomalous in other words there was an enormous bubble in the 1720s there was one in the 1920s but we've had maybe maybe four or five of roughly the same magnitude in the last in the last 30 years and so I do think if you were if you're looking at an EKG chart of the health of the world and he started seeing all these up-and-down spikes it might be a mistake to say that everything's normal and very sane and under control it does say my shock I always try and myself to begin with the contrary and point of view or challenged or whatever everyone's agreeing on you know I just think in politics at least in my experience works out fairly often to be the opposite of what everyone thinks not always and made one problem here and this is that of course it does often sometimes commercial wisdom is just right and yes forces Chuck along and then of course being contrary and does you no good it's maybe if you're one of the few contrarians you actually get held out for you know it's just so much easier I think you're right to be part of the crowd it is although although I think I think the relative impact is is unusual to be unlikely to be that big so it's it right if you're one of sort of very large crowd that's trying to do something you know sort of always this question what's what's even the point because it will happen anyway it won't you won't make that much of a difference relative to what you could you could otherwise do and so I I do think it's always the question has two parts its tell me something people other people don't believe in and that is true so we do want the intersect that is important gay and you're saying that actually is you to go a good predictor for individuals ability to contribute to the success of the enterprise that it's not just an interesting intellectual quirk that some people have that they can sort of see around corners or willing to kind of take an opposite point of view I don't think so I don't think it's sufficient I certainly want to have certain all sorts of other personality traits that work out work out positively but I do think the power of conventional thinking is is incredibly great you know sort of one way of one other way of getting at this question is are these psychosocial forces greater now than they were were in the past one very odd aspect of Silicon Valley is how many of the founders these companies seem to be suffering from mild forms of Asperger's or seem to be sort of socially somewhat awkward and and I always think that we should interpret this as an indictment of American society where what does it say about our society or anybody who is sort of a well-adjusted normal person is deterred from having any unconventional thoughts very very quickly and so so sort of the sort of the personality type that seems to be extremely bad at pounding these companies is um someone who gets an MBA from say Harvard or a place like that and if you if you think of a lot of the MBA programs as these hothouse environments in which you have extremely extroverted people who have no strong convictions of their own get together for two years at the end of which they they basically are all looking to each other for what to do and they all end up trying to sort of ride the last wave there was a study done on Harvard Business School where they found that the largest number of people systematically went to the wrong things so in 89 they all wanted to work for Mike Milken just a year or two before he went to jail they were never interested in technology except 99 2000 which was probably the two worst years to go into it you know five 2:07 it was all private equity hedge funds real estate and so and so I do think that's that is a that is a very powerful factor in our society yeah that's interesting I want to come back to some of these poor two considerations but I just think on this question of fraud which i think is so interesting when you say that the conventional view at visa or some other place like that was you know the fraud problem is too great and dealing with all these individuals I guess that was the point you could deal with the restaurateur with a right with Bloomingdale's was there you know they have their own systems in place but just some guy selling something to someone else on eBay is so hard to monitor and and I I'm not mistaken your solution to the fraud problem both enabled eBay to be the great success it was but also laid the groundwork for further companies that you were involved in founding so I just think it's an interesting example maybe the how did you solve the problem actually I mean what ways did it did it almost trip you up or was it just to try to be not as big as people with flexure then what what was the after effect I think this is a good example of a somewhat unconventional solution we came up with where the conventional approaches to fraud were either number one that you had a human team that investigated everything so fraud here is just normal credit card for people to deal money from other people that tend to be other people the usual all sorts of complicated patterns it takes and so you could have a team of human investigators that could look into it and this was like looking for needle in a haystack you had millions of transactions and was just completely overwhelming poor the team of 20 investigators we had looking at that the other sort of conventional model was that you had a super duper computer that figured everything out on its own and this probably would require a generalized artificial intelligence which does not exist now and we can debate whether it will exist in a hundred years or never and that was sort of the the pure computer a solution and that also was was not going to work what what turned out to be extremely powerful as a paradigm was a hybrid solution in which you had you figured out the proper division of labor between the humans and the computers and had the computer basically flag somewhat suspicious things you trained people to visualize transactions and and that turned out to be a extremely extremely powerful technique and one of the one of the companies that I helped start in 2004's company called Palantir technologies which try to use the same sort of paradigm in the in the counterterrorism national security space where again we have sort of a pure human solution we just have human analysts and no one knows what anyone else is doing this is perhaps characteristic of the CIA um and then you have a pure computer solution where you collect all the data in the world but you have no idea what you what all you have which is may be characteristic of say the NSA within system and and it turns out again that some some hybrid approach is vastly more powerful I think the hybrid approach is is very under explored in general because we think of computers as substitutes for human beings in the in reality I think they are they're they're fundamentally complementary computers are good at very different things from what what people are good and the dominant narratives in our society on the computer age are either Luddite or you sort of utopian in a negative way where the we have to stop the computers from replacing us or the computers will replace us and that's a good thing whereas I think this sort of complementarity is is probably the much greater reality there you know it's you know it's conceivable that you could build a computer that would be smarter than a human being in every respect I think that's still somewhere between science fiction and science fiction fantasy and Palantir I know people in the military have been in the military work with the military who say it's really amazingly helpful in the fight against terrorism or in fights in general that other more other things the other national security well there's there's certainly our large classes of there are large classes of things one can one can surface so it you know it I think it did help connect some of the dots in the bin Laden identifying bin Laden certainly a lot of the insider trading cases the SEC is brought have involved combining the dots in certain types of way so I think I think we have we have all these intuitions around what what one could know and I think one has to be sort of a lot if you were inclined engaged in insider trading I would I would strongly discourage you from doing so that's good advice and edifying advice and maybe true advice in this case but say more word more just more about Palin terms I think people be interested how does it work I mean it sort of maps these these networks is that basically right or visualizes them sometimes there's always a front-end user piece where you you're able to visualize certain networks that it turns out there's also a lot of back-end technology of combining all these different databases so one of the big back-end challenges is that you have all these databases that basically do not connect in any way so the NSA is overhearing phone calls from or knowing that phone calls have been made between person a and person B and then you have visual identification yesterday is also many shirts and C and their credit card payments in person beat a person yeah F and somehow what Palantir does is put that all together but that's what you're the terror network you should be worried about in yes can is that the backend technology would be to combine all these elements and then the front-end technology is is effectively this this visualization engine where if you're trained as an analyst you can you can learn to recognize certain suspicious patterns and there's there's sort of ways that you work with the computer and really a really understanding this of quite effectively but yeah I think it's it's a I think we're so fixated on this computers replacing people that we have not asked the question of of how can people work better with computers and it's just amazing to you that the counterterrorism have not amazing that surprising is that the counterterrorism effort came out of this anti you know credit card fraud yeah certainly when we started pounds here in 2004 but you know the thinking and we would not have thought that that seven years later the technology would they still would have caught bin Laden and that our technology would be would be would be used in that context so it's it is um you know I think that there are I think that there are a lot of people in these agencies who mean quite well I do think I do think it's it is surprising how how hard it's been to get technological innovation inside these these agencies to work even though it would seem like there's enormous need to do so post post 9/11 it is that a government problem of just the government's are so bad at understanding it adopting technology or is it Warbeck the people who work there problem of not i you know it's why questions are always really hard to answer but I suspect that the Burke rhotic incentives really cut against people making sustained effort for several years to build something that that really works there's an aspect I think there is something quite toxic about the whole contractor subculture in DC where people have incentives to sort of bill by the hour to have projects that take take really long and and are sort of overly complex that nobody really has has responsibility I mean I I'm sort of more on the libertarian side politically and generally skeptical of government ability to do things but even I was shocked that something like the Obamacare website couldn't work so that's this is not the Manhattan Project and so there has been I think there has been some decline in the government's ability to do these things and I suspect I suspect it has a lot to do with very um with bureaucratic incentives that are extremely extremely misaligned we knew each other back when you were running PayPal and so I thought I don't think of you quite in the context that most Americans probably do which is Facebook and it's done so much with PayPal Palantir LinkedIn so many other companies and also philanthropic activities but I would be remiss if I didn't ask you about Facebook how did it happen how did it get going what has it what were the biggest surprises in the early years will it um it you know people always asked was it extremely hard to figure out how to invest Facebook when I did in 2000 2004 at the time it was a it felt like actually relatively straightforward investment they were ready on 20 college campuses such as that's where Zuckerberg has done he said it's just hard in February o4 he's in California summer vote for looking for investors and my friend Reed Hoffman he started LinkedIn and I ran across Zuckerberg and basically decided to give him another half million or so dollars to scale it it was generally a good sign when the only thing you need money for was to buy more computers because we're such such demand for the product it was people were probably too negative on these social networking companies at the time because there had been a few that had sort of come and gone so there was a sense that was this faddish thing that would would maybe get users for a year and then collapse but but it you actually looked at the intensity of usage that people had on Facebook how much time people were spending on it how much they were using it and the sort of network effects it had it seemed to be very powerful I I did not I did not think it would sort of certainly I didn't think was going to become quite as big as it has today but we thought that at the time I thought it could be sort of a new media company that would effectively be an equivalent of an online media for all the calls newspapers in the US and you basically have a media channel to reach all the all the colleges in this country and that seemed that seemed like quite a quite a values originally if I'm not mistaken as you'd remember this from decades ago when I was at Harvard there was the Facebook was right either the real name or the kind of cloak weõll name right for them yes pictures of all of us in the freshman book yes a physical book yeah actually you would know if you had someone you could look them up actually Facebook the initial name for Facebook was the facebook.com so even they even copied that and it was it was basically so I was just putting on jaws but it was putting online in a certain way something that existed in hardcopy in there and it had more dynamic aspect where people could update it people could learn more about different people on it they could talk to each other on it it um but I think I you know I I think I think on the whole Facebook is is a very you know I'm obviously a little bit biased here but I think it is a very very good service and and one of the ways in which it worked worked quite differently from some of the earlier social networking efforts so in the 1990s people thought there would be this virtual reality on the internet where you had had some sort of alter ego in some chat room on AOL or something like that and maybe you know you'd pretend to be a cat and I'd pretend to be a dog and I forgot how we would relate and and it turned out that people were not really interested in fictional identities they were interested in in real identities no what I think was very powerful about Facebook was that it was um it was not it's not the sort of radically alternate reality it is actually about who people really weren't and this was why it was so critical to start at a place like like Harvard where where people were comfortable representing themselves in a fairly accurate way Facebook's main competitor in the early years was a service that we started in Los Angeles called MySpace and I often think there's something even about the names of these companies that uh that suggestive of the general direction so MySpace had sort of this Los Angeles narcissistic aspect of of telling people about yourself and sort of people pretending to be somewhat different from who they were so everyone in LA sort of an actor that kind of a that kind of a feel Facebook was fundamentally about learning about other people and you could say that all these social networks require people to both write and to read unlike the real world writing comes before reading so you have to first write something about yourself then you get to read about other people but over time reading dominates writing and so Facebook was fundamentally about reading myspace was more about writing and so I think even implicit in in the names was was this arc of the the product but I think it is I think this idea that that real identities are more important than fictional identities is is a positive attribute and it's I think it's quite good that the one that was closest to that has has emerged as the as the leading service and was there a moment where you realized or were Zuckerberg realized that we were going beyond way beyond you know a replacement for all the college hard copy so if you know a student guy you know that student guides we really would it was yearbooks or whatever they were Facebook's to sort of a huge national agency so late 2006 early 2007 that it started being opened up to non college students and so I guess it wasn't even open writer yes the first two years was just college students it was that that in retrospect was that an important part of the success that it didn't try to be for everyone right at the beginning somehow it sort of seems to be unusual well maybe that's done its kind possibly it's always you can never run these experiments twice it's always it's always hard to say but I think I think there was uh I think it turned out to just kept geylang and scallion this is certainly one things that's always very difficult to calibrate in these in these businesses how far does the growth go how long does it how long does it keep going but I think there is something about you know it was sort of a initially was just English then we sort of had multiple languages multiple age groups and it has gradually uh brought more and more people on board and they've I mean that there are sort of more sort of a lot of fairly creative product iterations that were developed of sort of this this news feed product where people basically have news that's sourced by their friends and this actually turns out to be you gets from a surprisingly large number of quite interesting stories that you find yourself interested in reading so it's it's actually quite a powerful news venue at this point and some people say well this is all very nice but ultimately is that kind something crazy by society that's valuing this corporation that's so much more than all these businesses that make real things that you know medicines or food or whatever that that you know people need to live and what is there is that just silly or is there well it's it's people um I think I think with all these in facebook is the iconic Silicon Valley company of the of the last decade it's probably it's probably worth about as much as all the other businesses started in Silicon Valley combined since 2000 so so there's sort of a way in which it gets a it gets a disproportionate focus as a as a result I do think there is sort of this modality where we find we either talk about a specific success and general success or specific failure and general failure and so we would like to say you know Facebook is a specific success it must mean some general success and so Facebook is a great business and therefore it will solve all the world's problems and I think the the modality I prefer to think of is that there are specific successes but they may be symptomatic of general failure and so Facebook will not solve all the world's problems but it may still be a great business and and it's that's not a that's not a critique of Facebook we shouldn't turn Facebook into a scapegoat for lack of innovation elsewhere but the challenge is that it is so it's so anomalously unique and that there are so few other companies like this being built in general and that's sort of a so I tend to think that the story of specific success that masks generalized failure is one that we find we find very hard to tell for example Benham we on our website we have this this tagline they promised us flying cars and all we got was 140 characters which is this is another website of a venture fund founders fund okay and it's a little bit of a little bit they promised us flying cars and all we got was 140 characters a little bit of a dig at a Twitter right but it's it's it's a it's again in some sense Twitter is a is probably a great business that you know the thousand people who work at Twitter are going to have well-paying jobs I suspect it will last for decades excuse me but but I but it's again there's a sense that it's probably not enough to take our civilization to the next level okay and but it's again it's it's a mistake to blame Twitter for that it's more a problem with with not enough happening elsewhere I do think that if you if you were to sort of broaden the perspective on the the last 40 or 50 years we are living in a world where there has been significant innovation in information technology computers both hardware software internet mobile internet and much less in everything else and and there's sort of argument reasons one can cite for this I tend to think that we live in a world where bits are quite unregulated atoms are very heavily regulated and so and so it's it would explain that for a minute that's a good it's a good phrase but so other words information technology people just do it they sure if you're Bill Gates starting Microsoft in 1975 you don't have people from the government checking your code checking how safe it is how dangerous it is if you're working on a in a biotech company you have sort of massive regulatory barriers all the way through or if you're going to build and you kind of you're trying to build a rocket right so you know remodeling yeah and so even though there's always this sense that stem needs to be need more stem sort of science technology engineering math I suspect even stem is a bit of an abstraction and you know probably the only engineering fields that are doing really well are computer science and maybe at this point petroleum engineering and most other areas of engineering have been bad career decisions the last 40 years when I was an undergraduate at Stanford in the 80s probably the top engineering profession was Electrical Engineering and that was you know it was not a great field to go into you'd work in these very large companies and the semiconductor revolution kept going for a while but it's was plain nada not that good a career decision and electrical engineering was still much better than say nuclear engineering aerospace engineering or things like this which were which were really catastrophic decisions for very talented people to go into so even though rhetorically we always say that we want more science and engineering people in practice these have been on these have been extremely tough fields I mean you've made this version of this point I think but it always strikes me that we say we live in a time of unprecedented change progress dynamism but it's true in some areas and I think especially though in some version of information technology the intersection of the personal computer and the internet that I do think is we are doing things that thirty forty years ago or a hundred years ago certainly which is almost inconceivable but in other areas aren't you struck by how little change there is we go to schools that sit in classrooms that are pretty much like what our parents and what I grandparents did we live in houses that aren't that unlike our yards we drive commute into work you know in cars that look in the highways yeah but not much it's such a disproportionate lack of change there compared to the yeah I think you were to be if you were to be even more critical you could say that that all of these gadgets and devices they dazzle us but they also distract us from the ways in which our larger surroundings are strangely old so we you know we're on cell phones while we're writing a nineteenth-century subway system in New York or if you're like San Francisco the housing stock looks like it's from the 50s and 60s it's mostly quite decrepit and incredibly hard to change sort of things so you have a bits making progress atoms are strangely very stuck I like that because we've made the progress that can be made with atoms and it's just sort of that part of the Industrial Revolution ran out and now we're in a some kind of well this is always information revolution that's different yeah this is always the there's always sort of a very fundamental question whether it's driven by the sort of the low-hanging fruit has been picked and now it's going to be much harder to make incremental progress which is sort of the natural explanation we hit some sort of natural limit of course and buggy to trains to airplanes but what's you know what supersonic jets don't quite works you're stuck at airplanes let's say um the alternate explanation which I'm more partial to is that it is a cultural kind of a thing and that that even though there probably are some areas where progress objectively is very hard there are many areas where we could we could still have progress if we really wanted to have it and so it's always this question is it an external reality that's made it hard or is it something in the culture that's changed and makes us less ambitious more risk-averse you know more scared to try to do do things and I do think I do think the regulatory double standard where we have massive regulation one place and very little on the other suggests us that something like like that might be going on you know the exam you know there's sort of our all these examples where one striking example is something like the SDI program in the 1980s where you know I remember at the time the debates were you know the Conservatives argued this was a good thing because it would be a defensive technology the Liberals argued it was going to be a bad thing because it meant the US would have a first-strike nuclear capability but everybody assumed it was going to work and 2025 years later it sort of is implicitly assumed that it's never going to work even though you have things like the Iron Dome technology in Israel which works remarkably well and it would seem that if you had applied yourself you to extend these sorts of technologies to things like intercontinental type missiles and things like that's harder but it doesn't feel like the sort of thing that would be that would be impossible and so I I do think that I'm sort of very heavily on the cultural bias I think it's always the part that people are more uncomfortable because it suggests that there was some sort of generational failure versus just external circumstances through outside of people's controls I think we're always too biased to go to the natural explanation because it's a it's one that exonerates us from from responsibility for the for the slowdown maybe you say cultural you mean cultural / political you know it's some combination yet associates all these things sort of probably are cause and effect and do you think it has been a slowdown I mean that there's a part from I guess Silicon Valley sort of stuff yeah we are not progressing as we once were as people expected us to or as we could be I suppose well the easy on the sort of macroeconomic manifestation of this is the relative stagnation in wages in the US since the early 1970s the sense in which a large majority of Americans believe that the next generation will be less well-off in the current generation so there is a there's this incredible disconnect between what people believe to be true economically and the story that we're told about accelerating technological technological progress culturally the sort of failure of an imagination of a different future is seen in the example the simple example I always give is science fiction movies where if you if you look at all the science fiction films in the last quarter century they basically show technology that doesn't work stoking that kills people so you can choose between the Terminator or The Matrix or you know or avatar or maybe you know maybe if we don't get Obamacare Elysium and so and that's sort of that's sort of what it does not portray a future that's sort of radically different and better I think the Star Trek retread movies are sort of an exception but that's or still throwback to the 60s right Jetsons are a completely reactionary aesthetic at this point but it needn't be you think you know I I don't think it needs to be across the board so I do you know it's if you look at I mean you know it's a lot of these things sound very very out there but if you look at things like nuclear technology we could be building a much safer much cheaper reactors and and I think it is it is probably a combination of political will and a belief that something like this could work that would enable it to work and if you you don't think it can work it won't happen if it is strike it you write the few deaths 50 60 years ago people have assumed people it assumed they said energy will be so cheap and plentiful it'll be virtually be like water right gets they pay for it even yeah it's cheap to meter right this nuclear power is extremely cheap once you built the plant presumably right and it's still you don't use up anything you know much I mean and there's still there's a sense in which it's still you know if you sort of think about the energy density of something probably the more advanced technologies and ones that produce more energy with less of a unit of volume or something like that and so there's a there's a sense in which something like nuclear power still seems like the energy of the future versus say massively distributed windmills or or or solar panels are less energy intensive than than say oil or natural gas and and that sense seemed seems somewhat retrograde yeah Anna strike needs you to say how much people seem to accept almost the slowdown in various ways so that we're having this excessive discussion while I was fighting its war in Gaza iron dome was working and see we're living in a dangerous world maybe nuclear proliferation is coming but there's no demand at all really from any quarter in the US and I think about it so why don't we build some version of Iron Dome are we confident for the next 50 years no one's going to have missiles that could strike the US or no one who does have those missiles might choose to use them in you know analogous to the yellow Hamas striking Israel and wouldn't it be kind of a prudent thing to spend a few tens of billions of dollars on our version of Iron Dome but you could multiply examples I mean yes it's just one of your right nuclear power plant we're sitting here with the gas prices at what almost $4 a gallon oil prices 100 bucks and no one's sort of that alarmed by that even though what were they just five six seven years ago they were half that right I mean it's presumably not helping our economy to have everyone to have this new level apparently a very high energy prices yet people kind of have a passivity or fatalism about so many of these issues will be vulnerable to missiles we're going to have to pay more for to drive you know we can't get old things the way we used to yeah it's to space it's I often think that that if there's I don't want to be to decline it's about this but if you have sort of this period of generalized stagnation you could sort of accept it you can deny it or you can fight it and the modalities that seem to dominate our culture our acceptance and denial and probably the Republicans are more on the denial side that maybe a little bit less than before the Democrats tend to be on the acceptance side and what's what probably is really needed as to is to fight the stagnation or to fight the decline because acceptance and denial are actually you know they're opposites in some ways they're actually very similar in that both of them tell you at the core that there's nothing to worry about there's nothing you can do it doesn't actually matter yeah that's very interesting so acceptance would be we live in an era of limits we can't control things abroad we can't get start work might as well have a clean environment you might as well on you know but you shouldn't you shouldn't expect too much you just sort of lower your expectations and then denial is something like we're still in an era of growth and it's all happening on its own and it's not actually it's not a political or cultural question at all just it's just automatic that's sort of the Republican view I guess I think that what I just removed one or two bad government policies that's well yes so as always so it's always very optimistic that you can change with just one or two policies and that I think that was maybe that was the that was probably the Bush era Bush 43 or Republican view I think it's it's a little bit less so but but it's always tricky how do you how do you get out of denial without going straight to acceptance which seems to be the common modality so you know it's I describe this this era of technological stagnation it's not it's not meant to be demotivating it's meant to say there's a problem and we could be doing and we could be doing a lot better on these things it is interesting now that you sort of measure this way we have this fantastic breakthrough who's obviously in Silicon Valley from the internet etc but people don't say well we've done it in this area we've gone from land lines to big bulky cell phones to iPhones and what 25 years so why could we do the analogous thing in space exploration defending ourselves energy production medicine transportation medicine them you could what a commander culture that says that it might go the culture might be wrong to say that because maybe these other areas are just susceptible of that kind of growth but we don't even think that way I'd say we think this is great and this is nice but it's sort of unique and we just Chuck along the way we're chugging along and hoping that we can get one place to another five minutes faster ten years from the hell yeah how does I mean there's there's a great deal of histories so when when things haven't worked for a while people do give up on areas so you know Nixon declares war on cancer in 1970 says he will defeat it by the Bicentennial in 1976 forty-four years later by definition were 44 years closer the goal but people don't people are was less motivated today than they were in the 1970s and it would be inconceivable for someone like Obama to get on on television and say we're going to declare war on Alzheimer's even though I know one-third of Americans at age 85 are suffering from from some form of dementia and so it would it would seem like the sort of thing that that when one should one should try to do something on but it's it just it just does not resonate and again I guess it comes back to the question of does it not resonate because he didn't let cancer and six years or even forty six years and we we you know they took other claims hopes have been expressed along these lines with respect to other disease and other medicines I mean so I guess the question is are people right to be much more sober about the future or are they now accepting and deny accepting to watch and and and were denying too much and not doing what they could be doing in some of these areas it's yeah it's always it's always over determined it's some combination of all all of the above but from from my liking people are are too complacent and I do think that it is it there's this incredible self-fulfilling aspect you know if you think you can do something thinking you can do something is a necessary precondition for being able to do it it may not be sufficient but it surely is necessary you know it was while the Princeton mathematician Serbs solved for Maas Last Theorem worked on it by himself for for eight years I solved it after three hundred fifty eight years of people trying and you know maybe it was impossible maybe was a fool's errand to spend time on that but if you didn't think that you could do it you were never going to be the person to do it and what could turn this around everything you're right you're this funny combination now I think in the general culture certain kind of complacency but it's not a happy complacency really it's a sort of unhappy a little sullen you know sense that we can't do much so we should accept it but it's not we're not satisfied with it so we lash out occasionally at our political leaders but well it's I do think I do think if there's a silver lining to the crisis of 2008 and post 2008 it is at least a sense that sort of the automatic tract things no longer work as well and so and so the were for a number of decades there were all these reasonably well-paying jobs people had got that would be would involve taking little risk would be sort of incremental and you could become a lawyer or a banker or consultant and and I think there's there is some sense that that's that is that is no longer working I think Silicon Valley you know it's in some way sort of an exception to this is is much more charismatic and so I'd be very bullish on Silicon Valley and relatively both bearish on New York City sort of a tale of a tale of two cities where New York was the tract a thing to do in a overly financialized world and I think at this point you have a talented young person in the u.s. Silicon Valley is probably the most charismatic place for that now it it you know you hope is that the information technology revolution can somehow be expanded more to the world of atoms than it has but I do think I do think there's some sense that these set ways of doing things are are no longer working as well so there's that there's that negative sense it often doesn't quite translate into positive yet where people don't know what to do instead would you need a political joke do you think I could it be done by private citizens in terms of founding businesses that do what the equivalent of you know Facebook or PayPal in medicine and space exploration and other such things I mean it varies in all these different areas I mean certainly there was there was some deregulation of the space industry under Bush 43 and it's probably enabled a private company like like SpaceX to gain traction it's it's hard to see how medicine can work without a less onerous FDA so I do think there are parts where you're incredibly embedded in this risk-averse political system there are probably some other technologies like say uber or Airbnb the the car service and the short term rental company where in a way you can things can grow very quickly and the technology can sort of outpace the politics and so I you know you're you're often in the sort of gray legal zone but then at the end of the day at the end of the day people will not want to shut it down because there are tens of thousands of people are making a living on this so I think if you can get something to grow quickly enough you may not need to the politics may sort of get dragged along but it's it's it's things where you need political cooperation ex-ante that are that are quite hard to change and do you think of Erika I guess the question is it could either American liberalism or American conservatism the Democratic Party or the Republican Party really embrace what I think you would like to see which is a real sense of recommitment to progress and to make progress right I mean you heard you talk before about in this respect people everyone is now accepting of or sometimes unhappy about but not really going to do much about globalization but globalization really isn't the same as real technological breakthroughs and technological progress well they're extremely globalization is about some sort of convergence theory of history in which the developing and developed nations converge and and sort of a lot of the rhetoric around globalization is implicitly anti technological and so when we split the world into developed and developing nations this is a pro globalization dichotomy but it's also an anti-technology dichotomy because we're implicitly saying that the developed world is that part of the world where nothing new is going to happen where nothing is going to change where things are basically stuck and so I think the the question that I would like to see us ask more is how can we develop the developed world or something something like that it's I you know I'm not I'm not involved and you know any sort of political I don't haven't run for public office or don't intend to run for public office but I and I I don't know exactly how you convey this this rhetorically I do worry that that a sort of Pro big progress a political message resonates very strangely so when English says we should go back to the moon it's like well you're really lost in space or something something like that and and so I don't know if you pushed for building hundreds of new nuclear power plants whether that would how well that would that sort of thing would would go over but I I do think I do think that you know I do think that the sort of pessimism that is endemic to places like Japan or Western Europe um is somewhat unamerican and so there is there isn't there is there is and so it is really critical there still is always an opening to tell a more optimistic story and that we could be doing a lot better than we are it does seem a lot of the talk right afterwards in these days is talk about optimism rather than actually acting in and after a segue right right Republicans say our best days are not behind us you know but it's you know it always has a feeling of protesting too much or something like that and so I don't I do think I do think that a lot of these things will happen in in very specific contexts I think I think if we had less regulation you know a lot of these things could happen it's possible it's possible there will be some global you know maybe the FDA will have less of a you know less of a throttle on global innovation in biotechnology and so there are some ways one can imagine that things things will change in the in the decades ahead I do think but I do think that the the most there is sort of a sense in which the tracked narratives feel feel exhausted and that's that's why I think there is there is an opening today in a way in which there was not say in 2007 or 2006 like I was thinking I guess the last person to really run for office with a big vision of change was Reagan I mean it was partly reaction against Carter obviously in reaction against the failures of his own party at a Nixon and Ford excuse me but there was also a sense of I mean Reagan bleed this much more than his advisors and then most conservatives you could actually win the Cold War with the right combination of defense build-up and moral challenge to the Soviet Union and he believed again much more than many of his advisors that with the right mix of tax cuts and deregulation you could really get the economy going again and in both of those those he was at least over the short medium term very much vindicated yes and if you think about it I guess no one really is the kind of proposals the tweaks whether it's reform conservatives on the right or Clinton's kind of form of your Democrat reforms or president obon Obamacare such a big allegedly such a big program and one that someone like me doesn't like it all because of how big it is and how much it impedes our liberties and stuff still at the end of the day because it really transforming healthcare in the United States not which is making it more bureaucratic and so forth so the lack of ambition of major politicians is pretty political parties is pretty striking the rhetorical version of this that I always think is striking is you know when were the last political speeches you can remember we're people in very concrete terms portrayed a future that looks very different from the present so you cannot you can imagine Martin Luther King you know I have a dream of a nation you no longer divide it and so it's radically different from the present a much better very different looking future the last the last speech like this that I that I can relay down if I would be Reagan at Berlin mr. Gorbachev tear down that wall where you know very concrete terms a future that looks radically different and and much better than the present and somehow that that works much less well you know the during the Obama campaign in 2008 there was a subtle change in the way the the slogan worker you started with the slogan hope and change and in the course of the campaign that slogan changed to the change we need and so in other words it changed from maximal change to the absolute minimal change that's absolutely necessary is quite a striking reversal because it turned out the change poll-tested very badly people were scared of change they thought that change meant change for the worse not for the better and I think that is that is the sort of political malaise that that you're up against whether you're a democratic or Republican politician yeah maybe in retrospect Obama for all the talk about hope and change and how new was exciting was kind of a echo or a shadow I don't quite the way you know of real hopes for change you know you think about what really was he going to change in America compare what's incredibly abstract right and so it's uh and so and so the abstractions enable people to project onto it whatever whatever they want to but it suggests that there's not that much not going to be sort of any specific leadership in one direction or another and I think it's I think I think this is not a problem limited to Obama or Clinton or the Democrats it's I think it's really these are these abstractions are sort of very much across the board I mean Mitt Romney was gonna get entrepreneurship going again in America or something like ass but that's just you know yeah it wasn't much help really know the word entrepreneur so yes right right I guess again when it comes back to the question is this a recognition of a reality we're now living in there's no cold water wind there's no it's not so easy to just deregulate oil and cut taxes and have six percent economic growth for six seven years under Reagan or is it a failure of imagination a failure will somehow I should say a kind of cultural change somehow I could have come back I guess the other question is do you need these external events to spur a nation or culture on sort of bracing these big changes the space program case of some degree the Cold War yes yes so I you know I I don't I don't quite um I don't quite know what it would change to what it required to change the sort of malaise but I I do think I do think that a world in which little changes and little there's little progress represents a radical departure from the past and and it is something we should fight really hard and in all all all ways that we possibly can you know I I sort of wonder whether you know on some level the US constitutional system can even work without some sort of growth because I think the way the way things fundamentally work is you have people around the table and the Congress the White House and you pass bills that that give some more a little bit for you a little bit for me a little bit for everybody if you're a difficult person doesn't get along with people there's there's nothing for you and that's sort of a that sort of a political mechanism works quite well so long as the pie is growing if the pie is not growing there's much less need to cooperate to craft to craft new legislation and it is actually not clear to me you know how well you know how well are our constitutional system even works you know the we've had in the Western world 200 years of growths of 250 years of growth since the late 18th century and you know if you look at the 1930s which is probably one decade where there was a real shock to growth it put enormous strain on all the sort of constitutional Democratic Republican types of types of systems and I I do think that's a that's an enormous challenge in our time so so I think we should not be complacent about this at all Peter you've been involved in American higher education for a long time and critical of it actually especially in recent years the best in the world what's wrong well it I think sort of many of these many of these challenges that we've discussed also apply in the higher education context where you know it's it's probably the if you define technology is doing more with less education is perhaps the most anti technological aspect of our society today where you're getting the same at a higher and higher price you know the the real costs of higher education since 1980 have gone up about 400% it's after inflation and and it's not clear the quality has gone up at all it's and so I think start to even imagine how that is I mean you know it's like there's the classrooms of the same the teachers are the same the facilities are a little bit better 400 percent it really is a bizarre region well it's it's on some level on some level the universities have found they can just charge more every year and and I think as I think the the questions may be why has not been more resistance to these these price hikes and I think it again in part goes to this failure of an imagination of an alternate future and so talented people should all go the same universities learn the same things pursue the same types of careers and and so I think we have we have a you know if we had an internet bubble or a housing bubble we certainly have an education bubble today and it has it is you know bubbles are characterized by things costing more than they're worth they're characterized by sort of intense psychosocial dynamics so it's it's very hard for people to suggest that you should not go to it the best college you can get into because people don't know what else to do see on a sort of failure of imagination and alternate future and it's also bubbles are also characterized by abstractions away from reality and and so I think the word education itself is this incredible abstract filler and and it's it's worth you know drilling down a lot more on what is going on and that's the sort of thing you're generally not allowed to do so what is it specifically that you're learning so engineering is it some rigorous humanities course or is it just education the abstract and you know I've often suggested you could you could think of think of this in economic terms you can think of is education and investment decision where it's basically something you invest to get a better paying job is it a consumption decision where it's sort of a four-year party and maybe maybe it's sort of a combination of a bad investment and bad consumption decision where basically people think they are investing by consuming which was characteristic of the housing bubble we bought an especially large house with a swimming pool and you patted yourself on the back for being an incredibly frugal investor and and so there's sort of an aspect of that but I've come to think that even more than investment or consumption it's perhaps better to think of education as understood as an insurance policy where it's it's probably not worth as much as people are paying for it but they're scared of falling through the cracks in our society and so as the cracks get bigger we pay more and more for for insurance against it that's the way it's advertised and then I think the reality is that it's the exact opposite of an insurance policy it is actually sort of this this crazy zero-sum tournament in which in which what really matters is getting into the best schools and then a diploma from a third-tier university is really a dunce hat in disguise and so and so there is so I think at its core it's perhaps a zero-sum tournament masquerading as general insurance and that's that's incredibly dissonant and can it be changed I mean as long as I've been I came here to work in the education department we thought higher ed was ripe for change and doesn't look very different now than it did 2530 years ago um you know the tone historically I think the tone has been set by the the top universities they have these enormous lis rich endowments and they are incredibly resistant to to influence from the outside and and so I do think I do think it's the kind of thing that's very hard to reform from from without it is um it is nevertheless I think heading towards a crisis of sorts where it simply no longer works for the vast majority of middle-class students who are amassing enormous amounts of debt going to college and so there is going to be enormous pressure it's it's it's hard to say exactly what the timing on this is but I think some of the online alternatives you know are going to get more traction as these as these financial pressures start to mount on you know one of my one of my friends has characterized the university system as the Atheist Church which is sort of a successor to the Catholic Church it's sort of universal and and that the university system in 2014 it's like the Catholic Church circa 1514 there's less diversity so the Dominicans in the Franciscans and all those different lawyers whereas the diversity between say the Harvard and Stanford political science department is considerably less but it is sort of this priestly class of professors that doesn't that doesn't do very much work people are buying indulgences in the form of masking enormous debt for the sort of secular salvation that a diploma represents and and what I think is very similar to to the sixteenth century is that the Reformation will come largely from outside it will and then you know at some point maybe there will be some you know internal need to adapt but I think the first move will will have to come from outside because you have sort of systems that are so far decoupled from from what would actually make sense and the people are so they're so bought into a system that's that doesn't just does not work that they I think you will see enormous resistance from the faculty and I think it seems to be it's a combination of sort of bureaucratic bureaucratic sloth I guess and resistance to change on the one hand and then the political correctness on the other and I guess they go together more than perhaps people some people focus on political correctness the more ideological critics of higher education the financial critics you know focus on the self-perpetuating tenure system and and endless growth apparently bureaucracy and cost but I suspect this a relationship of those two well there's um well there's a there is a incredible conformity and there's a and there is and sort of the questions of how are you training people to to think in in different ways have have really gotten lost sight of I I think um I think it is striking how little of a focus there is on teaching in general and and you know there is sort of the subtle point where something goes from a not great system into an all-out racket where does it how much sense does it make for professors to really invest in their graduate students and PhD programs when there's a sense that no these people will get jobs anymore anyway and so I think you are sort of in this in the zone where it has in many ways become this this incredible racket and it's it's it's it it is hard to really know what people inside it think and I think just objectively people say it's the greatest is the best system ever and but just as a it's matter people are not as well educated today as they were the elites at least 70 or 80 years ago people know fewer languages they memorize less poetry they're less familiar with history and just literature I'm in just in very obvious ways someone graduating solely from European universities but maybe from American universities as well just seems to be had a better education leaving entirely aside politics yes well today which is just sort of amazing that you think someone should be able and and that strikes me it's also ripe for challenge if someone set themselves up and said we're going to really enjoy this would K through 12 - obviously we're going to write a real education there's no reason young people in 2014 should be less well educated than a young person was in 1914 but it's evidently the case in many ways you know yes well the there is sort of an a gala terian assumption embedded in education where where it's assumed that everyone is more or less the same and therefore if you look at how well do people do who graduate from Harvard versus people who just have a high school diploma let's say they make twice as much money per year if the graduate from Harvard as with a high school diploma it's assumed that this is prima facie evidence of how great the Harvard education is when I think the reality is much more that it's a super selective a selection of fact into their selection their signaling relatively little a sort of value-added learning but because we have this egalitarian mindset it's it's sort of hard to make the argument that it is just on this selection rather than a value-added learning you know the obvious the obvious way to illustrate this would be if you said that the top universities in the US we're doing as good a job as they claim the most natural thing for them to do would be to increase enrollment so if you say you have 1600 people a year going to Harvard and we're offering the fantastic education it's making them much better than they otherwise would have been you know I think could you could you sort of have some structured growth plan where you increase that number - maybe 3,000 over 20 years certainly the population in the country is a lot larger it's it's attracting people from all over the world and so so if you're offering such a great education what sort of a product is it that where you wouldn't increase the number of people who use it I mean I think the only the only product I can think of where you would limit access as much would be a nightclub which is which is a which is sort of again a zero sum product that's based on exclusion and I think that if you went to any of these top universities and you proposed doubling the enrolment you would get a uniform opposition from the alumni from the current students from the faculty because it would they would rightly perceive they would make it less prestigious even though that that sort of goes very much against this egalitarian ethos that everyone's the same yeah so that's a that's a good contrary and point of view that you're taking there and at higher education I think I think the rhetoric around education is always that it's a positive sum game because there is this naive intuition that you know knowledge if I know something and I teach it to you we both will know it and so there's something about knowledge that's fundamentally this incredibly positive some aspect and I think it masks the the very zero-sum aspect of education I mean I went to I went to a law school if you look at the law schools it's you know there's this brutal ranking on the US News and World Report's scale where I know the top three I think are still very Goods if you go to Harvard Stanford or Yale that's really good then I think the sort of for after that that are pretty good and then there's sort of the numbers eight to fourteen where maybe if you're in the top half of the class and then probably numbers 15 to 200 it's it's very unclear whether it's a positive value for anybody who goes or for bottom ninety percent of those classes yeah it's kind of amazing how fast the law school situation is used to have changed and five or ten years which does make one wonder whether the apparent stability of higher ed in general or at say education in general or I'd say even more generally you know whole chunks of the culture out of our institutions it seems so impervious to change government will be another one you do wonder whether you know they can chug along from longer than one thanks but then when they really when things really hit when things begin to change it could all change faster than one thing I think I think when I when I've looked at this I think in the 1980s and 1990s one saw rapidly escalating costs and education but also increasing inequality in our society and so there it was at least correlated it was always worth going to the top college because you'd you'd make more money it would sort of seemingly make up for it post-2000 even though there still is a vast gulf between high school graduates and college graduates it stopped widening the costs have kept going up and so so the relative value of a college education has actually been going down since about 2000 if you say we're to measure the value of a college education by how many years it take you to pay off your debt the number of years was actually going down in the 80s and 90s because the premium was going up even faster than the costs were escalating post-2000 it's taking longer and longer to pay off the debt so that the actually the relative premium has been in decline for for 14 years now and I think again 2008 was a was a bit of a watershed moment where we're all of a sudden there were sort of a lot fewer of these tracked positions available you know when when kids graduate from college and move back in with her parents that was not part of the deal the parents had implicitly signed it sounds like it's a sector of American life ripe for new founders to come along and do things as you did in in in in tech and Silicon Valley but it's so I get is it possible I mean could well it's it's certainly it's it's it's incredibly distorted you know it's one of the things that's one thing that makes the education bubble different from say the housing or the or the tech bubble of the last decades is that it is actually very hard to measure what the quality of education is and so when people say things like you'll figure it out in 20 years the things you learn that are intangible it will help you 20 years in the future you know somewhat cynical cut on that might be that well this is the sort of thing you say if you're running a scam where you want to have a really long shelf life to it so people won't notice that they've been defrauded for a long time but there is something about the immeasurable 'ti of education that's the education bubble quite durable but on the other hand that it probably also means that it's gotten bigger and bigger in a way that some that's extremely distorted um but I think I think I think we are we are at a point where where it's going to start changing and you are our backgrounds are in these elite universities you went to Harvard I went to went to Stanford I think those are the ones that will be the last to change and so we may be we may be under estimating how much change is going to be happening in the next 5-10 years in this you know very broad swath of colleges where the cost-benefit calculation is is not working in any sense of the word anymore ya know I very much agree with that but I do what also even for elite students if you think of the product as education as opposed to going to college whether one won't over the next 10 20 30 40 years people will get educated in very different ways much less and it will focus on what actually happens in these accredited institutions of higher education or maybe even k12 or maybe that it's doozers will have to change therefore a lot in terms of well it is a question whether the uh you know there's a question how good are the elite institutions even for the people who go there right so one of my friends uh started at Yale in 2001 that the Dean welcomed him by welcome to the class by saying congratulations you're set for life you got into Yale and this is 17 years old the Sims this seems slightly off it like maybe it's true as long as you absolutely never believed it to be true but if you if you actually were to believe that it's uh it's probably quite toxic and so I I think that adds a farce attracts people into probably safe trajectories which may not turn out so great as you said you know and you know you're not so sure if it's even true at that level anymore you know yeah I suspect that you know there's the K through 12 tracking to the elite universities sets people up in ways where when things don't quite work out automatically for them afterwards they're they're not that resilient they're not that able to recover there is an amazing degree to which people's ambitions get beaten out of them in the end these are in these top universities if I look at what people thought my senior year in high school sort of like we're very ambitious had all these ideas what they were going to do if you looked at the same people at sort of college plus five years sort of nine years later let's say it was amazing how much things have been ratcheted down so I I do think there's something problematic where all the talented people go to these schools they're sort of evaluated on the same terms and at the end at the end a lot of ambitions are beaten out of them probably the one that I think is even worse for people in Harvard in this respect might be a might be Caltech where you have you know these brilliant math physics people and after four years we're in the middle of your class you're convinced that the most you can do with your life has become a line engineer at Lockheed and maybe you can go into mid-level management twenty years later and so that that is that sort of is characteristic of what I think has happened and what I think we need to somehow find a way back to is is this idea that that there's not just a single track that there are very different things you can do you know the question you know what truth do you know that nobody agrees with you on the sort of career version this is what what are you really good at that other people aren't that good at or or something like that and that's and that somehow gets discouraged by this by this incredible modernization and big ambitions get discouraged I think that you think every way the you end everyone wins true of all of us I suppose we we decide we can make it in certain line and do things a little move ahead step by step but the kind of yeah there's always the ambition to be a founder that to come back to what we're talking about earlier that seems to be knocked out the whole both the institutions and the mindset that permeates the institutions it's almost a denial that that ambition is reasonable or even possible well there's a sense that they're all these people who are ahead of you so there's always a there's so many people who are who are much better than you or just as good as you so who are you to think that you can do anything on anything different and and obviously when everybody starts to think that nobody does anything in fact it becomes self-fulfilling once again and no one no one does anything different yeah well you're a good example of doing something different so I I thank you for that actually because I think it's important and I think the question really is though it's amazing how many people think you and Mark Zuckerberg and I'm one also done these different things but it's only doable in that one area of the country so look unveiling in that one area of business and of enterprise which is sort of information technology it's sort of hard to see why that would be the case of course but but politics culture as a whole other parts of business it is striking how the weird combination of maybe it's not weird a passivity and a certain kind of complacency and passivity and solidus all at once it's not entirely a healthy picture I think yeah um well I think I think that I think people on put this up people it is it is always you know coming back to one of the points you made earlier it is always very important to think through where is there a freedom of action that's possible and what spheres on you know is there is there sort of a lot less a lot less freedom of action and and probably the academic setting you know the thing it gears most talented students towards is academia itself and and that is probably a place where the sphere of action has gone down you know as much as anywhere in the last 40 or 50 years you know this sort of the idea that you know all the Allroad scholars had a great future in their past or and it's um and it's it's because they're they're encouraged to then do these these super conventional things where it turns out a lot of other people are doing basically the same things and you end up again with this question why does it matter for you to do it if twenty other people are doing it already and I I do think it's against and on a somewhat more optimistic note it's it is it is not the case that everything so exhausted and that there are so that you know the set this is again sort of those cultural natural questions is the set of possibilities really this narrow where it's they're only are these tracks things with a few positions at the end of these these tracks that are any good or are there are there really a lot of you know unexplored paths and and you know hidden paths that are much more promising that that people should explore and I think the the political correctness tells us that you know everything that's conventionally known is true there's nothing nothing outside that that works and and so that's how I think it probably intersects with this tracking in a very deep way well I hope people watching or encouraged to try not to natural things and have gotten some guidance for you I think they really have on how to even how to think about that and how to go about exploring hidden paths or new paths and had in many different ways so I've really enjoyed this conversation thank you so much Peter for joining me today and thank you for joining us on conversations thank you

Channel: Conversations with Bill Kristol

Views: 87,101

Keywords: Peter Thiel (Organization Leader), Facebook, PayPal (Venture Funded Company), Palantir Technologies (Venture Funded Company), Stanford University (College/University), Silicon Valley (Region)

Id: F3EBfS9IcB4

Length: 96min 39sec (5799 seconds)

Published: Sun Sep 14 2014