Peter Thiel: We are in a Higher Education Bubble

so let's humanize Peter see if we can get him to answer a little bit of a personal question then we'll go to the their larger issues the run I just gave is too full of success there must have been some complexity about being thought of as a child prodigy or have that kind of attention focused on you talk about whatever that complexity was and then tell the Supreme Court story well there's there's a way in which I grew up in a phenomenally tract context at the end of the day you know eight in California eighth grade junior high school when my friends wrote in my yearbook and I know you're making him to Stanford four years later four years later you understand further than four years laughter that Stanford Law School you know probably the final sort of tracked credential that I thought I I needed to get was a Supreme Court clerkship got interviews with two justices the internal interview eight people pick four I missed it with both at that point I was just I was just absolutely devastated one of my friends would help coach me through the process years later we reconnected and he sort of asked you need to ask me know how are you doing or it's great talking you Peter first question was aren't you glad you didn't get that Supreme Court clerkship and and there was it was sort of the sense more generally that in my 20s there was was a super track thing and I ended up at a top law firm in Manhattan it was one of these places where from the outside everybody wanted to get in on the inside everybody wanted to get out on when I when I left after seven months and three days um one of the people down the hall from me said you know was really reassuring to see that it was possible to escape from Alcatraz and actually all you had to do was go out the front door and not come back so it's a little bit easier than Alcatraz but but it was it was difficult because psychologically so many of our identities get wrapped up in these competitions we win and I think often the people who in our society who are very talented very gifted in some ways get tracked into this even more intensely than than elsewhere and I think we we owe that you know if we're going to build a better future we need to do new things and we can't all do the same tried-and-true things that have worked and so I always try to get at get at these things indirectly so it's you know what great business is nobody building the interview question I always like to ask is tell me something that's true that very few people agree with you on sir we said somehow how do we break the mold how do we how do we move out out of it and these these are super hard questions for people to answer even when they can read on the internet that you're going to ask a question of everybody who comes in the door it's one of those questions that doesn't actually become easier when you know that it's going to be asked because even though we all have some answers to these questions they're very uncomfortable because in the context of an interview or anywhere else the answer is one the person asking the question doesn't want to hear so if you they agree with you that's probably a bad answer you know and and so I do think this this this challenge from breaking from from convention being able to do new things is a very acute one you know ready in the time of Shakespeare the word 8:00 meant both primate and to imitate there's something about human nature that's very deeply imitative it's how kids learn language from their parents it's how culture it's transmitted in our society but then there also are all these contexts where imitation goes badly wrong it's the madness of crowds its market bubbles it's all sorts of crazed manias that we've seen in in recent decades and so you have this very strange phenomenon in Silicon Valley where a number of the more successful people seem to be suffering from a mild form of Asperger's and I think we always we always need to flip this around into an indictment of our of our broader society and we need to ask the question what is it about our society where those of us who do not suffer from Asperger's are talked out of our interesting creative innovative ideas before they're even fully formed where we sort of pick up on all these cues from the people around us and notice oh that's a little too weird that's too strange I better um I better just stick with that Supreme Court clerkship peterey you have some evolving views on higher education there's some wonderful quotes we have a bovine attitude towards academic degrees higher education is the next u.s. bubble university administrators are subprime mortgage brokers as if they were subprime Oh explain the argument well well education is it is sort of seen as the absolute be-all and end-all as the the safe way to track things and and education is very good at training people to do the same things that we've done over and over again and it's it's perhaps not as good at pushing some of these new ideas I think there are a whole set of challenges that have gone wrong it's a the costs of escalated faster than inflation since 1980 in more faster than any other category and and so there is sort of and then there are all sorts of questions whether the kind of incredible tracking where you know kids are getting tracked already in preschool certainly K through 12 is in some ways narrowing things and and sort of socializing our younger people in ways that that that are that are less good than they appear you know I think I think there's always a question what the nature of the educational good is you know you can say it's a it's an investment good we're investing in the future you can say it's a consumption good like college is a four-year party um you know I think most of the parents and students think of it actually as an insurance policy where you're buying this really ever more expensive insurance so that so that the students don't fall through the really big cracks in our society and we should be asking some big questions why the insurance costs are going up and up like that and I think that reflects some questions about our society but then I think from the point of view of the college's it's not an insurance policy at all but it's sort of a crazy tournament and it's a zero-sum tournament and if you were the president of Harvard or Stanford if you wanted to get a lynch mob of students alumni faculty to come after you and try to lynch you what you should say is something like this you know we we live in this much larger more global world we offer great education to everybody and so we're going to double or triple our enrollment over the next 15 to 20 years and people would they'd all be furious because the value of the degrees comes from this massive exclusion and and what you're really running is some thing like a studio 54 nightclub with this incredibly long line outside and a very small number of people let inside it so it's branded as positive some everybody can learn and the reality is is deeply zero-sum Peter and I had time to talk by phone last week it was just a phone call it wasn't that special frankly but thank you so Peter and I had time to talk last week and I said so what's the big thing you're thinking about what's the big thing you're talking about and he said something Kanchan he said he's not overwhelmed by the pace of technological progress used words like stagnation Groundhog Day flush that argument out a little well well I think one of the very important public policy questions in our society is how much technological progress is happening because I think this is what's going to determine whether on the quality of life is going to get better for people in our in our society in the decades in the decades ahead and you know I'm not I'm not absolutely negative but I'm probably slightly on the pessimistic end of the spectrum as Silicon Valley goes which I think is always hyper optimistic on this question and I think it's been if we look at the the past 40 years it's been a it's been the story of quite rapid progress in computers software internet mobile internet in the world of bits it's been much more limited progress in the world of atoms whether it's energy you know a biotech has been more challenging there's been more child there been more challenges in everything from transportation you know space travel all these things that people would have called technology in the 1950s and 60s I would say have been much slower so it's been a lot of progress in the world of bits which have been quite unregulated a lot less progress in the world of atoms which for all sorts of reasons both good and bad have been much more heavily regulated and I think the I think the upshot is that is that when you look at things like the productivity growth numbers in the economy the GDP growth rate these things are actually somehow slower and then we have all sorts of complicated debates whether these numbers don't measure things correctly I think they're going to roughly correct or they're no more distorted than they were 40 or 50 years ago and so I think we have to take very seriously this idea that perhaps there's not as much progress as there has been in the past it's all decade was the golden age you know I think I think that in the 50s and 60s you had very rapid progress but I think I think you would have had rapid innovation even in the 30s which were you know horrible decade by almost every standard from the point view of technology you had phenomenal progress yet secondary oil recovery had the plastics revolution household appliances the movie industry the aviation industry so if you looked at all the new industries that were started in the 1930s and you contrast that say with the the 2010s it tells you that this is a this is an era that's I think that's actually much worse than the 30s from the point of view of say technological innovations I think we had we had a lot more for maybe the 150 years before and you can pick any decade like that you have a now famous quote about flying cars well it's it's probably overdone but it's basically that they they promised us flying cars and all we got was 140 characters which as um is on and it's always on I think it's always gets misread is a bit too much of a negative thing on on Twitter because I think I think we have had a lot of very successful companies in Silicon Valley and Twitter is a you know phenomenally valuable business it came up with a new way to to narrowcast communication but of course there's a sense that even though it's can be great as a business it's great for the two or three thousand people who work at Twitter they will have well-paying jobs for decades to come there is a sense that that level of innovation is perhaps not enough to single-handedly take our civilization to the next level and so I think we have a lot of stories of specific success but they don't necessarily translate into into this general societal improvement peter published a book wrote a book in 2014 which was a bestseller it's called zero to one I read it it is astonishingly original and it's just taken by storm all the young entrepreneur community he was teaching a course at Stanford in 2012 and one of the students Blake masters took notes and put his notes up online they be come a little bit of a sensation in Silicon Valley and the David Brooks wrote a column about it they ended up with 2.4 million page views on his notes so he and his student wrote the book give the argument of the book well the the contrast I try to start with is two different modes of innovation or progress and I think we can have progress in the 21st century through globalization where you copy things that work it's going from 1 to n China is the prototype of that and there are ways in which that's worked incredibly well and we can debate you know how well that's going to keep working from here on out and then there is um and I always draw that on x-axis kryb that as horizontal or extensive progress and then and then there's doing new things copying things that work globalization and doing new things that's technology it's going from zero to one so it's going from 1 to 100 typewriters zero I'm typing and going from a typewriter to the first word processor that's sort of vertical or intensive progress and and the basic argument is that those are those are the kinds of businesses we need building more of if you succeed in building them they can be very valuable because you know on the inside you often don't want to be copying things that work is you end up with super competitive businesses you don't want necessarily be starting xx pet food company online pet food company or the you know the the one thousandth restaurant in San Francisco which is sort of my example it was a bad business to go into so copying things that work is not always the best idea in business but actually trying to do new things can often be both both good for innovation and and good for business you have to try to get that intersection just right many of us have children who have decided they want to be entrepreneurs and you see them by the raft what what's your observation about what young smart people are doing now they headed down a right path or do you find it disappointing well it's hard to generalize in such broad brushstrokes I'm always a little bit nervous of people who say I want to be an entrepreneur so I think that's that's roughly in the same category of I want to be rich I want to be famous and you know you don't um you don't start a company or start a new business for the sake of starting a business ideally you start a business because there's a very important problem that cannot be solved in an existing you know large government large corporate large nonprofit structure you know why do you ever start new businesses it's because large structures get to sclerotic to political they can't actually do new things and and that's and then so it's always it should always be anchored in some specific substantive problem where which you're going to solve and never I never like the abstraction of starting a business for its own sake George Packer wrote a profile of you in The New Yorker I think we can all agree that it was a disappointment to him that the magazine was New Yorker but leave the Atlantic take a broad view of this and we think within another hundred years they're going to really make something of themselves there so George Packer said here I'm quoting he might be the most successful technology investor in the world in zero to one there's a seven part test that Peter applies to investments that are brought to him and I was I thought we might do is just go through a few parts of that test you get a sense of the rigor he's bringing the the field that we're going to talk about for a moment is green technology where Peter is a little bit of contrarian in the community of people who are enthusiastic about it so let's see how green technology fares against elements of the test so one is the question of monopoly could you explain the test and what your thought in green technology is so so every city or starting a company you always want to aim for monopoly and you want to have a large share of a market and so if you and so paradoxically it's often good if you start with small markets if you go after small initial markets and a lot of the you know like eBay started with Pez dispensers and then it went to beanie babies and then it gradually expanded into collectibles and so that sort of was that was sort of a very interesting way to start a business on and they often start with markets that are paradoxically too small as this has been true for so many of the great internet companies on the clean tech startups they all started the first slide of every presentation was we have a market it's called energy its measured in trillions of dollars and that's the that's like and we're like this tiny minnow in a vast ocean and you never want to be that so-so so whenever you have vast markets that's telling you the competition is going to be too intense too indifferent undifferentiated you're not going to be able to do something that's really interesting and this was a this was a very deep endemic problem too too much of that field how does clean tech do against the test of durability you you want it on a great companies not just the first mover it's not just something someone that does something new but it's one that somehow will be a last mover where has some sort of a lasting advantage there are many areas of clean tech innovation where it's been this sort of very small set of incremental improvement so you come with a new solar panel design it's 10-15 percent better than the next guys but then someone else comes along with a better design one or two years later and you're out of business and and there are certain that this is sort of and so it's a good form of innovation for society but it's paradoxically quite hard to get it to work on the business level and there are many areas of innovation that have this sort of continuous feel to them where it ends up being very difficult to get the business to work describe manufacturing in the 1980s aviation you know it was it was great for society hard to get the other business models to work and and so one of the one of the tests I often have is can we do something where you've got enough of a breakthrough and then you some are able to maintain that lead and that's that's often been quite hard to to get that story told and then there's an elegant test of the secret we explain that well it's it's a once again it's just some answer the question what do you believe that other people don't and so so if you um if a presentation is if there are too many buzzwords in a presentation that's always a worrisome sign so in Silicon Valley people are focused on educational software healthcare IT software probably overrated SAS enterprise software very overrated Big Data cloud computing if you hear those words you need to think fraud and run away as fast as you possibly and so if I gave you if I gave you a startup that was a concatenation of buzzwords we're building a mobile platforms for SAS businesses to bring big data to the cloud my sort of pattern recognition is that the buzzwords there tell like in poker that you're bluffing and that there's nothing undifferentiated there's no secret that you know that nobody else does and I think that that certainly during the clean tech bubble in Silicon Valley sort of which was about 2005 to 2008 you had again the sort of concatenation of all the buzzwords they all sounded um differentiated you could work really hard and try to go beneath the surface and try to figure out okay was this one a little bit different from this other one in some way but but on some level the surface of things was the heart of things and just if you just saw this uh this litany of buzzwords it was it was a good enough reason to be to be quite nervous Peter has an original view on the process of aging he could talk about people being too complacent about the inevitability of death he talks about death as a problem to be solved and he's done some funding some nonprofit funding this area on the phone I tried to push Peter to say so how long can we live and he resisted the question let's give it one more run so pretend we were coming in at the top 20% of outcomes 50 years from now how long might the species live in 200 years from now how long might the species live well I'm still absolutely refuse to answer that question um and it's because I don't agree with this is the this is not the right way to think about the future the future is not this thing that is out there that's that set in stone dislike the reycarts while the singularity is near we have these exponential curves of progress you know there's there's a longevity trajectory where life expectancies been going up by about two and a half years a decade it's been a straight line for you know 150 years so you could extrapolate that but I think there's um but I think it's never it's never set in stone like that and I think we should talk much more about instead of the future we should always talk about this question of human agency what what can we you do to effect these problems and shape them and I think on this question of Aging generally there are these deep forms of psychological denial or these all these crazy psychological ways that we deal with it and I think the combination that we have with aging is a calm it's generally a combination of acceptance and denial and acceptance is uh you know we're we're all going to die there's nothing we can do about it denial it's not going to happen anytime soon so I'm not going to think about it and and you can sort of think of acceptance as extreme pessimism denial as extreme optimism but they sort of always extreme pessimism and extreme optimism always converge extreme pessimism tells you there's nothing you can do extreme optimism not there's nothing you need to do and so it always sums up to doing nothing on and I would and so I think that I think that the question about the future should never be one of extreme optimism or pessimism we're just going to be this way it should always be mild optimism mild pessimism it's contingent there's a lot we could do one way or another and so on this question if we work at it I think we could make tremendous progress we could cure cancer we get your Alzheimer's we might find there might be there might be some general things that cause aging so it may not be just these organ failures of one sort or another I think there's a lot of general progress we could make the question has barely been tackled but it's something we have to choose to work on you did you didn't have a figure that if we defeat disease and then we die by the chance of accidents what did what's the math look like there well if you if you've solved the problem of Aging all together on you know you wouldn't that wouldn't necessarily make you immortal you'd basically end up getting into a car crash or plane crash or something like that you died after about six hundred to a thousand years and so then then then those things would become much more serious and people probably be very nervous about driving cars I want to close on a memorable note so Peter meets Mark Zuckerberg he's 20 years old Zuckerberg is 20 years old at the time Peter gives him I don't figuratively or how it's done but you give him $500,000 and then you have four words of advice do you remember them something something like don't mess it up want me to do it so something like don't mess it up he's such a gentleman

Channel: The Aspen Institute

Views: 163,248

Rating: 4.8775668 out of 5

Keywords: Higher Education (Industry), Higher Education Bubble, aspen ideas festival, aspen institute, Peter Thiel (Organization Leader), PayPal (Venture Funded Company), Silicon Valley (Region), paypal mafia, money, Venture Capital (Industry), Student

Id: H5NUv0nOQCU

Length: 22min 19sec (1339 seconds)

Published: Thu Jul 02 2015