Robinson: Welcome to Uncommon Knowledge, I'm
Peter Robinson. When I first got to know my guest Peter Thiel he was a struggling student
at Stanford Law School, since then he as co-founded PayPal, become one of the principle investors
in Facebook and turned his present company Clarium Capital into one of the leading hedge
funds in the nation; this past September Forbes put Peter on its list of the 400 richest Americans.
A point to bear in mind as Peter and I talk about economics, during that same period of
time my principle achievement was to go from a 30 to 15 year
mortgage. Peter argues that a book published in France in 1968 under the title
[foreign language], showing off for you there, or The American Challenge has a lot to say
to us in the United States in 2008. Today on Uncommon Knowledge Peter Thiel, a
40 year old book, and the state of the American economy. Segment one, How America Once Looked,
by the way, first question, this book was published the year you were born how did you
even hear about it let alone tell me that you
wanted to talk about it on this show? Thiel: Well, one of my friends told me I had
to read the book a few years ago and it was -- it's always striking to read these books
about the future that were written in the past and the question is, how does the present
map up to compare with the way the future used to look? Robinson: Okay, so, Jean Jacque Servan Shriver
[assumed spelling] published The American Challenge in France in 1967 the American
translation in 1968, 40 years ago and he argues that the economy of the United States was
so dynamic that, "In 1980 the United States will have entered another world," by the year
2000, "Life will be as different from what it is today as our society's now are from
Egypt or Nigeria, American will be a post industrial society with a per capita income
of $7,500, there will be only 4 work days a week
of 7 hours per day, the year will be comprised of 39 work weeks and 13 weeks of vacation
with weekends and holidays; this makes 147 work days a year and 218 free days a year
and all this in America within a single generation." It didn't pan out as Servan Shriver
predicted, how come? Thiel: Well, I think that's a very interesting,
very important question the basic thing that Servan Shriver predicted was that you
were gonna have this exponential growth in technology and I think the very difficult
problem is there's been less growth than people thought there was going to be. And we have,
obviously, the big headline type stuff you have stories on Google and Apple all these
very high-profile tech companies. But in some sense the compound growth has been less than
people thought even with globalization, even with the computer revolution, the Internet
revolution, the biotech revolution it somehow has not added up to quite as much a
difference as people thought. And so today people in the U.S. have to compete more with
the rest of the world than they did 40 years ago where as if you have this exponential
technological growth you might have to compete less because we'd be so much further ahead
of the rest of the world. Robinson: Okay Thiel: It goes to something very interesting
that's gone wrong with the way people thought the future was gonna look and, ya know,
if you were in the mid 1960's people thought it was gonna be the Jetsons, we're gonna have
vacation trips on the moon and flying cars and robots doing all your work and it hasn't
quite happened, it's been just much slower. Robinson: Right, the only robot that does
any work that I'm aware of is the Rumba little carpet sweeper, that's as far as we've gotten.
Now, I should repeat, or I should make note that The American Challenge, [foreign language]
swept Western Europe; this is not as if you've noticed a book that sort of slipped
through the cracks 40 years ago this was an enormous book. The argument that this man
laid down was bought by western Europe and substantially by the American elite Arthur
Slessenger [assumed spelling] in the American translation there's a big long forward by
Arthur Slessenger, Jr., so the question I guess would be, was it just a hysterical Frenchman
getting over-excited or was it a reasonable argument at the time and in some fundamental
sense the American economy has under performed? Thiel: I think it was a reasonable extrapolation
from what was going on at the time, so if you looked at the world if you were born
in 1950 and you were looking at the world in the late 60's it looked like everything
was just getting better automatically every single
year. And certainly, and then it somehow slowed down a lot and you had the oil trucks, the
resource constraints of the 70's, it got restarted sort of in the 80's and 90's but
we really had 40 years of much slower growth than before. Robinson: Alright, let me attempt to contradict
you. Economist Art Laugher [assumed spelling] and Steven Moore [assumed spelling]
in their new book The End of Prosperity, "America's net worth climbed in real terms from 25,000,000,000,000
in 1980 to 57,000,000,000,000 in 2007, more wealth was created in the United
States in the past 25 years than in the previous 200 years. In 1967 only 1 in 25 families
earned $100,000 or more where as now in constant dollars almost 1 in 4 families do." That's
really a very, very impressive record, right? Thiel: Well, you have to sort of -- Robinson: We may not be flying to the moon
but this is a substantial achievement, the American economy has been amazingly prosperous. Thiel: Well, you have to drill down a lot
of the facts. Robinson: Okay Thiel: So I think the acid prices have gone
up tremendously for -- and we've had an incredible bull market in equities from '82
to 2007, I think if you updated it for the last year you'd probably have to take off
about 14 or 15,000,000,000 with the loss in housing
and -- Robinson: I Googled around last night and
the number I came up with was 16,000,000,000 as sort of a rough estimate. Thiel: So you can calibrate it down quite
a bit in just the last year and then if you make that adjustment on a per capita basis,
ya know, population's grown we're probably about where we were in 1980 on a per capita
basis today. Robinson: Really? Thiel: So you make those two adjustments,
and so it's, now, maybe it's grown some but it's certainly grown less quickly than people
would think. Robinson: Okay Thiel: Family incomes are up some from the
late 60's but it's not clear that's the right metric because you have a lot of families
where both spouses are working and that's very different from the world of the late
60's and -- Robinson: Okay, let me -- segment two, who's
on vacation now? Servan Shriver made a lot about all the vacation days Americans would
have in the future more free days than working days. Now, let me present to you a couple
of arresting statistics, until 1970 western Europeans and Americans worked about the same
number of hours each year and after 1970 they diverge. Western Europeans work less
and Americans work more until the new President of France Nicholas Sarkoze [assumed spelling]
changed the law earlier; this very year France had a work week, by law, of 35 hours,
no more than that no paid overtime. The typical American work week 42 hours, in France
vacation guaranteed 5 weeks plus 12 public holidays, typical American vacation time 2
weeks, so what's going on? Thiel: Well, people are working more in the
U.S. than in France and there are all sorts of crazy laws on the books in France that
prevent people from working. You know you get police officers in Paris who ticket your
cars if you're parked for more than 35 hours at an office they measure all these things
very, very methodically. But at the same time I think the thing that is going on is we're
nowhere near the 13 weeks that Servan Shriver was predicting in '67 or '68 for the U.S.
and somehow things have fallen short. Now, ya know, I think you can argue that people
like working more and but I think at the margins though a lot of people who would actually
prefer somewhat less. Ya know, most people's jobs aren't as much fun as your job and they
would like to have some sort of different balance and so when you look at families where
both spouses are working they might have to have a third job or a part time job on top
of their regular job to make ends meet. The fact that people are working around the clock
and running really hard just to stay in place is telling you something about this
incredible decline -- Robinson: You are sounding so bearish about
America I'm not gonna let that stand, at least not yet. Let me try a couple of economist's
explanations of this diversion in working patterns. Bruce Sasserdode [assumed spelling]
of Dartmouth, "Europe has been friendly to the politics of the left than the United
States for the last half century. Unions in Europe use their strength to bargain for more
holidays, more vacation days, shorter regular work weeks, and more unemployment insurance,
it's clear he's correct about that, right? Thiel: Yes, but the question, look, the question's
not how many hours, the question's not how many hours are people working or how
many days they're working a year. On some levels the question is, how much are people
getting paid per hour? Robinson: Ah, alright, then I present to you
Edward Prescott [assumed spelling] of Arizona State University winner of the 2004
Nobel Prize, I know you so well that I can anticipate where you're about to go -- Thiel: This is very impressive. Robinson: and Prescott says that Americans
work harder because they get paid more after taxes, "Marginal tax rates explain virtually
all of the difference." Americans are working harder because they get something for it;
this is good news about the United States not bad. Thiel: It is -- it's definitely not the way
people would have thought about in a naively would have thought about it in the late
60's where people would have thought that we're gonna have all this technology progress
and you'd have a society where there would actually be less pressure on people to be
working around the clock. So, yes, I think the marginal taxes are different there are
all sorts of regulations that are different. Robinson: Right Thiel: So, but I think the question is, how
many women in 2 income households really would choose to work if their husband was making
more money? And -- Robinson: And the answer -- Thiel: So when you [inaudible] down on that
question I think it's much more complicated and then if you say, well, they're working
just because the marginal tax rates; this doesn't resonate as true with the social realities
of what's going on in this country. Robinson: Well we know the answer to the first
question, right? Because in recent years of the pattern -- there was a period, oh,
I don't have the statistics on paper so I'll probably flub it but roughly speaking, there
was a period beginning in the 70's or so when high status women worked; this was something
-- Thiel: Yes Robinson: and then but in the last decade
or so the higher the income level the more likely the woman was to stay home not to work
suggesting that -- Thiel: And, yes, that is true. Robinson: Right? Thiel: And the part, however, that's problematic
is that relatively few women are in households where the income level is high
enough that they can make that choice, so that is the choice women would make. Most
middle-class women are not able to actually make
that choice because they're not, their husband's not able to make enough money. And so, one
key metric along these lines would be, how much are -- what's the hourly wage that
the average male is earning and how do you compare that today versus 1973, for example,
and it's basically flat since '73? The hourly -- Robinson: Even taking into account -- Thiel: income for men has not gone up in 35
years. Robinson: Okay -- Thiel: And again, they made all sorts of complicated
adjustments for inflation -- Robinson: Right Thiel: and so on down the line. Robinson: But there's one adjustment I'm trying
to remember and, again, I'll flub it you'll have it at soon as I begin to describe
it you'll understand what I'm talking about here. But isn't there also an adjustment for
risk in the market place, that is to say that in the old days you'd get such and such
an income and tied to it would be such and such a risk that you'd lose your job or that
your income -- there's a variability of income is what's going on. Hasn't that at least decreased? Thiel: It's quite unclear; I think it has
gone down some although it's not clear that's a good thing or a bad thing. So when you
have a heavy manufacturing economy there was much more variability than in a services economy,
but it may be that a services economy has ultimately less growth. So, ya know, if
you have a factory that's making widgets you can imagine a factory that's making 10 times
as many widgets if you get more automation per worker. Robinson: Right Thiel: If you have a restaurant it's hard
to imagine a waiter or waitress being 10 times as efficient as a waiter or waitress was
100 years ago. Robinson: The best Starbucks barista can only
squeeze out so many espressos per hour. Thiel: Only so much. And so there is -- there's
less volatility as a result of the shift towards a service economy but there's
probably also less growth. Robinson: Very quickly, I want to flush out
the nature of your argument. You are not saying that the United States has failed
relative to Europe. Thiel: No, they both have fallen way short
of expectations. Robinson: You're not saying the United States
has failed relative to China. Thiel: China is complicated but it's -- China's
still extremely far behind the U.S. so -- Robinson: So what you're saying -- Thiel: it's much more relative to Japan or
Western Europe but it has failed massively relative to what people expected 40 years
ago. Robinson: Okay, segment 3, Peter Thiel on
what is wrong. You gave a talk in October as part of the Big Think Project, which, as
I recall, is www.BigThink.com, people can click on that and get the streaming video
of you, people whose appetite is merely wetted by this video today can get more of you. "There
has not been enough real growth in the economy." Here's what I'm trying to tease
out, what I'd like you to explain about that, are you saying simply, look, it is the nature
of human existence that 2 or 3% growth is really pretty good and we ought to be happy
with that and strive toward that? Or are you saying that the United States in these
last 40 years has demonstrated chronic -- there's something wrong that needs to be addressed
and fixed? There's something wrong with expectations or there's something really wrong
with the real economy. Thiel: Well, there's something really wrong
with the real economy so it's there's not enough progress. I'd say long-term rural
growth in our world is driven by two things one is, global trade and the other is technology. Robinson: Okay Thiel: I think we've had the easy gains from
global trade so I think going forward the main gains are gonna happen from technology.
And I think that -- Robinson: Explain the easy gains from global
trade. Thiel: Trade with China, people in China make
something more cheaply and therefore your real standard of living goes up in the U.S. Robinson: And all this accompanied by the
post World War II regime of free trade, the NAFTA and all that stuff. Thiel: Especially starting in the late 60's
and early 70's when globalization really took off. Robinson: Okay Thiel: And 1980's and so on. And then technology
is more intensive growth where you replace a typewriter with a word processor and
that's more efficient. So it's one type of growth where you have 10 typewriters, go from
1 to 10 typewriters, the other one is go from a typewriter to a word processor. Robinson: Got ya. Thiel: And those are basically the two ways
that you can improve growth or productivity, extensive and intensive. I think we've had
some of both but the combination is just not as much as people think and that's why people
are having to work harder, that's why the wages have gone up some but not as much
as people think, there's been some increase in real wealth but not as much as people think.
Now, when you ask why is this, that's, I think, a very difficult question but I will throw
out several -- Robinson: Yes Thiel: answers and I think it's a combination
of some of these things. So I think one is we have an education system that's very
broken in this country and so people, most people do not have the skills to do these
kinds of jobs. Robinson: You surely want to distinguish between
American universities where broadly speaking everybody on the planet aged 18 or over
is trying to get into a Stanford or a Grinnell or -- that's pretty good, right? You want
to talk about public schools and high schools, right? Thiel: Well, the top universities are quite
good on a relative basis it's very hard to know on an absolute basis whether they could
be better or worse than they are. So I think even with the top universities if you take
something like science research there are very
difficult questions about how efficient it is, is there this complicated government procurement
process where people say they're doing research on something but it's really just
some other different weird pet project they're working on to get tenure, and the lack of
transparency's extremely hard. Robinson: What a suspicious cast of mind you
have. Thiel: Well, we're living in a very specialized
world where the specialization has led to a point where it's very difficult for
people to understand things. If you think about the recent housing crisis and the credit
rating agencies the imprimatur they were giving on these bonds was very critical because nobody
could evaluate them, now, it turned out they couldn't either. And we have this sort
of deferral experts in many different areas. Robinson: Okay, let me ask you, clearly, a
question that I must ask you is, what went wrong? Now, let me tell you my little mind
molded as it was by the big mind of Milton Friedman [assumed spelling] begins with the
presumption that if you see a catastrophe somewhere you're likely to find the government
intervening in some hand-fisted way that messes up the workings of the market place.
And fundamentally my little mind sees two things that went wrong one of them was the
creation of the sub-prime market and there you
see it the government is pushing Fannie Mae and Freddie Mac to give money to people to
get into homes they can't really afford. The government is creating this sub-prime market
place and that's a catastrophe and it's sort of a Miltonesque catastrophe, the government
intrudes where it ought not. But the second bit of it, as best I can understand, is that
all kinds of highly paid very intelligent sophisticated people who had a full array
of incentives to do otherwise never the less carried lousy assets on their books, didn't
value them correctly and made systematically bad choices in investments, and that bit there
is not Miltonesque explanation for. Thiel: Yes Robinson: So I'm hoping that you will explain. Thiel: Well, I think there's a history of
the last 5 years and there's a history of the last 40 so -- Robinson: Okay Thiel: the time horizon's very important.
So we had a housing and finance thing that went really crazy in the last few years -- Robinson: Right Thiel: and there was certain assumptions that
were embedded in it that were probably just wrong. So one was that house prices would
always go up and that is probably a true assumption in a world where you have massive growth when
you don't have growth it's not true. And I think that was just a mistake people
made and the reason they made that mistake was because you can't have growth if there's
no progress on the technology front. And so,
I think if you want to sort of wind the clock back a little bit further we had this tech
bubble in the 90's that preceded the housing bubble, parts of it were real but parts of
it were fake and, ya know, you have to sort of
wonder how much technology and innovation was there in the 100th on-line pet food company,
for example. And when the technology -- Robinson: That's the one I invested in, incidentally. Thiel: I'm sure you did. Robinson: I missed PayPal but I certainly,
yeah, alright, go ahead. Thiel: And so, when the technology bubble
of the 90's turned out to be more fake than real then people had to somehow make returns
elsewhere and you made it up with leverage and leverage was housing for consumers, exotic
financial products for banks and then it was aided and abetted by the government racket
that was Fannie Mae. So I think it's a sort of complicated story but one of the reasons
that a lot of the common sense views went wrong were that people assumed and were too
optimistic about the story of automatic relentless progress that this is something that just
happens automatically. For example, an alternate history of the U.S. in the 20th century
would be that the U.S., that you had these totalitarian disasters and, ya know, communism,
fascism where they basically destroyed all their talented people and they all came to
the U.S. in the 50's and 60's and so we had this enormous boom. And that we made a big
mistake to assume that this was just automatically going to happen and that instead you had to,
ya know, what is necessary is for you to have a rigorous education system, you have
to have a society that encourages people to do this and it doesn't work if people
think things are automatic. Just one last -- Robinson: Go ahead, sure. Thiel: So, your question about Fannie Mae. Robinson: Yeah Thiel: Ya know, the question is, why were
not more people critical of Fannie Mae? Even on the republican side it was a small minority
-- Robinson: Right Thiel: that was speaking out about this and
it was because they didn't think it was that bad and they didn't think it was that bad
because they thought that no one would really lose money it was all housing and housing
was gonna go up because it was automatic progress. Robinson: Okay, segment 4, the political economy
of our day. What I want is the key note, the theme music that plays in Peter Thiel's
mind as he thinks about the economy today. And let me try a quotation on you and see
if you'll go for it as sort of thematically correct, the right mood; this comes from the
perceptive economist and trenchant social observer Tony Soprano. Episode one of the
Sopranos, "It's good to be in on something from the ground floor, I came too late for
that I know but lately I'm getting the feeling that I came in at the end, the best is over."
What do you think? Thiel: Well, I don't think the best is over
at all, so I think on a 30, 40 year horizon I'd be quite optimistic to think things are
going to get better. But I think there is this very crazy adjustment process and one
of the problems from a political economy perspective is that we're probably -- that the regulatory
stuff is we let all these crazy things happen and then we shut down all risk taking
in response to that. And so, I think we have this -- and so, the worry is what happens
in the political system in the U.S. the next 5 to 10 years [inaudible] just break things
altogether. Robinson: Clearly I want to get to that but
I also want to kind of establish your own thinking as well. This is a quotation I don't
have written down but I'll paraphrase it, there's a fellow who blogged somewhere on
Yahoo who goes by the name The Naked Economist, that's
enough for people to Google and find him if they want to and he wrote, this is a pretty
close paraphrase, "Even as in 1989 when the Berlin Wall came down no serious person could
any longer believe in communism." In the autumn of 2008 no serious person could any longer
continue to believe in the unfettered free market. Thiel: Well, we haven't had a free market
-- Robinson: What are the events of the recent
months done to your views as a libertarian and a free market man, shaken them? Thiel: Not particularly, although, I mean
it was eminently predictable that we had way too much government entanglement in this.
The part that I am more pessimistic about is that people won't draw their own lessons
from this. If you look at the early 1930's there
were a lot of reasons things blew up, it was not necessarily an unfettered free market
it was quite possibly the trade tariffs and the protectionist stuff and various bad decisions
the Federal Reserve was making on the governmental side, so you can make an argument
that it was the government that, ya know, made a sort of garden variety recession turn
into the depression and people did not think of that in that way in the 30's, they didn't
actually start talking about what the government's role was until Friedman wrote his book
in 1962 and they didn't start reversing the bad decisions they made because of their misunderstanding
of the history 'til Reagan came along in the 80's. And so, the big worry is
that people will misinterpret -- Robinson: Take entire decades to get it squared
away. Thiel: It'll take us 5 decades to get this
straightened out. I'm not that pessimistic but I think there's a very important question
of exactly what went wrong here and I don't think it had anything to do with free markets,
I think it had to do with, ya know, excessive government entanglement on the one
hand and then on the other hand, these long-term motors of growth working much less well
for -- Robinson: Than was understood. Thiel: than was understood. And part of it
was, again, excess of government entanglement and things like education. Robinson: Okay, lay blame and then figure
out what ought to be done; we're talking about government policy. Art Laugher, [assumed spelling]
"What this administration (and we're not talking about Obama, we're talking about the last
few years here) -- What this administration and congress have done will be viewed in much
the same light as what Herbert Hoover did in the years 1929 to 1932 we are now witnessing
the end of prosperity." And Art Laugher, who was an advisor to Ronald Reagan and supply
side economics and so forth, Art Laugher said Bush and this past congress, past several
congresses, largely republicans, republicans messed it up. Thiel: Well, they certainly were not -- certainly
if you look at the way the spending spiraled out of control the government
sectored that, got a lot bigger, there's a sense in which Bush was the worst president
in the U.S. since L.B.J. and L.B.J. was -- Robinson: Do you subscribe to that -- Thiel: If you just look at the amount of increased
government spending, absolutely. Robinson: You do. Thiel: Just if you -- that one metric. Now,
I think the -- why I agree with Laugher that lower taxes are very desirable and, ya know,
a very important component I think the mistake
that he makes is to assume that this is just gonna happen and, ya know, we're -- and for
some reason it's not a popular issue anymore, people want the government to take care of
them. And you have, I think we have some, ya know, the real problem is that if we have
a down cycle does this actually make the regulatory stuff even worse? The tech thing
when it ended we, ya know, however real or fake it was in the 90's, when it ended you
got Sarbanes Oxley [phonetic] you got a whole bunch of additional regulations and then it
broke it even more for the next decade. Robinson: Right Thiel: And so, the question is, now that,
ya know, there was this risk taking that was done in bad ways, are we now gonna outlaw
risk taking all together -- Robinson: Okay Thiel: and break things even more in the next
5 to 10 years. Robinson: As we sit here today we're still
some weeks from Barack Obama's taking the oath of office as the 44th president but he's
announced his economic team, Tim Geithner, Chairman of the New York Fed, Larry Summers,
former President of Harvard, former Treasury Secretary in the Clinton administration, they're
talking about a massive -- I'll let you, I don't know whether massive is the right
term, anyway -- minimum of $300,000,000,000 in public works projects and some sort of
unemployment security, some sort of -- I haven't read the details I don't know that the details
exist. You have the $750,000,000,000 bailout and the President Elect and his economic
team are already calling for an additional, at least, 300,000,000,000. Good, bad, what
should they be doing? Thiel: I don't know if it makes much -- I
don't think it's particularly good but I don't know if it makes that much of a difference.
I mean long-term you want to fix things that enable long-term productivity growth to happen
and the road we're going down is the road that Japan went down in the 90's where you
had one kanesian stimulus after another. The government borrows money if the government
borrows another trillion dollars it means there's one trillion less in the private sector.
And the question is, is the government going to deploy that money better or worse
than in the private sector? In the short run maybe it helps a little bit because the money
gets spent more quickly and you can sort of get a short-term stimulus. Robinson: You can get a little kanesian stimulus
in affect you're fooling the market, right? Thiel: Yes, kane's does work to that extent. Robinson: Yeah Thiel: But in the long run it probably means
just a lot less long-term productivity growth and this short-term long-term trade off
is, ya know, it is one of the places where the U.S. is at a massive disadvantage as we
are constantly focused on, ya know, the next 6 months, the next year, not thinking about
the next 20 or 30 years. And this is, ya know, we're better off than China in every way
except that one way, China's better about looking at the long run -- Robinson: They do think in terms of decades
don't they? Thiel: than the short run. Robinson: Okay, segment 5, our final segment,
fine minds, let me read you a few quotations from very bright people and then ask
you my very bright friend how you'd respond. Let's begin with Jean Jacque Servan Shriver
writing 40 years ago in the American Challenge, "During the past 10 years (so he's talking
about '58 to '68) -- During the past 10 years American power has made an unprecedented leap
forward there is a real danger that Europe may forever be confined to second place."
Is the United States now in the position that Europe was then and is China now in the position
that the United States was in then? Thiel: The U.S. is definitely at risk of seeing
several decades of slow growth or stagnation. It is not clear that China may catch
up to the U.S., it's unclear they'd be able to overtake the U.S. because it's unclear
there's any innovation happening in China. China
is not a frontier country it's not pushing the frontiers. It can copy the west like Japan
copied the west, they can catch up but I don't think they can overtake us. Robinson: So the Chinese, even as you look
to the next decade or somewhat longer, the main Chinese game is still moving people from
the countryside where they're growing rice into factories where they're more productive?
But they're still making toys designed in the
United States or tires -- Thiel: They get to be more productive doing
things that are already being done in the west? Robinson: Got it. Thiel: But geopolitically it's significant
because China has 4 times as many people as the U.S. does and so if China merely catches
up to the U.S. it will become the world's leading power and that change is -- that can
change things in important geopolitical ways. Robinson: So do you expect that to happen? Thiel: Yes, on current trajectories I would
expect China's GDP to surpass the U.S. within 5 years even though the per capita GDP
may never catch up. Robinson: Oh, I see, I see, I see, okay, alright,
alright. Hendrick Hertzberg [assumed spelling] in The New Yorker magazine writing
about the election, "Emphatically comprehensively the public is turned against conservatism,
the faith that unfettered markets and minimal taxes on the rich will solve every
domestic problem is dead for a generation or more." Thiel: We'll see, these political predictions
tend to be very off and I think a lot of it will come down to how the Obama administration
performs in the next few years. And it is -- I think the timing is not as good as F.D.R's
was in the 1930's, ya know, Roosevelt came in in March 1933, which was also the point
when unemployment happened to peak, he was lucky he got the timing exactly right and
he got all the credit whether or not his policies
did any good. Robinson: Everything got gradually better
from the moment he took office. Thiel: He happened to get the timing exactly
right. Robinson: I see. Thiel: They were gonna get better anyway,
maybe he slowed it down maybe he accelerated we have a long debate about that but it was
-- Robinson: You and I, I hope you and I wouldn't
have a debate about it. Thiel: One could have a long debate -- Robinson: Alright, alright. Thiel: But I think -- I do not think unemployment
will peak in January 2009 and so, I think that Obama will not -- it would be like
F.D.R. getting elected, ya know, in the fall of 1930 and we would have had a very different
post mortem. And that's, by the way, something like that is what happened in the
U.K. where basically the labor party won in late '29, it was thrown out in mid '31 and
then the conservatives ran the U.K. for the next
15 years. Robinson: So, could I ask you to make a -- just
a nice tight political prediction, do republicans pick up an additional -- you
wouldn't expect republicans to take control of -- take back either chamber 2 years from
now, would you? Thiel: No, but I think they'll make very big
gains and most likely we'll win in 2012. Robinson: Okay, now, this show, there's quite
a lot of darkness here in this show, we're in a plane that's going down so I'm gonna
hand you the joystick and I'm looking for a way to -- do something to lift my spirits
if you can. If you can't don't feel obligated but if you can do something to -- Milton Friedman,
perhaps the most consequential economist of the 20th century, certainly the second
half I'd argue and also our friend who died just 2 years ago this month. At dinner with
Milton about 5 years ago I tried to pay him a complement and argued that he had won the
intellectual battle that on economics departments of major universities across the country
free markets were now embraced. And Milton wouldn't have it he said that yes, I, Milton
and Meces [assumed spelling] and Hiack [assumed spelling]
and George Stigler [assumed spelling] and others may have won an intellectual battle
but if you look at practical politics there's no evidence we've had any effect what so ever
government spending continues, regulations continue to proliferate. And then he was
quiet for a moment and he looked at me and said, the challenge from my generation, Milton's
generation, was to provide an intellectual defense for liberty the challenge for your
generation is whether you can keep it. Will you accept that framing? Thiel: Yeah, well, I think that on a more
optimistic note even if we have a move against capitalism and against freedom in the next
few years I think -- Robinson: Which is we have to take it for
granted now, don't you -- Thiel: It's unclear what's gonna happen? Robinson: Oh really. Thiel: It's always unclear, ya know, because
Obama wants to get re-elected, the people in his administration want to get re-elected
so it's unclear what they're gonna do. Ya know, they're already talking about not increasing
taxes at all, which would be a very good first step. But I think one of the constraints
on it is that we're in a far more competitive world, so in the 1930's when you have
the new deal or the 1960's when you had the great society there was no other country in
the world -- Robinson: China was in a deep freeze. Thiel: even remotely competing with the U.S.
And so, ya know, if you didn't like paying a 90% marginal tax rate in the 30's, ya
know, you weren't gonna move to Stalness [phonetic] Russia where the marginal tax rates were 100%
and you would get shot. And so, I think the fact that we are living in a more
competitive world while it's in some ways a symptom of America not staying ahead technology
wise. In practice it means that really bad decisions are much harder to make and you
can't unilaterally aleve it. Where the only way it would is if globalization itself breaks
cataclysmically barring anything cataclysmic I think there will be surprisingly
big constraints on political action. Robinson: Alright, last question, you've said
a number of times during this interview, technology, technology, technology, improving
schools is really the thing that must be done? If I said to you, "Peter you've got to give
me 2 sentences on what we must do to accelerate technological growth," how would
you reply? Thiel: Well, there are probably regulatory
things that need to be, ya know, there needs to be less regulation, there needs to be
better education system in both primary and secondary schooling, there are probably ways
in which it should be culturally valued to the point where people going into the engineering
scene is as valuable as going into say, ya know, being a rock star or something
like that. So, I think there sort of are a number of levels that are financial, political,
cultural that all intersect. Ya know, one of the things that's very odd about this whole
technology debate is if you think about the whole broader debate, is the west in
cultural decline. Basically the left says we're not because we have science and technology
and the right says we are and science and technology don't matter and both the liberals
and conservatives in our so called cultural wars silently agree that we have this incredible
science technology thing going on and they just disagree about its importance. And what
I'm saying is that, ya know, if that's not going on or if it's not going on as much as
people think then there'd be no question that we are in incredible decline as a society
and it would sort of -- it's a very important way that I think we need to reframe some of
these issues. Robinson: Peter Thiel of Clarium Capital,
thank you very much. I'm Peter Robinson for Uncommon Knowledge, thanks for joining us.
