Peter Thiel, Silicon Valley, innovation stagnation and US-China competition

by Chris Zappone

Suppose geo-economic competition is the name of the game between a country like the US and a country like China. Suppose such a rivalry, using economics to advance geopolitical goals, is more important than the ability to produce war-making hardware because – in superpower terms – it underpins the nations’ ability to shape the future. From there, defense, economy, and even history, to a degree, fall into place by changing the way a superpower is treated by the world.

Peter Thiel

Peter Thiel

So suppose such eventual competition between a country like the US and one like China is built on technological possibilities. Basic scientific breakthroughs, the kinds that invent new industries, will be the foundation of that success. PayPal co-founder Peter Thiel is among those in the US who see a crisis in the Western ability to generate the new kind of breakthrough technologies needed to for future robust US growth and the power it brings.

Thiel sees Silicon Valley as the place to find and hatch these new technologies, pointing to the talent the region today attracts increasingly at the expense of post-credit bust Wall Street and dysfunctional Washington. And yet I can’t help but think that looking for productivity increasing-breakthroughs in Silicon Valley is, frankly, looking for them in the wrong place. Wouldn’t the rise of Silicon Valley as the standard for technological progress coincide with the much-lamented post-1970s innovation-stagnation? So isn’t it possible Silicon Valley is, if not a dead-end of sorts, an unlikely source for groundbreaking future technological breakthroughs? I mean the sort that had increased quality of life and extending the reach of industry.

After all, historically the biggest scientific breakthroughs occur in an environment that is often divorced from a waiting, expectant market. Gregor Mendel, the father of modern genetics, was a monk, for example. The father of microbiology, Antony van Leeuwenhoek, was a Dutch draper. Discussing inventive periods in the past, anthropologist


What ever happened to the Concorde?

David Graeber notes: “Britain [during the Industrial Revolution was] notorious for being just as generous to its oddballs and eccentrics as contemporary America is intolerant. A common expedient was to allow them to become rural vicars, who, predictably, became one of the main sources for amateur scientific discoveries.”  In other words, guys tinkering away at their own projects far from the dealing rooms of London, were a credible source of invention.

1961 illustration by Charles Schridde showing Motorola's

1961 illustration by Charles Schridde showing Motorola’s “House of the Future”

Big breakthroughs, in fact, are often happy accidents of scientists in a world of pure science and discovery.

US Wartime Director of the Office of Scientific Research and Development Vannevar Bush acknowledged this way back in 1945, noting that “basic research is the pacemaker of technological progress. “ In the essay ‘Science The Endless Frontier‘ penned on the eve of the kind of multi-decade dramatic growth of the US economy and rise in living standards longed for by Thiel and Neal Stephenson and others, Bush wrote.

Industry is generally inhibited by preconceived goals, by its own clearly defined standards, and by the constant pressure of commercial necessity. Satisfactory progress in basic science seldom occurs under conditions prevailing in the normal industrial laboratory.

Scientific progress on a broad front results from the free play of free intellects, working on subjects of their own choice, in the manner dictated by their curiosity for exploration of the unknown.

Bush even noted that “discoveries pertinent to medical progress have often come from remote and unexpected sources, and it is

Vannevar Bush

Vannevar Bush

certain that this will be true in the future.”

In other words, for real breakthroughs to occur, you can’t have investors and marketers breathing down the necks of the researchers and scientists in a place. Real breakthroughs tend to occur in free-range, not caged, conditions.

Yet today, the triumph of monetized, market-ready applied science most visible in a place like Silicon Valley reflects a commercial mindset rather than a more universal abiding push for scientific discovery. The broader experience of significant scientific breakthroughs is different, as well. True scientific progress leading to technological wonders goes hand-in-hand with the myth of our human destiny, of being the one species that can shape its own environment and ultimately, our own destiny. Rolling out tweaks and updates foretold in investor updates and SEC documents that try to quantify the ka-ching is not the same.

Thiel’s VC group, Founders Fund, has a manifesto ‘What Happened to the Future?’ that points to the slide in the scope of technology visible in just the last 20 years:

In the late 1990s, venture portfolios…still supported transformational technologies (e.g., search, mobility), but venture investing shifted away from funding transformational companies and toward companies that solved incremental problems or even fake problems (e.g., having messenger Kit-Kats to the office).

The statement continues

Not all technology is created equal: there is a difference between Pong and the Concorde or, less glibly, between Intel and Microprocessing represents real technological development, peddling pet food on-line, less so.

The presumption that technology has an immediate market value is another lesson learned after decades, yes, decades, of free-market ideology, embraced in the post-Cold War US. So there is an irony that libertarians, like Thiel, hold the primacy of private enterprise over government as an article of faith, particularly when government can have a crucial role in promoting scientific achievement which leads to productivity-gaining advances.

Apple: Not Different Enough

Apple: Not Different Enough

The final word on the matter is really for historians to debate. But we can say today that the current system is failing. We now have a situation where government has been robbed of basic tools it needs to assure a vibrant, competitive technology sector: Don’t believe me? Consider the case Office of Technology Assessment. Without it, now there is concern government agencies and committees in charge of regulation can be overwhelmed by new technology. It means more clunky and inefficient direction for industry. It’s already happening in areas like civilian drones. Uber is another case study.

Ironically, China, an authoritarian capitalist state, doesn’t have to cope with such ideological blinders on technology, science and results. There was a time when science in a communist country would be shoehorned to fit an economic outcome foretold by the political system. The People’s Republic of China in past times pushed its own population to starvation in the drive to develop its steel industry – as a sign of communist progress. Now, a nation like China can simply gather its best scientists into a room and fund them – market be damned – and look for results.

A recent photo from a Chinese moon mission, (Xinhua)

A recent photo from a Chinese moon mission, (Xinhua)

China’s space program is a clear example of this. While not breaking new ground (yet), it is winning the very real admiration of the world’s space scientists in the process. Moreover, China’s focused space program speaks volumes about China’s civilization, about its place in world affairs and about its destiny – all of which is closely watched by the international community. At its current pace, China will eventually begin to chalk up breakthroughs, and the story China can then tell will be, to a use a word from Silicon Valley, “transformative.” Another more universal description for China’s expected success might be “transcendent” – which is what big technology can do: transcend boundaries, borders, expectations.

Illustration by Charles Schridde

A future postponed (Illustration by Charles Schridde)

Meanwhile the US may still be debating what happened to the unbroken period of productivity-gaining inventions associated with American ingenuity. The sense of crisis in the US is palpable. But that, as Thiel noted in a 2011 New Yorker article, is not necessarily a bad thing. Says Thiel:

“It seems like we’ve not been thinking about the right issues for a long time…I actually think it is a big step just to ask the question ‘What does one need to do to make the US a better place?’ That’s where I’m weirdly hopeful, in spite of the fact that a lot of things aren’t going perfectly these days. There is a very cathartic crisis that’s gone on, and it’s not clear where it’s going to go. But at least everyone knows things are rotten. We’re in a much better place than when things were rotten and everyone thought things were great.”

And that kind of crisis thinking may be what’s needed to get back on the track to technological progress, the sort that reflects the possibilities of people, and that extends a sort of arc of meaning forward into the future.

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