A Better Future Needs a Bit of a Push
Peter Thiel comes bearing dark portents for our civilization. The PayPal co-founder and venture capitalist is an outspoken iconoclast, regarded by some as brilliant and by others as crazy. In recent years, Thiel has joined the chorus of voices warning that technological progress has stagnated, adding his voice to those of Robert Gordon and Tyler Cowen, but also Neal Stephenson and Paul Krugman. When you find such a diverse group of smart people sounding the same alarm, it’s worth paying attention.
In early 2013, Thiel debated fellow Silicon Valley titan Marc Andreessen, a famous tech optimist. Andreessen made some great points, basically arguing that technology makes qualitative, not quantitative, changes in our lives, and that we’re on the cusp of great things. Of course I agree. Andreessen also had the macroeconomics right.
But, as blogger Dan Wang notes, Thiel made some important points too, and if we want to speed up technological innovation, there are gems of insight to be found in his pessimistic take.
Thiel identifies one big problem as stagnation in energy. For centuries, we kept getting better energy sources -- first coal, then oil. That powered faster transportation, cheaper construction, bigger appliances and better materials. But now that energy quality has started to backslide, we’ve had to switch from creating new physical technologies (“atoms”) to creating new information technologies (“bits”).
The basic question is: What comes after oil? Nuclear power has been a bust so far, with its huge fixed costs and high-profile disasters. Natural gas is good, but is really just a somewhat cleaner replacement for coal. The only real bright spot (apologies for the pun) is solar, whose costs have plummeted dramatically for decades, and which is now almost as cheap as coal. But even if solar eventually gives us ultra-cheap electricity during the day, the lack of good storage technology means that gas or coal or nuclear plants will still have to be built for the nighttime, and we will still need some way to power our cars, planes, trains and ships.
So solar can’t be the whole solution. We need better energy storage technology, and better energy tech in general. And how are we going to get it? In a 2011 article in National Review, the libertarian Thiel declared that government -- yes, government -- is going to have to be a big part of the solution:
The state can successfully push science; there is no sense denying it. The Manhattan Project and the Apollo program remind us of this possibility. Free markets may not fund as much basic research as needed.
In other words, even libertarians are realizing that it’s no longer good enough to boldly declare, as Ronald Reagan did, that “government is the problem.”
Another important Thiel point is that our public infrastructure is decaying. This is partly a result of stagnant spending, but we’re also getting less bang for our buck. Infrastructure costs in the U.S. are absurdlyhigh compared with Europe or East Asia. As Thiel lamented in 2012:
There are ways that the government is working far less well than it used to. Just outside my office is the Golden Gate Bridge. It was built under FDR’s Administration in the 1930s in about three and a half years. They’re currently building an access highway on one of the tunnels that feeds into the bridge, and it will take at least six years to complete...There’s an overall sense that in many different domains the government is working incredibly inefficiently and poorly.
Bringing down high infrastructure costs will involve taking on a lot of entrenched interests -- government contractors, property owners and unions. Conservatives and libertarians can be the ones to take on this job, but only if they realize how important government-provided infrastructure is to economic efficiency and technological progress.
A third good point by Thiel is that regulation may already be slowing progress dramatically in the field of biosciences. This is a drum that Alex Tabarrok and Joseph Gulfo have also been beating. We would like to think, to paraphrase Princess Leia, that the more the government tightens its grip, the more that clever innovators will slip through its fingers -- but in the biomedical field, this may not be happening.
So although I share Andreessen’s overall optimism, I think we would be foolish to ignore Thiel’s warnings. In the areas where we have slowed down -- energy, infrastructure, and biomed -- we need a more efficient government to push things along where necessary, and to get out of the way where necessary. Progress isn't always automatic -- it could use a helping hand.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Noah Smith at firstname.lastname@example.org
To contact the editor on this story:
James Greiff at email@example.com