Extraordinarily pessimistic, and yet still extraordinarily motivational

Saturday, August 11th, 2018

Peter Thiel speaks to Die Weltwoche, in English — after beginning the conversation in German with an American accent:

At the moment, Silicon Valley still looks all-powerful.

The big question is: Will the future of the computer age be decentralized or centralized? Back in the 60s, you had this Star Trek idea of an IBM computer running a planet for thousands of years, where people were happy but unfree. Today, again we are thinking that it is going to be centralized: Big companies, big governments, surveillance states like China. When we started Paypal in 1999, it was exactly the opposite: This vision of a libertarian, anarchistic internet. History tells me that the pendulum has swung back and forth. So, today I would bet on decentralization and on more privacy. I don’t think we are at the end of history and it’s just going to end in the world surveillance state.

What has become the problem with Silicon Valley?

One of the paradoxes of Silicon Valley is that this internet technology revolution is supposed to get rid of the tyranny of place and geography. And yet, it was all happening in one place. There is, however, always a tipping point with network effects. At the beginning, they are very positive, but at some point they can become negative. In economic terms, they become negative when the costs get too high. If you have to pay 2000 dollars a month for a one-bedroom apartment in San Francisco, maybe that is a sign of the boom. But when it is 4000 dollars a month – with a city government where the police don’t work, the roads don’t work, the schools don’t work – 4000 dollars is just a very high tax, in effect. There is also a cultural component: At one point, the wisdom of crowds tips into the madness of crowds – and you end up with a sort of conformity, lemming-like behavior. It actually becomes a somewhat less creative place.

You label yourself a “contrarian”. How did you become one? How does one become a contrarian?

It is a label that has been given to me, not one that I give normally to myself. I don’t think a contrarian per se is the right thing to be. A pure contrarian just attaches a minus sign to whatever the crowd thinks. I don’t think it should be as simple as that. What I think is important for people is to try to think very hard for oneself. But yes, I do deeply mistrust all these kinds of almost hypnotic mass and crowd phenomena and I think they happen to a disturbing degree.

Why do they happen in a supposedly enlightened society?

The advanced technological civilization of the early 21st century is a complicated world where it is not possible for anybody to think through everything for themselves. You cannot be a polymath in quite the way people were in the 18th century enlightenments. You cannot be like Goethe. So there is some need to listen to experts, to defer to other people. And then, there is always the danger of that going too far and people not thinking critically. This happens in spades in Silicon Valley. There is certainly something about it that made it very prone to the dotcom bubble in the nineties or to the cleantech bubble in the last decade.

Tell us about how your support for Donald Trump for president of the United States was received in the Silicon Valley.

That was quite striking. My support for Donald Trump was, on some level, the least contrarian thing I have ever done. If it is half the country, it cannot be that contrarian. And yet, in the Silicon Valley context it has felt extraordinarily contrarian. It is not that politics is the most important thing. I think there are many things that are much more important than politics: Science is more important, technology is more important, philosophy, religion… We normally think that political correctness is literally about politics. But politics is sort of a natural place to start. If you cannot even have differences of opinion in politics, that’s a sign that things are very unhealthy.

What was unique about the Trump campaign?

Republican candidates have always been way too glibly optimistic about everything. I’ve thought for many years that it was critical for the Republicans to somehow run a more pessimistic candidate just because that was a more honest description of what was going on. It is very hard to know how to do that because if you are too pessimistic, you demotivate people: If everything is just going down the drain, no point even voting for me. Somehow, the genius of Trump was that it was extraordinarily pessimistic, and yet still extraordinarily motivational. The slogan “Make America Great Again”, the most pessimistic slogan of any presidential candidate in a hundred years: The country used to be great, it is no longer great. That is a shocking, shocking statement!

Another issue that is debated very controversially is Trump’s trade policy. People are shocked by his imposition of tariffs.

At the center of this is the question with China. The US exports something like 100 bn a year to China, we import 475 bn. What’s extraordinary, is that if we had a globalizing world, we would actually expect the reverse to hold: you would expect the US to have trade surpluses with China and current account surpluses because we would expect that there is a higher return in China because it is a faster growing country than the US. This is what it looked, let’s say, in 1900, when Great Britain had a trade surplus of 2 percent and a current account surplus of 4 percent of GDP. And the extra capital was invested in Argentinean railroads or Russian bonds.

The fact that the US does not have a surplus, that actually it has a massive deficit, tells you that something is completely wrong with the standard globalization picture that we have. It is sort of like: Chinese peasants are saving money and it is flowing uphill into low-return investments in the US and bonds in Europe with negative interest rates. There is something completely crazy about that dynamic.

What’s your view on Switzerland?

Switzerland is an extraordinarily well functioning country. I don’t like the neighborhood it is in, but it is really remarkable. If you compare Switzerland with Austria or Scandinavia, human capital is equally good but the per capita income in Switzerland is 50 to 100 percent higher. It does tell you that there is something that people are doing that is dramatically better. The question is whether its cities are big enough. If you are a talented young person: Do you move to Geneva or do you move to London? It was good if Switzerland had a somewhat better answer to that sort of question. But as I stated at the beginning, I think the technology will be more decentralized and so I think what has been a limitation for Switzerland will be much less going forward.

Are you jealous that you didn’t invent Bitcoin?

It is hard to be jealous of something that you weren’t remotely capable of doing. I have to acknowledge I would never come up with anything like that. So I can’t even be jealous. I was very interested in all these virtual currencies in the late 90s. We started Paypal thinking about that, but at the end it was a payment system for existing fiat money. Somehow, that experience weirdly primed me to underestimate Bitcoin early on. It was on the radar in 2011 and there were people telling me I should buy it, and we didn’t really get involved until 2014. When you have experiences and you learn things, it is often very dangerous and my experience in the late 90s was that cryptocurrencies didn’t work. And it was largely correct, but you always have to be open to think about it.

(Those are just some of the questions and answers.)


  1. Kirk says:

    One thing I think Theil had absolutely right is the decentralization and privacy issue, with regards to damn near everything.

    Bureaucracy and the static hierarchies that they create have gotten us to where we are. The problem is that their inherent inflexibility and slow adaption rates are rendering them ineffective and irrelevant in the fast-changing world. What’s going to supplant them is unclear, but what is increasingly clear is that the way we do things does not work effectively in modern conditions. I hate use of the word “paradigm”, but that’s what it is–Our reflexive world view and how to deal with problems within it? It’s obsolete, and isn’t working effectively. You can see this happening in regards to the swifter burn rate that a lot of modern companies and organizations demonstrate, going from agile-and-effective to sclerotic-and-ineffective in years, where it classically took generations for that to happen. Hell, the very structures of these things are rapidly exhibiting the same issues. Do corporations, invented during the Renaissance, still make sense…?

    Decentralization and “power-down” is the only path that makes sense–You stick people into organizations based on hierarchy and bureaucracy, and they almost instantly take on the inherent characteristics of those meta-organisms. Get a person to look at a problem, as an individual? They’ll see it, agree that it’s a problem, and acknowledge that something needs to be done. But, put them in an office cubicle, and then ask them to, y’know… Actually do something…? Nope; no can do, the “…forces are arrayed against us, we can’t even acknowledge the problem exists…”.

    I’ve railed on here, before, about the actual difficulties that I and others encountered in the Army, while trying to get the “system” to acknowledge the likelihood of the IED war, and equipping to deal with it properly. What’s an interesting side note here, and entirely relevant to this discussion? During the course of that, there were numerous Reserve officers who would privately tell me that I was right, but that they couldn’t actually do anything about the issue in their day jobs as civilian Department of the Army employees at the Engineer School, because… Well, just “Because…”. As individuals, they saw the same things I did, and recognized the same implications. As creatures of the corporate whole, however…? They could do nothing, and did nothing until the freight train of reality overwhelmed their flawed corporate view of the world.

    Organizations have a separate life, an entirely discrete and separate existence from the lives of the people participating in them. This is something a lot of us refuse to recognize, thinking that “good people” can fix things. Frankly, no. What happens is that “good people” get assigned or hired with these dysfunctional organizations, and then slowly get dragged into the mindset and culture that makes that organization what it is, resulting in them acting out real-world Borg-like assimilation. Seen it happen too many times to enumerate. And, it’s why I’m a proponent of a “corporate death penalty” for organizations like the FBI and others that are guilty of corporate collective misbehavior. The problem is that the guys like Strzok didn’t come out of a vacuum–They were selected, hired, trained, promoted, and then put in charge of things by the organization. The fact that the organization didn’t catch their issues, and deal with them appropriately, at some point along the line? That points to the fact that those individuals like Strzok were not only on board with the organization’s real values and mores, but that they were approved by the rest of the organization–You cannot possibly convince me that Strzok just suddenly woke up one morning, late in the Obama Administration, and turned into the scumbag that he obviously was. Or, that nobody on his left and right flank as a peer or supervisor didn’t know who and what he was–That simply does not happen. A racist cop does not spend twenty years in the locker room or briefing rooms, and not betray his attitudes and behaviors to his or her peers–The idea that “Nobody knew…” is absolutely the rankest BS I’ve ever heard, in nearly all these cases. You cannot mask yourself that well, and these guys like Strzok and the various other creatures of the night? Their peers knew; they approved, if only by failing to actually do something about what they saw these jackasses doing.

    We need to find another way of operating and doing business. I don’t know what it is, but I can guarantee you that what we are doing right now ain’t gonna last, or keep working in the face of rising pressures and capabilities to decentralize and debureaucratize.

  2. Ross says:

    Love the FBI comments.

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