The Unpersuasive Gloom of Peter Thiel

Economic growth does not travel in a straight line. There’s plenty of innovation to deliver a more prosperous future.

Ticker-tape parade for General Dwight D. Eisenhower, June 1945.

I am writing to cheer up Peter Thiel—or, failing that, the people who treat him like an oracle.

Thiel, a well-known Silicon Valley entrepreneur and venture capitalist, gave a talk earlier this month at the Oxford Union summarizing his present views. We live in a stagnant age, Thiel said, when the citizens of the U.S can no longer expect to live better than their parents. Thiel blamed this on a “zombie center-left establishment” that’s fostered a general cultural and scientific malaise in which the future is feared and humanity is doomed.

Thiel was speaking to a real problem. The Stanford economist Raj Chetty has documented that 90 percent of children who entered the labor market in the early 1960s out-earned their parents, whereas only about half the children entering the labor market today do the same. “We wanted flying cars,” Thiel said a decade ago, “instead we got 140 characters.” That’s a pithy way to state an important puzzle. We live in an age of scientific marvels, if headlines are to be believed, but few manifest themselves in our daily lives beyond a flurry of digital applications that amuse us and allow us to shop more easily (and in which Thiel has been a successful investor). This stagnation is visible in slow growth in economic productivity. Where are our flying cars?

Thiel set the stage by discussing his time at Stanford, where incoming freshmen were assigned to read a book by Rigoberta Menchú from Guatemala. This now largely forgotten Nobel Peace Prize winner (surely unknown to the Oxford audience) fought in the 1980s and 1990s to expand the rights of indigenous peoples. The culture war over diversity that began, in Thiel’s view, with Menchú subsequently spread, he argued, to the natural and physical sciences. There, research ceased to be conducted with high ambition and the expectation to make great change. Thiel cited as a prominent example the rise of string theory.

The only area of science that flourished in those days, Thiel suggested, was computer science, then still an upstart. That became the path for anyone who wanted to change the world. Nuclear engineering, material science, and other more conventional fields held out limited prospects. The result was the rise of technology-based firms focused on digital commerce, social media, and online entertainment.

We’ve heard this tone before. It’s the sound of a very rich man, made rich in one particular domain, pounding the dinner table as he bemoans broad currents in a society that he does not, mystifyingly, control. It is the rhetoric of the world-is-going-to-hell pessimism.

Let’s talk about what Thiel’s complaint leaves out. It leaves out the building of electric cars and more powerful and sophisticated rockets, satellites, and batteries. It leaves out the mRNA vaccines that came to fruition as a result of the Covid pandemic, which are part of wider progress in the biosciences, including personalized gene therapy. All these advances somehow managed to sneak past Thiel’s zombie establishment.

Erik Brynjolfsson, an economist who thinks deeply and broadly about the impact of technology, thinks the sort of stagnation Thiel describes is a measurement problem. The benefits of the digital economy evade capture in the productivity statistics, he argues, and therefore are undercounted.

An alternative explanation is that we’ve exhausted the innovations available from the scientific breakthroughs of the first and second industrial revolutions. The economist Robert Gordon argues that the inventions of the future are unlikely to be as important as the inventions of the period from 1870–1970. Consequently, future generations won’t see the same doubling in standards of living that previous generations did.

Joel Mokyr, an equally distinguished historian of technology, takes a more optimistic view. He sees science as an endless frontier and the world still filled with exciting technologies. But he would add an important caveat. In Mokyr's  view, institutions set the incentive and penalty structure for developing new technologies. We need the right institutions if we are to foster invention and technological creativity. Successful applied research requires the integration of multiple technological breakthroughs organized around use-inspired research goals. The great corporate industrial laboratories of the mid-twentieth century provided such a setting. The decline of the industrial lab and its replacement with research universities often organized around narrowly defined disciplines may have slowed the pace of innovation.

The federal government has experimented over many years with ways to recreate what was effective in the industrial-labs model through the establishment of manufacturing institutes, industry-university collaborations, and entrepreneurship programs. None of these have proven to be as effective. Thiel has little faith that existing institutions such as university or government labs can do the job, either.

I believe there’s a simpler explanation for whatever stagnation we’ve experienced since the early 1970s: Mainly, it reflects the reality that the information age’s new general-purpose technologies took decades to diffuse. It was the same, in earlier centuries, with electricity and steam power. Our present challenge is to integrate information and communication technologies and Artificial Intelligence into factories, vehicles, hospital systems, and supply chains.

Back in the 1980s and 1990s, hard-working researchers continued to enter the physical science disciplines that struck Thiel as sleepy. Their work is now bearing fruit in the deep technologies we’re beginning to see all around us, including robotics, autonomous vehicles, automated production lines, batteries, cheap renewable energy, and even nuclear energy (I keep hearing that there are 30 nuclear fusion start-ups). The stagnation we observed was the inevitable pause before new technologies were synthesized and integrated.

We know this to be true in the bio-sciences—after decades of research mRNA technology has now generated an effective therapy for malaria and other stubborn diseases, and there is talk of a general-purpose flu and COVID vaccine. In the physical sciences, the extraordinary progress that has been made is epitomized by a Dutch company called ASML that makes Extreme UltraViolet (EUV) lithography machines. These machines allow a semiconductor manufacturer to place 10 billion transistors on the chips inside Apple’s latest phones. The technology is a marvel, and includes, for example, the following process:

To generate extreme ultraviolet (EUV) light, a CO2 laser fires two separate laser pulses at a fast-moving drop of tin. This vaporizes the tin and creates EUV light. It does this up to 50,000 times per second. Several multilayer mirrors guide the EUV light to the wafer, shrinking the reticle pattern by a factor of four. The wafer stage positions the wafer under the light to within a quarter of a nanometer for each exposure, checking and adjusting 20,000 times per second.

This process will soon be able to deposit patterns onto a substrate below 3 nanometers in thickness (for reference, a strand of human DNA is 2.5 nanometers in diameter).

Another marvel is that ASML’s supply chain is comprised of more than 600 businesses spread across three continents. The components include super-smooth mirrors from Germany and lasers from California (using U.S. National Laboratory technology). This supply chain is only possible because of deep, secure digital communications. The digital age has made a new material age possible, where teams collaborate .

Thiel complained in his Oxford remarks that we don’t have ticker-tape parades anymore for uniquely important contributors to society. This longing for individual heroes perhaps reflects his philosophical disposition (all that Ayn Rand in his early years). But the incredible futures that lie before us are the collective work of many people, working through diverse institutions over many years. These futures will be accelerated by significant government investment, for example the CHIPS and Science Act and the Bipartisan Infrastructure Investment and Jobs Act that were passed last year. These actions mobilized tens of billions of dollars in support of research, development, and deployment of new technologies. The future will also be accelerated by business and political competition. The U.S. is blocking the sale of ASML machines to China, who as a consequence will have to develop their own, while Europe is contemplating its own public investments in green technologies in response to U.S. initiatives.

To be sure, the plagues of wokeness, bureaucratic sludge, technophobia, and luddism aren’t entirely figments of Thiel’s imagination. But human enterprise and curiosity, distributed widely around the world, harnessed by private and public entities of every kind, remain as powerful as ever.