On March 15, Peter Thiel gave a talk at the Economic Club of New York, explaining his opinion on the way various economic developments will pan out.
I highly recommend watching the full thing (on double speed if you’re in a rush) just to see how Thiel works through meaty problems. For those that are too busy, here’s a summary of the surprising stances Thiel took. Bear in mind that I’m deciding what qualifies as surprising, so you might miss out on profound insights that I consider run-of-the-mill.
Thiel related Bitcoin to gold, an analogy I’ve never heard of before. He said he believes that cryptocurrencies will cascade to a winner-take-all outcome because of their vast similarities to gold and silver. He said it was ok if the product is inherently a bubble-like in character; gold and silver have no inherent value either. Paradoxically, the value of any currency is social in nature (e.g. I find it worthwhile to have gold because many other people believe it’s valuable too). In short, he was “long” on Bitcoin, and neutral to skeptical on every other cryptocurrency.
I don’t know enough to evaluate the prospects of Bitcoin, but I agree that the plethora of ICO’s and small currencies is going nowhere fast. As established above, social value increases exponentially when you double the number of people utilizing a certain currency. Thus the most popular a cryptocurrency gets, the more attractive it becomes to investors, which increases popularity. This virtuous cycle will eliminate most (if not all) coins from usage.
Artificial Intelligence and Automation
He critiques AI for being poorly defined and overblown. He says when we look at the U.S. economy, automation has not been producing massive differences in jobs lost or corporate efficiency. He says that the bulk of the U.S. economy is based in tradable service sector jobs, and that they’re automating much more slowly than people think. Ditto for the industrial sector.
It’s interesting that he dismisses AI so readily; I thought it was a substantial competitive advantage in his company Palantir (although I could be wrong). There could be three motives behind this. One, as a multi-billionaire he’d rather focus on products that will radically change the world we live in (instead of solely focusing on a healthy profit). Two, he doesn’t want to discuss the details of specific ventures he’s in. Three, he actually meant what he said.
Politics and Groupthink
He mentions that there’s a lot of lemming-like behavior in Silicon Valley now, and believes that the place has lost much of its luster. He points to their inability to correctly evaluate the odds of Trump winning as an example. Additionally, he indicates that he doesn’t see Silicon Valley as the innovation hub that it used to be ten years ago. I agree. For larger companies, they still need to put branches where the talent is (especially the 30-50 year old cohort with families that don’t want to move). As far as startup founders, there are compelling reasons to go back home. Lower cost of living, easy virtual communication, and budding innovator cohorts in other cities all make the Bay Area less compelling.
Thiel also discusses trade wars, and establishes that trade is so lopsided with the U.S. and China (or even Germany), that it’s hard for them to tariff any substantial product we export to them. In other words, there’s not a lot of downside to creating some bite back against these net-importers. I have no opinion on this subject. I don’t know enough about international relations and its idiosyncrasies.
Finally, he talks about how democrat news outlets almost have the perverse incentive of getting Trump re-elected, so that they can lampoon him for another four years. He points out that the Republicans tried something similar against Obama in 2012 with poor results. He advises that politicians steel-man their opponent’s arguments, and only disagree once they can argue the other side stronger than them. Straw-manning and vituperative demonizing will actually ensure Trump’s success.
This aligns closely with what I’ve learned about media systems. They’re incentivized by consumers to synthesize sensational stories, not untangle stories in a logical, coherent manner.
Peter is a smart motherf*cker. The way this guy teases through issues, adjusts for prior odds, and dampens his cognitive biases is downright extraordinary. Watching thirty minutes of him talking makes me acutely aware of how little I know about complex macro-issues.
I don’t know if I’d work for him, but I’d love to grab coffee if he’s ever at Berkeley…