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Peter Robinson: Welcome to Uncommon Knowledge, I’m Peter Robinson. My guest today, the investor and philanthropist and possessor of an unusually interesting mind: Peter Thiel. You’ll notice that Peter Thiel and I are having our conversation in front of an audience, this is a meeting of the Mont Pelerin Society, the organization founded in 1987, that brings together Nobel laureates and government officials and investors such as Peter himself, to discuss economics and the state of the world. And when it comes to the state of the world, as you will see, Peter Thiel has opinions. We discussed China, and the United States under Donald Trump, and his own world, Silicon Valley, which he talks about as, this is his word, “deranged.” Uncommon Knowledge with Peter Thiel. 

Peter Robinson: Born in Germany, Peter Thiel moved to the United States with his family when he was a child. He graduated from Stanford and then from Stanford Law School, and after deciding not to practice law he co-founded PayPal and Palantir, made the first outside investment in Facebook, funded companies such as SpaceX and LinkedIn, and started the Thiel Fellowship which encourages young people to drop out of college to start their own businesses. Mr. Thiel remains a very active tech investor, now based in Los Angeles. Ladies and gentlemen, Peter Thiel. China. The late economist and foreign policy analyst Hoover fellow Henry Rowen writing in 1996, quote, "When will China become a democracy? "The answer is around the year 2015. "This prediction is based on China's steady "and impressive economic growth, "which in turn fits the pattern of the way in which freedom "has grown in Asia and elsewhere in the World." Worked in South Korea, worked in Taiwan. Economic growth leads to democracy. In China, what went wrong?

Peter Thiel:  Well, Peter, this is always a set up for me to start by both flattering you and criticizing you a little bit, since there was that very famous Reagan speech you gave, that you wrote for Reagan, where it was, you know, tear down that wall, Mr. Gorbachev, and it was very effective. But it was perhaps, it was not only in the West that we learned lessons from it, the Chinese communists also paid very careful attention to it, and they learned that you had to have perestroika without glasnost. You had to get rid of the Marxism without getting rid of the Leninism, and they learned somehow the very opposite lessons of that fateful year 1989. You know, Tiananmen worked in China and that is what is continued to work. So I think that's sort of a simple first cut. There is nothing about history that is automatic or predetermined. It's always a question of agency, of people, and unfortunately, China took the lesson very much to heart and has stayed on this trajectory. You know, its per capita GDP is close to $10,000, which was sort of the point where democracy was supposed to start taking over, and it seems to have, if anything, been going the opposite direction. Or there's another sort of historical riff I have on this that I was thinking about the other day, where there was this famous interview with Zhou Enlai in the early 1970s where they asked him about the French Revolution and what did he think of the French Revolution, and he said, you know, it's too early to tell, which was seen as sort of a funny diplomatic answer at the time. But I've come to think that there's sort of a very sinister way of thinking about that answer which is that in some sense, the French Revolution, it ended. It ended in 1794 when the insanity burned itself out and you had Thermidor. And then of course when you had the Russian Revolution, one of the promises Lenin had was that the Russian Revolution, the communist revolution, would never have a Thermidor. But it took a little bit longer than five years as it did in France, but I'd argue you had something like Thermidor, 1956 when Khrushchev gave the anti-Stalin speech, certainly by the time of Gorbachev. China, what Zhou Enlai was saying in that speech was that China is the one country that is still true to the spirit of the French Revolution. It is the one country in the world in which there will never be a Thermidor. And then of course the way this manifests is that it will still, you know, continue in the sort of revolutionary communism that will have one genocidal thing after another, and that continues under Xi.

Peter Robinson: Still China, three quotations, two of them from heroes of the Mont Pelerin Society. Friedrich Hayek in 1982, "The mere idea that a planning authority could ever "possess the information necessary to run the economy "is a somewhat comic fiction. "What prices ought to be can never be determined "without competitive markets," close quote. If you want economic growth, you must permit free markets. Quotation two, Milton Friedman, 1991, "When the regime in China introduced "a greater measure of economic freedom "that generated pressure for more political freedom "and that led to Tiananmen Square." If you permit free markets sooner or later your people will demand political freedom and they'll be hard to handle. Quotation number three, Peter Thiel, speaking last November, "Artificial intelligence is the big eye of Sauron, "watching you at all times, in all places." Close quote. Will artificial intelligence overturn Hayek and Friedman? Will it enable China to achieve sustained economic growth without economic or political freedom?

Peter Thiel: Well, let's not be too dogmatic in answering this. So, you know, I certainly think that it's possible that the totalitarian, the form that totalitarianism has in China will exhaust itself, that it will hit some kind of crisis at some point. China does have some very serious demographic challenges. Maybe it's sort of like, you could say it's a revealed preference that people don't want to have children because it would be very cruel to allow a child to be born into such a horrible society. So I think there are ways that we can speculate on how it might ultimately exhaust itself. But I think we should not be dogmatic on the other side and assume that it automatically will, and that perhaps it can sort of develop, perhaps it can sort of catch up, you could sort of get things to work. And there are probably certain parts of the economy where you don't need to be that free or that creative or that innovative, there is just sort of a copying things that work. Just, you know, copying the West. And maybe you can't get quite to our standard of living but maybe you can get to a half of our standard of living or something like that.

Peter Robinson: But you're not singling out AI as a game changer here. You tend to pooh-pooh the notion that AI will change things.

Peter Thiel: Well, I think it's unclear, I think there's always a lot of propaganda around all these buzzwords and so I think it's somewhat exaggerated, but yes of course, there's sort a continuation of the computer revolution where you'll have, you know, more powerful Leninist controls and you can have certain, you know, maybe the farmers can sell the cabbages in the market and you can still have face recognition software that tracks people at all times and all places, and so there's sort of a hybrid thing that might work for longer than we'd like.

Peter Robinson: Okay, so you touched on this a moment ago but let's bear in on it. Two competing narratives, one is that President Xi is centralizing power more tightly, and with the help of technology, more successfully, than any other central authority has ever been able to do in all of human history. He is the most successful dictator the world has seen. The other narrative is that the Chinese population is growing old, its economy is slowing, its one-child policy has produced 40 million more men than women, and that the freedom movements in Hong Kong and Taiwan have placed Beijing seriously on the defensive. So--

Peter Thiel: Well, let's--

Peter Robinson: You're gonna choose one or the other or?

Peter Thiel: Well, let me--

Peter Robinson: How close are we to a Brezhnev moment?

Peter Thiel: I'm gonna give you my speculative conspiracy theory on how the Chinese communists are trying to psychologically undermine the West, and I believe they are inducing two perspectives on China in the West. One perspective is that China is very far behind us, that it's still a very poor backward country. Even in 2049, even on the 100-year anniversary, it will still only be a middle-income country, and it's so far behind that we don't need to worry about it and we can be in denial about China. And the other one is that it's so far ahead of us that there is no way that we can ever catch up. It is, you know, it works better, there's certain things where it can, you know, build skyscrapers super fast, there's certain things where it works so much better that we have to just accept that we are really far behind. And, you know, denial is extreme optimism, acceptance is extreme pessimism, but extreme optimism and extreme pessimism converge to doing nothing. There was, for example, I think there was this question about Taiwan and how protected Taiwan was and I believe it was in a single month in the year 2005 where the US strategic assessment shifted from Taiwan would be safe for decades because of our aircraft carriers and whatnot, to, no, Taiwan was already lost because China had all these missiles that they could knock all our defenses out overnight. And so it's somehow, so the fact that it gets framed in these two extreme terms, I'm wondering if you're sort of a mouthpiece of the Chinese communist party and it's always extreme acceptance and extreme denial, and the reality is actually, no, it's close, and there are strengths the US has and there's strengths they have and it's a fight, and it's gonna be a fight for a very long time. And even if China in some ways gains ground in that fight it will be strategically close for a long time because as China gains ground, other countries will get more scared of China and they will work more closely with the US. Japan was toying with the idea of shifting its alliance from the US to China, this was always the DPJ line in Japan in the late '90s, early 2000s. Under Abe, that's definitively over. Japan is back firmly on the side of the US. Vietnam, you know, much more on the US side than the China side. This is very different from Vietnam of 40 years ago. And so even if China sort of gains ground in certain things, I think the strategic picture will stay very even for a really long time. So somehow it's in between is probably the truth and it will be the truth for a long time.

Peter Robinson: So the notion is the Chinese want us to believe two statements, one is there's nothing to worry about, the other is resistance is futile. And both are frauds.

Peter Thiel: It's China is super weak, and China is super strong. And I've been in meetings in China where in some sense you got both messages within 20 minutes of one another, and it's like logically inconsistent but psychologically it doubles up.

Peter Robinson: All right. The United States is the center of the resistance. Let's take a moment or two considering what we need to resist right here. Zombie socialism, socialism rising from the dead. Again, a couple of quotations, the first from "A History of the Mont Pelerin Society." "In the 1980s and '90s members of the Society "had the exhilarating feeling "that things were at last going their way. "Several countries, "starting with Margaret Thatcher's government in Britain, "were privatizing their state industries. "Governments from China to India to America to France "were liberalizing, retrenching, or cutting taxes. "And then in 1989, with astonishing speed, "the Iron Curtain fell." Here's quotation number two. This is Bernie Sanders, he's speaking in 1989, the year the Berlin Wall came down, quote, "In Vermont, everybody knows I'm a socialist "and that many people in our movement are socialists. "And I think there's been too much of a reluctance "on the part of progressives and radicals "to use the word socialism," close quote. As we sit here this evening, the self-avowed socialist Bernie Sanders is tipped by many to win the Democratic caucuses in Iowa on February 3rd. From the triumph of democratic capitalism and all that the Mont Pelerin Society stands for to the re-emergence of socialism. How did this happen?

Peter Thiel: Well, these are like sweeping questions, there are all these different answers one could give but--

Peter Robinson: Choose three.

Peter Thiel: Let's just challenge a little bit the premise of that question. I don't think he's really a socialist in the sense, I mean there's no five-year plan, he doesn't actually claim that's he's gonna make the post office or the DMV work better. If he was promising things like this it would just be completely ridiculous. And, you know, the way in which socialism works is it's just this thing that's really different, and it's different, and it's meant in opposition to the zombie institutions in our society. And there is a problem that we have, you know, we don't have a very well-functioning capitalist society. There's a generational problem where it is difficult for young people to acquire capital, and that's the young people that are supporting Bernie Sanders. And the sort of the two simple political things that one should really think about are the runaway student debt in colleges, you know, it was $300 billion in student debt in 2000, it's up to $1.7 trillion today, and if you start your life in debt that can never be discharged in bankruptcy it will be much harder to accumulate capital and you might be less friendly to capitalism. So that is a big problem. And I don't think we should socialize the student debt but we should deal with it in a non-socialist way, we should internalize the costs onto the universities. We should redo the bankruptcy laws, yes, you can discharge the student debt, and when you discharge it, it's the college that gave you a bad education that gets stuck with the bill. This is the non-socialist alternative. And then I think the other basic problem of a lack of capital or inequality is that it's very hard for people to get onto the housing ladder. The main way that the people in the middle class in this country accumulate capital is through owning real estate, through owning your house, and if through a series of urban zoning laws and bad planning and impossibility of building things, it has become impossible for people to get onto that, and if you could find ways for people to own more houses you would have much less of the sort of millennial crazed socialism. So I think, you know, we should try to understand where it's coming from, we need to try to solve it, but at the end of the day I think it will be pretty weak because it's mainly a critique. It's a critique of bad institutions, and if Sanders becomes serious I think it'll be as scary as Corbyn was in the UK, and obviously we'll be talking about the post office and the DMV and it'll just be ridiculous.

Peter Robinson: Bernie Sanders can not get elected, any more than--

Peter Thiel: He can't get elected.

Peter Robinson: He cannot, all right. The universities, you touched on this a moment ago. Again, a couple of quotations, Michelle Obama, "The one thing I've been telling my daughters "is that I don't want them to choose a name university. "There are thousands of amazing universities "in this country." Quotation number two, Peter Thiel, "Of course we knew she was lying." 

Peter Thiel: Yeah, this was an interview they gave just before their eldest daughter Malia was thinking about what university to go to. It was sort of in the context of always this sort of question of fact checking and politicians lying, and I think that the facts we need to check the most and the lies we need to call people out on the most are the really big lies that everybody tells. And so I added that it was actually, I mean, it would've been disturbing if they weren't lying. I mean, if they actually believed that nonsense that would've been really disturbing.

Peter Robinson: And where did Malia end up going?

Peter Thiel: She went to Harvard.

Peter Thiel: But look, it's always, is a theme that, I can go on all these critiques of the universities, but basically, the basic problem is if you think of it as an economic good, you know, is it a consumption good, is it an investment good, so is it an investment where you're investing for your future? Is it a four year party? Okay, that hybrid is pretty weird, but I think it's actually a hybrid of an insurance policy that people buy to avoid falling through the big cracks in our society and a tournament, a zero-sum tournament, where the elite universities like Harvard and Stanford are basically sort of a Studio 54 nightclub with a long line and a big velvet rope. And if you were the president of Stanford or of Harvard and if you had some kind of crazed martyr complex where you wanted a mob of students, faculty and alumni to come after you, you should give a speech saying this university is offering a great education and Harvard, you know, it used to just educate the 200 million people who live in the US, today it's educating the eight billion people in the world, and so we should increase the enrollment, not by a factor of 40 but let's say two or three over the next 20 years, and you would just get lynched because you're running a Studio 54 nightclub and you shouldn't forget it.

Peter Robinson: Political correctness at the universities. This is you, I'm quoting you once again, "If you have a majority of the vote, that's good. "If you get 70%, that's even better. "And if you get 99.99% of the vote, you're in North Korea." In 2016, how many professors at the top five law schools endorsed Donald Trump?

Peter Thiel: Zero. And the law school example's interesting because you would think it's one where if you took the, a lot of academic fields are more internal to academia, but law is one that sort of cashes out in a governmental political context, and taking a contrarian position in theory is quite valuable. You know, if you're a tenured law professor at Harvard, and you're the only law professor at a top law school to endorse Trump, I don't know, I think there would be like a 50% chance you would've gotten nominated to the Supreme Court or something like that. So it seems like it's the sort of thing where the contrarian thing would be quite valuable, and then if nobody takes that bet, I mean, wow, there must be some unbelievable enforcement mechanisms, and it's sort of like a gentle version of North Korea. But it's like, you know, even though you have tenure, it's like, wow, they can relegate you to some broom closet and play loud music or something. They'll figure out some way to punish you.

Peter Robinson: Silicon Valley. We've discussed this a number of times. When you were starting PayPal, you have said many times, the whole Valley felt as if it was truly dedicated to free markets and entrepreneurship and if you talked about politics you were wasting your time. Today it feels woke, more than woke, and I'm going to quote you again, "In recent years, Silicon Valley has become "completely deranged," close quote. What is the nature of that derangement and how did that happen?

Peter Thiel: Well, this one's actually hard for me to explain because it's quite a, it's a remarkable shift, certainly, from 20 years ago. I would say that there is a question how much innovation is actually happening that I always come back to, where I'm somewhat on the sort of side that we've had generally limited progress in technology and science the last 50 years. There was a very big exception in computer software, Internet, mobile Internet, the last quarter century. This was sort of this narrow cone of progress in the world of bits that really drove things. And I sort of wonder if there's actually less innovation possible even in those areas at this point. And so if you look back over the last five years, let's say, there have been fewer new consumer Internet companies that have come out, and sort of, maybe the easy ideas have been picked, maybe we need to move on to other areas but the other areas are regulated and difficult, so biotech or, you know, all kinds of futuristic science areas are deceptively hard, and we're in a zone where the returns accrue to the larger companies. So if you say, if you're sort of in an early innovative boom phase, like the dot-com boom in the '90s, it's all startups, it's in small companies that you start new things. You know, when I started PayPal in 1998, one of the questions I was always asked was why can't a big bank just do this? And I never really had a good answer to it. I now think the answer is roughly that most big corporate institutions are very political, they're very slow, they're not actually good at innovating, and that's why you have startups, that's why you have small companies, that's why you're able to merge and the big banks are too political to do anything new. And so if you can do something new and you can do it reasonably quickly there's space to do this. And I think the ratio of these bigger to smaller ones has shifted a lot and it is probably just a less innovative place. And then this cashes out in all sorts of ways politically. There's of course, you know, these things are always overdetermined. You can say it's linked to California. California was a 50/50 Republican Democrat state 40 years ago, now it's a D plus 30, it's the second most Democratic state in this country and so there's sort of a way in which the environment pushes it. There's probably a degree to which the workforce in Silicon Valley is the most educated in the country, has the most advanced degrees, college degrees and advanced degrees, and from the elite universities, and maybe the more education you have the more brainwashed you are, and so there's sort of a version of that. But I think there are parts of it that seem completely unhinged. You know, Elizabeth Warren is taking out these banners saying that she would, in Silicon Valley these billboards saying that she would break up Facebook, Google, Amazon for antitrust. Maybe it's shifted a little bit but the first two, three quarters of 2019 among Google employees, and I think Google's the craziest of the big tech companies, Elizabeth Warren got a plurality of the donations. She got more donations than anybody else. And so if she were, by some miracle, to get elected I think she would be able to argue that even the people at the big tech companies think they should be destroyed. And so there are parts of it that seem just completely deranged in ways I can't fully explain.

Peter Robinson: Visions of the future. During a trip to Europe last year, you realized that, at least in Western Europe, there are really only three visions of the future on offer. Vision one, accommodation more or less, in one way or another, with Sharia. Explain.

Peter Thiel: Well, I would say that, I think in politics or culture for the future to have power over the present, let me start with the general point, it has to be different from the present. The future has power because it's a time that will look different from the present and so it can't just be an endless Groundhog Day. If it's just always the same, it's just always repetition, then the future does not have any appeal and that's not part of a political agenda. And so if we look at Europe and we say, well, how will Europe be different from the way it is today in the future? I think there's sort of three pictures of a very different future, and sort of behind door number one is Islamic Sharia law, and if you're a woman, you'll be wearing a burka. So that's a very different picture of the future, it's very concrete. Behind door number two is the Chinese communist AI, and it's the big eye of Sauron that will be watching you at all times and all places. That's door number two for the future. And door number three is the green movement, and you'll be puttering around in an E scooter and you'll be separating out your garbage in a recycling can. And then I think the challenge is that there are no other doors. Those are the three options. And this is a, even though I'm not a crazy environmentalist, this would be my sort of argument for why the green stuff has so much traction in Europe. If those are the only three options, you know, I'll go with Greta.

Peter Robinson: But there are two places maybe, I'm putting this to you to see what you think of it, where there is a fourth vision of the future that involves economic growth, a reassertion of economic growth, a reassertion of national sovereignty, and a reassertion of cultural self-confidence, and those two places would be the United Kingdom of Boris Johnson and the United States of Donald Trump. You gonna go for that?

Peter Thiel: I would go with much more, you know, well, UK is sort of, US much more than the UK but--

Peter Robinson: I'll drop the UK completely. I'm trying to work a deal out--

Peter Thiel: They're trying.

Peter Robinson: To see what you go for.

Peter Thiel: I would go with Israel over the UK if you forced me to list two. But sure, let's say US, UK, Israel, I'll go with those three.

Peter Robinson: Okay, okay, that's, that's, usually I try to ask questions to which I already know the answer.

Peter Thiel: UK's sort of half way between the US and Europe, so it's better than Europe and it's worse than the US.

Peter Robinson: All right, Peter, quoting you again last November, "I would encourage us," and you were talking to a conservative crowd, like this crowd, "I would encourage us to rethink "the doctrine of American exceptionalism." What did you mean by that?

Peter Thiel: Well, it's again, it's this question of how we're stacking up as a country, and I think the analogy that I have made to exceptionalism is that it's like the radically monotheistic God of Islam and Judaism, where it's so one of a kind and so radically different that it can't be compared or measured in any way. And so when we say that we are exceptional we are often saying that we're so different that we can't even make sense of how we're doing, and then one gets the suspicion that there's a way that exceptionalism can degenerate into a cover for all sorts of things that are exceptionally out of kilter. And so you have a society in which people are exceptionally addicted to opioids, or we have a society in which people are exceptionally overweight, or we have a society in which people are exceptionally un-self-aware. And the alternative that I would pose is something more like greatness, where it's a comparative function and we would ask questions, you know, how are we stacking up? How are we stacking up compared to our past? How are we stacking up compared to other countries? And that's where, they're all sorts of questions that would come to the fore. I think, coming back to the stagnation one, one of the things that I would want to quantify more is in the world of science, we can quantify things to an incredible degree of Avogadro's number, the fine-structure constant in physics, all these things are precise to many significant figures. But the question about the rate of progress of science, of innovation, is incredibly unquantified, and it's just sort of hand-waving, and if you have sort of this Panglossian hand-waving where everything's exceptional and we're accelerating at the fastest pace possible, and it's not measurable, my sort of suspicion is that these are sort of the ever-narrower communities of sub-experts, the string theorists, the cancer researchers, telling us how great the string theorists and the cancer researchers respectively are. It's a place where there's no outside check, no reality check, no ability to really keep score, and you are certainly not exceptional and you're not even great.

Peter Robinson: Once again from "The History of the Mont Pelerin Society," quote, "The original members shared "a common sense of crisis, "a conviction that freedom was being threatened "and that something should be done about it. "They concluded that the threat arose "from erroneous theories so they committed themselves "not to political action "but to winning the intellectual battle of ideas." Close quote. Here are some members of the Mont Pelerin Society over the years, Milton Friedman, Friedrich Hayek, George Stigler, Gary Becker, James Buchanan, and others have won Nobel Prizes. Has the intellectual battle been won such that we should all shift our attention to political action?

Peter Thiel: I don't think the intellectual battle is ever fully over because I don't think history's over, and I would say if anything, if I had to sort of characterize the intellectual landscape, we've been in a world for a very long time in which somehow the range of intellectual debate has gotten more and more narrow, and sort of the Overton window's shifted to the left but generally in an ever narrower way. And you could sort of say that we've been in a bear market for ideas I think for something like the last 50 years. And so a lot of the people you cited I think of as pre the late 1960s and that in last 50 years if you had crazy ideas, if you had ideas that were outside the box, those were always bad and you got clobbered and you couldn't get tenure, you couldn't get funding because everything was peer reviewed up the wazoo. And I think we're now at a point where we've been in such a long bear market for ideas and the Overton window is so uncomfortably narrow that I would be long ideas more than at any other point in the last 50 years. I think we're not gonna find solutions inside the intellectual straitjacket in which our universities and our society put us and I think there will be positive returns to ideas greater than there have been in the last 50 years.

Peter Robinson: Last couple of questions, this one begins, again, by quoting Milton Friedman, "I believe a relatively free economy "is a necessary condition for a democratic society. "But I also believe there is evidence "that a democratic society, once established, "destroys a free economy," close quote. Do we really have any reason at all for optimism or is the whole magnificent project doomed?

Peter Thiel: I think always extreme optimism, extreme pessimism, are both equally wrong. As a libertarian, we should always, libertarians, we should always come back to the question of individual agency and it's not these large historic forces. And there are libertarian, or pseudo-libertarian, narratives in which there were these large historic forces and we'd sort of definitively won these battles but that's not even true to the spirit of free markets or belief in individuals. There's always room for history, there's always room for new ideas, and these things are never definitively decided one way or the other.

Peter Robinson: All right, last question, and this touches on the notion of greatness that you were discussing a moment ago. George Kennan, "The issue of Soviet-American relations is in essence a test "of the overall worth of the United States. "To avoid destruction the United States need only "measure up to its own best traditions "and prove itself worthy of preservation as a great nation." Kennan writes that in 1951. If we replace the reference to the Soviet Union with a reference to China would you subscribe to that statement today?

Peter Thiel: Yes. I don't know, I'm always uncomfortable with saying it's a simple template though. So if we just go with the simple template, it's too automatic, and then if it's too automatic we're back in your Berlin tear down this wall speech, and then we've replaced the reference and we're, you know, we know China's the Soviet Union and because we say it's the Soviet Union we don't need to do anything else because we knew that just all happened on its own. And in practice the Cold War was won in very specific ways. There was sort of a whole series of concrete situations that you had to deal with, and the rivalry with China, it's somewhat different. It's happening in an Information Age, not an Industrial Age. There's sort of a global competition question. There's sort of a way in which the two economies are very deeply connected. We weren't deeply connected to the Soviet Union. So there are sort of a lot of things about it that are very different and I think, yeah, we have to, it's not like 2020 is like 1951, or like, you know, 1989. 2020 is like 2020 which is much less helpful but much more accurate.

Peter Robinson: Peter Thiel, thank you.

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