innovation

Inventors Seldom Capture the Value of their Invention

anscript

00:02
hi everybody I’m Josh constant here at
00:05
TechCrunch Disrupt SF I’m here with
00:07
Peter Thiel of founders fund and Metro
00:09
capital now you’ve talked a lot about
00:11
how you need to choose companies that
00:13
might seem crazy at first to the average
00:15
person otherwise it would be an idea
00:16
that somebody already taken how do you
00:18
tell the difference between crazy and
00:20
crazy like a fox you’re something that
00:21
will actually pan out well you try to
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you try to just always evaluate the
00:27
substance afresh so does the technology
00:30
work you can ask questions about what
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what’s the prehistory of the founders
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have they been working together for a
00:36
while are they are they going to give up
00:39
at the first sign of trouble so I think
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you you want to always focus on the
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substance there are no shortcuts so you
00:46
try to avoid you know coming in with
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biases about what can and can’t work
00:49
ahead of time yet there’s always a
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temptation to come with all sorts of
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sort of one-sentence rules and we’re as
00:56
guilty of that as anybody but but I
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think what’s what’s gone best is you
01:00
find something interesting about it and
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then you try not to get to a yes or no
01:04
decision right away you try to really
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understand the substance keep an open
01:08
mind and understand that so substance
01:11
over-over process every time so it’s
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surely a hard question to answer because
01:16
it’s very generic and everyone every
01:18
startup is different but when you hear
01:19
an idea that you’re wondering if it can
01:21
really work what is it your go-to
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follow-up question to ask an
01:25
entrepreneur pitching you about and what
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is their their philosophy or their
01:29
long-term vision and how likely they are
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to succeed at it well well there’s sort
01:34
of you always want to get the team the
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technology and the business strategy so
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you have to get all three of those to
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work and so if people are if you want to
01:42
talk about the technology we’ll talk
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about the people in the business
01:45
strategy so you go to you go to the the
01:47
other two topics if they don’t want to
01:48
talk about them that much so I wanted to
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ask you a little bit about your
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philosophy and the philosophy of the new
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rich that’s come out of the technology
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scene you know you’re known for having
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very strong perspectives I personally
01:59
went to the seasteading festival of
02:01
ephemeral really fascinated by that way
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of looking at things where we can solve
02:05
the problems ourselves we don’t
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necessarily have to wait for somebody
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else what do you think do you think that
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there’s a different value system amongst
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people who are becoming wealthy out of
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the technology scene opposed to you know
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industries of old it’s always hard to
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generalize but it I I do think there’s
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play something different whether you
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made your money in computers or in say
02:25
resources in the Congo or something like
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that so I do think I do think that
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there’s something generally good about
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technology and generally very positive
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about this as an industry I’m obviously
02:35
a bit biased but I do really I do really
02:38
believe that I think I think
02:40
philanthropy is an area that deserves to
02:43
also be rethought and I always like
02:45
asking these contrarian questions and so
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if the contrary in question businesses
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what great companies nobody’s starting
02:50
in on implants would be the contrarian
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question I think is always something
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like what great cause does nobody want
02:57
to support and and so I always uh I one
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of the questions I always like to ask is
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why is it cause unpopular I don’t want
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to give money to popular cause I feel
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those are well enough funded I think the
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unpopular causes that deserve to get
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more its me it seems like when people
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come up so quickly in the technology
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world because of the way that you know
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equity structures work and how quickly
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you can get to market and make something
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really big with the modern distribution
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channels that you know if somebody
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becomes rich in five years it feels like
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maybe that money doesn’t really belong
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all in my bank account like it’s kind of
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belongs to the world it was kind of
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random that it ended up with me opposed
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to somebody who maybe came up through a
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more hierarchical world worked every day
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for twenty years and when they get to
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the end of it they say this money really
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is mine do you see any of that
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perspective that people feel like they
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don’t really have a right to the money
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that they’ve earned in technology and
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that it’s better for them to give it
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away or like what is the philosophy of
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people who are taking the giving pledge
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or making those really big donations
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well I think I think in general it is um
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it is that that they they want to give
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something back to society I’m not sure
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they I think that mostly do think that
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they actually deserve all of it but I
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think these are some of what they got I
think the reality is that what’s unusual
about the tech industry in Silicon
Valley
is that the inventors are capturing
anything at all the history of
innovation has been one where most the
people who invent things get nothing at
all and so the Wright brothers came up
with the first airplane but didn’t get
rich or you know even the original
Edison versus Tesla you say Tesla is the
greater in
and that was the better way to go but
somehow Edison edged out Tesla and so
most of innovation has actually not not
gone to the people who came up with
things you have to to make money you
have to do two things number one you
have to create something of value for
the world and number two you have to
capture some fraction of the value you
create and and often people have
completely failed of doing the second so
I think Silicon Valley is very unusual
04:51
in that there’s this large class of
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innovative people that are actually able
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to capture some fraction of the value
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they’re creating that’s great so now
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that we have founders who are making a
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fortune by making something everyone in
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the world wants hopefully they can make
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some difference for the better in the
05:06
world as well yes yes and I always I
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always would say that you want to make a
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difference for the better in a way
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that’s not just looking for status not
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just in a respectable way but people
05:17
should try to be courageous in their
05:19
philanthropy

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The Institute for Freedom & Community at St. Olaf College seeks to promote free inquiry and meaningful debate of important political and social issues. By exploring diverse ideas about politics, markets, and society, The Institute aims to challenge presuppositions, question easy answers, and foster constructive dialogue among those with differing values and contending points of view. Established in 2015, The Institute offers a distinctive opportunity to cultivate civil discourse within a liberal arts setting. See more at institute.stolaf.edu

This is the final event of the IFC’s spring 2018 series: “Freedom, Community, and Health Care,” featuring a conversation between Amitabh Chandra and Tyler Cowen, moderated by St. Olaf College Associate Professor of Economics Ashley Hodgson.

Amitabh Chandra is the Malcolm Wiener Professor of Public Policy and Director of Health Policy Research at the Harvard Kennedy School of Government. He is a member of the Congressional Budget Office’s Panel of Health Advisors, and is a research associate at the National Bureau of Economic Research.

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Peter Thiel on being a contrarian

you think they’re going to go well it’s

been a it’s been an incredible success I

would I would never bet against a long

in anything so I think that’s sort of

you know hard hard rule number one um

it’s probably you know if you sort of

ask what is it that the innovation

what’s what’s been the innovation in

SpaceX or Tesla on the many different

forms innovation takes the most common

one we’re used to is sort of you launch

something and then you iteratively

improve it sort of this continuous

improvement model we occasionally have a

modality of innovation we have a big

brilliant breakthrough like maybe

Bitcoin where Sony who worked on it in a

closet for 10 years and then release

this amazing discovery to the world but

I think there’s another modality of

innovation that’s that’s very underrated

is what I described is complex

coordination where you just take a lot

of different pieces and the innovation

is to combine them in a new way so if

you ask what is new about SpaceX rockets

or Tesla cars you know all the

components already existed at least in

the initial designs and the critical

thing was to pull them all together in a

in a new form and and that sort of

vertical integration on you know is

somewhat capital intensive which is why

it’s quite hard to get it financed but

it’s done very little and and so and

then once it’s done it’s something that

tends to get underrated I think Apple

Apple’s iPhone the first smartphone that

really worked is another example of

complex coordination and when

people as you know people write

biographies on jobs it’s like well he

was a jerk and that’s that’s the most

interesting thing and what would really

is interesting is how was he able to

motivate all these people to build this

completely new product and it was that

you could you could do something

incredible not by inventing any specific

thing that was new but bringing all the

pieces together in just the right way

and that’s that’s what the iPhone

represented

that’s what Tesla represents with cars

or or SpaceX with rockets and what is

the no pun intended the trajectory of

SpaceX do you think because he’s now

gotten you know to space many times

gotten to the space station many times

and he’s almost landed the reusable

rocket he’s tried twice and it’s it’s

what it’s apparent he’s going to get it

and that’s truly innovative yes well I

think I think I think having built this

vertically integrated rocket company

it’s now possible to innovate on that in

ways that we much harder if you had this

super complicated subcontract or sub

subcontractor system where all the

components are bespoke and you can’t

innovate on the whole thing so having

integrated all the pieces you can

innovate if they if they get to