Thiel on the confusion of capitalism and competition, difficult and valuable

Peter Thiel is turning out to be a very, very original thinker. In today’s New York Times David Brooks mentions a lecture he gave at Stanford on starting up a company. Thiel’s main point is subtle and incredibly interesting: he says that people are confused when they think capitalism is about competition. In fact, with perfect competition there is no profit and you are forced to reinvest all the money you make to stay in place. Capitalism is about doing something in a large market where there is very little competition, and thus making huge profits. And then he adds that this is a consequence of many people confusing what is hard with what is valuable. There is so much sheer insight in these lecture notes that Blake Masters have put up that there is no excuse not to read them. Favorite quotes below:

The usual narrative is that capitalism and perfect competition are synonyms. No one is a monopoly. Firms compete and profits are competed away. But that’s a curious narrative. A better one frames capitalism and perfect competition as opposites; capitalism is about the accumulation of capital, whereas the world of perfect competition is one in which you can’t make any money.

On value and difficulty as a proxy for value

Intense competition makes things hard because you just beat heads with other people. The intensity of competition becomes a proxy for value. But value is a different question entirely. And to the extent it’s not there, you’re competing just for the sake of competition. Henry Kissinger’s anti-academic line aptly describes the conflation of difficulty and value: in academia at least, the battles are so fierce because the stakes are so small.

That seems true, but it also seems odd. If the stakes are so small, why don’t people stop fighting so hard and do something else instead? We can only speculate. Maybe those people just don’t know how to tell what’s valuable. Maybe all they can understand is the difficulty proxy. Maybe they’ve bought into the romanticization of competition. But it’s important to ask at what point it makes sense to get away from competition and shift your life trajectory towards monopoly.

On why life is not war

The perfect illustration of competition writ large is war. Everyone just kills everyone. There are always rationalizations for war. Often it’s been romanticized, though perhaps not so much anymore. But it makes sense: if life really is war, you should spend all your time either getting ready for it or doing it. That’s the Harvard mindset.

But what if life isn’t just war? Perhaps there’s more to it than that. Maybe you should sometimes run away. Maybe you should sheath the sword and figure out something else to do. Maybe “life is war” is just a strange lie we’re told, and competition isn’t actually as good as we assume it is.

On AI:

Artificial Intelligence is probably an underrated field. People are burned out on it, largely because it has been overrated and overstated for many decades. Few people think AI is or will soon be real at this point. But progress is increasingly relentless. AI performance in chess is increasing. Computers will probably beat humans in Go in 4 or 5 years. AI is probably a good place to look on the tech frontier. The challenge is that no one knows how far it will go.

The fascinating thing with Thiel’s argument is that it contains a tip on how to live your life as well on how to start your business. And maybe the trick is not viewing your life as very different from an investment in a startup. And realizing that life is not war, difficulty is not a good proxy for value and competition is opposed to capitalism.

FuturICT – is this the approach to research we want in the EU?

The European Union has a research policy agenda that varies wildly. In one project, FuturICT, it has set out to examine the following, according to their website:

The ultimate goal of the FuturICT flagship project is to understand and manage complex, global, socially interactive systems, with a focus on sustainability and resilience. Revealing the hidden laws and processes underlying societies probably constitutes the most pressing scientific grand challenge of our century and is equally important for the development of novel robust, trustworthy and adaptive information and communication technologies (ICT), based on socially inspired paradigms.

Oooookay. That is pretty ambitious. Now, here is a question for you. Is this the kind of research we want? I must confess to being very much of two minds here. On one side I do like the broad approach and much of what the project has been doing is interesting. A recent paper outlines in-depth some challenges for complexity sciences that I found interesting. Again, though, the scoping is a bit, hm, exorbitant:

FuturICT foundations are social science, complex systems science, and ICT. The main concerns and challenges in the science of complex systems in the context of FuturICT are laid out in this paper with special emphasis on the Complex Systems route to Social Sciences. This include complex systems having: many heterogeneous interacting parts; multiple scales; complicated transition laws; unexpected or unpredicted emergence; sensitive dependence on initial conditions; path-dependent dynamics; networked hierarchical connectivities; interaction of autonomous agents; self-organisation; non-equilibrium dynamics; combinatorial explosion; adaptivity to changing environments; co-evolving subsystems; ill-defined boundaries; and multilevel dynamics. In this context, science is seen as the process of abstracting the dynamics of systems from data. This presents many challenges including: data gathering by large-scale experiment, participatory sensing and social computation, managing huge distributed dynamic and heterogeneous databases; moving from data to dynamical models, going beyond correlations to cause-effect relationships, understanding the relationship between simple and comprehensive models with appropriate choices of variables, ensemble modeling and data assimilation, modeling systems of systems of systems with many levels between micro and macro; and formulating new approaches to prediction, forecasting, and risk, especially in systems that can reflect on and change their behaviour in response to predictions, and systems whose apparently predictable behaviour is disrupted by apparently unpredictable rare or extreme events. These challenges are part of the FuturICT agenda.

Oh, just that? Where is your ambition, project members? Joking aside, it is exhilarating to see someone aim for the stars like this. But will it succeed? One problem I have is that I do not know what it would look like for the project to succeed. Accomplishing the singularity (finally!) or producing a god-like AI? Or just cataloguing a series of really interesting problems?

So I hesitate. On one side: good for EU that it dares address these challenges head on! On the other side: what exactly are you doing? Then I remember the millions that the EU plowed down into Electronic Copyright Management Systems like Imprimatur. Maybe we are better off with a project that states the following:

The FuturICT flagship proposal intends to unify hundreds of the best scientists in Europe in a 10 year 1 billion EUR program to explore social life on earth and everything it relates to. The FuturICT flagship proposal will produce historic breakthroughs and provide powerful new ways to manage challenges that make the modern world so difficult to predict, including the financial crisis.

Oh, good. What is all the fuss on the stock markets about, then? So, what do you think. Flip or flop? My jury was caught in a combinatorial participatory sensing explosion.

Beekeeping and the turn away from technology

At lunch, during the conference in Stockholm last week, I sat down with a conference attendee I have met a couple of times previously. She works on human rights issues and is deeply involved with the Internet, but she had arrived at the end of the road. She was taking courses in beekeeping, because she wanted to turn away from technology and do something “real” as she put it.

Her issues with new technology were many, but foremost was the way our technology destroys time. Not time as a physical phenomenon, but experienced time. Our ability to concentrate on something for a long time. This phenomenon is sometimes referred to as technology-induced attention deficit syndrome and it consists in that twitching spirit that checks email and status updates and tweets every second. Her thesis was that no greatness will ever come of that. No originality will come from those locked in the moments, views, and random thoughts of others.

We had our lunch, silently, there is something about an argument like this that kind of makes you feel stupid if you laugh and chatter too much, and then we spoke about Nietzsche and Bruchstuck-menschen for a bit. She agreed that she thinks that technology is turning us into fragmented beings, that it shatters our ability to authenticity. Much like Nietzsche.

The problem with technology, she seemed to say, is that it eats all of our time. but in very small portions, leaving us with but crumbs of time for reflection, insight and deep thought. It is easy to agree, but let’s push back for a moment. What is it in technology that forces us to use it obsessively? What is that forces us to check our email ever few seconds?

Perhaps our mind changes with the new technologies we use. Some studies argue that the changes in the brain that follow on what is loosely referred to internet addiction syndrome are akin to those caused by cocaine or alcohol dependencies. Nicholas Carr et al argue that the Internet is making us shallow.

But is this change necessary? There is, paradoxically, a strong element of technological determinism in the new techno-pessimism. It seems to state that we can offer no resistance, and that technology will force us to shatter into shallow fragments of what we were. That thought of inevitable technological degeneration has been with us since Plato, who had Socrates say that writing would lead to people losing respect for wisdom, forgetting the epic poems and generally think much poorer thoughts. Yet, we conquered the pen and it seems as if it was not a bad idea to let writing into our culture. Why could we not also conquer the new technologies?

There are tools for those that are interested. Here are my two favorite distraction reflecting technologies, or technologies that safe-guard our ability to think long thoughts.

  • Freedom. This little piece of software shuts down the Internet for a period of time you choose. The only way to get back only is to reboot the computer. This minimizes the distractions and allows you to work in a concentrated manner. Combine with…
  • WriteRoom. A word processor that has a fullscreen mode that hides all other software and all other things on the screen. Just text and you.

It does not have to be harder than that. I actually think that beekeeping and the turn away from technology is a response to something else than a deeply felt dissatisfaction with the way technology forces us to distraction, it is a response to the phenomenon that Weber called Entzauberung, the continual loss of magic in our world. It is not so much that the Internet distracts us, it is that it is hard to create meaning in this new medium, and if there is something we crave as human beings it is exactly that: meaning.

And if you turn to beekeeping, away from technology, you have created meaning. But, again paradoxically, that meaning is dependent on technology. You have turned away from technology and that becomes your meaning producing choice. You have not turned to beekeeping. It is only with the information society as background that beekeeping has an attraction.

The real challenge is to create meaning that depends on something more profound than a frustration with technology and its effects. To accept technology, but not allow it dominion over you.