Technology == Salvation ?

Due to service disruption with my print subscription to The Wall Street Journal (WSJ) this past week, I was not aware of the interview with Peter Thiel entitled "Technology = Salvation" by Holman W. Jenkins Jr. in last weekend's edition until today. Thiel was one of the co-founders of PayPal and an early investor in Facebook, and now serves as president of Clarium Capital, a global macro hedge fund that he founded in 1998.

Thiel offers some interesting perspectives in the interview of interest to the technology community. Some excerpts:

• Except for computers and the Internet, the idea that we're experiencing rapid technological progress is a myth.
• "People don't want to believe that technology is broken…Pharmaceuticals, robotics, artificial intelligence, nanotechnology – all these areas where the progress has been a lot more limited than people think. And the question is why."
• "The big variable that [Bernanke, Geithner, and Summers] are betting on is that there's all this technological progress happening in the background. And if that's wrong, it's just not going to work. You will not get this incredible, self-sustaining recovery."
• The great exception is information technology, whose rapid advance is no fluke: "So far computers and the Internet have been the one sector immune from excessive regulation."
• Some companies and countries will do better than others. "In China and India," he says, "there's no need for any innovation. Their business model for the next 20 years is copy the West."
• The West, he says, needs to do "new things." Innovation, he says, comes from a "frontier" culture, a culture of "exceptionalism," where "people expect to do exceptional things" – in our world, still an almost uniquely American characteristic, and one we're losing.

The fact that so many comments were posted in response to the online version of this interview in such a short time period demonstrates that there is a lot of interest here, but the substance of most of the comments is unfortunately lacking (probably due in part to the text of the interview being available to the public without a WSJ subscription).

As someone who studied economics as an undergraduate, I agree with Thiel that politics plays a heavy role in how the U.S. economy will play out in coming years. It is difficult enough to predict the future when the markets are able to work things out on their own, but when the government gets involved it is nearly impossible. Of course, I use the term "predict" loosely here – what I am referring to is estimating event probability.

And while I was not overly impressed with Michael E. Raynor's "The Strategy Paradox: Why Committing to Success Leads to Failure (And What to Do About It)", in my review of the book I noted the following:

Any future strategy, according to the author's explanation of the Strategy Paradox, may fail because the future cannot be predicted: "strategies with the greatest possibility of success also have the greatest possibility of failure". Planning and executing well a strategy does not necessarily increase the chances of success. Instead, companies should hedge their bets by developing practical strategies based on multiple options that respond to the different requirements of several possible futures rather than commitments on singular strategies.

There exists no public talk regarding the development and execution of multiple strategies for the U.S. economy. At present, the driving singular strategy is offshoring work in order to gain very short term profits. Offshoring complete industries will render the U.S. heavily dependent on other countries until the strategy is changed, and it is becoming increasingly clear that this dependence is not feared.

I agree with Thiel that the unfortunate business model that has been the main driver for growth in economies such as China is to "copy the West". The U.S. rebuilding of Japan and Germany following the second world war acted as a powerful catalyst for economic growth, but that growth would have been less probable if it were not for the intelligence and work ethic inherent in those countries.

While it might be true that China is "coming back" rather than "rising up" (as Chinese economist Dr. Peter Zhao Xiao noted in the recent conference I attended), the economic progress in China over the last few decades would have been unlikely if it were not for the vast investments from the West. And one of the resultant problems is that the accompanying knowledge and skills have followed these investments.

As a consultant, I need to be able to keep up with advancements in my field and reinvent myself on a continual basis in order to remain viable. Every year I experience periods of time where I am running in order to learn new skills in order to provide what is best for my clients. Knowledge transfer and mentoring are typical products by design during these periods of time, but the lifetime of each growth spurt is limited.

Applying this running analogy to the U.S. as a whole, there is a mathematical limit to how fast these sprints can be executed, and how long they can endure, when a sizeable part of the end products is also the ability to do the work itself without regard to whether subsequent sprints continue to contain innovation (and there are legal implications when products and processes are copied).

While my field is fortunate in that innovation still occurs, and there continues to be opportunity to advise clients and develop solutions, it is unknown what will happen if U.S. innovation in my field ever ceases. In my opinion, part of the country will be lost.