Peter Thiel versus Google

So the tech world is abuzz with the CEO equivalent of a catfight.   At a dinner in Aspen, Colorado (which seems to have cool meetings like every other week over the summer), Peter Thiel (co-founder of PayPal) and Eric Schmidt (chair of Google) were members of a panel discussion.  Thiel launched the first strike, saying “Google is no longer a technology company“.  Google is known for having a large amount of cash in its coffers, but spends little of that on research and development.  Thiel argues Google is just sitting on it because the company “is out of ideas”  and accused Microsoft of being in a similar position.

This seems to fit into Thiel’s more pessimistic view of the future of technology.   Unlike most people in this day and age, Thiel thinks the pace of scientific and technological development is slowing down.  Though I think that might only be true based on his definition of progress.  Thiel seems to think only “disruptive technologies” are meaningful.  Improving on existing technology doesn’t seem relevant to him, as he said Google is stagnating by sliding by on search, and his venture capital firm’s motto is “We wanted flying cars, instead we got 140 characters.

Thiel’s argument struck me as weird for two reasons.  First, I’m not really sure why he only called out Google and Microsoft.  If any tech company really strikes me as sliding on older technology, it’s Apple.  Yes, yes, Apple makes wonderful devices.  But very little in any of the Apple products released in the last decade feature new technology.   Look at the iPhone.  Touchscreens have been in various products for decades.  The music store and player is iPod with a touchscreen.  The main innovation was the idea of combining these things (which had been slowly coming together) and adding the app store.  Apple is great at designing attractive and easy-to-use technology and developing good software to go with it.  But it didn’t require any great basic research breakthrough in hardware or software to go from the iPod, Nintendo DS, and a cell phone existing separate to get to the iPhone.  To my knowledge, Apple does no basic research, and it’s known for spending less than most companies on overall research and development.  Google and Microsoft have basic research labs.

Secondly, I’m not sure there is any “tech” industry  in Thiel’s mind when you compare Google and Microsoft to other companies.  Both are in the top 10 for R&D spending in terms of total spending and percentage of revenue.  I understand that Thiel believes in big, breakthrough innovations, and puts his money where his mouth is by investing in lots of research himself.  But I feel like he doesn’t fully appreciate how very few companies are like him.  He’s called the Great Recession a symptom of technological underdevelopment not growing the economy fast enough to justify housing prices.  But can’t the fact that our economy placed so much of a bet on housing also indicate an inefficiency in the market (I know virtually no economics, so pardon the abuse of terms) that also leads to underinvesting in technology with few short-term payoffs?  Thiel himself seems to acknowledge this, as his new grant foundation, Breakout Labs, says it provides for the gap between federal funding and venture capitalists who want results on the market soon.

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3 thoughts on “Peter Thiel versus Google

  1. I love Peter Thiel, despite the fact that is world view is a bit strangely colored. I think his main problem (or perhaps his point) is that he confuses the technology sector (that is, those internet/software/hardware companies whose business from cradle to grave is devices that we traditionally think of as “techy”) with innovation. I would agree that there is a disctinct lack of innovation in this country, and I’ve read a lot of articles saying that contributed to the recession in a big way. This issue is that no one expects (or should expect) technology companies to innovate for all the sectors. Sure, they can build computer systems that streamline operations, but no one should expect Google to build a flying car (and yes, I know they want to) – we should expect GM to, or a start up like Tesla. When was the last time Boeing or even Sears brought us a really cool new item? Or whole new category of items? Thiel’s mind and money is in the right place, but he’s preaching to the wrong church.

    • Haha, I like that description. Boeing is trying to do something cool with their crazy/awesome/terrifying dreamliner (http://en.wikipedia.org/wiki/Boeing_787_Dreamliner).

      I think you’re right about his problem/point. I actually agree with that basic idea. I feel like there’s been a change in what terms we use to describe the sector of the economy companies like Google, Microsoft, Apple, and Facebook are in, at least in the broader culture. In the 90s, it felt like we just called Microsoft, Apple, Gateway, Dell, etc “computer companies”. Things like Yahoo!, Amazon, and eBay were “Internet” or “web” companies. If any of those were considered “tech companies”, it was the computer ones, because they were making stuff and all our definitions of “high tech” involve cutting edge devices (and in the 90s, computers definitely advanced enough to be cutting edge). In my mind, it only seems like we recently started throwing in Internet companies with the rest of the tech field (we never really called MySpace a tech company, to my knowledge). Since it’s so easy to make Internet-based companies, their numbers have overwhelmed the old definition of making physical stuff.

      And your point about things like GM and Boeing is spot on. The idea of a “tech sector” might be too broad to describe all the industries that make new technology (and maybe this is why “tech” got stuck to computer and web companies as they started to get more similar and neither of the older terms worked well). Johnson & Johnson is one of the top investors in R & D, but we’ll never consider it “tech”. And if you’re looking at cutting edge technology, then we could probably consider oil and aerospace companies to “tech” companies. Actually, Boeing is trying to do something cool with their crazy/awesome/terrifying dreamliner (http://en.wikipedia.org/wiki/Boeing_787_Dreamliner). The airplane relies on a lot of new materials processing and construction methods. I just think it fell out of awareness because there were a lot of problems with the new technology at first, and they couldn’t keep the materials together. But they eventually got it to work, so props for making an airplane that the market wasn’t even sure was physically possible for a while.

      (Sorry, I’ve had this rant about why Facebook isn’t a tech company in my head for like a year now…)

  2. Pingback: Who’s afraid of technical “solutionism”? | nontrivial problems

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