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.