What Peter Theil Gets Wrong About U.S. Innovation
It's not about culture, it's about funding and complexity.
In a recent interview with Ross Douthat of the New York Times, billionaire Peter Thiel said that U.S. innovation is stagnating because of complacency, liberal woke ideology, and cultural elements. Referencing the movie “Back to the Future”, he quipped that the U.S. is not keeping pace. Where are the flying cars and home service robots, for example? He made it clear “the left” is to blame for slowing innovation.
He continued that the U.S. lacks medical and other technology breakthroughs. In Thiel’s view, there hasn’t been a cure for dementia or a major technological advance since the advent of the internet because of liberal ideology — the hippies, he said, were very successful at changing the nation’s culture. Americans, by his reckoning, has run out of ideas.
It’s not a lack of ideas or ideology that’s hampered scientific breakthroughs. It’s diminished federal R&D funding that's being cut even further after decades of decline.
U.S. research and development funding rose in the early 1980s before plateauing from 1985 to 2007, a period where federal funding took a nosedive and has not recovered since. Business funding alone was not enough to raise R&D as a percentage of GDP during that period of time (see chart below from the National Science Foundation.)
It's inevitable for innovative breakthroughs to slow if businesses are the primary funding source for R&D. Except for the outlier cases of technology giants like Apple, Alphabet, and Meta who can throw billions of dollars at new ideas, there’s little incentive for Salesforce or Oracle, for instance, to make more than incremental changes to their moneymaking technologies. And shareholders reward that focus on quarterly returns.
Thiel was right that research on dementia has focused on amyloid plagues that were found not to be the cause of the disease. But that’s exactly how science works. Test hypotheses, gather more clinical data, revise or abandon previously held frameworks, and repeat.
Research tends to cluster around certain ideas promoting a surge in derivative works. It is neither a new phenomenon nor culturally based. That’s why the venture capital industry looks to fund breakthrough technology at the pre-seed stage outside major corporations that have the freedom to think and act big.
What's lacking is billions of dollars to supercharge new findings, after the outright gutting of primary research at the federal level that may set back breakthroughs by years or decades.
Incredibly innovative breakthroughs have been taking place in medicine (biologics, gene editing, AI-assisted diagnosis), advanced materials (carbon nano tubes and graphene), and even a few U.S companies making advanced electric vehicle batteries (e.g. QuantumScape and Factorial) all within the last several years.
As for flying cars from “Back to the Future” fame, several U.S. companies are about to commercialize all electric vertical take off and landing vehicles (EVTOLs) including publicly-traded companies Joby Aviation (JOBY)and Archer (ARCH) as well as Vermont-based and privately held Beta Technologies, which has completed test flights and landed at a commercial airport. They’re primarily for air taxi service cutting commute times from major cities to airports. If successful, they are likely to populate private helipads at the world’s richest estates.
And, are flying cars really the metric to judge by? We know more efficient and affordable public transportation cuts down commute times (New York’s congestion prices on cars, for example, significantly reduced traffic into the city) Also, imagine tens of thousands of commuters flying into a major urban area looking for parking.
Ideology has indeed inhibited some areas of potential breakthroughs, costing the U.S. a lead in high-speed rail, smart cities, and alternative energy to Japan, China, and South Korea. Advances were ceded because there was no unified government policy to focus on advances in these sectors. Instead, entrepreneurs in other countries not hamstrung by politics set their sights on scientific innovation, received support from their governments to take on high risks, and have been richly rewarded in the marketplace when they succeeded.
Major scientific discoveries also take longer because of the complexity of the science itself. Once the human genome was cracked open, researchers discovered 3 billion gene pairs, in addition to the role of proteins and RNA on disease, and more. Artificial intelligence may help in speeding up research, but with so many possibilities to explore it is inevitable that it takes more time to discover, test, and commercialize medical insights.
More and faster innovation, like Thiel has suggested, is a laudable goal. Blaming cultural politics, however, only serves to push people further apart. That limits essential collaboration and denigrates logic, facts, and independently time-tested observations crucial to scientific breakthroughs.
The U.S. needs more innovative policies in order to go back to the future of scientific revolutions.