Titans of Tech Face Off
Published on: July 20, 2012
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  • It is also worth considering Nick Carr’s discussion of innovation’s arc which he describes by analogy to Maslow’s hierarchy of needs. Here is Carr’s concluding paragraph:

    “One of the consequences is that, as we move to the top level of the innovation hierarchy, the inventions have less visible, less transformative effects. We’re no longer changing the shape of the physical world or even of society, as it manifests itself in the physical world. We’re altering internal states, transforming the invisible self. Not surprisingly, when you step back and take a broad view, it looks like stagnation – it looks like nothing is changing very much. That’s particularly true when you compare what’s happening today with what happened a hundred years ago, when our focus on Technologies of Prosperity was peaking and our focus on Technologies of Leisure was also rapidly increasing, bringing a highly visible transformation of our physical circumstances.

    If the current state of progress disappoints you, don’t blame innovation. Blame yourself.”

    It’s an insightful contribution to this discussion. You can read the whole thing here: http://www.roughtype.com/?p=1603

  • thibaud

    All due respect, Thiel is not a scientist, or even, truth be told, really a technologist. Perhaps his libertarian instincts incline him to dismiss advances that are occurring because of government-financed or subsidized research. Maybe he’s just not very well-versed in the really exciting, difficult, hard science research and the other innovations flowing therefrom that are taking place now, so it’s not surprising that he would leap to a rather facile conclusion from just looking at a couple of consumer internet-focused software companies.

    To take one example from his backyard, Thiel doesn’t mention virtualization, a set of very advanced OS-level technologies developed by professors at Stanford that is, along with in-memory processing and other advances related to “big data,” transforming the data center and holding out the prospect of vastly cheaper, more flexible, more agile IT resources for government and for business.

    This is a big deal – far bigger than search technology, actually, because it will eventually result in significantly lower costs for servers, storage and perhaps even networking. To take one example of immediate impact, the Dept of Defense now has the capability to process extraordinary amounts of unstructured real-time data captured from its live video feeds overseas, in part because the cost of the servers and storage is plummeting.

    Likewise, Thiel’s focus on previous generations’ advances related to transportation, energy and other big stuff blinds him to the huge advances occurring all around him, in California anyway, in the extremely tiny stuff – materials science, genetics, nanotech.

    To take just a couple of examples, scientists from UC Santa Barbara and some brilliant California entrepreneurs are now commercializing gallium nitride and lattice matching technologies that render their light bulbs 75% more efficient. This is a huge deal for countries such as Japan and Germany, which are desperate to reduce their electrical consumption now in the wake of their retreat from nuclear power.

    We’re also seeing big advances now in cell biology, including advances in self-replicating synthetic cell technology recently announced by Craig Venter
    in San Diego. Venter’s more entrepreneurial than most scientists, but he too is standing on the shoulders of (government-supported) giants in this regard.

    [commenter’s musings about what a terrible site this is deleted.]

  • Mrs. Davis

    Yeah, Ventner waited for the government to finish the Human Genome Project so he could stand on its shoulders. If government monopolizes the funding of scientific research, it is likely that most advances will be the result of some government research. But that doesn’t prove that it was the best way to allocate scarce resources to maximize scientific progress. Ventner proved that.

  • thibaud

    Funny, but more and more examples of government-funded research keep cropping up, in ways that expose the insanity of the “starve the beast” Tea Party crowd.

    Mrs. D., you mention “allocat[ing] scarce resources to maximize scientific progress.”

    Never mind scientific progress — how on earth would someone run a research lab doing hard science for many years without funding by a patient, non-profit entity such as, y’know, NIH, NASA, NSF? — how would even INDUSTRY manage without huge infusions of government research dollars?

    Are you aware that the latest cause celebre of the anti-gum’mint crowd, the advances in “fracing” and related forms of extraction of tight oil, were critically dependent on hundreds of billions of federal dollars, over 30 years, allocated to basic research, demonstration studies, and industry subsidies?

    Without massive federal funding, what sort of budget for this kind of cutting-edge research would be allocated by any publicly-traded corporation? The short answer: zero.

    The typical investment horizon for a GOOG, or HAL, or GE or IBM or MSFT or any other public company on the planet is a fraction of the time it takes to demonstrate viability and move toward production of an extremely difficult, innovative, major new technology like fracing.

    This election is crucial. Thank goodness that Romney is so stubbornly incompetent that he will hand the victory to Obama, thereby sparing us a GOP takeover that would devastate not only the safety net but also publicly-funded basic scientific research that enables huge breakthroughs.

  • Anthony

    At some level WRM, innovators spark mimetic behaviors given favorable economic environment. I think both Thiel and Schmidt acknowledge that reality with the former insisting that it is necessary innovative condition but not sufficient.

    Both men concede that technological change has created new conditions by which globalization and info-structure have forced both adaptation and labor reorganization. Within that reality, Thiel argues technology has been restricted/circumscribed by environmental forces exogenous to individual/entrepreneurial motivations – environmental conditions (government regulations, etc.) pose restraints or embed stagnation vis-a-vis technological innovation. The critical issue for me is whether Thiel/Schmidt debate boils down to an either or proposition as technological applications (and ongoing innovation) impact real living.

  • Crocodile Chuck

    “There are still some gains to be made here — faster jets, more fuel efficient cars and so on”

    1) I recently flew to the USA on a forty three year old aircraft design (747-800) whose biggest difference is marginally greater fuel economy. Airspeed is approximately equivalent to its 1970 predecessor. The Concorde was decommissioned ten years ago-this will never come back.
    2) The upper limit for fuel economy in automobiles is 180-200 mpg: http://physics.ucsd.edu/do-the-math/2011/07/100-mpg-on-gasoline/

    In the end, it all comes back to one thing: energy. And we are incinerating our billion years old endowment of fossil fuels at an exponential rate-think about it: its only been 150 years! http://www.priweb.org/ed/pgws/history/pennsylvania/pennsylvania.html

    ps Thibaud’s comments above on tech are ‘spot on’. And, see this: http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/

  • JGreer

    The foundational tech of the internet was created in the 60’s and 70’s. Yet, it took until the 90’s for a relatively simple innovation (html/browsers) before the “Internet” was born.

    Yes, behemoth organizations like Apple, Microsoft and Google have little incentive to produce radical change, but that does not inhibit small operations from doing so.

    There is more than one way to look at the “low hanging fruit”. One viewpoint as stated is that innovation now gets tougher. An alternative perspective is that with the easy pickings gone, more people will begin searching for the ‘next big thing’ vs. continuing to cherry pick.

  • Andrew Allison

    Thiel falls into “Moore-trap”. Pundits, including Gordon himself, have been saying for thirty years that the limits are within sight, just as they have been saying that we’ll run out of fossil fuel within 10 years for twice that long. The foolishness of the latter has been much discussed here of late.
    As to the question of the impact of yesterdays technologies on today’s life, it is pervasive but largely taken for granted: our grandparents paid much more for much less and, e.g., we no longer need to write checks or buy stamps.
    Today’s advances make possible similarly “invisible” but pervasive applications.
    If there’s one lesson to be learned from the IT revolution, it’s that the fat lady remains a constant distance from the piano seat.
    FWIW, I spent my career in the computer industry, participating in early stages and growth of first the minicomputer and then the microcomputer, and am confident that nanocomputers and their application have a virtually boundless future.

  • MH

    Chuck has the right of it; I work on an aircraft that is being newly revised (in several impressive ways) but is still at its core (all the structural parts that don’t change from decade to decade) a design that dates back to 1964, with antecedents that date back to 1956, and yet it competes well with more modern (but only slightly) designs. This is frugal engineering, yes, but it also shows the inherent conservatism of our business and perhaps our species. Go back to 1650 and look at the ships they had…then flash forward to 1850 and you see that while the designs were tweaked the general layout and performance that you could get were basically the same, for 200 years.
    Speaking on behalf of aerospace engineers everywhere, we could and would love to build supersonic transports for every market, but we’re stopped by the fact that none of the people who could make this future happen want it. The airlines are probably the least innovative bunch in the history of the world. Back in the 1950s they totally discounted jet aircraft until we were able to convince them that gas turbines, having fewer moving parts, are actually more reliable than the leviathan radial piston engines (28 cylinders for an R-4360 from the Boeing 377!) that powered the last generation of propliners. As late as 1955 the president of American Airlines and RAND corporation were going around saying that the jet is a pipe dream that will never be adopted. It took Boeing and Juan Trippe at Pan Am to convince the industry otherwise. Would that happen in this day and age of deregulation where the ideal airliner is some Spirit or Ryanair bus that you ride in the fetal position with no window shades, no lavatories and (consequently) vinyl seats that can be hosed down by the cabin crew after each flight? Nope. There are no visionaries in the airlines anymore, just weirdos like Michael O’Leary (who, I reiterate, is a *highly valued* customer!). And why would there be? Airlines themselves are unsustainable money pits that have to fight both one another and their rapacious trade unions (pilots are the biggest prima donnas I have ever had the misfortune to encounter, regardless of how nice some of them are) for cash. Maybe some day if the airline industry stabilizes we can resume innovating, but I’m not holding my breath.
    Another problem with SSTs is NIMBYism. Back when Boeing was designing the 2707 all these people came out of the woodwork to lobby against it, saying that the terrifying sonic booms would break windows and destroy livestock and what not, so now we have laws forbidding supersonic transports on transcontinental routes, nevermind the fact that you can’t hear an aircraft going transonic if it’s at a high enough altitude.
    I don’t think that the SST is inherently a money-losing concept; BA and AF were able to turn a profit on the Concorde before the maintenance costs got them; I know we could build a much more economical and reliable aircraft today than in 1968.

  • jdo717

    For an interesting historical perspective, refer to the last two chapters of The Education of Henry Adams. His analysis of paradigm shifts is still worth pondering.

  • thibaud

    Note the central role of the federal government in funding basic research, demo projects, offering large early-adopter markets (via DoD, usually) and subsidies as a way of enabling breakthroughs that the private sector by itself will not or cannot achieve.

    A great example is the Ford and Carter administrations’ billions dedicated to unconventional gas and tight oil extraction research and demo projects, without which we would not have the tight oil bounty that’s now within our grasp.

    Here’s a lengthy analysis here of the federal government’s central role in that story. It’s written by two prominent critics of cap and trade, Tim Nordhaus and Michael Shellenberger of the Breakthrough Institute:

    http://thebreakthrough.org/blog/Where_the_Shale_Gas_Revolution_Came_From.pdf

    “… if cheap gas is harnessing market forces to shutter old coal plants, the existence of cheap gas from unconventional places is by no means the product of those same forces, nor of laissez faire energy policies.

    “Our current glut of gas and declining emissions are in no small part the result of 30 years of federal support for research, demonstration, and commercialization of non-conventional gas technologies without which there would be no shale gas revolution today.

    “Starting in the mid-seventies, the Ford and Carter administrations funded large-scale demonstration projects that proved that shale was a potentially massive source of gas. In the years that followed, the U.S. Department of Energy continued to fund research and demonstration of new fracking technologies and developed new three-dimensional mapping and horizontal drilling technologies that ultimately allowed firms to recover gas from shale at commercially viable cost and scale. And the federal non-conventional gas tax credit subsidized private firms to continue to experiment with new gas technologies at a time when few people even within the natural gas industry thought that firms would ever succeed in economically recovering gas from shale….”

  • John J

    Having spent the past 30 years practicing medicine and a brief 10 year stint in research university, anyone who says that the private sector is less innovative than government is so blinded by partisanship they are ignoring fact. Practically every major medical advance from penicillin to heart surgery has been from either an individual or corporation. Virtually every drug used at my hospital was discovered and created by a private firm. The truth of the matter, is with all the money we have spent on government sponsored cancer research, they have provided very little results. Right after medical school in the 70s, I was apart of one of the first government sponsored cancer trials at John Hopkins and after 30+ years and over 100 billion dollars spent, the US government has not produced a single cancer drug.

  • Samtastic

    Thibaud looks at everything through a partisan lens. Thiel and Marc Andresson are considered the first among equals when talking about the successful silicon valley venture capitalist. I’ve heard both of them speak and they understand technology better than some [unkind reference to contributor deleted] on this website.

    Eric Schmidt is a Democrat, a huge donor to democrat causes, and is on the board of directors of the New America Foundation. If you read the debate, he basically concurred with Thiel on the issue of regulations.

    Virtualization, cloud storage, and a more efficient light bulb are not harbingers of a technological wave. Other than allowing people to run software from a cloud and storing their movie collection, it does equate to the massive tech waves of the past. Go on Matlab, and do a probabilistic analysis with current data and you will see what I mean.

    Thibauld is cherry picking stories that sound good for his narrative, but utterly avoiding any logical or reasoned arguments.

    Look, I voted for Obama and I’m getting my PhD in Electrical Engineering. Whatever my politics, I know they cannot trump math. Do the math, most of the great innovations that have pushed mankind forward have been individuals and businesses. From James Watt to Steve Jobs, government has benefited from business and entrepreneurship, not the other way around. The only sector government has a positive hand is the military, but leave aside the DOD or DARPA, all you have is waste and failure. This country hasn’t built a nuclear reactor or refinery in 30 years, and my friends in engineering in those fields have no work. It’s people on this site with Thibauld’s mentality which are holding innovation back. Detroit, anyone?

  • thibaud

    Enough straw men here to fill a small city.

    Re “partisanship,” the unconventional fuels R&D, demo project and subsidies effort described above was BIPARTISAN. President Ford was a Republican – back in the days when Republicans had not been hijacked by blindly anti-gum’mint zealots.

    As the bizarre straw man, “anyone who says that the private sector is less innovative than government “: the difference is in time horizons. Our capital markets force management of publicly-traded companies to deliver returns within time horizons that are shorter than what’s required to bring forth breakthrough technologies. That’s a form of market failure, which is where and when government steps in.

    Re Sam’s weird assertions, apparently you haven’t paid any attention to unconventional gas. That was enabled by the Dept of Energy programs referred to above. Read the Nordhaus/Shellenberger link.

    Again, the point is that government support for basic R&D is not sufficient, but it is necessary.

  • Kris

    [email protected]: “If there’s one lesson to be learned from the IT revolution, it’s that the fat lady remains a constant distance from the piano seat.”

    Zeno’s Concerto.

  • justaguy

    One way to look at the shortage of innovation is to compare innovation to the growth of the regulatory state. The state, through rent-seeking politicians, will over-regulate any profitable area– taking through regulation opportunity, taxes, monopoly, or whatever they can extract for their benefit. Innovation occurs where the state has not yet regulated. Once technology, ideas, or markets open up, there is initially growth in a relatively unregulated area until the political class discovers it.

    Cell phones and cable industry are examples of this idea. The state over-regulated both land-line phones and over the air TV, but when cell phones and cable reached a technology/cost position, they took off in the free area allowed by lack of rules. Once they developed to a point of rent-seeking profitability, the politicians then regulated them for the taxes and/or influence they could gain.

    Internet– same idea — initially unregulated until the politicians discover that wealth and influence could be extracted from it. The battle to regulate the internet is still on-going. Does anyone think that the internet will still be relatively free in the future?

    A good analogy which shows the repercussions of such regulation is the Chinese bureaucracy of the middle ages. The Chinese bureaucracy developed and held great power over what was the world’s most powerful and well-developed society. The result was to stifled innovation in more and more areas and thus the most powerful civilization stagnated for hundreds of years. Isn’t this what we are seeing in the U.S. and Europe, as a relatively free society innovates (think 1900-1950) and now there are few areas of innovation left — so many rules kids can’t even open a lemonade stand in most places.

  • Glen

    The late 90’s promise of so-called “free flight” air travel is another example of a revolutionary innovation that has yet to be fully realized because the government holds a monopoly on airspace management. Not only has the FAA’s Next Generation Air Transportation System suffered horrible delays and cost overruns, its primary clients — large commercial airlines — have little or no interest in developing a more open and competitive environment.

    Fortunately, we are finally beginning to see some of the benefits of free flight. New aircraft such as the Embrarer Phenom 100 very light jet (from Brazil) represent a quantum leap in reliability, usability, safety and price/performance. The Pheonom 100 brings private jet service down to a price point that can be affordable to those whose wealth may not yet rival Schmidt’s or Thiel’s. And new operators are beginning to take advantage of these technologies along with underutilized infrastructure in ways that may finally realize the promise of free flight (e.g., most U.S. airline flights originate and depart from less than 150 major airports while there are over 5,000 civilian airports in the United States).

    We haven’t yet reached the point where everyone has a Jetsons-style robotically-operated flying car. But we’re getting close. And the innovations are coming from unusual places…

  • Jim.

    Maybe the next few steps of human technological innovation won’t center on computers or software — rather on something that computers and software will help enable.

    I suspect that VC has been concentrating so long on software that it doesn’t quite know what to do in terms of non-electronic hardware.

  • 698uy08y9u8

    http://mjperry.blogspot.com/2012/07/2020-headline-protests-break-out-in.html

    “First, robotics. The factory assembly that China is currently performing is child’s play compared to the next generation of robots — which will soon become cheaper than human labor.”

    Then there is artificial intelligence (AI) — software that makes computers, if not intelligent in the human sense, at least good enough to fake it. Neil Jacobstein, who chairs the AI track at the Silicon Valley-based graduate program Singularity University, says that AI technologies will find their way into manufacturing and make it “personal”: that we will be able to design our own products at home with the aid of AI design assistants. He predicts a “creator economy” in which mass production is replaced by personalized production, with people customizing designs they download from the Internet or develop themselves.”

    “How will we turn these designs into products? By “printing” them at home or at modern-day Kinko’s — shared public manufacturing facilities such as TechShop, a membership-based manufacturing workshop, using new manufacturing technologies that are now on the horizon.”

    “By the end of this decade, we will see 3D printers doing the small-scale production of previously labor-intensive crafts and goods. It is entirely conceivable that, in the next decade, manufacturing will again become a local industry and it will be possible to 3D print electronics

  • Jim.

    By the way, could someone please point out what “financial innovations” we have had since http://www.google.com has been online, that actually qualify as a net positive?

    PayPal, KickStarter and…. come on, help me out here.

    Along with that, we have “the power of YES”, a trillion in student loan debt, zero-interest savings accounts, Adjustable Rate Mortgages, Mortgage Securities (and the accompanying housing bubble / crash), $5 trillion in new national debt under Obama alone. This, while “finance” gobbles up an ever-larger share of our economy. Are we better off because that share of the economy has increased? Seriously?

    And now we have Google and Apple sitting on enough cash to establish a permanent human presence on the Moon. Anyone else get the idea that encouraging banks to have enormous amounts of liquidity sloshing around amounts to solving a problem that doesn’t need solving — at least, in terms of driving our economy ahead?

    Seriously, if liquidity were the solution to the problems we’re having, they’d be solved by now. These “tech titans” are right — there are non-financial obstacles in the way of new innovation and development. Many are regulatory.

    We need to identify them and resolve them.

  • thibaud

    Jim – you’re looking at the wrong VCs. Most of the older investors, the ones involved in semiconductors a generation ago, for example, are now putting huge sums into earl-stage advanced technologies related to materials science and energy.

    Not as sexy as the latest Faceball or PinHead or FishVille timewaster, perhaps, but much more consequential.

    The press and the public will catch on in another 20 years or so.

  • Jim.

    @thibaud-

    So where can I look to find out more about where these VCs are investing?

  • thibaud
  • thibaud
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