On Innovation: Where Hans Rosling Teaches Us Why Peter Thiel Is So Wrong.

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If you haven’t already done so, read Peter Thiel’s article “End Of The Future”. It is darkly brilliant, and extremely compelling. It speaks to the fact that the energy revolution we were promised in the 70s seems to have stalled; that cars planes and trains don’t move any more quickly today than they did 40 years ago; that the leaps and bounds in biotechnology that we should have made by now seem to still elude us. Why, he asks? He presents a number of cases:

 – The libertarian case: government regulation has stifled innovation. The FDA, the TSA, the government subsidies on oil & gas, Congress, etc. have made it impossible for free market innovation to thrive today, the way it must have in times past. 

– The neoconservative case: the military industrial complex drove most paradigm-shifting innovation in the modern era, from gunpowder to the internet to advances in transportation, science, and energy. We’re too afraid of arms races to innovate anymore.

– The Krugman liberal case: Since Carter’s presidency was largely viewed a failure, Reaganomics, which brought along a deep fear in government spending, has starved the economy from investing in energy subsidies, and better education infrastructure, etc.

It’s a fascinating article, and one that I was really glad to have read before I took Thiel’s amazing class at Stanford last year. But I felt as though something was wrong with the argument. For one, as many others have described far more eloquently than me, Thiel includes the dawn of the Information Era as something of a concession, or a footnote, which is crazy. The invention of the Internet, the World Wide Web, and the mobile phone are all “printing press” scale innovations, and they happened within years of each other. And they permanently transformed every industry that they didn’t simply destroy. But that’s not my argument. After all, the conditions that catalyzed two, if not three of the Information Era’s core innovations were tied to military-driven speculative bubbles. The software folks have done an admirable job of debating that side themselves. I have a different beef.

Peter Thiel talks about “us” vs. “them”. His view on the technology industry speaks about how “we” have stopped innovating, and in the same breath it refers to “we” as it relates to job creation, and “we” as it relates to immigration policy. It’s clear that he’s referring narrowly to the United States, but perhaps more broadly to Western Europe as well. Yes, the United States is the world’s last great superpower. Yes, there are 300 million people of moderate to high income here to serve as an anchor customer base. Yes, the United States and Western Europe were responsible for the majority of technology in the 19th and 20th centuries. But you want to know the real reason why innovation stopped in the 1970s, as Thiel likes to say? The answer is Chairman Mao.**

If you look at Hans Rosling’s dynamic chart of the world’s mortality rates and per capita income, you see that at some point between 1955 and 1980 the biggest dot in the world starts moving extremely quickly. In Hans’ words: “Mao brought HEALTH to China.” And it’s true, he did. In 1959, the average life expectancy in China was less than 35 years. By 1969, life expectancy in China was around 65 years: a 186% improvement over a population set of a billion in 10 years. For people who study macroeconomics and public health, you don’t see numbers like that… anywhere. Mao Zedong’s reign is without question the most significant 20th century event that the West has forgotten to talk about. In the same 10-15 year period, the entire continent of Africa went from under colonial rule to independence. That meant effectively 2 billion people added to the world economy, ready to contribute, and especially to consume the world’s resources. Eric Schmidt points to the fact that there is a mobile phone in billions of hands around the world as evidence of innovation not slowing down. He’s completely right. There are more people with smartphones today than were alive in 1860. That is no small feat.

The companies, like Google, by creating the Android Platform and spreading the smartphone across the globe; like Apple, who created the most extraordinary manufacturing infrastructure of the modern era entirely in Asia; like Samsung, Huawei, Sina/Weibo, and dozens of other Asian companies, innovation stopped because there was a greater incentive, rightfully, to move the needle across the horizontal axis (one product to very many people) than along the vertical axis (one product, vastly improved). Both are needed, but sometimes the world shifts very rapidly very fast, and one overwhelms aspects of the other.

Entrepreneurs, investors, journalists, and thinkers: don’t sleep on the rest of the world, like Mr. Thiel seems to be doing. Talent, market opportunities, and access to resources are all increasingly distributed evenly around the world, and in many cases unevenly against the United States. Germany runs on clean energy. Kenya runs on an entirely different (and superior) payment infrastructure from the West. Gaming culture in South Korea would be unrecognizable to your average Zynga user, or Xbox gamer here. If you have interacted with technology entrepreneurs in other parts of the world, very quickly as you hear them describe their businesses, you will notice that they are intimately aware of where they are in the world: “the biggest X in Europe, and excited to launch in Asia” or “we are focused on East Africa, but there’s a big opportunity in India”  or “we are already international, but haven’t launched in the US yet.” If you listen to entrepreneurs in the United States, Mr. Thiel included, the language is very different. The nature, source, and pace of innovation in our world is changing whether we like it or not. Take heed!

** No, Senator McCarthy, I’m not saying Mao or authoritarian communism was good for the world, or even necessarily for China. It was terrifying and in many ways awful, to be sure. I’m just pointing out that we conveniently forget his level of influence.

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