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Thiel and Hoffman on How to Promote Innovation in a Fearful Society

From left, Techonomy's David Kirkpatrick, LinkedIn's  Reid Hoffman, and Peter Thiel of Thiel Capital at the Techonomy 2014 conference in Half Moon Bay, Calif.

From left, Techonomy’s David Kirkpatrick, LinkedIn’s Reid Hoffman, and Peter Thiel of Thiel Capital at the Techonomy 2014 conference in Half Moon Bay, Calif.

Peter Thiel sees Western civilization as a society that “hates science and technology in all forms.” Reid Hoffman sees an uninformed public and political leadership that is biologically predisposed to fear death, not embrace change.

Thiel says corporate boards snuff out innovative leadership and public offerings empower the “wrong people” in an organization. Hoffman says corporate leadership typically “would rather let a company coast for another 10 years, even if it’s sacrificing its ultimate figure, because it doesn’t look like a failure on their watch, versus take a big risk that might fail.”

And while Thiel accuses Washington leaders of being stuck in the Dark Ages, Hoffman concedes that “it’s hard to see a path to Congress having an intelligent technology strategy.”

In the opening session of Techonomy 2014 on Sunday in Half Moon Bay, Calif., Techonomy CEO David Kirkpatrick provoked a frank discussion between the tech-industry-pioneers-turned-venture-capitalists, PayPal founder Thiel and his former Stanford classmate and longtime collaborator, LinkedIn founder Hoffman.

The two do share the optimistic outlook that “we could be seeing decades of phenomenal progress in all sorts of dimensions” (Thiel), including “massive transformations in medicine and a cure for cancer” (Hoffman). And though neither has a clear proposal for how to overcome political and cultural obstacles to progress, both have written books—and made investments—that express their ideas about how to innovate. Both billionaires have given much thought to the responsibility their industry has to securing a future made better by technology.

Hoffman, who calls the intersection of biology and computing inevitable, asked, “So what do we do to maximize positive outcomes and minimize negative ones?”

In his new book, “Zero to One,” distributed to all Techonomy 2014 participants, Thiel writes, “We cannot take for granted that the future will be better. That means we need to work to create it today.”

Kirkpatrick called the book a celebration of innovation and an exhortation to try harder and do bigger things, but he and Hoffman challenged Thiel to explain an apparent contradiction: How, as a Libertarian, can he argue that government should fund the development of transformative technology? Thiel said, “If we had a government that spent things, I’d much rather it spend money on basic research than redistributing wealth.” But he sees such forward-looking investment as an impossibility: Polls and voters prioritize redistribution over investment, he said.

Thiel sees a gulf between Silicon Valley and Washington, D.C. “We tend to think questions about science and technology are important topics. People in D.C. don’t even think they’re important. It’s not even that we disagree on the details.”

Hoffman said, “The ability for government to execute intelligently on ‘what do you think your technology strategy should be given that technology pace is accelerating—for example the cost of genetic sequencing is going down, what should you be doing?’—is extremely important but very difficult to make happen.”

Thiel’s take is even more cynical, given that, by his estimate, maybe 35 of 535 people in Congress have any background in science technology: “The rest don’t understand that windmills don’t work when wind isn’t blowing or solar panels don’t work at night,” he said.

Thiel sees big corporations, like big government, as hostile to innovation. “You have startups because large existing institutions—both governmental and large corporations—are too screwed up politically to execute. When we started PayPal, one of the most common questions I got was, ‘Obviously the banks are going to do this; how will you ever compete with the banks?’”

Thiel and Hoffman stressed that the right climate is required to incubate disruptive products. For one, they agreed that innovative companies are led by founders, or at least people who possess “a founder mindset.” Thiel pointed out that the return of Apple’s founder is what brought that company back from the brink, and suggested that if Microsoft wants to recover it should bring back Bill Gates.

But they also agreed that “the system” works against installing visionary leadership. “The system,” Thiel said, “is the Board of Directors, political actors of one sort of another, who like people without rough edges who don’t say controversial things; you’ll get politicians to run these companies.”

Even appointing a chief of innovation is generally useless, Hoffman said. Big companies that want to innovate need to establish small teams answerable only to the CEO to work on projects without political interference from the rest of the company.

Hoffman, whose book, “The Alliance: Managing Talent in the Networked Age,” speaks to how management can keep organizations vital and people creative, suggested assigning innovators to short tours of duty within the organization. He pointed to the way Steve Jobs set up the iPod development team in a room that could be accessed only with their badges, or the way Google’s Android team was isolated from the rest of the company. “It can’t be, ‘we’re creating a strategy,’” he said. “It has to be, ‘we’re doing this’ … ‘we’re building something, empowered by the CEO and no politics.’”

But on that point, too, Thiel’s take is more cynical: “In theory I agree, but we shouldn’t minimize the challenge in practice. I think of people who are able to drive innovation as being weak at political games and processes. The more processes you set up, it seems to empower the wrong people…. Process itself gets hijacked by people who are good at politics and bad at substance.”

It’s why Thiel’s book is subtitled, “Notes on Startups, or How to Build the Future.” Silicon Valley, he said, is “radically countercultural … at odds with what people in the Western world think about future or what they want,” but he believes that “supporting small numbers of people to start new companies and do new things is how you gradually change the discourse of the future.”

To watch the full video of the “Two Friends on Innovation, Obstacles, and Future Revolutions” session, click here. For a complete archive of Techonomy 2014 videos and transcripts, click here.

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