Sunday, February 19, 2012

Affirmative Action

Peter Thiel undoubtedly has made some clever investment decisions, notably co-founding Pay-Pal and buying in on Facebook very early. According to Wikipedia, he also seems to have managed to blow most of seven billion in some currency market speculations, but most of that may have been other people's money.

Newsweek columnist Niall Ferguson begins his drooling paean to Thiel like so:

Damn. Peter Thiel is smarter than I am.

The list of people smarter than Niall Ferguson is a not a short one, but what really impresses him is that Thiel is really rich. He is also pretty impressed that Thiel is a libertarian, and has some thoughts on how the world ought to be organized.

Ferguson seems to be an economic history professor at Harvard, perhaps the beneficiary of some affirmative action program to hire more right-wing Brits.

Ferguson interviewed Thiel:

I ask him why he thought that for the past 30 years innovation has been so narrowly concentrated in technology and finance, with miserably little progress in, say, energy. “Everything else is being regulated to death,” he replies. “From a libertarian perspective, with regulation we have become a much more risk-averse society.”

Thiel may or may not be a genius, but this is silly. There are a few reasons why energy isn't seeing a lot of progress, but regulation is among the least important. Calling what has occurred in finance "progress" is at best an exaggeration, and progress in energy will only come with progress in technology.

A technology can't develop before its time. We humans have been working on energy technology for roughly a million years, and progress has mostly been slow, despite a lack of government regulation (and government) for most of that time. The areas of rapid development in the nineteenth century stemmed mostly from understanding of the laws of thermodynamics and chemistry. The twentieth century owes most of its progress to electricity and electronics. The most rapid progress since the middle of the twentieth century has come directly from the transitor - that child of quantum mechanics.

Progress in other areas will be likely depend more on the technological and scientific foundations for such technologies than on government regulations.