Silicon Valley mints vast new billionaires at an ever-increasing rate. But almost none of them are doing the sort of work on which all technological progress depends.

Peter Thiel thinks that's a big problem.

In conversation on November 9 with his old friend and LinkedIn founder Reid Hoffman at the Techonomy conference in Half Moon Bay, California, the PayPal cofounder and investor zeroed in on inadequate incentives for basic science as a failing of capitalism. While creators of lifestyle apps amass ten-figure fortunes, Thiel said, scientists are expected to expected to live "like monks." 

"When you think about the history of innovation more broadly over the last 200 or 250 years, it's a sobering fact how many creators of inventions, how little of the value they created they captured," he said. "If you're an Albert Einstein and you came up with the theory of general relativity, you don't get to be a billionaire. You don't even get to be a millionaire." 

An outspoken libertarian, Thiel said he'd be open to the idea of government fixing this imbalance by shifting some of its spending toward rewarding scientific research if he thought that was plausible. He doesn't. "That's politically impossible in our system because whether you're on the left or the right, you'll always prioritize utilitarian considerations" like entitlements or education, he said.  

But it's not just shortsightedness that prevents legislators from spending on science, he said. It's ignorance. "I looked this up the other day. Out of 535 senators and congressmen, by a generous estimate, 35 of them have a background in science, engineering or technology, very broadly defined. The rest of them, they don't understand that windmills don't work when the wind isn't blowing or that solar panels don't work at night. When you're dealing with people basically stuck in the Middle Ages, they just change the conversation."

The composition of Congress isn't an accident, he said, but a symptom of a broader cultural bias. "We live in a society in which all the culture, all the politics hates science and technology in all forms," he said. "I watched the 'Gravity' movie the other day. Watching that, you'd never want to go into outer space. You'd just want to be back on a tropical island somewhere." 

If government can't be counted on to take up the slack in scientific innovation, neither are big corporations, Thiel and Hoffman agreed. Unless they're dominated by a strong founder figure like Steve Jobs, big companies are almost always hampered by their boards of directors from doing anything bold, Hoffman said. "The usual action of a group decision is risk minimization," he said. 

The good news: government ignorance plus corporate conservatism equals more opportunity for entrepreneurs. 

"There's something of a mystery why you ever have startups at all," Thiel said. "I think the answer is because large existing institutions are too screwed up, politically." 

Published on: Nov 10, 2014