Peter Thiel’s Pursuit Of Technological Progress; It’s Not About Democracy and It’s Definitely Not About Capitalism – Part 2

In feedback to my paper, Professor Andreas Glaeser said, “I find your most interesting idea to lie in Thiel-fellowship workers as representatives of an entrepreneurial proletariat of sorts. Or, to put it in another metaphor, Thiel as the orchestrator of entrepreneurial hunger games in a world that is the iron cage to the square.”

Professor Glaeser is referring to Max Weber’s “iron cage”.

From “Mad Max: Escape From The Iron Cage” on the blog Philosophy for Life by Jules Evans.

Max Weber once suggested our society was haunted by the ghosts of dead religious beliefs. Sociology is more haunted than most. For the last century and a half of its existence, sociology has repeatedly told us that the rise of capitalism and decline of religion has left us lacking community and miserably alone. The great sociologists have found many different ways of describing the prison of modern isolation. Weber suggested we are trapped in ‘the iron cage’ of capitalist productivity; Emile Durkeim wrote that we have lost the capacity for ‘collective effervescence’ and are suffering from suicidal ‘anomie’; while Thorsten Veblen and Norbert Elias both insisted that we are imprisoned in an over-civilised concern for the approval of strangers. Our lives have become boxed-in and one-dimensional (Herbert Marcuse), our characters are corroded by the rat-race (Richard Sennett), we are cut off from nature and each other (Charles Taylor), we no longer dance together (Barbara Ehrenreich) or even go bowling together (Robert Putnam).

Here is Part 2, “Peter Thiel’s Iron Cage and Why He Wants You To Jump In”.

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The motto for Thiel’s movement could be “Tune in, turn on, and drop out.” Thiel, who prides himself on being an original, actually sounds quite a bit like 60’s counterculture guru Timothy Leary. Thiel takes pride in his position as a contrarian, even when those positions cause him to lose billions. So it’s interesting Thiel shares counterculture hero Leary’s interest in activating “neural and genetic equipment” and in discovering one’s “singularity”.

From Flashbacks(i) by Dr. Timothy Leary:

‘Turn on’ meant go within to activate your neural and genetic equipment. Become sensitive to the many and various levels of consciousness and the specific triggers that engage them. Drugs were one way to accomplish this end. ‘Tune in’ meant interact harmoniously with the world around you – externalize, materialize, express your new internal perspectives. ‘Drop out’ suggested an elective, selective, graceful process of detachment from involuntary or unconscious commitments. ‘Drop Out’ meant self-reliance, a discovery of one’s singularity, a commitment to mobility, choice, and change.

Dr. Timothy Leary, unlike Thiel, had a bumpy start to his education, but ended up at the top academically anyway. Leary attended Holy Cross College, West Point and the University of Alabama, and left each before finishing. He earned a bachelor’s degree in the Army during World War II and then a doctorate in psychology from the University of California at Berkeley. He taught at Berkeley and then joined Harvard’s faculty in 1959. In a short video, Leary lays out a philosophy that sounds a lot like what Thiel has been promoting.(ii)

We tell young people today ‘Drop out of school’ because school’s education today is the worst narcotic of all. ‘Don’t politic. Don’t vote.’ These are old men’s games. Impotent and senile old men that want to put you on to their old chess games if war and power. ‘Drop out’. Tune in with the natural things. Take off your shoes. Get back in time with God’s harmony. Surround yourself with beauty and sacred objects. We can’t get caught in the rote conforming lockstep we call American society.

Leary’s New York Times obituary(iii) says he, like Thiel, was obsessed with the process of death and of doing everything he could to avoid dying.

Mr. Leary became fascinated by death, both by the near-death, out-of-body experience and by the social controls surrounding the dying. In his last book, “Chaos and Cyber Culture” (Ronin Publishing, 1994), which skewered “the priests and mullahs and medical experts” who “swarmed around the expiring humans like black vultures,” he wrote, “The time has come to talk cheerfully and joke sassily about personal responsibility for managing the dying process.”

Thiel’s most famous contrarian initiative is probably the Thiel Fellowship, a $100,000 grant that encourages “some of the world’s most creative and motivated young people” to “bring their most ambitious projects to life.”

That means dropping out of college. Thiel launched the program in 2010, after coming up with the idea the night before a start-up conference. What’s wrong with higher education? Thiel told the conference attendees it’s too expensive, encourages conformity, and teaches nothing about entrepreneurship.

The Fellowship is a great example of Thiel’s approach, and the technology industry’s typical response, to intractable problems they can’t quickly and easily solve —ones that require political engagement with people who may not be, in their opinion, as smart or creative as they are or driven by same market incentives. It’s easier, with the right amount of money, to walk away from the existing system and create a parallel universe—for-profit charter schools for example—than engage in the political process to effect positive change. The Chronicle of Higher Education reviewed the results of the Fellowship’s fellows since the first class five years ago.(iv)

If you add up the work of the four classes of fellows—83 people in all—their ventures have raised $72-million in investments and produced $29-million in revenue, according to the foundation. Those who have sold their start-ups have brought in $17-million. (Two left the program early, and six others returned to their studies when their fellowship ended).

Regardless of the as yet unrealized practical financial advantage for students in taking Thiel’s advice, the higher education establishment did take notice. There are many outspoken critics of his program and the higher education establishment did some innovation of its own. Universities started or expanded their own entrepreneurial programs.

Stanford University created StartX, an accelerator for student entrepreneurs. At the Wharton School, Entrepreneurship & Innovation is one of four sub-fields of scholarship within the discipline of Management. The University of Southern California offers 23 entrepreneurship-related undergraduate courses and says that over the last five years, its graduates have started 250 companies.

(Thiel would dismiss these attempts to compete with his initiative, since universities not reestablishing the monopoly they once had, but merely attempting to take back some advantage lost from his initiative.)

Thiel’s Fellowship initiative has a self-serving side. Thiel, regardless of his investments in “The Singularity” and in anti-aging technology, will not live forever. The venture capitalists like Thiel who feed off the start-up culture need hungry “entrepreneurs” to code software now, not four or six years from now or maybe ten years from now after a Ph.D.. Every year that bright creative people spend in college and not hacking and disrupting are years they’re not creating above-average returns for Peter Thiel. The money spent by Thiel up front to incubate one hundred ideas is worth it for the one or two grand ones that may develop.

It’s perhaps just another way for elites to start exploiting labor sooner. Why waste time in school becoming educated to think like Stanford undergraduate and law degree holder Thiel? Easier to get funded by Theil, at age 18, to “Do” now. Peter Thiel will do the thinking for you.

Until the 2008 financial crisis, mention of Karl Marx in mainstream media or economics was met with derision. The fall of the Soviet Union, in particular, was seen as proof that Marx was wrong and a “crisis of overproduction” was merely the wishful thinking of the few who couldn’t see that capitalism had triumphed. Capitalism may not the best system for everyone but the consensus was it’s the best of what anyone had to offer.

Slow growth and low or disappearing profit margins are the bane of capitalism. When companies cut workers to boost profits they risk choking the very consumers who need wages to buy products. We’re now seeing over-production and under-consumption in goods like automobiles and housing.

In an essay for Bloomberg View in 2011(v), George Magnus, a senior economic analyst at UBS, describes policy makers “struggling to understand the barrage of financial panics, protests and other ills afflicting the world”. Magnus wrote that “today’s global economy bears some uncanny resemblances to what Marx foresaw.”

In Das Kapital Marx wrote:

The growing incompatibility between the productive development of society and its hitherto existing relations of production expresses itself in bitter contradictions, crises, spasms.(vi)

Magnus writes that this is now what is occurring throughout the developed world.

Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant. U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost. (vii)

How did this happen and was Marx right? Even Nobel Prize winner Paul Krugman admitted in 2009 “that the last 30 years development in macroeconomic theory has, at best, been spectacularly useless or, at worst, directly harmful.”(viii) Marx held that conflict was necessary to achieve progress. Dialectical materialism predicts that not only will capitalism fail, it will die a violent death at the hands of the proletarian laborers.

Marx’s materialist philosophy, asserting the primacy of the material world, is an alternative to Hegel’s idealism. His labor theory of value (LTV) argues that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it.

David Graeber, the anthropologist and a founding member of the Occupy Wall Street movement, wrote in 2012 that Peter Thiel has good reason to be disappointed in the accomplishments post-war technocrats. Instead of building robots, capitalists continue to chase the least common denominator of labor cost all over the globe.

Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization’s effect is to drive down the general rate of profit.

For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.(ix)

If only we could solve this slow growth problem overhauling the education system or teaching people to code or something more dramatic like Thiel’s “drop out and make apps” approach. In the end, it’s all about the demand curve, says Larry Summers(x).

The core problem is that there aren’t enough jobs. If you help some people, you could help them get the jobs, but then someone else won’t get the jobs. Unless you’re doing things that have things that are effecting the demand for jobs, you’re helping people win a race to get a finite number of jobs. (…)

Folks, wage inflation in the United States is 2%. It has not gone up in five years. (…)

I think that the broad empowerment of labor in a world where an increasing part of the economy is generating income that has a kind of rent aspect to it, the question of who’s going to share in it becomes very large. One of the puzzles of our economy today is that on the one hand, we have record low real interest rates that are expected to be record low for 30 years if you look at the index bond market. And on the other hand, we have record high profits. And you tend to think record high profits would mean record high returns to capital, would also mean really high interest rates. And what we actually have is really low real interest rates. The way to think about that is there’s a lot of rents in what we’re calling profits that don’t really represent a return to investment, but represent a rent.

The question then is who’s going to get those rents? Which goes to the minimum wage, goes to the power of union, goes through the presence of profit sharing, goes to the length of patents and a variety of other government policies that confer rents and then when those are received, goes to the question of how progressive the tax and transfer system is.

Part 3 on Monday.

(i) Leary, Timothy. Flashbacks, an autobiography. JP Tarcher, 1983.

(ii)

(iii) Mansnerus, Laura. “Timothy Leary, Pied Piper Of Psychedelic 60’s, Dies at 75” The New York Times, June 1, 1996.

(iv) McMurtrie, Beth, “The Rich Man’s Dropout Club”. The Chronicle of Higher Education. February 8, 2015.

(v) Magnus, George. “Give Karl Marx A Chance To Save The World Economy”. Bloomberg View. August 28, 2011.

(vi) Tucker, Robert C., ed. The Marx-Engels Reader. Norton, 1978.

(vii) Magnus, George. “Give Karl Marx A Chance To Save The World Economy”. Bloomberg View. August 28, 2011.

(viii) Quoted by The Economist from Paul Krugman’s LSE Lionel Robbins Lecture of 10 June 2009 http://cep.lse.ac.uk/_new/events/event.asp?id=93

(ix) Graeber, David. Of Flying Cars And The Declining Rate of Profit” The Baffler. Issue Number 19, 2012.

(x) Summers, Larry. “The Future of Work in the Age of the Machine”, Remarks by Larry Summers, www.HamiltonProject.org. February 19, 2015