Why Peter Thiel is Wrong about Innovation

During every period of technological innovation, the world around that innovation was inhabited by the free market and competition, not a monopoly.

Ma Bell had a strangle-hold on telephones for over a hundred years. When I was a kid, we still had rotary phones we had to rent from the phone company. Once Ma Bell was broken up by the justice Department in 1984, innovation exploded: rotary moved to push-button dialing; cord led to cordless; landlines led to mobile.

There was no monopoly on buggy makers in the early 1900’s that led to the automobile revolution, it was a complete free market.

The space race didn’t evolve from an airplane monopoly, but from a competition with Russia for global supremacy.

The internet came out of a need for faster speed of delivery of content, but we had options like UPS and Fedex, competition for the US Postal Service.

The mitigating factor in all of these innovations was the lack of profits earned by the free market companies. Peter is correct in observing that monopolies have more money to be creative with, but just like the current ISP problems America shows, record profits don’t lead to innovation as ISP service in the U.S. falls well behind other countries like Japan, South Korea, the Netherlands, and Ireland in terms of connectivity speed per capita. Google’s search tool is an example of how lack of competition is terrible for innovation. While Google innovates in other areas (like self-driving cars), the basic search function that is synonymous withouts name hasn’t evolved for a decade; I still face the same search issues I did 10 years ago like trying to search for a topic I’m not entirely sure how to compose. just yesterday I had to reword a search over a dozen times to figure out how to create a podcast on Youtube with multiple hosts in multiple locations with one of our computer screens being the background. I still haven’t found a suitable search result to help make it work. (And let’s be honest, Bing and Yahoo aren’t worthy alternatives). Facebook and Twitter have no competition and Russia manipulated them with ease because they’re still the same platforms they were ten years ago because they have no competition.

Monopolies don’t innovate, they stagnate.

Again, Peter is correct when he claims that Free Market produces less profits for the players in the market. But less profits create a fear for survival and that fear of survival drives innovation and creativity. Fear of survival creates 0 - 1 companies.

Peter’s own company, PayPal, emerged when there were four major credit card companies to choose from, all of which offered the same service with the same interest rates with similar perks. I’m sure Peter looked around and thought, why create another credit card company when profit margins are so low and the amount of capital needed to muscle into the space would be so high. By creating a new 0 - 1 company, he was able to side step the free market to create a new market place, that has also stagnated, being just one of the reasons for the growth of blockchain and cryptocurrency.

Ultimately, monopolies stifle innovation; free markets and competition help innovation thrive.