The Perils of Popular Entrepreneurship

Earlier this month in The Daily Reckoning email edition, we highlighted four distinct views, or paradigms, that try to explain what the future holds.

To review, Oxford University philosopher Nick Bostrom, in a 2007 paper entitled The Future of Humanity, discusses four possible futures for humanity. They are: recurrent collapse, plateau, extinction or posthumanity. Each one is summed up well at the end of PayPal founder Peter Thiel’s bookZero to One.

We recently spoke with Theil’s co-author on that book, Blake Masters. Part 1 of our conversation is below. But first, let’s review the four possibilities they both summarize…

The first is recurrent collapse, which looks something like this:

REC_06-04-15_Collapse

This is the ancient view of the way the world works and what the future holds. “The ancients” explains Thiel in his book, “saw all of history as a never-ending alternation between prosperity and ruin. Only recently have people dared to hope that we might permanently escape misfortune, and it’s still possible to wonder whether the stability we take for granted will last.”

Moving along… Bostrom next considers a plateauing future. As you’d guess, that’d look something like this:

REC_06-04-15_Plateau

“Conventional wisdom,” continues Thiel in Zero to One, “seems to assume instead that the whole world will converge toward a plateau of development similar to the life of the richest countries today. In this scenario, the future will look a lot like the present.” Today, in particular, this paradigm seems appropriate. To go full “doom pornographer,” though, we need to show you our third visual. Bostrom’s next consideration for humanity is total annihilation.

REC_06-04-15_Extinction

“Given the interconnected geography of the contemporary world and the unprecedented destructive power of modern weaponry,” relates Thiel, “it’s hard not to ask whether a large-scale social disaster could be contained were it to occur. This is what fuels our fears of the third possible scenario: a collapse so devastating that we won’t survive it.”

We’ve left the rosiest for last. Bostrom calls the fourth possible future “posthuman,” but Peter Thiel, summarizing it in Zero to One, calls it “takeoff.” Sort of like this:

REC_06-04-15_Takeoff

According to him, it’s the “hardest one to imagine.” And by that, he doesn’t mean it’s the least likely. “The end result of such a breakthrough,” writes Thiel, “could take a number of forms, but any one of them would be so different from the present as to defy description.”

It’s a future “in which we create new technology to make a much better future. The most dramatic version of this outcome is called the Singularity, an attempt to name the imagined result of new technologies so powerful as to transcend the current limits of our understanding.”

As you read on, keep each of these four paradigms in mind. We spoke with Blake Masters — co-founder of Judicata and co-author of Zero to One with Peter Thiel — about which future he thought was likely, how we’d get there and how it would change the way you work and play.

“I was a student,” explained Masters, in preface:

“it was my final year of law school in spring of 2012, and Peter Thiel came and taught a class. It was just called ‘Startups’ — it was an undergraduate computer science class.

“But I’d actually taken another class with him the year before and got to know him. I interned for him that summer of 2011. So we kept in touch. He’d become sort of mentor-type figure, and he reached out and said, ‘Hey, I’m teaching this class on startups. So you should take it.’ And I did and basically wrote down everything he said.

“Then, I thought to myself, Well, I should edit this, and it’d be a shame if only I had access to it. Maybe other people would find it interesting, too. So I just threw it online, thinking that some people would definitely find it interesting and valuable. I was blown away with the response, and it quickly became something that a lot of people in Silicon Valley began to pay attention to and anticipate the twice-weekly updates. Never before had you been able to hear what Peter Thiel had to say or what he thinks about the startups in one location.”

Today, those notes have been edited into their book, Zero to One: Notes on Startups, or How to Build the Future.

Read on for part one of our discussion…

Peter Coyne: Blake, welcome to The Daily Reckoning.

Blake Masters: Glad to speak with you. Thanks for having me.

Peter Coyne: In Zero to One, which you wrote with Peter Thiel, you outline four possible futures for humanity. We’ve already outlined them for our readers. Did you and Peter ever discuss which one you thought was most likely?

Blake Masters: I think most people believe in some sort of plateau argument. When people think about the future they think it’s going to look a lot like the present — in the same way that maybe the present looks a lot like 1955, except with progress in sort of civil rights and social justice on the one hand, and better gadgets and the Internet on the other hand.

I’d say that’s the one — the idea that the status quo is sustainable without new technology — that’s most certainly going to be wrong. I mean you’ve got literally billions of people living overseas in relative poverty compared to us in the West. They are dreaming of American quality lifestyles at this point. And they’re not content to stay poor, and they shouldn’t be, and there’s simply not enough wealth in the world to redistribute to current Western standards.

This idea that you can have a future that’s conflict free and that looks a lot like today is, I think, almost narcissistic from a Western perspective. So, I know that’s not going to happen.

The recurrent collapse, or this idea that we could lose everything but then build it back up again in these endless cycles, it actually does seem unlikely to happen.

Today we have massively decentralized storage systems. I mean the power grids and systems like them are very fragile, but it seems hard for humanity as a whole to lose a lot of the knowledge that we’ve built up in the last two or three centuries.

That sort of leaves singularity takeoff where the future gets really, really good; or leaves this sort of in-decline extinction model, that it’ll get really, really bad. And so, I don’t know which one it’s going to be, and I actually don’t think it’s preordained.

I think it really could be either. The big question is sort of — and maybe this is too political of a way of framing it, but technology versus politics. If politics is about redistributing what exists or sort of low-level conflict about the status quo and technology’s about creating new things, then the question is, “Are we going to create new things in abundance faster than we’re gonna sort out conflict with each other and try to just work with the status quo?”

If we can sort of escape that then I think things will look really good. And if not, it’s just going to be a century of decline.

Peter Coyne: In the book, you and Peter Thiel describe two types of progress: horizontal and vertical. Horizontal progress means copying things that work like when you take one typewriter and build 100 of them. Vertical progress means doing entirely new things, like when you have one typewriter and build a word processor. Are you hopeful that more vertical progress will be made or that, taken as a society, we’re focusing too much on horizontal progress?

Blake Masters: I wonder if both can be true even. I mean I think it’s definitely true that as a society if you generalize, most people focus on horizontal progress. When they think of progress they think of China industrializing or putting more McDonald’s in Shenzhen or something else.

It’s hard to imagine vertical progress on the other hand because, by definition, you’re imagining something that doesn’t exist yet. And that’s just really hard for most people. Society, as a whole, is definitely geared towards horizontal progress — taking stuff that exists already and just making more of it.

But maybe you don’t even want a society that is mostly innovative or something close to it. What would it mean for most people to be engaged in the enterprise of creating new things? So, I think that’s fine.

The danger is that it becomes such a pervasive climate that the people who could innovate, or were going to innovate, or could ever innovate, don’t actually do that work. That’s the big. I think the people doing new things in a society, frankly, it’s always going to be a minority. I think it always has been a minority of people in the past, working together, mostly in small groups, sometimes in bigger groups, to really change the world in enough time.

Are we getting enough of that? I think you’re seeing some of that in Silicon Valley. I think you’re seeing some of that elsewhere. So, I think there’s reason for hope; though I don’t think we’re seeing enough of it.

When look at Silicon Valley, there are all of these smart and creative people that are working on mostly derivative applications or something like that. It’s tricky, because you never quite know what silly-looking thing — you know, Twitter looked really dumb in 2008-2009.

You do get these things and you don’t want to write off all these startups just because they look silly, but at the same time, you do wonder if enough people are pursuing the really hard tech problems that really promise to relieve huge burdens on humanity if they get solved.

I don’t think enough people are doing it, but I think it was always going to be a minority anyway. Merely pointing to the fact that most people are engaged in sort of horizontal progress, it doesn’t alarm me too much. I mean horizontal progress is good. The point is, we need both, and we need the right combination of both.

Peter Coyne: What do you think could cause a kind of shift in new thinking about innovation or tackling the hard problems you mentioned?

Blake Masters: It’s really hard to say. You know, I’ve thought a lot lately about how “entrepreneurship” is becoming sort of a buzzword. You’re meeting more and more people with business cards that say “entrepreneur.” It’s becoming popular and there’s good aspects and bad aspects of that.

The bad aspects are that people are maybe mimetically flocking towards being entrepreneurs. It’s like a fashion statement; it’s cool. Whereas great entrepreneurs have been someone who doesn’t care about being an entrepreneur, Mark Zuckerberg, Bill Gates — I mean, they weren’t like, “Hey, what cool businesses can I start?” They were technologists who hit on something and then built a great business.

I do worry about the shift towards the popularization of entrepreneurship. The more people that flock to the same concept and say, “I’m going to do something new,” becomes like the Monty Python movie Life of Brian, where they’re all chanting together, “We are all different; we are all individuals.” There’s just something ironic about it.

The flipside is, most people who are running around with a business card that say “entrepreneur” aren’t actually going to do anything new, or they’re not gonna spur the new thinking that’s going to create some new industry.

But you do wonder if the opportunity costs in the past is having entrepreneurship deemed really risky, or kids stay in school sort of and then double down and go to grad school instead of trying to start something new themselves.

As the culture changes, it gains acceptance. Now it’s fine; it’s not being as crazy to drop out and do — and start a new thing. Everybody’s working on a side project here in Silicon Valley that they hope will be the next Facebook or something.

It’s like even if most of these people turn out to be wrong, I think we can celebrate actually a culture in which most people actually are warming up to this idea that we need to do things. So, I think it’s creating a climate where new things are possible, even if there’s some sort of silliness associated with that.

Where it actually come from, I’m not sure, but people first need to feel free to be uninhibited in their thinking. And so, I think we’re heading mostly in the right direction in that respect.

Peter Coyne: You were talking about “entrepreneur” being a buzzword. In Zero to One you both write that “disruption” has become a buzzword too. “Creative destruction,” to borrow Joseph Schumpeter’s term, is another phrase that’s bandied about.

Even though these buzzwords can be annoying, don’t they still represent desirable actions in the economy?

Blake Masters: I totally agree. And I agree that disruption is the technical term that describes this process where big companies get overtaken by small companies with inferior products. That’s a real phenomenon.

I think Clayton Christensen truly brought a new idea and articulated it in a way that no one had quite done before. In Zero to One we’re more pointing to the abuse of the word, in the same way that I think The Lean Startup book is a valuable tool in an entrepreneur’s arsenal. But I think people have basically gotten carried away with it and abused it. And I suspect Clay Christensen would agree. But if it loses substance, and becomes a buzzword which merely points to this idea, then it becomes more of a fashion statement than an actual description.

I mean the thing we say about great monopoly businesses is they’re rarely permanent. I mean it usually does take a patent or government privilege of some sort to have a perpetual monopoly. Most of the great businesses can secure monopoly profits for a few decades, but maybe the founders die, or they step down. They’ll get to Microsoft’s point or something like that.

And then there’s a new wave of technologies, a new wave of companies that come along to sort of move things forward.

So, I think monopolies are bad in a static world. They’re great in a dynamic world when they do replace each other. That means there’s something to this idea of creative destruction and disruption. The problem is just that those can become buzzwords that become excuses for doing what everyone else is doing.

An entrepreneur might say, “Oh, I’m going to work on this healthcare IT startup, even though everyone else is doing it, because this industry ‘really needs to be disrupted.’” And so, it becomes sort of an excuse for you to participate in something that maybe doesn’t make that much sense on the merits.

You get the sense that every creative destroyer, every disruptor is actually — that’s not their primary goal. You know, they’re just trying to do the best thing they can, and the consequence of that is some paradigm shift. So if you set out to create a paradigm shift either intellectually or in business, it almost seems like you’re less likely to actually do it, because that’s too meta of a goal.

Peter Coyne: Right — thanks. This is a good place to stop and pick up at tomorrow. Thanks again, Blake.

If you haven’t yet, you should order a copy of Zero to One and study it closely. Blake will explain why it’s essential reading no matter if you’re an employee… a business owner… and investor or just someone trying to be successful in a hobby or everyday endeavor. We’ll have more tomorrow on that tomorrow, but in the meantime, please click here and grab a copy now.

Regards,

Peter Coyne
for The Daily Reckoning

P.S. We highly recommend grabbing a copy of Zero to One. You can grab yours right here on Amazon.