Peter Thiel thinks we're in irrational exuberance, crazy edition

By Razib Khan | April 12, 2010 6:56 pm

Below I referenced a talk that Peter Thiel gave at the Singularity Summit 2009. In the Q & A I recall that Thiel was skeptical that we’d head into another irrational bubble craze after having gone through two speculative boom & bust cycles in less than 10 years. My friend Michael Vassar points me to an article in Wired from January where Thiel asserts that we are in a bubble. Either I don’t recall correctly, or he’s changed his mind. Here’s the relevant part:

Wired: You’ve had a rough year. The stock market rallied strongly, and Clarium Capital bet the wrong way.

Thiel: I think we’re back to a zone of irrational exuberance.

Wired: Like before the Internet bubble burst?

Thiel: I think it’s maybe even more irrational because there’s no story about the future. At least in ‘99 there was a story.

In ’99 there was a story based on something concrete, the internet. In the aughts we had a fake story. Now we’re down to no story. Well, at least above the board. If you haven’t you might be interested in listening to this week’s This American Life, which chronicles the market manipulation which one hedge fund engaged in, and which bankers allowed them to get away with because it was in their private (as opposed to corporate) interest. Some people can make money off bubbles, even if aggregate utility is less after than before.

CATEGORIZED UNDER: Economics
MORE ABOUT: Bubbles, Magic Carpets
  • XXL

    Thiel is a guy who has a lot of contempt for democracy, and for poor people and women, who vote against his libertarian interests[1]. So he wants to “escape” American democracy by building sovereign artificial islands (he’s an investor in the Seasteading Institute[2]). He also (probably) funded the James O’Keefe documentary that falsely portrayed some ACORN employees as giving advice on running a child prostitution ring, which led to the (temporary) federal defunding of that organization and nearly to its bankruptcy[3]. Well, if you know you’ll never realize your libertarian utopia in this democracy, at least you can mitigate the “damage” by embarrassing an organization that registers so many poor people, minorities, and women, who vote against your interests.

    I used to think that he was a shrewd investor and must have known what he was buying with the $10,000 that he gave to O’Keefe. Now I’m not so sure he’s that shrewd.

    1. http://www.cato-unbound.org/2009/04/13/peter-thiel/the-education-of-a-libertarian/
    2. http://seasteading.org/stay-in-touch/press-releases/peter-thiel-offers-100000-matching-donations-tsi-makes-grant-250000
    3. http://www.businessinsider.com/paypals-peter-thiel-funded-acorn-sting-2009-9

  • http://lyingeyes.blogspot.com ziel

    Thiel is a guy who has a lot of contempt for democracy, and for poor people and women, who vote against his libertarian interests

    Well, know sense listening to him, then.

  • Chris T

    Perhaps we have seriously underestimated the potential of the transistor revolution. I personally think the computational and information revolution of the last thirty years was a major cause of the financial crisis (in quite a few ways).

  • Russ

    Peter Thiel is interesting if nothing else. His hedge fund is famously unsuccessful. But, can anyone point me to another silicon valley-er where lightning has struck twice (Paypal and Facebook). If he is responsible for the O’Keefe thing then it shows that he really does know how to leverage his money.

  • http://lyingeyes.blogspot.com ziel

    I’m banning myself from commenting for two weeks after that gross error in the above comment.

    Except I’ll add to what Chris T says that computers allowed for huge productivity increases in the 70′s and 80′s by eliminating the need for legions of clerks for bookkeeping and compiling data for basic analytics. But of late, it seems all information processing is used for is to support competitive one-upsmanship (creative finance and data-mining customer records) rather than increases in real output. Now for manufacturing, that’s obviously not true, but for the financial industry, it’s been a source of much trouble.

  • Chris T

    Most of the productivity increases actually came after 1995 (hence why manufacturing production continues to increase while employment goes off a cliff). Generally, automation works best when you don’t actually notice it’s there.

    Information processing itself has revolutionized science and engineering (although the actual scientific process hasn’t really kept up with the advances). Most of our current science would be impossible or come about much slower without it.

  • Al

    @XXL

    Thiel’s a libertarian, with strong views about the role of government and politics. But by no means does that add up to a contempt for poor people or women…more like bailed-out banks and abuses of power. Give this a spin: http://www.cato-unbound.org/2009/05/01/peter-thiel/your-suffrage-isnt-in-danger-your-other-rights-are/

    “While I don’t think any class of people should be disenfranchised, I have little hope that voting will make things better.

    “Voting is not under siege in America, but many other rights are. In America, people are imprisoned for using even very mild drugs, tortured by our own government, and forced to bail out reckless financial companies.

    “I believe that politics is way too intense. That’s why I’m a libertarian. Politics gets people angry, destroys relationships, and polarizes peoples’ vision: the world is us versus them; good people versus the other. Politics is about interfering with other people’s lives without their consent. That’s probably why, in the past, libertarians have made little progress in the political sphere. Thus, I advocate focusing energy elsewhere, onto peaceful projects that some consider utopian.”

  • http://lablemming.blogspot.com/ Lab Lemming

    Have any of these market valuators tried applying their formulae to the price of gold? After all, gold has more than tripled in value since 1998. However, there has been no noticeable increase in productivity; a troy ounce of gold still contains 9.5×10^22 atoms with 79 protons and 118 neutrons.

    So some of the recent run up in US securities could just be flight from Europe and a realization that there is nowhere better to invest.

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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at http://www.razib.com

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