Life After Google

by George Gilder

  Like Keats’s stout Cortez, high on a cliff in Central America, I found myself staring at the oceanic expanse of a new realm of economics, driven by new forms of money. After all, enabling all economic growth over the millennia had been new forms of money. Mired in the impossibly sticky sloughs of barter, world wealth would be a tiny fraction of what it is. Double-entry bookkeeping had fostered the commercial revolution in Venice. Now the bitcoiners were speaking of “triple-entry bookkeeping” with a new permanent ledger in the blockchain.

  It is indisputable that the invention of money and finance was indispensable for the accumulation of all the world’s fortunes. The worth of money springs from its power to enable and measure trillions of transactions and to store value that is portable over time and space. A true new breakthrough in the technology of money could make comparable contributions.

  I recalled a comment of the venture capitalist supreme, Marc Andreessen, that he sought companies that “accomplish a lot with a little” money. Surely this group of mostly self-funded entrepreneurs fitted the bill. Most of their companies were funded largely by the appreciation of the bitcoins that they were mining, minting, and enabling with their ingenious new software architectures.

  Fitting the bill also was this improbable campus, with its coalition of epistemic Austrian School economists and new-age technologists who in forty-five years had built a world leader in a ravine once filled with sewage amid the beauty and poverty of Guatemala City.

  So there we were at UFM, talking across the globe with Tuur Demeester, back in the heart of the Old World. Twenty-three years old, a buyer of bitcoins at five dollars in 2012, he had partly cashed out near five hundred dollars to fund two companies, an “exchange” called Kraken and a mining equipment firm called Cointerra. Kraken thrived, went on the Bloomberg Terminal, and formed a working bitcoin “bank.” Cointerra died in the bitcoin crash of 2014. Demeester told of the even grander self-funding exploits of Bitcoin Armory, now said to be among the best bitcoin digital “wallets.” Aiming to produce a secure bitcoin wallet, in software, it launched a $100,000 funding round in 2013. The dollars poured in, and in an upside surprise, they actually raised $500,000. They spent $100,000 on the business plan and stashed $400,000 in bitcoins. The $400,000 soared to a bitcoin value of $4 million. Filling their wallet without even writing code, they provided the model for close to 1,500 blockchain companies over the subsequent five years.

  In response to my question about bitcoin-as-Ponzi-scheme, Demeester sneered, “If it were a Ponzi it would crash when it was discredited by setbacks. Bitcoin has endured continual frauds and flareouts and come back stronger every time.”

  I knew it was true—both the shocking setbacks, frauds, and scams surrounding bitcoin and the irrepressible resilience, the cornucopian comebacks stemming from a so-far impregnable core. This was a technology with legs that took it around the world and through bad times to good times to frightening stupendous tenterhooks in the sky.

  Following in the footsteps of the Third World educators, Peter Thiel was supporting an array of blockchain-related startups. Marc Andreessen was leading many of the choice venture capitalists of Silicon Valley into the blockchain fray. Reports from the lushly lubed New York bitcoin entrepreneur Matt Mellon indicated that Goldman Sachs, Morgan Stanley, and an array of other plush old-guard forces are lining up to supply some $500 million more—all raising the piquant possibility that the bags for any so-called bitcoin Ponzi may be Goldman sacks.

  Meanwhile, as Thiel has continually pointed out, U.S. universities bear little resemblance to UFM. A Harvard alumnus and former fellow of the Kennedy School, I received, just before I came to Guatemala that spring of 2014, an announcement from the president of Harvard that she was launching a $400 million fund to dedicate my alma mater and all her science faculties to the cause of combatting climate change. Such efforts, in practice, amount to suppressing energy production with no benefit to the climate.

  Feeding on the air of entitlement of fading upper-class institutions that accomplish “little with a lot” of other people’s funds, the Harvard initiative reflected the increasing inebriation of elite American education. Focusing on stopping progress, barring new power plants, dismantling chemical facilities, mobilizing against Israel, and other reactionary pursuits, Ivy institutions are pursuing the fancies of a declining intellectual and business elite, full of chemophobic nags and luddite lame-ducks quacking away on their miasmic pools of old money as the world whirls past them.

  In the autumn of 2013, just as the chief environmental ministers of Germany and Spain confessed the near-total failure of their once-pioneering programs of cross subsidies, feed-in tariffs, and punitive taxes to promote “alternative energy,” Harvard’s privileged student body jumped on board. They voted by an 80 percent majority for a resolution to cleanse the university’s $500 billion endowment of all investments in companies involved with extraction of carbon-based fossil fuels.

  Demanding disinvestment from Israel, a similar majority of the same students had previously aligned themselves with the egregious “boycott, divest, and sabotage” movement (BDS). Thus they joined the globe’s anti-Semites, some of whom were also lavishing on Harvard their mostly oil-based fortunes. Israel is not only the creative fount of pioneering water and fuel efficiencies that have reduced its total net water usage 10 percent in the seventy years since 1948—while raising output sixtyfold. Israel is also the source of many of the information tools and cryptographic insights that shape the lives of Harvard students day to day, from Facebook post and Google search to cross-campus texting and Kindle stream or Kinect gaming signal. These students could no more support their precious “nego,” low-energy lifestyles without Israel than without oil.

  As I listened to the voices at UFM in Guatemala, by comparison so sane and oriented toward a bountiful future, I could sense a changing of the guard, a historic transition of intellectual and economic leadership from the old American elites to a prophetic new generation in what is often termed the Third World but is rapidly eclipsing America in free zones of the mind, from Guatemala City to Shanghai.

  Yes, even still-despotic “communist” China has grown its private economy so much that its government spending is now under 20 percent of GDP (compared with the United States’ 26 percent). China is in some ways proving more receptive to rebellious thinkers and entrepreneurs than is America. For all its flaws, China now dispenses as much venture capital as the United States does, and it holds three times more initial public offerings. We should not assume that Silicon Valley “has got it made” without China.

  The United States, however, is beginning a comeback, led in part by the new generation of entrepreneurs lured out of the university monolith by Peter Thiel. At the end of October 2017, the Thiel-inspired investment fund 1517 celebrated the five hundredth anniversary of Martin Luther’s Ninety-five Theses, which triggered the Reformation, gathering together hundreds of college-dropout entrepreneurs. Vitalik Buterin’s scheduled speech was canceled at the last moment. He turned out to be too busy—a good sign.

  A few weeks before the event, “The New 95” appeared on the 1517 fund’s blog, The Subversionist. Number 19 reads:

  In 1987, the year Stephen Trachtenberg became president of George Washington University, students paid $27,000 (in 2017 dollars) in tuition, room and board. When he retired twenty years later, they paid more than double—close to $60,000. Trachtenberg made GW the most expensive school in the nation without improving education at all. The degree “serves as a trophy, a symbol,” he said. “I’m not embarrassed by what we did.”

  There are buildings on campus named after this guy.

  Written by 1517’s Mike Gibson, with the help of the fund’s inspirational leader Danielle Strachman, the “New 95” reverberated with the philosophical insights of their sponsor Thiel.

  They were sounding the alarm. The harvest of this system and its horrendous student debt is whole generations driven out of the entrepreneurial economy. “Why
are there some 5,300 universities and colleges in the U.S. but only one point of view?” asked thesis Number 8. Thesis Number 23: “The power of government should not be used to compel everyone to learn the same things in the same way at the same place at the same pace at the same age.” Thesis Number 28: “The problem in schooling is not that we have invested too little, but that we get so little for so much.”

  51. Licensing is a tool to obtain and enforce monopoly. . . . Medical schools, law schools, and other professional schools should drop a college degree as a requirement.

  65. Most published research findings are false. Yup, here’s your footnote. (“Why Most Published Research Findings Are False,” by John P. A. Ioannidis, PLOS, August 30, 2005, https://doi.org/10.1371/journal.pmed.0020124)

  78. Every academic and scientific journal should be open and free to the public. It is much easier to check results for reproducibility with a billion eyes.

  79. Schools are squeezing for profits when they require freshmen at schools like MIT to take intro to computer science classes even though the students have been coding for eight years on their own.

  94. We will be judged by generations to come by what we build, not what we consume. Will it survive time better than its maker?

  95. Education ought to be a mission not merely to instruct the world but to liberate it.

  Yet the universities are focusing on teaching the students how to stop things—pipelines, energy exploration, chemical innovation, new plant forms, new businesses—rather than how to create them. In a sad irony, anti-chemical regulations promoted by the universities have ended up banishing silicon chip foundries from Silicon Valley, and the chip industry has largely moved to China and Israel.

  The academy, already a wealthy pillar of the American establishment, receives with its ideology a sense of entitlement to government support. While tuition and other educational costs soared for decades at multiples faster than inflation and most graduates’ incomes languished, the universities blithely funded their enrichment on the backs of ever more indebted students. Loaded down with debt, young people eschew entrepreneurial activities and even marriage. As business starts stagnate in America, they drift toward socialist dependency.

  Google, the supreme Silicon Valley company, was born in the Gates Building at Stanford, which is full of prestigious professors. It epitomizes the closed and costly merger of university, industry, and government. With former Stanford president John Hennessy, who harvested $360 million from Google shares for the university’s endowment, on its board, Google represents both the best and the worst facets of the marriage of the academy and its commercial progeny.

  64. The more PhDs we mint, the fewer scientific revolutions we seem to have. There are more scientists working today than in any time in human history. It could be that science is harder, or it could be they’re not really scientists.

  1517 and the Thiel Foundation do not merely hurl rhetorical gauntlets. Since the fund’s founding in 2014, it has directly funded scores of companies led by university dropouts and indirectly fostered hundreds of others. The results are coming in.

  Buterin’s Ethereum leads the charge. In July 2017, the Ethereum Enterprise Alliance welcomed thirty-four major corporations to a list already loaded down with names such as Intel, J. P. Morgan, Mastercard, and Samsung. Established to build and extend Ethereum-based standards and architectures, this alliance attests to the broad interest in Ethereum blockchain technology at the highest levels of finance and industry.

  At the end of September of the same year, Toyota, the world’s largest automobile company, announced to the surprise of the experts that it would obtain lidar systems, a key component for its self-driving cars, from Luminar, an unknown Silicon Valley startup funded by 1517 (see Chapter 9). In choosing Luminar, Toyota followed three other leading automobile companies, and Luminar was on its way to taking over the world’s lidar business.

  While Google was building out its giant data centers around the world for Google Brain, 1517 funded Stephen Balaban’s efforts to build compact, cheaper centers that could perform the same functions inside corporations. The Lambda Labs deep-learning machines found an eager response in companies hesitant to upload their most valuable asset, their data, to a centralized server controlled by a competitor such as Google, Amazon, or Microsoft. Three of the giants themselves—Apple, Amazon, and Microsoft—are already Lambda Labs customers, along with many others, including GE and IBM; not to mention MIT, Princeton, and Los Alamos. Balaban sees the larger cloud computing market as a next step. “Down the road,” he predicts, “we will become a distributed computation utility like PG&E, selling our customer’s spare compute cycles on our marketplace. . . .”

  The blockchain transforms the architecture of the Internet from the bottom up. Vitalik Buterin’s Ethereum transforms the network from an array of parochial hierarchies to a global heterarchy anchored in a new model of security. Austin Russell is bringing unique hardware innovations to a Valley full of vain software omnivores and centralized computing evangelists. Stephen Balaban is turning the cloud movement into “rainmaking,” bringing the supercomputer from centralized and subcontracted to distributed and personalized.

  42. The Wright brothers — with a home library, no college degrees, and a bike shop — kicked off the age of flight. Their main competitor, Samuel P. Langley, a professor of mathematics with grants from the U.S. government and the Smithsonian, crashed into the Potomac.

  From one point of view, Thiel’s fellowships are an ingenious way for a venture capitalist to find the most driven, capable, and even impatient entrepreneurial talent in the new generation of students. Thiel’s fortune began with PayPal, but it reached its apogee when he persuaded eighteen-year-old Mark Zuckerberg to move Harvard’s Facebook to Silicon Valley and open it to the world.

  When Internet bulletin boards and social networks such as MySpace were seething with murky anonymity, Thiel saw that what the Internet needed was faces. He sought the accountability of real identities behind Internet posts. He also knew that bearing the largest transformative ideas are often some of the youngest entrepreneurs, from Harvard dropout Bill Gates of Microsoft to Stanford student Larry Page of Google. If you are a venture capitalist with a desire to achieve large changes in the economy and society, a bold focus on youth is critical to success.

  Attracting tens of thousands of applicants each year, the Thiel Fellowship anoints only twenty. Russell in 2013 and Buterin in 2014 were members of early cohorts. Buterin is already well on his way to becoming the Larry Page of the new generation by reversing Page’s top-down revolution.

  Seeing these youths as mere vessels of the ambitions of a venture capitalist, however, would be to miss their importance as symbols and protagonists of a new system of the world. Peter Thiel is known as an entrepreneur and financier, but his deepest calling is visionary philosopher and contrarian critic of the prevailing rule of the academy.

  In welcoming Vitalik Buterin and the other 2014 Thiel Fellows, Thiel said, “We hope [they] inspire people of all ages as they demonstrate that intellectual curiosity, grit, and determination are more important than credentials for improving civilization.” Credentials are the way the old academic order perpetuates itself and its hierarchies. At vast expense, the universities channel students into echoing corridors of an increasingly reactionary educational establishment that imagines that socialist nostrums, identity politics, chemophobia, sterile hedonism, druidical sun-henges, totemic windmills, and great walls of batteries are progressive. To lure them out is a revolutionary act.

  36. There’s no iron law of economics that says tuition should go up — and only up — year after year. By many measures, universities are the same or worse at teaching students as they were in the early 1980s. But now, students are paying four times as much as they did then. Imagine paying more every year for tickets on an airline whose planes flew slower and crashed more frequently, but that spent its revenue on one hell of a nice terminal and lounge ins
tead. Would you put that sticker on your car’s back window?

  Thiel called this an “education bubble” enforced by political correctness. Google’s system of the world reverberates with the ideologies, indulgences, entitlements, and biases of the academy. Thiel and 1517 are summoning the students to rebel against their ideological confinement and think anew.

  They do not condone the idea of a stagnant and complacent America where information companies ossify into a few giant keiretsu, business-starts shrink, IPOs shrivel, and creativity languishes. Nor should the rest of us.

  The world will not wait.

  CHAPTER 20

  Neutering the Network

  Do you feel alone when you go on the Internet? You traipse from one website to another, lonely in the cloud, joined but not jostled by an unseen throng. They are visiting the same pages at the same time, reading the same news, watching the same performers. Invisibly they share your interest in trail races or tax rates or Leonard Cohen or Information Theory or track and field or Joan Didion or network processors or March Madness or Art Tatum or beautiful women or Yo-Yo Ma or the Federal Communications Commission or mountain scenery or the blockchain. The throngs are with you but unreachably apart. Most of the time you are uninterested in the others. But from time to time, wouldn’t it be gratifying to find kindred voices on the Web?

  Pages with comment sections reflect this loneliness and reaching out. You can feel it in the intensity of the responses and the attempts to address other commentators in a stunted dialog in text. As Leonard Cohen says in his song, it’s “almost like the blues.”

  I am having dinner with Daniel Berninger, who wants to tell me about his efforts to help and his government’s resolve to stop him. If they can block him from pursuing this small step for the Internet, he believes, they also can stop new generations of technology across the board. Under threat today is the $300 billion wireless transformation under the new fifth-generation architecture of 5G and the now ascendant blockchains of life after Google.