Peter Thiel & Max Levchin: "Silicon Valley Lacks Radical Innovation"

http://www.siliconvalleywatcher.com/mt/archives/2011/02/top_paypal_alum.php

by gatsby • 15 years ago

61 73 15 years ago

Max Levchin: Groupon is probably under-valued. The fastest growing company ever. I came across a startup recently that had a Powerpoint and no engineers, no product and it had a $16 million valuation. That's an over-valued company.

Interesting how different his opinion of Groupon's valuation is from the prevailing sentiment.

loire280• 15 years ago

Groupon has had pretty huge revenue growth and is currently bringing in some hundreds of millions of dollars a year in revenue.

Skepticism about the ability to maintain that growth rate, and the suspicion of many (especially here) that they're burning bridges with the companies they work with put a high valuation in doubt, but that's a matter of opinion at this point. Evidence that Groupon is having any trouble finding partners to offer coupons is so far anecdotal.

I never thought there'd be this much money in coupons, but so far it looks like it's a great business model. It wouldn't shock me if those valuations were true.

dreamux• 15 years ago

I think one of the big reasons you don't see startups changing the world anymore is that the name of the game has changed from 'go public' to 'get acquired'. Many game changing technologies that big companies have released in the past 10 years (since the dot-com crash) have been through acquisition. With the IPO market now completely stagnant, its nearly impossible to aim for a public offering... and your investors want an exit.

Its not about changes in innovation, its about changes in exit strategy.

jonny_eh• 15 years ago

Is this a problem just in the US? Why don't we see more tech IPOs in other countries such as Canada?

yummyfajitas5• 15 years ago

Canada lacks the startup ecosystem (so few homegrown IPOs), and changing countries is tricky.

Moving your flag while keeping your offices in the US is even trickier - you run into risks like double taxation (e.g., paying taxes on profits in Canada, then paying taxes in the US when you move the money from Canada to the US).

Also, the benefits of being traded on TMX are not as large as the benefits of being traded on NASDAQ. Lower liquidity, the "huh?" factor, etc. That could change if many companies move to TMX, but there is a Chicken&Egg problem here.

juiceandjuice• 15 years ago

I'm not one to bash software, but software only goes so far in radical innovation.

I think the reason you don't have the radical innovation is because everything has tipped heavily towards web and consumer/convenience oriented innovation. This isn't a bad thing, the costs for writing code are much smaller than R&D costs for most anything else, and it puts people to work and solves problems.

There are still some companies like Tesla/SolarCity in the valley (or technically, on the East bay) changing the name of the game, but even Tesla is valued less than Groupon, for instance.

pnathan• 15 years ago

I think this is one of the key factors: most of the buzz today is orienting on what amounts to entertainment for the moneyed. Since the moneyed, well, have money, they buy it, and thus the company does well.

What makes my life 1% more fun does nothing for someone in a third-world country. This is compared to, say, 50 years ago, where something that made my life better, e.g., an advance in refrigeration tech, could be distributed out to the third world better. I'm pulling examples out of a hat here, and I'm sure that other and better examples could be found.

There are a ton of more fundamental projects done by companies, people, and universities out there. But they don't get the buzz right now, generally speaking.

panarky• 15 years ago

Money quote: "Too many companies are featurettes."

gamble• 15 years ago

1950-2000 was one of those rare moments in history when industries (whole states, countries even) could coast on regular, incremental improvements to a single world-changing technology. SV was in the right place at the right time, and never totally lost it's edge. But the semiconductor and software industries are mature now, and spread much more widely than thirty years ago. SV still retains many advantages, but you can't get blood from a stone. The radical, disruptive stage of digital technology is over.

edw5192• 15 years ago

A lot of what our parents generation did: building interstate highways, Manhattan Project, etc, could not be done today.

Being the only remaining superpower (and having little global military competition) really takes the wind out of government's sails of achievement.

Interstate highways, the Manhattan project, the space program, national infrastructure, aerospace, much medical technology, and even computers were all borne out of military necessity. With so many bad guys around the globe, only a traitor could vote against these things.

Our parents built the stuff needed to save the world. We're building better ways to instantly share our bowel habits. I don't know whether to laugh or to cry.

kenjackson3• 15 years ago

I'd love to find links to old newspaper articles talking about building interstate highways and such. Doing nearly anything today seems like it is near impossible. The costs, the time, and the political divisiveness (at even the city local level) makes doing a monorail or adding a line seem like Roe v Wade.

narrator• 15 years ago

The health care debate in the U.S is a microcosm of all this. The only thing that people argue about is how much more money we're going to spend on it, and we already spend far more, as a percentage of GDP, on health care than any other nation.

Any solution that has to do with process innovation, technology innovation or any sort of thing that would otherwise upset the status quo besides more money is largely ignored. There are so many vested interest involved that the only thing they can all support is even more money being poured down the same old rathole.

shakeshake2• 15 years ago

Blah Blah Blah. Social networking was crucial for a country of highly oppressed people to overthrow their tyrannical government. Doctors can identify diseases from their phone in a way that would have taken days, we can de-salt water in way that is practical. New times, new problems.

Our generation is pushing innovation at a speed that is unparalleled, don't confuse the 47 fart apps in the app store as a complete misappropriation of focus.

jdp233• 15 years ago

Yeah really. Incredible innovations affecting people's daily lives all over the world. Peter comes across as somebody who prefers his parents generation's view of how great it used to be to all the exciting and empowering stuff happening today.

edw5192• 15 years ago

Blah Blah Blah.

Normally, I ignore such responses, but how could I resist bait like that?

Social networking was crucial for a country of high oppressed people to overthrow their tyrannical government.

Ahh, the jury's still out on that one. Let's see how much less tyrannical the next government is. I bet not much.

Doctors can identify diseases from their phone in a way that would have taken days

To what purpose? This is the first generation with worse health and life expectency than its parents. What good is providing so much technology at so much cost to those who push so little value out of the other end of the pipeline?

New times, new problems

No question. All I'm wondering is, "Where is the new value?"

Our generation is pushing innovation at a speed that is unparalleled

Versus what? Citing, please.

Hmmm, lets see...

From 1910 to 1960: The masses received first value from the automobile, the airplane, the telephone, radio, television, electricity, indoor plumbing, sewage treatment, and antibiotics.

From 1960 to 2010: We can carry our phones with us. Cool.

don't confuse the 47 fart apps in the app store as a complete misappropriation of focus

Opps, I completely forgot about smart phones. I was referring to all the instant communications we now have that produce so much activity and so little value. Is that all we've got?

vannevar3• 15 years ago

Social networking was crucial for a country of highly oppressed people to overthrow their tyrannical government.

No, not really. It might surprise you, but repressive regimes have been overthrown for centuries before Facebook. What really helped was high food prices, historically a harbinger of political change. Social media was marginal.

_delirium• 15 years ago

It's a strange example to use in a story bemoaning the decline in startup innovation as well, since the interstate highway system and the Manhattan Project were not exactly things done by startups.

jdp233• 15 years ago

Yeah, particularly strange for somebody who sees himself as a libertarian. Oh well. "A foolish consistency is the hobgoblin of small minds."

danenania11• 15 years ago

China has no problem taking on projects like these.

It's very naive to tout the benefits of central authority without considering the costs. A government that has the power to push through massive public projects isn't going stop there.

One of the main reasons projects on this scale are so difficult to organize is that there are so many independent stakeholders with diverging interests. Glorifying the state's ability to steamroll these interests for the sake of 'progress' is dangerous stuff.

jbooth11• 15 years ago

Do you have any examples of egregious civil rights violations as a consequence of the moon mission? I mean, having some sense of investing in your country and future doesn't mean you have to massacre people in Tiananmen square.

muhfuhkuh2• 15 years ago

All those things you said are government projects. We just tried a grand experiment to see if we could usher in a new era of healthcare and were met with strong resistance, oddly enough, from the _very same generation_ widely credited with producing all of those things (Interstate, Manhattan project, space program) that you mentioned. Those radical free-thinking minds are now more conservative as they grow older, those notions of revolution are replaced by memories and a strong desire to put things back to "how they used to be".

Now, people in their 20s and 30s, the ones that are supposed to be revolutionary, are worried about finding jobs, putting food on the table, and keeping work so that they can keep their healthcare plan. So, the big companies that used to work on big things and revolutionary technology, can now focus on extracting as much profit per product as they can (not that they didn't before, but there was, as you and this article admits freely, more focus on radical innovation and Doing Big Things). Instead of "revolutionary new products and projects" we get "refreshes" and marketing of said refreshes as "revolutionary". The bottom line is more secure, the worker subjugated, and thus the Empire retreats, stage right.

aristus• 15 years ago

You are confusing your generations. The people currently in power are 50-70 years old, ie born in 1940-1960. They were children during the WWII era and Eisenhower administration, and had nothing to do with the Bomb, the Apollo program or interstates.

For example, Feynman, one of the "young kids" of the Manhattan project, was born in 1918.

ippisl• 15 years ago

I don't think there's a lack of radical innovation. maybe it's less concentrated in silicon valley , but all across the u.s. and worldwide you can see radical innovations unfolding.

Things like robotics and artificial intelligence are probably the most radical technologies since the industrial revolution. probably much more radical.

And what about clean energy and clean technology ? the solution to the biggest problem of the 21th century ? and on the way make our chemical manufacturing clean ?

And what about stem cells ? they hold the potential to be a cure to many chronic diseases.

And telepresence , the holodeck at every home?

Things just take time , that's all.

atrevisan• 15 years ago

I don't think you can compare generational innovation. These things are all relative. It's hard for me to believe that today's minds who are building a supercomputer that can reproduce human logic and understanding couldn't produce the Manhattan Project.

We aren't becoming more short-term focused, rather the future is shrinking. A 20 year time frame in past generations is now 3 years. In this day, if you have a long-term scope and vision you will become obsolete in five years. Adaptation is crucial to innovation as well.

danenania11• 15 years ago

How does "valuations are all over the map" jive with "there is no bubble in tech"? If a lot of tech companies are being systematically overvalued, isn't that the definition of a tech bubble?

It's also no secret that monetary policy is as loose as ever, so it doesn't take a lot of dot-connecting to see which forces are driving these valuations, especially with Fed bedfellows like Goldman are getting involved. Would people be so willing to throw their cash behind 10-100x PE companies if they had to obtain that cash at market rates and without implicit government backstopping of losses? I'm sure no one involved in tech investing wants to recognize this situation for what it is, but come on now, anyone can see that something's fishy.

kenjackson3• 15 years ago

I think a tech bubble generally means that nearly everyone is overvalued.

danenania11• 15 years ago

A sector being overvalued as a whole isn't enough? Perhaps the bubble is really focused on particular segments within what is generally known as 'tech', but it still seems like the most appropriate label.

vannevar3• 15 years ago

They're right. Silicon Valley has become enamored with the overnight success, which is usually attributable to fashion rather than innovation. Real innovation often takes a long time to catch on, since by definition it goes against conventional wisdom. VCs don't want to get rich slowly, and entrepreneurs are following their lead in chasing hockey-stick growth curves, which are a lot easier to come by in fashion than they are in technology.

inthewoods2• 15 years ago

Peter Thiel: "Everything is short-term focused no one is looking into the future, 15 to 20 years like they used to in our parents' generation. A lot of what our parents generation did: building interstate highways, Manhattan Project, etc, could not be done today."

This from a huge libertarian?

mindcrime2• 15 years ago

This from a huge libertarian?

Being a libertarian doesn't conflict with wanting to be forward looking, or with wanting to do ambitious projects. And a "small 'l' libertarian" might even be OK with the State managing the construction of something like the Interstate highway system. A "Big 'L' Libertarian" would oppose funding such a project through coercive, involuntary taxation, but wouldn't necessarily oppose the idea in itself. They would just argue that a means of funding should be found that doesn't involve coercion.

That said, I don't know Peter Thiel and I don't know how deeply his libertarian roots run, or how much of an ideologue he is. There are a lot of people who call themselves libertarians that I wouldn't necessarily call libertarians myself. <shrug />

jbooth11• 15 years ago

Libertarian has been diluted to meaningless.

These days, if you go by majority vote, it generally means "doctrinaire conservative who decided deficits were really important on January 20th, 2009".

inthewoods2• 15 years ago

Has nothing to do with looking forward or doing ambitious projects - it has to do with your view of the private sector vs. the government.

Most of the libertarians I know would argue that the government has no business being involved in creating innovation - regardless of how it is funded. They would argue that government can't innovate and the private sector is where the market can decide what innovations will succeed.

And yes, Peter Thiel is a huge libertarian. I find it comical that he would then list off an entire list of government projects as examples of driving innovation.

hendler• 15 years ago

Fundamental research isn't cheap or fast. Private investors aren't usually going to to take the long road until they can afford it.

jrk• 15 years ago

ML: There is not enough radical innovation in Silicon Valley. Focus is too narrow. Too many companies that are featurettes.

Companies…like Slide?

seiji• 15 years ago

Maybe that's how he formed his opinion? He spent years catering to the whims of 14 year old girls. It failed.

freshfey• 15 years ago

You can't expect radical innovation every day. It takes time, just like it took time to build streets, cars, airplanes and mobile phones (50-100 years). We could however hope that the intervals between radical innovations are shorter, now that we have a more efficient way to use technology.

IMO Google brought radical innovation and it is only what, 10-12 years old? The next big thing is probably in works, but we can't foresee the future so we'll know that is radical, when it's here.

hoag• 15 years ago

That was a great event, and that discussion sparked quite a bit of debate between my two friends and me over dinner afterwards. (Actually, you can see the three of us sitting in the front-right-most seats in the photo!)

In my opinion, the notion of "radical innovation" depends on one's point of view: one could argue that, although the spectacular innovation during the space race, e.g, like landing a man on the moon, was indeed remarkable, it was, for all practical intents and purposes, little more than a political publicity stunt to the average individual, i.e., it did not have a profound effect on a personal level.

In contrast, the developments of the past 20 years -- internet, cell phone, facebook -- have profoundly changed individuals around the planet.

I don't think the question should be whether a thing is more or less innovative than another thing, but rather what effect the thing has had on a group of people on an individual level.

Peter Thiel & Max Levchin: "Silicon Valley Lacks Radical Innovation"

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