Eric Schmidt and Peter Thiel - Debate

Gentlemen, why don't you go sit on the far side. Peter, maybe sit next to me. I won't make any jokes about who's on the right or who's on the left. We've got plenty of time for that. Good evening, everybody. Thank you for your patience. The lights are sufficiently bright that we can't see any of you, so I hope that you can see us. Terrific, thank you. That's a good thing about having people have a few glasses of wine before the conversation, we have an energetic audience. Okay, we have two of the most distinguished people in the technology industry in Silicon Valley to hear very different perspectives tonight. Peter Thiel, sitting directly next to me, is one of the most successful investors that Silicon Valley has ever known.

He was the first investor in Facebook. He was a founder and CEO of PayPal. He helped found Palantir, which has been a tremendous success. He has a hedge fund, Clarium Capital, an early-stage venture—no, not early-stage, yes, early-stage venture capital fund, Founders Fund, and many, many other things that I think we'll have an opportunity to discuss this evening. He has an interesting perspective on the technology world that he and many of you are a part of, and we'll get to that in a moment. Sitting next to him, a man who really needs as little introduction as Peter does, is Eric Schmidt, the executive chairman of Google. Eric nurtured Google from the days when it needed what was then called adult supervision.

It's interesting that Larry and Sergey are clearly adults now, right, and have been for a long time. And Eric is now, as he has time to do other things, doing many other things, in addition to Google, some of which he'll talk about this evening. The premise that we want to discuss—I know we said this would be a debate. We will debate. We will discuss. We will have an opportunity for audience Q&A. What is the benefit of the technology industry and what is the benefit of technology as we know it, the role that Silicon Valley and other parts of the technology industry play in that? I'm going to ask each gentleman to speak for about 4 or 5 minutes on what their perspective is on this, and Eric, I'm going to ask you to start by explaining your view of what technology brings to the world.

I think the message of technology innovation is an overwhelmingly positive one, and it's easy to criticize some of the effects of this, but the fact of the matter is that in the last 20 or 30 years, the globalization that we're all part of has brought a couple billion people from pretty significant poverty to what we would think of as lower-middle-class or middle-class lives. The investment, especially in countries in Asia and so forth, that you're seeing will continue that for a very long time. If you look at the rate of innovation in our sort of lifetimes, we'll go from a very small number of people having access to the world's information to virtually everyone in the world having access to all the world's information, and in their own language.

If you look at these devices, this of course is my ad for Google, the Android phone and then the new Nexus 7 tablet. Um, with these devices, you have access to supercomputers that can do the kind of knowledge and analysis that was incredible to think about in terms of artificial intelligence, machine learning, and those sorts of things. And these have transformed our world. If you think about the road going forward, what happens? Well, Moore's Law has not been repealed, and Moore's Law will continue for a while longer. The physicists are still working.

Just explain to the few people in the world, in the audience, who don't know about Moore's Law.

Moore's Law, stated originally by Gordon Moore in 1965, and as restated, is roughly the transistor densities double every two years. And it looks like there's another decade or so of that before physical limits are encountered. And again, people are working very hard. So that tells you basically that these devices improve in price performance by a factor of 10 or 20 very, very, very, very rapidly. There are other things involving fiber optics and so forth which are even more accelerating, storage, et cetera. And that's going to continue. So the important thing here is that we have an opportunity now to ultimately end up with devices and knowledge sources which are the perfect buddy. They can answer questions that you have.

They can suggest things for you and understand what you might want to do to help you through life, to help you with medicine. If you add that and then you take a look at what's going on with data analytics, take a look at the sort of data analytics that's going on around medicine, genetics, and unlocking the human genome, and the other kinds of genetic sequencing people can do, the explosion of data that we can now reduce in order to try to understand the combinatorics of disease, I think we can look forward to a world, at least for people who have a certain amount of income, extraordinarily long lives that are very, very productive with an enormous amount of information. And that pace, in my view, is accelerating.

If you take a look at the folks who are not so fortunate, the people in the developing world, for them, the world gets better, too. It doesn't get better as much as our world does, but they get access to the things that they've wanted for decades that they cannot have today. Peter?

So, Eric, I feel better listening to you. And in turning to you, Peter, I just want to prompt you by reading a few Thiel-isms. Did you say Thiel or Thiel? Thiel. Thiel-isms. Thank you. You have said that the problem with elites is that they are skewed in an optimistic direction. You say that America has lost its belief in the future. And lastly, and I believe this is the slogan of your Founders Fund, Founders Fund states, 'We wanted flying cars, instead we got 140 characters.'

Yes. Peter Thiel. Well, I don't, you know, I think, Eric, you do a fantastic job as Google's Minister of Propaganda. You said you were going to be nice. Well, he does a fantastic job. I think I'll just take the compliment. I agree with you that technology is critical. It is the only way that things get better in the developed world. I think we should distinguish the developed and emerging markets very sharply. In places like China, India, Africa, Latin America, there's zero need for innovation. All they need to do is copy things that work. But the part of the world where technology is really necessary for things to get better is the developed world, U.S., Western Europe, Japan. And the part that I would challenge you a little bit on is just how healthy

the state of technology generally. There are obviously individual companies that do quite well, especially if they have world-class monopolies like Google has in search. Legal monopolies. They're legal as long as they don't try to tie in and oppress other companies by extending the monopoly power unfairly. But it's quite legal to have a monopoly as long as you don't abuse it. But I think that when you look at this question of how much technological progress has been happening, we get into all these complicated measurement issues. The one that I cite as the big data point is that if you look at the U.S., say, in the last 40 years, 1973 to today, median wages have been stagnant. Maybe the mean wages have gone up maybe a small amount, not very much.

The 40 years before that, 1932 to 1972, they went up by a factor of six. So people, if you looked at how people did from '32 to '72, you had a six-fold improvement. And it was matched by incredible technological progress. Cars got better. You had the aeronautics industry get started. You went from no planes to supersonic jets. You had computers invented. You had all sorts of incredibly important dimensions in which progress took place. And so I agree we've had certain narrow areas where there's been significant progress, but it's very odd that it hasn't translated into economic well-being. And this is not just a problem with capitalist countries like the U.S. You may say the U.S. is too capitalist for your liking, Eric, but it's also true of socialist countries like France.

Do I need to be making a list, or are you keeping track? It's true of all sorts of other countries like Japan, where things have been surprisingly stagnant, and there's this weird question of what's going on. You have Moore's Law on the one hand. On the other hand, if I had to sort of simplify it, we've had incremental but relentless progress on the computer side. And on the other hand, we've had basically no progress on energy. And if you think about where oil prices were in 1973, it was $2 or so a barrel. It is now north of $100 a barrel. And so you've had sort of a catastrophic failure of energy innovation. And it's basically been offset by computer innovation. I think that's sort of a simplified account of what's happened in the last 40 years.

So before I give Eric an opportunity to jump in, I want to prompt you in one way, Peter, which is: why do you think this is?

Well, the why questions always get immediately ideological. So I'm libertarian. I think it's because the government's outlawed technology. We're not allowed to develop new drugs with the FDA charging $1.3 billion per new drug. You're not allowed to fly supersonic jets because they're too noisy. You're not allowed to build nuclear power plants—say nothing of fusion or thorium or any of these other new technologies that might really work. So I think we've basically outlawed everything having to do with the world of stuff. And the only thing you're allowed to do is in the world of bits. And that's why we've had a lot of progress in computers and finance. Those were the two areas where there was enormous innovation in the last 40 years.

It looks like finance is in the process of getting outlawed, so the only thing left at this point will be computers. And if you're a computer, that's good. And that's the perspective Google takes, because it thinks of the world— "You're not accusing him of being a computer, are you?" Well, you know, they like computers more than people in many cases. That's why there's a social networking revolution. But if you look at it from the perspective of 40 years in the future, Moore's Law is good if you're a computer, but the question is, how good is it for human beings? How does this translate into economic progress for humans?

Before getting into politics, do you—

There's such a long list.

I know it's a long list, but can you—just take the narrow point that these facts, these economic facts that he cited, taking just conditions in the United States over the past several decades, income being one, and sort of talk to that for a moment.

The U.S. issues have to do with entitlement spending, bad government, and demographic issues. Well, you two are in agreement on that then. We actually are. And the problem is he states the argument completely wrongly. Okay, go. The first 40 years were a golden period in the United States for the same reason that the same thing is occurring in places in the Arab world and in China, which are going through the same demographic dividend. The fact of the matter is that all of these countries face this issue. The problem going forward in America is, in fact, a demographic problem. You have the lengthening of lives, which, by the way, is considered progress and innovation. People are living much longer.

But that's why demographics are not a problem. If people are living longer and healthier lives, they will be productive for much longer. There is no demographic problem whatsoever.

That is unfortunately not true.

Then there's a problem that we haven't cured Alzheimer's, that we have too many people that are obese and old.

It is an absolute fact that people still choose to retire at roughly the same years when they do, and maybe they shouldn't. Maybe they should work until 80 rather than 65. But if you look at a technological basis, I think that to argue that the technological impact is not strong or that the bits and so forth and so on is crazy. Look at what information technology— 'Crazy' is a term of art, you understand, right? Thank you. Well, you only need to look at the economic numbers. Go ahead and make your point on that. But technology does not determine economic policy. And there are plenty of examples of bad governments.

In that case, you're saying technology is completely decoupled from the economy.

No, I'm actually saying that the economy is largely determined by the way governments make decisions, and governments make bad decisions, and you and I would agree to that. And there are plenty of ways where you could stimulate more innovation. Let's use your energy example. America in the next decade can actually become energy independent both in oil and gas due to innovations in oil extraction and so forth and so on. That's an example of innovation that's actually quite material.

Assuming fracking doesn't get outlawed, which is the more likely possibility.

But you made your argument as an absolute, and then you put in this sort of thing. In fact, fracking's not going to get outlawed.

You're shifting to the future. I'm talking about... Yes, that's my job! Okay? We're talking about the future. And you can easily... And I'm saying we should look to the last 40 years as clues for the future. Yes, it's actually good. If we've had 40 years of stagnation, where wages have been stagnant, the most likely... No, we have not. People are living much longer.

People are wealthier. There's fewer deaths. Drug addiction is lower. There's all sorts of reasons why America... Let me jump in for one moment.

Excuse me. Eric, Peter is making the point that, as a generalization... We don't agree on a basic fact. No, no, no. I know, but do you agree with his contention that we have invested in the wrong thing? Of course we have. Well... But how can you agree to that?

America is investing all of its assets in non-productive areas when it should invest in... Not all of them.

You don't think Google's investing in the wrong areas, do you? America... I'm talking about the government.

He's criticizing the government. Take a look at private companies. Private companies in America are doing fantastically well. Public companies, excuse me. They're well-run in general. The problem that all of these countries are having is that they have a political problem which is related to how our politics work. It's true in Europe, it's true in the United States, it's true in Japan, et cetera, et cetera.

I don't think the politics have changed that much in the last 40 years versus the 40 years before that.

Well, then maybe we got a free ride during those 40 years. Well, I think there was a huge technological tailwind in those 40 years that's no longer there. If past is prologue, then you would predict only good things for the future.

What's very odd about this conversation is you're saying technology doesn't matter, that it's all politics. I didn't say that. I said technology matters a lot. In fact, it's the only innovation available, which is your point. But you're saying we've been stagnant for 40 years because of bad government policy.

I didn't say we're stagnant. I said our policies could be improved.

Well, if the wages have been stagnant for 40 years because of government policy, that suggests that technology is just this tiny little side thing going on in the corner.

I do this small thing with politicians where I ask them, I need you to repeat after me. You take a dollar bill out. And on the back it says, "In God We Trust." Please say, "In God We Trust." All others have to bring data. As long as you believe that politicians can operate without facts, you get the government that you want. That's what we're dealing with. Let me ask you this.

Hold on, Peter, one second. There's one thing that, Eric, that you haven't answered. At the high level, Peter has made the assertion that making, for example, cars go faster or being able to do, I don't know, for rockets to go higher or faster, to be able to colonize Mars as an example, are the sorts of things we're not doing and they're less important than having good algorithmic search.

Is that a fair characterization, Peter? If you look at the improvements in power-to-weight ratio with new materials and cars, I think you'd be pretty impressed with that. There's a whole renaissance of material science going on with new smart surfaces, new much lighter, much stronger materials, all of this being driven by American universities. There's a mini-boom in America in advanced manufacturing using all these new technologies.

I often think it's worth looking at quantity, not quality, and we're not going faster. The Concorde was decommissioned in 2003, and if you include low-tech airport security mechanisms, we're back to about 1960-type travel speeds today in the U.S. But let's take another area that's probably much more basic, something like agriculture. We had a Green Revolution in the '50s and '60s that basically doubled world food production in line with population growth. It's decelerated dramatically over the last 40 years, and that's reflected in this incredible rise in food prices that we've seen over the last decade. Yield improvement. I don't agree with that. I disagree with your facts here. When you talk about the Arab Spring,

You can say that it's evidence of Google and Twitter liberating the world through information. But what the actual facts on the ground are, are that food prices rose by 30% to 50% in the previous year. And you basically had people who had become—you had desperate people who had become more hungry than scared who revolted. And then Eric goes around and says, you know, "Let them eat iPhones." Or maybe not precisely that. That's not a direct quote, is it? That's not precisely what he would say, actually.

Let's just say that everything he just said is not actually true. Let's start with the food revolution. The issues of food in the globe are all related to mismanagement by governments. Many, many people have looked at this, and even without synthetic food and the other things that are being developed, we can feed everybody. It's just bad policies, right? And that can be fixed with better governments, more representative governments, so forth and so on. With respect to the Arab Spring, and having been there and spent quite a bit of time talking to the people, these people were very courageous and they used the tools available to them to topple these sort of bad regimes that weren't giving them what they wanted.

Sure, food prices went up, but there was a long history of repression. If you go back, each of these groups had a couple of years earlier tried and had been squelched. The fact of the matter is that the dictators who were overthrown had a failure to regulate the Internet. They regulated everything else: the telephone, the television, and so forth.

So on the margin, Twitter and Facebook and other social media devices contributed to greater freedom, greater freedom of expression for some of these people, and on the margin, helped them achieve their political goals.

Yes or no? Look, I am in favor of all the computer companies that are being built, and I think that we should be doing even more in most of these businesses. He was asking about the Arab Spring. But I think the Arab Spring, I think the fundamental driver for that was the food prices went up 50% and people were going to starve.

Okay, I think that's a fair point, but the question is, did the social media contribute at the margin?

At the margin. But the main thing was people were facing starvation. And it's really, really outrageous for you to ignore that fact.

But in Egypt, since I was actually there and talked to them, I can assure you that that's not what they told me. I do agree with you, and I want to be clear, that the social media was on the margin, was not the primary driver. The primary driver was the feeling that we need to change the static regimes. And that's what's happening with these other countries as well now.

Well, I think one of the things that's very odd about this discussion is that I thought we were going to talk about technology. Eric seems to think it's all about politics, which in a way, I think, concedes my basic point, which is that technology is no longer that big a driver. If our political system were somewhat screwed up—I don't think it's the best, I don't think it's the worst in the world—it shouldn't matter. It's somewhat screwed up, but technology should be a large enough force that it could power change.

You touched on the employment issue earlier. The New York Times did a major piece suggesting that Apple doesn't account for the same kind of employment in the United States that General Motors did in the 1950s. You make a similar case. Twitter, Facebook, great as they are, 140 characters is neat, but they don't employ a lot of people.

Well, they're all great companies, in that they're profitable and good investors. But they're not ones that are able to basically... But they're sort of the exception to the rule that we don't have enough innovation. And so you have to avoid confusing the specific and the general. Google is a great company. It has 30,000 people, or 20,000, whatever the number is. They have pretty safe jobs. On the other hand, you know, Google also has $30, $40, $50 billion in cash. It has no idea how to invest that money in technology effectively. And so it prefers getting 0% interest from Mr. Bernanke. Effectively, the cash sort of gets burned away over time through inflation because there are no ideas that Google has how to spend the money.

Let me see if I can help Peter answer your question. The core problem we have going forward, since I think we're supposed to talk about the future, is that you have two forces that are gonna govern much of what's gonna happen in the future. The first is globalization, which we're not gonna repeal, and the second one is automation, which we're not gonna repeal. And if you look, these problems are ultimately cast in political systems in the West, and I think eventually globally, as jobs problems. And the solution to jobs problems, in my view, is education, right? Education at many levels and many different ways which we can discuss. I don't see another solution to this. It's absolutely true, as Peter says, that these gems, if you will, and you were nice enough to call those companies, describe them so well, they're not employing enough people.

But you have $50 billion at Google. Why don't you spend it on doing more in tech? Or are you out of ideas? And I think Google does more than most companies. You're trying to do things with self-driving cars and supposedly with asteroid mining, although maybe that's just part of the propaganda ministry. And you're doing more than Microsoft or Apple or a lot of these other companies. Amazon's the only one, in my mind, of the big tech companies that's actually reinvesting all its money, that has enough of a vision of the future that they're actually able to reinvest all their profits.

They make less profit than Google does.

But if we're living in an accelerating technological world and you have 0% interest rates in the background, you should be able to invest all of your money in things that will return it many times over. And the fact that you're out of ideas, maybe it's a political problem, the government's outlawed things, but it still is a problem.

I'm going to go to the audience very soon, but I want you to have the opportunity to address your philosophy of investment, Terry. I think I'll just let his statement stand. You don't want to address the cash hoard that you do not have, that your company does not have the creativity to invest.

What you discover in running these companies is that there are limits that are not cash. There are limits of recruiting, limits of real estate, regulatory limits, as Peter points out. There are many, many such limits and anything that we can do to reduce those limits is a good idea.

But then the intellectually honest thing to do would be to say that Google is no longer a technology company. And that it's basically, it's a search engine. The search technology was developed a decade ago. It's a bet that there will be no one else who will come up with a better search technology. So you invest in Google because you're betting against technological innovation in search. And it's like a bank that generates enormous cash flows every year. But you can't issue a dividend because the day you take that $30 billion and send it back to people, you're admitting that you're no longer a technology company. That's why Microsoft can't return its money. That's why all these companies are building up hoards of cash, because they don't know what to do with it, but they don't want to admit they're no longer tech companies.

So the brief rebuttal is Chrome is now the number one browser in the world. The platform for enterprise innovation on top of Google is, I think, phenomenal. The rate at which people are using Google to redo the way their businesses work.

There are many, many examples of business innovation that Peter's not choosing, of Google's investments in them. Okay, I'm going to open this to the audience. You do not need to restrict your questions to the topics that we've been discussing on stage. I see a hand up right over there. Please identify yourself and keep your question brief.

Okay, it's Mark Mahaney at Citi. Eric, one of the places that Google's been investing a lot in, it seems, is in hardware, the Motorola acquisition, et cetera. We had a speaker at the beginning of the day, Marc Andreessen, who said, in addition to software taking over, it's leading to this hardware resurgence, almost the implication that you need to combine software and hardware to succeed as a consumer technology company in the future. Do you agree with that, and what do you think the risks are to that?

I think you're going to see more and more interesting innovation in the hardware-software blend. One way to understand the PC industry is that the structure that Microsoft built sort of held a certain architecture for scale, and now that Apple and other device companies have really sort of beaten that model, you have open-ended innovation in many, many different devices. We would further argue that Android, another example of an innovation that Peter chose not to cite, which is on its way to having, you know, a billion... Jobs might disagree with us, but...

Steve Jobs? Yeah.

Were he here with us? Android is now both larger in unit volume and faster growth rate than the iPhone. But in any case, Android is free and is being used in many, many new consumer devices. I didn't bring it here, but we, in fact, just have now our own product called the Nexus Q, which is an example of that. There will be many, many such things.

But you are a believer in the integration of hardware and software, I think was Mark's question. Absolutely. Absolutely was the answer, Mark. Right here, right in front. Please identify yourself, sir.

I'm Andy Serwer, the editor of Fortune Magazine. I have a question. I have a question for Peter. You don't know who he is? That's all right. I have a question for Peter. Peter, I'm not a libertarian, but you made some good points. But you also are a technologist, right? And what I'd like to ask you is how would you improve the technology environment? How would you, if you were running technology companies today, what would you do differently to change all this?

Well, I think it's a multifaceted problem. I do think there are regulatory political issues. I think that there's a failure of imagination on the part of people starting things. I think often the incentives are too short term. People are not able to invest in multi-year projects. It's one of the things Google has done relatively better than most of these technology companies. That's called damning with faint praise, I believe. I do think there are all sorts of things like this at the margins that you try to do. On the nonprofit side, I've tried to direct my nonprofit donations towards technological projects that are not profitable. I think there's a lot of great technology that's not immediately profitable, but that could be quite valuable in different ways.

And so I think taking technology as something critical, not being complacent about it, and continually pushing that we need to do more is an incredible imperative. There are many other trends in our world. There are good trends. Globalization is a good trend. It has nothing to do whatsoever with technology. Globalization was going on in the 19th century. It is about the spread of ideas. You could spread ideas with the telegraph or with letters or books. And that's happening, and China and India will be better places because of globalization. What I'm interested in is vertical growth, intensive growth, doing fundamentally new things, and I think that involves a change in financial priorities, corporate priorities, and cultural and political priorities.

Over here, please. Right here in front. Just wait for the microphone, please, before you identify yourself. It's coming, but not quickly. Oh, I had one over there. Okay, I'll go over there next. Can we get the microphone? All right, I'll go here with the microphone, and then we'll come over to you, Michael. Go ahead, please.

I wonder, neither of you sort of pointed out why, you know, historically, finance was not, or financial institutions and finance in general, was not such an influence and factor in terms of innovation, investment, and growth. Now, we're living in an age where money shows up in financial institutions, and within a year, you can make as much money as potentially making any venture capital investment that you have to sit on for 10 years by arbitraging a pretty mature market. So I wonder if neither of you guys pointed to that as an influence for lack of investment in long-term innovation.

Eric, go ahead. There's a general problem right now of it's very hard to get money through the normal mechanisms because the banks are scared. But the issue of too much money, too little money is a cycle that's been going on for 100 years. If you study J.P. Morgan and the crash and so forth and so on, I think you conclude one of two things. You either decide that banks are private businesses in which they should be allowed to fail, or you decide that they are public in which they need to be regulated. You don't want to privatize just the gains. So if you're a capitalist, which I actually am, Peter, you actually believe that it's important that businesses be able to fail. Where is my $20 billion bailout?

That's the way you phrased the question. And until the regulatory system sort of addresses that dichotomy, you're not going to resolve this issue. I think we see common ground here.

Well, I'm glad that Eric is... I will not question him if he's a self-described capitalist. I'll take that as an adequate confession of faith. But I think that... I disagree with the premise behind the question that there's some sort of trade-off between finance and other areas of innovation. I think it's easy to be anti-finance at this point in our society. I think the reality is we have an economy that got very lopsided towards finance, but it's fundamentally because people weren't able to do other things. If you ask, why did all the rocket scientists go to work on Wall Street in the '90s to create new financial products? And you say, well, they were paid too much in finance and we have to beat up on the finance industry.

That seems like that's the wrong side to focus on. I think the answer was, no, they couldn't get jobs as rocket scientists anymore because you weren't able to build rockets or supersonic airplanes or anything like that. And so you have to, you know, it's like, why did brilliant people in the Soviet Union become grandmaster chess players? It's not that there's something deeply wrong with chess. It's they weren't allowed to do anything else. Michael Schrage right up front.

Yeah, I'm asking this question as sort of a born-again Austrian, so my sympathies are to Mr. Thiel, but I want to ask this question of you, Eric. You've described government as broken and dysfunctional. Why in your—and this may be a misunderstanding on my part and the part of many people in this audience—why do you publicly articulate a stance that Washington should be more involved in business and regulatory issues?

I'm not sure I've made that argument. Many arguments are being ascribed to me. No, no, no, that's good. Why don't you ask me a direct question? I'm here and you're there.

The direct question is, when one looks at what the Obama administration has done in terms of bailouts, etc., in terms of energy policy for renewables, etc., it seems as if the bias is for greater top-down involvement and injection in economic planning and decision-making rather than the facilitation of bottom-up entrepreneurship where the government plays the role more of a referee than as an investor. That seems to be the bias.

Are you making a comparison with the Republicans or Democrats?

No.

Because Republicans do the same stuff.

That's why I'm not making the assertion.

So there's a straightforward way of answering your question, which is I think most people in this audience would agree that it's better to let the private sector make investment decisions and largely be unregulated unless there's externalities. Um, it's also the case that the government, because of a lot of things, but especially all the lobbying that goes on, has an enormous influence in shaping all that. So I have argued, and will argue very strongly, that the government has a role in giving more money to education. But I would also argue that everyone in education should have a choice, right? Because choice is how you get competition among government services. And that's how I would come out there.

Now, on that point, we don't have time for any more questions. But one thing that we didn't get to on the subject of education, and I'd just like to ask Peter to speak for a minute or two about your fellowship program, what it is, what you're trying to accomplish, and what your commentary about the state of education is.

Well, let me just make my commentary on the state of education. I think this is one of the last—we've had a whole series of bubbles in this country. They've been quite destructive. There was a tech bubble in the '90s, a housing finance bubble in the last decade, and we have something of a government bubble going on right now. It's the strangest of all because the government's so clearly dysfunctional, and yet we have this idea that it's going to fix things, that things affiliated with government will do things better. We have a bubble in education. If there's anything in our society that's a bubble, it is education. Costs have tripled since 1980, or quadrupled—300% increase after inflation since 1980—for secondary education, for college education.

It's not clear that the quality has gone up at all. And if you measure how many years it takes for people to recoup the debt that they take on in college, it's actually steadily increasing. Since 2000, it's actually been better to finish after high school than after college on a relative basis. So college was a good investment, was an increasingly good investment through 2000. Since 2000, there's been basically a roughly consistent gap between college and high school education because the debt has kept going up that people amass. It has actually become relatively—you know, it's still better, but by a lesser degree since 2000. So we have an enormous amount of money that's being spent on education.

And basically, I think the crazy cultural shift that's happening is that people who are in the younger generation, millennials, are getting completely screwed. They're basically being turned into something like indentured servants where they have to pay off their college loans. Bush rewrote the bankruptcy laws in 2005 to make it impossible to get out of college debt even if you go personally bankrupt. And so I think there is this very serious issue that education and the debts that are being imposed on people linked to education are turning an entire generation into something close to indentured servants. And that seems to me to be a very bad development. And because they're not getting paid enough, the education has been hyped beyond belief.

Eric, I feel a sense of fairness to give you the final word tonight.

Well, the problem I have with your argument, Peter, is it would appear that through that logic, fewer people would get educated. And the problem that I see going forward is the only way to maintain competitiveness is to have more education in the right ways around innovation, new companies, and so forth. I can tell you that the generation of people we've hired at Google, the young people, men and women, are fantastic. Well, if we limit education to people who are getting engineering degrees, we can cut it back by about 90%. So I think most people would argue that there's some role for liberal arts, however small. That sounds less than a 10-to-1 ratio. So that was a joke.

Whenever people say they're joking, they never are.

No, actually, that's not true. In the life of Twitter, you actually have to label your jokes. Thank you very much.

Ladies and gentlemen, I'll just say thank you very much to Peter Thiel and Eric Schmidt. Thank you.

Thank you. Thank you.