Where is American capitalism today?

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America is falling behind when it comes to leadership, and it's pretty much directly correlated to how we value people with technical brains. They aren't given enough power, so much of the American way of the last 50 to 60 years or so has been marginalized by middle management types. The reason, Eric Weinstein argues, is that these types don't trust the smarter and more technical minded men and women. One example Weinstein gives is that university presidents 60 years ago might come from a physics or math background—now they're much more likely to be middle management types who have worked their way up the ladder using charm. Weinstein also makes an extremely valid point that technical talent can build a more optimistic future. This was certainly the case in the middle of the 20th century, but has been lost by the wayside. Meanwhile, superpowers like China have the same outlook we used to and are vaulting ahead in the world using the same mindset we used to have.

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ERIC WEINSTEIN

Eric Weinstein is an American mathematician and economist. He earned his Ph.D in mathematical physics from Harvard University in 1992, is a research fellow at the Mathematical Institute of Oxford University, and is a managing director of Thiel Capital in San Francisco. He has published works and is an expert speaker on a range of topics including economics, immigration, elite labor, mitigating financial risk and incentivizing of creative risks in the hard sciences.

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TRANSCRIPT:

ERIC WEINSTEIN: I get asked a lot about the state of capitalism and I think that for those members of society of a certain age we think of capitalism as being locked in an ideological battle with socialism perhaps or even communism.

But we never really saw that capitalism might be defeated by its own child – technology. And I think that what we find is that even the most diehard free market economists usually save place for what they call market failure.

That is, markets really only work when the value of something and the price of that object or service coincide. So the key question is: what causes value and price to get out of alignment? And, in fact, every government on earth has a form of levying taxes of some form, because at some level there are certain things that need to be paid for that cannot, in fact, be priced where they must be valued.

So, for example, raising a standing army is tough because if somebody chooses not to pay for it it’s very difficult to exclude them from the protection of that army. So that in general—what we find is that these market failures are found in every economy, but they are also hopefully a small portion of the economic activity so that we can deal with them as a special edge case.

Now the problem with this is that technology appears to do something about figuring out the size of that small slice and making it rather large. So, for example, if I record a piece of music, once upon a time if you wanted a high quality version of that music you had to go to the folks who actually pressed the record albums.

But now I can record music with arbitrary fidelity and share it as a small file. And my having a copy of that file doesn’t preclude anyone else from copying the file and using it themselves. There’s no question that the number of times I use that file doesn’t really degrade the file because it’s, in fact, digital. So in that situation musicians were among the first to feel the earth crumble beneath their feet and they had to find new business models because, in fact, they found that they had gone from producing a private good where price and value coincided to producing a public good.

And the idea of taxing people to pay for both an army and their diet of jazz and rock n’ roll probably didn’t make a lot of sense.So the danger is that more and more things are being turned into small files, and that means that the portion of the pie that is private goods is likely to shrink. This is one of several different forces.

Another one that I talked about in an essay called Anthropic Capitalism is that software has some very peculiar features.Traditionally technology has moved us from low value occupations into higher value occupations. So while we always decry the loss of jobs we usually create new jobs which are more fulfilling and less taxing.

And therefore those who have cried wolf when they’ve seen technology laying waste to...

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