The Dim-Post

April 9, 2015

Innovation and complexity

Filed under: Uncategorized — danylmc @ 8:57 am

This jumped out at me yesterday: a conversation between Tyler Cowen and billionaire venture capitalist Peter Thiel. Cowen is one of the most influential economists in the world, and he introduces Thiel as:

one of the greatest and most important public intellectuals of our entire time. Throughout the course of history, he will be recognized as such.

And then they talk about innovation and Thiel says:

There’s the question of stagnation, which I think has been a story of stagnation in the world of atoms, not bits. I think we’ve had a lot of innovation in computers, information technology, Internet, mobile Internet in the world of bits. Not so much in the world of atoms, supersonic travel, space travel, new forms of energy, new forms of medicine, new medical devices, etc. It’s sort of been this two-track area of innovation.

There are a lot of questions of what has caused it and I think maybe that’s a good part to start in terms of what gets you out of it. On a first cut, I would say that we lived in a world in which bits were unregulated and atoms were regulated.

If you are starting a computer software company, that costs maybe $100,000, to get a new drug through the FDA, maybe on the order of a billion dollars or so. If the FDA were regulating video game technologies, and you had to do a double-blind study to make sure that the video games weren’t addictive, damaging to your brain, etc.

Is government regulation really the primary reason there’s more innovation in software than biotechnology? Surely the big difference between the two is that from an engineering point of view, software code is the easiest material you can possibly work with. That’s what’s great about it. The barriers to entry are almost non-existent. You can develop something amazing in your garage and take it to market for about $100,000. Smart teenagers with laptops can just start messing around with software development tools and build stuff, which isn’t something that can happen in biotech. The smart teenager would need access to a multi-million dollar lab, and if they just started messing around in it they’d kill themselves very quickly.

Software can become complex, but working with it is easy. Pharmaceuticals, on the other hand, are just really hard to work with. You need labs filled with expensive specialist equipment, and lots of people trained to use it, and the biological systems that your product interacts with are many magnitudes more diverse and complex than the IT platforms that software interacts with. And, of course, there’s a regulatory burden because video games don’t cause birth defects or increase your risk of heart failure, or give you cancer. It costs virtually nothing to test a software product, but drugs mean large scale double-blind placebo clinical trials, and that’s just really expensive. Thiel is like a guy who watches someone build a sand-castle, and then points to a skyscraper and says, ‘Sand-castles are unregulated but you need a permit to build that, so skyscrapers are more expensive because of government regulation.’

Now, you’d think that a brilliant economist and ‘one of the greatest intellectuals of all time’ would realise all this, and you’d also wonder why they don’t. Cowen and Thiel are very smart guys but they’re also libertarians and that places a huge barrier of magical thinking between them and anything sensible they might say about issues involving government or regulation and markets. There’s a huge web of libertarian fantasy around free market alternatives to drug regulation, involving patients making rational choices about medication based on perfect information, and orphans sending price signals by winning tort cases against multi-billion dollar drug companies that accidentally kill their parents.

It’s all preposterous, but it matters because guys like Thiel are hugely influential among political and media elites. He made all that money! He must be right about stuff! But he’s not, and a lot of what passes for wisdom or insight among what Cowen refers to as ‘the hyper-meritocracy’ or ‘the cognitive elite’ is simply uninformed oblivious nonsense.

66 Comments »

  1. Succinctly, and elegantly, put.

    Comment by TerryB — April 9, 2015 @ 9:03 am

  2. If you accept his estimates of $100,000 and $1 billion, though, your explanation of the differences between computer software and pharmaceuticals doesn’t bridge the difference. So maybe he has a point, but not quite as strong a one as he thinks?

    Comment by Matthew Hooton — April 9, 2015 @ 9:08 am

  3. Remember when Thiel lamented how tough it was for a libertarian out there since women got the vote?

    Comment by Hugo Drax — April 9, 2015 @ 9:09 am

  4. As you note. The FDA is a barrier to entry in the medical product market. The onus is on the manufacturer to prove that their product is safe for use as intended, and the processes are complex, expensive, and time consuming. There is considerable call for reform for devices and products at the lower end of the risk spectrum.

    However, let’s look at the largest single consumer goods market – housing. I’ll quote Faisal Islam, who succinctly summarises the problem:

    The first thing to notice is that this is a highly illiquid market. Only a small proportion of the housing stock is actually being traded, or ever will be traded. On top of all this, transactions in the housing market are costly. Estate agents’ fees in the UK can typically reach 3%, and as high as 6% in the US, with stamp duty on top of that. These are the crucial features of a housing market: thin trading and high transaction costs. It is a recipe for dysfunction, distortion and inefficiency.

    In theory the internet would allow for us to circumvent this. The cost of hosting bits is trivially low once the infrastructure is in place, and this would increase the size of markets and the information available to buyers, and decrease the costs to a fraction of those charged by brick and mortar agents. However, TradeMe has simply become a host for Barfoot and Thompson et al, with the occasional private sale. Importantly, no company of size has appeared as an internet-based real east agent. Is this a regulatory issue, a commercial issue, or one introduced by TradeMe and their relationship with estate agents? It’s not clear.

    The problem isn’t that capitalism doesn’t have the solutions. It’s that those solutions are often not the most profitable ones. Introducing or maintaining inefficiency in a market by restricting how things are sold, and what things are sold, is very frequently much more profitable. Incumbents can and do use their size and market power to keep out competitors.

    Comment by George — April 9, 2015 @ 9:20 am

  5. If you accept his estimates of $100,000 and $1 billion, though, your explanation of the differences between computer software and pharmaceuticals doesn’t bridge the difference. So maybe he has a point, but not quite as strong a one as he thinks?

    It depends on how you calculate it. Cost of getting a single drug that is proven to be ‘safe and effective’ to market is a lot less than a billion dollars. The problem is that most drugs fail to be proven safe and effective, so you might develop and test twenty or thirty drugs before you actually get one out there earning money for you. Thus the enormous cost/drug to market.

    Comment by danylmc — April 9, 2015 @ 9:21 am

  6. I kind of agree with you Danyl. Except his is the only theory I’ve seen of why he have had such stagnation in the world of atoms. We had such rapid progression leading to Apollo and the 747 in 1969, and we don’t seem to have progressed much since. And where’s my jetpack?

    Or is it that the invention of computers has diverted all the brains away from engineering in the real world?

    Comment by Will Campbell — April 9, 2015 @ 9:43 am

  7. Another theory about “stagnation in the world of atoms” is anthropologist David Graeber’s thesis that we are overrun by bureaucracy and managerialism, caught up in a mesh of bullshit jobs. Graeber is an anarchist and there has a tiny bit of ideological overlap with Thiel the libertarian.

    Myself, I can’t help but think that there are limits to our ability to work with matter, that perhaps the most obvious ideas really are mined out, and we just have trouble accepting this.

    Comment by Stephen J — April 9, 2015 @ 9:53 am

  8. A lot of – possibly most of – what’s driving rapid progression in computing is actually driven by atoms, not bits. Materials science is a huge driver of the computing industry. And no, you don’t have a jetpack but you can buy yourself a drone.

    Comment by danylmc — April 9, 2015 @ 10:01 am

  9. The notion of Thiel being “one of the greatest and most important public intellectuals of our entire time” is laughable.
    He is famous for being a ‘wealth creator’ and shooting his mouth off about shit he knows very little about about – particularly in the field of medicine – but because he’s loaded, his ill-informed libertarian wank is taken with all seriousness.

    A good recent piece in the Wapo on his ilk and their quest for immortality framed as philanthropy.

    Asshats, the lot of them.

    Comment by Gregor W — April 9, 2015 @ 10:04 am

  10. Well, the basic premise is bollocks, so it’s no surprise that his analysis is facile. Stagnation in the world of atoms? Only if you wilfully ignore 20 years of rapid (and accelerating) progress in our understanding of and ability to manipulate the human and many other genomes. Then there’s material science, where we can design and make sheets of carbon atoms and turn them into super-fast transistors or stick nano-scale structures on top of solar photovoltaic layers to capture more light, etc etc etc.

    What the bits have done is radically transform the ways we can work with atoms.

    Comment by Gareth — April 9, 2015 @ 10:06 am

  11. We had such rapid progression leading to Apollo and the 747 in 1969, and we don’t seem to have progressed much since.

    Surely this is a false?

    Comment by Phil — April 9, 2015 @ 10:07 am

  12. one word reply to thiel: thalidomide.

    Comment by oldentired — April 9, 2015 @ 10:21 am

  13. It’s hard to believe these arguments against regulation are still being peddled by apparently intelligent people only a few years after the global financial crisis. I did a quick google and found that Thiel’s hedge fund shrunk 90% after the GFC, which makes it all the more baffling.

    One of the main reasons we have regulation is for public safety. Regulation for finance so bankers don’t crash the financial system and wipe out our savings. Regulation for airlines so planes meet safety standards so we can travel without crashing into the ground. Regulations for pharmaceuticals so we don’t get killed by the antibiotics we take. I would rather live in a regulated and safe world than an “innovative” one where it’s up to me to decide whether the drug I’m taking is safe or not.

    There is something about American culture that makes them pathologically averse to regulation.

    Comment by Seb Rattansen — April 9, 2015 @ 10:23 am

  14. Thiel talks a lot of nonsense. He and others like him benefited from lucky timing – being those with the acumen to exploit new opportunities in the new and wondrous world of networked computing, some of whom now confuse their position at the front of histories queue as something it isn’t.
    Thiel made his money by being first to make online payment work for a broad audience at reasonable costs and he only had the opportunity to do so because the technology had not existed long enough for someone to beat him to it.

    And that technology? The arrangement of atoms into computers and lines connecting them? The very thing he disdains as not being as good as his exploitation of it.

    “…a poor player that struts and frets his hour upon the stage and then is heard no more: it is a tale told by an idiot, full of sound and fury, signifying nothing.”

    Comment by Fentex — April 9, 2015 @ 10:25 am

  15. You might note the post by Tyler’s co-blogger, Alex Tabarrok, on costs of pharma innovation in the US.
    http://marginalrevolution.com/marginalrevolution/2015/04/the-demand-for-rd-is-increasing.html
    He there notes that new drug development in China is one tenth the cost of new drug development in the US.

    There’s a really big range from “current FDA” through to “leave it all to liability and tort law”. You’re casting Tyler and Thiel as being entirely in the latter camp. But surely where regulatory costs of new pharma development are ten times what they are elsewhere, that has to have some very real effect on new drug development. You don’t have to prefer a full-market alternative to recognise that excess regulatory costs are going to matter.

    Comment by Eric Crampton — April 9, 2015 @ 10:45 am

  16. Yes this is nonsense as a lot of the advances in the world of bits are opportunities created by advances in the world of atoms. Faster, smaller, cheaper computing hardware is an atom advance and that is what has provided the opportunity for most bit advances.

    The real difference between the world of bits and the world of atoms, is that the world of atoms is limited by physical reality. In physical reality it is often not sufficient to just have a clever idea, you need resources that are generally more complicated and expensive to arrange than coder hours, and you often need a technological advance to overcome some apparent physical limit. And some physical limits cannot be overcome; precisely which are in this class is arguable, obviously.

    If having clever ideas was sufficient in the world of atoms, we would be flying cars to work in a megacity in a colonial province on Alpha Centauri.

    Comment by RJL — April 9, 2015 @ 10:49 am

  17. “We had such rapid progression leading to Apollo and the 747 in 1969, and we don’t seem to have progressed much since.

    Surely this is a false?”

    Well we have progressed. But it seems to have slowed. Imagine transporting someone from 1923 so they were 46 years into the future in 1969.

    Wow, look at that massive 747! People just landed on the moon? Look how rich people are! Practically everyone owns a fridge and a washing machine and a car, and has enough to eat! Disease has nearly been wiped out.

    Now transport someone from 1969 to 2015. I mean there would still be some things to amaze them, but eveyone walking down the street staring at a little phone doesn’t seem quite so dramatic. And the average person is scarcely any better off.

    Comment by Will Campbell — April 9, 2015 @ 11:07 am

  18. “….He there notes that new drug development in China is one tenth the cost of new drug development in the US…”

    Ah, the stupidity of the libertarian economist writ bold for all to see.

    It is also cheaper to manufacture stuff in China, and in the process huge swathes of the place have been turned into environmental catastrophes that are now no longer safely habitable by human beings not wearing gas masks. By Crampton’s criteria, drugs would be cheaper to develop in the US/West if only we’d allow hundreds of thousands of people to be guinea pigs.

    Comment by Sanctuary — April 9, 2015 @ 11:10 am

  19. If only the US enjoyed the same freedoms as those living in the totalitarian communist dictatorship of China.

    Comment by danylmc — April 9, 2015 @ 11:12 am

  20. “doesn’t seem quite so dramatic”

    cept they are watching near live footage of a robot landing on a comet

    Comment by Pascal's bookie — April 9, 2015 @ 11:20 am

  21. Thiel made his money by being first to make online payment work for a broad audience at reasonable costs and he only had the opportunity to do so because the technology had not existed long enough for someone to beat him to it.

    This is the other thing that particularly galls me about Thiel.
    His fortune, like most other of the internet age, was made of the back of massive public investment which he is quick to forget.

    Comment by Gregor W — April 9, 2015 @ 11:24 am

  22. Now transport someone from 1969 to 2015. I mean there would still be some things to amaze them, but everyone walking down the street staring at a little phone doesn’t seem quite so dramatic. And the average person is scarcely any better offI>

    You are confusing the pace of change with the impact and visibility of change, I think.

    I think someone from 1969 would be pretty stoked that say smallpox had been eradicated, the human genome had been fully sequenced, and access to pretty much the entire some of human of human knowledge was accessible to everyone walking down the street via their little phone, though admittedly, they mostly use that power to check out the latest antics of grumpy cat for the lulz.

    Comment by Gregor W — April 9, 2015 @ 11:33 am

  23. There’s a really big range from “current FDA” through to “leave it all to liability and tort law”.
    —-
    By Crampton’s criteria, drugs would be cheaper to develop in the US/West if only we’d allow hundreds of thousands of people to be guinea pigs.

    That WHOOOOOOOSH sound you’re hearing is the train passing by Sanctuary Central Station without stopping.

    Comment by Phil — April 9, 2015 @ 11:35 am

  24. I don’t think they would be that impressed by a robot landing on a comet. They expected that we would have people landing on comets by now.

    But the main thing would be that they would have expected our standard of living to have have improved by as much as it had improved in the 50 years leading up to 1969. And it hasn’t.

    Comment by Will Campbell — April 9, 2015 @ 11:59 am

  25. “The Dallas Non-Buyers Club” – a movie where Mathew McConaughey chokes quietly on his own coughed up blood and vomit, then tears flow onto a coffin?

    Comment by unaha-closp — April 9, 2015 @ 12:14 pm

  26. But the main thing would be that they would have expected our standard of living to have have improved by as much as it had improved in the 50 years leading up to 1969. And it hasn’t.

    I would think that has more to do with the nature of politics and modern capitalism as opposed to scientific endeavour.

    Comment by Gregor W — April 9, 2015 @ 12:29 pm

  27. This message of support for the FDA has been brought to you by Johnson & Johnson, GlaxoSmithKline, Roche, Pfizer, Sanofi, Novartis, Astra/Zeneca…

    Remember the FDA is there to keep you safe and is no way protecting to our – massive, planetary system large, are you freaking kidding me – profits.

    Comment by unaha-closp — April 9, 2015 @ 12:37 pm

  28. Things like plane travel have improved (a lot!) at the margins. Peter Theil probably owns a gulfstream jet that can fly halfway around the world at close to supersonic speeds. They aren’t available for commercial travelers, but that’s for economic reasons not innovative ones. And we’re going to have self-driving cars pretty soon!

    Comment by danylmc — April 9, 2015 @ 12:59 pm

  29. @Gregor W: “access to pretty much the entire some[sic] of human of human knowledge was accessible to everyone walking down the street via their little phone

    Ha ha. You have obviously not read many student essays crippled by an inability to access anything other than the first few google hits.

    What’s available online via your smart phone is really a very truncated sample of human knowledge; and what is there is useless if you don’t understand it.

    Comment by RJL — April 9, 2015 @ 1:02 pm

  30. Things like plane travel have improved (a lot!) at the margins.

    Not really. Plane travel is a lot cheaper (about one tenth the price), and planes use less than half as much fuel to go the same distances. But they fly slightly slower than they did in 1970, by design. The biggest hold-up for domestic travellers is however security and baggage handling, neither of which have been made efficient. Nor has ground travel from airports to destinations been made cheap or efficient – because airport rail usually threatens lucrative taxi and parking revenue.

    Comment by George — April 9, 2015 @ 1:05 pm

  31. If as you claim drugs just cost so much, do you think Pharmac is harming future generations by buying at the lowest cost possible?

    Comment by unaha-closp — April 9, 2015 @ 1:10 pm

  32. “And we’re going to have self-driving cars pretty soon!”

    Yes. I hope we do. The point is that for some reason ordinary people’s lives have not been improved much by technology over the past 46 years, especially when compared to the stupendous improvements of the 46 years before than. Maybe that is about to change. I hope so.

    But that still leaves the unanswered question about what the heck has been happening over the last 46 years. Maybe Gregor is right, and it is about politics, not technological stagnation. One interesting theory is that while capitalism had to compete with communism (about which is the better system for the people) then western governments were more proactive about sharing the technologically generated wealth. Once communism was finished in 1989 capitalism no longer had to compete and all the riches were kept for the rich. Thus we have new technology (e.g. a gulfstream jet) but the benefits are restricted to the super rich (e.g. Theil).

    I don’t know what the answer is, but it is good question to debate.

    Comment by Will Campbell — April 9, 2015 @ 1:25 pm

  33. Ha ha. You have obviously not read many student essays crippled by an inability to access anything other than the first few google hits.

    Which is surely down to students not being taught properly about the importance of research and citation.
    That’s the fault of institutions, not students. Smacks of a poor workman blaming his tools IMO.

    What’s available online via your smart phone is really a very truncated sample of human knowledge; and what is there is useless if you don’t understand it.

    Re understanding, that goes for all knowledge repositories but the fact remains that there is no other tool that allows pretty much anyone – with the minimum of effort and cost – near instantaneous access to any peer reviewed research and analyses (plus a bunch of non scientific journals of records) so long as they have a wireless connection.

    Comment by Gregor W — April 9, 2015 @ 1:29 pm

  34. expected our standard of living to have have improved by as much as it had improved in the 50 years leading up to 1969. And it hasn’t.

    By any reasonable metric, the global average standard of living has improved far faster post-69 than pre-69.
    If your hypothetical time traveler was a white middle-aged male from Los Angeles he might not, at first glance, notice much of a difference in living standards. But what if your time traveler was a young woman from Mumbai?

    Comment by Phil — April 9, 2015 @ 1:35 pm

  35. ordinary people’s lives have not been improved much by technology over the past 46 years, especially when compared to the stupendous improvements of the 46 years before than.

    Can I nominate this for the “most wrong that any statement on the internet has ever been” award?

    Comment by Phil — April 9, 2015 @ 1:39 pm

  36. George #4: It brings to mind when Jonas Salk declined to take out a patent on his polio vaccine.

    Comment by Kumara Republic (@kumararepublic) — April 9, 2015 @ 1:49 pm

  37. You could reframe this:

    Most of the major advances in manipulating atoms during the 20th century including the 1969 Moon landings were financed or under-pinned by public money. Let’s spell that out for libertarians: government intervention. From the time of Thatcher and Reagan onwards, intervention wound down and innovation was left to “market forces”.

    So, the failure of the human spirit or whatever it is the libertarian geniuses are complaining about could be seen as market failure.

    As for the triumphant manipulation of bits, most of that is down to the the rise of the internet, essentially a government intervention that slipped under the neo-liberal radar.

    Comment by Bill Bennett — April 9, 2015 @ 1:55 pm

  38. Phil. Good point. My thinking was a bit western centric. The global improvements have been huge.

    But this is largely a matter of the rest of the world adopting the technology enjoyed in the West and catching up.

    Why has the West not forged ahead to any great extent, like it did in the previous 50 years?

    Comment by Will Campbell — April 9, 2015 @ 1:57 pm

  39. Also, when it comes to ordinary – with a nod to #35 we can read that as white working class people in the first world – not making much economic progress in the last 40-odd years, a lot of that is down to the masters-of-the-universe like Thiel sucking all the financial oxygen out of the world for themselves.

    Comment by Bill Bennett — April 9, 2015 @ 1:58 pm

  40. Supersonic jet travel a la the Concorde was an engineering marvel in its day, but proved to be a commercial flop because airlines preferred passenger numbers over speed.

    And there’s research into nuclear fusion energy, but the problem of fusion only happening at 100m Celsius has to be solved first. And even a single fusion plant would make Think Big look like a school woodwork project.

    Comment by Kumara Republic (@kumararepublic) — April 9, 2015 @ 2:04 pm

  41. Jesus, where to start?
    Surely biotech is more like chip fabrication?
    Computer programming is more like authoring: some Scottish woman wrote some best sellers while sitting down at her local café.

    Libertarian? So that explains his weird ideas? Or is it more of the phenomenon of successful or famous people thinking ALL their views are worthy, and coming out with clangers. Al Gore’s millions of degrees Sun), Danny Glover’s Haiti earthquake caused by global warming. Gordon Brown’s No More Boom & Bust. (supposedly) clever people say stupid things all the time. G Morgan & cats!

    Will, I don’t know if you remember back 46 years? I know my living standards have improved:
    Washing machines? Dryers? Microwaves? Bigger fridges & freezers. Television, cheap radios, most people can now afford cars, rather than only one family in the street. Cellphones, the PC, toothpaste, waste water treatment, central heating/ heat pumps, double glazing, pink batts, UHT milk. Polar fleece (no more scratchy wool for me!) better lighting. Workers lives have been improved (e.g. by a major reduction in risk, plus productivity gains) through chainsaws, bulldozers, cordless drills, robots. People are now cured of cancer who weren’t 46 years ago. We know how to deal with more learning issues, rather than simply labeling some children as stupid. And although some of those things were around 46 years ago, improvements all over the place have allowed ordinary us to afford them, rather than remaining as luxuries.

    Comment by Clunking Fist — April 9, 2015 @ 2:26 pm

  42. @39 46 years ago, did white working class guys travel overseas much? I know some who certainly do now, while still being able to afford a car, tv and (mostly) a house. Check out the change in life expectation over that period.

    Comment by Clunking Fist — April 9, 2015 @ 2:31 pm

  43. CF: “We know how to deal with more learning issues, rather than simply labeling some children as stupid.”

    Sadly the re-emergence of culture wars and pseudo-meritocracy has caused that to regress somewhat.

    Comment by Kumara Republic (@kumararepublic) — April 9, 2015 @ 3:27 pm

  44. This guy seems to have dealt with the issue with a touch more intellectual dexterity than most of us have achieved so far.

    http://www.forbes.com/sites/timworstall/2011/10/05/an-answer-for-peter-thiel/

    Comment by Tinakori — April 9, 2015 @ 3:45 pm

  45. There is always a tendency for convergence in our centrist political structures such that the left and right merge into one another. Regulatory authority is captured by wealth and debts of the powerful are expunged by socialised wealth. Neither socialists or capitalists are in charge, but everyone at the top profits via the worst aspects of each. Today, in the shadow of the GFC, much of the Western world is experiencing this convergence.

    So we get ideas like Theil’s libertarianism and it has some merit, but is also largely horseshit. We also get ideas from the likes of the Occupy Movement which are largely horseshit, but contain some merit. The problem is that over time it is likely these horseshit ideas (of the right and left) will gain traction in places where the centrist convergence holds sway, because the centrist convergence is worse.

    Comment by unaha-closp — April 9, 2015 @ 4:12 pm

  46. unaha: “The problem is that over time it is likely these horseshit ideas (of the right and left) will gain traction in places where the centrist convergence holds sway, because the centrist convergence is worse.”

    As in the centrist convergence of say, Michael Laws or Richard Prosser?

    Comment by Kumara Republic (@kumararepublic) — April 9, 2015 @ 5:18 pm

  47. Tony Blair & David Cameron?

    Comment by unaha-closp — April 9, 2015 @ 8:09 pm

  48. When Tyler Cowen began advocating his ‘Great Stagnation’ theory, a bunch of people pointed out that if you have a mental illness – and a lot of people do – then your life is just immeasurably better now than it was fifty years back. There’s effective low-cost medication and you can live a mostly normal life, instead of living on the streets or being imprisoned and tortured by the government until you die. It’s a big deal for a lot of people, but as far as I know Cowen never addressed any critics who pointed this out, and he’s never modified his thesis to reflect this. And the reason, I think, is that libertarians struggle with the concept of mental illness: when your philosophy is bound up around individuals being free to make rational choices, the spectre and prevalence of mental illness challenges that on pretty much every level. So the response – as with climate change – is just to ignore it.

    Comment by danylmc — April 9, 2015 @ 8:22 pm

  49. Most of the stories about some form of intellectual crisis stem, not from a cold-blooded objective look at current technology, but from a desire to frame the narrative as one of crisis so people (presuming they accept that narrative) will be more willing to contemplate major sacrifices. If these sacrifices will benefit the people creating the narrative of crisis, well, that’s probably just a coincidence right?

    Comment by kalvarnsen — April 9, 2015 @ 8:26 pm

  50. He there notes that new drug development in China is one tenth the cost of new drug development in the US.

    I look forward to the wave of pharmaceutical innovations coming out of China.

    Comment by herr doktor bimler — April 9, 2015 @ 11:24 pm

  51. I look forward to the wave of pharmaceutical innovations coming out of China.

    You should.

    Comment by George — April 10, 2015 @ 9:01 am

  52. Thiel’s argument basically compares apples with elephants. Technological progress always goes in fits and starts, because the barriers are mostly not about economics, but about what is possible. Hard limits get reached. The space program hit the hard limit of the extreme cost of getting things into space. Air travel hit the hard limits of how fast you can push a huge thing through the atmosphere. Biotech hits the enormous complexity of the human body and the world of molecules. But computing has been driven by the so called Moore’s Law, which has driven down the cost of practically everything electronic. This will most likely also hit a hard limit, we’re just not there yet. But it’s pretty much accepted that there is likely to be an absolute limit to how much computation you can get from energy. Once we reach that, the only way to get more computation will be to make more energy. Computer power will be unable to continue exploding on the high exponential rate that it has been, and will drop down to the lesser exponential growth of available energy.

    But even then, such things are hard to predict. Maybe quantum computing can break that barrier. To base an argument about the rate of progress failing to measure up to how it was imagined that it should by people who had not yet undertaken the exploration is silly. Maybe we will never have a jetpack because the whole idea of them is fundamentally flawed, that even if they could be made, they would be impractical, and they can’t be made anyway. Maybe our scale of space exploration will never get beyond a certain point. Maybe there isn’t really enough available energy to make it worthwhile for humans to go beyond our solar system – most sci fi has faster than light travel in it, something that, on current available evidence, is simply impossible.

    Comment by Ben Wilson — April 10, 2015 @ 9:49 am

  53. So the response – as with climate change – is just to ignore it.

    They’re more likely to dispute it, like progressives with regulatory capture.

    Comment by unaha-closp — April 10, 2015 @ 10:27 am

  54. The next wave of pharmaceutical innovation coming out of China ??

    This is seen as a big problem:

    “The sector is also challenged by a lack of intellectual property rights to effectively protect domestic innovation, contributing to destructive competition in the field”

    They steal someones else s innovation, who would have thought ?

    Comment by dukeofurl — April 10, 2015 @ 11:32 am

  55. That billion dollar estimate is highly contested. Last year The New York Times said:
    “In 2010, a systematic review of studies that looked at the cost of drug development was published in Health Policy. The review found 13 articles, with estimates ranging from $161 million to $1.8 billion (in 2009 dollars). Obviously, methodology matters.” http://nyti.ms/1xPnAQm

    Comment by Josh Petyt — April 10, 2015 @ 2:30 pm

  56. China has already had a few innovative drugs developed in China by chinese companies approved. One that has attracted recent attention is the HDAC inhibitor from Shenzhen Chipscreen called Epidaza ( chidamide ), which cost about US $70 million to develop and approve, which is less than 10% of the cost of a similar drug approval in the USA or Europe.

    The major cost of drug development is in the clinic ( Phase 1 – 3 trials ), so it seems China has a major cost advantage there. However, Western regulators are now very wary of external clinical trials, and may demand more trials if the company seeks approval in the US and Europe.

    The trend now is that any new drug seeking approval must have significant advantages over current best-in-class treatments. That requires extensive and expensive trials, so western pharmaceutical companies seek drug classes that will provide continuing revenue, eg mental health, preventative treatment using long-term regular doses ( cancer, blood pressure, etc. ). That leaves many classes of drugs available for China, India etc. to explore.

    China has some of the smartest chemists around, and now have world-leading facilities. They will dominate pharmaceuticals in the not-to-distant future.

    Comment by Bruce Hamilton — April 10, 2015 @ 5:16 pm

  57. “They will dominate pharmaceuticals in the not-to-distant future.”

    And China will develop a much stronger interest in intellectual property protection

    Comment by Tinakori — April 10, 2015 @ 5:46 pm

  58. danyl, have you seen the Sachs interview? To be fair to Cowen, he seems keener on getting the interviewees views than pushing his own. However, would be interesting to hear him and Krugman!

    Comment by owen — April 10, 2015 @ 9:50 pm

  59. However, Western regulators are now very wary of external clinical trials, and may demand more trials if the company seeks approval in the US and Europe.

    They’re “now” wary? You mean there was a time when they weren’t wary of clinical trials conducted in an extremely corrupt country in which patronage, influence-peddling and straight-out bribery are the norm? I really hope that’s not the case…

    Comment by Psycho Milt — April 11, 2015 @ 7:33 am

  60. Capital is international and the market will always wins. These are basic facts. If a drug has been developed in a low regulated economy and works it will find its way to consumers internationally. Cowan & Theil are domestic focused so their agruements are ruined from the start.

    Same with Statist who attempt regulation of the economy. Capital is international and makes Statist who attempt local regulation into fools.

    Comment by Simon — April 11, 2015 @ 9:14 am

  61. “…Is government regulation really the primary reason there’s more innovation in software than biotechnology..?”

    I guess that this may turn on what you consider to be “government regulation”. For example, Silicon valley transhumanists/technolibertarians like Thiel are no particular friends of democracy, so for all we know Thiel may regard the bothersome ritual of empowering the in-valids as a form of government regulation that impedes his impatient march to a Gattaca like future. Also, Thiel is an American – and the United States is the country where eugenics refuses to die, and forms part of the tight matrix of interactions of things like racism, fascination with technological solutions to human problems, and paranoia that forms a large part of the character of many people in that country.

    The implicit racism of transhumanists/technolibertarians is never far from the surface. If you believe yourself to be part of a futurist, utopian movement in which you feature as an exulted member of the chosen ones then those beliefs are bound to colour your views on bio-tech – after all, uninformed medical experiments are much more likely to be conducted on “inferiors” – read non-white and/or mentally disabled people – than they are on billionaire white males.

    Technological innovations like using aluminium rather than lithium in batteries or quantum computing or whatever will continue apace, but really game changing technological breakthroughs – as opposed to innovations – is largely dictated by the cost of the energy required to make it happen. Thus, if Concorde had have burnt half the fuel it did (or fuel was half the price it is) then Supersonic airliners would still flourish today; If the amount of rocket fuel required to deliver 100 tonnes of cargo to LEO was 30 tonnes rather than 3000 then the solar system would have been a thriving place of commerce for decades now. So, IMHO, the only game changing new technology we may see in our lifetimes is commercially feasible fusion power. Why fusion is accorded the same urgency as the Manhattan project is an eternal mystery to me (the United States spends one trillion dollars a year on it’s military, which is twice as much as it has spent in all it’s history on fusion research).

    Comment by Sanctuary — April 11, 2015 @ 9:15 am

  62. “…Why fusion IS’NT accorded….”

    Comment by Sanctuary — April 11, 2015 @ 9:16 am

  63. Just thoguht of a good eg of international capital making fools of local regulators. Chinese money pouring into NZ has exploded bank leverage so that the NZ housing market is now a ponzi.. So what ever rules those clowns at the RBNZ are operating under circa 2010 are badly outdated. More State failure.

    Comment by Simon — April 11, 2015 @ 9:17 am

  64. Psycho Milt, perhaps a little background will help…

    Clinical trials are designed well before the experiment starts, and the pass/fail outcomes may even be agreed in advance with regulators. The trials are designed to eliminate bios and have specified criteria at different progression points of the expensive trial to justify continuing. The extensive, independent, quality systems in place should, and do, detect shonky and shoddy behaviour.

    The reason the US and European regulators have concerns about external trials is that the agreed criteria between the foreign regulators and company may reflect local culture/diet/herbal medicines etc. The pallet-load of paper that accompanies an application will be diligently reviewed by quality, pharmaceutical, and medical specialists within the company, by their external quality consultants, and at the regulator in each country/region the drug is submitted to. Corrupt or inadequate practices will be identified.

    Drugs for rare diseases have a much simpler path to approval, as the general population is not at risk, but they do have extensive post-approval monitoring to ensure they are, and remain, the best available option. Big Pharma isn’t interested in such drugs, hence other countries pursue them.

    No rational company is going to try and push through a drug that fails to meet pre-agreed endpoints. It’s possible to change endpoints if data suggests unexpected beneficial outcomes, but that is very rare and subject to intense scrutiny. Usually a new trial has to be started. The more difficult drugs are ones that marginally pass/fail – companies and their funders have to decide whether they will win the lottery or throw good money after bad.

    AFAIK, New Zealand has not discovered a novel small molecule drug entity that has been approved by the FDA and been commercially successful. Most of our “breakthrough” drugs have piggy-backed on the applications of approved drugs that have similar mechanisms, thereby avoiding the US$ 1+ billion clinical trial / regulator approval cost.

    Comment by Bruce Hamilton — April 11, 2015 @ 9:34 am

  65. Sanctuary,

    Concorde failed because of declining passenger numbers ( after the Paris crash ) and increasing maintenance costs because Airbus did not want to continue providing the support for obvious reasons. The issues of the sonic boom and takeoff noise blighted the early history of Concorde in the USA, and it was originally banned there. Singapore had to stop flights because the Malaysian government objected to the noise. Richard Branson wanted to buy the fleet and continue flights , but British Airways refused to sell. Stil,l 27 years of commercial operation is a great record.

    Comment by Bruce Hamilton — April 11, 2015 @ 9:54 am

  66. 55, Josh Petyt,

    Re cost to develop a new drug. Obviously the cost varies with each drug, each company, each regulator, and the agenda of the publication. One recent estimate of US $2+ billion triggered diverse responses. Discussion and links available at :-

    http://www.forbes.com/sites/johnlamattina/2014/12/02/the-debate-over-the-cost-to-develop-a-new-drug/

    However, using US$1 billion has been popular for the last 5 years. There is a trend at Big Pharma to shrink in-house R&D and purchase small companies with potential blockbuster drugs. The problem is that companies with smaller R&D lose the capability to technically evaluate the drug and small company, and have paid premium prices for companies with poor drug candidates, such as GSK’s purchase of Sirtris for US$720 million, and shutting Sirtris down 5 years later.

    Comment by Bruce Hamilton — April 11, 2015 @ 5:05 pm


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