Thiel vs. Schmidt: The fireworks fly

July 17, 2012, 4:02 AM UTC

Eric Schmidt, Peter Thiel, and Fortune’s Adam Lashinsky.

FORTUNE — Has technology improved our lives over the past 30 years? It depends who you ask — and some of Silicon Valley’s biggest luminaries couldn’t disagree more.

According to Eric Schmidt, the executive chairman of Google (GOOG), technology has had an overwhelmingly positive role, lifting some 2 billion people out of poverty and spreading access to vital information from a relative small number to virtually all the people on earth. Going forward, people in the developed world can expect to have “extraordinarily long lives that are very productive,” he said. And for those in developing countries, “the world gets better too,” he added.

The retort from Peter Thiel, the co-founder of PayPal (EBAY): “I think you do a fantastic job as Google’s minister of propaganda.” Thiel is one of the Valley’s most successful investors.

MORE: Full transcript and video of this debate

Thiel, who debated Schmidt during a dinner conversation at Fortune’s Brainstorm Tech conference in Aspen, Colorado, said that technology is the only thing that could improve people’s lives, but it hasn’t. Over the past 30 years, Thiel argued, wages have stagnated, we suffered from a “catastrophic failure of energy innovation,” and progress in narrow areas of technology has not translated into general wellbeing.

Thiel contrasted the last 30 years with the prior 40, when wages rose dramatically, and innovation in cars, aeronautics, supersonic jets and computers delivered giant leaps that translated into improvements in the lives of people.

There was little that the two executives could agree on during a debate that got heated at times. To Thiel, the Arab Spring was caused by rising food prices caused by our inability to sustain gains in food production from the green revolution. To Schmidt, food prices have risen, but only because of misguided food policies by governments, and the Arab Spring was largely the result of people being fed up with oppressive regimes. (They did agree that social media only played a marginal role in the uprisings that convulsed the region.) To Schmidt, government is burdened by entitlement programs that are unsustainable given the aging population. Thiel denied there was a demographic problem.

MORE: America’s consumer electronics comeback

The two did agree that government was broken, but not on what is ailing it. And Thiel was particularly critical of higher education, the costs of which have risen sharply. Universities, he said, have burdened students with mountains of debt and not given graduates significantly larger earning potential. “The debts being imposed on people linked to education are turning and an entire generation into something close to indentured servants,” Thiel said, calling the problems with higher ed an “education bubble.”

Schmidt had the last word. “Through that logic, fewer people would get educated,” Schmidt said. He added: “The only way to maintain competitiveness is to get more education.”

It’s not clear who, if anyone, won the debate. But perhaps not surprisingly, Schmidt’s last line earned him a round of applause.

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