Thursday 25 September 2014 5:21 pm

Listen to Peter Thiel: Politicians must embrace the fact there’s no money left

MORE must cost less. In his new book Zero to One, entrepreneur and investor Peter Thiel observes that the dream of globalisation – expanding the affluent consumption habits of the western middle class to more and more of the world – demands we also commit to radical technological innovation in order to reduce that lifestyle’s environmental cost.

What a difference from the world of British politics, where both sides appear committed to the idea that spending less can only mean getting less: Labour believes it must prove it loves the NHS by paying more for it – and putting the screws on the City’s wealth to get the cash; the Conservatives, by contrast, sometimes seem as keen on preaching austerity for its character-building quality as championing the possibility of efficiency gains.

Yet offering more for less is something business achieves all the time: whether it’s free newspapers or faster processors. Take the introduction of containerisation for cargo shipping. In 1956, loose cargo cost $5.86 a ton to load. Using shipping containers slashed it to 16 cents a ton.

A more recent example is the way cloud computing has driven down server costs. According to Timothy B Lee of Vox, the cost of running news aggregator Digg’s servers has plunged in just two years: it cost $250,000 a month in 2012; now, the cost is well under $100,000 a month, with five times as many users.

Sometimes the answer is found by providing a slimmed-down service that still meets customer needs: look at the explosive recent growth of discount supermarkets like Aldi and Lidl, or the way the budget airlines Easyjet and Ryanair are now redefining business travel.

Sometimes it is about using algorithms and machine learning to complement human labour: FCA boss Martin Wheatley has expressed his hope that such technologies will help fill the financial advice gap for small investors. Already, a lifestyle startup like clothing specialist Chapar can act as a free personal stylist thanks to a combination of smart analytics and an efficient back office.

And for visionaries like Thiel or Peter Diamandis, founder of the X Prize, setting out to do more with less is the only way to build a future that works. The launch of the Global Learning X Prize this week established a $15m (£9.18m) challenge to create software allowing children anywhere in the world to teach themselves to count, read and write. Diamandis sees a future where traditional models of education cannot keep up with demand as an opportunity to do better, not a cause for despair or unaffordable spending.

In an age of stagnant thinking, where low growth is increasingly seen as the new normal, we need to turn the fact there is no more money left from a burden into an opportunity. Seen this way, reducing the size of the state is not about doing less. It’s really the only practical way to do more. Because if you need radical efficiency gains and lower costs, you need fewer state bureaucrats and more entrepreneurs.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.