The takeaway from Thiel's fairly accurate assessment of broad technological progress is the following:

You get what you incentivize.

Winner-take-all free market capitalism is not synonymous with advanced, century-long research and development projects at the national scale. Our current socioeconomic system rewards convincing others to depart with their money in the quickest way possible. Ponzi-schemes, marketing, financial trickery, etc. are the preferred methods.

Why do we see so many get rich quick startups (to the dismay of Sam Altman and YC) instead of fusion startups?

Because that's the most rational way to succeed in today's economy. You'd have to be an idiot to waste your time trying to build a working fusion reactor in your basement when you could just code up a photo sharing app and get acquired for billions. That's why we all idolize Elon Musk; he's only ever tackled difficult industries. How much easier would it have been for him to have made a Facebook, Instagram, etc. clone and become an investor just like the rest of his cohort of successful entrepreneurs?

Look gang, we have to stop lying to ourselves. YC and VCs are great for startups that require a few laptops and a bunch of determined programmers. They really are not suited to decade long research projects which have produced such things as: Multi-stage rockets, genetic sequencing, computers, the Internet, fission reactors, etc.

I love the startup culture, hacker culture and the sheer spirit of creativity and determination it espouses. But serious science and technology research is very expensive, very long term, and financially extremely risky. That's why in the last century, it has almost exclusively been financed by governments under threat of war (WWI, WWII, Cold War).

Thiel prescribes deregulation and Libertarian governments as a solution to the failure of Big R&D. I think he is wrong, precisely because of the last hundred years. Big R&D is expensive and risky, and requires a very long commitment timeline for results. Corporations cannot and will not bear the financial risk of long term research. Neither will individuals or investors.

Thus, I propose the only solution that has any precedence: Big R&D as a government mandate. Much like education, healthcare, and social benefits, Big R&D must become a central pillar of a modern society. I envision a Cold War era science race between nations, research labs, and individuals, but in the spirit of science, not war.

Research would be a continuous national challenge, much like the Apollo project under Kennedy, but encompassing all of the sciences and continuing past a single administration. There would be work at every level for citizens in the nation's research industry to slowly offset the losses incurred by automation. When all basic needs are met by a very efficient, very high tech and mostly automated free market system, research would become our generator of economic activity. It would provide a consistent safety net for citizens exiting the free market, and prepare them for an eventual return if the opportunity arises (e.g. a new technological breakthrough is ready for the market).

Think of research labs like Bell Labs or Xerox PARC, but government funded, intertwined with a cutting edge educational platform (e.g. edX), and in every municipality.

In conclusion, I think the free market has done all it can for research. Capitalism is great at providing needs and wants very efficiently in the short term and making incremental technological progress, but is terrible for making big leaps by solving very hard problems that have substantial capital requirements.

For that, we have to look back to our previous successes in Big R&D.