This Tech Bubble Is Bursting
wsj.com
wsj.com
Energy, manufacturing, transportation, healthcare and agriculture have seen the most growth lately.
Of course tech can play a role in all of those industries, but overall tech is not that big a part of the US economy.
[1]http://www.investopedia.com/articles/investing/042915/5-indu...
There is surprisingly little tech going on in "tech" today.
Just like Ford's cars are made by factories, Facebook's products are made by programmers.
Even if you want to look at the "tech industry" as meaning "creates tech for use by other people" instead of just "develops tech-based products for consumers," Facebook still has some solid output (React Native, Nuclide, etc).
Warner Bros. makes plenty of money off of product placement, but it doesn't make them not a movie studio.
And what about Oculus? Are we writing off VR as a technology because Facebook might put advertising in it?
This stuff is all being driven from within the tech industry, even when it will benefit "other" industries.
Uber is a "tech company" because as they are providing a new business model for a livery service based on using an application to make a market that is distinct from the previous market.
Facebook is a "tech company" because they are providing a business model around sharing information between acquaintances (a social network) using an application and a web site.
Fedex is not a tech company as they are augmenting but not replacing their model or their processes. Foster Farms is not a tech company as they have not fundamentally changed the way in which they raise chicken.
I go back and forth on Tesla or SpaceX. Consider Tesla, they are a car company but electric cars have been around forever, their most successful incarnation, the Golf Cart, has dominated golf courses for decades. It wasn't the "idea" or the "product" that made the Roadster and then the Model S successful, it was the execution on the vision. Similarly SpaceX rockets are just rockets with better execution and better alignment with available technology.
Biggest example is Goldman Sachs. Their CEO came out and said "We're not an investment bank anymore, we're a tech company." Their rationale is that they have to use technology to defeat their competitors--before their competitors can use technology to defeat them.
Let's try a few examples: P&G: Not a tech company. They spend tons of money on advertising to get products on shelves and on TV that tons of Americans buy. They can innovate in packaging and distribution, but honestly not that much.
Tesla: tech company. Spending tons of R&D. I don't know how much, but it's a lot.
Pepsi: Not a tech company.
Your local grocery store: tight margins, probably not a tech company.
AmaGooFaceSoftPle: Billions/yr on new product development. Tech companies for sure.
https://www.google.com/search?q=procter+and+gamble+high+perf...
It's not just packaging and distribution. Now it's fair to point out that P&G spends less on R&D than tech companies, but it's not zero.
That's such a vague definition and one could seemingly fit every company into being a "tech" company if they wanted to. How do you unilaterally define something that is "completely new"? What precisely is a technological innovation? Isn't the iPhone not "completely new", since we had palm pilot and blackberry before it? Is a personal computer considered "completely new" even when mainframes existed before? How do you draw the line between a laptop that has a touch screen (but still has a keyboard) and one that is just a touch screen (iPad Pro for example)?
But I don't think that being arbitrary makes it invalid, the goal is simply to put a stake in the ground so that the conversation can move forward. One of the challenges of having discussions about tech bubbles or tech economies is agreeing on what companies are considered (by the speaker) to be tech companies, and which are not. Then the listener can translate that into their own set of companies and look past the definitional challenge and then on to the meatier question of the role of technology in the economy and the businesses that are currently considered valuable by that economy (or not).
But your other examples made a lot of sense to me.
Anyone that has worked in these industries knows how they usually don't care about whatever best practices are touted in tech conferences.
They only want something that delivers business value, regardless how the code looks like.
Companies that want to keep customers (in some cases keep customers alive [cars 'n shit]) are going to have to start caring about software as it becomes the conduit for every interaction their customers have with their products. It's not just social networks that are getting funded now—it's companies that build the previous poster's top five drivers of the US economy. I believe you have to call pretty much any company in those verticals tech companies to some degree.
Any Tech company, facebook and apple included, has a ton of accounting DNA when it comes down to the nuts and bolts - how to pay their employees, how their stock compensation is structured, and even how the founder keeps control of the company.
Accounting really is taking over the world - in every single industry, tech / high - tech included.
If by "tech", you mean "high tech", well, that encompasses an awful lot of different things, and of course the goalposts are constantly moving as today's high-tech becomes tomorrow's tech becomes the next day's obsolete.
If by "tech" you mean computer hardware, software, networking, and networked services, then sure, that's a pretty important driver of some other advances, but likewise advances in other fields help to drive this as well. Globalization, shipping, mining, energy, RF engineering, photonics, aerospace, and so on all play into this, and all both benefit from and contribute to the success of computer hardware, software, networking, and networked services. But just because this form of high tech can help with other fields, doesn't mean it's driving the economy. It may be increasing productivity to a certain degree, but there is an awful lot of the economy which is only minimally influenced by these kinds of things.
Requires technology
>manufacturing
Increasingly dependent on technology for the most basic of operations, such as managing inventory or customer orders.
>transportation
Automated driving, mandated auto breaking, hired drivers, bus schedules...
>healthcare
DHR, wireless pace makers, direct to pharmacy prescriptions
>agriculture
Indoor farms, pink LED's, automated nutrient systems
So I think it's quite the understatement
>Of course tech can play a role
Tech already plays a vital role and with out it we would not have the global economy and productivity levels that we currently enjoy.
You can see where I'm going here. The economy is a network. No single node is the focal point around which everything else orbits.
This right here. So what happens when AI becomes is in the focal length of simple adoption? AI isn't even affecting .0000000005% of the economy yet. But when it comes, it going to unleash of fury of change never before seen.
To go full circle, there's a reason that the "tech industry" carries a big weight. It's because the Information Age is coming to a close, and who knows what's next.
"The economy is us. We don't need a mechanic. Put away the wrenches—the economy's organic."
https://eresearch.fidelity.com/eresearch/markets_sectors/sec...
Tech. is second only to finance. Given finance is going through it's own troubles, fully expect tech to take over the top sector of the economy in the next five years.
The data you cite is from 2009->2015 so it's just showing the recovery from the great recession. In reality Manufacturing hasn't created jobs since the 1970's.
>Healthcare
Their lobby wrote a bill and gave it to the GOP which ran it as Romney Care. Obama couldn't get anything passed so now we call it Obama Care. So yes legally requiring all people to have something does ensure more people buy that thing.
>Energy
Is having a turbulent time now that you can export US Oil/Gas. Renewables continue to grow at a steady pace tho.
That's true, but output has steadily grown over those years.
None of that would be possible without Micro-controllers, programmers, or PC's to run their compilers/ladder logic programs on.
Yes, computing technology has played a major role in helping us communicate our advances and better model the next iteration. However, it's myopic to regard it as the sole driver.
Energy, Manufacturing, Transportation, and Healthcare are all very heavily entrenched in technology.
I would Agriculture may be "not so tech" still, but look at the amazing advancements in GMOs and equipment that are helping us feed our growing population.
Plus, who runs the infrastructure? Tech companies. What do they use when they need stuff? Other tech companies, like Google (apps), Amazon (AWS). They build their solutions using products like Facebook's React...
https://www.youtube.com/watch?v=WBmFH7fNxnA grape harvesting
https://www.youtube.com/watch?v=UlaNDm88yZo Autonomous harvesting robot for Sweet-pepper.
Highly recommend watching the cow milking one.
http://www.wsj.com/articles/SB100014240531119034809045765122...
Heck, most of them have their own software divisions. Let's not even get started on companies like Lockheed Martin/Honeywell - how many programmers do you think they employ?
Yes tech is the future - AI, VR, and etc. But most of us are writing web and mobile apps, and lots of those apps are not that useful.
Most companies are actually quite overstaffed for various reasons, freeing up X employees in department Y doesn't mean they slide over to department Z, Z already has more than enough employees usually.
Although in all likelihood, they were fired.
My simple web app, which took virtually no mental effort to create other than learning the source code system and some vanilla Web App / SQL, was treated as a god-send to those employees. It was still being used 6 years later, though I've lost track relatively recently. Always interesting to hear interesting stories like that out there.
My brother's workplace (from my distant vantage point, keep in mind) could have saved millions upon millions of dollars had it had a dedicated technical engineer working on crafting automated reports that connected their massive databases of data to its operational scientists instead of spending 2-4 hours on building the report themselves during the worst time-crunches.
You're unlikely to hit millions like you would from a VC, but you can be solving very tangible problems rather than the stereotypical "Uber for X". And you would be amazed at how much companies are happy to spend on products that work.
The main issue with deep learning is that for a small/medium client, there isn't enough data to train on. Lot of clients want classification software of some kind, but often it's binary and you don't need anything as complex as a CNN.
There are a few big frameworks for vision, like Halcon, which include SVM and neural net implementations (and loads of other stuff). You can provide training examples and it'll do the rest for you. It's not cheap and you have to charge for licenses, but they even have their own little scripting language as well as hooks for C++. The idea is you can use any camera, drag and drop functions and get your solution out. I've never used it, but I've seen their sales demos and they're quite slick.
What we're really talking about here is the end of a half-decade of basically free capital, which has been funneled into startups willy nilly. As a result, a lot of startups that never should have been funded will fail. Other startups that probably deserved funding, but were massively overfunded and overvalued will also face difficulties. Some startups will survive.
Similarly, some big tech companies are struggling to right-size the investments they made when their effective cost of capital was radically different from where it is today. Some will be fine. Etc.
There's an exception to that group. Microsoft was one of the largest companies by market cap ten years ago. They've been very consistently in that spot since 1998.
Exxon Johnson & Johnson General Electric AT&T
Exxon has a really large research arm, so do Johnson and Johnson. Maybe not tech as this forum traditionally thinks about it, but I'd consider it tech.
GE and AT&T have great research arms, as well, and they are much more tech: focused a lot on communications, storage, and hardware.
Tech isn't really an industry...
Amazon = Retail (and probably another 10-20% software and software services)
Google = Advertising (and probably another 10-20% non advertising)
Facebook = Advertising
Microsoft = Software / Services (but very diversified)
Also, companies like Bechtel and Saudi Aramco are not publicly traded but could be considered in the "largest" category. We just don't know what their market cap is because they're private.
I think you are failing to see the overall picture. 10 years is not a long time, those companies could fall out of favor at any time. yes software runs the world, but is it facebook and twitter software or software that runs industrial services and backend systems? do you really think Uber is more important than something like general electric or dow chemical?
Housing / real estate are the backbone of the economy. Everyone needs buildings. Does that mean it could never be in a bubble?
I do see a slowdown but this is nothing like dot.com. Seems like a normal correction and is not really separate from the rest of the economy being uncertain. Nothing tech specific.
Bubble is an overused term. An inflated market is not a bubble, and a correction is not a bubble bursting. Markets go up and down all the time.
i.e. Not A Bubble.
Right now it looks like a gentler reversion to the mean in GDP growth from the peak of this 6-year business cycle, which was much less pronounced than previous business cycle peaks.
But who knows - the failure of a large firm that was generally thought to be solvent could set off another crash.
Someone invested in a mutual funds or index funds will have pretty little exposure. Sure Apple, Google, Twitter, and Facebook might lose some value, but those aren't a huge portion of a diversified portfolio.
Even the first web bubble only had modest real impact on the general economy. It put the country into a shallow recession for a few quarters but that was it.
Even worse was pouring money into things like Nortel after the crash was well under way. People just chased it to the bottom.
Edit: I thought I'd add that even in a bloodbath like 2001, not everything tanked. The (tiny) company I was with continued to grow in revenue. We weren't doing anything glamourous, just focusing on business value. No IPOs, although some folks were trying to push us that way in the late 90's.
I don't know what I'm saying I'm just saying it with data.
I guess "the high tech sector may experience a reasonably paced contraction" wouldn't get as many clicks.
P.S: Also mixed messaging (http://www.wsj.com/articles/fidelity-in-reversal-raises-valu...). Maybe its not all sky-is-falling doom and gloom.
Most Uber drivers I ride with have at least one other ride share app open, none of them have a loyalty to the company. In fact, many actively dislike it. And riders I talk to aren't loyal either - they'll happily flip between Lyft, Uber, and whatever else is available, depending on who is offering a discount code that week. I don't doubt that Uber has a better investment in the future (self driving cars and the like) but it remains to be seen if they'll make it that far - that future is still a ways off.
By itself that wouldn't be so drastic, but Uber has taken on a lot of funding and obstinately refused to go public. It could put pressure on other companies that are currently quite happily staying private, too.
Imagine a new startup launches today offering ridesharing in NYC. Drivers - who already have Lyft running - add the app to their roster. After some advertising spend, so do users. What is Uber's strategy to stop them? Spend more money, usually - more advertising! More drivers! Is that sustainable?
What is Uber's moat?
Engineering for an app like this is non-trivial but hardly insurmountable.
The one advantage they do have is network effect, the more drivers and users they have the quicker it is to get a ride and more lucrative for drivers. That does matter, the question is how much.
Someone like Hertz or a General Motors already have fleets and know how to manage them. All they have to do is engineer an app.
What is easier? A nationwide vehicle fleet or an app that connects drivers to riders.
Maybe the party with biggest publicity budget wins, or maybe it's the one with lower overhead (in things like publicity), or maybe it's the one that pays better the drivers...
Or maybe there comes a company with a really open network, and destroys the entire market in exchange for a couple million (what is a good thing, by the way).
Their profitability in America, means they are in no
threat of "dying".
http://www.businessinsider.com/uber-says-its-profitable-in-t...
Citing previously undisclosed financial documents,
Bloomberg pegs Uber’s February US profit per ride at
$0.19 (not including “interest, taxes, and equity-based
compensation for employees").
Does that $0.19 come from (total margins from US rides - total US operating expenses) / (total number of US rides), or is it (total user payment - total driver costs) / (total number of US rides). The former means that they're actually bringing in about 10m in total net profit per month, which isn't terrible. The latter means they're probably not doing so well.
In Uber's case it turns out "better than a yellow cab" is a pretty low bar to clear, and neither drivers nor consumers have much loyalty and are highly price sensitive, creating a race to the bottom.
In Square's case it turns out merchants will gladly use a slightly-worse iPad UI for payments if the fees are lower, and consumers don't really care regardless. Again, race to the bottom.
Right now it looks like Uber is engaged in an epic price war in many markets where the prices are unsustainably low - and these prices are sustained by a combination of setting VC cash on fire and squeezing driver pay. Having no insider information into Uber, I'm a bit skeptical that they're that close to be sustainably profitable.
My mother drives in SF for Uber and Lyft. She makes about one quarter (with the same time/schedule) she did less than two years ago.
Some call this _market efficiency_ and point out this is functioning as designed.
My mother, she's moving back to Washington State.
Better than a yellow cab (UberX) isn't the interesting part of Uber's business, Pool (and a swarm of dynamically routed cars buzzing around a city, picking up and dropping off people and cargo) is. Further, that swarm becomes more cost-effective the larger it is.
People I talk to about this sort of thing USE online services, but we're also fully backed up and ready to move at a moment's notice. Probably a consequence of watching so many of these things go up in smoke.
I agree but not, I think, in the way you intend. If someone asks for a Kleenex and they get passed a non-Kleenex brand tissue, they rarely object. "Uber" could just become the 21st Century "Hoover".
Uber still has to compete on price, for sure. But there's certainly friction to A) download non-Uber ride sharing apps and (even greater IMO) B) open multiple apps to compare prices.
If Uber's price doesn't seem unreasonably high, what reason is there for people to compare?
that gives me an idea...
Some of these are still around but most are not. Not sure if the ride-sharing space will turn out the same or not. I feel at least Uber and Lyft are probably safe.
> that gives me an idea...
...for the ride service fare and time comparison feature in Google Maps?
Google Maps (on Android, at least, but I assume generally, I just haven't checked elsewhere) has that feature already, though when I've checked what it showed it only listed Uber. Even if it is currently Uber-only, the feature's UI makes very clear that its intended to be a ride service time & cost estimate comparison feature, so...
My friend wrote it. Includes other modes of transportation like buses and scooter-shares.
And so have customers. It's like grocery shopping. One store might be a little cleaner than another, have longer hours or feel safer, but, mostly, you go with the low-price leader.
It looks like they last raised money at a $62.5 billion valuation [1], which suggests that investors are expecting the company to operate at a global level. Unfortunately, Uber is facing extremely stiff competition in China [2] and India [3]. There's also the well-publicized tension between Uber and various European companies. And that's not even taking into account increased regulation in US cities like San Francisco [4].
So, while Uber is clearly a successful company - how successful will it be? $62.5 billion dollars successful? My guess would be no, which would drive a correction for the company.
[1] http://www.bloomberg.com/news/articles/2015-12-03/uber-raise... [2] http://fortune.com/2015/07/08/uber-didi-kuaidi-china-funding... [3] http://qz.com/645258/uber-sues-ola-for-allegedly-using-the-s... [4] http://www.sfgate.com/bayarea/article/SF-to-require-Lyft-Ube...
Yea--Uber has always rubbed me the wrong way, on so many levels.
This would be a win-win for many reasons, one of which would be that cities would keep the revenue from these services, or they could run it at cost and send more money to the drivers (thus stimulating the local economy and not VC valuations)
One challenge is that when things aren't going well companies are much quieter than when companies are going well.
[1]: http://www.nytimes.com/2016/01/15/technology/foursquare-rais...
At their HQ the bottom floor had astroturf and a lot of windows. This is where the pet day care was for all of the employees. You'd walk past and see how great it was to work there - just look at the pet day care!
When they shut down, they shut down so suddenly that nobody cleaned up that area.
I forget how long that space was vacant, but I want to say it was roughly a year. You'd walk by the space and you'd see little doggie turds in various forms of decay on the nearly-neon astroturf. The dot com boom in a nutshell!
If interns are making $80k a year, I think most of us are safe (for the time being).
Lucrative internships are generally like $25/hr. 102k is twice that.
I personally wouldn't consider $25/hr to be particularly lucrative in the grand scheme of things considering how highly paid many interns in SV/SEA/NYC area. In my area, yes.
I wanted to validate ideas early and tighten the feedback loop for products I was building, so we built Baqqer in the hopes it would create transparent projects and companies that help grow community from day one. Less time floating around until launch going "I hope someone uses or pays me for this." and more time spent figuring out what people actually want.
https://medium.com/@tbsmartens/is-iot-the-end-of-rocket-inte...
It´s all about singularity: How many services do you need that all do the same? Not too many, not too many - and this realisations will hit everybody, from ad-tech to server technologies to consumer services.
https://www.google.com/#q=site://www.wsj.com/articles/this-t...
$30 a month for the 1~ article I read a week = $7.50 per article. I'd rather miss it and put the 7.50 in a retirement fund.
Sometimes the comments at foxnews.com are more civil than WSJ in my experience, but they're both pretty atrocious.