The drivers of big tech’s growth are losing momentum
charleshughsmith.blogspot.com
charleshughsmith.blogspot.com
https://en.wikipedia.org/wiki/Dot-com_bubble
That bubble formed because of inefficiencies and excessive speculation in the tech market itself after a period of extreme growth.
I'm not necessarily agreeing with the article that we have arrived at that point in the cycle again, but I'm not as sure as you that it won't happen at all. And I'm pretty sure I'm not the only one.
So it seems reasonable to take the view that while software is eating the world other software and technology will eat its own lunch.
The rates of technological and scientific development have arguably been increasing since the dawn of mankind[1]. I figure if we see any major progress in life extension in the next 50-80 years, there's a nonzero chance that some people alive today may live long enough to effectively acquire some form of immortality.
The left half of any logistic curve looks just like an exponential.
Energy clean and too cheap to measure, faster construction, new modes of manufacturing, new medicines, efficiency of engines, new modes of transportation and propulsion and so on. You can easily imagine an entire array of things that would materially improve our lives and improve productivity through the entire economy, applicable even in rural places.
What has probably reached its end is the zero-sum rent seeking enabled by platform owners and attention merchants. Maybe the Silicon Valley investors of this world will go back to the scifi of the 60s and try to come up with inventions that touch the physical world instead of continuing to pump money into the cyberpunk version of the future we've been trying to emulate for the last 20 years.
So productivity growth is definitely happening globally, but generally by bringing existing tech to new geographies (usually combined with cheaper labor input and less regulation), or adapting existing technology to legacy processes in industrialized economies
Investors are not returning to scifi of the 60s, just take a look at the latest YC demo day: loan due diligence, direct to consumer B2B platform, "AirBNB for electric chargers", online sales academy, contractor onboarding software - tech is truly focused on picking some huge TAM market and taking x% of that market from legacy competitors by having a narrow focus and adding "tech" to the offering [1]
The lucrative place to be right now is private equity - there's so much money floating around for buying and selling companies right now ($2TN in uninvested "dry powder" at end of 2018). Why invent new products and companies when you could simply buy an existing business and cut costs to attain or boost profitability
Is this supposed to sound horrible?
We’ve forgotten what “good technology” means.
1) Actually freakin' show up.
2) Not take the lifetime of the universe showing up
3) Accept credit cards
4) Clean their car occasionally
I can go on ...
If Uber/Lyft completely flame out, I would not like to see these things go back to the way they used to be.
The technology is everything that enables these apps (GPS, mobile chipsets, cellular technology, mobile OS, etc.).
My prediction is that Uber and Lyft will either themselves morph into something more like traditional cab companies, or their technology will be bought out of bankruptcy to build something similar. The world will run out of suckers who want to lose money subsidizing their rides and suckers who are willing to wear out their vehicles to drive for them.
Deflation reduces monetary velocity because consumers rightly assume that a dollar tomorrow is worth more than a dollar today, so they spend less. This reduces the effectiveness of monetary policy and various multipliers.
Deflation is great if you're a rentier since fewer people can afford financing given that the low/negative inflation rate won't monetize their debts. So there's less competition for assets.
If you think deflation is good, you should consider the 30 year malaise Japan has been in.
Currency deflation is bad because it causes people to hoard cash in a mattress because it will be worth more tomorrow than the returns on equally safe investments. Then you get underinvestment and economic collapse, which causes more deflation, which causes more currency hoarding. It spirals into a depression.
But that's caused by the value of the currency increasing relative to everything else. "Deflation" in the price of products in a single industry is basically the source of all growth. It's what happens when you make something more efficient. And it doesn't cause anybody to have any reason to hoard cash in a mattress, because it's not the cash that's worth more -- it still buys the same amount of wheat or land -- it's only the computer chips that lose their value. Which just causes people to not hoard manufactured computer chips as an investment, which there is no apparent benefit in anybody doing anyway. (Maybe it would ensure that we have a stock of computer chips available to rely on in a chip shortage, so then instead we get a big price spike when severe weather strikes a major manufacturing region, but that's about it.)
And the lower prices don't even necessarily hurt the industry, because they're a result of lower costs. So the companies are still moving product at a profit, but now at the lower price there is more demand and they move more product. Selling a billion of something for $1 each is more profitable than selling a thousand of them for $100,000 each with the same profit margin percentage. Apple today makes a whole lot more money than IBM did in 1970.
Lot's of the big tech is just user interfaces (Uber, Airbnb, even Netflix). There is some utility in better interfaces - but overall their market power comes from squeezing the suppliers (see https://stratechery.com/2017/defining-aggregators/ and my assimilation of it: https://hackernoon.com/aggregators-bffd36063a72). This is a market inefficiency and it will be eventually fixed somehow.
But it is not everything - because we can automate more and more stuff beside user interfaces, this will grow.
It's not like all those cars and drivers and spare rooms were being used for anything else before, or offered through some other "interface"
I'd argue that they created both the supply and the demand, so in effect an entire market. That's rather more than an interface
User interface is not rocket science. They did unlock some economic potential and they have been rewarded for this - but the equilibrium state is when return on investing in Uber and investing in a physical facility (a car used as taxi or for Uber) is the same. An app (Uber market cap $40B) cannot be worth more than a factory (Ford market cap $9B) forever, because app is easier to produce and if it is worth more now - then this attract competition that will drive this down.
We've done everything possible and there's absolutely nothing left for us to imagine, discover, or create. /s
What remains to be seen is the second claim - "the fantasy that AI and machine learning will generate trillions in profits"
While I tend to agree that ML/AI are generally deployed to save costs rather than increase revenue and create totally new categories of products, there are definitely still a lot of brownfield opportunities in legacy tech for data scientists to tackle and automate
This also ignores the huge opportunity for cloud service providers to take compute-as-a-service business from legacy on-prem/datacenter biz as well
But I would challenge you to think outside the sarcastic box and propose what you see as a few of the main technological drivers of productivity growth that are currently popping up in tech
On a more serious note, if you're genuinely interested, just take a look at my historical posts/comments on HN. I post all the interesting articles I see from my personal feed on here.
I think the smartphone fad is going to die down. The uptake rate of purchased apps has got to be kind of dismal right now. It had novelty, now it doesn't. Frankly, these phones are nothing but a pain. My 9-year old son has a phone, he doesn't care. My teenage daughter uses some social media but the kids are very wary of all of it having heard the horror stories and lived a few of them. Telemarketers have utterly wrecked voice to the point where I never hardly answer my phone anymore. Their bullshit has cut us off from each other instead of bringing us together. Either it dies or we die.
His other point, financialization, is correct. But the issue there is that all these companies were created to chew up money, not to better humanity. Our priorities are what are all out of whack here. We could have spent all the capital far more wisely, but it got allocated to sexy "disruptive" ideas like Uber and Airbnb instead. Meanwhile, air travel sucks, traffic jams are way up, and honestly, the US is headed to a 3rd World nation status because we haven't invested in the things that really matter. Thus, in the midst of this extravagant tech expansion, we have very little to show for it. Just money down a hole. A kind of Keynesian money-sink situation.
Uber does stand out as terrible disruption. Cab companies had it coming, but every day now I drive amongst these asinine Uber/Lyft stickered vehicles and it just seems so...amateur. It's amateur hour. The tech behind it was cool, but the actual, rubbe-meets-the-road aspect looks so completely idiotic to me. For people who drive so much, they sure as hell aren't very good at it, either!
On the contrary, all indicators point to big YoY increases. As an example, "during the week starting on Christmas Eve, a record number of customers made purchases or downloaded apps from the App Store, spending over $890 million in that seven-day period." Other sources are talking about overall 25%+ revenue increases for both Apple's and Google's stores.
The Lyft price is down but it looks like Uber has kept pace with the overall market since their IPO. I think we'd struggle to find many people who would define "keeping pace with the market" as "terrible stock performance".
These two companies do not represent all of tech. They represent ride sharing.
Possibly not the best examples...
What I meant is that any poor market performance for Uber/Lyft could simply be a function of investors waking up to the aforementioned realities, it doesn't necessarily indicate the bursting of some broader bubble.
Furthermore, I don't even view Uber/Lyft as "tech" companies. Sure, they make software, but they're not in the software business.