After a decade of unconstrained growth -- when it seemed that a new billionaire was minted every day -- the tech industry has finally hit a rough patch. Elon Musk's erratic behaviour following his takeover of Twitter has left the financially leveraged platform in a precarious state. The crypto exchange FTX's sudden implosion has vaporised a business that was recently valued at US$32 billion (1.1 trillion baht), taking many other crypto firms with it. Meta (Facebook) is laying off 11,000 people, 13% of its workforce, and Amazon is shedding 10,000.
What are we supposed to make of these setbacks? Are they isolated incidents, or signs of structural change?
Twitter was already struggling. After taking on debt and overpaying for it, Mr Musk immediately began cutting costs, declaring that the firm was losing $4 million per day. His first layoffs swept out 80% of the company's contractors and half of its permanent staff.
He then reversed the bans on thousands of far-right provocateurs, as well as ending the enforcement of rules against "harmful misinformation" about Covid-19. Many advertisers have paused their campaigns to avoid having their brands associated with toxic content. As I write, Twitter is in chaos.
As the second-largest crypto exchange, FTX came out of nowhere, built a huge public profile, and then blew up -- all in the space of a few years. The ripple effects are being felt across the crypto industry.
Meta's layoffs reflect the company's stalled growth after a meteoric 17-year run. Young people have embraced TikTok, undermining the growth of Meta's Instagram platform, and Apple has introduced a tool that lets iPhone users opt out of sharing data with platforms like Facebook and Instagram, costing Meta as much as $12.8 billion this year. Meanwhile, Meta CEO Mark Zuckerberg has made a huge bet on virtual reality, attempting to create a general-purpose operating system for an industry that does not yet exist. The company has already spent $36 billion on this vision, with little to show for it.
I believe the global economy is in the early stages of a structural change that will leave the tech industry -- the biggest beneficiary of the prior economic regime -- particularly vulnerable to disruption.
Russia's invasion of Ukraine changed everything, catching most corporations and even governments off guard. I believe it will be remembered as the trigger that ushered in a new economic era, with interest rates, inflation, geopolitical tensions, and instability at significantly higher levels than in the past decade. There has been a loss of trust among major powers.
For tech, a new economic environment presents both challenges and opportunities. Many tech businesses will not recover. Crypto, Twitter, and Meta's best days appear to be behind them. Other tech businesses, probably including Amazon and Apple, will recover, but perhaps more slowly than they would like.
Some new opportunities will emerge. Enterprises that are restructuring manufacturing and supply chains will need technology, and demand for tech-based automation will likely increase. And as consumers adjust to new economic realities, they will stand to benefit from a range of applications and services that do not exist today.
While it may be too much to ask, policymakers should seize this moment to steer the tech industry in more desirable directions. For years, the industry has weakened democracy, undermined public health and jeopardised public safety. To the extent that policymakers have done anything to rein in the industry, they have focused on privacy and competition -- efforts that have accomplished too little and come too late.
The focus of policymakers and regulators should shift from symptoms to root causes: namely, the industry's culture, business models and structure. The culture of the industry is hyper-focused on speed, scale, and profits, without regard for consumer safety.
Similarly, the "surveillance capitalism" business model is an assault on human autonomy analogous to child labour. And it is an assault that has spread from internet platforms to many other industries.
Finally, the concentration of economic power in the tech industry prevents new ideas and business models from coming to market. With today's macroeconomic disruption, policymakers have an opportunity to make up for years of laissez-faire policies. Tech companies should be forced to demonstrate safety as a condition of market access. Surveillance capitalism should be banned. Monopolistic business practices must be outlawed and monopolies broken up.
Protecting democracy, public health and public safety are good politics. It also happens to be the right thing to do. There will never be a better time. ©2022 Project Syndicate
Roger McNamee is a co-founder of Elevation Partners and an early investor in Facebook, Google and Amazon.