Oh No, Technology!

Dispatches From the Doomsday Machine (Warning: this one is weird)

"Anything that can't go on forever eventually stops"

I awoke as if from some pleasant dream into a grim reality from reading that sentence on pluralistic.net. In his usual and insightful way Cory Doctorow goes on to explain how Facebook's bigness prevented them from getting bigger, and how that panicked Facebook's investors and executives, who made the whole company "the metaverse" in a desperate attempt to stay relevant. He then explains the difference between feudal companies and capitalist ones and advocates that we evacuate the platforms before they crash and take all our stuff with them. It's very good and especially if you're not familiar with the economics of big tech it will be very illuminating.

But in his focus on the individual companies and their present harms I think he ignores a wider angle:

Tech is in a bubble.

More precisely, the economy has probably been in a recession for a few months, and big tech has been the slowest one to catch up.

https://www.axios.com/2023/06/01/sp500-tech-companies-stock-price

Check the date on the article, it's June 1st, and none of those trends have gotten better. In fact without that basket of 5 stocks from the article, the S&P 500 is down 4% on the year!

A spreadsheet that shows the collective gains represented by the five big tech companies in the above article and that when you remove them from the S&P 500 metric the metric is down 4% on the year

As the pluralistic article notes, the big tech companies aren't magical and they haven't hacked the human brain, they're just built on fraud, and it seems there is increasing public awareness of this. For example there was a fabulous blog I read earlier this week titled I Accidentally Saved Half a Million Dollars that I think does a fantastic job illuminating the mechanics of the curse of bigness, and how it relates to tech-fraud. The author doesn't do anything wrong by fixing the issue, and ultimately the process that produced the waste was not nefarious on its own, but by not being forced to care about efficiency by competition or regulation the organization doesn't bother to find these inefficiencies and stamp them out. It's a kind of graft, but because the organizations that produce it have stuck tech to the side people have a hard time recognizing it. The problem with fraud, of course, is that it can't go on forever; eventually the fraud is revealed, the hoodwinked get wise, the music stops, and so on. Anything that can't go on forever eventually stops.

It is the combination of these two ideas that gives cause for concern. It's been a tough couple years for the kind of company of aspiring rentiers who hope to wholesale enclose a market they can make money off of in perpetuity, Uber is the canonical example, who at IPO was valued at a staggering $120b but would actually IPO for just over half that, and who would three years on be worth almost exactly the same when accounting for inflation, but Uber is by no means alone here: countless tech companies have been weened off the VC money in the high interest rate era, in sectors ranging from self driving trucks to consumer electronics. Perhaps in no industry has this trend been more public than social media, where YouTube is desperate to turn a profit and can't imagine more people using their services as a sustainable business model, where twitter needs to service massive debt, or where reddit went to war with its users, business partners, mods, and advertisers.

What this amounts to is the tech economy getting worse and worse for consumers, when every streamer has raised it's rates in the last year, Amazon's price gouging driving prices up across the economy, and greedflation driving prices up for the rest of the tech stuff consumers want. This all has led to a sense that, despite positive signals from the economy (unemployment is still at historic lows, gdp is still increasing, etc) consumers are stretched to the brink, with Worldline seeing a big hit due to lower consumer spending in the latest quarter

While it seems like the tech giants have weathered this better than most other companies out there, I don't think that can last forever. Whether it's changes in consumer habits, changes in ad spend, or something else, I don't think the current trajectory is sustainable, and something has to give. When it does, I expect big tech will be in a lot of trouble, and I suspect they know this too. There was speculation towards the beginning of 2023 that the massive tech layoffs and return to office initiatives were part of a strategy to extract more value from the companies, and I think that's definitely an element, but what if for once the executives weren't full of shit when they said they needed to streamline their businesses? What if they were telling the truth, as they saw it? It's entirely possible that increased interest rates, investor pressure and consumer sentiment raised the risk of huge bets like metaverse.

Most immediately, this puts a huge importance on antitrust measures like Mike Lee's AMERICA Act or the FTC's antitrust lawsuit that would break up Facebook and Google. This would lessen the overall risk to workers, consumers, and the economy as a whole by reducing the scope and scale of possible failures, in addition to all the other advantages robust antitrust enforcement would deliver.

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