Is there a tech bubble? » Tech T100

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Francisca Domínguez, from ComputerWorld, called me on the phone to talk about the recent evolution in the stock market of big tech, the strong penalty to which they were being subjected by the market, and the possibility that we were once again facing a technological bubble similar to the one we experienced at the beginning of this century. Today he published a story titled “Is it the end of the tech gold rush?” (pdf), in which he collects some of the topics we discussed.

Basically, my opinion on the matter is that the big tech they have benefited from a long period of absence of regulation, partly because of the North American tradition of strong deregulation since the Reagan administration, and partly because, simply, no one knew how to regulate such a phenomenon and growth. As a result, we have seen the growth of true business empires that have, in fact, been among the most valuable companies in the world, in many cases based on completely meaningless premises that, at the time, seemed reasonable to us.

What happens now? In general, growth problems aside, we live in the end of the “anything goes” era. First Europe, and then the United States and – with obvious nuances – China, has been embracing the need to regulate the big technology companies, in part to prevent them from becoming huge, extremely powerful monopolies and ending up proving many writers of science dystopias right. -fiction, and partly for trying to generate environments that better protect citizens against a brutal greed that condemned them to be little less than raw material that many of these companies marketed with virtually no restrictions. In some cases, like that of Facebook (now Meta), the crisis comes from a market saturation combined with a weariness of the model. In others, such as Netflix, it comes as a result of signs that seem to indicate a saturation that has not necessarily occurred or as a way of reminding the company that it needs to continue to maintain its disruptive character with respect to new entrants in the business of the streamingbut we are talking about some of the biggest falls in the history of the market, which is not saying little.

¿What will happen now? A crisis like the one in 2000 is, in principle, very unlikely: what in 2000 were fragile companies with incipient and little-tested business models, are now huge business empires with huge cash reserves and the ability to reinvent themselves – within of some limits – having many more degrees of freedom than any other company in a crisis situation. We will see more and more signs of this: technology companies pivoting towards models more aware of the limitations that regulation is imposing, trying to reformulate to comply with new restrictions, or breaking trajectories – or even undoing acquisitions – to avoid being subject to sanctions or of stock market penalties.

In some ways, it is a time of opportunity and reinvention, in many cases with characters different from those who starred in the previous phase. In others, we will see major catastrophes and crashes. But I doubt that, in a general way, the current crisis of the big tech will come to resemble what was the dot com crash of 2000: that was a questioning of the model that time later proved to be false, the old economy claiming that “that internet thing” was something extravagant and meaningless. Today, the value generated by technology and the network is completely beyond doubt, and some of the rules of the game are simply under discussion.

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