Disrupting Internet Disruptors
After a decade of unfettered growth that seemed to spawn a new billionaire every day, the tech industry has finally hit a rough patch. Elon Musk’s erratic behavior since taking over Twitter has left the leveraged platform in limbo. The sudden explosion of crypto exchange FTX has vaporized a business recently valued at US$32 billion (1.1 trillion baht), taking many other crypto companies with it. Meta (Facebook) is laying off 11,000 people, 13% of its workforce, and Amazon is cutting 10,000.
What should we make of these failures? Are these isolated incidents or signs of structural change?
Twitter was already struggling. After taking on debt and overpaying for it, Musk immediately began cutting costs, announcing that the company was losing $4 million a day. His first job laid off 80% of the company’s contractors and half of its permanent staff.
He then revoked bans on thousands of far-right provocateurs and suspended enforcement of rules against “harmful misinformation” about Covid-19. Many advertisers have stopped their campaigns to avoid toxic content associated with their brands. 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 exploded, all within a few years. The ripple effect is being felt in the crypto industry.
Meta’s cuts 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 allows iPhone users to opt out of sharing data on platforms like Facebook and Instagram, which Meta- cost 12.8 billion dollars this year. Meanwhile, Meta CEO Mark Zuckerberg has made a huge bet on virtual reality, trying to create a general-purpose operating system for an industry that doesn’t 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 technology industry, the biggest beneficiary of the previous economic regime, particularly vulnerable to disruption.
Russia’s invasion of Ukraine changed everything, catching most corporations and even governments off guard. I think it will be remembered as ushering in a new economic era, with interest rates, inflation, geopolitical tensions and volatility significantly higher than in the previous decade. There was a loss of trust between the great powers.
The new economic environment for tech presents both challenges and opportunities. Many tech businesses will not recover. Crypto, Twitter and Meta’s best days seem to be behind them. Other tech businesses, including Amazon and Apple, will likely recover, but perhaps more slowly than they would like.
Some new features will appear. Businesses that are restructuring manufacturing and supply chains will need technology, and the demand for technology-based automation is likely to grow. And as consumers adapt to new economic realities, they will benefit from a variety 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 undermined democracy, undermined public health, and endangered 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 done little and come too late.
The focus of policymakers and regulators must shift from symptoms to root causes, particularly the industry’s culture, business models and structure. The culture of the industry is hyper-focused on speed, scale and profit without regard for consumer safety.
Likewise, the business model of “surveillance capitalism” is an assault on human autonomy, akin to child labor. And it’s an attack that has spread beyond internet platforms to many other areas.
Finally, the concentration of economic power in the technology industry prevents new ideas and business models from coming to market. In today’s macroeconomic disruption, policymakers have an opportunity to reverse years of laissez-faire policies. Technology companies should be forced to demonstrate security as a condition of market entry. Control capitalism must be banned. Monopolistic business practices must be outlawed and monopolies broken up.
Protecting democracy, public health, and public safety is good politics. It also happens to be true. There will never be a better time.©2022 Project Syndicate