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The Importance of Reevaluating Tech Exceptionalism: Adapting to the New Normal
The tech industry has long been a shining example of America’s exceptionalism – a place where innovative solutions could be developed and tested without the constraints of regulation. Giants like Google, Amazon, and Facebook have been seen as unstoppable money-making machines, outperforming even the S&P 500. However, recent economic events have highlighted that the era of tech exceptionalism may be coming to an end.
The pandemic put an end to the buoyant stock market, forcing tech companies to make significant changes. Mark Zuckerberg’s Meta empire suffered the largest single-day drop in the history of publicly traded companies, while other corporations lost hundreds of billions in market cap. Companies also began laying off workers, and cryptocurrencies lost significant value. These events have led to a reevaluation of the magical thinking that fueled the era of tech exceptionalism.
Investors have long subscribed to the power law – the belief that successful ventures can make up for many failed ones. However, this approach has led to many misguided investments, such as those in Theranos, Juicero, and WeWork. This irrational era left thousands of zombie companies and cryptocurrencies struggling to remain economically viable. Furthermore, the rise of surveillance capitalism has invaded every aspect of people’s lives through smartphones and social media.
The collapse of Silicon Valley Bank (SVB), blamed on lax regulation by the Federal Reserve, has exposed the risks of the easy-money era. Panicked investors withdrew $42 billion in one day, causing the implosion of that shiny valley. This event signaled the end of a supercycle of low-interest rates, where capital flowed into high-risk, high-return assets like startups and venture capital. With interest rate hikes to combat inflation, tech giants must pivot to efficiency to survive.
The tech industry must learn from last year’s traumatic events to adapt to the new normal. This adaptation will require the abandonment of the idea of tech exceptionalism. Mark Zuckerberg has already heralded 2023 as the “year of efficiency,” and other tech companies have started pruning unnecessary departments and projects. Though the industry may need fewer stupid ventures, innovation is far from dead in the U.S.
The U.S is gearing up for competition from China on everything from A.I. to climate tech. However, the type of innovation must change if it wants to survive. Tech can invite regulatory oversight to sort out the mess and provide stability. Tech cannot return to its freewheeling ways anytime soon, but the sector can learn from the past year’s trauma. Innovation must continue, but this time, it must be grounded in a realistic economic environment.#Techs #innovation #boom #bad #economy
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