Techpocalypse?! The Mind-Blowing Future of Silicon Valley Will Leave You Speechless!

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Hello Swampians. My interviewee in the Swamp this week is San Francisco bureau chief and tech guru Richard Waters, so today I’m going to focus on tech topics, in part so that you all can appreciate his perspective.

Conventional market wisdom holds that whatever goes up in one decade must go down in the next. Writer and investor Ruchir Sharma has long written that the market loved ones of the last decade If they were large technology companies in the United States, the future will favor exactly the opposite. This would mean all things small, foreign, and not related to technology.

It could be argued that the start of the US government’s antitrust case against Google, launched last week, marked a turnaround in this sector. I disagree with New York Times writer Steve Lohr regarding this case cultural impact is missing of Microsoft’s battle a quarter of a century ago. In fact, I would say it’s much more important, because it will be an in-depth analysis of the power of surveillance capitalism and how defaults and the network effect can be used to push consumer behaviors in a certain direction. This is the business model of almost every company nowadays, not just the Big Tech giants.

Which brings me to my first question: What counts as technology today? Of course, if you accept the idea that market narratives change roughly every decade, you would be wary of buying the Nasdaq and may even want to sell the S&P 500, given that its value is weighted so disproportionately relative to Big Tech.

But it could also be argued that we are about to enter a new golden age of technological innovation and investment. The difference is that this time we won’t be talking about consumers, but about industry. Three-quarters of the world’s $100 trillion gross domestic product are made up of traditional industries – such as manufacturing, transportation, logistics and healthcare – that have yet to be profoundly transformed by technology.

Now things are changing. The desire of most companies to increase the resilience of their supply chains, combined with the digitalisation of industry, has led to a boom in sectors such as additive manufacturing and materials science, but also sensors, robotics, artificial intelligence and logistics software. Some of the leading companies are located in Europe and Asia, but most are located in the United States.

However, this boom is occurring at a time when interest rates are higher, the availability of finance for new businesses is more limited, and markets in general are less forgiving (a topic Richard recently addressed through the lens of Instagram IPO). Meanwhile, much of the hottest technology right now depends on the reindustrialization of parts of the developed world that could be weakened by the devaluation of the Chinese currency, a wave of cheap imports (witness the The current investigation into electric vehicle dumping by the EU against China) and a return to a world where price is all that matters.

I continue to bet that both tech and US stocks have room to maneuver, partly because I think de-risking will actually accelerate in the years ahead. But I also think the next big tech startups will likely come from outside Silicon Valley, which has become too focused on “me-too” consumer technology in recent years. Richard, would people in the Bay Area agree with me on this, and the Silicon Valley business types that you talk to at length or briefly in their own industry right now?

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Richard Waters answers

There are a lot of great questions, Rana. How much time do you have?

She suggests that an investing fad may only last a decade. Well, we’re already more than two decades into Wall Street’s love affair with Big Tech, and it shows no signs of ending. The secular shift to digital may at times speed up or slow down – and things have certainly slowed down as interest rates have risen and Covid-19 restrictions have eased – but I would argue that it still has a long way to go.

And we are only at the beginning of the era of artificial intelligence. Many things change when computers understand language, not only in terms of what they can do, but because they become much easier to use. So no, I don’t expect the next decade to be any different, even if the market’s periodic technological “corrections” become more pronounced. But you didn’t really expect me to say anything else, did you? (And I assume your question about whether there are tech people who expose technology was posed in the spirit of irony? Silicon Valley’s answer to any problem is always more technological, as you well know.)

But that doesn’t mean the same companies will dominate. You’ve always articulated the concerns about today’s dominant technology companies very well: It’s hard to imagine that such large, powerful, irresponsible companies have another period of unlimited growth ahead of them, without some greater effort to rein them in. If anything, you would expect their size to slow them down. Technological upheavals, such as the rise of artificial intelligence, also typically result in a change in industry leadership, although in this case companies like Google have strong technical advantages.

As for your main point – whether our definition of technology will change and who will benefit from it in the next cycle – I think you’ve nailed the right questions. I agree that sectors such as manufacturing, logistics and healthcare are set to see considerable changes. But I think it all starts with digital technology and we already know some names well: the cloud platforms of Amazon, Microsoft and Google. All the materials scientists and supply chain experts you talk about will depend on this digital infrastructure – and artificial intelligence running in the cloud – to deliver the next waves of innovation.

Hopefully this doesn’t make this another “winner takes all” moment for Silicon Valley. As digital understanding spreads, hopefully the people closest to the problem will be the ones to see how this new technological infrastructure can be best used. This definitely needs to happen outside of Silicon Valley, as you suggest. The tech industry has been too concentrated in terms of wealth and power. If only for political reasons, the next cycle will have to be much broader in scope.

Next time you’re in California I’ll buy you a kombucha and we can compare notes.