Picture: Eniola Odetunde/Axios
Every 15 years, it seems, the US economy rolls into a ditch – and the tech industry pulls something remarkable out of their labs. Here we are again!
Game Status: Silicon Valley’s favorite bank has failed while its top companies continue to lay off hordes of workers — but at the same time, industry leaders are seeing tremendous new growth fueled by AI.
Be smart: If this split-screen snapshot looks confusing, remember that the history of technology is one long boom-bust cycle. Each new era builds on the ruins of the past.
Look closely at this story and you will see that all of the great transitions in technology happened in times of financial turmoil.
- Pundits and economists agree that a key factor in the industry’s woes today has been the US Federal Reserve’s anti-inflationary rate hikes.
- But if you think today’s 4.5% interest rate is high, turn your clock back to when the IBM PC was introduced in the summer of 1981: During that murky time of year, the Fed was charging borrowers around 17%.
The first big platform jump of modern times – from mainframes and minicomputers to the personal computers we still use today – occurred when Fed Chairman Paul Volcker ushered in the sickeningly painful recession of 1981-82.
- The interest rates Volcker set then, which are being doubled today, would flatten the overburdened banks and corporations of 2023.
tech’s next leap, It hit the global internet in the early 1990s as the US struggled to restart its business engines after another recession – and Bill Clinton took over the White House with the slogan “It’s the economy, stupid”.
- The third major industry shift of the late 2000s—when the arrival of the iPhone heralded the smartphone era—occurred in a landscape of business failure that we now refer to as the Great Recession.
What’s up: Today, tech optimists consider ChatGPT and the new generation of AI it symbolizes to be the industry’s latest platform shift.
- They predict that innovation will restart the US economic engine as it did in earlier times of business downturn and technological change.
Yes but: Tech’s earlier leaps included breakthroughs that promised to empower individuals, streamline businesses, and launch whole new waves of startups.
- Currently, today’s generative AI projects like ChatGPT, the new Bing, and imaging tools like Midjourney and DALL-E require massive computational resources and cost a fortune.
- This means they are developed directly by the dominant tech giants or with their partnership and support.
Between the lines: These big companies are the same ones that are laying off hordes of workers right now.
- Some of these cuts involve ethics, diversity and privacy specialists who would otherwise have a chance to guide early development of the technology in socially beneficial ways.
The big picture: Although technology has become an increasingly central part of the economy over the decades, the economy remains a much larger machine, with retail, real estate, energy, healthcare and other sectors following their own dynamics.
- Tech innovations have transformed the way we work and play, but their impact on productivity remains a contentious issue among economists.
- Whether the generative AI boom will change the world as dramatically as proponents believe is still unclear.
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