It’s Doom Times in Tech

The tech industry is experiencing an earthquake.

The five largest technology giants in the U.S. have collectively lost more than $ 2 trillion in stock this year. Companies large and small, including Facebook, Uber, Robinhood, and the celebrity video app Cameo, regularly announce recessions or layoffs. Start-up founders who a few months ago were turning away eager investors will now have to make an effort to get more money. (Pant.)

Big Unknown: Is this meltdown the Big One that will take tech out of its position as the most dynamic and successful industry in the world? Or, as is often the case in the decade-long technological boom, is this a temporary panic?

I asked my colleague Erin Griffith, who reports on tech start-ups and venture capital, to evaluate the current moment of fear of technology.

Shira: Does this take on Doom and Loom make sense?

Erin: I go back and forth, because I have seen this cycle many times. Every two years in the last decade, whenever there have been some turmoil or moments of doubt in technology, smart people have predicted that the growth of the tech economy may not be sustainable after the Great Recession. And every time, those predictions were wrong.

In the early months of the recent Covid-19 epidemic, technology investors thought a lot of companies would perish. But within a few months, a huge influx of money flowed into the technology of all things, and the values ​​of the companies went to the moon. The tech money madness of the last two years was unprecedented. Now we are hearing the warnings again.

Shira: Sorry, but I have to ask: Is this time different?

Erin: Maybe. We have not seen this combination of economic anxiety and high inflation before. Economists are weighing the risks of the US recession, and companies in many industries are worried that their businesses are slowing down. During other uncertain moments for Tech, there was not the same combination of economic stress.

And because there has been so much fame, growth, and cash in technology since 2020, there may be a bunch of companies that are nowhere near as valuable as they were a year or two ago, and others were unstable to begin with and face contraction. Can’t

Shira: Has anything really changed? Amazon, Zoom Video and grocery delivery start-ups InstaCart They’re worth a lot less than six months ago, but are they bad companies?

Erin: Not really! So far this has been a further reset to what these companies value to investors. But changing moods make a difference. Especially fast-growing start-ups need the trust of investors, customers and employees to keep pace. It could kill companies if it goes ahead.

Shira: What signs are you seeing that could tell us that this tech meltdown could be more than temporary?

Erin: First, if more startups bust overnight. Recently, a payment company called Fast, valued at hundreds of millions of dollars, got into trouble and closed relatively quickly. If this continues, it is a sign that many of the so-called unicorns that we built on solid ground may be at risk.

And the second is if the so-called “good” companies seem to be in pain. So far, the start-ups that have closed or announced significant layoffs are those that took big risks, spent a lot of money and assumed that investors would always be willing to give them more. If start-ups that preach responsible spending and reasonable growth also pull back, it could be a sign that this time is different.

Sheera: What can happen next?

Erin: The biggest question is how long the tech meltdown will last. If within a few months, the stock price rises, investors start investing in start-ups again and the market for early public payments stabilizes, the industry could recover. But if investors remain dormant for many months or years, it could lead to a major upheaval.

The tech industry has been booming since the end of the recession in 2010. Now, that’s a big part of the economy. We do not know what will happen to this Titanic and rich industry in the Great Recession.


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