From American Affairs Journal, Winter 2022, Volume VI, Number 4
So far, the year 2022 has certainly looked like a deflating technology bubble. After a decade of rising market caps, stocks for formerly hot “tech” companies fell far below their recent highs. By September 2022, exercise equipment maker Peloton was down 90 percent from a year before; ridesharing company Lyft had fallen 70 percent; videoconferencing firm Zoom, 70 percent; electric vehicle manufacturer Rivian, 60 percent; Meta (or Facebook), 60 percent; Netflix, 60 percent; the gory list goes on. Many recent new technologies have simply failed to meet expectations. For instance, despite predictions that the economic gains from AI would reach $15 trillion by 2030, the market for AI in 2021 was only $51.5 billion, expected to reach $62 billion in 2022.This downturn is occurring at the end of record spending on innovation by venture capital firms and incumbents such as Google. Futuristic technologies such as quantum computing, nuclear fusion, bioelectronics, and synthetic biology have received massive funding in recent years. And while exuberance around a host of new technologies from the past decade—like self-driving cars, delivery apps, home flipping, and augmented reality—recedes, VCs are working to inflate new bubbles around other, much-hyped technologies, such as the Metaverse and Web3, which is a part of the wider excitement around blockchain technologies. The shelf life of ebullience for the Metaverse and Web3 is, of course, unclear, but a much more important question is this one: how do such technology bubbles affect the broader economy and society?
Answering this question requires looking at the broader economic and social context in which these bubbles develop. Of course, this broader context is large and complex, but here is one road in: For at least a century now, there has been a widespread faith that technological progress will improve human well-being, including via economic growth. For much of the twentieth century, new industries developed around new technologies. These industries created well-paying jobs and flourishing communities. Use of the new technologies improved quality of life and, by enhancing productivity in mass production industries, greatly reduced prices, leading to even relatively poor people being able to afford increasing quantities of both necessities and modern conveniences. The period from the late nineteenth to the mid-twentieth centuries witnessed a remarkable era of innovation, perhaps the most significant in human history. Running water, electricity, mass production, the telephone, and the automobile provided improvements to our standard of living that have not been equaled by recent innovations.
But as economist Robert Gordon examined in his book The Rise and Fall of American Growth, the technological growth engine hit hard times beginning in the 1970s. With the brief exception of a period between 1994 and 2004, which we will examine in greater detail below, improvements to business efficiency, or productivity, have remained stubbornly low since the 1970s. This period of low productivity growth has remained true right up through the technology bubble of the last decade, when technophiles were singing the praises of robots and AI. Indeed, contrary to expectations that the Covid-19 pandemic would spur ever widening adoption of automation in businesses, productivity was negative for the first two quarters of 2022.
Meanwhile, basic economic conditions have become more precarious for many people. For the past decade, the United Way’s alice program has attempted to measure how much of the population faces economic hardship, taking into account both the cost of living and available incomes. Working at the county level in about half of the United States, alice routinely finds that about 40 percent of the population struggles to make ends meet. While this reality hits some groups harder than others, it affects all races, genders, and other identities, from the majority of white populations in, for example, dying manufacturing and mining towns in Appalachia to majority black populations on the Southside of Chicago or rural Alabama. The reality of hardship plays out in places with long-standing black poverty, examined in classics like William Julius Wilson’s When Work Disappears (1996), as well as in Anne Case and Angus Deaton’s study of the more recent rise of “deaths of despair.”
Our question is whether newly hyped technologies, like the Metaverse, Web3, and blockchain, have any chance of changing this basic picture. There are many reasons to be skeptical that they can. In many ways, the Metaverse and Web3 are merely a pivot by Silicon Valley, an attempt to gain control of the technological narrative that is now spiraling downward, due to the huge start-up losses and the financial failure of the sharing economy and many new technologies. Huge start-up losses along with the small markets for new technologies have brought forth novel criticisms of Silicon Valley. If we are correct that the newest wave of hot technologies will do almost nothing to improve human welfare and productivity growth, then elected officials, policymakers, leaders in business and higher education, and ordinary citizens must begin to search for more fundamental solutions to our current economic and social ills.
In what follows, we will first review Web3 and the Metaverse. Multiple industry insiders claim that these technologies require far better infrastructure than currently exists, and that their constituent technologies of blockchain, crypto, virtual and augmented reality (VR and AR) aren’t working well by themselves. Second, we examine the economic effects of bubbles by comparing the current technology bubble to past ones. The biggest difference is that some goods did emerge from the dot-com bubble, but not from the housing bubble, and probably not much will result from the current bubble either. Third, we describe changes in America’s system of basic and applied research that might be preventing new, more useful ideas from emerging, particularly those based on advances in science. Finally, we sketch out alternative roads for future technological and economic development. The current ecology of technology, including venture capital and both corporate and university R&D, is failing society. Together, we must look for other paths forward....
....MUCH MORE, including Izzy.
Regarding innovation all is not lost. Following on the development of the mRNA vaccines for covid, it was just announced that a "First-ever blood test for myocarditis detects heart inflammation," is on the way after the discovery of a biomarker for the potentially lethal heart inflammation.
This seems very timely, what with many young people tipping over, and often croaking,
