Fixing the tech sector
Apple’s Q1 2023 filing shows a 5% decline from last year. Meanwhile Amazon reported its operating income decreased to $12.2 bn in 2022, compared with $24.9 bn in 2021. Alphabet, the parent company of Google reported $5bn lower operating income in 2022 compared to 2021.
Speaking on the BBC Radio Four’s Today programme, Roger McNamee, founding partner of Elevation Partners believes that while Google and Amazon prospered during the pandemic, with people now going back to work, Big Tech is seeing web spending decline. He said that the tech firms have now reached market saturation and the only way to grow is by cannibalising other industry sectors, at a time when these industries desperately need a way to refocus.
The war in Ukraine, according to McNamee, has meant that all Western countries have needed to revaluate the way they do business globally. “Most countries have subordinated traditional national security interests to economic growth,” he told the BBC.
These decisions are now being reassessed, which, he says, will drive up inflation. There is also what McNamee sees as a reallocation of industrial effort away from the things that have been popular in recent years into areas like alternative energy sources and new models for healthcare. McNamee believes such innovations will be very disruptive to Internet companies. But since they are effectively monopolies, the tech giants have enormous control over their destiny.
As global economies shift away from fossil fuels, McNamee believes Silicon Valley and the tech industry is behaving like the banking industry where, he says, it “it’s basically just trading stuff”.
For McNamee, technologies like cryptocurrency, AI and ChatGPT and self-driving cars do not represent the innovations that world economies need. “Silicon Valley is capable of producing so much more. I really do hope that the current moment and the challenges these companies are facing will force them to redirect their investment into things that are more productive,” he said.
Similarly, billionaire philanthropist and co-founder of Microsoft, Bill Gates, responded to a BBC question on Elon Musk’s SpaceX endeavour to build rockets to go to Mars, comparing the immense costs to the $1000 required to buy Measles vaccines to save a life.
What Musk shows is that the tech industry can divert resources to do things that 60 years ago would have required global collaboration.
In 1962, US President John F Kennedy said: “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard.” McNamee’s observations are worrying. Rather than the easy pickings cannibalising other industry sectors, tech must focus on fixing the hard things.