The end of the heroic age of the tech giants does not imply that tech giants are in decline, but confusing the two is natural. Observers and analysts usually talk that way about companies, especially tech companies and the platforms they enable: they grow, mature, then decline (in relevance if not in revenue).
In general, what characterizes this phase of the tech giants' development is a shift from unlocking user creativity and customer value to doubling down on surveillance, usually augmented by AI. Mass surveillance was always an important emergent part of the tech giants’ strategy, but was arguably secondary to delighting users and giving them greater capabilities. Now surveillance and nonhuman solutions are dominant, and the creative possibilities are now almost all residual.
The stock market is one measure of growth and decline, and it's fair to say the stock market is worried about Big Tech. Last month, The New York Times wrote about tech losses and their drag on the overall stock market:
Everybody with broad stock market holdings owns tech stocks, and those accounted for most of the market’s gains last year. But now, tech-stock declines have pulled down the overall market. The information technology sector alone — which includes Apple, Alphabet, Microsoft and Nvidia — accounted for 44 percent of the decline of the entire S&P 500 this year through October. But that understates tech’s negative impact on the market this year.
Meta, Alphabet and Netflix are classified in the S&P 500 as communications services stocks; Amazon, Uber and Tesla are in the consumer discretionary category. Each is unique, but in common parlance, they are all tech stocks, and when you include everything that fits under this expansive rubric, you will have enumerated nearly all of the stock market’s losses.
A year ago, Amazon was worth the equivalent of $170.32 per share; as of December 20, 2022, it's worth $85.19 per share, slashing its market capitalization almost exactly in half. Meta, Tesla, and Netflix have fared worse; Apple has done a fair bit better, but is still down 23.52% year-over-year.
The downturn in the tech market is partly driven by general concerns about the economy and projections that most consumers will cut inessential and high-price purchases (or anything requiring access to cheap credit) first. Many investors are also specifically skeptical about streaming media, VR, and digital advertising. Tech companies that went through the stratosphere two years ago are coming back to Earth as more investors see their pandemic growth curve as accelerated rather than accelerating. No more easy digital gains, no longer a firm conviction that tech companies will eat everyone else's lunch — these companies are what they are. If you're a growth investor, that's hard to swallow.
I think the tech giants' current stock troubles influence the end of their heroic phase without being identical to it. The stock market influences companies in two ways: it creates incentives or disincentives for investors, and in turn does the same for executives, whose wealth is typically bound up in their stock holdings and options.
The market is no longer rewarding potential growth, reinvesting in research and development, hiring lots of employees, or acquiring smaller companies, so companies and their executives are much less inclined to pursue any of those. Instead of accelerating growth, we're seeing accelerated attempts to manage or ward off decline, where decline is much more narrowly construed as a loss of profits and revenue, rather than market share, user relevance, or technological innovation.
Companies — and here again, Amazon is a prime example — would rather keep up their profits and share prices than sacrificing either to be seen as a leader in customer satisfaction or technical expertise. In its first decade, Amazon focused almost exclusively on serving its customers, and in its second, fought hard for a place among the other tech giants like Microsoft, Apple, and Google, competing with them for hires, customers, and in the public consciousness. Taken together, we can think of the first twenty-five or so years of Amazon as the company's heroic phase.
Throughout those twenty-five years, the stock market rewarded Amazon's behavior with high share prices even when its profits were low (partly through artful accounting and partly through continual reinvestment in more hires, more markets, more infrastructure). Now, those market rewards are gone, and Amazon is correspondingly entering a different phase in the company's history.
These market dynamics are not unique to Amazon. The same pressures are affecting the entire sector.
The other way you can think about the tech giants' decline is by studying its customer products themselves. As an exercise (why not?), let me give a deliberately one-sided, polarized and polarizing account of where the tech giants stand today.
You want to talk some shit? Let's talk some shit!
Google/Alphabet haven't come up with a new signature product in years. Their heroic phase peaked with Gmail and Google Maps; in retrospect, Google Books signaled both the height and the necessary limit of their ambitions to index and make available all the world's knowledge. Jokes about the company's willingness to launch and then abandon new messaging products every few years reveal a culture that's given itself over to internal power politics, where engineers and team leaders get credit (and promotions) for launching new products but not making them work better once they've launched.
The other read on Google is that they actually have been developing new products, especially in AI, for their own internal use, but are caught in a Microsoft-sized strategy tax where they can't risk their reputation and gazillions in ad revenue by introducing these internal products to the public. Ten years ago, Google/Alphabet had such a reputation for solving intractable problems that people talked seriously if misguidedly about the company "saving" cites like my hometown Detroit — a process that's repeated itself with nearly all the tech giants, including Amazon.
Now, it's unclear whether Alphabet can even save itself. Even in its core business, Google has given up on offering the best, most relevant search results in favor of shilling its own products. Insofar as it's still engaged with the world, it's much less interested in offering up new or better consumer products than it is working to spread its surveillance machinery all over the globe. (ProPublica recently published a particularly grisly example of this, with Alphabet trying to gain access to, digitize, and use AI to analyze a DoD-owned archive of dead soldiers' tissue samples and DNA.)
Mass surveillance is one way around diminishing customer returns, but Facebook/Meta has discovered limits to this strategy. Apple threw up a wall around Facebook’s ability to hoover up data, and the business is still reeling. Zuckerberg's company is looking for an escape hatch with virtual reality,but VR has yet to find traction and may never do so in Facebook’s vision of it.
A year ago, Ben Thompson at Stratechery wrote an article arguing that Microsoft, not Meta, was best positioned to take advantage of VR. I still think about this post a lot, especially its (surprisingly persuasive!) contention that the most compelling use case for VR is probably remote office work. I won't lie; it reminds me of the Simpsons joke about the Yard Work Simulator. Sometimes I wish cyberpunk had been a more specific warning manual.
Still, it's much better to be in Meta's position, with social apps that people enjoy using, than Twitter's.
Let's be clear: Twitter was in trouble long before Elon Musk bought it. That's why he was in a position to buy it, why founder Jack Dorsey endorsed Musk's purchase, and why its board members sued to enforce the sale at the inflated price Musk offered.
But today — wow! Twitter is a garbage fire, forced by its own disastrous prospects to sell itself to a man with no positive vision for it, who either bought the company on a whim or with the goal of remaking it in his own twisted image, then immediately recanted and tried to get out of the deal. Musk and his cronies are now stripping Twitter to the bone, while also skullfucking its most desirable users. They are welcoming trolls, bullies, and actual Nazis back on the platform. Meanwhile, users and advertisers flee what appears to be the pettiest midlife crisis in human history.
We’re a long way from the social media network that helped bring the Arab Spring and Black Lives Matter to the world. Even if the "heroic phase" of Twitter was always overstated, the company as currently run is designed to extinguish whatever liberatory potential it may have once shown. If there's a point to Musk's actions beyond his own incompetence and ideological blinders, it might be to salt the earth so nothing like Twitter can ever grow again. (And no, Musk stepping down as CEO, if and when that happens, doesn't change any of this.)
With Twitter, Meta, and YouTube, we're touching the joint businesses of media and tech. Tech companies’ dream of becoming the new Hollywood (and old Hollywood’s dreams of retaking the lead in tech) have been brutally beaten back, as market growth is taking a back seat to cost-cutting and a new focus on profitability. Netflix, Prime, Spotify, and other studios are all realizing you can’t count on big budgets and global markets to deliver profit-making hits.
We're waking up from several dreams about tech and media, all at once: the dream of global scale, the dream of a fundamental reshaping of the entertainment business, the dream of serving the longest tail of users, and the dream that tech companies with their troves of data could know better than blinkered studio executives. But first, the artists and technicians who signed onto these projects are the hardest hit, losing jobs, losing residual revenue, losing bargaining power.
Meanwhile, the whole world of user-created content is fragmenting audiences, even as it mines their choices to feed the algorithm. If you're a creator, you’re only as good as your latest viral craze, which might not even reach most of your users. Creators are increasingly asking for a slice of the pie. User-created video (and podcasts, and newsletters) doesn't have to be a utopia to be a still-growing field that’s worth watching.
Even Apple and Microsoft, who brought computing into the home and then out into the streets, are circling the wagons, refining their products but not shifting paradigms. (Try explaining the value of rewriting the OS for ARM-based chipsets versus pointing to an iPhone.) Sure, they're still making technical innovations, and yes, comparatively, they’re welcoming shores in a sea of instability. But ultimately, despite their good stewardship, Apple and Microsoft are just as flat-footed in the face of a looming recession and changing consumer behavior as anyone else.
Across the board, layoffs and hiring freezes have everyone scared. People don’t want to move jobs. Young graduates are going unhired. Companies aren’t getting the new talent they need to replenish their burned-out, checked-out, or ready-to-move-on-to-the-next-big-thing workers. A stuck-in-place, aging, threatened, and opinionated workforce is a prime target for unionization. In my opinion, this would be a welcome development, but from the tech giants’ perspective, it would be a total disaster.
What happens when engineers stop thinking of their interests as fundamentally aligned with the companies' owners and management, and develop their own class consciousness? Tech companies are not pursuing automation purely out of intellectual interest; they are trying to solve looming labor problems that can no longer be ignored.
All of this is the backdrop for these companies moving away from human customers and human workers, towards AI solutions, invisible infrastructure, and business, government, or military contracts. The ideal for a tech company in 2023 is either docile humans ready to consume what they've been given, or better still, no humans at all.
Both of these declines — the decline of the consumer experience and the decline of the market forecasts — are driving tech companies' retreat from what I'm calling their heroic phase. But neither are identical to it.
We can imagine — in fact, I predict — that these companies' stock prices will rebound along with the rest of the market. Their profits will soar — the newfound emphasis on profits rather than reinvestment demands that they soar. Their technical innovations will continue, especially in AI, automation, and cloud computing. And yes, customers from you and me to the DoD will continue to shop for, use, and stream their products.
The main difference is that it's now clearer than ever before that these companies' interests are not the same as their customers', or their workers'. There's nothing universal about the technology revolution, no rising tide that lifts all boats. We have to give up that fiction in order to see things as they really are.