Since the painful days of the global financial crisis, tech companies have flourished and their innovations have transformed all parts of the economy.
Their focus on exponential growth has propelled share values to record heights.
All of that changed this year.
The music stopped, and the scramble for the few wobbly chairs in the room started as economic forces turned against them.
Here are five big themes that defined the world of tech here and abroad in 2022
Big tech de-FAANGed
It’s been a terrible year for the big tech companies that for a decade had reigned supreme as the FAANGs (Facebook, Apple, Amazon, Netflix and Google).
Endless upward momentum, disturbed only briefly by the pandemic lockdowns in 2020, came to an end this year. Those companies have shed over US$3 trillion (NZ$4.8t) in market value, reported declining or slowing revenue and laid off over 50,000 workers.
The worst may still be ahead, with inflation and rising interest rates making a recession in the US a distinct possibility next year.
Then there’s the lingering uncertainty around China’s zero-covid policy and the potential impact on tech manufacturing for the likes of Apple and other computer and smartphone makers if China opts to rip off the plaster and leave lockdown behind.
Hundreds of thousands of people will die in the event of that, but the alternative is social unrest, which could be just as disruptive for supply chains and the global economy in general.
The shedding of staff and share value could just be seen as a correction after years of excess and obsession with innovation-driven companies. But there’s evidence emerging that Big Tech has made some big bets that may not pay off.
Amazon’s Alexa voice assistant is on track to lose US$10 billion this year. It turns out that people use the little gadget to check the weather forecast and turn on their lights, rather than asking Alexa to place orders in the Amazon store.
Mark Zuckerberg has bet the future of Meta on his plan for us all to inhabit his 3D virtual social network, using virtual reality headsets his Reality Labs division has spent around $10b developing.
Will Zuckerberg hold his nerve as the losses rack up? A cratering ad market in 2023 could force his hand and spur a U-turn.
Google and Microsoft are better placed to ride out a difficult year to come, but the glorious run of growth is definitely at an end, and they’ll have to cut their cloth accordingly.
Then there’s the looming anti-trust and privacy regulation in the US and the European Union
Social media shake-up
After a decade of Facebook, Twitter, Instagram and LinkedIn dominating the social media landscape in the English-speaking world, it feels like we are finally on the cusp of a seachange in social networking.
Elon Musk’s takeover of Twitter is the real catalyst, leading many who have occupied the world’s de facto digital town square to look for other outlets.
Mastodon has emerged as the frontrunner and added more than 1.5 million new users in November. Based on open-source protocols, ad-free and without the manipulative algorithms that drive the attention economy, it’s how social media could have looked if the Web 2.0 revolution had played out the way the geeks who originally built the internet wanted it to.
Musk’s mission to turn around Twitter is a make-or-break undertaking, given the crippling debt load on the company and the fact that it is losing US$4m a day.
But Musk seems hellbent on alienating loyal users, employees and advertisers alike with his free speech absolutism (except when it doesn’t suit him).
Twitter will probably still be around at the end of 2023, but there’s a good chance that a sizable number of its 138 million daily active users will have dispersed to the ‘fediverse’ of rival platforms that have been waiting in the wings.
Meta’s risky metaverse play has attracted the ire of investors and the ridicule of the internet at large, but Zuckerberg’s crisis is the slowdown in the growth of Facebook and Instagram.
TikTok is the new kid on the block and achieving user engagement Zuckerberg could only dream of. But is the platform owned by Chinese company Byte Dance really just a psychological tool for the Chinese Communist party?
TikTok’s supercharged algorithms keep people scrolling through video after homemade video. But we’ve seen the damage that can be done.
If TikTok is the successor to the social media incumbents, we’ve got bigger problems than a tech billionaire treating Twitter as his personal plaything.
Tech policy stasis
Our tech industry is going gangbusters, but the overriding sense in 2022 is that it is capable of so much more if the government showed some vision for what the industry can deliver for the country.
We finally have a digital strategy in place, as uninspiring as it is.
Legislation for a Consumer Data Right, which would go a long way to making open banking possible, is grinding its way towards becoming law, years after the UK, Singapore and Australia cleared the way for innovation in financial services, based on the ability of customers to take their banking data to third-party providers.
Our Commerce Commission has been missing in action on Big Tech regulation, even as Australia’s regulator calls for more sweeping changes to the regulation of digital platforms.
The Christchurch Call is looking shaky following Twitter dismantling its content moderation, a fact brought home in graphic detail last week as it emerged that the video streamed by the mosque shooter was again circulating on Twitter.
New Commerce Commission chair John Small, an economist with a background in networked economies like telecommunications, would do well to get some tips from his colleagues in the Australian Competition & Consumer Commission.
A voluntary code to tackle online harm developed by Netsafe arrived stillborn because it was largely written by the big tech players and has few enforcement powers.
Our video games industry faces a crisis as the government dithers on matching tax rebate schemes across the Tasman that can see games studios claim back up to 40% of their development costs.
Community groups tackling digital divide issues cling on by their fingertips with inadequate funding. A major reorganisation of our research sector, which could fix the broken relationship between our public research institutions and businesses, is now unlikely to progress before the election.
We are woefully underinvesting in cybersecurity at a national level, despite the intensifying flurry of data breaches.
We’ve done too little, too late, to replenish the immigration pipeline that’s so important to securing skilled tech talent.
The National party’s Judith Collins has been cosying up to the tech sector, seeing an opportunity to create a point of differentiation with Labour.
Collins last month held a tech summit in Auckland and knows well the industry’s frustrations over weak government leadership on the digital economy.
It’s an opportunity for the Nats if they can genuinely offer some tangible policy changes, something that won’t be hard given Labour’s ambivalence and inaction.
Crypto’s Bernie Madoff moment
This was the year when FOMO (fear of missing out) was a lot of people’s undoing.
Nowhere else did that become so apparent as in the crypto sector. Naive investors who piled into Bitcoin, Ethereum and any number of lesser-known alt-coins saw their token value crash 75% or more as over US$1t was erased from the market.
A lot of institutional investors who should have known better took a bath as well.
The collapse of the Luna stablecoin and big-name crypto investors like Three Arrows Capital, then the FTX bankruptcy – crypto’s Bernie Madoff moment – have done irreparable damage to the sector.
Greed and a lack of regulation combined to create a house of cards that still hasn’t fully collapsed.
There is plenty more dead wood to cut out. Only regulation of the crypto space in each country will allow cryptocurrencies to become mainstream in the way their evangelists hoped.
That will need to include provisions for crypto exchanges to show proof of the reserves they hold, rules around related-party transactions and identifying individuals tied to crypto trades.
Those types of provisions will upset crypto fans trying to sidestep the bloated and fee-hungry financial sector. But crypto will never recover without sweeping regulatory change.
The record prices many of those coins reached early last year were only achieved because those who bought them believed people would be clambering to own them in years to come.
But why would you go near crypto until the market has more credibility and more financial integrity?
I still believe in the value of decentralised ledger technologies and the blockchain to transform industries. The best of those projects, protocols and platforms will survive.
Meanwhile, I’m sitting underwater on a pile of big-name crypto tokens, ‘Holding on for Dear Life’ for better times.
Where’s the game-changing tech?
Do you get the feeling that the tech you use in your daily life is a bit staid and familiar?
I can’t remember the last time I played with a new gadget or trialled a new online service that filled me with joy and wonder.
OK, there was one instance of that this year, when I was test-driving the Dall-E image generation software that uses artificial intelligence to produce some breathtakingly beautiful artwork.
DALL-E is based on the GPT-3 (Generative Pre-trained Transformer 3) machine learning model created by San Francisco-based start-up OpenAI.
With simple text prompts, Dall-E will search billions of images for context and come up with its own creation inspired by them.
You’ve probably seen some of the results in your social media feed as friends start experimenting with DALL-E.
It’s impressive technology and shows how quickly machine learning is progressing.
AI-driven natural language tools like Jasper have also come a long way. Both have huge implications for the ways we create and consume content.
A personal highlight was visiting IBM Research’s quantum computing labs at Yorktown Heights, New York.
Big Blue is leading the charge on quantum hardware and last month ran the largest quantum program yet. That’s an important milestone because if these computers are to be useful beyond a narrow range of computational functions, they need to be capable of running complex programs.
Quantum computers may never replace classical computers for most tasks, but they have the potential to radically expand what computers are capable of in the realms of science, finance, cryptography and modelling nature.
It really was a year of incremental change when it came to consumer tech.
Our phones and laptops became ever so slightly lighter and more powerful. Streaming services added more content while bumping up prices to try to claw back their eye-watering production costs.
It’s really symptomatic of where the tech industry is – riding on its laurels and reaping profits from innovations that were conceived over a decade ago.
Tech leaders are under pressure to cut costs. But if history is anything to go by, the one area they are sure to continue investing heavily in is research and development.
Let’s hope 2023 sees that investment come to fruition after a fallow year for tech.
Originally published on BusinessDesk.co.nz.
Photo: Kamrul H Supon, Unsplash
PETER GRIFFIN 