With some severe corrections currently happening in the values of 'tech' stocks, it's worth looking at some of the challenges associated with previous technology waves, as these can help with assessing whether these corrections are systemic or cyclical.
I have long supported what is known as Amara’s Law:
"We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run."
The issue of timescales from invention to societal and economic impact have long fascinated me.
Back as a grammar school boy, a distinguished old boy working in Atomic Energy assured us that controlled fusion would within 10 years mean that electricity would be so cheap it would not be metered. Oh that this was the case now! Over 50 years and still waiting.
Similarly, in the late 70s I saw a demonstration of voice to text computing. Like many of my age, HAL90 from Kubrick’s masterpiece “2001” was a formative influence. When I asked if they thought that HAL was realistic for 2001, I was assured that it would happen comfortably before 2001. I’m still waiting.
When I moved from the FT to the Computer industry in the early 1980s, a distinguished leader of the AI community told his audience that within 5 years that the boardroom of every FTSE 100 company would have what was then known as an “Expert System” in its boardroom, I was already uncomfortable about such confidence in technological determinism. That scepticism was given substance in the late 1980s when a lecturer from the Sloan School at MIT suggested that "you do not understand any technology unless you understand its limits". That insight has been helpful to me for over 30 years as I’ve watched cycles of hype, bust and realism follow.
Of course, the limits of what is possible are not fixed. For me though, the important lesson is to understand if there is a substantive body of research happening to address those limitations. Where it is not clear whether there is a focus of research to address the 'current limits', it is best to be sceptical. In the midst of the dotcom bubble in the 1990s, I frequently was subjected to presentations where it was stated that “The internet would change everything”. I do not deny, and indeed welcome many of the changes that the internet and the WWW have contributed to our society and economy.
Another important maxim gained through experience is that, at the leading edge, technology is a two edged sword, and the potential for use and abuse of technological progress march hand in hand. Everyday I benefit through my use of the digital world but I remain acutely aware of the threats of online security, fraud, identity theft and misinformation. These are among the many downsides that have emerged to dampen techno- utopianism.
So, looking at the current downturn in the valuation of “tech” stocks, I think that there are a repeating set of challenges that can help us derive better insight into the reality of Amara’s law and improve our ability to invest in developing capabilities that deliver economic and societal value. I would not claim that we can eliminate boom and bust cycles in Tech investment, but I believe that we can do better than I have seen over my adult life.
One lesson of the dotcom bubble has proven very relevant. In the late 1990s a number of incidents had happened in the real world, before they appeared in soap operas- for example in a tech-enabled, real-life retelling of Romeo and Juliet, 2 teenagers from different ethnic groups had met online and eloped to the distress of their families and communities.
I was invited to a dinner with an interesting group which included writers from TV and radio. Despite the hype of “changing everything”, it proved surprisingly difficult to come up with convincing new plot lines and incidents that would make popular entertainment as opposed to science fiction.
So, to add to skepticism about timescales, it is useful to address technological potential from a societal starting point. Even where technology potential is advancing exponentially, the absorption and creation of value occurs at human timescales.
The Pamphleteers mantra is to throw ideas into the arena rather than seek or offer certainty. I intend to follow this post by looking at key technologies and offering, I hope, insight into how we might better invest and value technology developments to deliver economic and societal value.
Read further articles in this series here