What’s Behind the Big Tech Meltdown? Is It a Temporary Blip or a Longer Term Reckoning?

Anything That Goes Up Has To Come Down! The Big Tech Meltdown and Its Causes and Consequences

Once considered the “darling” of stock markets and the world in general, it does look like the “party’s over” for Big Tech firms! From Tesla to Twitter, and from Meta to Microsoft, with Amazon and Google following suit, Big Tech firms are laying off employees in the thousands.

Not to be left behind, the much hyped and fabled Unicorns (startups with Billion Dollar valuations) and smaller startups too are downsizing at an unprecedented rate. So, what is driving the Big Tech meltdown? And, is this is a temporary blip or a longer term reckoning with “reality”?

While one cannot really predict the future, especially in a fast changing business landscape where the very technologies unleashed by the Big Tech firms have ushered in exponential and accelerating change, it does look as though there is some sort of reckoning with the “hard and harsh” realities of the economic aspect.

For one, as Economics 101 teaches, what goes up has to come down one day and this is as truer for Big Tech firms as it is for any entity operating in the global economy.

How the “Illusion” of Pandemic Era Big Tech Prosperity Collided With Economic Realities of Now

Moreover, the pandemic created an “illusion” of prosperity for the Big Tech firms. When nearly every firm and corporate were laying off and reporting huge losses, Big Tech was partying as the pandemic was good to them.

Aided by near Zero interest rates that drowned the global economy in a sea of liquidity and easy money, along with the fact that the pandemic enhanced our reliance on technology to the point that we could not operate without it, Big Tech had it never as good as before.

For instance, subscriptions to Netflix and other OTT (Over the Top) streaming platforms zoomed as are signups to Facebook and Instagram, and to cap it all, Billions of people worldwide turned to Google and Twitter to keep track of news and views around the world.

As the boom in Big Tech continued well after the pandemic subsided, there was a feeling among Tech Titans that the party would never end and this led to them increasing their headcount (before, during, and after the pandemic years) to record levels. Once the interest rates were hiked and the global economy began to “cool down”, the entire business model of Big Tech wobbled leading to layoffs.

Why This Big Tech Meltdown Is Good For the Longer Term Just Like the Dotcom Mania of the 1990s

Having said that, it is not that the Big Tech firms would stagnate in the years ahead. Rather, we believe that there would be more realistic valuations and feet firmly on the ground business strategies as well as demand based hiring rather than out of the world recruitment which becomes a liability once economic condition worsen.

This is especially true of the Unicorns and the Startups where geeky Twenty Something’s became overnight Billionaires, without much understanding of how the economy or for that matter, finance works.

Indeed, we remember very well a similar “mania” that set in during the late 1990s when the internet became popular and the so-called “Dotcom bubble” built up with what one economist called as “irrational exuberance”.

As now, back then too, the bubble burst, leaving in its wake thousands unemployed and millions of dreams shattered.

However, as the Tech reckoning happened, it led to more sober and capable entrepreneurs who succeeded with their talent, rather than benefiting from VCs or Venture Capitalists with money to throw.

The result was that the iPhone from Apple with the late legendary Steve Jobs, and the Google search browser, along with Facebook and Amazon were the truly innovative outcomes.

Can Big Tech Use This Crisis to Usher in True Innovation Like Steve Jobs Did After the Dotcom Bust?

Talking about innovation, another reason for the Big Tech meltdown is that not much has come out of their stables for the past so many years in terms of truly revolutionary inventions and innovations.

For instance, it is received wisdom in Silicon Valley that Big Tech is essentially feeding off past innovative cycles and all that many of its firms are doing is building on and tweaking the innovations mentioned in the previous section.

Indeed, talk to any entrepreneur or Angel Investor and they would mention the frustration at the lack of any truly game changing products or inventions for some time now.

The same is true for the Unicorns and Startups that are essentially iterating the past trends. For instance, we have had the iPhone, Google, Facebook, Twitter, and Netflix for close to a decade and half now.

Can you think of any such radical innovation in the years since then? So, our point is that the present Big Tech meltdown is for the good as the threat of financial ruin would trigger the “hunger” for innovation and inventiveness and spur the next generation of Tech wizards to emerge from the debris and ruins of the present economic downturn.

The “Inevitable” Tech Meltdown in the March to the Digital Age

Last, the Digital Age is well and truly upon us and hence, the present Big Tech meltdown is a “rite of passage” to the future where the next big things would emerge. As we mentioned elsewhere, Big Tech must use this opportunity to reorganize and recoup its vitality.

As for the thousands of those laid off, we can assure them that once the economy improves, then can regain employment or in the meantime, start something of their own and who knows, another Steve Jobs might emerge. To conclude, business cycles come and go and the truly innovative tech firms survive.