Tech is in turmoil – but there is an upside
There’s no need to panic about cutbacks and uncertainty around AI, capitalism is all about change and innovation, says Paul Ormerod
The Greek god Chronos, known as Saturn to the Romans, was notorious for eating his own children. Something similar seems to be going on within the tech industry.
Tech giants such as Google, Microsoft and Meta have carried out substantial job reductions. Google are apparently preparing for a second round. Forbes magazine estimates that 34,000 jobs have been lost in tech in the first two months of this year alone.
By a delicious irony, a key driver of these job losses is alleged to be technology itself in the form of artificial intelligence (AI). It appears to be the case, for example, that AI can write code which is just as good, if not better, than the very coders who coded the AI algorithms in the first place. And much more cheaply.
Of course, there will be other reasons for the cutbacks. Immediately after the Covid pandemic, the tech sector went on a massive hiring spree. So some sort of rebalancing was always on the cards.
Yet it does seem to be a time of great uncertainty more generally within the tech sector.
For example, the company OpenAI, which developed ChatGPT, is valued at $68bn on the back of its creation. But all does not seem well.
ChatGPT basically works by scouring the entire internet for information whenever it is asked a question. A key issue has arisen. What permissions does the algorithm need to make use of this material? OpenAI is already being sued by a range of publishers such as the New York Times and the Authors Guild on the alleged grounds that the system illegally uses their copyrighted articles.
Now the truly formidable figure of Elon Musk has joined the party, suing OpenAI for breach of contract. Musk, who funded OpenAI at the start in 2015, basically claims that, further to a massive investment from Microsoft, the company is breaching key aspects of its non-profit mission. A titanic battle in prospect in the courts, with Musk in one corner and effectively Microsoft, ChatGPT’s main investor, in the other.
In contrast to ChatGPT, which seems to be just too successful, Google’s rival, Gemini, looks to be in serious trouble.
The launch of its predecessor, Bard, a year ago was something of a fiasco, with the software providing incorrect answers to questions. The Gemini launch last week was at least as chaotic. The bot was unable to say whether Elon Musk was more dangerous than Adolf Hitler and, in a sequence of images which attracted widespread derision, depicted Nazi stormtroopers as black and Asian.
Looming over all of this is the spectre of MySpace. Between 2005 and 2009, MySpace was the largest social networking site in the world. NewsCorp bought it for $580m in 2005, but sold it in 2011 for just $35m.
The amounts invested in tech ventures have of course soared since then. But the prospect of a 95 per cent loss in value for a major company in this sector remains just as real.
In the EU, dominated as it is by a risk-averse mentality, such turmoil and uncertainty would lead to strident calls for regulation and the “safeguarding” of jobs.
But this time of turmoil and uncertainty should be viewed in a positive light. Many new ideas and approaches are being tried. Most will fail, or at least not succeed as well as their supporters initially hope. But some will succeed spectacularly.
The distinguishing features of capitalism are innovation and evolution. Things do not just stand still. Yes, there are losers along the way, but these factors are absolutely essential for economic prosperity.
Whoever wins the next election needs to embrace these forces of change.