Just think about the technology companies that have defined modern computing. Some have fallen from our memories. Even those of us who have worked in tech for most of our careers have probably no idea which companies, and which pioneers, defined the sectors outside of our own narrow spheres of interest.
That’s true for data networking, enterprise software, semiconductors, trading systems, geospatial technologies…in fact any area of tech. Companies are founded, funded, grow and are acquired, acquire or disappear. The market decides. It’s not a perfect market, admittedly. But it works and it has been the means by which we have seen startling progress.
That’s the way technology innovation has always worked. We’ve created a relatively level playing field and allowed all comers to innovate. And with each iteration of tech we have built on the shoulders of the pioneers.
The system has been criticised, of course. Some say that Silicon Valley has too strong a power base and that in order to play in the game one has to be the right type. Mix in the right circles, know the right people, have the right background, go to the right school. And Silicon Valley tends to favour certain types of investment – especially software. It’s not so good at funding the things that the world might need more of, like hardware engineering expertise, or better ways of producing energy.
But Silicon Valley doesn’t have a monopoly. London has been better at betting on financial technology innovation. Canada has created more than its fair share of quantum computing innovation. Australia has built a huge reputation for innovation in mineral exploitation technology and blockchain based supply chain innovation.
But then, in March 2019, everything seemed to stop. A virus emerged from China. And the Chinese response to dealing with the virus, lockdown, became the definitive way of dealing with it in the West too. Technology was the means by which business – or rather, some business – dealt with lockdown. Services businesses and the administrative bits of the public sector were readily able to cope given the uniquity of mobile devices and the ready availability of collaborative software and video conferencing. But the impact on the travel and tourism, hospitality, and retail sectors was devastating. Governments stepped in with generous welfare programmes to avoid wholesale economic collapse, but the cost in terms of sovereign debt has been without parallel since the second world war.
While VCs have been quick to assure everyone that nothing really has changed – everything has. There has been an employment flip in many Western societies – systemically away from the private sector towards the state. Furlough schemes, coupled with increasing unemployment and a long-term increase in public sector employment, has resulted in a significant increase in public sector dependency (financed through public debt) when coupled with the Covid policy response. And there’s also been a systemic tilt away from small and medium enterprises in certain sectors towards big gorilla players. So competition has been lockdown casualty too.
Consumer spending has also been changed. With lockdowns continuing in one guise or another in most Western economies for nearly a year, now purchasing patterns are potentially going to replace everything that came before.
The consequence may be that tech innovation will take place in this more constrained and government defined set of parameters. It just doesn’t feel like the kind of market that we associated with tech markets of old. It’s true, of course, that tech investment had a tendency to create asset bubbles. But now it feels like the money that’s undoubtedly still sloshing around in the system will only make it to those businesses that are apparently fit for purpose for a new normal that many people would prefer not to be normal.
The VCs aren’t stupid though. New, new things are much more lucrative than the current, safe, normal. And despite attempts to create a global reset and to build back better (as long as we all agree what this better stands for) there’s not much room for speculation and big returns in that kind of world.
There are opportunities to create new, new things that have a different view of what the future might be. The likelihood is that it’ll be much more like the old normal than what passes for it today – regardless of what today’s regulation brokers in government might believe.
We believe it’s time for a debate to discuss how we resume innovation post the lockdown era. We shouldn’t assume that the extent of technology innovation is more server capacity to support more real-time video conference sessions.
As Naseem Taleb has said, “The difference between technology and slavery is that slaves are fully aware that they are not free.” We all need to be aware that the constraints we currently work under are not immutable, interminable constraints. They will change and they will go away. We are no longer required to employ men carrying red flags to walk in front of our cars.
VCs aren’t investing at the rate they have invested in the past and are overlooking opportunities. They’ll soon get bored with that.
Foreign direct investment will happen again. Airlines will start operating again. Hotels will open and parties will be organised. Perhaps the world will be different. But we need innovation to make the new normal more like the old normal. And here’s where we start making this happen.
Because Tech is always about the new era, not the current one.