CZM Rewind: The Rot-Com Bubble

0:00This is an iHeart Podcast. Guaranteed human. Eczema is unpredictable, but you can flare less with Epglyss, a once-monthly treatment for moderate to severe eczema. After an initial four-month or longer dosing phase, about four in ten people taking Epglyss achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. Epglyss, LibriKizumab, LBKZ, a 250 mg per 2 ml injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

0:35Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. EBCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EBCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Ask your doctor about EBCLIS and visit ebglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979.

1:27Visit VitalProteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same premium wireless for$15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm told it's super easy to do at MintMobile.com slash switch.

2:04If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, it's time to get Brex AF, a gentic finance that eliminates that work before it starts. Learn more at brex.com slash AF. call zone media hey folks it's me ed so i'm off this week get my wisdom teeth out finally time but i'm gonna rerun this episode the rock con bubble and i want to be clear this is two years old it's gonna i i am sure at some point i'm like this is gonna end in three quarters which i was i was wrong about that one nevertheless this is an important piece because i think everything about the ai bubble comes back to the rock con bubble which is the idea that the big companies they've out of hyper growth ideas they don't have a new smartphone they don't have a new cloud computing and i think this episode is super educational and yeah i'm taking a week off so enjoy this remember it's from like september 2024 but nevertheless it's very very important that you listen to this as i think that this is going to be kind of formative to the future anyway enjoy

3:18Hello and welcome to Better Offline. I'm your host, Ed Zitron.

3:32In the next two episodes, I want to present you with a theory about why the tech industry has felt so weird for the last few years, and why there are so many products that have popped up that don't seem to really do anything or be things that people have actually asked for. And it comes down to a few simple questions. Chief of them, what if the next big thing in tech is actually years or decades away? What if the era of hyper growth in tech is over? And as I've mentioned before, I believe the rot economy is to blame for a lot of this. It's a core of pretty much everything I've written or spoken about.

4:08It's this force that drives businesses to grow bigger rather than better and make products to conquer markets and show growth to the public markets rather than fixing a problem that you or I might have or a business might have or provide a necessary service that was nevertheless popular and profitable. And the raw economy doesn't feel like any other economic period I've seen. It's not like, say, I don't know, the post-2008 financial crisis or that stagnation that lingered afterwards. And what's different was there isn't really a single obvious event that started the decline of the services we're using or the companies that make them.

4:43And there's not really like a Lehman Brothers crater we can point at and say, there you go, that's the thing. The closest I can come is kind of FTX, which was the big crypto crash, the big massive Ponsai scheme that no one really saw coming other than many people who were looking behind the scenes. But other than that, that was kind of what crashed crypto. And maybe it was the end of the zero interest free era where interest rates went up and it was harder to get money. But there was no one thing you could point out. But I do want to try. And I have one epoch, I think, for when the raw economy kind of took over.

5:17And I'd want to point to the latter point of the 2010s. Think about it. Like, really think about it for a second. Sometime after 2019, the tech industry kind of lost its sizzle. There were new gadgets. There were new apps, new services. but tech started to feel iterative rather than innovative, yet they were making more money than ever. And by 2021, even the pretense of any gradual improvement was really dropped. It felt like, I don't know, they were trying to sell us things that didn't really exist. We were told that NFTs would replace physical, tangible collectibles and that cryptocurrency would replace regular money while also emancipating customers from an unstoppable market force like inflation or big tech, because of course cryptocurrency came with it, the idea, and I mean idea, of decentralized software.

6:06And this was all meant to get rid of rent-seeking middlemen that were taking parts of every purchase, despite the very same middlemen investing in cryptocurrency. Yet the actual services that came out of these movements didn't really seem to do anything or improve our lives in any meaningful way. And we were told at one point that our futures were in the metaverse and we'd lived in this massive interconnected quote new internet yet when we actually got there it was just this really wonky vr virtual reality space that mark zuckerberg has somehow burned 36 billion dollars on it's all so weird and today we're told that we have this glorious ai powered future that's just imminent yet what we've actually got is this unprofitable unsustainable generative AI that has this horrible, unustainable problem of hallucination, where it spits out incorrect information authoritatively, which worryingly Google CEO Sander Peshai has said in an interview with The Verge is an inherent feature of a technology that he's now plugged into Google search, which means it's generating these horrible answers to queries based on the links of a search engine that Sander Peshai has helped decay.

7:19It's all just very frustrating. And it's also quite useless. Kind of illogical too. And at the forefront of this AI boom is Sam Altman and his$80 billion juggernaut OpenAI, a company that claims it's going to build artificial general intelligence, one that experiences human-like cognition, which is just not possible with generative AI. The tech he is selling today is not going to give us AGI. I just want to be abundantly clear about that. Anytime you read Sam Altman talking about AGI, he is talking about tech that OpenAI does not have and is not building. They may claim they're building it behind the scenes, but they're only working on generative AI.

7:59And the frustration you hear in my voice, you might have felt yourself, you might not have, but it's this prevailing sense of you keep telling me the future is here, but when I look at what the future is, it isn't even close. And the products you're selling me aren't actually useful. Let me give you another example. Windows laptops will soon integrate an AI-powered search feature called Recall that allows you to search everything you've ever done on your computer in the last three months. And it does so by recording everything. Everything. From the meetings you've been into to the things you've written.

8:34I should be clear, I don't think anybody actually asked for a feature like this. And it's also inherently invasive. It directly encroaches on your privacy and your security. and it takes screenshots of your machine every few seconds and stores them, along with AI-generated inferences, in a locally held database. This isn't good, and the fact that they're not sending it anywhere doesn't really make it better. It is, in essence, a pre-installed screen recorder, the kind of thing that a hacker might install on a victim's computer, and if an attacker gains access to it, it's obvious how catastrophic the ramifications are.

9:09Or, let's be honest, domestic abusers, people at work. There are people who can get on your computer, force access by forcing you or just getting your password, and they can now see everything you've done. Despite this being an inherently AI-powered feature, it can't distinguish between your regular computer usage and, say, sensitive information, passwords, health information, trade secrets, the very obvious stuff you would not want your computer recording. It treats, I don't know, like an email from your doctor with the same level of concern and copying as it would like YouTube or a chat conversation.

9:48It's just really bad. And already White Hat security researchers, they've created proof of concept malware applications that can pull sensitive data obtained or generated by Microsoft Recall from your computer and with pretty minimal effort. And now the UK's Information Commissioner's Office, the nation's privacy watchdog, by the way, They can actually do quite steep finds. It's not great. They're now probing whether the tech actually presents an unacceptable risk to consumers, which, as anyone who thinks about it for more than 12 seconds, or even five, can confirm it does. It's just very frustrating.

10:24And who asked for this? Who actually asked for this? Now, every major tech company, they're integrating AI into their products and services, yet underneath the hood, the AI they're integrating doesn't actually seem to do anything new or generate a profit or solve anyone's actual needs. Even the companies themselves seem incapable of explaining why AI is such a big deal, to the point that Microsoft Super Bowl commercial for its AI-powered co-pilot assistant featured multiple things that it cannot do, like generate the code for an open world game. By the way, you type in the prompt, which on the commercial is 3D, generate the code for an open-world 3D game.

11:03And you type that in, and it will give you a list of things you should do to build an open-world game. It's so strange. And it's so strange how so many of these companies just can't really explain why this is the next best thing. They just need you to believe them. And maybe that might actually be the problem.

11:32Eczema is unpredictable, but you can flare less with Epglyss, a once-monthly treatment for moderate to severe eczema. After an initial four-month or longer dosing phase, about 4 in 10 people taking Epglyss achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EbGliss, Librikizumab, LBKZ, a 250 milligram per two milliliter injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema, also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

12:09EbGliss can be used with or without topical corticosteroids. Don't use if you're allergic to EbGliss. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Ask your doctor about EBCLIS and visit ebglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks.

12:40You become what you spend on and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF. Hey, it's Ryan Seacrest for Jewel Osco. Now through June 23rd, shop for You Save Days and get great savings on all your favorite personal care essentials and earn four times points. Shop in-store or online and save on items like head and shoulder shampoo, Pantene shampoo, Tresame conditioner, L 'Oreal hair dye, Tresame hairspray, and Aussie Miracle Curls.

13:22And earn four times points to use for future savings on groceries or gas. Offer ends June 23rd. Restrictions apply. Offers may vary. Visit Jewelosco.com for more details. Hey, everyone. It's Cal Penn. I'm the host of Earsay, the Audible and iHeart Audiobook Club. This week on the podcast, I am sitting down with Ray Porter, the narrator of Andy Weir's audiobook Project Hail Mary. Massive sci-fi adventure about survival and science and what happens when you wake up alone very far from Earth. I really had to make a decision because I caught myself getting that frog in my throat and starting to get teary as I'm narrating some of these sections.

14:03And it's like, OK, yo, yo, yo, is this indulgent? And I really thought about it. I was like, no, at this point, it would kind of be betraying the trust the author and the listener have in telling this story if I don't go through it. But there's places in this book that deeply emotionally affected me. And I left it on the mic. That's great. Because it served the story. People will say like, oh, my God, I cried at the end. It's like, yeah, dude, me too. Listen to Earsay, the Audible and iHeart Audiobook Club on the iHeartRadio app or wherever you get your podcasts.

14:40For decades, the tech industry and its various venture capital funders, they've been remarkably good at coming up with both innovative new products and ways to turn them into huge new markets for hyper growth. $100 billion, trillion markets that they could then sell into investing companies within actual industries. You had search engines, digital maps, smartphones and apps, social media, cloud computing, software as a service, electric cars, streaming audio and video. And also another thing, in the period between 2005 and 2024, we've tripled the amount of people on the internet. It's now over 5 billion people who use it.

15:17And that's also another problem I'll get to in a little bit. There were obvious meaningful markets to move into, ways to connect people, ways to get people content they wanted, algorithms to present it to them, ways to sell people things that solve problems that they had, or either for the first time or solving them faster, like the transition from physical to digital media, and problems that were both important to solve and actually solvable. Tech has perpetually succeeded at building things, new things, that neatly create these new markets, and they've been incentivized by both the public and private markets, in growing these companies as fast and as big as possible to dominate these new markets with the assumption that there would always be more of them, more massive multi-billion and multi-trillion dollar markets to conquer.

16:02And I must be clear, you should never assume anything. Between 2022 and 2023, only 100 million additional people got online, which is the slowest rate of growth in the last 18 years. And that's not because the need to bring connectivity to the masses is actually solved, especially in the global south. It hasn't been. And as of the most recent figures from the UN's International Telecoms Union shows, 33 % of the world's population, or about 2.6 billion people, have never actually used the internet. But I have more worrying stuff. I've received some data from SimilarWeb that shows that the majority of the internet's top 100 web properties have seen significant declines in traffic since 2021.

16:48In the years since the world slowly emerged from lockdown, Google.com has seen a decline of 5.3 % in web visits, as has YouTube, which lost 3.8 % of its traffic, Facebook, which lost a remarkable 27.7%, Twitter, which lost 3.5%, Amazon, which lost 11.6%, Twitch.tv, 17.5 % lost there, they're owned by Amazon, sadly Wikipedia, which lost 24.8 % of its traffic, and here's the thing that really worried me, porn sites like xvideos 27.4 % loss and pornhub 17.1 % loss. When the porn's down, that's when you start worrying. Though you might be tempted to dismiss this all as a result of life returning to normal and that traditional office-based environments aren't particularly conducive to a crafty midday wank, you shouldn't.

17:41The trend actually began earlier, with similar web data showing the decline starting in 2019. My analysis focuses on 2021 to 2024 because that's the one I have the most detailed month-by-month and year-by-year breakdowns for. And by the way, I'm going to put in the episode notes links to things so that you can all see this. I want you to know this data is very worrying, but don't trust me, trust the data from SimilarWeb. When you look at the trajectory of the web's most valuable properties on a year-over-year basis, things look quite bleak. With Google, which lost about 0.9%, YouTube lost about 4.4%, Facebook 7.7 % loss, Twitter 6.2 % loss, Twitch 11.9 % loss, and Amazon 2.7 % loss, all still seeing significant declines.

18:29Only a few sites like Reddit, which saw a 31.3 % growth, TikTok 11.6 % growth, and Instagram 9.9 % growth but trending down every year since 2019, and also LinkedIn, up 17.9%, they're the only ones that are really seeing good year-over-year growth. And while it's important to note that these are visits rather than active users, and in fairness, this data only covers visits made through a browser rather than an app, this is still a truly astounding trend that suggests for the most part that the web's largest platforms are seeing kind of a digital recession. While there might be revenue coming to these companies and they might still be acquiring no users, there's really no good way to spin the fact that traffic to platforms like Amazon and Google has plateaued then declined.

19:16Something's shifting downwards and it's been doing so since 2019. Perhaps this explains why platforms like Google and Facebook have kept making changes to make each user journey create more engagement and make it more profitable to sustain growth. Because fewer people than ever are actually visiting the platforms. I believe we're at the end of something I called the Rotcom boom, the tech industry's hyper-growth cycle, where there were so many new lands to conquer, so many new ways to pile money into so many new, innovative, useful ideas that it felt like every tech company could experience perpetual growth just by throwing money at a problem.

19:54It also explains why so many tech products, YouTube, Google search, Facebook, and so on, feel like they're either trapped in amber or like they've got tangibly worse. because when you think about it, when there's no incentive to improve the things you've already built, why would you? You should just be working on the next big thing or new ways to juice the thing you have right now to keep people coming back, yeah, maybe, but to keep people on the platform, sometimes by monopolizing an industry so they have nowhere else to go. And that's the thing. All of these companies, Facebook, Google, Amazon, I mean all of them, they've all built themselves on this very simple idea that there'd always be a next big thing.

20:36And I'm not even saying that there won't be, but they've assumed. And the problem that they're facing right now is that there would always be one around the corner. This belief that exponential growth is not just a reasonable expectation, but a requirement is central to the core of the rot in the tech industry. And as these rapacious demands run into reality, I'm sorry to say that the rot-com bubble is going to deflate. And as we speak, the tech industry, they're grappling with somewhat of a midlife crisis. And they're desperately searching for that next hyper-growth market. And they're eagerly pushing customers and businesses to adopt this technology that nobody actually asked for.

21:14They must keep the rot economy alive. Because if they don't, they're going to have to face the fact that they've built pretty unsustainable businesses. Even though they're profitable even though they keep growing. The only thing that grows forever is cancer.

21:54more clear at one year with monthly dosing.

22:24should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Ask your doctor about EBCLIS and visit EBCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks? You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds.

23:02It's time to get Brex AF. Learn more at brex.com slash AF. Hey, it's Ryan Seacrest for Jewel Osco. Now through June 23rd, shop for you save days and get great savings on all your favorite personal care essentials and earn four times points. Shop in-store or online and save on items like head and shoulder shampoo, canteen shampoo, Tresame conditioner, L 'Oreal hair dye, Tresame hairspray, and Aussie Miracle Curls. And earn four times points to use for future savings on groceries or gas. Offer ends June 23rd. Restrictions apply. Offers may vary. Visit Jewelosco.com for more details. Hey, everyone.

23:40It's Cal Penn. I'm the host of Earsay, the Audible and iHeart Audiobook Club. This week on the podcast, I'm sitting down with Ray Porter, the narrator of Andy Weir's audiobook Project Hail Mary. Massive sci-fi adventure about survival and science and what happens when you wake up alone very far from Earth. I really had to make a decision because I caught myself getting that frog in my throat and starting to get teary as I'm narrating some of these sections. And it's like, OK, yo, yo, yo, is this indulgent? And I really thought about it. I was like, no, at this point, it would kind of be betraying the trust the author and the listener have in telling this story if I don't go through it.

24:22But there's places in this book that deeply emotionally affected me. And I left it on the mic. That's great. Because it served the story. People will say like, oh, my God, I cried at the end. It's like, yeah, dude, me too. Listen to Earsay, the Audible and iHeart Audiobook Club on the iHeartRadio app or wherever you get your podcasts.

24:47The Rot economy and tech's growth lust isn't new, though. Venture capital has been incentivizing and monetizing Rot for over a decade, and Marc Andreessen advocated in 2011 that we should look to expand the number of innovative new software companies created rather than constantly questioning their valuations. Yet just a year earlier in March 2010, his partner, Ben Horowitz, he advocated for fat startups, and I'll link to that in the notes, saying that you can't save your way to winning the market and that startup purgatory is when you don't go bankrupt, but you fail to build the number one product in the space and have zero chance of becoming a high growth company.

25:25Which, by the way, Horowitz described this as worse than startup hell because you are, and I quote, stuck with the small company, even if it's cash flow positive. At the time, this might have made sense to them because this mindset made them quite rich. Even though there's something inherently abnormal about describing being a stable, profitable company as being in a state that's worse than hell. Anyway, I want you to take a step back in time with me though and think about how much has changed in the last 10 years, 15 years. Think about it for a second.

26:03in 2010 it felt like we were just making our first steps into the digital world it was still pretty new 2010 there was no instacart there was no zoom no snapchat no lift no tinder no slack no snowflake no doordash no tiktok no discord no coinbase no robin hood and there wasn't any venmo or zelle either tesla facebook linkedin airbnb uber square Alassian, Okta, MongoDB, Workday, Palo Alto Networks, Asana, UiPath, Spotify, they hadn't even gone public yet. Instagram was still independent, it wasn't part of Facebook yet, and consumer drones, they hadn't reached ubiquity. Voice assistants hadn't even been launched.