The Rot-Com Bubble

0:00This is an iHeart Podcast.

0:30Thomson Reuters and specialized bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure. OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high availability, consistently high performance environment, and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second. Cheaper? Better? OCI costs up to 50 % less for computing, 70 % less for storage, and 80 % less for networking. Better? In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.

1:12This is the cloud built for AI and all your biggest workloads. Right now, with zero commitment, try OCI for free. Head to oracle.com slash strategic. That's oracle.com slash strategic. Wells Fargo announced a new$20 million program in 2025, teaming up with nonprofits to support small business owners. That's how Wells Fargo is helping strengthen small businesses and communities. Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash say do. Call Zone Media Hello and welcome to Better Offline. I'm your host, Ed Zitron.

2:04In 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 growth at all costs mindset that sits at the core of pretty much everything I've written or spoken about.

2:39It'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, it 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.

3:14And 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 ponzi 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 and i'd want to point to the latter point of the 2010s.

3:52Think 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 for 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.

4:38And 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 on. It's all so weird. And today we're told that we have this glorious AI-powered future that's just imminent.

5:21Yet what we've actually got is this unprofitable, unsustainable generative AI that has this horrible, unassainable problem of hallucination, where it spits out incorrect information authoritatively, which, worryingly, Google CEO Sander Peshaw 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 Sundar Pichai has helped decay. It'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 any time you read sam altman talking about agi he is talking about tech the open ai 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 and 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.

6:43And 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. I 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.

7:25This 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. Or, 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 just, 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.

8:10It 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. It'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, confirm it does.

8:53It's just very frustrating. And 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's 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. When you, by the way, you type in the prompt, which on the commercial is 3D, generate the code for an open-world 3D game, and you type that in, and it will give you a list of things you should do to build an open-world game.

9:41It'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

10:04parking shouldn't slow you down parkwhiz gives every driver a shortcut book ahead Save up to 50 % and skip the hassle of circling the block. Park smarter. Park faster. ParkWiz. Download the ParkWiz app today and save every time you park. So I've shopped with quints before they were an advertiser and after they became one. And then again, before I had to record this ad, I really like them. My green over shirt in particular looks great. I use it like a jacket. It's breathable and comfortable and hangs in my body nicely. I get a lot of compliments. I liked it so much. I got it in all the different colors, along with one of their corduroy ones, which I think I pull off, and really that's the only person that matters.

10:41I also really love their linen shirts too. They're comfortable, they're breathable, and they look nice. Get a lot of compliments there too. I have a few of them. Love their rust-colored ones as well. And in general, I really like quints. The shirts fit nicely and the rest of their clothes do too. They ship quickly, they look good, they're high quality, and they partner directly with ethical factories and skip the middlemen. So you get top-tier fabrics and craftsmanship at half the price of similar brands. And I'm probably going to buy more from them very, very soon. Keep it classic and cool this fall with long-lasting staples from Quince.

11:11Go to quince.com slash better for free shipping on your order and 365-day returns. That's q-u-i-n-c-e dot com slash better. Free shipping and 365-day returns. Quince.com slash better. Run a business and not thinking about podcasting? Think again. More Americans listen to podcasts than ad-supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only iHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business?

11:48Think iHeart. Streaming, radio, and podcasting. Let us show you at iHeartAdvertising.com. That's iHeartAdvertising.com. for 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 hundred billion trillion dollar 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 like 2005 and 2024 we've tripled the amount of people on the internet it's now over 5 billion people who use it and 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.

12:58Tech 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. And 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.

13:43It 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. In 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%.

14:24Amazon, 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. The 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.

15:12And 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 percent youtube lost about 4.4 percent facebook 7.7 percent loss twitter 6.2 percent loss twitch 11.9 percent loss and amazon 2.7 percent loss all still seeing significant declines only a few sites like reddit which saw a 31.3 percent growth tiktok 11.6 percent growth and instagram 9.9 percent 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.

16:04And 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. Something's shifting downwards, and it's been doing so since 2019.

16:38Perhaps 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. It 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.

17:22because 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. And I'm not even saying that there won't be, but they've assumed.

17:58And 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 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.

18:32They 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.

19:14Thinking about podcasting? Think again. More Americans listen to podcasts than ad-supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only iHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business? Think iHeart. Streaming, radio, and podcasting. Call 844-844-iHeart to get started. That's 844-844-iHeart. Hey, I'm Jay Shetty, and I'm the host of the On Purpose podcast. Recently, I had a conversation with the one and only Madonna.

19:51When I was broke and I had no friends, nowhere to live, I was held up at gunpoint, I was robbed. All these horrendous things happened to me. I had such an unhappy childhood that whatever happened to me in New York is better than what my life was, so I'm not going back. Listen to On Purpose with Jay Shetty on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. the rot economy and tech's growth lust it isn't new though venture capital has been incentivizing and monetizing rot for over a decade and mark andreason 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.

20:53Which, 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.

21:32In 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 Lyft, no Tinder, no Slack, no Snowflake, no DoorDash, no TikTok, no Discord, no Coinbase, no Robinhood, 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.

22:094G LTE networks, they were brand new, and Amazon Web Services, one of the most profitable things in the world, as I'll get to, was on course to make$600 million in revenue in 2010, which is, by the way, 2.5 % of the$24 billion that AWS on its own made in the first quarter of 2024. Google and Apple's stock prices were worth less than a tenth of what they are today and nvidia a stock now worth over a thousand dollars traded at under three dollars a share between 2005 and 2018 we saw this incredible surge of innovation and tech valuations and this kind of seemingly unstoppable period of growth and big sexy ideas that created big sexier new markets while applications existed in 2008 apple's app store and the perpetual nature of connection that we get from smartphones, it consumerized the concept of distinct service-based apps, as well as the overall concept of software ecosystems, which has become a multi-trillion dollar philosophical and economic force.

23:12And it's changed just about everything about how we communicate and even do business. It's remarkable. And also, was a new market just sitting there waiting for the hardware and software to catch up with it and for someone to come up with the idea, of course. Connecting people digitally through social media, voice, video, and so on, it's been central to the hyper-growth cycle, with innovations like connectivity and cloud infrastructure allowing multiple companies to carve out these hundred billion and trillion dollar ecosystems. On some level, big tech companies could put money, through research and development, investment, or acquisitions, wherever they needed to as a means of making the future a reality, and thanks to the fact that interest rates were rock bottom and there was a lot of private money going into startups, they were never really short of cash to do so.

23:59Yet at some point, hype began to outpace innovation, and while there were new ideas, the actual fundamental technology required to actually innovate may not actually exist, making a lot of these ideas theoretical and so far behind the cart that you may as well shoot the horse dead. When Mark Zuckerberg renamed Facebook to Meta, he told Casey Newton, who by the way should feel nothing but shame for accepting this in good faith, that he believed the metaverse was an embodied internet that was a persistent, synchronous environment that would resemble social media but also be an environment where you're embodied in it.

24:37That's a real quote, by the way. This is, of course, total nonsense. A total word salad that will make you throw up. Conjured up by somebody without any real ideas that knows that they won't receive any pushback on them anyway. Not even from those whose job it is to scrutinize the tech industry and ask difficult questions so that people don't buy stupid shit. Anyway, what Zuckerberg had actually built, by which for the most part I mean acquired, was a half-assed virtual world accessed through niche virtual reality technology that nobody asked for, that already kind of existed, that made people sick, and that Meta couldn't actually build.

25:15And what Mark Zuckerberg wanted to do was built the successor to the mobile internet in the hopes that, quote, the metaverse would be another hyper-growth industry where people would buy land, which they didn't, or hang out en masse, which they didn't, or have meetings, which they did not, all while sharing data and watching ads served by Meta and other companies that Meta could sell ads to. In this cynical, horrible version of the future, the internet, neutral, standards-based, and controlled by no single company, would be transformed into a platform, a feudal system where meta would set the rules and exact a cut from each engagement, interaction, and transaction.

25:52It was quite plainly a power grab, the likes of which the internet hasn't seen since the bleak days of Internet Explorer 6 and ActiveX, and if you don't know what those are, Microsoft has some evil things in the past. The tech, however, it was never there. Mark Zuckerberg sold everybody on the concept of a Ready Player One metaverse, And putting aside for a second that Ready Player One is a poorly written dystopia, this vision hinges heavily on the idea of technology that completely immerses the user and their senses and makes them feel like they're actually in a world, which is just insane. It's not possible.

26:29It's not even close to possible. We're talking about full sensory takeover and the ability to traverse a digital world somehow without moving. This would be a revolution both in cloud computing, because just the raw data would be insane, but also immersive technology. Just what was everyone doing accepting this idea? And let's be honest, the reality was just so much worse. You had these nausea-inducing headsets that led you into this horrible, clunky cartoon world that wasn't fun or practical or useful. and tens of billions of dollars of R &D costs developing headsets that lose money on every sale.

27:08It's just insane. By the way, Mark Zuckerberg has spent tens of billions of dollars, and I realize sometimes people don't like it when I get yelly, and I apologize, but where has the $30 billion gone? What has Mark Zuckerberg done with it? Where is it going? I don't know. I'm not accusing anyone of anything, but the whole thing just feels like a con. And Zuckerberg's glossy metaverse video the first one he published when they rebranded facebook to meta it was significant in quite a few ways first of all the most disgusting bullshit i've ever seen a tech company put out just complete lies but it was also a demonstration of the company's future ambitions and directions and it showed exactly what they hoped they could build and had zuckerberg actually done so i would have said it would have been a success but said success would have been predicated on a pace of innovation that we haven't had in over a decade or longer.

28:01I don't actually know how we get to anything close to what Mark Zuckerberg was selling. But$40 billion later, the metaverse is just nowhere near close to existing. And yet he keeps burning cash in the hopes that he can get just one more hit of hyper growth, man. That's all Mark Zuckerberg needs, just one more hit, brother. Just give me a little more growth. I'll be okay. I swear I won't need any in the future. Putting that aside, I really think this is why Zuckerberg is so full force on generative AI. He's shoved it into every meta platform now, regardless of whether it does anything useful or whether it's doing anything weird like commenting on a parenting group that it has a gifted child and telling parents where to take their kids.