The Rot-Com Bust

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1:52Results can vary. Mori is not a substitute for medical advice. See website for more. Call Zone Media. Hello and welcome to Better Offline. I'm your host, Ed Zitron.

2:13Better Offline. Last episode, I posited that everything weird and bad you're seeing in the tech industry right now could be attributed to the death of its hyper-growth era. You see, up until around 2019, tech experienced this epoch where there were these obvious, giant, multi-trillion dollar markets to conquer. Things like software as a service, cloud storage, streaming audio and video, things like that, along with billions of people that were getting online every single year. Yet now they face another problem. That only 100 million new people got online between 2022 and 2023, and the traffic that they're sending to the majority of the internet's top 100 internet properties has entered this prolonged, agonising period of decline.

2:59And worse still, there don't appear to be any new multi-trillion markets left to grow into. This led to a profound period of desperation in tech. The tech industry got high on the hog, promising the world and then somehow actually managing to deliver it. You see, Facebook, they actually connected billions of people. There There are millions of electric cars. Cloud products are both ubiquitous and useful. You can stream music anywhere. There are real things, real ideas, new things that they could just pump money into and then reap the benefits. Until, of course, there weren't. Venture capital also got used to making easy, safe bets on new startups and seeing pretty much automated, massive returns because there were still these massive markets to enter.

3:43And of course, they were able to get very cheap money borrowed from limited partners. And I, at some point, really do need to explain exactly how venture capital works, but that's a future episode. Yet since 2019, tech's biggest ideas have been a bit... wank. These new ideas they've had, NFTs, cryptocurrency, the metaverse, generative AI, these movements, they seem to sell ideas and glimpses of the future rather than an actual product that would solve an actual problem for anyone, let alone the billions of people required to make a giant market. And the commonality between all of these products is that they're all trained to create one.

4:22They all need to make a new hyper-growth market, an industry that could be worth hundreds of billions or even trillions of dollars for investors to pile capital into, or I should say into startups that will then grow into these industries. But in all of their cases, they kind of seem to fall short the moment they enter the real world. Had NFTs actually been a replacement for art or collectibles, they could have created an industry worth hundreds of billions of dollars. Except they lacked any compelling use case or reason to do so, other than the fact that venture capitalists really wanted them to do so.

4:57The same went for cryptocurrency, which draped itself in these horrible manipulative concepts like decentralized software, programmable money, democratized finance, ideas that could theoretically be trillion-dollar concepts. Except in practice, cryptocurrency is horrible as a store of value and even worse as an operable piece of software. But the same does go for the metaverse and for generative AI. Their concepts sold on the idea of what if it could do this rather than what it can actually do. And that's before if you got to the nasty, messy problem of whether actually people wanted them to do anything, whether people wanted to live in the metaverse or transact with digital money.

5:38You can do that using Zelle or Venmo today. You could do it years ago. I don't really get it. And yet the most obvious problem with these movements is that they're constantly having to explain why you should care rather than showing you why you should care. The promises they've made, they're not based on things that they're actually doing, but on showing you this kind of messy, childish drawing of a concept of something that one day might exist, and almost universally rely on this kind of pseudo-religious belief system where one has faith in an industry and that doing so makes you smart and you need to decry cynics as Luddites that hate progress because, well, one has to be first, right?

6:19And what's crazy as well with all the AI people who are like, ah, you need to believe in AI. A lot of these people aren't invested in these companies. They just want to be part of a movement. It's so sad, but it's also so craven and manipulative. and the problem isn't so much that these concepts are bad but that they're premature the metaverse is a silly idea at the scale that zuckerberg pitched it but digital worlds that people spend thousands of hours of their lives in are not the tech that he's talking about just isn't there and may not actually be and without that tech i just don't think they become ubiquitous concepts adopted by hundreds of millions of billions of people in the way that he said To do the things that he demonstrated in the 2021 video he showed when he changed Facebook's name to Meta would require, as I mentioned last episode, all of this extrasensory tech that is nowhere near existing.

7:12but let's get a little bit into the present for a second and talk about generative ai which has use cases and can do some cool things but the desperation to make it the next big hyper growth market has turned it into more of a marketing campaign and a marketing campaign made up of these gratuitous insane promises about artificial general intelligence or about how ai could run our lives, all kind of to hide the fact that most of these models are trained on a noxious form of public larceny, stealing from thousands or millions of creators to train models to do nothing. Training these models, by the way, will not give us AGI.

7:54It's not going to give us cognition in AI. They are lying about that. I really want to be clear, but also want to be clear that, well, generative AI is probably not going to do much more than it's doing today. I'm making that call right now. What's happened in the last year? Nothing. But these problems are created by the fact that they might be good ideas, but they're not trillion dollar ideas, but they're being given the funding and the marketing efforts to make them that way, even though they're so premature, it's ridiculous. And it's just a rotten kind of mindset. It is the rot economy, and it is the rot.

8:30com bubble. This is the bubble being inflated, pushing concepts to the limelight before they're ready, pushing things through to show that companies can keep growing, that the tech industry can keep growing. And you can see miniature versions of this problem running through all of your favorite tech products right now. Google's forcing AI into search, Facebook's constantly changing its algorithms and adding AI, Amazon's letting in basically anyone to sell anything on Amazon at any time, even if it's clogging the Kindle store with AI generated crap. They're all doing it because they're desperate to show that they're innovative and adding new things and able to express perpetual growth, even if doing so makes things worse.

9:10Even Apple, who I generally like the products of, is doing it too. iOS is a complete mess. Go into your settings. There's a hundred different things. At the top, it will sometimes try and sell you Apple News+. Sometimes you get a notification about a baseball game that's a nail biter. I had one yesterday for the Angels-Marlins. And if you're not a baseball fan, that's not that exciting a game. It's like watching two turds fight in a toilet. Sorry if I've got any Marlins or Angels fans. Back to the tech stuff, though. I must be clear that there is a mindset behind this, and it is the rot economy.

9:44And the rot economy's growth at all cost mindset, it drives these companies away from innovation. It flies in the face of what it takes to innovate, which means losing money on ideas that actually help people. And it's all happening because these markets, they reward public companies and the startups that they try and acquire for making a number go up rather than any kind of consistent, profitable, sustainable, or useful business. And it frustrates me and fills me full of angry bile because they're all capable of making cool stuff. Amazon made AWS, Amazon Web Services, the foundational thing of all cloud computing.

10:24Facebook at one point was a very useful product that connected people that you loved and you liked and that you just met. Except they had to make the number go up. And I think, by the way, Zuckerberg is separate to a lot of these companies because he was always kind of evil. Listen to the Facebook episodes, I'm not lying. But really, though, all these companies had noble times. They had times when they were still doing value extraction, where they were still doing some form of conning, where they were still doing monopoly plays, but they were at least providing something useful. Now they're making things worse because they have no more useful ideas, or at least useful and profitable ones.

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12:46Give it a try at mintmobile.com slash switch. Upfront payment of$45 for a three-month plan equivalent to$15 per month required. New customer offer for first three months only. Speed slow after 35 gigabytes if network's busy. Taxes and fees extra. See mintmobile.com. What makes the last few years worth of bullshit, stupid tech movements different from the previous innovations is that when an industry is ready for hypergrowth, there's a product that actually exists that will truly change people's lives. The promises made by tech executives were at one point based on things that one can reasonably believe would happen, rather than this kind of weird erotic fan fiction to send a stock number up.

13:22using the first iPhone you could kind of see that you might make video calls on it or take video or use distinct third-party apps like you were already doing on a Mac and while Steve Jobs and yes he was an awful person I know did talk about what's coming next he did so by saying that the iPhone on the initial announcement would add 3G and amazing things in the future and he did so just before and this was in the original iPhone speech showing the actual real features of the first iPhone, things that people actually wanted, like having your music on your phone, being able to see what voicemails you had versus just calling a number and then hitting buttons to skip to the ones you need to see, or hear in this case.

14:02And these promises, they were believable, either because they felt like a logical next step or because they described features that could be found in other competing products. Apple's always been a company of iteration rather than forceful, explosive innovation. It doesn't really create new categories, but it does refine them. And this trait was even referenced in the classic Douglas Copeland novel, Microsoft's first published in 1995 before Tim Cook took over or even the return of Steve Jobs. It didn't make the first smartwatch or the first tablet or the first ARM-based PC, but Apple did make them good and made them practical and useful and sellable.

14:41You saw these new products and you said, oh, I could do that. I could take photos with that? Oh, I don't need an iPod and a phone. I have a phone that does two things. I'm not even trying to romanticize the iPhone. I'm just describing what basic utility sounds like in a product, something that has been lost in the tech industry. Just look at Sam Altman, Sondar Pashai, and Satya Nadella of OpenAI, Google, and Microsoft. They seem intent on discussing what AI will do, that it will have a monumental impact, that it will be a smart person that knows everything about your life. And yet when they're actually asked about what it does today, they just seem to go kind of quiet.

15:21They stutter. They're speechless. And when Sachin Adela was actually asked about how he uses AI in his day-to-day work, he said the Microsoft co-pilot helps him compose emails better. Congratulations, Microsoft. You invented Grammarly, a product that's existed for 15 years. Jesus Christ. Anyway, as an aside, Satya Nadella of Microsoft said in 2021 that Microsoft was, with the metaverse, creating, and I quote here, a new platform and a new application type that was similar to how it talked about the web and the websites in the early 90s, and that he could not overstate how much a breakthrough the metaverse was.

16:01He would then dump it entirely two years later. Two years before that, so in 2019, Nadella called HoloLens 2, Microsoft's augmented reality glasses, an absolute breakthrough a few months after its demo failed live on stage at Microsoft's Build 2019 conference. And while Microsoft hasn't killed HoloLens, it's clear the company's appetite for mixed and virtual reality has kind of dampened, with HoloLens workers partially impacted over the last year's sweeping layoffs at Microsoft, and Microsoft discontinuing its VR social network, alt-space VR, and Windows mixed reality. Where's the breakthrough, Satya?

16:40Satya, you told me this shit was a breakthrough in 2019. Hey, the metaverse was a breakthrough. Is everything a breakthrough, Satya? Anyway, every single one of these questionable, weird, stupid products and the stupider decisions behind them, it's all an act of desperation, an attempt to keep the rot economy going and the growth that all costs fire from going out, stripping crap off of the walls and throwing it in selling shit so you can get more oil to throw on the fire you can tell i've done a lot of fires but seriously this is all desperation to keep a party going that ended quite some time ago there's a finite amount of people in the world right now less of them getting online and while more people are being born they're going to be born into a very different tech industry than the one we see today and there's an even more finite amount of those people that will go online at any given time, and in turn, even fewer of them that might actually want to use a particular service, especially one that isn't obvious in why you should bloody use it.

17:40Previously, these companies were able to anticipate and meet customers' needs on both a consumer and enterprise level, in part because they actually understood their customers and knew that making their customers happy actually made them successful. I believe that behind the scenes, many of these companies have been struggling for years to find the next big thing, knowing that while there might be needs to be met, you know, those horrible, nasty customers that always want problems solved, those needs might not be things that will create double-digit revenue growth or convince Wall Street that a stock will grow forever.

18:13Though I can't say for certain, I'd also say the ascent of management consultancy types in tech, people like Sheryl Sandberg, Adam Masseri, Sundar Pichai, and Sam Altman, who was adopted by the management consultant types, it's a testament to how obvious that they're desperate for the next big thing is and how big their failure is to actually adapt to customer needs or how incapable they are of building useful things. Management consultancy people, Sundar and Sheryl, by the way, they both came from McKinsey, one of the worst companies around. They're not built to innovate. They're built to grow.

18:48They're built to create business cancer. Now, you might say that's horrible, but at the same time, do you think Facebook's useful? Do you think Google search has got better? Or do you think that management consultancy people have seen it and gone, number must go up. Number must go up forever because if number go up, money go up. Money go up. Good. I know I'm being somewhat facetious, but really look at the tech industry right now. look at it and tell me that this is an industry going well, that this is an industry building the future. No. Right now, the tech industry feels like a management consultancy.

19:25People trying to do PowerPoint presentations to customers to say this is going to change your life without actually showing them how it will in the product. And in the case of Microsoft lying in their Super Bowl commercial, or in the case of Sam Holtman and OpenAI lying all the time. I mean, tons of liars at the top of most of capitalism, but really the tech industry is just full of them. But I think generative AI is quite special, and what makes it so special is it kind of has the hint of utility, the scent of a product. And as a result, it can be sold to the markets as the next big boom, the next big thing that justifies hundreds of billions of dollars of investment and increased market caps, even if it doesn't really do something.

20:09Every single company chasing the generative AI dragon is hoping that it's the next Amazon Web Services, which, as I mentioned, is the ubiquitous cloud product that went from a side project of Amazon's store to actually something that makes more than it. And today, it underpins most of the internet. And you want to know why AWS does that? It's because it's useful. It's because it actually does something. It's actually a thing that has utility. You don't need to explain why someone needs a website on the internet or why they need services to do the compute to run an application that runs in the cloud.

20:41That's pretty bloody obvious. And that's the problem with generative AI. And that's the problem with a lot of the things you see in the tech industry. Nobody really seems to be able to explain why or how generative AI is the next big thing. Just that it is. ChatGPT, Gemini, Claude, all of these large language models, they can do some things that are superficially cool. They can generate images. They can quickly query databases, albeit with no guarantee they won't hallucinate and make up something that isn't true and tell you it is. And they can craft poetry. But there's no real endearing reason to pick one of them up every day and use them.

21:19These use cases that they enable, they're not really exciting or ubiquitous or world-changing. They're not anything like what the tech executives are actually selling us. And the problem might not be that they're useless, but that as a piece of technology, generative AI just isn't a hyper-growth market or much of an industry changer, no matter how much money you shove into it. Sam Altman is not asking Microsoft for an$100 billion supercomputer because generative AI is going to get better. He's doing it because what we have today is not a world-changing product. It's not the boondoggle that the tech industry needs it to be, and his only prospect of fulfilling these promises is basically a tech industry equivalent of the Marshall Plan.

22:04Yet without generative AI, what do these companies have left? What is the next big thing? For the best part of 15 years, we've assumed that the tech industry would always have something up their sleeves. But what's becoming apparent is that they might have actually run out of ideas. They don't have any big, sexy things to sell us. And the disruption that has become associated with tech was predicated on there being new markets for them to disrupt and ideas in their hands that they could actually use to do so. And a paper from last year from Nature that kind of worried me too, posited that the pace of disruptive research is actually slowing.

22:41And I believe the same thing is actually happening in tech, except we're conflating innovation and finding new markets to add software and hardware to. And we've been doing so for 20 years. And the net result of this is a kind of innovation stagnation and the rot economy and the rot-com bubble, a tech industry laser focused on finding markets to disrupt rather than actually disrupting anything, rather than actually meeting anyone's needs. When the biggest venture capital investments go into companies that can sell for massive multiples rather than sustainable, stable businesses or things that might truly change the world, venture capital is not investing in moonshots.

23:20They're not putting money into the future. They're putting money into the goddamn present. And there are exceptions. I like a lot of seed stage investors because they're actually taking risks on real companies that are doing new things. However, the largest VC firms need to get their heads out their asses and actually invest in the future. But really, what's so stupid about this is, of all these big tech companies, before they really mess with their products, they were good, sustainable, insanely profitable businesses. There's no reason that Google or Meta or Amazon couldn't build businesses that have flat, sustainable growth and really respectable, reliable profitability.

23:58They just choose not to, in part because the markets will punish it, and partly because their DNA has been poisoned by the rot economy. And the demands of the rot economy are very simple. More. Always more. I also think that the tech industry, both the venture capitalists funding it and those running big tech firms, they've been dominated by people who don't build things. The people running VC firms, the people running Google, Facebook, and all these, well, Mark Zuckerberg, I guess, was a coder, but he's not doing it anymore. They're not actually building products, and they're not coders even.

24:35Sam Altman's not an engineer. The future isn't being built by the people saying what the future is. The future is being built by people under the thumb of management consultant brains. And I know, I know, I'm being a little facetious again, but really, these people aren't speaking to people with real products. They're not looking at the human condition and saying, let's make this better for money. No, they're saying, how do we drain more blood from the consumer until they give up on our website? Well, guess what, arsehole? They are giving up on it. But this problem, It's poisoning the startup industry as well, leaving big tech for a second.

25:12So the Rabbit R1 and the Humane pin, I'm not sure if you've seen them. The Rabbit R1 is this$200 orange brick with a screen that claimed when you got it that you could talk to it and it would run these apps. And it cost$200, by the way. And the Humane pin is this AI-powered pin that costs$700. And it has a little infrared screen that goes in your hand, except when you use it too much. of heats. Anyway, now they're giving you back, kind of the backstory there. Both of these companies, they raised incredible sums of capital based on these vague ideas, you know, that people felt overwhelmed by their smartphones or that they're not connected with the real world.

25:50Things that sound nice to investors who don't experience speaking to people. And they raised all this money, over$200 billion between them, I believe, to build products that range from extremely bad to potentially fraudulent, and they failed to build products that anybody actually needed. What they did build were very expensive things that answered questions nobody had and solved problems that nobody had very poorly. And I'm not sure if it was ignorance, ambivalence, or just pure evil. But anyway, if I'm honest, these startups, they're only a symptom of the rock-on bubble. The investors are disconnected from the process of building things, and they're funding ideas that they don't understand in the hopes that the people building them aren't full of shit.