Will Tech Stocks Bounce Back?
Technology has a dark side and I think people are starting see it.
Millennial investors came of age in one of the longest bull markets in history. I’m sure many know about the dot-com crash of 2000, but when you only really know bull markets, it seems impossible that it will fall apart. Surely, we’ve learned our lesson since then, right?
And yet, here we are.
I think one of the shocking things for many younger investors is the tech sector crash. These products, services, and companies became integrated in and integral to our daily lives. How could they possibly crash?
Over the last year there have been hiring freezes at Apple, Google, Meta, Netflix, Substack, Tesla, Twitter, and more. It’s a far cry from the heady days of late 2021 when all these companies seemed unstoppable.
How could something so solid fall apart? And will it rebound?
For a while, I've been talking about my problems with technology – surveillance capitalism and the attention economy. Technology has a dark side and I think people are starting see it.
It's a very manipulative ecosystem. In a nutshell, they hoard and use our data to modify our behavior for their own profit motives, and they do so in ways that aren’t transparent. We blindly click “I agree” to the terms and conditions, in exchange for their services that we think we can’t live without.
A lot of the marketing of technology is built on a fundamental lie. If you’ve been following me for a while, you know I’ve talked a lot about Robinhood. In the financial markets, I think they are a perfect example of this lie.
Robinhood claims they're democratizing investing by creating access and more choices for retail investors. But really, they're just giving investors access to a limited set of choices, all of which benefit Robinhood for sure, but aren’t necessarily the best choices for users. Robinhood makes more money when their users transact more frequently and in less liquid and more volatile securities.
That's their business model. Period. It has nothing to do with a noble pursuit, like democratizing investing. Meanwhile, they position themselves as the champion of the little guy, when in reality they have made a lot of extremely wealthy people even wealthier.
So, they're lying. They are not democratizing investing. They’re making money by incentivizing frequent and risky trading. And they're not transparent about it. They had to get called out by the SEC – they had to get sued in order to start admitting the truth.
They're not alone. This is one example of a bigger problem in the technology sector. They're all manipulating their users and their users’ data, and they're not transparent about it.
Another great example of the lying going on in the tech sector is self-driving cars. They've spent $100 billion on self-driving cars – billions of investors’ money. Turns out, self-driving cars can't make left turns into oncoming traffic.
The industry says that self-driving cars can make left turns; they just can’t make “unprotected” left turns. Give me a break. Practically every left turn is unprotected!
The way it came to light is a lady in San Francisco complained that Google’s cars were coming down her street and making three point turns to avoid having to make an “unprotected” left turn at a nearby intersection.
She called Waymo (formerly Google’s self-driving car project). No one would admit it was happening until she called the local media and asked them to come film all the self-driving cars coming into her driveway to avoid making a left turn.
You know what else self-driving cars can't figure out? What to do if a pigeon flies in front of the car. We know that we may get rear-ended if we slow down or stop suddenly. We also know that the bird is probably going to get out of the way at the last minute.
Technology companies have spent over $100 billion, and they've sold shareholders a bill of goods. They've described a world where we're chauffeured everywhere. Our cities will be transformed because we won’t need parking garages. Think of all the things we can do with the extra space!
They’re lying. I personally don’t believe that AI will ever drive better than humans (unless they also make the roads a controlled environment). Whether you believe self-driving cars will eventually become a reality or not, however, there’s no doubt that these companies are talking their own book – and scooping up billions in investment dollars on pure narrative.
Here’s a great video of Elon Musk promising self-driving cars “next year” … for the past 8 years!
I have little doubt that there will be a rip-roaring rally in technology stocks following these big declines. I won’t be jumping on that bandwagon myself. I pounded the table in 2021 about getting out of technology companies whose business models relied on user addiction in the attention economy.
I haven’t changed my mind one bit today – but I’m increasingly encouraged that more and more people are coming around to my point of view. I don’t think that bodes well for addiction-based technology business models.
Let’s invest in something better.
Stop the lying,
Dr. Richard Smith
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