Opinion - State of the Tech Industry - May 2023
"What mobile was to Web 1.0 is what AI will be to SaaS" -David Sacks. Either you get disrupted or you ride the wave.
Everybody remembers the transition to mobile in the history of tech. Now everybody is getting into AI because they don’t want to be like the companies that failed to adapt in the mobile era. Let’s review the recent events that has led us to today’s state of the technology industry.
SaaS Boom: 2008-2021
This was truly a remarkable run. Companies like Netflix and Spotify revolutionized the way consumers watch movies and listen to music, respectively. We no longer relied on renting physical DVD’s from Blockbusters and illegally listen to music from Napster.
In the B2B SaaS world, companies like ServiceNow (IT workflows), Snowflake (Cloud Data Warehouse), and Okta (Access Management) blew up to help make other companies run more efficiently.
Other Notable Tech Bull Runs: 2008-2021
Facebook is a great example of a company that successfully transitioned to the mobile era in the late 2000’s. Consumer behavioral shifted from using Facebook on ugly, 15 lbs computers to iPhone 3’s.
AWS led the charge in creating a worldwide infrastructure (IaaS) so that companies didn’t need to host their own physical data centers. This allowed companies in the “SaaS Boom” section to build their platforms/UI’s serverless-ly and more efficiently.
Lastly, the “platform” concept became widespread when executed well. The App Store by Apple made it so that companies developing their products on the iOS app made it impossible for them to ever leave the App Store, which guarantees Apple 30% of the products’ revenues. This is a similar concept for companies like Salesforce (Veeva and nCino built products on Salesforce’s PaaS) and Shopify for e-commerce.
What the Hell Happened between 2020 and 2023?
The bull run of nearly 12 years abruptly reversed in March 2020 when COVID shut everything down. This led to several events in the few months proceeding the initial “shock”
The Fed shifted the objective to Quantitative Easing to support the economy. This meant lowered interest rates, free stimulus checks, and intensive support for unemployment. In other words, spending more money was heavily encouraged
The stock price of a tech-heavy S&P 500 skyrocketed with the new era of work from home (WFH). Zoom (videoconferencing) ZM 0.00%↑ rose to +400% at it's peak in 2021 from pre-covid. WFH required companies to adapt to remote work and shifted everything to be delivered through the cloud.
Cryptocurrency also skyrocketed and the price of Bitcoin was projected to easily surpass $200K
VC’s encouraged all startups to grow at all costs, funding tech companies that had great ideas and strong growth numbers
The consequences of all of the above led to Q4 of 2021 that has domino-effected the tech industry to the present day. The following started happening:
The Fed pumping up inflation leading to higher interest rates
Geopolitical events like the war in Ukraine and COVID lockdowns in China that have major rippling effects on the global economy
Layoffs in a tech-heavy S&P 500 due to over-hiring or lower demand
Cryptocurrency and Augmented Reality/Virtual Reality (AR/VR) technologies have taken a major setback in development, becoming “dead” in the US as described by many
VC funding becoming dry and shifting the mindset from a) “growth at all costs” to b) “be profitable”
And yes, b) is much harder than a).
This was a 180. We went from having Meta recruiters getting paid $200K to do nothing, having yacht parties, and working 20-30 hour weeks to layoffs and being quiet hired into multiple roles in one year.
How Do We Get Out of This?
We have been in a near-recession for over a year now. There are two major ways to get out of this macroeconomic mess:
Increase inflation, which indirectly cuts spending
Produce more economic output
Let’s expand on point 2 above.
The Age of Artificial Intelligence
The obvious way in 2023 to “produce more” is to automate and incorporate AI.
There hasn’t been a single product that has revolutionize not only the tech industry but humanity in recent history the way OpenAI’s ChatGPT did in November 2022.
ChatGPT has been already used by people in all industries across thousands of use-cases for consumers and businesses.
AI Serves to Continue the Theme of Tech
“Help make more things more efficiently and more accurately”
The other day, I was making homemade potstickers. I didn’t have a processor to shred the cabbage into very small pieces, which is very important for the texture of the fillings in dumplings. My workaround was to use a knife to shred the pieces of cabbage. This process not only was tedious and took longer, it also resulted in sort-of-thin cabbage pieces that would have been much more thin had I used a processor. AKA reduced quality.
This analogy is a representation of the same thing when we have a day without access to Artificial Intelligence to get something done in 2025. This analogy is also a representation of when our phones die today: we are less efficient, cannot communicate quickly, and struggle to do normal tasks.
The whole point of the tech industry is to help us become more efficient, more productive, and more accurate in what we do so that we can really focus on the things we are good at. It pushes us to find out what doesn’t exist that should exist. AI simply continues this theme into the mid-2020’s.
Case Study: SpaceX and Tesla
Up to this point in this post, I have primarily focused on software technologies. I am also closely following companies that produce hardware and hard technologies like SpaceX. Every rocket launch costs more than $67 million USD. We expect every rocket launch to be operationally reusable and be so much more cheap the way computers became more cheap, lighter, and mass-producible from the 1990’s to present day. SpaceX has a mission to make humans multi-planetary.
This also means our one-way trips from New York to Tokyo could potentially be reduced from 14 hours (aviation) to 3 hours (launch to space and back down). How will that be possible? Through iterations and years of R&D, ML/AI, and cheaper and higher quality technologies.
And one more Elon, ego-boosting comment: Tesla “recalling” all cars sold in China was not a traditional recall but a software update to a braking defect. This gives Tesla a giant advantage over other motor companies. In other words, when cars had braking defects in the past, cars would need to be recalled back into the shop so that they could fix the hardware/physical parts issue, but this Tesla example is a simple software “hotfix” for a major bug where customers could use the car immediately after the fix is deployed.
Will AI Replace Jobs or Will It Make Existing Workers More Productive?
This is a half-glass empty vs. half-glass full debate. Will AI replace 30% of jobs or will AI make existing workers 30% more productive?
I choose option C: the middle. I think it will displace jobs where a team of 3 accountants will be just as productive with AI as a team of 5 accountants without AI in 2024.
AI will replace some jobs but I believe only a minority of jobs. Those “replaced” jobs will be displaced into other roles.
Think about how much Microsoft Excel “replaced” jobs in the 2000’s. Or how much the adoption of cornfield machines replaced jobs a century ago. We focused and shifted those “displaced” jobs into different roles.
Scared of AI? I Kinda Am.
Call me crazy, but I don’t enjoy the idea of robots destroying human existence. We need to figure ways to regulate AI the way the FDA had to suddenly find a way to regulate electronic signatures in the 2000’s.
We also need to find a way to effectively regulate AI without blocking the next Mark Zuckerberg from inventing the next big thing because otherwise we will fall behind to geopolitical rivals like China.
Closing Remarks, 2023 - 2025, 2030’s: Predictions
We went from the SaaS boom in the 2010’s to a sudden buller-than-the-bullest market during COVID. This all fell apart in 2022 and we took a nosedive back to a bear market. The series of events over the past two decades have lead us to today and tomorrow’s quest to become the best at AI.
To build a startup today will no longer require an army of 25-50 people. Human’s are smarter and sharper at identifying and solving problems than ever before.
The companies that don’t incorporate AI (whether for internal processes or directly in products), specifically the ones in technology, will fall behind in 2025. Things that were measured in years and decades before the 90’s and in the 2000’s are now measured in months thanks to AI/ML.
In 2025, the majority of professionals will be very comfortable having their emails drafted through AI and have large documents summarized for them via AI.
I don’t know if I’m exactly excited for the future, but I will definitely be riding this wave of the AI revolution.