For 65 years, the United States has counted on its tech industry to create products and drive economic growth. For most of that time, the industry exceeded expectations. Over the past decade, however, the tech industry has lost its way, with a culture, products and business models that undermine democracy, public health and safety.
America needs its tech industry to solve problems, not aggravate them. But we can’t expect the industry to transform itself without incentives, which must come from government and voters.
Today’s tech industry has been allowed to operate with no regulatory constraints. Entrepreneurs and investors have focused on growing as rapidly as possible to massive scale and profits, without consideration for community values such as consumer safety and human autonomy.
After the financial crisis of 2008-09, the global economy was stable, with low inflation and interest rates. Stability in international trade enabled supply chains optimized for short term cost. We might have used this environment to tackle the greatest challenges facing humanity, such as climate change and income inequality. Instead, we allowed corporations to set their own priorities. They pursued wealth and power, with strategies that aggravated every problem. No industry did more harm than tech.
Some new technologies, such as facial recognition, got financed without a constructive use case. Other new industries, like ride sharing, ignored existing laws and regulations, consumed massive amounts of capital and produced staggering losses, all in pursuit of a monopoly that might eventually lead to profits. In artificial intelligence, entrepreneurs asserted that huge data sets — even ones consisting largely of garbage content — would make our lives better, despite overwhelming evidence of bias and bad outcomes.
Low interest rates and inflation encouraged investors to take greater risk, so they kept throwing money at startups. Entrepreneurs responded with ever crazier ideas. Eventually, investors funded business plans that depended on suspending the laws of physics or finance. The self-driving vehicles sector claimed not to need the special lanes or beacons on obstacles that are standard for autonomous aircraft and ships. They assertedAI and sensors in the vehicle would be good enough, despite copious evidence to the contrary. The crypto industry built a Ponzi scheme on top of bad computer science.
Each of these ideas had skeptics, but their warnings were not enough to overcome the enthusiasm of investors determined to own a piece of the next big thing. At the peak earlier this year, more than 1,000 startups had a valuation of a billion dollars or more, many with little or no revenue.
Despite prospering in the early days of the pandemic, the tech sector has hit a wall. Nasdaq has declined by nearly a third in 2022, while 448 individual stocks have declined by 70% or more. It may get worse, as few of the new tech companies have produced material revenues. The transformation of the global economy creates big incentives for a tech reset. Climate change calls for new energy solutions, a new power grid and new approaches to transportation. The U.S.’s exceptionally costly healthcare system is failing to address the nation’s need. The education system is not preparing children for adulthood.
The lesson Americans should learn from the past decade is that failing to regulate tech leads to catastrophic harm.