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Downturns and Tech

November 20, 2008

I just spoke to a business class about technology and thought that I should share one of my favourite parts of the presentation.  I speak on tech trends (although I wonder about my qualifications), and thought that this year there was no more dominant trend in discussions of technology that the fact that the economy is crashing to the ground.  For tech people this is nothing new, and they’re all returning to the discussions and awful feelings of the tech bubble collapse of 2001.  

Some of them have been pointing out an interesting fact.  It seems that every crash or slowdown in the economy has seen a resulting revolution in technology come out the other end.  This is not to suggest that anyone looks forward to the downturn or that there aren’t corporate bodies all along the roadside … clearly, all kinds of people have only bad memories of recent downturns, but there is a clear indication that the shakeup and changes to the environment that occur in these times has interesting results. It all begins with 1975-1976 when nobody was enjoying the oil crisis, stagflation , and lots of unemployment. However, two companies started very small with the idea that people might want computers in their homes (a pretty crazy sounding idea at the time).  Microsoft and Apple emerged from those years and I imagine that everyone is familiar with their stories.  The 90’s saw a fair amount of bad times, mostly a slowdown with massive drops in interest rates and  some more unemployment.  The years spawned Google, ebay, napster, and things like blogs.  The 2001 tech crash wiped out a huge number of firms that had been riding the idea that any Internet business is surely worth a million dollars, even without a plan or any hope of generating revenue.  The folks who pulled themselves from that rubble and were up and going again a few years later included PayPal, myspace, Facebook, Digg, and Flickr.

I’m not just interested in the idea that successful businesses emerged from bad times.  Each of these cycles changed the tech business significantly.  Apple and Microsoft had obvious effects, but it’s interesting to me that the next tech boom in the late 90’s signalled the beginning of the interactive web …. widespread personal commerce, P2P sharing, and self-publishing were a new paradigm, where once there had only been sites to visit and look at online “stores”.  Post 2001, we saw the emergence of the social web, and this was also an entirely new paradigm for this technology, ushering in a new wave of progress.  So, having gone through a boom since then with way too many copycat social sites being created, it seems very likely that quite a few of those will be killed off as venture funding, advertising, and other forms of revenue dry up for the next 18 months or so.   

There will be fewer companies, possibly some new models for how to conduct business on the web and survive, and perhaps some brand new paradigm-shifting ideas created by clever people with  some newly-found spare time. We’re going to need something to look forward to …

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One comment

  1. Nothing sparks innovation like crisis.



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