After a decade of unconstrained growth—when it seemed that a new billionaire was minted every day—the tech industry has finally hit a rough patch. Elon Musk’s erratic behavior following his takeover of Twitter has left the financially leveraged platform in a precarious state. The crypto exchange FTX’s sudden implosion has vaporized a business that was recently valued at $32 billion, taking many other crypto firms with it. Meta (Facebook) is laying off 11,000 people, 13% of its workforce, and Amazon is shedding 10,000.

What are we supposed to make of these setbacks? Are they isolated incidents, or signs of structural change?

Twitter was already struggling. After taking on debt and overpaying for the platform, Musk immediately began cutting costs, declaring that the company was losing $4 million per day. His first layoffs swept out 80% of the company’s contractors and half of its permanent staff, including key engineers and most of the content-moderation team.

Musk then reversed the bans on Donald Trump and thousands of far-right provocateurs, as well as ending the enforcement of rules against “harmful misinformation” about Covid-19 and vaccines. Many advertisers have paused their campaigns to avoid having their brands associated with toxic content. As I write, Twitter is in chaos.

As the second-largest crypto exchange, FTX (and its founder, Sam Bankman-Fried) came out of nowhere, built a huge public profile, and then blew up—all in the space of a few years. Details are still emerging, but the bankruptcy specialist now serving as FTX’s CEO (and who previously oversaw Enron’s bankruptcy), says he has never seen “such a complete failure of corporate controls and such a complete absence of trustworthy information.” The ripple effects are being felt across the crypto industry.

Meta’s layoffs reflect the company’s stalled growth after a meteoric 17-year run. Young people have embraced TikTok, undermining the growth of Meta’s Instagram platform, and Apple has introduced a tool that lets iPhone users opt out of sharing data with platforms like Facebook and Instagram, costing Meta as much as $12.8 billion this year. Meanwhile, Meta CEO Mark Zuckerberg has made a huge bet on virtual reality, attempting to create a general-purpose operating system for an industry that does not yet exist. The company has already spent $36 billion on this vision, with little to show for it.

Other tech companies are also retrenching, owing to a broader post-pandemic reversion to the trend line for online retail, as well as disappointing results from some individual products. But more to the point, I believe the global economy is in the early stages of a structural change that will leave the tech industry—the biggest beneficiary of the prior economic regime—particularly vulnerable to disruption.

The economic environment of the past decade was ideal for business. Interest rates and inflation across the advanced economies were exceptionally and persistently low. Peaceful relations among major powers underpinned easy access to global markets and sustained supply chains that optimized labor costs.

But while prolonged economic stability benefited market leaders in every industry, it lulled executives, investors and politicians into complacency. Many took on more risk, seemingly without consequence, leading to a mispricing of risk throughout the economy. When the pandemic hit in early 2020, it shocked most of the economy. But lockdowns and quarantines were great for tech companies, which kept hiring through the first half of this year, seemingly unaware that they, too, might be subject to disruption.

Russia’s invasion of Ukraine changed everything, catching most corporations and even governments off guard. I believe it will be remembered as the trigger that ushered in a new economic era, with interest rates, inflation, geopolitical tensions and instability at significantly higher levels than in the past decade. There has been a loss of trust among major powers, and it will be many years before governments are once again willing to subordinate other issues to economic interests.

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