The covid‑19 pandemic stimulated a massive, rapid transition away from in-person interactions and toward a world that was much more online. Brick-and-mortar businesses saw demand disappear as individuals shifted rapidly toward online commerce and goods delivery. Home-based alternatives for fitness, entertainment, and other outside-the-house activities flourished while traditional counterparts such as health clubs and movie theaters saw enormous declines in business. Office buildings emptied out, and demand for residential real estate increased as companies shifted entire workforces to work-from-home arrangements. Meanwhile, the tech companies that provided the products and services that enabled the world's rapid digital transformation saw huge increases in revenues and built out huge new infrastructures of equipment and staff to handle the increased demand. Because many analysts expected that the world's accelerated digitalization would become permanent, tech companies planned accordingly, adopting ambitious and costly long-term strategies to dominate the rapidly approaching digital future.
Tech companies have since realized that the digital future that they envisioned is not actually approaching rapidly. Instead, the world is trending strongly—though far from entirely—back toward its prepandemic norms. The extent of the change appears to have taken at least some tech companies by surprise. For example, as growth in e‑commerce demand began to slow down in early 2022, Amazon.com began to scale back its plans to continue expanding its network of fulfillment centers, having already doubled its fulfillment capacity between 2019 and 2021. As of September 2022, Amazon had shut down 21 fulfillment centers and had canceled or delayed plans to open 48 more. Similarly, Meta Platforms—which operates Facebook, Instagram, and WhatsApp—announced in November 2022 that it would lay off 13% of its workforce, which it had nearly doubled during the pandemic amid a surge in demand for online services (and online advertising). In a message to Meta employees about the November 2022 layoffs, Meta CEO Mark Zuckerberg explained that "at the start of Covid, the world rapidly moved online and the surge of e‑commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected" ("Mark Zuckerberg's Message to Meta Employees," Meta Platforms, 9 November 2022; online). Many other tech companies seem to have similarly misjudged the extent to which the pandemic had changed the world permanently, and the high-tech sector as a whole has been undergoing a major contraction. Some companies have gone from a state of rapid expansion to a state of near collapse. One such company is Peloton Interactive, which makes tech-enabled home fitness equipment.
Many other forces have been contributing to the problems that the high-tech sector has been facing. For example, as SoC1323 — Cost-of-Living Crises discusses, consumers in major economies are under severe pressure from high inflation, experiencing high costs of energy, food, and housing. Many factors—including the war in Ukraine, the effects of climate change, and the shift to remote work that happened during the pandemic—have been contributing to these high costs. Central banks have responded to high inflation by raising interest rates, which has contributed strongly to a decline in market valuations for high-tech companies and has also made funding rapid growth more expensive for such companies.
The high-tech industry's troubles do not necessarily mean that the world will revert to prepandemic trends entirely. Although many companies are cutting back on staffing levels and reducing expansion plans, the current cutbacks do not yet represent a reversal to a prepandemic status quo. For example, Amazon will continue to have a vastly larger warehouse footprint than it had before the pandemic, despite its cuts. And as SoC1283 — Remote-Work Transformation discusses, the covid‑19 pandemic caused a drastic expansion in remote-work policies across numerous sectors, and that expansion thus far does appear to be permanent, though not as extensive and rapid as some tech executives apparently had expected it to be. Although many companies have sought to move workers back to the office, many other companies have realized the benefits that remote work can have on productivity, costs, and the environment. In addition, many workers have pushed back against companies' return-to-office efforts. At the same time, evidence has emerged that indicates that in-office work is superior for creative ideation and certain other work tasks. Hybrid-work arrangements, in which workers spend only a few days per week in the office, have become popular for their ability to balance the benefits and detriments of in-office and remote work.
The tech industry's troubles could end up having far-reaching effects on society and governance. As SoC1293 — Threats to Big Tech's Power discusses, Big Tech companies such as Meta, Amazon, Apple, Baidu, and Tencent Holdings have come to wield substantial power in crucial economic, technology, and policy areas. The covid‑19 pandemic expanded that power substantially. As covid‑19's societal effects have waned, Big Tech's power seems destined to decline in kind. But Big Tech companies are also under threat from regulatory changes and from transformations in the competitive environment in which they interoperate. Accordingly, companies have much less freedom to operate in ways that could enable them to manage their current state of crisis and resume their visionary growth strategies quickly. For example, Meta has very ambitious long-term plans to create a virtual-reality (VR) metaverse that will become people's preferred location for work, socializing, entertainment, and much more. As Meta's revenues have fallen during 2022, investors have increasingly pressured Meta to scale back its huge VR-related R&D expenditures, and regulators are closely scrutinizing Meta's plans to build what could become a new kind of societally disruptive digital monopoly. As a result, Meta might be unable to realize its metaverse vision quickly enough to avoid falling victim to a future competitor.
The high-tech world's downturn has accompanied a collapse in the market for cryptocurrencies, cryptoassets, and other forms of blockchain-enabled digital property and services. Many of the companies and investors who had been building new products and services around blockchain technology have also suffered. SoC1298 — Web3 discusses the emerging vision for a new iteration of the internet that incorporates blockchains and other technologies to bring about a radical decentralization of content distribution, hosting, and monetization. The cryptocurrency collapse will not necessarily mean the end of Web3, but it will likely reduce interest in the Web3 vision substantially, decreasing the likelihood that any new products, services, and protocols that embody Web3 technology will break into the mainstream in the near term.