Tech Bubbles and Reputational Risk

Chris Yapp wonders whether recent problems in the tech industry could be seismic foreshocks presaging a coming quake in global technology stock prices.

One of the signals which often happens when stock markets are at the top of their cycles and valuations are high is that factors which have been ignored during the exuberance of the growth phase start to bite and reputations become exposed.

In the last month or so, we have experienced 3 events which I believe are problematic for the tech industry as a whole.

First, the series of problems at Uber including overlooking sexual harassment, the founder’s tirade against one of his drivers and the legal action by Google over alleged IP theft have put what is allegedly a toxic culture in the spotlight.

The regulators are fighting back against the business practises of the gig economy companies in many countries. Fighting these diverse challenges to new business models can be very painful, expensive and time consuming.

Second, the 5 hour outage at Amazon took out a significant proportion of the internet. It was blamed on ‘fat finger’ trouble. The challenge here is to understand what a disgruntled employee might be able to do. For all the concerns over cybersecurity, insiders can often be a greater challenge than external threats. What would be the implications of a 12 hour outage or longer?

I have a small wager with a former colleague that at least 1 company will go into liquidation before 2020 because they lose their data. One former colleague lost part of their infrastructure for a few hours and only then discovered that one of their suppliers used AWS.

Finally, the placing of adverts on YouTube from major brands on videos of hate speech, homophobic and racist content has led to the withdrawal of major brands from the platform.

I have some sympathy with Google in the comparison between their ability to take down copyright material quickly and their tardy response over extremist content. Content is either protected or it isn’t, whereas definitions of extremist content has more grey areas. I’m not happy with the idea of the internet giants being asked to become global censors any more than I am happy with the illegal or extreme content that is easily available.

However, advertisers have a right to know that they are not being posted by algorithms against content with which they would not wish to be associated. This does create a significant problem.

Giving advertisers more transparent data is one step, but take down, when you have already appeared to endorse extreme content is shutting the gate after the horse has bolted. However, say that Brand X doesn’t want to be associated with various extremes such as racist and homophobic content. What is the balance between software and humans in making this work?

If YouTube staff determine that Content Y is acceptable on the platform to avoid damage to free speech and over censorship but that our Brand X should not expect to be associated with it, how would that work?

If YouTube labels particular content as racist, homophobic but legal, does the software then take over? If it does, do content creators have the right to sue for censorship and limiting free speech?

While I am sure that no Jihadi groups would go to court, there are plenty of grey areas where reasonable people could differ on where to draw a line.

NESTA, the Innovation Foundation recently launched their 10 Predictions for 2017. They are an interesting set, worth reading. One that is important here is the ‘Computer says NO, the backlash’.

The social challenges of AI, machine learning and algorithms is one that I think will take time to resolve politically and economically.

The collapse of Zano, a drone start up funded through Kickstarter back in November 2016 received limited publicity except in the tech press.

The recent examples I have highlighted have all hit mainstream media. The collapse of Enron and Worldcom at the turn of the millennium were classic examples of the ‘creative destruction’ phase of capitalist economies.

Timing the top of bubbles is notoriously difficult. The aphorism ‘The market can remain irrational longer than you can remain solvent’ is worth bearing in mind. Sometimes attributed to Keynes, but probably not said by him, it is a good counter to ‘this time it’s different’.

I suspect that 2017 will turn out more ‘interesting’ than even 2016.

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About the author
Chris is a technology and policy futurologist. Chris has been in the IT industry since 1980. His roles have spanned Honeywell, ICL, HP, Microsoft and Capgemini. He is a Fellow of the BCS and a Fellow of the RSA.

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