Artificial intelligence, NFT and other new technologies: the crash that shows us how tech markets have lost their rationality

Does the decline in the markets contradict the technological euphoria that has mainly been expressed in the media in recent years?

Does the decline in the markets contradict the technological euphoria that has mainly been expressed in the media in recent years?

©Justin TALLIS / AFP

Blinded by the hype

Does the decline in the markets contradict the technological euphoria that has been expressed in the media in recent years, especially over artificial intelligence, cryptocurrencies or NFTs?

Atlantico: Be it artificial intelligence, cryptos or NFT and other new technologies, does the decline in the markets contradict the technological euphoria that has been expressed mainly in the media in recent years?

Remi Bourgeot: It is difficult to see in the markets a force to judge the intrinsic value of technologies, both up and down. We are just coming out of a period of incredible growth in the valuation of technology companies. The Nasdaq has grown tenfold between 2009 and the end of 2021, falling by more than a quarter in the past six months. This decline comes after an extraordinary move funded by the mountains of central bank liquidity, from crisis management to crisis management. The nearly uninterrupted monetary stimulus in the developed world since the 2008 financial crisis ultimately contributed to soaring inflation, against a backdrop of global logistical chaos at the end of the pandemic. Inflation is the death knell for this monetary policy, while the monumental bubbles we’ve seen in recent years, from financial markets to real estate, didn’t seem too much to worry about.

Aside from the liquidity bubble, it is difficult to compare the revolution represented by artificial intelligence – although the question of its direction is clearly raised – with a phenomenon like NFTs, which rather represent the icing on the cake of the crypto bubble. Moreover, whatever one thinks of crypto-currencies and the rampant speculation that has driven them, the idea of ​​monetary decentralization has also responded to an intuition about the monetary deadlock that appeared as far back as 2008, with the support of arm’s length of the banking system ( central engine of monetary creation) by the central banks, under the guise of permanent recovery of the real economy. Paradoxically, this interesting cryptographic invention has been driven to insane heights by the onslaught of liquidity from the same central banks that its founders wanted to challenge and compete with.

Read also

Short explanation for those who didn’t understand NFTs and the record sales of the very first SMS

The political and media environment is very favorable for startups, especially in high-tech sectors, but are profits and success really there? What could explain why tech companies aren’t as profitable as they seem?

In recent years, 80% of startups opening their capital in the United States have not been profitable, compared to about 20% 40 years ago. Financial perceptions have been radically changed by the deluge of cash. Investors’ eyes were on increasingly distant prospects, banishing the good old financial realities and valuation methods. It is normal and legitimate that investors in these types of companies, a fortiori technological, are forward-looking. But the compass ran wild with the various phases of QE, finally breaking forcibly at the end of the extraordinary support operations prompted by the pandemic, with central banks neutralized by the surge in inflation. There is also the question of the economic role, especially the industrial one, of start-ups. Their perception was partly determined by the financial disorder. The contribution of startups must be understood in their integration into a larger innovation system, including large companies, universities, government agencies… Despite the ongoing industrial revolution, the unlimited multiplication of overvalued startups, following what in some cases is a sophisticated variant of a Ponzi scheme, by itself, of course, does not guarantee a movement of content innovation.

Read also

NFTs Are Just The Beginning Of The Cascade Of Billions Of Cryptos That Will Enter The Economy

Why do we let the “hype” convince us? How to return to a more reasoned and fairer approach to technology?

Indeed, we live in an era of industrial revolution, aimed at a new phase of automation, with artificial intelligence. Its magnitude, coupled with the (very) long history of mechanization, is indeed revolutionary in nature. All great innovations take years, even decades, before they are truly integrated into the economy and, in particular, the organization of work. We see it with the Internet, which more than a quarter of a century after the mass use of the Internet began, a global catastrophe like the pandemic and its political management will have required telecommuting. Bureaucracies have a knack for curbing technological innovations and preventing them from translating into productivity jumps and lifestyle improvements. However, this does not rule out the exclusion of the technological breakthroughs that are underway and their scope. Of course, financial bloat has shaped technology investment decisions for the past decade, but an innovation like artificial intelligence should be placed in a much longer story, which logically fits into the dynamics of electronics and computing power development. The study of post-war science fiction would tell us more about this dialectic than most economic studies.

Leave a Comment