Why every tech downturn has a silver lining

San Francisco was a very bleak place in the aftermath of the dot.com meltdown that began in the spring of 2000. Every single day of that summer I woke up to the news of more layoffs, more shutdowns, and a general sense of despondency which only got worse when the tragic morning of September 11, 2001, brought a swift end to whatever innocence and optimism remained. I remember feeling under a pall of gloom, going about with a dark cloud over my soul and tears in my eyes. The months that followed that horrific event were particularly difficult but I found a way to react, and that was to write. So I started writing on my blog. About technology. About the networks. About the Internet. I wrote about jobs lost. I wrote about things that could be. And things that would be. Deep down, I believed in one thing for the future and that was the inevitability of the Internet.

I am reminded of those days now, but it feels like we’re wading through an even larger, still unfolding tragedy. More than 38 million Americans have filed for unemployment. The disparity between America’s haves and have-nots has been laid bare. The inefficiency of our legislators has made us the laughing stock of the planet (so much so that an opinion writer at the Irish Times even felt pity for America). Being quarantined in our homes, we can’t seem to figure out whether to work or curl up and go to sleep. An invisible enemy has brought us to our knees, and it is as if we have lost all hope. We want to do something, anything — even if it is risky — to give ourselves the illusion of being in control.

While we couldn’t appreciate it at the time, the bursting of the Internet bubble and the ensuing recession was a net positive for the technology ecosystem and entrepreneurs. Prior to 2001, the technology industry in general (and Silicon Valley specifically) were over-run by arrivistes and posers with too much capital competing for last-minute opportunities. The bust cleared them all out. That cleansing brought clarity and simplification — exactly what was needed to set the table for the next big thing.

In the sullen aftermath of Y2K and what followed, many people retreated to their little cubby holes and started working on their ideas. The team behind Oddpost hung out their shingle and started working on what would become one of the first of new Web 2.0 companies. Their email service was acquired by Yahoo, and it became Yahoo Mail, and many of their ideas were later included in Google Mail. The founders of that company didn’t worry about the lack of capital in the market, or that the press was proclaiming the death of the consumer internet. Just like it is today, by the way.

Thankfully, the news is a lagging indicator of reality. Slack co-founder Stewart Butterfield might be a household name today, but in 2001, he couldn’t raise money for his online gaming company, Ludicorp. So he, and co-founders Caterina Fake and Eric Costello, ended up creating Flickr, the pioneering photo-sharing service that helped inspire many of modern Internet behaviors. It was acquired by Yahoo.

Look around you, right now. We have all been forced back into our cubbyholes. Our lives have become a lot simpler. All the useless noise in the ecosystem, the sound, and fury signifying nothing — whether it is peer pressure, pointless tweeting, or all that talk of fundraising — is going to be muted like a squelch knob on a radio.

“Since March 11, 2020, about 300 U.S. startups have laid off about 30,000 employees across the country,” notes NVCA in a report. “This is likely just the tip of the iceberg for what will be tough times for startups over the coming months.”

That report predated the 3,000 jobs being cut at Uber, which has laid off 25 percent of its workforce since the pandemic started. To be clear, those being laid off are previously pampered full-time employees and not the gig workers who are treated as disposables by these big companies. Airbnb, another pillar of the consumer internet, also cut a quarter of its workforce. And they aren’t alone — Softbank’s big bet on unicorns is unraveling. If the stumbling unicorns are any indication, things are about to get a little hairy in Silicon Valley. More job losses, more problems for startups.

Most companies are tightening their belts and laying off employees — and this is as true for unicorns, as it is for small companies. If you have less than a year worth of runway, well, you are in the red zone. Holding on to cash is mandatory and that is why we are seeing a surge in technology layoffs. The high-flying valuations have been replaced by tougher financing options, and only the very best will find willing investors. Will there be a thinning of the herd? Perhaps! Will we see companies fighting hard to survive? 100 percent. Long term, though I am not worried. The shift to the inevitable has happened in a hurry. Technology is the economy, and the economy will be driven by technology.

And despite my optimism, no one is forecasting a clear return to business as usual. The new now means that we will all be incorporating new ways, means, and methodologies in how we live, work, and exist. Yes, the future is unknown and it is worrying, but pause for a minute and think about what the future of work looks like: less peer pressure and office politics, less need to run around looking pretty or showing up to show you’re there no need to chase crazy trends and shiny objects, and a lot less emphasis on working just to make sure people see you working. This is a rich opportunity to find a new work-life balance of one’s own, to shed the meaningless friction of a commute, to turn off Slack, silence the phone and focus and actually work on new things. I saw that in 2002 and 2003. Why not now?

A downturn is like a snow day from school. It gives you permission to work on just one thing and be okay with that choice. It’s okay to not pay attention to the rest of the world for a while, to give up that corrosive feeling of FOMO for not being at the right conference with the right people, of missing a chance that may never have been an opportunity, to begin with. In the stunned aftermath of the dot.com-9/11 combination punch between 2002 to 2004, many refugees from the dot.com days emerged with radical ideas that coalesced into a new Internet — Web 2.0. Sure, there weren’t distractions like Twitter and Facebook and Slack.. There wasn’t a torrent of blog posts or podcasts full of so-called wisdom that turns out to be less nutritious than a 50-cent packet of ramen noodles. But there was Ruby On Rails and the tagging and RSS and open APIs and a new table was set for the social media/cloud revolution that followed.

If memory serves me right, in those days, the popular media narrative was all about trying to explain what went wrong in the late 90s. Of course, none of that coverage actually led to Web 2.0. Progress only came about because of a desire to build a better way to the Internet. The idea of the two-way web was exciting to many of us, and it led to the revival. Today, the popular narrative plays up the general greed and ethical evilness of technology startups. A lot of criticism is justified, but that doesn’t take away from the fact that technologies — whether they be mechanical or digital — keep progressing. Sometimes slowly, sometimes quickly. Wait a few months, and you will start to see some edge-case tinkering, and new ideas begin to emerge.

What might some of our new projects be? Well, for starters, the working from home experience needs to be better. The shortcomings and opportunities in grocery delivery services are increasingly apparent. There remains plenty of room for improvement in health care. The pandemic has also exposed us to how much we impact the environment — and it won’t be much of a surprise to see the next generation of entrepreneurs attracted to climate-tech as their reason to tinker. Though, as real as these trends are, the breakthrough ideas of the future are unlikely to come from being reactive to the crisis. The pandemic has given us space and opportunity to indulge in fresh thinking, mostly because we aren’t busy trying to keep up with Joneses.

We have only just started to decouple the idea of an event from a place — and who knows what will emerge, the death of distance has been talked up since the banker Walter Wriston published the Twilight of Sovereignty in 1992. I don’t think the “work from home” revolution will be the ultimate gift from this pandemic experience (unless you’ve been suffering a marathon commute, in which case you’ll be getting the gift of time).

Rather, this is an opportunity to begin rethinking how we value real estate and places. The handshake may be going the way of the necktie, and attendance may not be taken in the future, but to limit the idea of how collective gatherings might look going forward to Facebook, Fortnite, and Minecraft would be a disappointing stifling of human potential. These recent experiences of conducting music concerts in virtual worlds are stepping stones towards a new Internet. We can’t think of them as replicas of the real world, but instead platforms for the post-social Internet. Rather than trying to improve upon the modes in the real world, what if the energy was spent on these new massive virtual gatherings and virtual worlds become a new way of socializing.

The crisis has given us a chance to take a step back, and think about what’s possible in the future. The simple fact a third of American workers were able to continue working remotely is a testament to the original vision of the Internet as a military network capable of withstanding a targeted strike. Without the connectivity of the Internet and near ubiquity of broadband home connections, the option to social distance wouldn’t have been imaginable. Smart entrepreneurs look at a crisis — be it a virus or a recession or an act of terrorism — seeking what was revealed, what was missing, and what will persist in the future. The post COVID world won’t be all about on-demand shopping. Instead it could be about resilient on-demand manufacturing that is automated and optimized. It won’t be telemedicine. It will be new bio-sensors and technologies that are in sync with our reality a decade from now.

If anything, I hope this pause in the whirligig technology economy would inspire us to think about a better web, one that finally escapes the tyranny of the browser. don’t get me wrong — I like the browsers and I won’t be lazy and call the future web “3.0”. But we need to be thinking about what else is out there. Maybe this is a chance for developers to build for Alexa or Google Assistant? Or perhaps there will be opportunities to build new experiences that capitalize on augmented reality.

The future comes with its responsibilities — the pandemic has exposed our vulnerabilities as a society. The dichotomy between the haves and have nots is clear for all to see now. Our privacy is a pinata — from ad-platforms to our national governments, everyone is using our data to work against us. The social platforms are crucibles of hatred, divisiveness, and xenophobia. We should not be blind to how technology goes wrong — and instead strive for a better resolution.

My bet is always-on broadband. Virtual worlds, digital entertainment, gaming …. None of it would be possible without broadband. Today, we have about 100-250 Mbps in most modern homes. In some places, you can get a gigabit per second. Now imagine what we could do if, in ten years, we all have 10 gigabits per second in our homes, and we have in-home networks that are fast and fat. What could apps do then? What would it mean for our AI-enhanced devices? In 2001, we imagined a 100 Mbps future — and we got Google, a nearly trillion-dollar company. We got Instagram, YouTube, and Facebook. Fast forward 20 years from now, what do you think is possible? What do you want to be possible?

The pandemic has given us a chance to step away from the past. The question is: Will we?

PS: Many thanks to Toni Schneider, David Churbuck, and Reeve Hamilton for helping shape and craft this piece.

Disclosure: I was an angel investor in Slack and I currently own Slack shares.

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