View from Washington: Big Tech goes home

Is the party over? Probably not, but it is cooling down.

Technology has driven real growth for decades. It has stood apart from the risks in financialisation – simply shuffling dollars, euros, and pounds around to fund the designer goods market (well, apart from Patagonia). Innovation has fuelled new products and services, creating hundreds of thousands of jobs, and boosting GDP. It has remodelled how we live.

Even tech’s titans are suffering, with companies as big as Amazon, Apple, Alphabet and Meta said to be freezing or slowing hiring – or in some cases, laying off staff. With consumers facing inflation and wider worries across all industries, advertisers are rethinking their spending, which is especially unwelcome news for the likes of Google and Facebook.

The threat of an impending, even perfect storm is compounded by systemic issues that were dogging the sector before Covid and now, the war in Ukraine. Sexism, racism, and ethics are issues tech leaders have only begun to address. Wider working practices and culture have become as great a source of labour disputes as employees’ concerns over making pay match the cost of living.

Then there is the degree by which Elon Musk’s hokey-cokey pursuit of Twitter is increasingly seen as indicative of how major tech businesses are run, rather than the latest mercurial machinations of an eccentric but hugely influential genius.

I could use a stiff one – but maybe a blend rather than a well-aged single malt.

In response, some companies and investors are pivoting away from ‘cool stuff’ and towards more essential markets.

Amazon recently spent $3.9bn (£3.25bn) on One Medical, a US operator of primary care clinics (the Leeds-based OneMedical Group is a separate company providing the same services). Healthcare has been seen as a white whale for technology for some time, and the deal will not just bring Amazon into the sector physically but also give it access to a huge amount of data about American patients.

The stock prices of traditional US players, such as the Walgreens Boots Alliance, dropped sharply on the news. “We think healthcare is high on the list of experiences that need reinvention,” said Neil Lindsay, senior vice president of Amazon Health Services.

Amazon’s CEO Andy Jassy is also taking a different leadership approach from Jeff Bezos when it comes to the public sector. Where his predecessor kept a wary distance from US legislators (although he did buy The Washington Post), Jassy has been taking more frequent meetings in DC, including with members of President Joe Biden’s administration.

Tech is concerned about anti-trust regulation, and Amazon specifically is in some regulators’ crosshairs. Lina Khan, Biden’s pick to chair the Federal Trade Commission, wrote a strongly critical paper on the company’s influence before her appointment.

Yet Washington is looking to influence, even support Silicon Valley more actively. The long-gestating bill to provide $52bn to repatriate more semiconductor manufacturing and billions more in R&D funding is winding its way through Capitol Hill. Behind that, there is mounting concern over a digital arms race between the US and China around artificial intelligence (AI).

China pivoted on AI some time ago. President Xi Jinping’s administration has reined in public-facing technology giants, but is directing billions towards what it sees as strategic core technologies through Government Guidance Funds – money that is coming on top of the $29bn it set aside for chips three years ago.

In this environment, national security is trumping the metaverse in many US executives’ minds as the next big play. Public funds cannot fully compensate for a serious consumer slowdown, but they are a haven as well as a political priority.

Opportunity remains. It may be more at technology’s fundamental level, and that will mean leaders need to adjust their mindset (interestingly, Jassy’s earlier experience leading Amazon Web Services leaves him among the better placed).

And there is an irony. If Washington does assume the much greater role Biden envisages, Silicon Valley will go back to its roots – the US military backed the original wave of electronics innovation.

So, the party’s not over – but it is starting to shrink from crazy mosh-pit to a more sedate ‘at home’.