Artificial Intelligence, NFTs and Other New Technologies: A Crash That Shows Us How Tech Markets Have Lost Their Rationality

Does the fall of the markets contradict the technological euphoria that has been expressed in recent years, in particular, in the media?

Does the fall of the markets contradict the technological euphoria that has been expressed in recent years, in particular, in the media?

©Justin TALLIS / AFP

blinded by the hype

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

Atlantico: Whether it’s artificial intelligence, cryptocurrencies, or NFTs and other new technologies, is the fall of the markets contrary to the technological euphoria that has been expressed, in particular, in the media in recent years?

Remy Bourgeo: It is difficult to see the strength in the markets to value the intrinsic value of technologies both up and down. We’ve just come out of an incredible surge in tech company valuations. From 2009 to the end of 2021, the Nasdaq rose tenfold, but has fallen by more than a quarter in the past six months. This fall comes after an emergency move, funded by mountains of central bank liquidity, from crisis management to crisis management. The near-continuous monetary stimulus policy in developed countries since the 2008 financial crisis ultimately contributed to skyrocketing inflation amid the global logistical chaos at the end of the pandemic. Inflation is the death knell for this monetary policy, while the monumental bubbles we’ve experienced in recent years, from financial markets to real estate, don’t seem to be too much of a concern.

Aside from the liquidity bubble, the revolution represented by artificial intelligence – although the question of its direction obviously arises – is difficult to compare with such a phenomenon as NFTs, which are rather the icing on the cake of the crypto bubble. What’s more, whatever you think of cryptocurrencies and the rampant speculation that drove them, the idea of ​​monetary decentralization also responded to the intuition of a monetary impasse dating back to 2008, backed at arm’s length by the banking system (the central engine of money creation). ) by central banks under the guise of a permanent recovery of the real economy. Paradoxically, this interesting cryptographic invention reached insane heights thanks to an onslaught of liquidity from the same central banks that its founders wanted to challenge and compete with.

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The political and media environment is very favorable for startups, especially in high-tech sectors, but is there really profit and success here? How can you explain that technology companies are not as profitable as they seem?

In recent years, 80% of startups that have opened their capital in the US have not made a profit, compared with about 20% forty years ago. Financial views have been radically changed by the flow of cash. The view of investors is focusing on ever more distant prospects, discarding the good old financial realities and valuation methods. It is normal and legitimate for investors in this type of company, especially technology, to look ahead. But the compass went berserk during the various phases of quantitative easing and eventually snapped sharply at the end of the pandemic-motivated emergency support operations when central banks were neutralized by a spike in inflation. There is also the question of the economic role, especially industrial, of start-ups. Their perception was partly driven by financial troubles. The contribution of startups should 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, after what is mentioned in some cases a sophisticated version of the Ponzi scheme, it is obvious that does not guarantee the movement of significant innovation by itself.

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Why do we allow ourselves to be convinced by “advertising”? How to return to a more reasoned and fair approach to technology?

We are truly living in an era of industrial revolution based on a new phase of automation with artificial intelligence. Its scale, combined with a (very) long history of mechanization, is truly revolutionary in nature. In order for all major innovations to be truly integrated into the economy and, in particular, into the organization of work, years, and in fact, decades, are required. We see this with the Internet, which required a global catastrophe such as a pandemic and its political management for telework to take hold more than a quarter of a century after the mass use of the Internet began. Bureaucracy has a knack for holding back technological innovation and preventing it from becoming a productivity boost and lifestyle improvement. However, this does not detract from technological breakthroughs and their scale. Naturally, financial inflation has shaped technology investment decisions over the past decade, but an innovation like artificial intelligence must be placed in a much longer story that logically fits into the dynamics of electronics and computing power. A study of post-war science fiction could tell us more about this dialectic than most studies in economics.