Facebook, Amazon, Uber… When Tech gets lost in futile innovations

Seven billion dollars. This is the amount that American and European venture capitalists invested in 2021 in start-ups that offer fast delivery services, such as Deliveroo, Gorillas or Gopuff. This fall in France, poster campaigns have multiplied to attract customers to these thirty businesses that promise to deliver a toothbrush or a meal in less than fifteen minutes. The battle is fierce: a massive consolidation is underway, with acquisitions costing billions of dollars; the latest being US DoorDash’s $3.5 billion acquisition of Finland’s Wolt.

Home delivery is part of a wider galaxy of services that constitute a kind of digital concierge: catering, shopping, laundry or cleaning tasks… A market that tantalizing minds call a “lazy economy”. We can also add the whole micro-mobility sector, offering self-driving scooters and bicycles for pedestrians, which is attracting huge amounts of capital (about ten billion dollars raised in recent years worldwide). All these companies target a young, urban, busy clientele for whom it is unthinkable to go down to Franprix or walk a mile and a half.

However, this “gimmicky” service economy may see its golden age come to an end. Awareness of the social dumping associated with these services, which thrive on low-wage workers, and criticism of their environmental performance have sparked a debate: haven’t the promises of technology been watered down into futility? The question arises in many areas, the famous metaverse being a perfect example.

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This concept has been updated by Facebook, which has made it a historic strategic shift to make people forget the controversies surrounding the functioning of its social networks (Facebook and Instagram). Mark Zuckerberg’s company thus invested 10 billion dollars last year to build a virtual universe whose interest no one really understands in relation to real life. The influence of Meta Platforms – the new name for Facebook – is such that ten or twenty times more investment is expected in the coming years by companies and investors who are terrorized by the idea of ​​”not being one of them”.

cruel comparisons

Let’s dwell on these amounts. Ten billion dollars is roughly the cost of producing the 13 billion doses of anti-Covid vaccine that have been injected into the world to date. Vaccines, which have been developed in part by start-ups remarkably frugal given the scale of their discovery: Germany’s BioNTech has been funded for 1.7 billion euros by its investors – 11 times less than what Facebook paid to buy WhatsApp in 2014 – while Moderna required $2.5 billion in capital, $1 billion less than the Finnish acquisition of DoorDash. Another telling comparison: Bill Gates spent 14 times less than Zuckerberg to develop a post-Fukushima nuclear reactor for his metaverse. His traveling wave reactor works with radioactive waste that is replaced every ten years.

True innovation, one whose scale is measured in decades and hundreds of millions of individuals involved, is therefore not so expensive. Better, its costs are collapsing exponentially thanks to a myriad of tools that didn’t exist thirty years ago. Today, it costs next to nothing to create medical diagnostic tools for use in developing countries, networking them with computers the size of cigarette packs that cost less than $30 apiece. In the same way, it is possible at any cost to get competences where they are.

So there is no reason not to engage in high performance innovation. And yet none of the technological promises intended to benefit the greatest number have materialized. The smartphone, the data industry or artificial intelligence may offer breathtaking demonstrations, but they have had no impact on poverty, malnutrition or life expectancy – which, by the way, is in decline in the US, the country that invented the digital universe. And we’re not even talking about the non-existence of investments from tech linked to the climate crisis.

Low impact of technology on development

In 2015, the United Nations announced no less than 17 specific goals aimed at “fighting poverty, fighting inequality and ending climate change by 2030”. Last week, in its report, the Bill & Melinda Gates Foundation identified the absence of significant progress in most metrics: general poverty, malnutrition, access to drinking water, infant mortality, progress is very weak at best. “We have to go five times faster to achieve these goals,” Bill Gates recently explained in an interview with New York Times, it is even largely underestimated because the effects of the pandemic, the war in Ukraine or the food crisis developing in Africa have not been taken into account […]. The world is in much worse shape than I expected.”

Why has technology had so little effect on these big problems? Because the canons of technology investment are completely at odds with the profitability prospects of high-impact innovations. A French entrepreneur who works with cataract treatment in developing countries made the bitter observation: The needs are in the south and the capital is in the north. Its potential lenders also suggest it concentrate on solvent markets.

This drift can be explained by two factors. The first is the essentially marketing construct of technology companies aimed at Western consumer goods. The reasoning of the entrepreneurs and their financiers boils down to this: What is the size of the desired market? Which part can we take? What are the means to implement to grow as fast as possible and be able to dictate prices (usually after years of abysmal losses)? The second factor is the commitment to profitability imposed on venture capitalists, who are under vigilant pressure from those who entrust them with their funds (insurance companies, pension funds, private wealth). The principle adopted by venture capitalists is generally based more on flair than on objective analysis. The best parallel is perhaps film production, where you bet on a dozen projects in the hope of one or two big hits. Added to this is a herd instinct where no one will take the risk of being wrong alone, while collective failure is relatively acceptable. The need for “social validation” from the community too often discourages disruptive thinking.

In terms of technology, this system worked remarkably well. Between 2006 and 2021, venture capital investment in the US increased from $30 billion to $330 billion per year. This money has produced real innovations, such as in biotechnology. But it has also created products and services that are of little use to humanity. The influencer market, for example, is now worth $16.4 billion, but there’s little cause for ecstasy: it’s mostly had the effect of depressing millions of teenagers who, at the rate of nine hours a week, compare and mourn on TikTok or Instagram.

New priorities

In recent months, clouds have gathered over the technology sector. They are the result of a combination of current or impending upheavals: climate, energy, food, geopolitical crises. Never before has the world needed innovation policies aimed at the long term so much. Which electrification will reduce emissions? Very good. But in the US alone, this means that the capacity for storing electricity must be multiplied by 100, which will not be possible with current technologies. Everywhere, even assuming that enough can be produced, distribution capacity will need to increase by a factor of two or three.

From this perspective, everything is size XXL. The list of actions to take looks like a giant shuffle board if all sliders need to be pushed at once. We need to greatly accelerate renewable energy programs and develop new types of nuclear reactors, but also work on ways to reduce the demand for raw materials (rare earths, cobalt, lithium, the demand for which will explode, with all the risks associated with geopolitics) . It will also be necessary to accelerate innovation in synthetic biology, review the manufacturing processes of almost everything produced on the planet, invent new materials, revise the main principles of urban planning and transportation, or even learn to recycle as much as possible.

The financial cold that the technology sector has experienced since the beginning of the year is real. However, it should not overshadow two fundamentally positive factors. First, the tools to allow a reorientation of the technological effort are there. Properly employed, artificial intelligence, data science, modeling skills or robotics can make it possible to tackle many problems related to climate or development. On the other hand, capital is not lacking in reality. In the US as in Europe, the public sector plays the locomotives with envelopes that count in billions of dollars or euros. Venture capital also has huge profits: American venture capitalists alone have $151 billion in reserve looking to invest.

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Belatedly, but surely, the investment industry is starting to understand and smell the nose. Larry Fink, CEO of BlackRock, an institution that manages $8.5 trillion in assets, believes that decarbonizing the economy is “the biggest investment opportunity right now” and that the next thousand unicorns “will be made by startups, that will help with decarbonisation and bring the energy transition within everyone’s reach.” Chicken?


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