Sep 15, 2018

How the Great Recession teed off tech's long boom

Illustration: Rebecca Zisser/Axios

While the rest of the U.S. economy reeled from devastating losses in 2008-9, the tech sector looked on sympathetically while wondering to itself, "Are things really that bad?"

The big picture: That's partly because the tech industry was well insulated from the financial meltdown's real-estate-focused epicenter. And Silicon Valley had already experienced its own financial bust at the start of the decade, leaving the industry with more solid growth and less hot air.

For tech, the 2001-2 recession — considered mild in most of the nation — was epic, scarring.

  • After the dotcom bubble popped, the tech-heavy NASDAQ index lost 3/4 of its value between March 2000 and Dec. 2002.
  • A generation of software developers and designers got to know what it's like to be laid off. San Francisco's South of Market neighborhood — today, a hive of startups and chic luncheries — became a ghost town.
  • If the NASDAQ today experienced a drop like it did in 2000-2002 and the index lost 3/4 of its value, it would fall to 2000, squashing today's cushy portfolios, beheading unicorns and destroying trillion-dollar valuations.

The industry experienced only limited recovery during the mid-2000s, took a brief dive again during the 2008 crisis, and then jumped on a bull for a decade, rising from its spring 2009 low near 1300 to around 8000 today (that's a 600% return).

Modern tech has always been a cyclical industry, but its boom-bust pendulum has been stuck on the side of growth for a full decade now:

  • Cash has flooded in as investors around the world looked for higher returns during a long era of near-zero interest rates set by central banks trying to stoke a broader recovery.
  • Technology investments from previous eras — in everything from fiber backbones to wireless broadband to more versatile software development tools — delivered big payoffs.
  • Innovations in machine learning and AI, device miniaturization, cryptocurrency, and autonomous vehicles held out one promise after another of uninterrupted growth.

The bottom line: Tech is hardly immune from future downturns, and any number of disasters — from a full-on trade war with China to a massive earthquake along the San Andreas — could trigger a race to the exits.

  • A single big bust is less likely than a series of smaller pops, as enthusiastic investors and funds overplay their hands on one tech fad after another. For instance, a lot of experts think there's a bubble in scooters right now.

Go deeper

World coronavirus updates: Spain's health care system overloaded

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

Two planes carrying protective equipment arrived to restock Spain’s overloaded public health system on Wednesday as confirmed cases surpassed 100,000 and the nation saw its biggest death toll so far, Reuters reports.

The big picture: COVID-19 cases surged past 930,000 and the global death toll exceeded 46,000 on Wednesday night, per Johns Hopkins data. Italy has reported more than 13,000 deaths.

Go deeperArrowUpdated 8 mins ago - Health

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 932,605 — Total deaths: 46,809 — Total recoveries: 193,177Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 213,372 — Total deaths: 4,757 — Total recoveries: 8,474Map.
  3. Business updates: Small businesses are bearing the brunt of the coronavirus job crisis.
  4. World update: Spain’s confirmed cases surpassed 100,000, and the nation saw its biggest daily death toll so far. More than 500 people were reported dead within the last 24 hours in the U.K., per Johns Hopkins.
  5. State updates: Florida and Pennsylvania are the latest states to issue stay-at-home orders — Michigan has more than 9,000 confirmed cases, an increase of 1,200 and 78 new deaths in 24 hours.
  6. Stock market updates: Stocks closed more than 4% lower on Wednesday, continuing a volatile stretch for the stock market amid the coronavirus outbreak.
  7. 1 future thing: Shifts to telemedicine, at-home diagnostics, and drone delivery are all likely lasting consequences from this pandemic.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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U.S. coronavirus updates: Confirmed cases surpass 200,000

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

Positive cases of the novel coronavirus passed 213,000 on Wednesday — nearly twice as many as Italy, per Johns Hopkins — as more state governors issued stay-at-home orders for Americans to curb infection.

The state of play: Trump administration officials are anonymously sounding the alarm that America's emergency stockpile of personal protective equipment is running dangerously low, the Washington Post reports.

Go deeperArrowUpdated 17 mins ago - Health