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The Tech Sector Is Leaving the Rest of the US Economy In Its Dust (theverge.com) 155

Yesterday afternoon, the S&P 500 closed at a record high, and is up over $1.5 trillion since the start of 2017. "And the companies doing the most to drive that rally are all tech firms," reports The Verge. "Apple, Alphabet, Facebook, Amazon, and Microsoft make up a whopping 37 percent of the total gains." From the report: All of these companies saw their share prices touch record highs in recent months. This is in stark contrast to the rest of the U.S. economy, which grew at a rate of less than 1 percent during the first three months of this year. That divide is the culmination of a long-term trend, according to a recent report featured in The Wall Street Journal: "In digital industries -- technology, communications, media, software, finance and professional services -- productivity grew 2.7% annually over the past 15 years...The slowdown is concentrated in physical industries -- health care, transportation, education, manufacturing, retail -- where productivity grew a mere 0.7% annually over the same period." There is no industry where these players aren't competing. Music, movies, shipping, delivery, transportation, energy -- the list goes on and on. As these companies continue to scale, the network effects bolstering their business are strengthening. Facebook and Google accounted for over three-quarters of the growth in the digital advertising industry in 2016, leaving the rest to be divided among small fry like Twitter, Snapchat, and the entire American media industry. Meanwhile Apple and Alphabet have achieved a virtual duopoly on mobile operating systems, with only a tiny sliver of consumers choosing an alternative for their smartphones and tablets.
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The Tech Sector Is Leaving the Rest of the US Economy In Its Dust

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  • Bubble (Score:3, Insightful)

    by Anonymous Coward on Tuesday May 16, 2017 @08:30PM (#54430995)

    I'm going to cash out my stock options and ESPP as soon as they vested. Tax penalties be damned. I'd rather lose 20% of the value to taxes than 80% of the value to a crash.

    • by Anonymous Coward

      But it's different this time!!

    • someone with a half of a brain.
    • Re:Bubble (Score:5, Insightful)

      by unixisc ( 2429386 ) on Tuesday May 16, 2017 @09:11PM (#54431207)

      Of all the above, Apple is the only company that actually manufactures, and can bring jobs back to the US. The others - Alphabet, Microsoft, Facebook & Twitter, don't make squat (okay, Alphabet does a bit w/ the Pixel). And it's just as easy for them to offshore work as it is to hire within the US, since most software jobs now are remote jobs that can be done on 'the cloud'.

      You could try shorting Snap, Inc stocks: those are definitely overvalued, and given that their main selling point is that kids love them, kids can just as easily do to them what they did to MySpace. But I thought that the value you'd lose to taxes would be more like 27% or thereabouts.

      • by Anonymous Coward

        You didn't list Amazon, so you're clearly a moron.

      • Microsoft Surface, Microsoft Xbox, etc. They also make products that could be manufactured in the U.S.A. like Apple. But they don't, because it's cheaper in Taiwan/China.

      • Microsoft does have quite a bit of hardware.

        http://www.xbox.com/en-US/xbox... [xbox.com]
        https://www.microsoft.com/acce... [microsoft.com]
        https://www.microsoft.com/en-u... [microsoft.com]

        Facebook also own Occulus.

      • A related question is which of these companies is actually increasing the productivity of Americans. Several such as Facebook and Microsoft have simply achieved a monopoly position in their sector; this accounts for much of their success and employment growth. For society to benefit in the long term, worker productivity across the board needs to rise.

        This is why the mantra that the tech industry means everything to the economy is bunk. Its purpose is to justify more visa programs. The real opportunity i

      • What's your opinion on Nvidia? I guess they use Taiwan to manufacture their products, not sure if that has any chance of being changed to USA. I only bring them up because their products enable basically all of the machine learning revolution that has come around lately (as well as graphics too), and seems like a legit company with a legit product and contribution... hopefully not part of the 'bubble'. (Then again, many of its customers may be in the 'bubble', so there's that.)
      • by euroq ( 1818100 )

        > Of all the above, Apple is the only company that actually manufactures, and can bring jobs back to the US. The others - Alphabet, Microsoft, Facebook & Twitter, don't make squat

        You are implying that the only real jobs and value are through physical manufacturing as opposed to service work. In fact, services are obviously very valuable.

    • It is at least reassuring that most people here have no problems identifying The Return of Dotcom for what it is...
    • by elrous0 ( 869638 )

      Don't be silly. The party's gonna last forever, see? President Coolidge said so!

  • by Anonymous Coward on Tuesday May 16, 2017 @08:34PM (#54431015)

    Digital advertising isn't an industry.

    At best it is a digital parasite.

    • by Anonymous Coward on Tuesday May 16, 2017 @09:16PM (#54431241)

      If you would stop clicking on the spam mail promising to increase your penis size by taking a pill, a pump, or a secret diet then they'd stop. I blame you for all the crappy digital spam.

    • by elrous0 ( 869638 ) on Tuesday May 16, 2017 @10:01PM (#54431425)

      We should be fine as long as the advertisers never realize that no one has any actual money.

      • I have money. The problem here is more that I intend to keep it rather than throwing it at the parasites.

      • I have money. But, of course, I work in government IT. :P
    • Parasites have a long standing history, reaching back millennia and still going strong.

      Of course, in nature every organism tries to combat them, fight back and do its best to eliminate them rather than embracing them and lauding them for living on their expense...

    • by kisrael ( 134664 )

      We all carry a thriving microbiome in our gut. Relationships that begin parasitical can become symbiotic.

      The thing is, people tend not to pay for digital content. With Microtransactions, people had no idea how their usage might add up (think the first iPhone coming out ONLY with unlimited data plans - that cleared one of the hurdles that left WAP stumbling) or there would be privacy concerns, especially how porn was a big mover of the web.

      Subscriptions are tough too, there are too many possibilities to try,

  • USA culture is obsessed with the 'new'. In fact, 'new' and 'free' are the two most-liked words in the English language (in the USA.) It should be no surprise that consumer spending behavior would gravitate towards what's novel, which necessarily (eventually) requires new technology. An increasing proportion of our entire economy is being automated, with widespread predictions that eventually, our ENTIRE supply-side economy will be automated. This automation requires, again, new technology. Therefore, tech c

    • Re: (Score:3, Interesting)

      by Opportunist ( 166417 )

      And until the not so recent past, that was a pretty sensible attitude. New was better, and free was actually free. Yes, TANSTAAFL does apply, but I do remember people who would host parties for the only reason that they enjoyed being party hosts and invite friends over. Without any actual ulterior motifs.

      And new did actually mean better. Think back the last 100 years and you'll see that every generation of something that came out was in some way better than its predecessor. Faster. More reliable. Safer. Mor

      • Cars get harder and harder to repair yourself with every generation having more and more technical bullshit baked into its vital parts

        But they also become more reliable, and EVs have the potential to be substantially more reliable because they feature the simplicity that you are valuing so highly.

      • Comment removed based on user account deletion
  • by rsilvergun ( 571051 ) on Tuesday May 16, 2017 @08:43PM (#54431063)
    The #1 cost of most things are the raw materials needed to product followed by the labor (and their benefits). Tech needs almost nothing to produce since it includes software and even then needs a fraction of the employees of most sectors. Tech has amazing ROI because you just plain don't need to invest very much.

    The trouble is that a lot of tech is either useless (Twitter) or evil (Uber).
    • by Anonymous Coward
      Unless you're like my employer that throws more programmers at a problem. Can't cook fast enough? Put more cooks in the kitchen, that'll speed things up.
      • by Anonymous Coward

        One of my bosses wanted a particular problem "fixed now!!!" The issue at it's roots was poor business practices by management, but of course management never sees it that way and must be the fault of a SINGLE human IT guy.

        Apparently he didn't like it when I told him that there wasn't anything that could be done to speed it up resolution, and that he just needed to wait until it was done and that I couldn't defy laws of physics. He then felt like I must have been just making up bullshit like I'd intentional

        • Old German proverb: The knave thinks (others are) the way he is. Now take a wild guess why your manager thought you were bullshitting him when you told him it will take the time it will take.

      • Baby taking 9 months? Try more women.

    • The #1 cost of most things are the raw materials needed to product followed by the labor (and their benefits). Tech needs almost nothing to produce since it includes software and even then needs a fraction of the employees of most sectors. Tech has amazing ROI because you just plain don't need to invest very much.

      The trouble is that a lot of tech is either useless (Twitter) or evil (Uber).

      whoa whoa... twitter is both useless AND evil (on an average)

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Not Surprising?!?!?????

      I'll tell you what's surprising.....

      These tech companies are all being successful due to two very simple reasons...

      1) Selling you stupid bleeding edge shit you don't really *need*.

      2) Selling your soul out to the devil via datamining your ass 24x365 live in realtime via all microphone video chat gps purchases habits photos *including* the last time you jacked off to Britney Spears. They buy, sell, and have it *ALL*, your entire LIFE on their backend. Ruling over and engineering you is

    • by Kiuas ( 1084567 ) on Wednesday May 17, 2017 @02:30AM (#54432103)

      Tech needs almost nothing to produce since it includes software

      Uhm... what? You do know that increased demand for tech has caused the demand for raw materials involved in making tech, such as rare-earth minerals, to skyrocket [mit.edu]?

      Take, for instance, one of the world’s fastest-improving technologies: silicon-based semiconductors. Over the last few decades, technological improvements in the efficiency of semiconductors have greatly reduced the amount of material needed to make a single transistor. As a result, today’s smartphones, tablets, and computers are far more powerful and compact than computers built in the 1970s.
      Nonetheless, the researchers find that consumers’ demand for silicon has outpaced the rate of its technological change, and that the world’s consumption of silicon has grown by 345 percent over the last four decades. As others have found, by 2005, there were more transistors used than printed text characters.
      “Despite how fast technology is racing, there’s actually more silicon used today, because we now just put more stuff on, like movies, and photos, and things we couldn’t even think of 20 years ago,” says Christopher Magee, a professor of the practice of engineering systems in MIT’s Institute for Data, Systems, and Society.
      “So we’re still using a little more material all the time.”
      The researchers found similar trends in 56 other materials, goods, and services, from basic resources such as aluminum and formaldehyde to hardware and energy technologies such as hard disk drives, transistors, wind energy, and photovoltaics. In all cases, they found no evidence of dematerialization, or an overall reduction in their use, despite technological improvements to their performance.
      “There is a techno-optimist’s position that says technological change will fix the environment,” Magee observes. “This says, probably not.” - -

      “[Technology] will get us to a sustainable world — it has to,” says J. Doyne Farmer, a professor of mathematics at the University of Oxford who was not involved in the research. “I say this not only because we need it, but because there is only so much we can suck out of the Earth, and eventually we will be forced into a sustainable world, one way or another. The question is whether we can do that without great pain. Magee’s paper shows that we need to expect more pain than some of us thought.”

      Chips don't grow on trees. This is a classic case of the Jevon's paradox [wikipedia.org] which has been noticed since the very beginning of industrialization: as you increase the efficiency of a technology, whether it's coal plants, internal combustion engines or microchips, the demand for said technology goes up.

      We have a limited amount of raw-materials in the ground and the extraction of the remaining resources will grow increasingly difficult and expensive with time, which means recycling of old electronics more efficiently is the only sustainable option in the long run. Same goes for plastics: we currently dump billions of dollars worth of plastic to dumps and the oceans but as the cost of oil keeps rising and plastics become more expensive, we should start to see the market turn towards a greener economy not because they care about the environment but because picking floating plastic out of the sea and reprocessing it will at one point (hopefully soon) become more cost-efficient than making new plastics out of a perishing resource.

  • What idiot... (Score:5, Insightful)

    by Nutria ( 679911 ) on Tuesday May 16, 2017 @08:46PM (#54431087)

    conflates the "stock market" with "the economy"????

    Oh, right: journalists. I'd be unhappy as hell if my kids became lawyers, but kill the one that becomes a journalist.

    • Good point. It would be worth comparing gross revenues of various sectors of the economy and see the long term trends. I would bet that tech would weigh in quite well, especially when growth trends are considered. But the stock price is really the wrong place to look.
      • Good point. It would be worth comparing gross revenues of various sectors of the economy and see the long term trends. I would bet that tech would weigh in quite well, especially when growth trends are considered. But the stock price is really the wrong place to look.

        I looked at BEA numbers [bea.gov] and found that the "Information-communications-technology-producing industries" grew by 3.05% between 2015 and 2016, while all industries grew by 1.62%. So "tech", very broadly and loosely defined, grew nearly twice as much as the rest.

        However, it's also much smaller. Goods-producing industries generated $8T in 2016, services industries almost $20T, while tech was less than $2T.

    • You can add politicians to that pile. A lot of the stupidity in the legislative response to the 2007 crisis was a direct result of confusing the stock market with the economy.
    • by dbIII ( 701233 )

      conflates the "stock market" with "the economy"????

      Oh, right: journalists. I'd be unhappy as hell if my kids became lawyers, but kill the one that becomes a journalist.

      That connection was especially amusing when there was reporting about China's new stockmarket which may as well have been a casino - booms and busts every day with only the house winning in the long term.

    • even when I was a kid they knew they were doomed. We met with people to talk about their work in high school and the Journalists all told me to steer clear of their profession. It would help if we didn't let one guy (R Murdoch) buy up 90% of the news papers so he could push his agenda through them. I mean, what's even the point of buying a news paper when it's nothing but the usual pro-corporate blather. Muck racking is what made journalism worth paying for. Not that the powers that be would let that fly...
    • Yes the article compares share growth of tech sector with economic growth of the rest which is nonsense. That said, It's been said that the stock market leads the overall economy in terms of trends by about 6 months. I don't know if it's true. But the productivity part is probably relevant: 2.7% for the tech industry and 0.7% in things that are more important. That's not a good sign.

  • Daniel Bell. 1973. The Coming of Post-Industrial Society: A Venture in Social Forecasting. Basic Books, New York, NY.
  • I had no idea that industry could grow quickly AND slowly at the same time.
  • Bubble? (Score:5, Interesting)

    by thogard ( 43403 ) on Wednesday May 17, 2017 @12:35AM (#54431865) Homepage

    The reason those stocks are increasing is that millions of people have their 401K investing in "tech stocks" The people who manage some of those get a billion a week that they are obligated to invest before the next billion shows up next week. The result is the tech stocks are over valued and the price keeps going up as the game continues.

    This gets worse when they go to prove their investment works. Say they bought a billion in shares in GOOG 5 years ago at $300. They can sell them this week for $950 or so they make a 2.16 billion profit which they can keep for weeks since it was a result of a sale of stock. Next week they dump another billion into GOOG stock at say $1000 and they other 3.16 billion from last weeks sale may go to something else like IBM and MSFT just after the investment firm reports wonderful profits.

    There is a class of investment in the UK that is limited to something like 60 tech companies and there are retirement funds that are limited to those 60.

    The high speed computer traders know this and have been gaming the system for decades.

    • Re:Bubble? (Score:5, Informative)

      by swillden ( 191260 ) <shawn-ds@willden.org> on Wednesday May 17, 2017 @08:09AM (#54433143) Journal

      The reason those stocks are increasing is that millions of people have their 401K investing in "tech stocks"

      All evidence suggests that you're completely wrong. Tech stocks are soaring because tech revenues and profits are soaring, not because their prices are being artificially bid up.

      If your argument were correct, we should expect to see crazy P/E ratios in those tech stocks, as they're bid way up ahead of earnings growth. The three you mentioned, GOOG, IBM and MSFT have P/E ratios of around 30, 12 and 30, respectively. The GOOG and MSFT numbers are slightly higher than is normal, but seem totally justifiable given that the companies both still have excellent growth prospects (rational stock prices should represent the net present value of future income). Now, if you want to look at an inflated P/E, AMZN is about 180... but that's only because AMZN chooses to keep its profits low, reinvesting instead to increase shareholder value a different way. Everyone knows that Bezos could decide to flip a switch and start generating profits an order of magnitude larger, instantly dropping his P/E to 18, where AAPL's is.

      P/E is just one measure. You can do the same analysis on several others, and you'll find exactly the same thing.

  • Remember 2001. This is just the next stock market bubble. It will pop. just like the last one did.

    The symptoms are the same, too. Crazy startups (especially in Silicon Valley), getting $millions in funding, and yet anyone looking from a distance can see that they have zero chance of ever making money. Stupidly high market values for companies making thumping losses every quarter. For whatever reason, it all turns into a lottery: this little startups hoping some big boy like Google or Apple will buy them out

    • Remember 2001. This is just the next stock market bubble. It will pop. just like the last one did.

      The 2001 dot com bust had everyone and their grandmother investing in tech stocks. The only people who are losing money these days in tech startups are venture capitalists and they can afford to lose a shirt or two from playing the game.

      We are overdue for a recession after eight years of growth under Obama. Since Hillary lost the election, it won't be the Hillary Recession.

      • by gtall ( 79522 )

        Yes, dumping and extra 5-6 Trillion during the Obama years in deficit dollars into the economy will tend to heat it up a bit. However, not all of that was Obama's doing. It started under Bush with "surpluses as far as the eye could see" back before 9/11....that turned out not be extremely far. Bush managed to add only about 4 Trillion to the debt, so Obama beat him fair and square. Bush decided the country needed big tax cuts instead of sending the surpluses off to retire the debt. It is hard to buy votes b

        • It's the government spending that does the most damage.
          Drop medicare and health spending, unemployment and labor department, housing and community development, transportation, federal education spending, food and agriculture. Those comprise 40% to 60% of the federal budget, and they're almost all completely unconstitutional - i.e. illegal.

          How much better would your life be if your federal taxes were halved?

          • How much better would your life be if your federal taxes were halved?

            You forgot Social Security and Medicare, which will consume 2/3 of the federal budget in 2030. Taxes will have to go way up to pay for everything else.

  • These things are produced by non-American immigrants, while US worker produce crappy cars and appliances that nobody else than Americans buys.

    Heck, even now you can't get only a handful of US car models for driving on the left, like several billion people need.

  • "The Tech Sector Is Leaving the Rest of the US Economy In Its Dust"

    Uh, more like The Tech Monopolies and Mega-corps are leaving Everyone In Its Dust.

    These tech giants are crushing even other tech companies.

    And of course let's not forget about the political strings they've pulled to stay on top. I wonder how well the "Tech Sector Five" would have performed had they been forced to play more by the damn rules and actually do things like pay taxes, and not hide 99% of their revenue in some fucking tax haven somewhere.

  • Not (Score:4, Interesting)

    by zifn4b ( 1040588 ) on Wednesday May 17, 2017 @06:32AM (#54432767)

    Wages have been stagnant for almost 10 years even for the A players and unicorns.

    There are slightly higher paying jobs (5-10%) you could take but they require twice as much work if not more. Not worth it especially if you have a family. We're still due for a correction because of the recession like everyone else.

  • While market valuation may a gauge of the economic health/activity, it is not the economy.

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