Is a tech bubble forming or is it growing pains for a new (better) normal?

tech bubble
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There has been talk recently of a tech bubble emerging that could cause major trouble ahead. The arguments for this bubble are sound, but there is room to question certain fundamentals.

Read Richard Windsor’s piece on this emerging tech bubble, and you will probably find yourself nodding to yourself and reaching for your stock dealing app. He sets out four reasons why a bubble is forming – from valuations to rights issues, market inefficiencies to FOMO, or Fear of Missing Out.

It all makes perfect sense and, clearly, individual companies’ valuations at the moment have little to do with reality and much more to do with hype and the current circumstances.

Yet the current circumstances are anything but normal. And even when we have all been vaccinated and go back to something approaching normal, the world will be different.

The press, particularly recently, has reported on studies by leading research houses that indicate how different the world will be and how fast the pandemic is changing it. Everything from a new robustness about the success of the IoT to a new confidence in our ability to protect our networks against cyberattacks, there is a genuine sense of confidence in technology.

Two headline quotes from these studies stand out.

First – IDC predicts that the pandemic will trigger $6.8 trillion of spending on digital transformation in the next two years. That is more than the GDP of Japan.

Second, from IDC again, predicting that 65% of the world’s GDP will be digitised by 2022.

These two snippets alone are enough to make you think deeply about what just happened.

What just happened is that about 10 years of change is happening in two!

So while there may be a tech bubble forming and we may see corrections as we emerge, blinking, into the new normal, our world is going to be underpinned by technology to the extent that we would have predicted for 2030 or beyond, not 2022.

Our very lives – the way we live and shop and work – have been turned upside down and new infrastructure is being put in place, and it is tech.

In a sane world, Richard Windsor’s wisdom would be what you would follow. But this is no longer a sane world; it is a world very much changed and very much more so than we believe, even now.

Whether the technology platform on which we will live will lead to a better normal is debatable, for sure. What is also debatable is that while a tech bubble might well be forming, the new normal will support it to a greater extent than we would normally believe. And while there will be corrections and some valuations will be dramatically corrected, there must be a sense that the whole tech sector’s value just got a massive and supportive boost.

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