Farhad and Mike Ruminate on the Peaks and Abysses of 2015

Each Saturday, Farhad Manjoo and Mike Isaac, technology reporters at The New York Times, review the weeks news, offering analysis and maybe a joke or two about the most important developments in the tech industry.Farhad: Hey, Mike! Hows it going? Its the most wonderful time of the year: The last newsletter Ill have to write with you in 2015.Mike: Dont lie. Youll miss me when I go away on my vacation to Puerto Rico, which coincidentally is on the verge of a major bond default. Im not sure what that means, but I think it has something to do with Daniel Craig.Anyway, well get through this together. While being apart, that is.Farhad: O.K., on to the weeks tech actually, lets skip all that. Apple shuffled some executives around, California proposed rules for self-driving cars and Facebook and Uber hooked up, but for the most part nothing major happened this week.Instead, lets look at the whole year. What were the most important tech stories of 2015? The biggest news, by far, was the inauguration of this weekly newsletter, a development that rocked the tech world from San Francisco to South San Francisco.Mike: I recently showed my parents how to subscribe, mostly to convince them I have a real job and have done something with my life. So our audience is growing.Farhad: But enough about us. Lets talk about the tech bubble. Tech financing went a little nuts in the first half of the year. Hedge funds and mutual funds joined traditional tech venture capitalists in trying to get a stake in hot new companies, so a tsunami of money poured into start-ups. It might be the best time for any kind of business in any industry to raise money for all of history, like since the time of the ancient Egyptians, Stewart Butterfield, the co-founder of the business messaging company Slack, told me in April.Also, unicorns a term for tech companies valued at more than $1 billion became as common as mosquitoes. And with rising real estate costs and an invasion of tech bros, San Francisco became unbearable.Continue reading the main story Subscribe to the Bits Newsletter Mike: Can I ask that we coin a new term besides unicorn in 2016? I was thinking something like, Liger. You know, the hybrid child of a tiger and a lion. Plus unlike unicorns, they actually exist!Also, to be fair to the tech bro wave, I will say that the bro has always existed in the wild, in his many forms, across many industries. As long as there are young people thrust into ridiculous amounts of money, whose egos exist unchecked amongst approving peers, there will be bros.Farhad: Good point, bro. But in the second of half of the year something suddenly shifted. Investors began to worry about exits tech companies werent doing very well on the stock market, so how would all these start-ups ever get a big payday? A lot of firms also seemed to be spending way too much money; several were actually upside down on their unit costs, meaning they were spending more to serve each customer than they were making from them. And the mutual funds that had eagerly poured money into private tech companies began to mark down their investments that is, declaring them worth less than theyd paid for them.So thats the recap. But where do you think we are now? Are we headed for a huge blowup, or is it going to be the proverbial soft landing?Mike: I think if one continuously says, Were in a bubble and its going to burst for years and years, they will eventually be proved right, but it doesnt really make them prescient. So I wont do that.What I do think will happen: A gradual slowdown in funding which in some areas is already occurring and a tightening of belts on some of the lavish start-up spending weve seen in recent years. Feelings of austerity tend to reverberate in cocoons like the technological one in which we exist.Im not saying Dropbox and Pinterest will stop serving sushi tomorrow. A number of these companies are sitting on huge cash reserves, and may take years to go under or slowly fade away into acquisitions. The shift will be subtle, but notable.Farhad: In fact, I ate a delicious lunch at Dropbox just the other day. Grilled mahi-mahi, spinach salad, wheat berries it was a like a fancy restaurant. Based on the lunch, its doing fine!Mike: That said, if you give out exorbitant sums of money to untested idealists for a long enough period of time, you will certainly see spectacular flameouts. Clinkle is a perfect example, as was the implosion of Fab. Evernote, Jawbone and others are on the watch list. There will be more. There will be blood.Farhad: Another big story in tech: This industry is terrible for women. Thats not news, really its been clear for years that the tech industry hires and promotes women at a far lower rate than men. But this year the problem finally got attention in the media and from some of the fields top execs. Ellen Pao, the former chief executive of Reddit itself a cesspool of misogyny sued the venture firm Kleiner Perkins for alleged gender discrimination during the years she worked there. Pao lost the case, but the lurid descriptions of sexism that surfaced during the trial cast an ugly light on the industry. So, do you think the case, or the attention, will change anything for women in tech?Mike: I think the Pao case, and subsequent fallout, certainly raised the profile of systemic and longstanding problems of gender and race discrimination in the Valley. That folks are discussing it more openly now is undoubtedly a good thing.Photo French livery drivers protested against Uber in Paris on Friday. Credit Francois Mori/Associated Press But this stuff runs deep. There are many, many people in Silicon Valley who believe it is, and always should be, a pure meritocracy, where advancement is race- and gender-blind and should be judged solely on the quality of work. That sort of attitude, while not always professed in public, will take years to unravel. And Im not sure that those currently in power see much incentive to make those sorts of changes, except for public relations purposes.Not to be a downer, but my outlook is not so good here for the short term. Maybe, just maybe, theres a chance in the long term for change if the issue isnt just a du jour menu item.Farhad: I guess I disagree, but only slightly. I think youre right that this should be a long-term commitment for tech companies. Talking to many of the big tech firms about this issue over the past year, I got a sense that theyre not just paying lip service to diversity. But maybe Im just easy to fool.Mike: I hope youre right! I really do.Last thing we should address: The inexorable rise of Uber, the ride-hailing company I seem to spend all my time covering. Theyre valued at $62.5 billion, have raised more than $10 billion, and seem to be taking over the world faster than Star Wars mania.And yet, I think the mainstream that is, those who are not insufferable coastal elitists like ourselves really have just begun to wake up to the phenomenon that is ride hailing. Sure, I may take an Uber from Manhattan home to Brooklyn at 2 a.m., but I doubt my folks in Fort Worth are doing the same thing. Also, they dont stay out that late.So what do you think hails for Uber in 2016? Whats the next big challenge on their horizon?Farhad: There are two key questions, I think. The first is whether they can put a meaningful dent in car ownership and use. As they begin to expand services like UberPool, which allows multiple people to ride together at low prices, will they start to convince some people that getting around in Ubers is much cheaper than owning a car? If that happens and it seems possible in cities, but an open question in suburbs Uber could be far larger than it is now.The second question is whether the international expansion works. The company is spending huge amounts to replicate its success in the United States across the world, but it faces stiff competition and skeptical regulators. In 2016, we may begin to see signs that the expansion is panning out or whether its a costly failure.But next year is still two weeks away. Until then, pal. Happy holidays!Mike: Same to you, sir! May our 2016 be filled with many more jocular exchanges and occasional insights.The Saturday tech newsletter will be on hiatus until Jan. 9.