Compared to the year-long economic celebration of cheap capital in 2021, the contrast to 2022 is stark: raising interest rates, high inflation, a battered stock market, mass layoffs—and this is with a strong US economy with persistently low unemployment rates. It’s as if COVID’s retreat from our collective consciousness left a vacuum that has subsequently been filled with a new war and a surplus of economic challenges.
A New War
For those of us not steeped in the theater of geopolitics, the swiftness of Russia’s invasion of Ukraine came as an unwelcome surprise. It’s been several years since there’s been open, hostile territorial disputes around the world; countries’ borders have mostly stayed intact in the 21st century. That’s not to minimize the armed conflict that did occur: we still fought 2 wars—in Afghanistan and Iraq—and there have been ongoing civil conflicts in countries like Yemen and Syria. What has been rare is for one country to claim territory from another: the example that comes to mind is Russia annexing Crimea in 2014, a precursor to this year’s invasion.
It may be just the maturation of news and the advent of social media, but the Ukrainian conflict has received global attention as it raged on, 9 months later with nary an end in sight. Even as the country mobilized to defend itself, there were immediate alliances and equipment support, while the rest of the world felt the effects on exports like Ukrainian wheat and Russian petroleum. Western countries made swift use of economic sanctions1, with any major and minor effect quickly analogized to the territorial tensions between Taiwan and China.
It’s too much to hope for this war to play out to a conclusion in 2023; there is no line of sight toward a peaceful resolution after so many months of fighting, and the cold winter weather will not compel a pause in military operations as some hoped. The Ukrainian people have remained incredibly resilient and have the world rooting for their victory.
The End of COVID
No, of course, COVID isn’t actually over. This winter’s flu season is dubbed a possible tridemic: a combination of widespread COVID, the regular flu2, and a resurgent RSV. In China, the country has decided to relax some of their lockdown policies in December, but at the likely cost of many more infections in the coming months.
The processes we’ve developed to contain COVID have mostly run their course, and we’ve entered a phase of endemicity that had always felt like the most likely outcome. Historically, pandemics tend to last between 2 to 3 years: as immune systems catch up to the virus, it loses some of its novelty, and higher immune response rates naturally tamper its virality and eventually its severity. After a certain point, the restrictions that we’ve set on ourselves to contain a virus with costly societal and economic tradeoffs are no longer worth the benefits.
3 years is also enough time for normalization. Face masks are no longer unusual in western countries, and COVID boosters have slotted in alongside seasonal flu shots as another vaccine to obtain, at regular intervals, for vulnerable populations. In the next year or two, we’ll get to see which pandemic-induced behaviors stick around for the long run, and which will revert to pre-pandemic norms; some are already predicting a wholesale return to offices next year. Indeed, if we mistook COVID to be an accelerant when it’s more a circumstantial inflationary event3, then this snapback to an earlier time will be acute and painful.
AI to the Masses
Moving onto technology, 2022 was the year when advancements in AI jumped from a hypothetical curiosity into something that feels real and usable. That’s not to take anything away from the massive amounts of AI research that have been occurring in the past half-decade; it was a big deal when Google’s DeepMind released AlphaGo to play Go competitively back in 2016. But, the pace of development this year feels profound, as the culmination of AI development has finally reached the point where we’re starting to see end-user products emerge.
And this increased accessibility captures the imagination in a way that specialized closed-game systems are, well, specialized. Effective productization of AI isn’t just about building a friendly interface on top of big neural networks, though: it’s also about advancing economies of scale far enough that the formerly high costs of training models and running queries are relatively cheap. In doing so, these products can afford to sustain themselves with a small subscription fee, or just stay free to use4.
What gets exciting is intersecting the raw capabilities of this AI—be it generative artwork or detailed, authoritative-sounding responses—with an engaged user base looking for novel use cases. Already, AI art is winning competitions, and colleges are worried about the possibility of essays spun whole cloth from a ChatGPT prompt because we are struggling to tell the difference between human-created works and artificial remixes. It also portends the inevitable shift in which humans can add value with our unique capabilities, where this AI’s newly-developed strengths can act as a complement, in a tale as old as the Luddites.
The cliché is: 2021 was the party binge, and 2022 has been the hangover. There were already signs of a slowdown at the end of 2021 when inflation rates spiked, which along with the ongoing labor shortage and low unemployment rates have also driven up real wages. The response has been for the Fed5 to raise interest rates sharply—to what they were 20–30 years ago, but in less than a year—to explicitly cool inflation by slowing down the economy, bringing us into a formal recession if needed to contain the dreaded wage-price spiral.
The earliest casualty of this set of economic decisions has been our tech sector, which had enjoyed this prolonged period of low-interest rates and cheap capital. Whereas the layoffs from COVID-19 impacted specific sectors dependent on physical proximity, the rounds of layoffs that have been continuing through 2022 are broader and deeper, affecting both small startups and major public companies. The fundamental difference in this down turn is that tech companies have overhired in the past 2 years, assuming that the boost in remote interactions facilitated by technology would persist once we emerge from virus mitigation public health policies.
It’s become apparent that this was wildly optimistic and is exacerbated by the rising costs of investment capital. During frothy times, it was a completely valid startup playbook to spend as much as possible, as fast as possible, on the backs of cash-flush investors chasing growth and willing to double- and triple-down on subsequent funding rounds, disregarding both revenue and profitability along the way. It was obvious by March that this was no longer a viable strategy for building a company; by summertime, those same investors were marking down their investments to reflect the new reality of lower valuations and tighter monetary policy.
The general sentiment at this point, at the end of 2022, is that we’re still a ways from seeing through the bottom. The Fed has signaled that interest rates will continue to rise next year, and the broader economy beyond tech has not felt the same pressures as the tech sector—if that does spread out to other sectors next year, it’d push us into a recession and apply even more pressure back to tech itself.
Friends and Family
As I stumble my way out of the past 2 years of COVID restrictions, I have a newfound appreciation for friends and family gatherings, or just spending some quality time hanging out with people I enjoy hanging out with. Granted, this has coincided with a couple of new nieces in my extended family, and friends who are looking for playdates for their kids as well.
Like a lot of men, I find it easier to socialize with designated activities. In my teens and 20s, school provided plenty of structure and opportunity, and it was easy enough to bond over sports or video games. In my 30s, we had board games and movies, but the workplace proved to be a poor substitute for college dorms. I turned 40 this year, and funnily enough, a common ground now is our children; if it takes a village to raise a child, it’s also a powerful social construct that binds its adult villagers to a common cause.
Life’s 5th decade is a transitional one, when careers peak but also responsibilities for both young kids and aging parents, with a maturation in understanding ourselves and the things that ultimately matter6. All these changes can develop into a midlife crisis, reprioritizing personal values that are arguably the culmination of decades of experience and wisdom.
I suspect I’ll be appreciating this support in the years ahead, particularly in tumultuous times.
Which itself has a higher propensity for infection, given how little it spread the last 2 years and made itself unfamiliar to our immune systems.↩
Both figuratively in some of the activities and norms that no longer seem as relevant, but also the actual rise of inflation, some of which is attributable to generous COVID stimulus from the world’s central banks.↩
To be clear though, companies like OpenAI aren’t looking to be profitable with their products at this point; they’re okay with the still subsidizing a lot of the costs.↩
Other central banks around the world have largely done the same.↩
And therefore, starting to let go of everything that doesn’t.↩