A few weeks ago I attended a remarkable lecture by Carlota Perez on technology revolutions and their economic and social impact.
Mountains of words have been written and spoken in the last 10 years to attempt to explain all the commotion around the Internet, "new economy", the dot-com boom, the bursting of the "bubble", the aftermath, and many related topics. But no one I've read or heard has put these turbulent times into a historical perspective as clearly as Perez did in her presentation, and as she has been doing in her various publications, in particular her book Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. A good introduction to her work can be found in these excerpts from her book, as well as in this online lecture.
Basically, she says that if you look at the historical big picture, patterns begin to emerge, which serve as a very good guide for thinking about and planning for the future. Over the past 200 years, you discover that we have had a technology revolution every 40 - 60 years, the present one being the 5th in that span. Each such revolution changes the paradigm for guiding innovation and for determining winners and losers in the marketplace and over time ends up significantly transforming the economy and everything around it.
Perez views technology revolutions as engines of growth, rejuvenating and transforming the whole economy, as well as re-shaping social behavior and the institutions of society. To better understand the dynamics of a technology revolution, we should split it into two different periods, each lasting 20 - 30 years. The "installation period" is the time of creative destruction, when new technologies emerge from the lab into the marketplace, entrepreneurs start many new businesses based on these new technologies, and venture capitalists encourage experimentation with new business models and speculation in new money-making schemes. Inevitably, this all leads to the kind of financial bubble and crash we are all quite familiar with from our recent experience.
After the crash, comes the "deployment period," which she views as a time of institutional recomposition. The now well accepted technologies and economic paradigms become the norm; infrastructures and industries start getting better defined and more stable; and production capital drives long-term growth and expansion by spreading and multiplying the successful business models.
Carlota Perez believes that we may not yet have entered the deployment period, as the crash phase doesn't seem to have resolved itself. She mentions three particular structural tensions that we need still to work out in order to move on: Investments continue to be focused on short-term gain, not on long-term production and growth; the social system continues to foster an unstable environment in which the rich get richer and the poor get poorer; and there is too much "idle money" chasing and inflating assets like housing and not going into expanding the demand needed to soak up all the excess supply being produced. She argues that, as after prior crashes, we need policy shifts to overcome these structural tensions, and that will require active promotion, complex negotiations and imagination from all parties involved in business, government and society at large.
In 2004, IBM conducted a worldwide study on innovation, the Global Innovation Outlook, and one of the key findings on the changing nature of innovation in the 21st century is that it requires wider collaboration across disciplines and specialties. In fact, we concluded, among other things, that "combinations of technologies, expertise, business models and policies will now drive innovation."
A look at Perez's CV reveals what a rich and varied professional career she has had in academia, government and business. Her areas of expertise are far-ranging. Perhaps it takes such an interdisciplinary scholar with so many different work experiences to be able to shed light on the very complex and uncertain times we live in, and thus help us anticipate the future, and be ready with the right strategies.
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