Irving Wladawsky-Berger

Given AI’s continuing advances, many observers argue that we’re entering a new technological revolution. But are we? To make sense of the moment we’re living through, it’s helpful to step back and look at the broader historical patterns that have shaped past waves of disruptive innovation. Few scholars have done more to illuminate these patterns than Carlota Perez.

In April 2003, Perez published Technological Revolutions and Financial Capital, a book that explored the connection between technological revolutions, financial bubbles, and economic development. Perez, — a British-Venezuelan researcher, author, and international consultant, — is affiliated with University College London, the University of Sussex, and the Tallin University of Technology in Estonia.

In her influential book, Perez argues that technological revolutions have long been engines of growth, regularly rejuvenating and transforming economies and societies. Over the past 250 years, she’s identified five technological revolutions, each unfolding roughly every 40 to 60 years. The first was the age of machines and factories, which launched the Industrial Revolution in Britain in the 1770s.  It was followed by the age of steam, coal, iron, and railroads in the 1830s; the age of electricity, steel, and heavy engineering in the 1870s; the age of automobiles, oil, and mass production in the early 1900s; and, finally, the age of information and communications technologies (ICT) and microprocessors beginning in the 1970s.

According to Perez, technological revolution consists of two very different periods, each lasting 20 – 30 years.  The installation period is an era of creative destruction, when new technologies emerge from the lab into the marketplace, entrepreneurs experiment with new business models, and venture capital fuels waves of innovation and speculation. These dynamics almost inevitably lead to a financial bubble, which eventually bursts.

The deployment period follows the crash, — a time of institutional recomposition. The now well accepted technologies and economic paradigms become the norm; the new infrastructures and industries are better defined and more stable; and production capital drives long-term growth and expansion by spreading and multiplying the successful business models. Over time, new paradigms significantly transform the economy and everything around it, as well as re-shaping social behavior and the institutions of society. (more…)