Technological revolutions alter the prevailing techno-economic paradigms of the time. These revolutions redefine and produce new industries and infrastructure. They then define a list of fresh “common sense” innovation models.” The new “common sense” not only transforms economic activities and markets, but penetrates social practice, legislation, governance, and ideology.
The limits of the Information Age continue to be pushed with disruptive and value innovation. With over 3 billion people online, the growth of personal computers (mobile) in the last couple of decades has created today’s huge tech industry. There are still conversations around the possibilities on mobile, the billion-dollar scale platform. However, many are eager to find what’s next.
Finding power-law returns is difficult in today’s consolidating market (GAFA). GAFA has massive distribution along with deep moats. The new incumbents are super-evolved organisms compared to their predecessors in Wintel and IBM. Investors and entrepreneurs are actively looking for the next insurgent platforms. The next S-Curves will need to have a tremendous market size but also have free and liquid distribution channels.
Historically, top-down predictions of the future are incorrect. When people in technology become thesis-driven, it means that are organic opportunities have dried up. The exception is for firms like Union Square Ventures. But it’s common to see many investors use passive success in other sectors that seem important creating false confidence in future predictions. 1 See Elad Gil’s End of the Cycle? The CleanTech bubble is a famous example. Predicting the future is less about prediction. Instead, it’s more clearly understanding the present and anticipating.
George Soros taught me to not predict, but observe. I view the world as a series of cause-and-effect relationships, and I am a student of Carlota Perez.
The next technology S-Curves will be found from blockchain, bio, 3D printing, quantum computing, artificial intelligence, the autonomy ecosystem, mixed reality, space travel and more. These technologies are part of the Internet and Communication Technologies (ICT) Revolution. The Internet and Communication Technologies has created incredible amounts of value to the world and will continue to do so. However, today, new technologies must now focus on distributing that value. That’s how I’m thinking about startup investing.
The global economy is near the bottom of the long-term Kondratieff’s long wave and faces profound issues. 2 In economics, Kondratiev waves are hypothesized cycle-like phenomena in the modern world economy. The GDP and the NASDAQ are not complete barometers in measuring progress. As Joseph Schumpeter once said, aggregate figures conceal more than they reveal. Numbers and statistics without context can become an echo chamber. Venture Capital is a small part of the United States and the world economy. It’s more valuable to understand the interactions between the fundamental structures of capitalism and technological diffusion and assimilation.
Today’s political environment is reminiscent of the 1920s. In the United States, wealth distribution is highly inequitable where the top 1% receive 25% of society’s total income. Many Americans hold strong feelings of hopelessness, fear, and xenophobia. Globally, populist demagogues have acquired power over these emotions. The continued deskilling of work only strengthens the antagonism between innovation and society led by the new Luddites.
The ICT revolution sits in a recessionary period like the 1920s and 1930s before the Age of Mass Production’s Golden Age. In the Age of Mass Production, massive investment and growth in the Roaring Twenties led to the Great Depression. (The Internet and Communication Technologies Revolution had the Internet Bubble and the 2008 Financial Crisis.) It took 13 years for the Age of Mass Production to reach a period where the positive-sum game between business and government resulted.
While the Age of Mass Production eliminated jobs, it created new jobs and more widespread prosperity via Schumpeterian creative destruction. This is an essential feature of technological revolutions. They pioneer a new and stable synergistic direction of the world. Technologies diffuse across the globe when they arise to address the world’s need at the right time. Under the mass production paradigm, the aspiration of suburban living became “the good life.” The good life diffused innovation and happiness across the economy –from automobiles, construction, through electrical appliances, to refrigerated foods. Credit was widely available, which helped fuel the largest economic boom in history. This was started after cooperation between government and private markets after World War II under the direction of reconstruction and urbanization.
The Information Age needs to define a synergistic direction of the world like the Age of Mass Production did. Currently, the Information Age has only added to the global demand for energy and materials. It also has had a negligible effect on productivity growth. New technologies have concentrated power among the information elite and even politics with algorithms.
Wellness-driven and more eco-friendly lifestyles have begun taking form. The old paradigm of mass production is exhausted and is not sustainable. Our world faces environmental problems from the Age of Mass Production. These problems offer solutions and the opportunity to catalyze smart green growth. Whereas mass production produced economies of scale and homogenous markets, new digital technologies create diversity and adaptability. Globalization is inherently a decentralizing force in that local economies need to specialize to remain market competitive.
Green lifestyles are information intensive rather than material intensive. There is an emphasis on shared ownership, vibrancy, and materials-and-energy saving. The sharing economy of today and subscription-based services will help expire planned-obsolescence business models from the mass production paradigm. But sustained innovation in 3D printing, renewables, and bio must usurp the previous paradigm.
Technologies in the Age of Mass Production didn’t emerge all at once but in clusters. (Automobiles, cheap oils and materials, universal electricity, road, airway networks, and more). By definition, technological revolutions and their respective new paradigms are systems. Systems, as defined by Donatella Meadows, are “an interconnected set of elements that is coherently organized to achieve something.” The Information Age has yet to define a system that is synergistic with the world. While the revolution has featured semiconductors, integrated circuits, computers, software, networking, and mobile, more technologies await to complete the system. 3 These new technologies (S-Curves) will drive smart green growth. This creates a clear positive-sum game for the world and an ethos of wellness that defines the era. While blockchain has its S-Curve, its part of a more significant and global cycle that is directed at creating more open economies. This enables the decentralization of power and distribution of value. It has already started with the early creations of an open financial system in Bitcoin. As the world gets increasingly dematerialized, sustainable, and collaborative, openness and access will cascade from the digital world to the physical one. This revolution of our time will also better connect software with our bodies (bio) and resources (energy and power). I’m excited for the future, and I hope it’s more democratized for everybody.