In the 1920s, Russian economist Nikolai Kondratiev described cycles of repeating boom and bust in the global economy, each lasting 50-60 years. Other economists have developed the Kontratiev wave theory in more detail, including Carlotta Perez in her book “Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages”. Perez ties the economic cycles to distinct sets of technological advances: The Industrial Revolution (starting in 1771); The Age of Steam and Railways (1829); The Age of Steel, Electricity and Heavy Engineering (1875); The Age of Oil, the Automobile and Mass Production (1908); and the Age of Information and Technology (1971), which is still underway.
What’s interesting of course is to look at the pattern of each previous “technological revolution” to see if it sheds any light on the future of our current one (information and technology). Perez points out that the pattern certainly looks familiar so far: an eruption phase with a rapid growth of core technologies, followed by a frenzy phase consisting of an explosive expansion of infrastructure and financial speculation. In every other technological revolution, the frenetic build out of the infrastructure and the financial bubble that accompanied it was followed by financial collapse – again, sounds familiar. The good news is that, if the model holds true, the next phases (synergy and maturity) are where we’ll start to see the real impact of the technologies on business and society. Just as the car led to social constructs such as suburbs and shopping malls, information technology will continue to transform the way we live and work.
And yes, the hype cycle overlays perfectly onto Perez’s charts of bubbles and crashes and eventual maturity. It seems that we reserve our greatest enthusiasm and financial speculation for anything to do with infrastructure – canals, railways, highways or the Internet. Perhaps it’s no coincidence that the Kondratiev waves span a generation – we need a new set of suckers… I mean speculators, who haven’t seen it all before and are willing to fuel the (seemingly essential) massive, global experimentation of each technological revolution.