The Birth and Death of Technological Revolutions

@EQUITYMATES|23 October, 2021

One of our favourite mental models here at Equity Mates is Carlota Perez’s ‘lifecycle of a technology revolution’. From her book ‘Technological Revolutions and Financial Capital’ it argued that new technology emerged in two periods – an installation period and a deployment period. The installation period was marked by explosive growth and massive capital flows and usually ends with a financial bubble. Then the financial bubble bursts and we enter the deployment phase where the technology rolls out into the market and those companies with true potential emerge and the technology is widely adopted. 

The best example of this is the internet. The installation phase emerged in the 1980’s and 90’s ending with the internet bubble bursting in the 2000-01 market crash. What emerged from there was a deployment phase. Amidst the wreckage of Silicon Valley startups, Google, Amazon, Microsoft, Apple and their peers emerged as the dominant businesses we know them as today. However, this isn’t the only example. Perez identified many other examples over the past 200 years – railways in the early 1800’s in the UK, electricity and steel in the late 1800’s in the US, oil and automobiles in the early 1900’s in the US before the IT and telecommunications that started in the 1970s in the US.

We are living through some giant technological changes at the moment – cryptocurrency, self-driving vehicles, space travel – and this mental model is a useful way to start your thinking on them all.

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