Business models

Putting the social media revolution in a 250 year context – Carlota Perez

By June 15, 2009 4 Comments

Carlota Perez‘s Technological Revolutions and Financial Capital is one of the business books that has most influenced my thinking (Taleb’s Fooled by Randomness, Anderson’s Long Tail, and Johnson’s Emergence complete my list of top business reads) and at the weekend I finally got started on the re-read I have been promising myself for some time, and before I had even finished the introduction I came across a passage I just had to blog here.

First some background on the book.  Carlota’s central argument is that the economic history of the industrialised world is best understood as a series of 30-50 year cycles in which feature:

similar productivity explosions and bursts of financial excitement leading to economic euphoria and subsequent collapses of confidence …. later to give way, through the establishment of appropriate institutions, to a period of widespread prosperity, based on the potential of that particular set of technologies.

Perez lists five of these cycles:

  1. The industrial revolution starting in Britain in 1771 based on Richard Arkwright‘s mill (or spinning frame) which revolutionised textile production
  2. The age of steam and railways starting in the UK in 1829
  3. The age of steel, electricity and heavy engineering when Germany and the USA pushed ahead of the UK, beginning in 1875
  4. The age of oil, the automobile and mass production, led by the USA and starting in 1908 with the Model T-Ford
  5. The age of information and telecommunications led by the USA and starting in 1971

Technological Revolutions was published in 2003 after the dotcom crash and sets out the internet as the probable sixth revolution.

When I first read the book in 2003/4 this thesis made a ton of sense to me given what I had seen of the rise and fall of the internet at that point.  Rereading it now it seems to make even more sense.

In the last couple of weeks I have written a number of hopeful posts about about the impact of social media on society, which all focused on the detail of how services and technology change the way we work and live.  I have written these posts in large measure because right now for many people it is easy to see the short term problems and challenges and difficult to hold onto the longer term vision.  The piece in Perez’s introduction that I am going to share with you now argues getting the most out of new technologies is always extremely challenging, not least at a societal level, but that we always get there in the end:

in the first decades of installation of the new industries and infrastructures, there is an increasing mismatch between the techno-economic and socio-institutional spheres …. the process of re-establishing a good match and creating conditions both for recoupling and full deployment of the new potential is complex, protracted and socially painful. [emphasis mine]

In recent years we have seen a decoupling of finance and industry (which is now being painfully fixed), a weakening of the social contract as income distribution has become too skewed (for which we are now debating potential solutions), and an insecurity about the impact of the internet generally and social media in particular on our lives and culture. 

For me this is the protracted and socially painful adaptation Perez describes, and just as we got through it in previous techological revelutions I think it is over-whelmingly likely we will get through it in this one, hopefully to witness another golden period like the late 1980s and 1990s or the 1950s and 1960s.  If I’m right then it could well be that social media help both with cold hard productivity and economic growth and also with the social side of the equation.