The Roots of Progress

Technological Revolutions and Financial Capital

The Dynamics of Bubbles and Golden Ages

Carlota Perez

Argues that each “long wave” of technological development has four stages. First there is a stage of experimentation and slow growth. This is followed by a period of rapid growth as people get excited about its possibilities; indeed they get over-excited, leading to “frenzy” and a bubble. The bubble then pops, leading to a crisis and restructuring. The third phase is one of deployment, in which the technology diffuses and growth continues, but now in a more sober way on sounder economic footing. In the last phase, the technology has matured and growth plateaus. Perez argues that the first and third stages are more driven by technologists but in the second and fourth the industry is captured by the financiers. Overall I learned a lot from this but found the framework too Marxist/Hegelian for me (Marxist not in the sense of “advocating socialism” but more in the sense of seeing human thought and action as being conditioned by tools and economic circumstances).

This book was popularized in the Silicon Valley tech startup community by VC Fred Wilson, who said that it was “the basis for much of our investment thesis” at his firm Union Square Ventures, founded in 2003: “We concluded that the period of building and investing in the infrastructure of the Internet revolution had passed and it was time to invest in the application layer.”

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