Where the model work began – Long Wave Theory
Technology was changing so rapidly in the latter 1990s that I had started reading everything I could find to see if I could simply explain what on earth was going on. I was trying to answer the question: had technology ever exploded like this before? I felt like a stock broker at work for the gazillion requests coming in on a weekly basis for new support services. I needed to benchmark against technology development history to develop an understanding for which of the new technologies I really needed to focus on.
As a result of the search, I read Guns, Germs and Steel by Jared Diamond and his research team. I have always thought that Diamond’s books have been interesting reads to say the very least. After reading Guns, Germs and Steel I thought maybe a very large model was really possible. I say that because Diamond’s book did not answer the question for me. It didn’t answer the question for others as well as Acemoglu and Robinson wrote why Nation’s Fail directly rebutting Diamond’s model in their book. Others like Eric Beinhocker wrote of evolutionary economics in his book the Origin of Wealth. But I am sure if you asked him, he would say he had read Diamond’s book as I had. There were many other examples as well who I am convinced all read Diamond’s book. Ultimately, I would go on to write several books along the lines of Beinhocker’s, not a direct rebuttal but more of a proposed techno-economic driven standard model.
The book which completely answered my original question as to whether or not this had ever occurred previously was Carlota Perez’s Technological Revolutions and Financial Capital. Perez had updated Nickolai Kondratiev’s (Kondratieff) original Long Wave model (example in left side of image below). In Kondratieff’s original model – he represented his model with a simple up and down curve. It was pretty basic. Today some investors still utilize the model but academically it is purely a historical footnote. Because the original model can be fit into almost any decline there are those who speculate as to whether there have been 4, 5 or even 8 of the original model Kondratieff’s (Long Waves) to date in the Industrial Revolution. This is why investors still like the old model one can rationalize almost anything with it.
Carlota Perez on the other hand created classifications which show why Long Waves have the trajectories that they do. She proposed an elegant curve with a crash at the center of her model. Perez had constructed a model showing the Industrial Revolution unfolding very close to reality. I know this to be true as I plotted 100 years of DOW and then NASDAQ data and sent her the graphs. I did it because her theory was very close to the pin. I ultimately would modify her perfect S curve into the lazier curve which tracked exactly to the data of the last two Long Waves (what there is actual data to track).
The chart below shows Kondratiev’s original model, Carlota Perez’s brilliant update and then my modified Perezian curve based on the graph of the actual data.
Without taking you all the way through Long Waves I offer a graph I stumbled upon in 2015. The author had taken 23 years of DOW Jones Industrials averages and graphed them against the Nasdaq exchanges performance. The snap shot starts with the run up in the last two Long Waves (1920s & 1990s) for both the DOW and Nasdaq. This aligns perfectly with the Frenzy Period and then the subsequent Turning Point (Crash) as described by Carlota Perez. Because the tech companies of the prior wave were listed on the DOW Jones Industrials Average (the Nasdaq didn’t exist back then). Therefore in graphing both exchanges during the 23 years and the periods as described by Carlota’s model – the hair should stand straight up on the back of your neck. They are virtually identical for those 23 straight years. This is the clearest example of the “smoking gun” anyone could ever present.
The upshot towards a proposed standard history model
Years ago, while returning home from a business trip it occurred to me that technology development was not something unique to the Industrial Revolution. That was when I began using other factors to measure the impacts of techno-economics (Long Waves) as the grit in the oyster that forms the pearl so to speak. It is the impact of newly developed technology which changes the economic dynamics in history. Always has and always will. I have created the chart below to summarize what every economic era undergoes.
In using these factors, I saw how each of three economic eras humanity had passed through (Hunter-gatherer, Agricultural and Industrial eras) was impacted by the development of technology. In using a rough constant for the acceleration rate, I was even able to model the economic eras side by side using a mathematical ratio. But without going into the entire models inner workings allow me to leave you with this thought. We clearly see the acceleration rate in the development of technology today. We know farmers living in pastoral societies 2000 years ago did not experience change of the type or at the rate we see everyday now. There are huge divides present in almost all societies because what is the truth and what is Internet fiction has lost its cohesion for us a group. I think this happened previously, albeit much more slowly, when writing was invented along with the sail and the wheel. Society radically transformed in the Agricultural era much as we are headed for radical transformation in the Industrial economic era.
I will not take you further down the rabbit hole here. If you are interested I have a published a book back in 2015 called Innovation and Revolt which details the model and supports it much more detail than can be done here. Here is a link for the book: Innovation and Revolt Kindle Edition.
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