Smart societies shape their future by understanding the potential of each new technological revolution and designing how it will be deployed.
But the new in order to establish itself it needs to replace the old. And that’s not easy because a lot of people LOVE the old. They made their success, their wealth, their lives based on what used to be the new, but it’s already old.
Now it’s obsolete.
This natural resistance from the old market and the government, plus the difficulty in assimilating these changes makes each great revolution go through bubbles and crashes.
How to identify a revolution
Revolutions are created by new infrastructures that allow wider and deeper market penetration at decreasing costs. Everything from canals to railways, to steamships, to highways and electricity, to the internet.
The rich, educated and young tend to be the pioneering adopters, with increasing layers of society copying their example.
Phase 1 — The excitement
At its birth, technological revolution attract investments from private investors. These investors fund the technological transformation. They back the new startups, the crazy ones, the excitement. They encourage experimentation with new business models until it decouples from the real but obsolete economy.
As mentioned above, during this period there is intense polarization between the new and the old. The old represents a mature, conservative market while the new adapts a free market ideology, in order to encourage the abandonment of the old way of doing things.
Phase 2 — Wild west 🌵
Now, imagine being in a “wild west” like investment environment. An enviroment with tons of funds and flexibility to speculate; where you are free from regulations and government involvement.
Eventually, everything moves closer and closer to casino-like financial instruments, huge returns that lead to more speculation. All creating a “paper” economy.
Besides that, this investment-frenzy phase ends in over-investment in a relatively small market.
Both the casino-like character and the over investment in a small market end up in a major market bubble. And eventually, every bubble bursts…
In a much smaller scale the bitcoin and ICO bubble that we just experienced in 2018.
Phase 3 — Recession, the good and the bad news
The good news is that after the frenzy and thanks to private investments, the basic infrastructure of the new technology has been installed, ready for full growth potential across the entire economy.
The bad news is that immediately following the crash, private investors have become risk averse and are not ready to fund the expansion.
Also, a recession period always follows where hopelessness, inequality and unemployment is observed.
Phase 4 — Government steps in
As a result, after the major collapses, the state has historically stepped in to play an active role in favour of investment and growth. This is where were see regulations and institutional money (the old money) coming in.
In this phase, the government gives a direction that spreads the new economy across the globe.
You can read more about technological revolutions and bubbles here: