Before I continue on, I wanted to touch on another helpful model to rationalise why we see so many changes, disruptions, etc during these times. Thinking in cycles is a good reminder that what is bad, has been bad before; and what has been good has been good before. History is a powerful teacher and Change is one of the few consistent truths in life.
The importance of Thinking in Cycles
Here, I reflect on the importance of thinking in cycles as a way of understanding the world in a rather emotive way before I get into the meat.
The theory of cycles holds true in the past, the present and future. A long lasting principle if you will.
On a more emotive note, looking at how these waves pan out is incredibly humbling. It tells us that no one ever got it right. It reminds us that our pursuit of the perfect answer is inherently flawed. Whenever and whatever the case may be, it is always important to remain flexible and adaptable, no matter how “stable” things may be.
Somehow, humanity has progressed (and/or regressed) by switching sides in many domains. It could be economic, as I will soon explain, or political - looking at the red vs blue flip-flopping that the US (and many other modern countries) has faced throughout history.
I would also like to think that as much as humans have been able to fight nature, macro forces and the nature of each cycle seems to correct humanity before we can correct ourselves. I wonder how much control that we collectively as a civilisation have over these. Governments and International institutions may temper the volatility of cycles (e.g. Despite our current cycle, it doesn’t seem like we are headed to World War III), but each transition creates a difficult and uncertain time for those living in it.
Will we ever overcome this to form a permanent end state? Or will we be haunted forever in the struggle against the whims of the invisible tide. I digress…
Applying Cycles to the Economy - Kondratieff 101
But back to the practical application of these… Credit where credit is due - this was introduced to me by an incredible manager I worked with during my time working for the government.
Kondratieff (Soviet era economist) as well as several other academics, have presented the concept of economic waves and cycles that have largely held true over the past centuries (albeit in a more modern sense than my initial view of chapters). Each occur at different rates. Every time a cycle happens, there is a phenomenon of disruption, often accompanied by social and political upheaval (though of course, to varying degrees)
- Kitchin cycle (inventory, e.g. pork cycle) - short cycle
- Juglar cycle (fixed investment) - medium
- Kuznets swing (infrastructural investment) - long
- Kondratiev/Kondratieff wave (technological basis) - very long
Indeed some of my thinking of the prior economic chapters stems from inspiration from these greats. These point towards how the world has ebbed and flowed between different upturns and downturns. Particularly on the last wave, which inspired my view of technological disruption creating new chapters.
Thought limited in circulation, many remark that we are living now in the Sixth Kondratieff cycle, marking another inflection point in economic development.
We live in a perfect storm of multiple cycles
So to answer why it seems like we live in an age more instability and disruption than usual, I rather liked an elegant article published by Ian Bremmer’s Gzero Media (likely inspired from a few sources).
In a nutshell, they summed up our current position as an inflection point rather neatly through three lenses, with considerations beyond just the economic one:
- Economically - as we enter a whole new world of ultra low interest rates, and modern monetary theory
- Politically - as the east “threatens*” the west, and the tensions arising from conservative and liberal political ideologies.
- Environmentally - as we enter a new era of more volatile era, biodiversity loss, so on and so forth, and a pressure to maintain our planet’s “health”.
With so many “inflecting” trends, we can rightfully expect an immense period of confusion, as many fundamental systems are being relooked at, for an angsty populace looking for answers.
On a rather random note - I also see that this uncertainty has birthed an industry of analysts, commentators, opinionators and conjecturers (ironically, not unlike myself in these posts, though I don’t get paid for it!)