Technology
Long Waves: The History of Innovation Cycles
Long Waves: How Innovation Cycles Influence Growth
Creative destruction plays a key role in entrepreneurship and economic development.
Coined by economist Joseph Schumpeter in 1942, the theory of “creative destruction” suggests that business cycles operate under long waves of innovation. Specifically, as markets are disrupted, key clusters of industries have outsized effects on the economy.
Take the railway industry, for example. At the turn of the 19th century, railways completely reshaped urban demographics and trade. Similarly, the internet disrupted entire industries—from media to retail.
The above infographic shows how innovation cycles have impacted economies since 1785, and what’s next for the future.
Innovation Cycles: The Six Waves
From the first wave of textiles and water power in the industrial revolution, to the internet in the 1990s, here are the six waves of innovation and their key breakthroughs.
First Wave | Second Wave | Third Wave | Fourth Wave | Fifth Wave | Sixth Wave |
---|---|---|---|---|---|
Water Power Textiles Iron | Steam Rail Steel | Electricity Chemicals Internal-Combustion Engine | Petrochemicals Electronics Aviation | Digital Network Software New Media | Digitization (AI, IoT, AV, Robots & Drones) Clean Tech |
60 years | 55 years | 50 years | 40 years | 30 years | 25 years |
Source: Edelsen Institute, Detlef Reis
During the first wave of the Industrial Revolution, water power was instrumental in manufacturing paper, textiles, and iron goods. Unlike the mills of the past, full-sized dams fed turbines through complex belt systems. Advances in textiles brought the first factory, and cities expanded around them.
With the second wave, between about 1845 and 1900, came significant rail, steam, and steel advancements. The rail industry alone affected countless industries, from iron and oil to steel and copper. In turn, great railway monopolies were formed.
The emergence of electricity powering light and telephone communication through the third wave dominated the first half of the 1900s. Henry Ford introduced the Model T, and the assembly line transformed the auto industry. Automobiles became closely linked with the expansion of the American metropolis. Later, in the fourth wave, aviation revolutionized travel.
After the internet emerged by the early 1990s, barriers to information were upended. New media changed political discourse, news cycles, and communication in the fifth wave. The internet ushered in a new frontier of globalization, a borderless landscape of digital information flows.
Market Power
To the economist Schumpeter, technological innovations boosted economic growth and improved living standards.
However, these disruptors can also have a tendency to lead to monopolies. Especially during a cycle’s upswing, the strongest players realize wide margins, establish moats, and fend off rivals. Typically, these cycles begin when the innovations become of general use.
Of course, this can be seen today—never has the world been so closely connected. Information is more centralized than it has ever been, with Big Tech dominating global search traffic, social networks, and advertising.
Like the Big Tech behemoths of today, the rail industry had the power to control prices and push out competitors during the 19th century. At the peak, listed shares of rail companies on the New York Stock Exchange made up 60% of total stock market capitalization.
Waves of Change
As cycle longevity continues to shorten, the fifth wave may have a few years left under its belt.
The sixth wave, marked by artificial intelligence and digitization across information of things (IoT), robotics, and drones, will likely paint an entirely new picture. Namely, the automation of systems, predictive analytics, and data processing could make an impact. In turn, physical goods and services will likely be digitized. The time to complete tasks could shift from hours to even seconds.
At the same time, clean tech could come to the forefront. At the heart of each technological innovation is solving complex problems, and climate concerns are becoming increasingly pressing. Lower costs in solar PV and wind are also predicating efficiency advantages.
Technology
Charted: The Jobs Most Impacted by AI
We visualized the results of an analysis by the World Economic Forum, which uncovered the jobs most impacted by AI.
Charted: The Jobs Most Impacted by AI
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
Large language models (LLMs) and other generative AI tools haven’t been around for very long, but they’re expected to have far-reaching impacts on the way people do their jobs. With this in mind, researchers have already begun studying the potential impacts of this transformative technology.
In this graphic, we’ve visualized the results of a World Economic Forum report, which estimated how different job departments will be exposed to AI disruption.
Data and Methodology
To identify the job departments most impacted by AI, researchers assessed over 19,000 occupational tasks (e.g. reading documents) to determine if they relied on language. If a task was deemed language-based, it was then determined how much human involvement was needed to complete that task.
With this analysis, researchers were then able to estimate how AI would impact different occupational groups.
Department | Large impact (%) | Small impact (%) | No impact (%) |
---|---|---|---|
IT | 73 | 26 | 1 |
Finance | 70 | 21 | 9 |
Customer Sales | 67 | 16 | 17 |
Operations | 65 | 18 | 17 |
HR | 57 | 41 | 2 |
Marketing | 56 | 41 | 3 |
Legal | 46 | 50 | 4 |
Supply Chain | 43 | 18 | 39 |
In our graphic, large impact refers to tasks that will be fully automated or significantly altered by AI technologies. Small impact refers to tasks that have a lesser potential for disruption.
Where AI will make the biggest impact
Jobs in information technology (IT) and finance have the highest share of tasks expected to be largely impacted by AI.
Within IT, tasks that are expected to be automated include software quality assurance and customer support. On the finance side, researchers believe that AI could be significantly useful for bookkeeping, accounting, and auditing.
Still interested in AI? Check out this graphic which ranked the most commonly used AI tools in 2023.
-
Money7 days ago
Visualizing All of the U.S. Currency in Circulation
-
Markets2 weeks ago
Ranked: South Korea’s Largest Companies by Market Capitalization
-
VC+2 weeks ago
What’s New on VC+ in March?
-
Economy2 weeks ago
Confidence in the Global Economy, by Country
-
Wealth1 week ago
Mapped: Where Do the Wealthiest People in the World Live?
-
Misc1 week ago
Ranked: Global Airlines with the Most Plane Crashes
-
Technology1 week ago
Visualizing iPhone 15 Production by Manufacturer in 2023
-
Automotive1 week ago
Visualizing Global Electric Vehicle Sales in 2023, by Market Share