Enterprise 2.0: Return of ‘The Long Boom’?

You remember “The Long Boom,” right? That seminal, late 90’s Wired cover story (and then book) that predicted a 25 year run of wealth and economic expansion, fueled by technology and the Internet? The “Long Boom” argument became something of a wry joke in the immediate wake of the obvious “bust” that was the dot.com collapse in 2000. By the time Osama bin Laden’s crew carried out the 9-11 attacks, the Long Boom idea seemed more like a millenial version of “Looking Backward,” Edward Bellamy‘s touchingly optimistic view of the future. That’s especially true when Long Boom authors Peter Schwartz and Peter Leyden talk about how the Long Boom will wipe away intractable problems like poverty and environmental degradation. Crisis in Darfur anyone?

While nobody’s quite so sanguine about the ability of technological change and economic growth to wipe away mankind’s many ills, the idea of a Long Boom continues to have many backers and, in fact, is gaining traction again. This time, though it comes to us under a different guise: the writings of British economist Carlotta Perez. Keynoting at the Enterprise 2.0 Conference on Wednesday, Wikinomics author Don Tapscott cited Perez’s ideas about the progression from disruptive innovation from creation, to bubble, followed by a bubble burst then a decades long growth in use and deployment. It struck my attention because Tapscott was actually the second person who mentioned Perez to me in as many days. Anant Jhingran, CTO for the Information Management Software Division at IBM also brought up Perez in my conversation with him yesterday. Now, I’m no authority on economics, but as far as I can tell, both men are referring to a 2002 book by Perez called Technological Revolutions and Financial Capital. In it, Perez argues that “continuous technical change takes place within discontinuous surges, diffusing successive technological revolutions,” and that “the types and amounts of profit-making opportunities vary significantly along the life cycle of each technological revolution.” (Think “Cisco in 1996” vs. “Cisco in 2007”)

Perez breaks out those surges in technological change into distinct phases: the first being what she calls the “love affair of the irruption phase,” during which “financial capital begins a passionate relationship with the emerging production capital,” followed by a “Decoupling in the frenzy phase,” during which time “brilliant successes in a sort of gambling world make (financial capital)believe itself capable of generating wealth by its own actions — almost like having invented magic rules for a new kind of economy.” No surprise, then, that financial implosion is Perez’s next stage, and that is followed by what she terms the “happy marriage of the synergy phase” and “maturity phase” during which a “period of deployment begins” in which there is a “recoupling of financial and production capital” that leads to a happy and harmonious marriage.

How long a marriage? That’s the big question, and its the question that’s on the minds of folks like Don Tapscott, who’s been able to put his finger on a lot of the most salient technology and socio-cultural trends of the last two decades. Perez looks at five different surges dating back to the industrial revolution of the 18th century and including the revolutions engendered by the advent of steam power, electricity, automobiles and then information and technology. In each case, the synergy and maturity phases last anywhere from 20 to 30 years.

What does that mean? Well, if you believe (as Tapscott and Jhingran clearly do) that the dot.com collapse was a Perez-ian “implosion,” and that Web 2.0 is evidence of the beginning of a “synergy” phase, then we’ve got another two or three decades of steady growth in which “innovation and growth can take place across the whole productive spectrum and financial wealth may take its share in the profits in what is clearly a positive sum game.”

Sounds good to me. And Tapscott is persuasive in arguing that there’s already evidence that this synergy is happening. Google, for example, may become the world’s first global “digital conglomerate,” capable of selling ads and media, and telecommunications services (municipal wifi, telephony, etc.).

The argument is remarkably similar to the one that Schwartz and Leyden put forward — and with a similar time frame (they pegged the long boom as lasting between 1980 and 2040). But they also suggested, in 1997, that the World was in the early stages of “a 25-year run of a greatly expanding economy will do much to solve seemingly intractable problems like poverty and to ease tensions throughout the world. And we’ll do it without blowing the lid off the environment.” Those words rang pretty hollow on September 12, 2001, and even hollower today, with Iraq and mounting evidence of widespread climate change. Does that mean that Perez is wrong — no. But it may mean that technology and capital aren’t the only drivers of change, and that progress can easily be derailed by other forces — poverty, hunger, environmental degradation and the political and religious extremism they tend to produce. Those perspectives sometimes get lost when you look at the world from the perspective of Sand Hill Road.

But even if the “Long Boom” –either Perez’s version of it or Schwartz and Leyden’s — doesn’t happen, it’s not wrong for companies like IBM and Google to presume that it will and act accordingly.