Part 1: The Great Transition: Industrial to Information Revolution

Have we reached a critical tipping point in the transition between the Industrial and Information Eras? It is always difficult to define a precise moment at which major periods of societal transformation take place, but there is an increasing amount of data that points to a significant decline in businesses founded in the Industrial era and operating on Industrial era principles. At the same time, one can hardly fail to notice the explosive rise of the information age.

If we look at the performance of the types of companies that have sustained the economy for several centuries, we see worrisome trends. The Shift Index, by the Deloitte Center for the Edge, notes a 75% decline in return on asset performance for US companies over the past 45 years, despite increasing labor productivity. At the same time, the success of market leaders appears to be increasingly short lived, with a decline of almost 80% in the length of time an S&P 500 company could expect to remain on that list.

Meanwhile, over the last 15 years, a significant portion of job and economic expansion in the U.S. has come from high-growth technology companies such as Amazon, Google, Salesforce, VMware, Facebook, Twitter, Groupon and Zynga. And while Apple was officially incorporated in 1977, it was the company’s reinvention of itself when Steve Jobs returned to helm in 1997 using the process of what one might call disruptive technology intra-preneurship that led to the later development of the iPhone, iPad and their corresponding app ecosystems. These new product innovations transformed Apple from a struggling organization to the company with largest market cap on the planet — quadrupling its value in just the past five years alone.

Consider this: the entire US GDP is $15 trillion. Collectively, these 9 companies that barely existed a decade and a half ago, have directly created almost a trillion dollars in new wealth. Will the trend of multi-billion dollar tech startups that have a disproportionate effect on the needle of the global economy continue? As we will discuss in these series of blog posts, many signs point to yes. The virtual explosion of startups below the radar is so big, the Economist recently likened it to the Cambrian moment of species evolution.

Humanity doesn't see transitions between eras very often, but when they come, every aspect of society gets reinvented: government, business, finance, education, health, energy, technology, art and science all get upgraded. In fact, most historians would argue there have only been 3 such transitions before: 1. foraging to horticulture 2. horticulture to agriculture 3. agriculture to industrialization. The Industrial Revolution was the last great societal transformation, and the scientific enlightenment that ensued gave rise to modernity. With two billion broadband internet users and billions of smartphones entering circulation, the necessary tools and infrastructure are now in place for the Information Age to burst into full bloom, moving beyond the confines of the technology industry to all aspects of society.

The role of technology entrepreneurship in our global economy is now more important than ever. Increasingly it is becoming clear that technology entrepreneurship will be the primary growth engine of this new economic era. Having gone through a fairly severe dot com boom and bust cycle only fifteen years ago, it is understandable that many people imagine a similar fate for the current tech boom. Rightly or wrongly, it is human nature to look to the past as a way to envision the future. Yet that thinking is also short-sighted. Based on the data we have, the larger context of this epochal transition from the Industrial era to the Information era appears to be a harbinger of long-term exponential wealth creation as the era continues to mature.

But the development from one era to the next requires dangerous periods of transition, where a society can either slide into turmoil or rise to the occasion. We will have to be thoughtful but bold about how we shed our industrial skin — and the institutions, business, jobs, culture and traditions that have come with it.

Change is hard. But if we can adapt, if we can adopt new skills, beliefs and and values appropriate for a new age, we can reap the full benefits of a prosperous and thriving world. The Industrial Revolution brought wealth and prosperity unseen before in the likes of human history. In 1750, the total wealth of the world sat at an estimated $126 billion dollars. Today the world’s wealth is over $70 trillion. It also brought unprecedented advances in education, transportation, medicine and civil rights.

But the hard truth is that what got us here, will no longer take us further. To successfully make the transition to the information era, much of the socioeconomic fabric of society needs to be reinvented for our new era. If we do not adapt and release much our now expiring industrial era mindsets and practices, then the dark days of the 2008 economic recession may return. To avoid this fate, we must let go of the past and engage with the future to ensure that the greatest era in human history is in front of us.

This series will explore what we can do to nurture the flame of progress, keeping the world on a path to greater prosperity by investigating the growth engine of the new Information Economy and harmful Industrial Era patterns we must relinquish.

Together we can lay the groundwork for a successful transition into the new socioeconomic era of the Information Age.