At USV we have been using Carlota Perez’s framework that distinguishes between the installation and deployment phases of a technology. In short, the installation phase is when a technology first comes into a market and investments are capacity building. The deployment phase is when this capacity is used to actually affect broad changes in the economy and society. The installation phase is (almost) always marked by a speculative bubble. Perez documents this across many prior technologies such as railroads and telegraphs.
We are right now in the installation phase in many different technologies all at once, including drones, self-driving vehicles, AR/VR, bio-informatics, CRISPR, crypto currencies, machine learning and I am probably forgetting some. That means we are seeing many speculative bubbles, fueled by early spectacular exits (eg Oculus, Cruise, Editas). While it is easy to scoff at this as “irrational exuberance,” from an overall social perspective the investment in the installation phase can yield massive benefits eventually as we are now seeing with the internet and mobile phones.
I am super excited about what the current installation phases will enable down the line across a broad range of fields. All the current talk about a lack of productivity gains is missing the massive investments that are taking place now which will unlock huge future gains. If you want to read my thoughts on how we should think about these vastly expanded technological capabilities you can head over to the draft of my book “World After Capital.”
For an example of a technology that has only recently concluded its installation phase and is now headed for deployment, look no further than 3D printing. During the installation phase stocks such as 3D Systems and Stratasys soared and then crashed back to earth. In the meantime though companies such as Tesla and SpaceX would not be able to move at the speed they are without 3D printing and more recently HP is entering the market with a much faster printer. Our portfolio company Shapeways already has one of them which will be available to everyone shortly. This is a great preview of what’s to come in all these other fields.
