Trump, Technology, and the Upcoming Decline in Polarization

By James Cakmak and Ryan Guttridge

There’s many characterizations (or mischaracterizations) as to why Donald Trump is president. But there’s a simple answer. He’s president because of how technology has evolved.

Trump tapped into a larger evolutionary process where polarization is common. In fact, polarization was inevitable regardless of who sat in the Oval Office. He timed this technology transition to his advantage.

It’s easy to think that the current political and cultural friction is unique and will continue. But it can be explained through the lens of technological evolutions. Indeed, this has happened before.

Much of what we’re witnessing is articulated in the 2002 book Technological Revolutions and Financial Capital by Carlota Perez. One of her powerful points is that the byproduct of sweeping shifts in technology are social upheavals. We think this explains the rise of political movements like the Tea Party, Squad, or the presidency itself.

There are three phases to monitor and examine: Installation, Turning Point, and Deployment. When combined these have predictable social implications spanning roughly 50 years, in 20, 8, and 20 year periods, respectively.

We can characterize the early 1990s as the start of the Installation phase for the internet. This marked the period where digital connectivity changed the way information was stored, moving it from local (e.g. computers, books, newspapers) to global through a few browser clicks.

It didn’t matter that the information was organized poorly and web experiences were terrible. It still represented the beginning of the end for the media’s control of content distribution.

Next came 4G networks during the middle of the Obama administration. This put an ever-increasing amount of data, flowing at greater speeds, in the hands of consumers — and voters — around the world. It killed Blackberry, made smartphones ubiquitous, and gave birth to social media.

This power pushed the evolution into the Turning Point, the shortest cycle, but by far the most acrimonious.

Socio-cultural divisions widen as a small number of business moguls profit from the disruption of traditional institutions. This polarizes society because many resist the change. Moreover, the polarization is intensified since the economic benefits of the new technology are unevenly distributed.

Consider the recent elections in Great Britain, Taiwan, Austria, and Italy. The spread of populism was made possible by the access to real-time information from virtually limitless sources.

Enter Trump who effectively capitalized on both effects. His voting base are primarily those who have either missed the benefits of the new tech or are victims of the technology-enabled global supply chain transition.

Independent book stores can’t compete with Amazon and not everyone is a coder in Menlo Park. Not to mention workers in the Midwest were left out as “Made in USA” became the exception rather than the rule.

It was also the technological advances made during the Turning Point that enabled individuals to become brands. With this backdrop, is it at all surprising a reality TV star was able to thread this needle?

The final chapter in this technological evolution is the Deployment phase, also dubbed the “Golden Age”. This is the period when society begins to reunite as the economic benefits become more evenly distributed. Going forward, look for gaps in society to narrow.

Initially, global connectivity led business managers to place cost savings at the top of the priority list. However, as the Deployment phase unfolds, these priorities are reordered as productivity enhancements begin to trump costs (no pun intended). As a result, predictability becomes the driving force behind decisions, whether it be minimization of turnover in the labor force, protection from intellectual property theft, or dodging viruses.

If the past is prologue to the future, this means greater opportunity for workers to specialize at higher income levels as they’re trained to leverage the new technology.

Politically, since the Deployment phase is just beginning, the polarization endemic to the Turning Point phase is still present. Society, however, is bound to reunite because those that have been left out get pulled back in. Both these developments benefit Trump in the next election cycle as they are occurring under his watch.

When looking at the opposition, they all seem to be following the playbook established under the old technological paradigm. History suggests this will be the wrong strategic calculus to upend Trump’s tenure in the Oval Office.

All this means that Trump likely gets another four years. But, if you’re still looking for something to blame, start with your smartphone.

Clockwise Capital is an asset management firm with a private equity approach to the public markets. We focus on the meaning of time and the role it plays in people’s lives. We believe the essence of a great investment resides in the ability of a company to either save their customers time, or improve its quality. We understand how technology evolves to drive these two factors, which we believe define human progress. As a result, we search for securities with cyclically depressed valuations whose companies save time, thus using secularly advantaged industries to build a concentrated portfolio. With each series of investments our goal is to optimize edge, maximize return, while also minimizing correlation. This allows our portfolio to maintain a liquid, low duration fixed income balance, ready to capitalize on market volatility, while still generating market beating performance.