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Tradecraft Capital

Crypto’s Role in the Age of Autonomy

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The Model of Technological Revolutions

I just finished reading Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez. She outlines 5 surges over the past 200 years and explains the model and mechanics of how these long cycles evolve. It got me thinking about the past technological revolution during the Internet Surge. I wanted to see how my experience going through that cycle fit within the context of the book. It explained a lot and helped me think about the Internet Age in new ways. Then, I started to think if this could describe what’s currently going on with artificial intelligence (AI) and cryptocurrency. I believe it does.

From “Technological Revolutions and Financial Capital” by Perez page 32
  1. Industrial Revolution: 1771–1829
  2. Age of Steam & Railways: 1829–1873
  3. Age of Steel & Electricity: 1875–1918
  4. Age of Oil & Mass Production: 1908–1974
  5. Age of Information & Telecommunications: 1971–20??
  6. *Age of Autonomy: 2009 — ?
From the book, “Technological Revolution and Financial Capital” by Perez

The 6th Surge — A New Age

Based on the model outlined in the book, I think we’re in a new Age — the Age to Autonomy. Many have talked about the “Age of Automation”, but I don’t think that description captures the full picture. Automation focuses on making systems and processes automatic without the need for continuous intervention or input from an operator (a human). Autonomy focuses on making an agent or system self-governing. As we’ll see, this slight distinction is makes all the difference.

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Age of Automation — Descriptions to Date

Many people have written about the Age of Automation. Just google the term. It’s about artificial intelligence (AI), internet of things (IoT) and robotics. There have been stories and documentaries aplenty the past couple of years on these topics. There are exchange-traded funds (ETF’s) investments focused on AI/robotics and automation like $BOTZ and $ROBO.

Photo by Ryoji Iwata on Unsplash

Blockchain — The Last Piece of the Puzzle

While I think both points of view on automation and cryptocurrency add value to the general movement, I think the writers miss the application and model structure a bit. Technologies that advance automation, like AI or robotics, can easily fit within the current paradigm. Any company that invests in building these will reap the rewards of their investments. There is no paradigm shift and no change to the status quo.

Photo by Jelleke Vanooteghem on Unsplash

The Age of Autonomy — What’s Possible

This new Age is going to bring about transformational change. It will alter every aspect of how a business or organization will go about producing goods and services. Throughout the globe, each industry, community and government will begin building autonomous agents to produce work, generate value then transfer and store value.

Where Are We Now?

It’s important to try and figure out where we are in the cycle. I believe the “Big Bang” milestone happened with the invention of bitcoin in 2009. Artificial intelligence, internet of things and robotics all made significant improvements in their respective space in the early and mid 2010’s. The last nine years have been about the technology and has not diffused to a wider audience, yet. These clues tell us that we’re somewhere at the end of the Irruption Phase. Additionally, we’ve seen some market fervor in cryptocurrency in 2017, so that puts us in the early stages of the Frenzy Phase. As such, I’ve marked where I estimate us to be in the cycle below.

Irruption Phase — What has Happened?

As Perez defines it, the Irruption Phase is the beginning of the cycle where the new technology is discovered. The focus is on technology. The phase starts with a “Big Bang” moment which is when some new technology is discovered. This is good news because the world is experiencing economic discord and unemployment from the decline of old industries of the past surge. The irruption of new technology creates new possibilities and during the Irruption Phase visionaries and early adopters are inventing and figuring out exactly what the new technology is and how it could impact the world.

Frenzy Phase — What to Expect?

The Frenzy Phase starts with intensive investment. The focus of this phase is investment and speculation. The Frenzy Phase brings out the speculators and during this phase we see a decoupling of investment and production. Moreover, increased polarization between the rich and the poor can be expected. The Frenzy Phase ends in a “crash” event that starts the Turning Point in the cycle.

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Conclusion

As you can see, we’ve started a new surge, a new technological revolution. Actions will be focused around building autonomy throughout the entire production cycle. Cryptocurrencies will play a key role. I predict by the end of this surge, we will no longer organize society around labor and production. Production, as a unit, will be solved. Robotics will automate production in the physical world, while sensors and data will move through the Internet of Things. Software, through bots, agents and cryptocurrency will generate, transfer and store the world’s value. Artificial intelligence will provide the brain power to learn, execute, measure and adapt each component within the decentralized system. New models will bring forth our new future.

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Jake Ryan

CIO at Tradecraft Capital & Author of Crypto Asset Investing in the Age of Autonomy, published by Wiley