Contents
Introduction
Background
Concluding Remarks
Bitesize Edition
In exploring energy consumption per capita and quality of life, I started to consider what cycles and frameworks could support the ideas I’ve been presenting.
The Big Cycle from Ray Dalio details the relationship between short-term debt cycles, which over time, contribute to the long-term debt cycle, occurring over 75 years, with 50 years give or take at either side. The important aspect to take away when exploring quality of life is that productivity always rises.
One contributing factor to rising productivity is technological innovation. We’re seeing this right now with AI. The time between these defining eras is shrinking. The agriculture era lasted millennia, the industrial era centuries, the internet era decades, and now we’re seemingly on the cusp of a new artificial intelligence era. Hence, technology is innovating at an exponential rate.
By superimposing the Big Cycle on the technological innovation curve, we get a steeper and steep productivity rise. Underdeveloped countries find themselves in the agricultural era while developing countries are in the industrial or internet eras. We can use the combination of these cycles and frameworks to help explain why nations exist in the environments they do, and how it will take more time and effort to get out of the earlier eras.
Introduction
Over the last few weeks, I’ve explored energy consumption per capita and quality of life in Somalia, India, and the United States. This got me thinking about cycles. I’m a huge fan of the cyclical nature of many aspects of our lives. The business cycle makes recessions and economic downturns inevitable. The full moon cycle is seen unfolding before our eyes every night. Weather cycles, with El Nino and La Nina, ensure different weather patterns emerge from year to year. The cycles that interest me more are the long-term cycles.
Ray Dalio’s Big Cycle involves the long-term debt cycle and lasts around 75 years with a 50-year expansion zone at either side. The end of a long-term debt cycle usually involves some aspect of a changing monetary system, be it from a hard-backed currency system like the Gold Standard, for example, to a free-floating system like the fiat system we live in today. There are advantages and disadvantages to each system, but as time progresses, the flaw in each system is realised and grows. The crises that emerge at the end of these long-term debt cycles come in various forms, but due to the cyclical nature, these crises will come.
You might be questioning how this long-term cycle is connected to the different stages of energy transition that underdeveloped, developing and developed countries find themselves in today. Well, if we merge this long-term cycle with the technological innovation cycle, we find some interesting points we can take away. I’ll dive into those points, and general strategies each category of nation can adopt in its processes to improve energy consumption per capita, and as a result, quality of life.
Background
Ray Dalio’s Big Cycle is one I refer to frequently. It describes the way the world works, but more specifically the countries within the world. Those at the developing stage are in the best position.
But does technological innovation, evolution, and productivity grow at an exponential rate?
If we can imagine these big cycles occurring over and over again on the exponential technology chart, the biggest changes in the rate of growth would be seen at the changes in era. From the end of the agricultural era and into the industrial era, we saw machines begin to facilitate energy transfer, through the steam engine and factory assembly lines, for example. This occurred again during the public adoption of the internet in the 1990s and is happening once again with AI.
The gaps between these eras are shortening, highlighting the seemingly exponential aspect of technological innovation and hence productivity.
The agricultural era lasted millennia, and if we wanted access to necessities to survive, we had to depend on the exertion of our own energy. Technology improved over this time, but the underlying theories of how life should and did work didn’t shift. Birth rates were high to work on the farm to provide for the family.
The industrial age kicked off around 1750. Soon came petroleum, electricity, internal combustion vehicles, and improvements in healthcare.
The changes in these eras usually align with crises. Many have discussed it in the past: Strauss and Howe with their generational theory, Ray Dalio with his big cycle and cycle of empires, and Howard Marks with his cyclical views towards investing and life in general. The crises come in different forms, perhaps a pandemic or a war, but these cycles often involve shifts towards fear and greed of different segments of the world. Inequality rises when the rich get greedy, and the poor get fearful. Current systems break and the problems that arise are fought over. Once these problems are solved, and winners and losers are established, the next era commences, and the cycle begins once again.
The worrying thing here is with exponential technology innovation, the gaps between these eras are shortening. Does that mean we find ourselves in more frequent crises until a permanent crisis dawns upon us?
It’s easy to look back at hundreds and thousands of years of history and see all these developments in a nonchalant way. We can’t gauge the enormity of the passage of time that got us to where we are today. Nor can we gauge the speed at which technology is advancing today. If the gaps between these eras shorten, productivity and innovation continue to rise. At what point do we lose control? When does innovation run away from us? If this is going to happen anywhere, it’s in developed countries.
For now, let’s look at the present day. Take an underdeveloped country in the agricultural era. How can we speed up the process to the industrial era, where a tailwind to quality-of-life improvements will spark the light and set the exponential technological innovation cycle underway?
Concluding Remarks
Next week, using the framework provided above, I’ll explore general strategies the world can pursue to ensure as efficient a transition to cleaner energy sources as possible.
Thanks for reading! I’d greatly appreciate it if you were to like or share this post with others! If you want more then subscribe on Substack for these posts directly to your email inbox. I research history, geopolitics, and financial markets to understand the world and the people around us. If any of my work helps you be more prepared and ease your mind, that’s great. If you like what you read please share with others.
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Sources:
https://www.linkedin.com/pulse/where-we-big-cycle-brink-period-great-disorder-ray-dalio
https://www.linkedin.com/pulse/ai-key-exponential-technology-smart-era-jacques-ludik
https://www.britannica.com/technology/history-of-technology/The-20th-and-21st-centuries
https://www.investopedia.com/ask/answers/09/gold-standard.asp