The global economy is in crisis, politics is in crisis, democracy is in crisis, investors need to understand why. History explains why.
History is repeating itself, look back at the past to learn the lessons of today
“The further back you look the further forward you can see,” once said Winston Churchill. “History doesn’t repeat itself, it rhymes,” said Mark Twain.
Technology is changing the world, this is creating shock waves with devastating consequences. We have been here before.
Take the printing press. It was invented on the island of Crete, 3,500 years ago, according to Jared Diamond. But it’s applications were niche, and the invention was forgotten. The Chinese re-invented it several thousand years later, and in the 15th Century, Johannes Gutenberg, either re-invented it again, or modified the Chinese version, we are not sure which. The printing press was one of the most important inventions ever — it spread ideas.
When Martin Luther nailed a list of criticisms of the Roman Catholic Church to a chapel door in Wittenberg, his grievances may never have moved beyond the German town if it wasn’t for the printing press. This spread his ideas far and wide. Some of the results: Henry VIII split from the Catholic Church, the underlying rationale for the English Civil War was created.
The printing press spread ideas in another way: it provided the intellectual force that drove the French Revolution, the French Revolution partially inspired the Russian Revolution.
The printing press also spread ideas of another sort, it created an environment ripe for innovation: the industrial revolutions of the 18th and 19th centuries were the result.
The internet will have — indeed it is already having — a similar impact. The Arab spring, for example. ISIS and Al Qaeda were supported by the internet as recruiting tools and to support communication. Now I read that crowd funding — something that only exists because of the internet — is funding Far Right extremists.
Then there is the internet’s tendency to polarise opinion — its echo chamber — and exacerbate the dangers of groupthink, a behaviour that can be devastatingly self-destructive, as groups, wooping themselves up in an orgy of confirmation bias, embark on ventures that spell their ruin. Ancient Athens fell victim to groupthink, instigating an un-winnable war against Sparta. In the UK in 2019, we see groupthink at work again, the echo chamber magnifying its dangers.
The English Civil War had another cause: the end of enclosures, the end of the feudal system. Peasants who had tilled the land for generations were removed from their livelihood, roaming the land as vagabonds. Charles I tried to halt the practice, retrospectively fining land owners who had taken land in this way. But the end of enclosures also created an entrepreneurial class — the beginning of capitalism perhaps. The English Civil War saw the king and the people who were adversely effected by enclosures on one side, the new capitalist class and workers who saw the great change as an opportunity on the other side.
The workers who fought for the Roundheads were betrayed. As the Parliamentarian Lord Essex said: “I am determined to devote my life to repressing the audacity of the common people.” The urban workers and rich upper classes may have fought side by side, but the alliance broke down after the war.
Technology is changing the world again. This time its impact will be even greater than the industrial revolutions of the past. We are only at the early stages, yet society is being ripped apart already. On the one hand you have digital natives, those at home with technology, those who love it. They usually have a more global outlook, they work in industries rich in diversity, dominated by immigrants. (One of Google’s two co-founders is Russian, the more famous co-founder of Apple, the son of an immigrant from Syria.) On the other hand, you have those who hate the way technology is making national borders seem irrelevant, who feel nothing but dread at the way traditional industries are being ripped apart. They blame globalisation and immigration.
Technology has created two opposing groups, both entrenched in their views.
But the industrial revolutions also created great wealth, eventually. There were issues at first, the immediate effect of these revolutions was a surge in inequality and some evidence that the median person in Britain during the middle of the 18th Century was worse off. But the period before was a miserable time, technology created great upheaval, but the eventual result is that billions of people lived out of poverty.
This time change is occurring faster. What once took centuries to pan out now only takes decades. The next two decades will see as much change as the previous few centuries put together.
Self-inflicted wounds, such as trade wars, will create danger.
But companies that are behind the new technologies will create huge fortunes. Occasional periods of hype will exaggerate valuations, but in this era, technology is king. All those that embrace it may flourish, those that don’t will definitely fail.
The same applies to investing.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees