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Every tech wave has four phases
Frenzy and synergy
The economist Carlota Perez described the four phases. In frenzy, everyone piles in, and investors are rewarded for big risks on unproven ideas, until the bubble pops and paper profits disappear. When rationality returns, synergy begins as companies make their products usable and productive for a wide array of users, and it pays investors who are patient, picky, and able to bring more than money.
Why eruption is hard
Eruption is harder. From 1971 through 1975, an investor had to be a true believer or a conglomerate with a poorly thought-out diversification strategy. Intel looked at first like a previous-wave electronics company. MOS Technologies was founded in 1969 to compete with Texas Instruments and sold a majority of itself to Allen Bradley to stay afloat. Exxon funded Zilog in 1975. Apple became a great investment but had none of the hallmarks venture capitalists look for, because the PC was still a solution in search of a problem.
Why maturity is hard
Maturity is hard for the opposite reason. The uncertainty about what will work is almost gone, things are predictable, and the successful synergy companies stay entrenched. They start entering each other's markets, raising prices, and cutting costs. R&D spending shifts from product and process innovation toward extending the current paradigm, and new innovations only find support if they fit that paradigm, so the dominant companies capture them.
How did Carlota Perez build her model?
Carlota Perez, a Venezuelan-born economist, laid out the model in her 2002 book Technological Revolutions and Financial Capital. She traced five revolutions since the 1770s, from the Industrial Revolution to the age of information and telecommunications. In each she found a burst of financial speculation followed by a crash, then a longer period when the technology spread through the wider economy. She places a turning point between the frenzy and synergy phases.
Why do railway manias end in crashes?
Britain's railway mania peaked in 1846, when Parliament authorized thousands of miles of new line in a single year. Investors paid for shares in companies that had only a route on paper, and many of the lines were never built. Share prices fell from 1847, and many investors lost heavily. The track that was laid stayed in use for generations.
How did MOS Technologies end up inside Commodore?
Allen-Bradley, a maker of industrial controls, took a majority stake in MOS Technologies in 1970. In 1976 Commodore founder Jack Tramiel bought MOS, and Chuck Peddle joined Commodore. The company's first computer, the Commodore PET of 1977, used the 6502.
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