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In a rapidly evolving global economy shaped by artificial intelligence, market concentration, and geopolitical tensions, understanding where we stand in the current technological cycle has never been more critical. Nicolas Colin, a former French official and co-founder of a European startup accelerator, offers a compelling framework for navigating what he believes is the maturity phase of our computing and networks revolution—a phase that demands new investment strategies and institutional reforms.
Key Takeaways
- We are in the maturity phase of the computing and networks revolution, not at the beginning of a new AI-driven cycle
- Market concentration in tech giants mirrors the "Nifty 50" phenomenon of the 1970s, signaling late-cycle dynamics
- Financial systems are typically the last institutions to transform during technological revolutions
- The current moment parallels the 1970s, when the Bretton Woods system collapsed to make way for new financial infrastructure
- China's manufacturing dominance and record trade surpluses indicate structural imbalances requiring systemic financial reform
The Framework: Understanding Technological Revolutions
Carlota Perez's Model of Technological Cycles
Colin's analysis draws heavily on economist Carlota Perez's framework of technological revolutions, which identifies five major technological cycles throughout modern history. Each cycle follows a predictable pattern with distinct phases: eruption, frenzy, synergy, and maturity.
The five technological revolutions include:
- The Industrial Revolution (invention of labor productivity)
- The age of steam and railways
- The revolution of electricity, steel, and heavy engineering
- Oil, automobiles, and mass production (20th century)
- Computing and networks (beginning with Intel's microprocessor in 1971)
Why AI Represents Continuity, Not Revolution
Unlike many venture capitalists who view AI as a completely new wave, Colin argues that artificial intelligence represents an intensification of existing computing and networking paradigms rather than a revolutionary break.
"If everyone understands it in an instant, it's not radical. It's more like the continuity, the deepening, the acceleration of things that were already happening."
The rapid adoption of AI technologies and the speed with which major tech companies developed competing models suggests building upon existing infrastructure rather than creating entirely new foundations.
Signs of Late-Cycle Maturity
Market Concentration and Dominant Players
One of the clearest indicators that we've entered the maturity phase is the emergence of clearly identified dominant players. The "Magnificent Seven" tech companies mirror the concentration seen in the "Nifty 50" blue-chip stocks of the late 1960s and early 1970s.
During the synergy phase, certain companies leverage new technologies better than others, securing dominant market positions. In the subsequent maturity phase, these winners enjoy their dominant positions and generate substantial returns, attracting concentrated investment flows.
The Need for Financial System Reform
Colin argues that financial systems are typically the last institutions to transform during technological revolutions. Throughout most of the computing and networks era, financing has operated within a system designed in the 1970s—stock markets, bond markets, derivatives, and traditional payment systems.
The mismatch between new economic realities and old financial infrastructure creates tension that eventually requires systemic reform. Just as the Nixon Shock of 1971 dismantled the Bretton Woods system to accommodate a new economic paradigm, today's "Trump Shock" may represent the opening move in a broader financial reset.
Historical Parallels: Learning from the 1970s
The Bretton Woods Breakdown
The collapse of the Bretton Woods system provides crucial insights into today's challenges. The gold-backed system worked for earlier technological paradigms but became a constraint as the economy grew larger, faster, and more dynamic.
The rigidity imposed by gold-standard constraints couldn't accommodate the capital requirements of a thriving, technologically progressive global economy. As Colin explains:
"At some point if the economy is so productive that you create a lot of value and you create currency to account for that value... there's a disconnect between the quantity of gold and the quantity of money."
Financial System Reconstruction
Following the Nixon Shock, it took 15 years (1971-1986) to completely rebuild the financial system, culminating in events like "Mayday" on the New York Stock Exchange and London's "Big Bang" deregulation in 1986. This new system provided 30 years of healthy economic growth until the 2008 financial crisis.
Implications for Today's Economy
China's Role in Global Imbalances
A key difference between today's transition and the 1970s is China's massive economic presence. China's record $1 trillion trade surplus reflects their successful integration of computing and networks into manufacturing, creating unprecedented global imbalances that the current financial system struggles to accommodate.
The Service Economy Challenge
The mature computing and networks paradigm has created a much more service-oriented, globalized economy with complex flows of services, goods, and money across borders. Traditional financial infrastructure designed for the industrial age of automobiles and mass production cannot efficiently serve this new economic reality.
Investment and Policy Implications
Recognizing Late-Cycle Opportunities
Understanding that we're in a maturity phase rather than an early-stage revolution has profound implications for investment strategy. Rather than expecting entirely new categories of companies to emerge, investors should focus on how existing technologies can be more deeply integrated and how financial infrastructure will need to evolve.
Institutional Innovation Requirements
Colin emphasizes that technological progress alone isn't sufficient—societies must build institutions to ensure that value created by new technologies is distributed more equally. The post-World War II welfare state emerged from lessons learned during the chaotic early phases of the automobile and mass production era.
"Tech contributes to creating value. But then on top of that, we need to build institutions so that value is distributed more equally and contributes to shared prosperity at the society level."
Conclusion
Nicolas Colin's late-cycle investment theory offers a sophisticated framework for understanding our current economic moment. By recognizing that we're in the maturity phase of the computing and networks revolution rather than at the beginning of an AI-driven transformation, investors and policymakers can better position themselves for the challenges and opportunities ahead.
The parallels with the 1970s suggest we're approaching a period of significant financial system reconstruction. Just as the dismantling of Bretton Woods made room for innovations that powered three decades of growth, today's institutional disruptions may be creating space for new financial infrastructure better suited to our service-oriented, globally networked economy.
Success in navigating this transition will require both shrewd investment strategies that account for late-cycle dynamics and thoughtful institutional innovations that ensure the benefits of technological progress are broadly shared. The societies that master both challenges will be best positioned for sustained prosperity in the coming decade.
