There have been several recent articles in the media about the prospect of us entering the fourth turning (not to be confused with WEF’s Fourth Industrial Revolution, although there is some overlap). Also known as the Strauss–Howe generational theory, the theory states that:
Whereas some describe the theory to be more of a pseudoscience than “real science”, the theory does appear to track recent past events pretty well. As I’m not a scientist, I will not argue the actual merits of this theory. Rather, as a life-long learner and observer of people & trends who has conducted business in many countries around the world, I do find it interesting to map the theory to relevant megatrends & paradigm shifts that are unfolding in front of our globally aggregated eyeballs.
Howe and Strauss observed that American history - I would argue now applicable to the world at large, given our increased inter-connectivity and inter-dependency - shows a new era, or “turning” about every 20 years or so. In its basic form, the “First Turning” is an upbeat era of strengthening institutions. The “Second Turning” is an awakening, a passionate era of spiritual upheaval, when the old order comes under attack. The “Third Turning” is an unravelling — a time when individualism is strengthened, and institutions are weakened. The “Fourth Turning” is a crisis, a decisive era of secular upheaval — the old order is toppled and a new one put in its place.
Howe and Strauss defined the “Third Turning” as having begun in the mid-1980s and was due to expire in the first decade of the 21st century. So, what about the “Fourth Turning”? Let me refer to their text for context (note the bolding of text is added by me for emphasis):
“History is seasonal, and winter is coming. Like nature’s winter, the saecular winter can come early or late. A Fourth Turning can be long and difficult, brief but severe, or (perhaps) mild. But, like winter, it cannot be averted. It must come in its turn. . .
The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade.Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire. . .The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II.
The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort — in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.”
One could quite readily believe that the 2008 financial crisis was this Fourth Turning. If so, I would argue that the US Fed, along with other central banks, has “kicked the can down the road” to today by adhering to zero interest rate & quantitative easing policies. It’s easy to observe that the underlying economic problems stemming from 2008 have not been solved, merely postponed.
Applying the Framework
Rather that delve into the entirely of this theory, including political fallout and other potential catastrophic connected outcomes, I will focus only on three prominent Turning themes and their interplay with three of the largest emerging ecosystems that are developing separately, yet increasingly merging into one. Such merging will not only create enormous disruption to the status quo but will, in the process, destroy business models and vast quantities of corporate equity capital value in the process
The three ecosystems to which I refer are blockchain, artificial intelligence (“AI”) & the internet of things (“IoT”). And the merging has begun.
But first, back to the Fourth Turning themes from which I select the most relevant to my thesis:
old order will disintegrate
Political and economic trust will implode
Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it
I believe we are now at the precipice of tumultuous change that will fundamentally alter how we organise ourselves productively as well as societally. Whether it’s an actual “turning” is open for debate but what is pretty clear to any observer is that profound change surrounds us. And such change will be destructive in nature for those unaware and/or ill prepared. For those plugged in to what’s really occurring, however, opportunity literally is screaming.
Framework Assumptions
As aforementioned, central bank driven macroeconomic factors (e.g., zero-cost money, quantitative easing) has created a hitherto unprecedented economic environment. Furthermore, Covid19 (and associated lockdowns & loss of personal freedoms), Big Tech de-platforming, seemingly endless financial & political scandals, increasing wealth inequality and acute political divisiveness have created fertile ground for fundamental change. People are tired, pissed off and trust in institutions, which has been trending down for decades, is now at historical lows.
In parallel to these destructive happenings in the “real world”, the digital world is undergoing accelerating innovation at a mind-numbing, seemingly exponential, pace. Famed macro investor, Raoul Pal, terms it the Exponential Age. For me, the uber mega trend today is what is occurring in the blockchain/crypto arena, and how it relates to the IoT and AI (referred to hereafter as “3MT”, a term that I’m coining right here and now that represents the convergence of the three mega trends).
3MT will drive political, corporate, environmental and societal change at a profoundly and unparalleled level in human history. For the purposes of this article I will only investigate how 3MT relates to the Fourth Turning keywords (“4TK”):
Disintegrate. Trust Implosion. Technology of Destruction.
Let’s now look at the component parts before we dive holistically into the interplay between the three megatrends & how they will exploit 4TK.
Blockchain/crypto
At its essence, the bitcoin blockchain is an open, public, permissionless & distributed ledger system. Blockchain proof of work algorithms enable a trust-less verification of value transactions. In other words, payments are made between parties on a peer-to-peer basis. Not only do the parties need not know each other, they also do not need to trust each other in order to successfully transfer value across the bitcoin blockchain.
Blockchain’s game-changing technology means centralised record-keeping entities – which historically has been the only solution – are no longer needed. In fact, central record-keepers represent single points of failure with known weaknesses, including business failure, corruption and getting hacked. Such centralised entities, acting as gatekeepers and controlling who can participate and what data is shared, are increasingly becoming viewed as antiquated and sub-optimal.
Blockchain’s decentralised technology addresses all of these weaknesses of these gatekeepers. Today, there are over 800 different blockchains, each with different attributes that can serve different purposes, obey different rules & employ different protocols. Smart contracts, which reside on the various blockchains, enable automated contract execution based on certain events.
IoT
The IoT is a network of internet-connected physical devices, such as HVAC systems, EVs, building automation, manufacturing, washing machines and dishwashers, etc. Introduced in 1991, today there are an estimated 50 billion sensors located in devices globally, generated unprecedented volumes of data. Efficient analysis and application of such data promises to yield massive benefits.
Especially when combined with AI.
AI
AI is defined as machine learning and is divided into 3 components:
weak AI (facial recognition, playing chess, etc)
strong AI (machines continue to learn by experience and develop additional intelligence)
super AI (the future day when machines are smarter than humans)
AI offers the opportunity for machines to process data from IoT devices and, increasingly, to make decisions, resulting in real automated actions. Together, this increases automation efficiency, requiring less and less need for human oversite and interaction.
But there is a missing layer – a transaction layer where data and service contracts are processed, and transfer of value is performed.
Enter the blockchain.
3MT Convergence
With smart contracts and digital currencies enabled by blockchain technologies, it’s relatively easy to see a future where machines collect, process and transact between themselves (known as machine to machine transactions) – and with humans – at an ever increasing rate.
Blockchain has created products and services that offer real value to real people. And we’re only in the first inning of innovation in this space, as well as being at the very beginning of its convergence with IoT and AI.
A quick look at the various blockchain-enabled products and services available today:
Defi – decentralised finance, one of the crypto ecosystem’s fastest growing sub-sectors that offers better yields and faster service than traditional financial institutions. Today, one can receive 8+% yield of various crypto currencies by “staking”. Compare this to zero (and negative) interest rates that banks give its depositors.
Moreover, one can borrow and lend on various blockchains, enabled by smart contracts, in a faster and more efficient & transparent way than traditional bank loans. Today, one of the earliest DeFi platforms, Maker, has nearly $10 billion of value locked into this concept. And other platforms are being creating at breakneck speed.
Stable coins - blockchain-based crypto tokens that mirror the value of underlying fiat currency. There are several means of implementation, ranging from fiat, crypto, asset and algorithmic-backed technologies. Of the many uses of stable coins, one of the largest supports international trade. For example, say a Malaysian company is buying products from China. Rather than deal with the various restrictions of the Chinese yuan and the Malay ringgit, the two companies can – and do – utilise a stable coin as the means of payment transfer, leaving each party to then convert into their national currency upon trade completion.
DEXs - decentralised exchanges that enable peer-to-peer exchange without central bodies, all enabled by smart contracts. Monthly DEX volumes now reach about $60 billion per month.
Synths - synthetic product derivatives are also being developed, enabling blockchain-based asset tokenisation of pretty much anything and everything imaginable. Synthetic products are the newest offering in the crypto space and are considered quite immature. Still, even in its infancy, total value of products total nearly $3 billion.
According to the University of Nicosia, combining distributed ledger technology with AI and IoT will create a new world of autonomous systems interacting with each other, procuring services from each other and settling transactions. In a very real way, blockchain allows for IoT and AI to achieve greater outcomes of increased speed, efficiency & transparency.
3MT Implications & Interplay with the Fourth Turning
With the above context, let’s now turn to the interplay, the overlap, the interaction between 3MT & 4TK of Disintegrate, Trust Implosion and Technology of Destruction.
Put simply, traditional business models are disintegrating. Trust less systems based on blockchain technology offer superior solutions. Technology-based creative destruction has never been more prevalent than it is today.
And it’s all happening at an increasingly faster pace with each passing day.
Centralised organisations, upon which our capitalist societies are built, are beginning to lose utility with their customers and, more broadly, to society at large. Financial institutions face obsolescence as decentralised, superior products now compete directly. Next will be stock exchanges, real estate transactions, high-end works of art (via NFTs - https://en.wikipedia.org/wiki/Non-fungible_token a huge area of growth already), social media platforms, technology-based service providers, and countless other industries. No industry or company is safe from the 3MT wave.
…And one can pretty much tokenise anything of value…
Once tokenised, transactions in blockchain ecosystems with the aforementioned benefits will utterly destroy the status quo. Superior products and services requiring no trust, no central entity and no “opening hours of operation” will win. Each and every time.
Furthermore, the 4TK of disintegration, trust & technology-enabled destruction acts both as a catalyst for 3MT growth as well as herding traditional players to their demise. And this phenomenon is gathering momentum, with the 3MT field continually improving whilst the status quo players remains … stuck.
AI, coupled with IoT, produce ever better and ever smarter smart contracts, all operating on ever more efficient blockchains.
Our 3MT Future
In summary, humanity has undergone fundamental societal inflection points that have driven dramatic change – examples include the agricultural, industrial & information revolutions. Each such revolution has had key catalysts, enablers & drivers that not only created the atmosphere for initial change but then propelled further, dramatic change. In 2021, we can collectively agree the profound impact that, inter alia, the invention of steam power, electricity, steel, penicillin, the automobile, oil, the internet, etc has had on humanity.
The 3MT revolution will have a greater impact on humanity than the aggregate of all prior revolutions. Times 10. Perhaps even times 100.
3MT will simply devour the world’s traditional business models, businesses who resist change & those who cannot pivot fast enough.
For those who position themselves according, unimaginable prosperity will result.
#GameOn
Endnote: I would like to thank the University of Nicosia for offering the Massive Open Online Course on Digital Currencies. I have attended the Spring 2021 MOOC, which has inspired this article. Likewise, Raoul Pal’s Real Vision Crypto service has opened my eyes to the shear potential of this space. My gratitude to both.
Future articles will investigate the broader impact on government, business and society.
Sources:
1/ What exactly is the “Fourth Turning” envisioned by William Strauss and Neil Howe?, 13D Research, March 1, 2017
2/ Session 11 - Convergence of blockchain with other technologies; DFIN 511: Introduction to Digital Currencies, University of Nicosia
3/ Session 12 – Decentralised Finance; DFIN 511: Introduction to Digital Currencies, University of Nicosia