Choose your tram-mates carefully, though, especially if you were born in a two-dimensional place, like me: the flat prairie of South Louisiana. I find the ride terrifying but doable if you happen to secure a fellow rider who can hold your uninterrupted interest.
Last summer, Carlota sat across from me in the tram and shared the story of her career. It was easy to be transfixed. Were we headed up the mountain? Down? I don’t recall. I do know I wanted to revisit that conversation so that everyone in the Hacking Finance community could delight in its interesting plot twists. Thanks, Carlota, for working with me to remember the territory we covered a hundred feet up in the air.
Leslie Campisi: Carlota, when did you decide to specialize in technological revolutions and their impact? Was it during your studies?
Carlota Perez: No. It was in the late 1970s, while I was working at the Foreign Trade Institute, a government agency that backed up international negotiations. It was during the years after the oil crisis—seen in Venezuela as the ‘oil boom’—when I was asked to look at the technological consequences of high-priced oil. At the time, the UN was promoting a strategy of development dubbed the ‘New International Economic Order’(NIEO), also known as the ‘North South dialogue’, which was co-presided by Manuel Pérez Guerrero, a Venezuelan. As part of that initiative, we were trying to look at the future of oil trade in its various aspects.
It was quite a challenging task, and I became totally engrossed in the research. Soon I discovered that technology since WWII had been strongly shaped by oil for fuels, electricity and plastics of all sorts. I even found an article in Fortune magazine titled “Too Cheap to Worry About,” which argued that there was a lot of technology for reducing energy consumption in the processing industries—oil refining, petrochemicals, cement, aluminium, steel and paper—which were responsible for 60% of energy consumption in manufacturing. But they did not incorporate it because oil was indeed too cheap to justify investment in energy saving.
The other thing was the increasing role of plastics in replacing almost every material in packaging, construction, clothing, furniture, household goods of all sorts (from appliances to plastic plates; even aspirin was petrochemical). The fertilizers, pesticides and herbicides in agriculture also came from oil.
Then came another discovery. Business Week published a report about a new product: microelectronic chips that could help solve many problems, from pollution control to reduction in energy and materials consumption, plus opening a whole world of possible new products. Most importantly, apart from being versatile and potentially all-pervasive, it was cheap! It was my ‘eureka moment’. Cheap microelectronics were destined to replace cheap oil as the driving direction of innovation.
Had such a major change of route ever happened before? That was the question. I absolutely needed to study this, so I applied for a scholarship to do post-graduate work on the topic and went to the US.
I soon discovered Schumpeter and his explanation of long waves in economic growth as driven by successive technological revolutions. Yes. That was it! This was going to be a technological revolution indeed.
I was at the same time excited and worried. There was a new world opening up, but my country was an oil producer. Could we [Venezuela] take advantage of expensive oil to develop and even enter the microelectronics revolution? Understanding technology and technical change was the key. So, I knew I was onto something big. I worked like mad reading the history of technology and of how society assimilated it. I came to the conclusion that each revolution created a mismatch between the nature of the new technologies and that of the socio-institutional framework. Successful periods of growth (upswings in Schumpeter’s terminology) would be those when a good match was achieved.
Leslie Campisi: So, is that when you became an academic?
Carlota Perez: Not yet. I frankly thought my discovery was a guide for action in the public sector, which is what I tried to do in my own country.
I came back home and accepted a job to design and head a Direction of Technological Development in the Ministry of Industry. I soon discovered and was able to nurture a local electronics industry that was truly innovative. Most of the entrepreneurs had PhDs from Stanford, Berkeley or MIT and knew as much about the new technologies as the Silicon Valley innovators. The first ever fully digital PABX (telephone central for buildings or big companies) was designed and produced in Venezuela and exported to a few countries.
But supporting them was not easy. All the existing policies were designed for import substitution i.e. importing parts of standard products of foreign companies and assembling them locally—not for inventing novel products and changing them frequently. After a huge battle, I succeeded in removing big tariffs for components. I also set up a public venture capital company that, unfortunately, couldn’t really succeed, because the law did not allow the government to take risks.
Leslie Campisi: That must have been very frustrating. Were you able to get around it?
Carlota Perez: Frustrating indeed! Credit had to be backed up with real assets; the entrepreneurs had to use their homes as collateral. There was indeed a mismatch, and legal obstacles defeated the purpose.
In other areas, I was a bit more successful: it was clear to me that the international context was about to change significantly, and the tariff protection provided by import substitution policies would have to come down. All industry in much of Latin America was in danger of disappearing.
I asked John Bessant and Howie Rush, the leaders of Centrim, at Brighton University, to organise a training course for a couple of dozen engineers in the introduction of information technology and Japanese methods of production. That created a strong group of consultants who helped to modernise companies in Venezuela and in the Andean countries (because the funding for the training had come from CAF, the financial arm of the Andean Pact), which was a sort of common market of five countries, from Bolivia to Venezuela.
With help from an Argentinian consultant, Francisco Sercovich, I set up two programmes for technological learning in the publicly owned aluminium companies. At the time, they were operating at a loss, were completely dependent on foreign technological support and made no effort at innovation or improvement. The results of the project were soon visible in morale as well as in the bottom line.
Together with that, I contracted two local engineers—Antonio Vera and Rodrigo Agudo—to conduct a study about the global aluminium industry, up and downstream. We then gathered all the downstream producers in the country, from cables to tubes and from furniture to cans, and identified possible routes for innovation and international competitiveness in each sector. The Washington Consensus had already brought down the tariff barriers in most Latin American countries and Venezuela would soon follow; there was little time to waste. With strong public-private collaboration, we identified problems and areas for innovation and had fantastic results in a very short time.
But these were little drops in the ocean. I needed to convince not only the whole government but the entire country that we had to make a huge shift in the technology and organisation of companies and in the policies that promoted industry. It was a major paradigm shift for all companies in the world, but those in developing countries had a double challenge: learn to innovate and learn to compete without protection.
Leslie Campisi: I can imagine the difficulty and the frustration. Even now, forty years later, when we know the future of information technology in robotics, artificial intelligence, internet of things and so on, there are still companies that are not willing or ready to face the challenges. So, were you able to succeed? What did you do to spread the word?
Carlota Perez: I did what everyone in such a situation does in a developing country. I brought foreign experts to say what I wanted the country to hear and believe.
I knew that the big expert in the topic was Chris Freeman, the Founder and head of SPRU, the Science Policy Research Unit in the University of Sussex. So, I invited him and some of his colleagues to come as consultants and speakers. It made a difference to all who heard them, but it made a much greater difference to my own life.
For the first time I had a profound discussion about the whole idea of technological revolutions with somebody who was as interested as I was but infinitely more knowledgeable. I instantly knew that I wanted to become a researcher and to delve into the history of such transformations. I understood that the real changes were happening in the advanced world and my titanic efforts to change my home country little by little would not make the difference I wanted to make.
Freeman was organising a conference about long waves two months later, and he invited me to come to London and present my theory. It was an incredible opportunity, but I was terrified.
In the end I did come, I met everybody who was anybody in that debate and, in one leap, thanks to Chris, I got invited to come to SPRU and I became an academic. The need to understand how such technological changes had happened before became an obsession. And that is how, in 1983, I left the civil service and ended up researching, teaching and writing.
Leslie Campisi: Do you miss the excitement of trying to move the economy through policy innovation? It sounds like you managed to do quite a bit under the circumstances.
Carlota Perez: Sometimes I do miss being at the helm, even of a small boat in the civil service. But, although that was not my intention when I took the research role, I have ended up having a wider impact on policy making in general. I became a consultant and lecturer and by doing so have regularly shared my ideas in Latin America, and some of my students end up working back there in the public service. I also work for companies in both advanced and developing countries and for industry associations. Being a writer and a speaker with an optimistic message to convey is as good as being a direct actor. You inspire others to act.
Leslie Campisi: I guess you know that your book Technological Revolutions and Financial Capital played a big role in Sean and Nadeem’s decision to create Anthemis.
Carlota Perez: That is one of the results I feel most proud of. And it is thanks to them that I am currently writing the sequel to that book, now focusing on the social shaping of technological revolutions. Anthemis made me ‘Academic in Residence’ and has been funding my work on the book. In a sense, I am coming full circle. The book is precisely about the role of the public sector in creating the conditions for the best deployment of the new technological potential. Perhaps government action cannot avoid the financial bubbles that characterise the first few decades of installation of the revolution, but the golden ages that have come after the collapses have been the result of a major context change through public policy. They have also implied a process of modernisation of government itself, along the same path shift in organisational lines as the business sector has had to follow each time.
Finance too goes through major changes with every shift. Since each revolution changes both production processes and consumption patterns, the financial needs of companies and people change and require innovation in financial instruments and institutions. During the mass production revolution, consumer credit became indispensable, both in the form of savings and mortgages for massive home ownership and in loans for instalment buying of cars and electrical appliances. Today, fintech is fulfilling the new needs and creating the new possibilities. That is part of what I am now studying. It is really fascinating.
Just to give you an example of something that involves both finance and government: in the middle of the first technological revolution at the end of the 18th century, Britain was engaged in the war with revolutionary France. Government needed funds to conduct it, but it also needed the private sector to invest in agriculture and industry as well as in infrastructure. Pitt, the prime minister of the time, took the huge risk of suspending convertibility, essentially allowing the Bank of England to print sufficient money to cover the needs of both the government and business. It was the first time that there was no gold backing, but it was necessary…and it worked. I’d say it was much better than the current QE, which has refilled the coffers of the big banks but has not seen an increase of investment in the production sectors.
Leslie Campisi: It must really be an exciting search. I find it interesting to realise that you are doing it just because you were once given a task in one job, at one point in your life. Your whole career path then changed completely. Do you think you would still be working in the government of Venezuela if the oil crisis hadn’t brought the question of the future of technology to your attention?
Carlota Perez: Who knows where I would be, Leslie?! I certainly wouldn’t be working for the current Venezuelan government, which has destroyed the economy, made a mockery of democracy and betrayed all its promises to the poor by becoming the most corrupt regime the country has ever known. Many well-intentioned people in Europe and elsewhere have believed in the Chavez image and rhetoric. I also trusted their good intentions and, during the first year, I worked pro bono in helping shape development and technology policy. Unfortunately, it quickly became apparent that a political climate of insincerity, resentment, love of power and corruption would make this work redundant—and sadly, the following 18 years have proved my initial perception right. So, if my life had not changed, the most likely is that I would be working either as consultant in another Latin America country or in an international organisation. I’m sure I would have continued, somewhere, trying to achieve the best development and social results with the ICT revolution.
Young people today face a much more complex situation in terms of job prospects and choices than we did in the 1960s or 70s. A portfolio career is now much more likely than a job for life. Zero hours contracts, the gig economy or some form of self-employment are on everybody’s radar. Going to university is no longer something done to follow a vocation or a passion but to have a good CV, which will open opportunities. That is the result of the paradigm shift brought by the ICT revolution. I don’t think it’s better or worse than what we faced; it’s simply different.
What I think will always be valid in terms of attitude is to make work meaningful and put passion into doing it. The moment will come when the personal path becomes clear. That’s what Sean, Amy and Nadeem experienced when they left the big banks and founded Anthemis. That’s what most entrepreneurs do when they set off on their own. And, even while working within a company, the path to the top is marked by how much creativity, imagination and commitment is brought to doing the job. And, if you find yourself in a company where that is not the case, changing jobs could be a good idea.
That is of course the case for those who are educated and supported sufficiently to be able to make such choices. There are great numbers of workers who are trapped in a descending career path, de-skilled, unemployed or under threat of becoming unemployed. That is the source of the current support for populist leaders, as it was in the 1930s for fascism and communism. This is the equivalent historical moment. Whether governments will find the will, the intelligence, the understanding and the boldness to change the playing field to provide a new, socially fair, growth direction, as the post-war leaders did, is an open question. I do hope my book will help in that task. We need to establish a win-win game between business and society. That is the key to achieving the global sustainable golden age that the ICT revolution can enable.