TL;DR
- Carlota Perez’s model describes how technological revolutions unfold in four stages: Irruption (emergence of new tech), Frenzy (speculative bubble), Crash (collapse and reassessment), and Synergy (integration and growth), typically over 40-60 years.
- Tokenization democratizes capital allocation, AI accelerates innovation, hype, collapse, and rebuilding, and macro trends like decentralization and declining trust in institutions redistribute innovation globally, transforming cycles into faster, overlapping hypercycles completing in 10-15 years.
- Technological cycles are becoming faster, messier, and more participatory.
Introduction
Carlota Perez’s “Technological Revolutions and Financial Capital” describes how technological breakthroughs unfold in predictable cycles: Irruption, Frenzy, Crash, and Synergy. Historically, each cycle spanned 40-60 years, moving from invention to societal integration.
However, in today’s world—with tokenization, AI, and major macroeconomic shifts—this cycle is evolving. This blog post explores how these forces are speeding up, decentralizing, and reshaping Perez’s framework for the 21st century.
Summary of the Traditional Perez Cycle
In “Technological Revolutions and Financial Capital,” Carlota Perez outlined how major innovations historically unfold in four stages:
- Irruption: New technology emerges, early infrastructure builds.
- Frenzy: Speculative investment creates bubbles.
- Crash: Bubbles burst, excesses are corrected.
- Synergy: The technology integrates into society, enabling broad-based growth.
Each cycle typically spanned several decades, deeply transforming economies and social structures. Perez’s model highlighted the dynamic between financial speculation and productive capital, shaping how societies absorb disruptive technologies.
Capital Allocation in each phase
Irruption Phase (Birth of the Revolution)
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Tech Emerges: A new breakthrough technology appears (like steam engines, semiconductors, blockchain).
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Capital Allocation:
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Mostly production capital (long-term investors, industrialists, entrepreneurs) funds early experiments and infrastructure.
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Small, risk-tolerant investors back pioneers because big finance is skeptical.
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Allocation is highly speculative but still grounded — you’re funding actual factories, prototypes, tools.
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Example: Early 1800s textile mills (Industrial Revolution) or 1970s silicon chip companies (Information Revolution).
- Frenzy Phase (Speculative Bubble)
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Tech Hype: The new tech captures public imagination. Financial capital floods in, seeking quick gains.
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Capital Allocation:
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Dominated by financial capital (VCs, banks, stock market speculators).
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Overinvestment in anything “tech-adjacent,” often funding flashy or risky ventures rather than solid, sustainable ones.
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Prioritizes short-term returns over building robust systems.
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Misdirected capital: Lots of startups, redundant companies, and speculative bubbles.
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Example: 1990s Dotcom Bubble. 2017 ICO Mania in crypto.
- Crash Phase (Collapse and Reassessment)
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Bubble Bursts: Speculative ventures fail en masse. Capital retreats.
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Capital Allocation:
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Severe contraction — banks pull loans, VCs freeze investments, public markets crash.
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Shift back to production capital — patient investors start picking survivors at fire-sale prices.
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Focus is on repair, consolidation, and real productivity rather than hype.
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Example: Dotcom crash 2000–2001 led to Google, Amazon, and other survivors growing into real giants.
- Synergy Phase (Golden Age of Deployment)
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Tech Integrates: Technology becomes normalized into everyday economic and social life.
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Capital Allocation:
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Long-term production capital dominates again.
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Funds scaling infrastructure, sustainable enterprises, public goods, and system-wide improvements.
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Governments often step in too, funding highways, internet access, energy grids, etc.
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Capital is more “patient” and seeks broad-based returns across industries (not just tech).
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Example: Post-WWII highways and suburbia (cars/oil revolution); Post-2008 cloud computing expansion (info revolution).
TL;DR version:
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Irruption: Early risk-tolerant production capital.
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Frenzy: Wild speculative financial capital.
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Crash: Withdrawal, painful consolidation.
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Synergy: Mature, long-term production capital building systems.
How Contemporary Trends Change how Capital is allocated in each phase
1. Irruption Phase (Birth of the Revolution)
Capital Allocation:
Early production capital seeds the new technology. Investors are few, risk-tolerant, and mostly patient builders.
How Tokenization Changes It:
Tokenization allows micro-allocation: suddenly, anyone can invest in early tech through token sales, DAOs, or onchain crowdfunding. Early capital isn’t just VCs — it could be 10,000 small token holders globally. Irruption becomes more crowdfunded, networked, and international from the start.
How AI Changes It:
AI accelerates discovery and prototyping. Technologies emerge faster because AI co-designs products, runs simulations, and predicts markets. The irruption phase shortens — we might have multiple competing tech paradigms born at once.
How Macro Trends Change It:
De-dollarization, declining trust in institutions, and global multipolarity mean early backers may come from outside traditional finance hubs (e.g., LATAM, Africa, Southeast Asia). Early ecosystems are more geographically distributed.
2. Frenzy Phase (Speculative Bubble)
Capital Allocation:
Speculative financial capital floods in, creating bubbles. Emphasis shifts to hype-driven investments.
How Tokenization Changes It:
Tokens make frenzies even faster and bigger. Liquidity arrives instantly (via token markets), new assets can be created overnight, and memes drive capital. The hype cycle intensifies, and new speculative behaviors (airdrop farming, yield chasing) emerge as dominant patterns.
How AI Changes It:
AI-driven trading bots and algorithmic fund managers amplify bubbles, detecting and reinforcing trends at machine speed. AI marketing tools also hyper-target investors, making bubbles more emotionally persuasive and harder to resist.
How Macro Trends Change It:
Low trust in governments and banking systems makes people more willing to “gamble” on new technologies. Meanwhile, declining real yields elsewhere (e.g., bonds) push more serious capital into tech speculation.
3. Crash Phase (Collapse and Reassessment)
Capital Allocation:
Financial capital retreats. Survivors consolidate. Focus returns to fundamentals.
How Tokenization Changes It:
Tokens can lead to messier crashes: because tokens trade globally, collapses happen 24/7 without coordinated pauses. Regulatory uncertainty can cause sharper selloffs. However, decentralized ownership (DAOs, community protocols) might also allow stronger community-based recoveries.
How AI Changes It:
AI could help identify surviving, undervalued projects much faster than humans, allowing “smart money” to reposition quickly. AI forensic tools could expose frauds early, accelerating necessary cleanups.
How Macro Trends Change It:
If fiat currencies continue weakening and governments stay slow to respond, alternative economic systems (crypto, local currencies, barter networks) might absorb some of the fallout rather than fully “crashing” in the old Wall Street sense.
4. Synergy Phase (Golden Age of Deployment)
Capital Allocation:
Patient, long-term production capital funds scaled infrastructure. Public-private partnerships thrive.
How Tokenization Changes It:
Tokenization enables public participation in infrastructure building. Citizens could crowdfund local energy grids, invest in supply chains, and earn dividends from public goods (like open-source AI or public rail). Ownership becomes more distributed — blending “investment” with “citizenship.”
How AI Changes It:
AI optimizes infrastructure deployment: designing smart grids, efficient transportation, predictive healthcare. Synergy eras become more dynamic and less top-down — instead of slow 20th-century bureaucratic projects, AI-guided ecosystems grow organically.
How Macro Trends Change It:
As governments lose dominance and trust, decentralized, community-led infrastructure (solar microgrids, mesh networks, localized manufacturing) becomes the norm. Synergy happens at local and global scales simultaneously.
Summary: Toward a Swirling, Accelerated Perez Cycle
Instead of a slow, singular arc, technological revolutions now resemble overlapping, hyper-accelerated cycles:
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Tokenization democratizes investment, creating micro-capital movements.
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AI speeds up invention, speculation, collapse, and rebuilding.
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Macro trends ensure innovation is geographically decentralized and socially transformative.
Rather than lasting 40-60 years, future cycles might complete in 10-15 years, with revolutions colliding and reinforcing one another.
We are moving into an era where capital allocation is faster, messier, more evolutionary, and more participatory than ever before. Perez’s framework still holds—but the players, tools, and tempo have fundamentally changed.
In short: the future is decentralized, AI-optimized, and evolutionary.