What were the major trends in technology?

Discussion of The Long Waves of Modern Technology

As we take our first steps into the twenty-first century we can see that technology is central to the economic growth of nations, large companies, and individuals. Technological change plays a major role in industry structural change, as well as in creating new industries. Virtually all contemporary accounts of how technological change proceeds in capitalist economies are based on Schumpeter’s work.

Schumpeter relied on the works of Karl Marx, a German economist, to develop the concept of “creative destruction,” and on the work of Nikolai D. Kondratieff, a Russian economist. In 1925 Kondratieff published The Long Waves in Economic Life, identifying “long waves” of economic growth, some lasting more than fifty years, from the end of the 1780s to the 1920s. These “Kondratieff Waves” were based on what Schumpeter called “clusters of technical innovations.” There is much to be learned from understanding the dynamics of technological change. As Marx said, “History doesn’t repeat itself, but it does rhyme.” Before we discuss today’s high-tech revolution, we first explore the five previous revolutions: industrial, steam, steel, electricity, and mass production.

The Industrial Revolution (1780s–1850s)
The term “industrial revolution” refers to the great change in the organization of work and production that began in England. This change was revolutionary, for it turned many things upside down and created a new class of wealthy and powerful persons. Recall that Adam Smith studied the “division of labor” in the pin factory and wondered why machines did what they did, and as a result thought about how to make them work better. Richard Arkwright’s invention of the spinning frame in the 1780s replaced a “cottage industry” established by the wool and cotton companies.

By 1850, cotton yarn and cloth accounted for 40 percent of all exports from Britain, and needless to say “Arkwright amassed a great fortune from his inventions.” These clusters of discoveries and innovations came one after the other, and each new discovery called for the next. But the most important invention of the 18th century was the factory, “the great machine which combined human and mechanical elements to produce undreamed-of amounts of goods, which in turn were absorbed by a market that was also viewed mechanically.”

The Steam Revolution (1740s–1890s)
Historian Charles Van Doren writes, “Steam power changed the city and the country, it revolutionized life and work.” The steam revolution was born in 1712, “when Thomas Newcomen erected a steam engine” to pump out water from English coal mines. The steam revolution wave crested some fifty years later. Leveraging James Watt’s cluster of innovations that included the separate condenser, steam power began disrupting the handcrafting industry with machinery in the factory and mill operations. This age of steam-powered machinery produced two very significant offspring: steam locomotive trains and steam-powered dynamos.

In 1830 the first “commercial” train was pulled in England, and soon after over a hundred railroad companies were started. Steam power created great wealth, and “some railroad magnates became richer than kings or emperors.” Later in the nineteenth century the steam engine was used to produce electricity, but the steam turbine, which is still in use today, displaced it in the next generation of electric power.

The Steel Revolution (1890s–1940s)
Modern business history in America started in the 1820s with a rail system that provided transportation between canals. The steel revolution brought clusters of innovations that affected every sector of industry and services, including this “railroadization” of America. Steel brought low-cost stronger rails, stronger, lighter steam engines, and huge bridges spanning wide rivers. Andrew Carnegie was dedicated to driving down the cost of steel. In 1875 he built his first plant based on the Bessemer process for the production of steel rails.

The cost of steel was reduced as much as 90 percent from the early 1860s to the mid-1890s. By 1881 Carnegie was the “foremost iron and steel master in America.” In 1901 he sold his business for more than $300 million to J.P. Morgan who incorporated it into an even larger venture, United States Steel. Steel led many other industrial innovations. The first high-rise building in Chicago was constructed of steel, the canning industry replaced the “tin” in tin-cans with steel, and electric power was “transported” through steel-wire power lines.

The Electricity Revolution (1830s–1950s)
The early 1830s introduced theories of electricity, and by the 1840s generators were commercially used in France. In 1877 Thomas Edison formed the Edison Electric Light Company with a group of investors that included William Vanderbilt and J.P. Morgan. By 1879 Edison developed the first successful electric incandescent lighting system, and by 1882 he started work on the Pearl Street Central Power Station in New York City.

Between 1880 and 1890 a modern industrial infrastructure was in place, and soon the electricity revolution created a whole new set of industries and disrupted the production processes of every old industry. In 1890 the share of power for mechanical drive provided by steam was 81 percent, water was 13 percent, and electricity was a mere 5 percent. By 1930 electricity accounted for 78 percent, steam 16 percent, and water 1 percent of the power. In the steam era a giant steam engine powered a central rotating shaft, and machine tools ran off pulleys in long linear factories.

In the 1890s Westinghouse was making AC motors for industrial applications, which spawned the growth of machine tools. Because these small motors could be attached to each machine tool, very different, more productive configurations of machinery could be arranged on the factory floor. Quite interestingly, the “electrification of America” laid the roots of the next wave we discuss.

The Mass Production Revolution (1880s–1980s)
Perfecting the mechanisms of mass production meant decreasing the unit cost of products. In 1881 John D. Rockefeller, viewed by some as the “Entrepreneur of the Century,” combined Standard Oil and nearly forty other allied companies to form the Standard Oil Trust Company. His goal was to achieve cost advantages that could only be realized by placing the companies’ refining facilities under a single management. The cost per gallon dropped from 2.5 cents in 1879 to 0.4 cents in 1885. Standard Oil’s successor is now Exxon Mobil, one of the largest corporations in the world.

The first true mass production techniques were used by Henry Ford in 1914 at his Highland Park Plant in Detroit for the manufacturing of the Model T automobile. Ford modeled Highland Park after Armour’s pig slaughtering system in Chicago, called the perfect “disassembly of a pig.” Once perfected, 15 million Model T’s rolled off Ford’s assembly line—one every twenty-four seconds.

SOURCE: Roadmap To Entrepreneurial Success