“There has always been, and there always will be, an economic cycle,” noted the British journalist and politician Nigel Lawson. He is right, and if you’re a regular reader of this blog, you know that arguably the most overlooked yet influential economic cycles are l-o-n-g. The Russian economist Nikolai Kondratiev first uncovered these long waves of economic growth (also known as Kontratiev waves). Interestingly, each new long cycle seems to not only have a novel set of leading-edge technologies to drive growth but also a secret recipe on how to make a new or established business ride the long wave successfully. Let’s explore what I believe this secret success formula will be for the Sixth Wave that has just started.

A brief revisit of Long Wave theory 

Kondratiev’s Long Wave theory suggests that economies experience long cycles of economic boom and bust sparked by a few leading-edge technologies that rise to dominance over several decades. Since the start of the Industrial Revolution in the second half of the 18th century, we have seen five long technological cycles, each of which was dominated by a few technologies that rose like a phoenix from the ashes to prominence as economic growth over the wave’s several decade-long duration (see also the chart below). 

The last long cycle that just ended was the Fifth Wave, which saw the rise of Information and Communication Technologies and the Internet. Now, we are in the early phases of the Sixth Wave of Technology Innovation (ca. 2020-2045), which will be driven by three technology spaces —digital, clean, and human-centered technologies— and unfold in five stages (initiation, boom, bust, golden age, and maturity). 

For more on the long wave concept, check out my earlier articles in the thinkergy blog: Learn about long waves to better ride the next one (Part 1) | (Part 2) | (Part 3).

 The success formulas of the early waves and the Fifth Wave

So, what prior formulas made companies rise to prominence in earlier long waves? The early industrial age waves predominantly played out using a quantitative formula geared towards the mass production of standardized goods to achieve high economies of scale. 

Unfolding in the knowledge and information age, the Fifth Wave expanded this quantitative perspective by adding two additional components. So, the secret success recipe of the Fifth Wave was to reduce transaction costs related to a product or service by applying computing technology while ensuring a networking effect (meaning that for an individual user, the utility of the product grows with the overall number of users). 

“Find the most expensive transaction cost that you can, and apply computing technology to it. Make sure that there is a networking component so that the more people who use it, the more useful it becomes.”
—JAMES B. MOODY & BIANCA NOGRADY 

Many Internet startups turned corporations used this blueprint to scale up their business successfully during the last long cycle. However, given that the market environment has evolved markedly over the past 30 years, the Sixth Wave is unlikely to continue that pattern and is likely to follow a new, radically different success formula.

The secret formula to success in the Sixth Wave?

I argue the Sixth Wave will unfold against a major perspective shift from primarily quantitive to predominantly qualitative growth. For me, the secret formula to successfully riding the Sixth Wave is best captured by one of the ten design principles of the well-known German industrial designer Dieter Rams: “Less but better.” In the following sections, let’s explore how this maxim may play out in various areas of business and life. 

1. Less but better work (=higher productivity and efficiency)

"Efficiency is doing better what is already being done,” noted the 20th-century management guru Peter Drucker. 

Due to the onset of digital technologies (such as artificial intelligence and robots) in the workplace, it is highly likely that work productivity and efficiency will significantly improve in the coming two decades. Productivity is defined as outputs over time, meaning we will produce more outputs in a given period or need less time to produce a given output. 

What does this mean for us human (knowledge) workers? 

• We will produce significantly more outputs (if we keep human inputs and the time constant), or …
• will need to work fewer hours for the same outputs (as we can produce the desired work deliverables faster), or …
• companies will use fewer (knowledge) workers to complete the human work input required to produce the desired outputs.  

2. Less but better consumption (= more mindful consumption)

"Buy less, choose well,” the British fashion designer Vivienne Westwood recommended.

In the next 10 years, I predict we will also see a major shift towards more consumers becoming more conscious of their consumption choices. In other words, we use less but better products. Better can mean better quality (such as using better quality or being more durable) or less harmful to humans or the environment (such as complying with certain environmental or personally desired health standards). 

This shift will be both consumer demand-driven (i.e., consumers demand cleaner, greener, more qualitative products) and government-coerced (i.e., regulators forcing producers to internalize external costs, likely to increase the prices of non-compliant goods). 

Nowadays, we can see this already in some areas, such as the organic food industry and the vegan food movement (in the “clean nutrition” space), electric vehicles, and solar energy (in the “clean transportation” and “clean energy” spaces). Moreover, some brands like Patagonia have built a tribe of loyal fans by contrasting their high product quality and environmental responsibility with those of other fashion brands. 

3. Less but better production (= higher resource  efficiency)

"The most sustainable way is to not make things. The second most sustainable way is to make something very useful, to solve a problem that hasn’t been solved,” suggests the Danish designer Thomas Sigsgaard. 

In their excellent book The Sixth Wave, James B. Moody and Bianca Nogrady highlight that greater resource efficiency is key to the Sixth Wave’s sustainable, clean technology space. Coupled with the inclusion of digital technologies (such as artificial intelligence, robots, and the Internet of Things), we can also expect significant improvement in production processes: fewer inputs in men, machines, and materials, less waste, less downtime, faster lead times, and better outputs. So, picture Toyota’s famed lean manufacturing system amplified by the latest digital technologies, and you get an outlook on the future of production.

4. Less but better education (= more consciousness)

“The fact is that given the challenges we face, education doesn’t need to be reformed — it needs to be transformed,” noted the English education advisor Sir Ken Robinson. 

Our “modern” education system was largely developed in the second half of the 19th century to meet the needs of the industrial-age economy. During the Fifth Wave, Google already put the world’s knowledge at our fingertips, making once-precious knowledge a commodity available globally to everyone with Internet access.  

With the emergence of generative AI, we are now able to process this knowledge even further and turn it into creative outputs in almost no time. In the near future, our role as human collaborators of digital technology will revolve more around acquiring the cognitive skills needed to guide and critically make sense of digital and robotic output production. (Little wonder that the surveyed executives in the World Economic Forum’s The Future of Jobs Report 2023 rated creative and analytical thinking as the most critical skills alongside complex problem-solving.)

This means that, at least for higher education and corporate talent development, we are likely to see an educational shift away from a traditional focus on knowledge acquisition towards a greater emphasis on knowledge application and skills acquisition — and ultimately, the gradual attainment of wisdom and higher levels of consciousness. (I wrote about this need for an educational shift in an earlier article titled Shifting from 1D- to 4D-education).

5. Less but better investments (= greater returns)

Can venture capital firms and other early-stage investors apply the same benchmark figures they used during the Fifth Wave to evaluate the value of a Sixth Wave technology startup? Given that the Sixth Wave follows a qualitative paradigm, sticking to their trusted networking-effect-based quantitative scaling-up model of Internet startups might lead investors to an adverse selection of startups to include in a portfolio. That’s because the old vetting model focused on revenue growth through the acquisition of large user numbers and thus gaining leverage through multiplication.

I propose that in line with the Six Wave's overriding maxim, venture capital firms will need to pivot their investment approach and complement or even replace their quantitative growth focus with a new, more qualitative revenue growth perspective. The new emphasis should be to seek leverage through magnification by focusing on strong revenue growth driven more by higher profit margins). Perhaps this qualitative shift aligns with Warren Buffett's advice: ”The best investment is in the quality of your own life.”

Conclusion: From the more, the merrier to less but better

Some of you might now rightfully challenge me: “How do you know?” Well, I don’t know for sure. After all, just like you, I don’t possess a magical crystal ball to look into the future. 

So, what potential limitations and challenges might I have overlooked? Consumer habit inertia, existing business models prioritizing volume over value, and the economic challenge of making higher-quality, sustainable options affordable for all could all hinder the envisioned transition towards "Less but better.” Another challenge might be in overcoming existing norms and practices, such as the resistance in traditional industries to adopt more sustainable practices due to initial upfront costs and the potential for job displacement in the short term due to automation and efficiency improvements.

However, after discerning historical patterns of how long waves unfold and connecting the dots of the emerging trends, I still believe that “Less but better” is a fitting prognostic maxim for spotting future technological, economic, and social business opportunities that will open up as we move through the key stages of the Sixth Waves in the coming twenty years. But what prophet am I? So, forgive me if I am wrong.

• Do you agree with my proposed secret success recipe for a Sixth Wave? If not, what alternative maxim would you propose to describe the underlying drivers of the latest technological long wave? If yes, what other areas can you spot where the “Less but better” maxim applies?
• One section of my upcoming book, The Executive’s Guide to Innovation, explains the cyclical nature of business and the long-wave phenomena in greater detail. We will relaunch the book in Q2.2024. Please look at our preorder page here and consider leaving your details so we can contact you once it is released.
• Are you a creative leader wondering how to prepare your team and company for the Sixth Wave tsunami that will wash over different industries at a certain point in time in the coming two decades? Contact us to tell us more about your industry niche and current challenges. Then, we will tailor a specific solution bundle to make you “Sixth Wave ready.”

© Dr. Detlef Reis 2024. This article is earmarked to be co-published in the Bangkok Post in the coming weeks.