Technological Revolutions and Financial Capital

One of the signals I use in deciding whether a book is worth reading is whether it is somehow connected to the people and organizations I already know and respect. Technological Revolutions and Financial Capital, by Carlota Perez, is one of my favorite examples.

I first heard of the book from a reference on Simon Wardley’s blog. Simon is one of my favorite writers on strategy (and he’s a blast to watch in action giving a conference talk). Then, when I looked the book up, I was pleasantly surprised to discover that it’s published by Edward Elgar Publishing, which was actually a customer of Safari, my employer at the time. And finally, when the book arrived in the mail, I was positively delighted to see that one of the testimonials on the back cover was from Bill Janeway, one of the sharpest minds around at the intersection of economics, technology, and venture capital (and also a board member at O’Reilly Media, Safari’s then-parent-company).

So it’s fair to say I started reading with high expectations — and Perez quickly exceeded them. After finishing this book, you will have a new framework through which to understand and analyze not just technology changes, but how they fit into the wider social, political, and economic landscape.

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Thinking in Systems

The title of Donella Meadows’ masterpiece Thinking in Systems explains precisely what the book will do in 254 concise pages that are a joy to read: it will very likely—and very likely permanently—change the way you think about the world around you.

Key concepts like stocks, flows, and feedback loops are introduced using simple models and metaphors like a bathtub filling and draining, or a home’s temperature adjusted via thermostat:


The tub can’t fill up immediately, even with the inflow faucet on full blast. A stock takes time to change, because flows take time to flow. That’s a vital point, a key to understanding why systems behave as they do. Stocks usually change slowly. They can act as delays, lags, buffers, ballast, and sources of momentum in a system. Stocks, especially large ones, respond to change, even sudden change, only by gradual filling or emptying.

(And speaking of bathtubs, if you’ve ever had to adjust the temperature in a shower with a knob unusually far away from the faucet, you’ve experienced the challenges of dealing with a delayed feedback loop.)

Quickly, yet almost imperceptibly, Meadows builds on these simple models and begins describing much more complex systems, including the kinds present all around us:


After the first chapter introducing these core concepts, you will already start seeing them all around you, and soon find yourself thinking about the relationship between stocks and flows in your home, your work, your city, and the economy.

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