The long wave economists, Kondratiev, Schumpeter, and Perez have given us a framework for thinking in long cycles of economic development, creative destruction and disruption, economic development, emergence of new cycles just as the old ones are tapering off, and what happens within these long growth cycles. We have extended the framework in our research work in the Connected Intelligence (CI) series of papers over the last 8 years. We have established that the new cycle is driven by sensors and the software is already creating disruptive effects in the economy, creative destruction of the old guard who have had a tough time adapting to the new ways consumers interact with goods and services, and the new technologies that completely shape our perspectives and way of doing business.
In his classic book, “Grand Transitions,” noted author Vaclav Smil ponders over the basic question, “What makes the modern world work?” To understand the epochal transitions, one must understand the basic units of the modernization process that lead to rapid transitions. Connected Intelligence tries to answer the basic question, “What makes the modern tech ecosystem work?” and what’s the impact, what are the major technologies at play, and ultimately, who is shaping this grand transition.
While mobile has played a key role in shaping the early phase of the Connected Intelligence cycle, several concurrent interlinked technologies are also growing and influencing the trajectory of change. AI, Edge Computing, Robotics, Blockchain, Crypto, Quantum, and others are all influencing how new systems and services are designed. Furthermore, some of these trends have been accelerated as a result of the pandemic thus making this long wave a unique cycle.
Each story has its characters who play an important role in defining the narrative. For the Connected Intelligence cycle, we have seen a number of new players emerge while some of the old stalwarts consolidate their positions. While the big 5 – MAAMA – Microsoft, Apple, Alphabet, Meta, and Amazon have solidified their hold on the ecosystem over the last five years, there are new players like Tencent, Reliance, Baidu, Nvidia, Shopify, Tesla, and Square who are providing key ingredients of the building blocks of Connected Intelligence Ecosystem architecture.
We have been tracking the top 50 companies who we think are the key players for the last several years and comparing their market performance with the rest of the market and it is very clear these “Nifty Fifty” are a class of their own. The platform players will dominate the cycle, but services, sensors, and access layers are important as well. We have seen the emergence of China as a regional powerhouse who is pouring all its might into dominating this long and critical cycle.
The Connected Intelligence Index provides us a way to study the progression of companies which we think constitute the core of this cycle as well as compare it to the wider market. The Index can also be used to study differences in evolution by region or category. The paper studies the market growth of the key 50 players as a group since 2009. The strength of the platform players or the big5 becomes apparent in the charts but it is the subtle shifts y-o-y that are worth paying attention to. Five years ago, very few would have picked Tesla, AMD, Shopify to be the biggest gainers or China’s CI Index to rise so fast to only drop down in 2021 due to domestic policies. That CI Index has outperformed all the major indices is not a surprise to us or to any keen observer of the ecosystem but how rapidly have the companies in the index come to dominate the landscape was difficult to predict a few years back. The paper discusses these shifts and the likely progressions.
Editorial Notes:
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