The Fourth Turning
In venture capital, understanding the cyclical nature of history and its impact on innovation and societal change is paramount. In this post, I draw on the insights from "The Fourth Turning" by Strauss and Howe to explore how historical patterns, especially during periods of crisis, have paved the way for the emergence of transformative technologies and companies.
The Fourth Turning, written in 1997, theorises that history follows a cyclical pattern with four distinct phases, or "Turnings," each lasting about a generation. It has been eerily accurate in predicting – at a macro level at least – major world events that have shaped societal evolution.
Here’s a summary of each Turning:
First Turning (High): Occurring post-crisis, this phase is characterised by strong communal institutions and weakened individualism. Society unites and optimism prevails, as seen in the American High after World War II.
Second Turning (Awakening): Marked by spiritual revival and the weakening of established institutions, this period witnesses a surge in individualism and challenges to traditional values. The Consciousness Revolution of the 1960s to 1980s, with its cultural and spiritual upheavals, exemplifies this phase.
Third Turning (Unraveling): Institutions continue to decline, and individualism reaches its peak. This era is less optimistic, characterised by societal pessimism and moral debates, such as those seen in the Culture Wars beginning in the mid-1980s.
Fourth Turning (Crisis): A decisive era of major crises leads to the dismantling of the old civic order and the establishment of a new one. It’s marked by reinforced institutions and reduced individualism, akin to the transformations seen during the Great Depression and World War II.
The book suggests that right now we are in the Fourth Turning i.e., a period of crisis. But this isn’t necessarily a bad thing – the theory posits that such turbulent times, while challenging, are essential for societal growth and rebirth.
It's clear that the world is screaming out for change. The current global challenges and socio-political upheavals are indicative of this. 2024 will be notable for the large number of elections, with 7 of the world’s 10 most populous nations (Bangladesh, India, United States, Indonesia, Pakistan, Russia, Mexico) voting. Countries that are home to nearly half of the world’s people will hold elections in 2024!
Pattern Matching
A lot of VC is about pattern matching. A pattern you see throughout history is that the biggest changes and the most important innovations don't happen when everyone is happy and things are going well. Changes tend to occur during, and after, a major world event. When people are a little panicked, shocked, worried, and when the consequences of not acting quickly are too painful to bear.
What’s more, crises and periods of change often coincide with the advent of transformative technologies, laying a breeding ground for the emergence of iconic companies that redefine industries. The aftermath of the 2008 financial crisis is a prime example, where economic turmoil coincided with rapid technological advancements, leading to the foundation of startups like Uber, Airbnb, and Snap, which capitalised on new digital and mobile landscapes to build billion dollar companies.
We now stand at the cusp of another significant period of change, with the world experiencing several crises and the advancements of technologies like generative AI, spatial computing and more (I’d recommend The Coming Wave by Mustafa Suleyman, co-founder of DeepMind, for more on this). During this time, transformative startups and visionary founding teams can play a key role in shaping the future - in both positive and negative ways.
The pattern is clear: periods of crisis, combined with the emergence of new technologies, create fertile ground for visionary entrepreneurs to innovate and build companies that not only survive but thrive and dominate their respective sectors. The current landscape is an invitation for founders and investors to envision and create the future, echoing the transformative journey seen in the aftermath of previous crises.
Throughout 2024, I will be looking deeper into startups and technologies I believe can help shape our world in a positive way.