Historical Tech Cycles

Created as an addendum to my blog post on the AI bubble; see here.

Infrastructure Buildouts

Railroad (early 1870s)

Peak of Expectations: The government was massively subsidizing new lines, railroads were seen as essential for settling the west, and bonds were being sold to individuals as “safe investments” to raise easy capital
Trough of Disillusionment: Profit was a long way out, too many lines were being proposed too quickly, and as skepticism rose funding dried up
Slope of Enlightenment: The truly important lines survived and the country ultimately benefitted from the railroad network

Telecommunications (late 1990s)

Peak of Expectations: Internet demand was expected to be near-limitless (”build it and they will come”) and the 1996 Telecom Act welcomed competition
Trough of Disillusionment: Demand growth was far too slow for the overbuilt capacity and some firms had been overstating earnings (e.g. WorldCom) + went bankrupt
Slope of Enlightenment: The excess “dark fiber” drove down bandwidth costs and enabled the broadband, cloud, and mobile revolutions to flourish

Other Examples

Dot-com (mid 1990s-2002)

Peak of Expectations: The internet was believed to be so revolutionary that profits didn’t matter yet and first-mover advantage would create dominating network effects, so VC capital and IPOs were uncharacteristically easy
Trough of Disillusionment: Shabby business models were revealed and companies failed to meet the huge expectations that had been set, so confidence faded and valuations collapsed
Slope of Enlightenment: Second-generation firms built massively profitable e-commerce, SaaS, and online advertising businesses (aided by the telecom overbuild)

Mobile Phones (early 2000s)

Peak of Expectations: The storyline was that “the internet in your pocket” would change everything, and phone carriers heavily pushed optimistic marketing
Trough of Disillusionment: The technology wasn’t ready; phones were clunky, screens tiny, network slow + expensive, and websites weren’t built to viewed on mobile
Slope of Enlightenment: Release of iPhone 3GS with a much faster processor, multi-touch screen, and improved 3GS network marked the start of the real mobile revolution

Massive Online Open Course (MOOC) (early 2010s)

Originally covered in this article about hype being a business tool

Peak of Expectations: In 2011 MOOCs gained popularity with companies like Udacity; they promised to revolutionize online learning and replace college educations + had massive global enrollment figures
Trough of Disillusionment: Completion rates were very low and courses (especially the free ones) were treated more like browsing/sampling than an actual education to learn from
Slope of Enlightenment: MOOCs pivoted to training certificates, online degrees, and enterprise/government upskilling

Other Examples