The power of Generational Cycles

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The power of Generational Cycles

Analyzing trends requires an understanding of how demography, technology and human behavior interact to shape our constantly evolving world.  At Trends, we’ve found the theory of “techno-economic revolutions” first formulated by Professor Carlotta Perez to be extraordinarily useful. 

Another very useful model linking the behavior of generations to economic and political evolution was originally formulated in the 1980s by Neil Howe and Richard Strauss.  It was presented in their landmark 1991 book, GENERATIONS.  This month, we’ll examine this framework which has influenced experts including investment gurus John Mauldin and Harry S. Dent Jr as well as the Trends editors and many others. 

Howe and Strauss specifically described the implications of the generational model for the period in which we now live in their 1997 book, The Fourth Turning.  When it was published, the United States was at the top. 

  • It had recently won the Cold War.
  • The economy was entering the final surge of the Dot-Com Boom.
  • The federal budget was showing a surplus for the first time in decades. And,
  • By many metrics, Americans seemed happy, prosperous, and optimistic.

Yet, Howe & Strauss saw trouble ahead.

Why?  Because careful analysis indicated to them that human history is divided into repeating cycles or 'saeculum,' which link demography to human behavior.  Therefore, this model is particularly useful in understanding politics and consumer markets over extended periods. 

Each saeculum or cycle is divided into four “ages.  Each “age” is called a 'turning.'   The first turning is a 'high,' a period of cultural unity and achievement. The second turning is an 'awakening', where the values of the old order are challenged.  The third turning is an 'unraveling' during which institutions weaken due to the challenges that emerge during the second turning.  And the fourth turning is a 'crisis' where a new order replaces the old order.

Each saeculum is defined by the interactions between four generations, each of whom has a personality archetype. The archetypes are: prophets, nomads, heroes and artists.

These cycles of generations occur during a saeculum, with one of each generation being born, passing through life, and dying between crises...

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