The 3 technological revolutions & what it means for property investors

Although for economic historians it was once commonplace to speak of The Industrial Revolution (as though there has only been one) more recently it has become fashionable to speak of three technological revolutions in modern economic history.

Each of these revolutions represented genuine structural shifts.
Put another way, although economies continue as ever to move in cycles, the revolutions fundamentally changed the environment so that things would never be the same again thereafter.

Revolution 1 – the Industrial Revolution of the mid-18th century

The first of the three industrial revolutions did not take place in Australia.Pete Wargent 2015
Instead, it took place in Britain in the middle of the 1700s.
Prior to the Industrial Revolution, the British population predominantly lived in rural areas and endured a lifestyle that barely extended beyond subsistence living.
People tended to work in agriculture and lived very much a hand-to-mouth existence.
The invention of new machinery such as the steam engine and the Newcomen Engine saw humans for the first time being able to use automated processes and Adam Smith’s famous division of labour in factories to create greater output.
Suddenly, Britain’s Gross Domestic Product began to increase, which it had not been doing through the Middle Ages and through the period before the revolution.
As the newly mechanised processes spread throughout Western Europe and to America, developed nations escaped from the assumed Malthusian Trap (Malthus had suggested that population sizes would be capped by the ability of humans to grow adequate food supplies to sustain growth).
The Industrial Revolution led to continued inequality, although the wealth moved into new hands – those of the capitalist factory owners.
As vast swathes of the countryside migrated to the rapidly growing and industrialising cities, the factory workers endured a tough existence and often dreadful working conditions in the new factories.

Revolution 2 – the technical revolution

The second revolution came about as humans learned to master the power of electricity and metallurgy, including the widespread use of steel.

Other resources such as oil were better understood and exploited to create petroleum and gasoline and the world harnessed its resources with more effect than had ever been the case before.

Increased sophistication with regards to mechanisation saw the rise of the motor car and the world began to mobilise itself.

Sadly for the Brits, it was the Americans who embraced this revolution with more gusto and America became the world’s leading economic superpower in the first half of the twentieth century – a status which the US continues to cling to today.

Revolution 3 – the internet revolution

Back in the 1980s we started to hear about a new “information super-highway” that was apparently going to change our lives forever.
bookNobody seemed to be quite sure how or what it would actually do, but sure enough the internet and the age of electronic communication has totally revolutionised the world we live in.
From 2007 the world slipped into a major recession triggered by the subprime crisis, and yet it seems as though this communications revolution, just as those before it, will again represent a structural shift in how we live our lives and will see the world more prosperous as a result.
This will be particularly so in those developing countries which are beginning to grow at great speed such as Brazil, China and India. The phenomenal growth in China in particular is potentially great news for a resources-exporting country such as Australia.
BHP famously noted back in 2010 that the world would consume more commodities over the next 25 years than it has previously done in its entire history. Rio Tinto also said that it expects demand for commodities to double over the next decade-and-a-half.

Effect on property markets in Australia

There has been a persisting theory that the internet revolution will see ever more people working from home and a consequent paradigm shift with the population electing to move away from the expensive capital cities to cheaper regional areas.

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So the theory goes, prices will slide in our prestige capital city suburbs and the regional markets in Australia will prosper.

There’s only one small problem with that theory: it is twaddle.

Take a closer look at what has happened in any number of overseas markets: regional property markets have been clobbered but quality suburbs in capital cities where demand is high have been remarkably resilient.

This is true in the UK, in the US and in a range of Western European and other markets.

And yet for some reason, some still persist with idea that Australia will be different. Unfortunately not.

The great “working from home revolution” has never really eventuated.

Even in the US where reportedly a sizeable percentage of the population has the potential to work from home, less than 7% the workforce actually does so, with many claiming that working from home increases their stress levels.

Moreover, the demand for property in Australia continues to focus upon the major capital investor

It is the major capital cities in which the hundreds of thousands of new migrants are choosing to live in, and for those of us that already live in Australia…well, we are choosing to live in the capital cities too.

Human beings are odd creatures.

Individually, we like to believe we are different to most other people, and yet the truth is that we are far more similar to each other than we care to admit.

Admittedly as a white, middle class immigrant to Australia myself, my social circle is perhaps a little way from being representative of the norm, but a vast percentage of my own friends and acquaintances want to live in only a handful of popular suburbs in Sydney, all of which are with easy striking distance of the Central Business District.

Future revolutions?

As for future revolutions…well, they are almost always unpredictable. There is an argument to say that the next revolution will come as a result of greater understanding of genetic modifications and cloning.

So perhaps in the future we will be even more similar to each other than we are today!

Want more of this type of information?

Pete Wargent


Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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