I know what you’re thinking: what on earth would Ian Fleming’s super-spy and general all round hero have to do with Ascendant Strategy, a firm of independently-minded researchers with an expertise in economic cycles and a client base that consists, not of presidents and princes, but largely of investors and corporate directors? You’re probably answering this one for yourself: nothing to do with them.
Actually, we think Cmdr James Bond CMG RN would be quite interested in what we have to say and would not be in the least surprised if he called us to sift through our intelligence. I will tell you why we think this.
At Ascendant Strategy we research economic cycles and develop insights in ways that are of practical use to clients. One of the most important cycles we research is the Long Wave commodity cycle, sometimes known as the Kondratieff wave. This was first formally put forward by a Russian economist in the early 20th century, Nikolai Kondratieff, who observed that there were long cycles of development within capitalist economies, lasting around 50-60 years in total. Each wave consists of 20-25 years of rising, followed by 25-30 years of falling, commodity prices and interest rates. Kondratieff’s writings were influential in the West and were taken up by, among others, Joseph Schumpeter in the 1930s. Subsequent research points to several interesting insights about economic development based on this cycle, including the relationship between these long waves and levels of investment and therefore levels of employment, income and wealth generation; and new innovations, the application of which tends to come forward at the start of the cycle, often leading to a technological revolution that drives the cycle forward.
In modern history, the dates of the Kondratieff Waves have been as follows:
- 1790-1810s (up) 1810s-1840s (down) – key innovating technologies: The industrial machine and the dissemination of mass production
- 1840s-1870s, 1870s-1890s: Telegraph and railroads
- 1890s-1920s, 1920s-1940s: Telephone and the motor vehicle
- 1940s-1970s, 1970s- early 2000s: Electronics and consumer aviation
- Early 2000s-[2020s]: The internet, big data and additive manufacturing
Source: Kondratieff, Ascendant Strategy calculations and Phil Anderson
It is difficult to date major economic and structural cycles like these precisely and so these dates are approximate. Indeed a number of commentators consider that the world is still in the downswing of the most recent long wave: at Ascendant Strategy we believe that the decade-long bull market in commodity prices during the 2000s to be a strong indication of the start of an upswing, with higher commodity prices to follow during the next 10-15 years.
So why would James Bond be interested in any of this? As a user of extremely advanced technologies (remember the invisible car in the film Die Another Day?) he’d be interested in knowing when Q-Branch would develop the latest piece of gadgetry to help defeat his enemies.
However, it’s the relationship between these long cycles and war that Bond would be even more interested in our services. Researchers have observed a greater incidence of war and conflict, particularly between great powers in the upswings of the long-wave, no doubt arising from the competition for resources and territory which are extremely valuable when commodity prices are high and during periods of great innovation. In the early 19th century there were the Napoleonic Wars between Britain and France; into the 1860s, there was the US Civil War; into the peak in 1920 there came the first World War and the 1960s and early 1970s saw the Cold War at its height. As we move towards the peak of the next cycle, which we estimate to be some time towards the end of the 2020s, there is the potential for another major clash. This would call for the services of James Bond and we could help him know when to get ready. (Note, Ascendant Strategy is not suggesting that a major conflict or loss of life will follow: the wars of the 21st century could well be virtual and waged in cyberspace).
Ascendant Strategy’s research on cycles and its ability to adapt its expertise to provide practical advice to clients is one reason why we think it’s not beyond the realm of possibility that someone like James Bond would give us a call. But while we are interested in geopolitics and the bigger picture, our core focus is to help investors and business owners make better business decisions. Our research shows, for example, that major downturns tend to be short and sharp during the up-swing of a Kondratieff wave, and more prolonged during the downswing.
If you’re interested in making better and more profitable decisions, you need to know about cycles. At Ascendant Strategy we will believe we understand cycles as well as anyone and can live up to our promise of: Unique Insight. Investment Excellence.