Book Review: The Fourth Economy by Ron Davison

If The End of Jobs by Taylor Pearson was my gateway book for entrepreneurship, then The Fourth Economy by Ron Davison is the book that got me addicted to entrepreneurship. The book does an amazing job of looking at the last 700 years of western civilization, with a main focus on the economies that have come to define certain time periods.  He starts off in the transition from the traditional economies to the agricultural economy around the year 1300.  He does a great job of providing what I would define as tipping points that led to transformations within economies of the western world.  These transformations then led to the next economical environment which itself was uniquely distinct from the previous economy and offered more opportunities and prosperity for society. The next transition happens around 1700 when we move from the agricultural economy into the industrial and then in 1900 when we move from the industrial economy to the informational economy.  Finally, in present day, as we move from the information economy to the entrepreneurial economy.

Within each period and each economy that defined that period, he explores specific events or movements that transformed the new era. He also makes a distinction between social invention and technological invention and how both are needed to transcend into the next era of economic opportunity and prosperity. I really like his exploration of social invention and how they affect societies.  Social inventions are often overlooked, especially as current “realities” become ingrained into society’s culture. These social inventions are all made up and have no true bearing on reality except for the reality that we bestow upon them.  If you ever heard someone say well that’s just the way it is, then you have just experienced some form of social invention that society or a portion of society runs by. One of my favorite quotes by Arnold Schwarzenegger is his advice to “…break some rules.”  I think he also advised not to break the law but to break the rules. A lot of the time we confuse social invention with these rules or just the way it is, but there’s no reason why we cannot make changes to these social inventions.

A key concept that Ron Davison touches on is that with each new economy which led to an overall era of prosperity, there had occurred a decentralization of power.  From the church that gave way to the nation-state, the nation-state then giving way to the bank, the bank then giving way to the corporation, and the current prediction that the corporation will give way to the individual. If you look at the Internet as the tool that has allowed a complete(not totally, but close) decentralization of information, with information being the main component that allowed the information economy to thrive, you can understand why this transformation is currently occurring. It also seems to me that decentralization of information has been the underlying factor for each transition. As information became more available, in different and easier to access mediums, it became more possible for the individual to take control of their lives rather than any institution that held any type of control in previous periods.

This book, although rather long, was a great and thorough read.  It was hard to put down and the author did a great job of providing support to the observations made.  I believe this book is an extremely important read because not only does it provide a great history lesson, it also predicts what the future could be as long as we take these lessons from the past and apply them to a future that strives to distribute power amongst individuals.  I highly recommend this book and consider it a required read for any aspiring entrepreneur.