These challenges represent complicated internally-tied clusters of various issues, each demanding in-depth scientific research. The primary purpose of this article is to provide a high-level picture of the biggest potential threats from my point of view. Vladimir Baydin, PhD, Investment & Strategy Director, J'son & Partners Consulting.
Have you heard about the fourth industrial revolution? Well, it is on its way with all prospective benefits as reindustrialization of the developed countries, the new level of customization, improved productivity, and significantly reduced costs. On the other hand, there are some potential side-effects:
1. Jobs Decreasing. There are several interesting research papers outlined that there is a significant risk to jobs due to automation trend: up to 50% workers in the USA are in danger: taxi-drives, cargo drivers, accountants, logistics and retail employees, insurance and travel agents, banks clerks, and many others.
2. Economy Recession in the World "Factories." Ask yourself - when was the last time you read the label on the shoes stating "Made in Germany"? Last year Adidas opened its new fully-robotized plant in Germany, which means that the company can reduce its operations in Asia. There are shreds of evidence that many western companies are considering the same path.
3. Content Supporting People's Beliefs. Automation impacts not only to manufacturing, transportation & logistics, finance, and retail, it also affects media consumption. During the whole humans' history, it has never been so easy to consume the content we like, as it is now. Long story short: it leads to polarization and online political bubbles.
It is a well-known fact that climate is changing. The optimistic scenario is an average temperature increase by 2 degrees till the end of the century.
1. Food Security. Temperature rising in the North Africa and the Middle East puts at risk of hunger and water shortage millions of people; it increases the probability of war conflicts.
2. A Higher Cost of Living. Fighting Climate Change requires a lot: the new Paris Agreement aims to spend $ 100 billion a year starting from 2020. In addition to these spendings, a drastic increase in coverage for devastating after-effects of severe natural calamities can be predicted.
3. Climate Migration Waves. For several last years, Europe has been struggling with hundreds of thousand Syrian refugees. What will happen if this number jumped up to millions? Published in 2016, the warning report predicted this amount of climate refugees by 2040.
The saddest thing is that these possible consequences of both Automation and Climate Change impact social structure of modern civilization. People exposed to the risk of the job cut tend to follow populists. Economy shrinking across developing countries, as well as, increasing unemployment in the developed ones, result in higher income inequality. The same logic can be applied to all points mentioned above. I sketched a very simple diagram showing relationships, as I see them, between outcomes of Automation and Climate Change. They ended with two major problems our world is facing now and will face in future: Populism Uprising and Income Inequality.
I suppose that Populism Uprising and Income Inequality are significant factors negatively affecting Geopolitical Stability. In its turn, Geopolitical Stability impacts international relations, including trade and foreign direct investments. Here, the vicious circle appears. Less trade and investments worsen the geopolitical situation, ending in the endless circle.
There is an excellent theory of the "Long Peace." Shortly, the main idea is that violence and war conflicts are decreasing over the time. However, well-known Nassim Taleb wrote a short article arguing that this theory is nothing but a statistical illusion.
Still, I am not going to be a total pessimist. While business can not solve these possible and existing global problems, it can contribute in good-doing, and make some profit on it. I will not be very original in stating the following opportunities sprouting from the nature of human beings.
1. In the post-truth world, there is a demand for a robust fact-checking media based on facts. Invest in new media.
2. People facing threats of losing their jobs need new skills and knowledge. Invest in education.
3. We cannot make the climate "normal" but we can ease side effects by implementing clean-tech technologies. Invest in Clean Tech.
The last one, but not the least one is my firm belief that changing environment, all kinds of environment, need new business models, helping people to adapt to radical changes they expect to face.
The Author: Vladimir Baydin, PhD, Investment & Strategy Director, J'son & Partners Consulting.