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Evgeny Kuznetsov

States will not go down
without a fight

We are starting the publication of an expert interview series on the future of major sectors of the global economy. Why is it that in the near future many qualified specialists will have to turn into couriers and engage in transactions? Will we be taken over by the ghetto?

Evgeny Kuznetsov, Director General of “Orbit Capital Partners” Rosatom venture fund, tells about this and much more:

— Today's changes in their scale can be compared with the situation of the 70-80s of the last century. At that time in the Western world, massive computerization took place. Old industries were radically transformed, new ones arose. For example, at that moment, the oil market changed dramatically and increased its impact on world politics.

In the era of that transformation, the Soviet Union fell apart — it could no longer fit into the changing realities, it could not solve the problems that the development of microelectronics, automotive, and other fundamental industries brought and which then became determining. No transformation comes without loss. There are always winners and losers. Therefore, there are very high risks for those who do not fit into the new technological arrangement.

Energy sector: some prefer to go greener

We are undergoing a global process of transformation of all basic industries. Consider the energy sector, which has been ruled by oil and gas since the 20th century. Currently, it is changing under the influence of technological progress and catastrophic climate changes, which risk ruining humanity on the horizon of the next few decades. There is already a global plan, one of its proposals is to reduce carbon emissions to a level where the atmospheric heating rate will not be so critical. For this, two-thirds of the world industry must shift to carbon-free activities including industrial production, energy and heat generation, transport, and construction. This is an investment of tens of trillions of dollars, and this process has already begun. As a matter of fact, China has allocated about three trillion dollars to it, the European Union — one trillion dollars, and private investors are also forming investment clubs that manage tens of trillions of dollars.

Last year, green energy in Germany and the UK began to generate more electricity than oil production. All hydrocarbon energy is bound to die, it will no longer be implemented in the next five to seven years, and no one is going back to it, despite the decline in the cost of hydrocarbons.

Automotive sector: goodbye, gasoline

The transformation of energy will lead to the restructuring of most related industries. The automotive industry will change dramatically. Currently, 44% of all world oil goes to the production of gasoline for cars. With the expansion of the electric vehicle fleet, oil consumption will decrease by tens of percent. According to a radical forecast, if the exponential growth of electric vehicles that is being marked today continues, by 2026 gasoline cars will no longer be produced at all. However, there are more conservative forecasts, and according to them the share of gasoline cars production will range from 20% to 50% of the total auto production by 2030. Nevertheless, most of the world's largest car manufacturers now design and develop only electric vehicles.

All logistics will also change — for an electric vehicle, especially a robotic one, the creation of fundamentally different transport and logistics systems will be required. In addition, the advent of 3D logistics, associated with the use of drones, is on the way. The production of batteries will also evolve: the widespread use of electric vehicles depends on the creation of more energy-intensive types of batteries and fast-charge.

The century of favelas

The transformation of key industries provokes significant changes in the types of settlement, urban policy, and construction. Until recently, two types of housing were created: comfortable settlements for the upper and middle classes and social housing for the working class around production facilities. Now the stage of radical robotization is beginning, therefore, enterprises no longer need a large number of workers. Since there is no need to build social housing, the classic type of settlements disappears.

The principle of organizing a modern city will be radically transformed, new types of construction will appear. This process has already begun. For example, the emergence of technology hubs such as Silicon Valley in the United States. Unfortunately, in Russia, the urban planning policy is based on a deeply outdated paradigm. Housing is still being built following the same concept as fifty years ago. Crazy human anthills (huge multi-story block buildings that house an enormous quantity of people) still function as homes. In the near future, not only these buildings but also the people living in them will be unnecessary. If the resettlement process in Russia turns out to be uncontrollable, we will go through a very difficult phase of the emergence of ghettos — multi-story favelas with people who simply could not fit into the new industry balance.

Changes in the resettlement of people within the city will be massive. Many residents who were previously tied to industrial facilities will be forced to look for some other purpose. Accordingly, an explosive growth of the services sector is expected, which will absorb those who are dismissed in the process of production robotization.

Eloi and Morlocks

The technological revolution will leave unemployed not only many industrial workers but also the average skilled personnel in trade: sellers, cashiers, — those who constitute a significant part of the population in cities. Trade will almost completely switch to e-commerce, and existing shopping complexes will be transformed into entertainment centers. Their maintenance will require specialists of a different type. In the USA, tens of hundreds of malls are already going out of business and closing, this is called the retail apocalypse. COVID dramatically accelerated this process. Transport automation will also leave many truckers and taxi drivers without work.

People are moving from manufacturing sectors to services, including intellectual ones. Those who are not threatened by robots are doctors and teachers. Telemedicine will get further development, activities related to editing the human genome will arise. The basic metric in education today, which characterizes its quality, is the number of students per teacher. If in Soviet times there were 30 or more students in a class, now a class of 15 people is already considered overloaded. In the best universities, the proportion of teachers in relation to students is one fourth. The whole world education industry will strive for this. The number of teachers will grow, especially since adults will also study more often — they will need to retrain and get new specialties. Every 10-15 years people will have to acquire a new profession. And although in modern education there are many solutions based on artificial intelligence, people remain a key element there.

Robots basically replace medium-skilled personnel, effectively expelling people into the category of low-skilled workers. This is where the process of dequalification begins. We are facing the Wells division of people into Morlocks and Eloi in a new way. To become a highly qualified specialist, you not only need to learn a lot but also to withstand enormous loads at work, including psychological ones. Therefore, the industry of coaching, psychotherapy, and various intellectual entertainments will get a strong development. All this will support the productive labor of a highly qualified person.

Finding the right path

Therefore, a radical transformation will affect most existing industries and the social sphere. Change will be swift. The transition from steam to electric energy took about 50 years, the Internet only took ten years to penetrate absolutely all spheres of our life. And artificial intelligence, robotics, and carbon-free energy will transform the entire technological landscape in three to five years.

Are we ready for this? Russia has the last chance to survive among the participants of the technological revolution. But over the past five years the situation has deteriorated — mainly because this new technological revolution is to be made using old institutions, which emasculate it and bend it to their purposes. But this is primarily a revolution of new forms of management and organization of investment activity. This is about the emergence of technology companies capable of exponential growth, from a startup to a global corporation. Unlike the USA and China, we have not created a mechanism capable of launching global companies from Russia, even Yandex and Mail.Ru Group work only in the local market. Without a radical transformation of the management model, I see no way to get on the right path.

But in the West technological transformation is facing serious opposition from state institutions, which are still under the influence of traditional industries. This is the most dramatic moment, because the modern type of state will not go down without a fight, and the battle will be very tough. Recently we observed two market disasters when the cryptocurrency platforms Libra and TON were denied the right to exist. In this way, the state destroyed its possible global competitors, which could issue currencies in ecosystems, measured in hundreds of millions and billions of people.

Interest in cryptocurrencies has waned today, but it is temporary. It is expected that in the next two to three years, projects related to blockchain architectures will advance significantly when they prove their reliability as a service tool, a document management and data exchange solution. This rapid growth of digital currencies will begin in China, where they have already created the digital yuan. There, digital money will be further developed.

The trade war between the US and China is also an example of how states are increasing their influence on economic processes, disrupting the operation of commercial companies. This is a long story that could lead to a huge economic downturn and degradation of many industries, against which the coronavirus pandemic will seem like a trifle, a little cold.

States’ attempts to strengthen their powers may result in the collapse of the entire post-capitalist system. Large corporations, which are now thriving on the wave of digitalization, are accumulating certain negativity as they are hindered by government barriers. Therefore, an influential political lobby that will insist on more accessible markets for its products will be formed. These corporations will be the drivers of the emergence of social and political forces, advocating a reduction in government intervention in the economy. We will see this in the next 5–10 years.