Dear Friends and Partners,
VI2 Partners is happy to share with you our recent newsletter on the most important developments and economic trends in Ukraine.
The power of established parties is eroding fast. So is the political lifespan of politicians. We are on the verge to a dynamic rollercoaster Turbo Democracy.
The name of the latest Austrian ex-chancellor is Kurz or translated into English Short. Today his government collapsed after the shortest period of office for a post-war chancellor in Austria. And while this can be attributed to a purely local phenomenon – a boozed far-right politician promised to sell out Austria to a self-declared niece of a Russian oligarch – the situation is simultaneously characteristic for the current political breeding ground. It took only ten days from the publication of a compromising video to the successful no-confidence vote on a highly popular Austrian Government, which was the first successful no-confidence vote in the post-war Austrian republic (and they tried 185 times before).
Political changes today happen fast and dramatically, the instant public discussion and reaction on all issues is chasing politicians and few are mastering to combine riding the ultimate populist wave with staying in office. Take some numbers of the results of EU parliament elections as a reference point:
We are experiencing the rapid transformation of stable Western party-oriented democracies into instantaneous direct voting platforms on leaders and hot topics of the day. Welcome to the rollercoaster turbo democracy. And it promises to be exciting, turbulent and fast. Gone are the times when parties mattered more than people, when believes and values were the foundation of political parties, when people or families, or even whole quarters voted identically over decades for one party. All this has become meaningless. The very same instruments, that can be cornerstones of a fast, livid and direct democratic involvement of the citizens, can also act as the grave digger for stable and democratic societies. Different sides of the very same coin, the old law of polarity. We have an unprecedented level of communication, information, understanding, and exchange and yet we are more controlled, watched and influenced than ever. The ultimate political Instagram show.
Attributes of the rollercoaster turbo democracy are starting to materialize. They are all based on unlimited reach and direct access to people through internet and social media, the mental overflow of citizens through information overload, the speed of events and the immediate global journalistic processing, and the difficulty to differentiate true from fake:
With the exception of the global climate movement, this rollercoaster is so far better mastered by the nationalist, right-wing political forces from Trump to Bolsonaro, Duterte and Salvini. This is the main reason for their success! Until we will see a societal shift to more stability, a return to values and integrity, a stronger focus on community than on individuals and a longing for more social justice and cohesion, it can be assumed that it will stay like this. And yet, we should not take our current democratic system for granted. It will need a substantial overhaul and it has to be seen, whether an open, transparent and liberal democratic order can survive the turbo rollercoaster; and whether the parliamentary party system can cope with the post millennial age of ultra-rapid change, robotization and short-termism. Otherwise it will become obsolete. At this very moment, it looks more probable that managed democracies like Singapore or China will perform better and take the lead.
Enjoy the Show.
Now it is official. The comedian Volodymyr Zelensky is the next President of Ukraine. While many observers and foreign experts are still astonished about the political experiment and public courage to put an unexperienced TV Star into the highest and most powerful political office in the country, it is first and foremost a demonstration of a powerful, energetic and lively democracy. That is good news. Neither the money, nor the political power or the control of the media, nor the patriotic staging could stop the crushing and deserved defeat of Petro Poroshenko. It is a message of great hope for a country who deserves a better leadership and future. Zelensky was right when he turned to other former Soviet Republics after the victory yesterday by telling them that indeed everything is possible. Accordingly, this election could turn into a harbinger for other countries alike.
As is with all dreams, the morning after a transformation of blurring pictures of hope and glory into purpose and hard work needs to start. And it will crucially depend on the next months, whether the dreams of so many supporters can be turned into a better reality of their lives. By appointing a truly forward-looking Government, by preparing elections to turn Parliament into an arena of trust and commitment and to dis-own it from oligarchs, and by selecting people for key positions in the country gifted and willing to energetically move the country forward.
After the Maidan protests and the ousting of President Yanukovich, Poroschenko had five years to prove that he understood what the people of Ukraine needed and were longing for and to act accordingly. He did not. As a result of his and his Government’s failure, the country today and its inhabitants are poorer, the territory is smaller, the conflict in the East has not ended, the Oligarchy is still in full power, and a selected group of people have amassed more wealth on foreign bank accounts. Another loss of time and betrayal of simple Ukrainians. Zelensky’s rise to power is the shameful sentence of complete failure on Poroschenko’s term.
The US, the European Union, and the international institutions would do well to listen carefully to the messages of the people, too. It is not wise nor efficient to only aim at stabilizing a counterpole and political bulwark against Russia. It is not the artificial language topic that keeps the Ukrainians awake at night, in a country where Russian is a dear mother tongue to many. It is also not the creation of an independent church that advances a country, where many have a decade long relation to their priests and parishes and the proximity to the Russian church is a century-long tradition. It is not even the fighting in the East and the annexation of Crimea by Russia or the demonization of President Putin and the Russian people in a country, where most have family ties to Russia and the Russian culture and traditions are embedded in everyday life. It is also not the accession to the EU or NATO that can rally people behind a common purpose or keep the young and energetic in the country.
No. It is like so often the economy, stupid. The harsh reality of money in the pocket and sheer survival at the end of the month. To get closer to European living standards is what people are dreaming about, and that students and young workers can stay in Ukraine with a perspective of development and modest wealth, and do not have to leave the country in millions to Poland, Canada or other countries to realize a decent life. The things that need to be done, are clear for thirty years, and it will depend on the political will of Zelensky and his key management team of Ukraine, whether they finally take the necessary steps and transform a country of endless potential into a country with a better future for the many and not bigger cash stacks for the few:
The first twelve months for Zelensky will be crucial and he will need to be brutal to bring this change to his country against enormous, powerful, well organized and wealthy resistance. The necessary political will and perseverance for such an undertaking cannot and should not be underestimated, as well as the necessary luck and foresight he will need to choose the right people for his team from the many advisors who will come forward now. As a reward and result, Ukraine has the prospect to become more European, with young Ukrainians wanting to build their personal future in this country, and separatists in the East getting under pressure to reunite with a booming Ukraine. In that case, Ukraine can turn into one of the hottest global investment locations for many years to come, and the coming Easter week a herald for the resurrection of the country.
A Macro and Micro Perspective
Dear Friends and Followers,
Since ancient times wise men have tried to read from stars, bones, runes, bird flight patterns, climate conditions and many other natural and supernatural events. Understanding patterns in a world where everything is linked with everything in a hyper-complex and ever-accelerating way gets more difficult by the day – many have given up.
The loss of general understanding and foresight is obvious: Our children have to skip school to tell us about the importance to invest into the preservation of our planet (which can be done with manageable resources today) while we drown a rotten financial system in money for free and endless taxpayer funds. We destroy our middle classes, write off the development perspectives of a whole generation, and are spectators to the rise of populists, minority bashers, warmongers and other dangerous propaganda from the forgotten ashes of WW2. We pour mountains of antibiotics into our food chain and are astonished about the renaissance of superbugs. And we elect people into office, who are outright fascist, extremist, unfit to govern, or simply idiots.
Time to lean back, have a good glass of red wine and read the meaning and direction of the World in the Tannins (this could be the future of fortune telling as humanity has given up on climate, animals and other traditional means, but alcoholism is on the rise!). Over the last days, 2.000 visitors have been in Bordeaux/France on their annual pilgrimage to understand the future of the best wines. We have participated in this pilgrimage and want to share what we have learned in discussions with winemakers, dealers, journalists, and serious wine addicts – and try to transpose these learnings into business reality. In a holistic world where up is down, and down is up, we can overcome the polarity between left bank and right bank, Merlot and Cabernet and clearly see our economic and political state and future in studying the Tannins.
What do the Tannins reveal:
China in Trouble: The last years, many of us thought to have arrived in Chinatown, not in Bordeaux, as the city was crowded with Chinese wine traders, journalists and investors. The breadth of the Chinese invasion in Bordeaux had easily matched their expansion in the South China Sea in previous years. While Chinese flags are still raised in front of famous Chateaux, we are finally back to normal. Chinese visitors are significantly lower in numbers this year. Obviously, Chinese traders are expecting less demand in their home country …
Russians turn homegrown: Following sanctions, an economic downturn that is mocking the official numbers, and increasing problems to invent new stories about the origin of money vis a vis scared private bankers, the Russian consumer tends to orientate towards culturally closer and most of all cheaper wines, i.e. from Moldova or Georgia. The French extravaganza is restricted to the real top end of the political and business class, and their numbers are shrinking.
Recession in Europe: Everybody keeps talking about prices. While in 2015 and 2016, experts were indulging into the great quality of the wines, accepting the price levels that would be set by the winemaker, this year the constant background noise of checking and complaining about pricing is omnipresent. In anticipation of the economic downturn, everybody is nervous about the looming price releases and their acceptance in the market
Democracies vs. Monarchies: Following Trump’s logic of cheering to life-long appointments of Presidents, there seems to be a benefit of non-democratic leadership. Whether it be the brilliant architectural restructuring of the city by Haussmann in the second half of the 19th century, the feudal order of organizing the Chateaux, or the multi-generational efforts of wine growing families into producing an ever-improving wine, there is reason to believe that for some developments of humanity, political leadership that stays beyond the narrow definition of an election period has a certain value.
The Brexit Psychosis: Brexit everywhere!!! The Brexit fatigue sensation has arrived in Bordeaux. Even additional glasses of wine and endless discussions do not lead to a better understanding of what is going on and to what it will eventually lead. Yet, new customs and duties on wine and a potentially weak sterling might contribute to a lower red wine demand, and pressure on prices. The World will move on, yellow vests might cry “French wine to the French” and the Eton elite will continue to indulge in Cheval Blanc and Latour wines.
The Deflationary Effect of Globalization is Nonsense: Inflation is there! The price development of the leading French wines demonstrates convincingly, that in a globalized world, prices can go up steeply. As soon as there is a limitation on production or monopolization of origin or supply, the only way is up.
We Only Taste What We Know: In the internet and robot age, where everybody is his own doctor, lawyer, forecaster and shrink, we re-appreciate the old Greek philosophic saying that we have first to know something before we see it or taste it.
Price Follows Brand Follows Quality Follows Continuity Follows Family: Having had dinner with a winemaker who is producing wine in the 27th generation of his family, and being witness to an industry where it takes a generation to start, grow and craft a truly outstanding wine you understand the meaning of continuity, which can only result from the responsibility of a family preparing the field for the next generation to come.
Or in a nutshell: Whatever happens in the World, happens in Bordeaux. The uncertainty and political sarcasm that you hear everywhere at the fireside chats is just another reflection of our current global downturn and political chaos. In that regard, the delivery of an excellent 2018 wine shall be a good harbinger for the excellent year 2021, when we can finally taste the bottled wines of 2018.
All best and Cheers
The very dynamic year 2018 comes to an end and the events of this year will shape the coming decade and beyond. We are witnessing a rapid transformation and disruption of our global word order, and the end-game of the domination of Western-style democracies.
Main events of the past 12 months
Other important events in 2018 included the (official) start of Genetically Modified Humans (GMH) in China, the Mueller investigation and economic and reputational cracks in technology giants like Apple, Google, and Facebook.
Review Forecast 2018
We had dared to make a series of forecasts for 2018 at the end of last year – some in stark contrast to banks and other analysts. Without going into the details and the reasoning, the review shows as follows:
Now to the more important look into the crystal ball of 2019 developments:
The good news: (1) there are many ways to invest successfully during recessions, every risk is an opportunity; (2) nobody can claim that there were no warnings; (3) the catharsis is needed prior to any new lasting and healthy upswing.
And finally, the sectors on which we are bullish for 2019:
We wish you a great, successful and healthy start into 2019!
This article is a summary of a brain teasing session that we held at the
NUS (National University of Singapore) Medicine International Conference, Singapore, November 27, 2018 and
at the Taras Schevchenko University, Faculty for Philosophy, Kyiv/Ukraine, October 2018
The Widening Cognitive Gap
Humanity is facing its biggest challenge yet. Since the beginning of mankind our thinking capabilities were beyond our technological capabilities. We could calculate the path of planets long before the first computers were developed and adapt our societies and legal systems to reflect the profound changes and possibilities these technologies were offering. We were mastering the technologies, alongside with understanding their impact, adapting ourselves and staying mentally sane at the same time.
This period ends abruptly. As our technological capabilities have started to grow exponentially, our cognitive skills are only growing gradually. This leads to a widening gap between what we can do and our understanding of its impact. The necessary adaptations of the way how we live and interact are not keeping up the pace. Huge parts of the population are intellectually left behind.
In case our societies and leaderships do not find appropriate answers and develop naturally into a higher state of governance, they will be abolished through revolutions or a putsch by small hyper-intelligent elites or robots, or a hybrid of both.
Philosophical Challenges Ahead
The main philosophical challenges can be summarized as follows:
They are valid on an individual level, and on a societal level, and have a huge impact on our daily life beyond any theoretical value. The answers to and societal consensus on these questions are defining the morale foundation of our societies, the way we interact with each other, the foundation of our laws and understanding of justice, the basis for all social contracts and state governance, and last but not least the breeding ground for our mental sanity and happiness.
Now, technological change and capabilities are creating a new playfield for these philosophical challenges and insights. This playfield questions the very fundamentals of our thinking, which have been stable for the last 3.000 years:
These profound challenges and questions to human societies are illustrated in six short take-aways, which are neither exclusive or exhaustive. They have a pure exemplary character for the challenges ahead of humanity.
(1) Freedom or Slavery: How free are we?
Everybody knows about Tinder and other dating applications. The basic idea is that people enter their profiles based on a set of parameters and preferences and are automatically matched by a neutral, objective algorithm, and set up to meet. So far so good. Instead of meeting at a bar, university, or work, Bob and Allison meet in the cloud. But imagine Bob and Allison meet based on a manipulated algorithm, or because someone wanted them to meet. Most users have a complete blind trust in algorithms, assuming that what comes out of these engines is neutral, objective and solely based on their criteria. We choose jobs, travel plans, drugs, business partners, romantic or sexual encounters, and even Presidents on that basis. Often because someone wants us to make these choices, not because it really matches our needs or preferences. Choices are increasingly outsourced to algorithms, which in reality are not neutral, of course. For the sake of convenience, anonymity and efficiency, we surrender subconsciously and naively our freedom of choice and widely open the doors to any form of manipulation. From the US elections to the strange ads following your search paths on the web, all possibilities to manipulation are and will always be fully exploited. The noise of constant information makes it easy for manipulators to hide themselves and their intentions and for us difficult to impossible to critically reflect and decide. In many countries every second relationship is originating in the cloud. There are predictions that the Millennials will be the last free generation on this planet.
(2) How to cope in a world where fake is real and real is fake?
Knowledge creation is based on the understanding of truth and beliefs, on a profound differentiation between true and false. We are moving high speed into a reality, where it is difficult to make this distinction. The digitalization and virtualization of all contents makes it too easy to digitally change, enhance or modify the truth: pictures, videos, sounds, statements, but also health data, personalities, bank account data. We do not have a truth stamp yet. While some politicians exploit this situation ruthlessly and create an alternative facts and post-truth habitat (i.e. The Washington Post counts 6.420 lies or grossly misleading statements of President Trump in his 649 days of office to date). At the same time, we openly provide biometric data, personal information and preferences, pictures, shopping and movement patterns and even sexual preferences to a big and unregulated data cloud, where these data will be stored forever.
With the foundation of knowledge creation in shatters, we give in to noise. The loudest will win the battle, the one who can push out a message to a maximum number of listeners and multipliers, no matter whether wrong or wright. Will the noise win in the end and be the new alternative truth? Will we be constantly influenced and manipulated? How can we navigate and orientate ourselves in a world, where we are simultaneously suffering from an overloaded brain and dramatically shrinking attention spans?
(3) Fusion of Man and Machine: The Identity Quest
It was a big surprise to science when in the beginning of the Millennium, US universities discovered that there was not even a 5 % difference between the DNA of a human and chimpanzee. Elon Musk has stated – and I tend to believe this estimation – that humanity had only a chance of survival and dominance vis-à-vis machines, in case that we fused with machines. But where will we stop to be human and start to be a machine, with 5 % of machine parts, or 50 % or 95 %?
This fusion has already started and will accelerate. It has taken off with the repair of defects/diseases from automated insulin pumps to bionic extremities, but this is only a starting point of human enhancements. The discussion of the essence of what is human has to start. Do we allow students with memory enhancements and runners with artificial joints? Is a human with 50 % machine parts still a human? And what happens if machines take over? Is a machine with an implanted human brain considered to be human? Can it register a residence and vote? It might sound sci-fi, but this process has started and is developing by leaps and bounds. Do not forget: the first Iphone was only introduced in 2007, and most people use it (or another smartphone/tablet) today more than 4 hours per day.
(4) Paradise 2.0: Robots work, Humans relax
Panic has arrived at the workforce level. The automation and robotization of large areas of our daily life and operations, will lead to mass extinction of low skilled and repetitive jobs. From automated trucks, to auto-pilot surgeries, sex robots, nurses, bankers, lawyers, huge numbers of jobs are set to disappear, and for the first time in history it happens across all industries. And we are talking huge numbers. In Germany alone, we have estimated 700.000 truck drivers. Who would believe we need those drivers in ten years from now and that we will have an alternative paid occupation for them? And this automation tsunami will hit white collar workers as well. How many banking outlets will survive in the next 10 years and what will happen to all the employees. What could be a paradise on earth, where humans relax and robots do the work, will not materialize with today’s distribution of wealth where the ownership of machines and capital is highly concentrated with a small group of super-rich. The way-out can only be a strategy of “panem et circenses” or a free general income for everyone in combination with broad entertainment and development offerings. The critical questions of who will own the robots, who will reap the benefits, what will be our occupation and purpose are getting louder. Whether our Western democracies will survive this strain on social systems in combination with the described proliferation of fake, has yet to be seen. We might see revolutions, the putsch of super elites or the transformation into managed democracies, such as Singapore or China, the end-game for Western democracies as we know them. There is no guarantee that a pure blood democracy will be the best form of governance to address the challenges of the future (see Brexit). In this regard, the mounting anger of wide circles of the population, the enormous polarity of our societies and the rise of populist movements is a bad foreboding of what to come. Donald Trump is perfectly Zeitgeist, and as in other countries his success is much more based on the hopelessness of the global middle class rather than on hyped immigration threats.
(5) Waiting for the spiritual revolution
If you ask teenagers today what they want to be later, you will not hear doctor, scientist or policeman. Many will answer that they want to be rich and famous. The life of the personal avatar is more important than the real one. Enormous time and energy is spent to create and communicate in the cloud an illusion of a perfect, pretty and sunny life. Confronted with real life, mass psychosis and depression are guaranteed. The meaning of life is reduced to the material riches. At the same time and, not surprisingly, all studies show, that people are to a high extent lonely, depressed, empty and self-centered. Their jobs are meaningless and boring, useless and they nevertheless suffer from burn-our syndromes. We literally touch our smartphones in average 4,5 hours per day – and human beings for mere 2 minutes. First we have lost our spiritual beliefs and ability to mediate in a fourth dimension (and do not forget: not to believe is also a belief). Are we now on the path to losing our human interface, hiding in anonymity and leaving all communication and interaction to technology? Where will the human race end up with, if we only concentrate on the left-hand side of our brain, on pure materialism – are we ourselves mutating into machines?
The good news: the spiritual revolution will come. As with many things, once the pendulum has swung too strong into one direction, it will bounce back with brutal force. It is only a matter of time and urgency. Humanity might realize it by itself in the end state of the global burn-out or by being forced into humility having experienced a global war or health crisis. Yet, the re-discovery of our minds and spirituality in combination with our technological skills might be the beginning of a new development stage for our race.
(6) On the verge to eternal life: the hunt for the ageing gene
There is no natural law/logic that we age and die, when cells in principle have the ability to renew and grow. So far, modern medicine was very successful in pushing up the average expectancy of life, with longevity being a mass phenomenon. However, the absolute maximum age of human beings has barely altered. We are entering an age where this will change. With the understanding of the human genome and the introduction of epigenomics, it is only a matter of time, resources and computing power until we will have found the triggers to stop and even revoke the ageing process of critical cells for our life. The hunt for the ageing gene and epigenomics is in full swing, and it will develop into the biggest business this planet has ever seen.
Then, humanity will reach the final philosophical question. The quest for the purpose of life is profoundly different in such a context. What will we do, if our life span is massively extended, and who might decide how long we live. Are we heading towards a super-elite, super-performing and longer living, which will dominate the rest of humanity, as Stephen Hawking has predicted in his last book? Eternal life can be frightening. Or are we entering the final level of our development, the human end-game, the last level of the development of our race? Note, scientists of the University Jerusalem have found out in an in-depth study, that male fertility had decreased by more than 50 % over the last 40 years, and the trend continues. So far nobody has found a satisfactory or consistent explanation for this phenomenon.
We have seen tremendous technological progress over the past decades. This has created great material wealth and well-being for many countries and its peoples. It has also strongly increased the inter-connectivity of people, communities and countries. Global resources have massively been allocated to advance this technological progress. However, this has come at the price of a slow erosion of our human interfaces and negligence of the social impact of the rapid progress. The technological progress has largely outpaced our cognitive mastering and social adaptation. It is time for a renaissance of social sciences to better understand how this progress will shape the societies in the future and how our race will stay in control.
The only time, when technology has shortly outpaced our social systems, was the beginning of the industrial revolution. This ended in real revolutions, wars, the end of aristocracy, the introduction of human rights and democratic systems. Humanity had the comfort of a 50-100 years adaptation period at that time. It can be excluded that we will be granted the luxury of such a slow-motion adaptation again.
Mind September/October for a serious stock market correction
The World is developing fast from a post WW2 liberal world order into a Nationalist Pre-Fascist World Order. Unfortunately, the President of the United States has hijacked the GOP and is leading this movement with an evil determination; the US has effectively stopped to be an advocate of human rights, a liberal world order, free speech, and media, strengthening of the rule of law.
This changing US role in the World will have dramatic consequences in the coming years and decades, and we should be prepared that we are heading into a post-democratic age. It gives an excellent pretext for other political leaders/movements to abolish inconvenient democratic standards. And it will have a significant impact on global trade and investment flows. These developments happen slowly but steadily while being blurred by the amount and speed of new scandals and while societies wrongly and dangerously get accustomed to the new normal.
Typical signs of a Pre-Fascist political order (and recent examples) are:
This erosion of global democratic norms and safeguards takes place, while the economy is booming – watch out for the looming recession. On a populist foundation, where masses have smelled blood and have been whipped for aggression against media, foreigners, political opponents, worse developments might happen. Pre-Fascist World Order implies that we are on the verge to a Fascist World Order. Unfortunately, the next recession is written on the wall:
Mind September/October for a serious financial market correction. Cash is king. An un-orderly Brexit caused by an incompetent UK Government and a reckless Tory party will only be an additional footnote in this scenario.