E613 | EUVC Live Powered by Woven Capital at The Drop | Alex Bakir, Norrsken Evolve: Climate, Competition & Chaos in a Fractured World

0:00AI really changes both the demand part and the solution part of the problem. So enter the age of AI, right? We talked about it very briefly. What is this super intelligence that has the possibility to solve all of our problems? Like, not sure what's going to happen there, but it's pretty clear that it's very competitive between companies for money, between nation states for security, ultimately. And then when I asked an AI to draw a picture of what AI is a fight over, it just drew this. So I don't know what they're fighting over, but they're fighting over something.

0:31Mic check. Oh, welcome to EUVC Live at the Drop. Powered. By Woven Capital.

0:46So to start with, hey, I'm Alex. I'm English. My mum is from Newcastle, a coal mining town. I was born just outside London. But my dad is from Iraq. He emigrated from Iraq to the UK in the 1960s. So in this wonderful era of post-World War II European awesomeness, I was like, what's going on, guys? The world is not flat. The world is not equal. Lights can be turned out, and they often are. Countries, unfortunately, can attack each other and often do. And it's called the nation-state contract is a competitive one. So what's going on with competition? This is heavily intertwined with sort of all of our systems, right?

1:25Social, political, natural, even at some level. competition let's call competition a company level uh really you guys are trying to grow right you're trying to survive you're trying to grow to do that you need resources resources tend to be very scarce and something to compete over so like this is a very ingrained concept that which you all have to deal with day to day uh so enter the age of ai right we talked about it very briefly what is this super intelligence that has the possibility to solve all of our problems like not sure what's going to happen there but it's pretty clear that it's very competitive right between companies for money between nation states for security ultimately and then when i asked an ai to draw a picture of what ai is a fight over it just drew this so i don't know what they're fighting over but they're fighting over something um so competition is very ingrained at the same time populism is popular again um took me by surprise actually um we if you like look at all the metrics we're doing the best we've ever done on like money and stuff you You know, the stock market has its blips, but it tends to come roaring back everywhere.

2:29So, like, why is this happening? Not sure exactly, but, like, one kind of thought I have is that some of the economics we've been talking about may not be accurate, or some of the assumptions we had may not be that accurate. So, like, I did, I have a master's degree in national economics. One of the core things in international economics is comparative advantage and free trade, right? So super quick, if I'm good at doing something, I should literally only do that. I should specialize my trade and do that one thing. So maybe I'm this guy making wood for construction. If you are not me, you should literally do anything else.

3:04You should not do this. You should do anything else of marginal value to anyone, but really, really good if you're really good at that. And then we will trade. We'll high five. I'll have some fish. You'll have some wood. Free trade will happen. and we will both magically be better off. So this kind of specialization in production, comparative advantage and free trade was meant to lead to the end of history. There was a philosopher, politician, sorry, political scientist called Francis Fukuyama that wrote in the 1990s, this is the end of history. So what the heck did he mean by that? He meant that we would all become so independent that we would all give each other so much stuff that the costs of getting into a fight would be too great.

3:44So this is the end of history, written unsurprisingly in 1990 after the fall of the Berlin Wall. Very optimistic time. So this wasn't the end of history. History seems to be carrying on. So what did all these theories we built most of our economics on get wrong? What was the assumptions? And one of the core assumptions was that this will be shared. The gains from this system will be shared equally. And the vibe that I pick up when I kind of look at what's going on in the internet, which is a very scary place, is that that doesn't seem to be the case. It seems like the gains from this system were heavily concentrated or are heavily concentrated.

4:22We have, by most measures, the most heavy concentration of wealth we have ever seen or ever recorded. So is it any wonder that a lot of people don't feel that the implicit promise of the nation state was not really met? So what is that implicit promise? I'm born, I go to school, I study well, I go get a job, and then I can afford to maybe start a family. I can afford to maybe buy a house. I think if you talk to a lot of people, and this age group is quite big, a lot of people don't really feel that way. The system didn't really work for them. Or more importantly, their expectations were not met.

5:03They had different expectations. So combine that with the really hyper-focused, personalized news feeds that we all get our news from that promote short messages. And is it any wonder that populist messages are popular? It doesn't really feel like a shock to me. I completely didn't see this coming. So this is sort of the world we're in right now. Also, it's important to point out we have been here before. We're very cyclical. cyclical. And some of the best researchers out there have time and time again shown us we have been here before. So Ray Dalio, which you guys should all know, awesome, runs Bridgewater, world's biggest ever hedge fund.

5:47He's great. He was just on Diary of CEO, listened to it. It's a great podcast, hour and a half long. So he says 80 to 100-year cycles. There's a couple of sociologists from Harvard, William Strauss and Neil Howe, that wrote this book in the 1990s, which looked at the same thing, the rise of nationalism and its correlation with international conflict from just purely a sociological point of view. Guess what? Same cycle, like 80 to 100 years. And so in these cycles, we're sort of at the end of that cycle. So while most people in this room were not alive 80 years ago, we haven't lived through this piece of the cycle.

6:22This cycle is not new. It's a realist part of the cycle. So utopianism, post-World War II, we built lots of institutions. We said, let's all hold hands and these legal systems will hold. So realism is a flip side of that in international relations, which is real things matter. What are real things? Money, power, energy, yada, yada, right? This end of the cycle is very realist world. This is also very real, right? I'm not even going to talk about this, but very real. I want to talk about this. So insert this month's drought, fire, you know, climate crisis. This is happening really, really frequently.

6:58One in 100-year events, probably one in 10-year events today. And so the only way I have a really framing that is this concept of self-organized criticality. Cool concept. It basically says any natural system that is beholden to the laws of physics when put under stress will approach a self-organized and critical state. In that state, if you just keep pushing it, you get this. So what is that? like avalanche, flood, etc. Have you guys read the three-body problem? That is the embodiment of a chaotic state, right? You don't really want it. Okay, so we have rising populism, 1.5. We expect shocks geopolitical and kind of climate-related.

7:40So how are we doing? Ultimately, we talked about it. I'm not going to cover this again. I do want to point out that Europe in international relations scholarship has been a declining power since about 1900. So this crumble isn't like brand new. right this has been going on for a while the european high point where most wealth was created was linked to the horrors of colonialism um and the industrial revolution ultimately so like this is the concepts which we will sit here today now i'm not going to talk about the fund we raised at all but i did want to kind of leave you guys with some thoughts because it's not that often i get to talk to lots of corporates that do control large parts of the economy right so okay in this world of rising protectionism, increasing shocks of various kinds, what should we all care about?

8:24Well, Europe outsourced most of its industry to a low-cost manufacturing base. 1975 onwards was super-fast acceleration and getting rid of that. So in this world, that doesn't seem to work that well. You are now reliant on a lot of stuff you don't have control over. So how are you going to predict your future profit, future revenue? I don't know. So we should think about that and maybe try to rebuild that. What's interesting about the rebuild is Europe clearly doesn't have enough fossil fuels. So if we're rebuilding that in Europe, it has to sort of be in fintech, climate tech. What else are you going to use?

8:55And that goes for a lot of the materials that get built into all the stuff we're looking at. The thing in the middle is shocks. Expect them. They will happen. And then the last one, the scales. So the populism piece of it, it's not really a short cycle. Everyone says this is like a blip or a thing. It's not that short. If you look at the research, it normally lasts for at least 10 years. I'm I'm not sure where we are in that, but unless we really address like the, who feels like they have a life that's good and like allow the populations, allow the people to on average feel like things are going well for them.

9:31I don't really understand how anyone expects the populism piece of this to go away anytime quickly. And so just final thought in a world, because dinner's coming, right? So in a world where AI is going to change everything, I think it is the people that are actually quite critical, at least right now. At least right now, all of you guys are doing pretty interesting stuff. And the people need to be talking to each other and supporting each other because these big kind of buckets are kind of here for a while. right so if you want your venture capital firm your corporation your x to succeed you know let's have dinner and like figure out how to do that together