States will cease to exist, cities will take their place – economist, best-selling author

The world is changing and it's changing fast – sometimes, too fast. You feel it, as everybody does. Mere decades into the Information age, we are witnessing globalization, changes in the ways the world communicates, in how it trades – and what it trades as well. These are the years of the great revolution, but what will it bring? What will the world of tomorrow be like, the world around the corner? We ask economist, innovative speaker and best-selling author Kjell Nordström.

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Sophie Shevarnadze: Dr. Kjell Nordstroem, welcome to the show, it’s really great to have you on our program today. So, as technology advances, nation-states are withering away and we’ll have cities instead. I’ve heard you say that lots of time. But, look, all over Europe, all over the world there are people fiercely obsessed with their national identity. London voted to stay in the EU - England voted to leave. New York voted Hillary - but the Bible belt voted Trump. What makes you think the nation-state pendulum won’t swing back - it looks like it’s making a comeback, no?

Kjell Nordstroem:  It’s seems like we’re looking for identification. After 35 years of intensive globalisation, we can now see that there's a little bit of backlash and it’s difficult, probably, for us, human beings, to identify with the globe as a unit of analysis. However, what I think we clearly see is that people identify with smaller units of analysis and the unit of analysis seems to be the city. So, cities seem to be more interesting than ever, particularly if we look at the numbers, where people are migrating.

SS: Borderless society has already existed in the EU for years, but with the migrant crisis and a spike in terrorism, borders are being reintroduced - and fast. Is it premature to hope for a world without borders?

KN: No, I don’t see a world without borders, I see a world full of borders, and the question is what kind of borders we will have - whether they are soft or hard. That’s number one. Number two, migration is driven by many factors, it’s not only war and terrorism, it’s also that people are in search of a better life. If you look at the border between Mexico and the U.S., or between the North of Africa and Europe, you can see that many people are also in search of a better life.

SS: But tell me something, how can cities exist on their own without a bigger framework - who will produce and feed all the bright minds and innovators sitting in skyscrapers? Look at Singapore, the Venice of our time, which imports almost all of its food ingredients from elsewhere.

KN: That’s where we are today, and the city of course needs the surrounding areas to support itself, that’s true, also, in the extreme case of Singapore. However, what we will see is, of course, that technology will help us to make the city in terms of degree somewhat more independent. However, I can see no state in the foreseeable future where the city is independent, no. The city will always need the surrounding areas.

SS: So do I understand right that your idea that the future is based on cities only is not nowhere near us. Weren’t you saying in your ideas that the world is going to made up entirely of cities?

KN: I think we have look at it like this: 2006, that was the year when more than 50% of the world population lived in cities. So that was a kind of a breaking point. Now, we are racing towards the next level and that is, probably, about 80% of the world population in cities, 25 to 30 years from now. Then, the world, in terms of its population, will be 600 cities that account for 80% of the world population. That’s just, you know, migration.

SS: I understand your idea and I understand how it can work, the total urbanisation, somewhere like in Europe, because everything’s close by -  it’s well connected in terms of transport – but, even 30 or 40 years, is it possible in a vast place like Russia?

KN: Russia does have similarities in terms of size with, for example, Canada, Australia, and actually to a certain extent the Nordic countries, because you might know that both Sweden, Finland and Norway have very small population in relation to the size of the countries, and these three scandinavian countries are some of the most urbanized in the world. So it might well work the other way around, if you see what I mean.

SS:  Ok, so let’s imagine all that you’re saying is going to happen one way or another. So 50 years from now, who will have the briefcase with the nuclear codes - the San Francisco mayor or the mayor of Boston?

KN: I think, for the foreseeable future, London, San-Francisco, Moscow, Berlin - the cities will have to accept that the power, the ultimate power is still in the hands of the nation-state. Although, I think, both you and I, and the rest of us, will experience how the cities gradually, of course, claim some of the power due the fact that there are many people in the city, number one, and number two, the city accounts for so much of the value production, the creation of value, and that usually can be translated into power if you see it over a longer period of time.

SS: I want to move on to money matters.  Will we see a kind of return to the Middle Ages, with every city having its own currency?

KN: I see what you mean. You are having the virtual currencies in mind, of course, and now we have somewhere between 700 or 800 different currencies. One of the most well-known today is, of course, bitcoin, I think most people have heard about bitcoin. This is some kind of currencies.

SS: So what role will this cryptocurrency play in, you know, decentralization? Could we be taking it more seriously, or is it a market fact? Because there’s a lot of controversies about bitcoin today. I mean, it’s a great idea, but it’s not totally working.

KN: I agree. It’s a great idea. It is not totally working, and I guess most of us would not like to save our money in that currency, and the prime reason being that it fluctuates dramatically, and most people don’t want their saving to fluctuate that dramatically. So that’s number one. Number two - we do have some countries in the world that now are interested in reducing the use of cryptocurrencies and various cryptocurrency kind of offerings. China is one such country that have said “No” to the use of some of these currencies. The central government in the country does have a monopoly on currencies.

SS: But can you actually fight the technological trends? Can you stop the cryptocurrency from happening in the future?

KN: No, usually you cannot stop technology. And that’s an excellent question, Sophie, thank you very much, because this is sometimes a little bit misunderstood. We cannot stop the technological revolution in any area, whether it is stem cells, the ability to grow certain organs on the skin of a human being, or computer technology in a general way, or any other technology, because it’s driven by human curiosities. So, I can see no state where we stop technological development, as long as we, human beings, are here.

SS: Digitised services are a big factor in this enormous shift you’re talking about. The internet of the 1990s was, perhaps, less omnipresent, but it was decentralised - now most of our lives are on Facebook, Apple, Amazon, Netflix, Google, just a handful of companies. Do you see the danger in this monopolisation?

KN: Any kind of monopolisation introduces, of course, problems, and this is not new. We have seen it before in a number of industries, how one or two, sometimes three companies, totally dominate the industry. We have seen it in the automotive industry, with a handful of players dominating the industry. We saw it in the oil and gas industry - a 100 years ago. We have seen it in the telecom industry. This is not the first time that one, two or three companies totally dominated industry. And what has happened is either of two things: either technological development has made some of these giants more or less obsolete, because new technologies have introduced new players. So that’s one thing that tends to happen. Another thing that tends to happen is that we go after these giants with the law, the book of law and basically break them up, and this has happened before. Companies have been broken up. Monopolies are, usually, a bad idea.

SS: You once said that the market is a machine that has no soul - that we need to put soul in it. How do we do that? You mean socialism?

KN: Socialism was of course an effort or an attempt where we tried to do that. Now, markets do not really have a soul, technologies usually don’t have a soul. We have to instil that from the outside. The way we do it is usually by legislation in our respective countries, but technologies are neither good nor bad. I mean, the Internet in itself is neither good nor bad, it’s a matter of what we use it for. The same goes for markets. Markets are in themselves neither good or bad. It’s what we trade, how we trade it, under what circumstances we trade.

SS: Yeah, but also, I’m trying to figure out what they will look like in the future. For instance, there’s an experiment going on in Finland with the idea of universal basic income, with a sample of people given a limited amount of money by the government regardless of their employment or wealth - is this Scandinavian socialism gone too far, or is Finland a step ahead of the rest?

KN: Actually, they are trying to answer exactly that question. No one knows, no one really knows what happens if people are given a certain amount, a basic salary every month - will they work harder, will they work less, will they do art, will they play games? How will people act and behave over a longer period of time, if they are given a small, I should say, basic salary, because the basic salary here is between 500-600 euros a month, which means that it’s not that significant. So, this is a piece of research, I think we have to see it for what it is - it’s research, basic research.

SS: Also I want to talk about the university education. That’s been discussed a lot lately, how it’s overrated and all. And you’ve been saying that a university education is becoming worthless - as you don’t have to go to Harvard because everything you need to know is available online. However, a university isn’t only giving you a diploma, it’s supposed to teach you the skill of self-education, perseverance, discipline - I mean, if you go to Ivy League schools, that’s really the network that it gives you that you then live in, in the world, lately - things that will be useful in any work environment. Will that not be enough to keep colleges going – where else will we be taught all that?

KN: You are exactly right, but I think what we can see is that many of our very basic human activities now fall into two categories, and I will try to explain. Let’s start with something basic that we do in almost every country - banking. One part of banking, we do it from a distance, we do it from our mobile phones, with our computers. It’s totally robotized, if you want, there’s no human being involved in the process. So that’s one side of banking. Then there’s another side of banking, which is when it’s super-sophisticated, and that is when you are buying your first house in a city where you were not born. When you are, for some reason, divorcing and you have to split all the financial resources in a fair way - then you need advice, human advice, and you need to see the banker, and you need to see your bank. Back to universities: lectures, old-school lectures, we need one, two, four or five really good professors that do that, and they can do it on camera for people in Oxford, Chicago, Moscow, Stockholm and San-Francisco at the same time, and from a distance, it’s fully automatic, if you see what I mean, very limited involvement of human beings. However, if you want to learn that discipline, perspectives, or knowledge, philosophy, how to analyze Shakespeare’s Macbeth and compare it to Hamlet - then you need to sit down and discuss in a small group with a senior professor - then you need to see each other. And you need to spend a long time together, furthermore. So, I think we will split many of the human activities into two piles. The component that can be fully automatic, and the component where you really need human interaction. And the rule of thumb is anything that can be digitized will be difficult to earn money on.

SS: You know how with Internet there’s overwhelming amount of information that comes into our lives. I mean, people stopped reading books, but the amount of words that they read is actually more than before, because you read so much stuff on internet, whether it’s useful or not. What can we do to keep up with the flow of information that we get into our lives every day? Actually, I feel like we need to do something with it, to prevent ourselves from becoming more stupid every day…

KN: In principle, theoretically speaking, we are all becoming more stupid every day, for the simple reason that the brain is the brain and it doesn’t develop very fast. However, we almost double the amount of information on planet Earth every second year, which means that in relative terms we know less and less and less. But that’s, of course, just a theoretical sort of spin on things. Now, on a serious note, we get a lot of information, we get a lot of data points, but to make sense out of them is still not that simple, which means that many of us now are informed but in a very weird and sometimes kinky way because we are putting information and data points together that actually don’t belong in the same context, within the same framework. I think the answer, long-term, will be machines. We need the help of machines here, because it’s far more data than any human being can process. So, in a longer period of time, we need an innovation here - or an invention, even, not even an innovation, rather an invention. A basic invention. You know, Google was such an invention once upon a time - how to navigate all the home pages…

SS: So are you saying that we need an invention that would actually help sort out the information that we intake.

KN: We need an invention that can validate, test the reliability, the relevance of the data that you and I are looking for. Let’s assume that you and I are looking for data on diabetes. Okay. If you google “diabetes type 2” today, you will get massive, massive amounts of data. But the question is - what about the quality of this data? The reliability of this data? The source of this data? And here we need help of a machine that can classify, categorise, standardise all this data. Otherwise, you and I, are in risk, of course, that we read a lot about diabetes 2, but it is not really up to date. And that’s where we are today.

SS: Half of the world’s population have never used a mobile phone. Regardless everything we’re talking right now, half of the world’s population hasn’t used a mobile phone. When we talk about digitalisation, the globalisation of everything - this hardly has anything to do with those parts of the world where children still have to walk miles to school, they don’t have clean drinking water… Are technologies leading to the reality in which the developing part of the world will trail hopelessly behind the developed?

KN: It’s a fantastic question and reflection. Now, number one: over the course of the last 30-40 years, we have - and by “we” I mean the world  - we have lifted so many people out of ultimate poverty, that today you could argue that we have 1 to 1.5 billion people that still live below the poverty line, which is, of course, horrifying. What we can see, though, is that technology, the way we think of it today, the fact that we trade with each other, seems to create value also in the most poor corners of the world. So, decent assumption is that if we continue along the lines we see today, with global trade, human interaction across borders - we will probably have eradicated poverty the way we define it today, in about 10 years. Then we will have to redefine poverty.

SS: Do you feel like we are headed into a “high tech, low life”, into cyberpunk? They use Twitter in Kenya to prevent sheep theft, or drone deliveries in Syria to drop bombs on people - the technology is seeping into the so-called “third world”, but is it really changing it? That  is the question.

KN: I don’t think that technology usually changes human behaviour. To a certain extent you can say that over a longer period of time we are affected by technology. We know, for example, that in a number of countries and in a number of cities people, also young people, prefer to do their dating using a machine, rather than hanging out in a bar. Then you can say: okay, technology has obviously in a very fundamental way, changed human behaviour, because we didn’t have machines before when we did our dating, but now we use Tinder or any of the dating apps. But I would say, on average, no - technology doesn’t change human behaviour. It’s rather the other way around, we adapt the technology to our ambitions. And if our ambitions are good, we use the technology for good, and if they are bad, we use it for bad. Technology is neutral in that sense.

SS: Kjell, thank you very much for this interesting interview. It’s been pleasure talking to you. We’ve been talking to Dr. Nordstroem, discussing the changes our society is undergoing in the Information age, with economist, innovative speaker and best-selling author, once again, Dr. Kjell Nordstroem. That’s it for this edition of Sophie&Co, I will see you next time.