Swedish economist Kjell Nordstrom planned to give an insight session “Business in F.A.A.N.G. style” on 17 May 2018 in Yerevan. Given the situation in Armenia, the organizer skill.am consulted with the partners and participants of the session in April and decided to move the event to 7 September 2018.

Ahead of the visit to Armenia, Kjell Nordstrom gave an exclusive interview to Banks.am.

Do you know anything about Armenia or Armenians?

Yes, I do (laughs - Mediamax). I know it is an old nation with a very old culture that goes back way before Christ. So, I know a little bit about Armenia, but I will be happy to learn more.

What do you think about the latest developments in the so-called ‘FAANG’ companies (Facebook, Amazon, Apple, Netflix and Google)? Facebook particularly is in hot water because of the concerns over user data privacy. Do you believe it will affect the ‘FAANG’ monopoly or the changes will not be dramatic?

I think the changes will be dramatic. Not tomorrow, not next week, but we will see it in a period of two-three or four years. There will be definite consequences both in Europe and the United States for not only Facebook, but also the other ‘FAANG’ companies.

The reason is that today the consumers and the governments in our countries gradually realize that when something is free in the meaning that you don’t pay for it with your money, you pay with data about yourself. More and more people understand this business model.

Do you think these changes will impact business? As you know, many small businesses don’t launch websites, but simply create a Facebook page or group and do good marketing, sales, etc.

Yes, I think business will be affected. But what I think will be kept is the transparent deal, let’s call it that way. Transparent in the sense it is a much more clear-cut deal on what you are actually giving and getting. As Facebook CEO also said, we might end up in a situation when you pay a little bit for services and you pay with money, not your information.

Essentially, you will buy the services from Facebook. If Gmail was a company in itself, you and I would have to pay for Gmail a few dollars a month. It will not be all that expensive in most cases, but I think it is not a threat to small companies. I don’t see it that way.

This is not the first case at all in modern times. We broke up some of the oil companies when they had an almost monopoly situation and we broke up some telecom companies, when one company became eight companies. I would like to emphasize that this is not unique, not an unknown thing. It is just that it happens in modern times, with modern companies.

Another popular topic of discussion today is artificial intelligence and its influence on business and labor market. Some say that many professions will disappear and others claim that artificial intelligence will require more skilled specialists. Do you think that some balance will be found?

Yes, we will find balance. The way we used robots in industry 15-20 years ago was that a worker would be taken out and substituted with a robot. Today we can do it in a little bit more sophisticated way: use an algorithm where now a bank teller, an insurance agent works.

Countries are different here, and in some countries we will substitute many jobs away, especially in low-productivity countries. This means that you can easily use a machine instead of a person in simple jobs, relatively speaking. If you take the other extreme, the highly productive countries like Sweden and Japan, I would say 5-8% of the jobs can be substituted by robots, because production there is already extremely rational and efficient. So, the jobs that are left are quite sophisticated in most cases. For Sweden, Norway, Finland and Switzerland, the countries with extremely high productivity, the impact will be quite low.

In low-productivity countries with less efficient manufacturing and service production, we can expect machines to substitute up to 15-20% of the workforce over a period of time. However, and this is a big, important ‘however’ - we will tax these machines because they do create value. And since they create value of some kind, they can be taxed, the same as you tax a human being. This will be a new tax base, and of course, this money can be used to some extent for mitigating the effects on the economy.

You mention in one of your books that former Soviet republics lag behind the world economy development. What are the key factors for creating a “funk style” business environment here? And do you see a direct link between democracy and flourishing economy? In other words, is it possible to have a flourishing economy without a full democracy in the country?

I traveled so much in the post-Soviet part of the world and many people spent long periods of time trying to understand both the public and the private sector. Clearly, there are a couple of things to be understood.

Number one: market economy is a numbers game, a little bit like tennis. If many people play it, you will get one Boris Becker or John McEnroe, but there is a necessity that many try in order to get one star. That means it has to be a broad reform program that brings everybody, young and old, as many as possible into the market economy. Make people more entrepreneurial so that they understand how the economy works. This is an educational thing to large extent, mass education in a way.

Number two is something more philosophical and it is the simple fact that cultures seem to change very slow - not only the Soviet tradition, but ethnic cultures too, which means that today, in factories and countryside, people still have that planned economic logic.

As for the economy without democracy, the example that is used is China. That country is not a democracy, but it has economic development that is very dramatic, everybody knows that. They are moving forward very fast in economic terms.

We can say many things about that, and number one is that China has now reached probably the position where you have picked the low hanging fruit. They have to start improving the efficiency and effectiveness, become more innovative, but there is problem of being innovative in an environment that is controlled by the police and the government, where internet is controlled. It is difficult then to assume that you can create something like Google or any other ‘FAANG’ type company and that basic innovation could happen in China. Why? Because it would never be accepted by the central authorities. It will only be accepted when the technology is checked, double-checked and compliant with the government standards. And this is exactly what we have seen - that Chinese, to large extent, copy technologies that were developed in Silicon Valley. They copy them fast, sometime they improve them, but they also adjust them so they fit in the Chinese context.

The general answer to your question is that it is difficult to drive economic development over longer period of times without democratic reforms. You can pick some low hanging fruit, but rather soon problems arise.

Armenia is a landlocked country without resources and we are in transport blockade due to problems with neighbors. But the general opinion in the society and the government is that we have smart people, our IT sector is developing quite well and we can rely on that. Do you think that a country could become sustainable if it puts the main focus on its smart people?

I think in a way the answer is “yes” and we have examples that show this is possible. Landlocked, very small, poor, with a hostile neighbor - that is Singapore 40-50 years ago. Today Singapore is one of the richest areas in Asia.

Of course, there are other examples, but Singapore is the most extreme case because they have developed in a very short period of time. They were indeed very poor, they did not have a highly educated population. Although the people were literate, they were not university educated.

You often say that the world is changing too fast. Is it possible that you make changes in your Yerevan event programme and perhaps talk about topics that you have never raised before?

It is not only possible, it is the way I work.

Ara Tadevosyan talked to Kjell Norsdstrom