The war in Ukraine has stunned the whole world. How can something like this happen in 2022? The conflict in Ukraine influences foreign and security politics globally. Moreover, it significantly impacts national and regional economies, businesses, and technology development. What can we expect? Perhaps we can learn something from the Cold War era. But now technology plays an even more critical role in development.
Although the war in Ukraine is very recent, we have already seen evidence of a military race for some years. A well-known example is that both the US and China have realized the strategic significance of AI. Both countries have started to invest in it significantly, including for military applications. Unfortunately, the reality is that military investments will now be increasing globally. Germany, which has been careful in its military investments since WWII, said it would invest an extra 100 billion euros in the military.
During the Cold War era, the military race played an essential role in new technology development. Silicon Valley also has a lot of history in military technology. Not only has DARPA funded many new technology projects in the US, even the Internet is the result of a military project – ARPANET was the first instance where the TCP/IP protocol was used to make a network that could also work under a nuclear attack.
In many other countries, the military sector has been important to new technology development. After the Cold War, for example, Israel emerged as one of the countries where military projects led to the creation of many startups.
Such an increase of investments in the military sector is about not only developing more advanced technology and equipment for the military, but also better preparing for the future crisis in critical sectors such as energy, logistics and food. Many countries are starting to realize that they cannot count solely on global supply chains for vital resources.
Five pillars that shape national security
Can we make any evaluation of what kind of technologies and businesses could be especially interesting for future needs of the military and societies as a whole? Let’s make some assumptions:
- Data and AI are becoming more important for military operations and just about everything else in societies. In wars and other conflicts, it is crucial to have good situational awareness, know what your enemy is doing, target your own operations, and know the latest status of your resources. AI and data are also important in all other sectors whether in war or peacetime, from healthcare, logistics and cybersecurity to sustainability and transportation. This also accelerates the development of decentralized solutions that are more resistant and have no single point of failure.
- Financial services constitute a cornerstone pillar of economic stability; financial sanctions have demonstrated their importance and power. Back in 2018 I wondered when fintech development and services would be recognized as a strategic sector.
- One of the most affected sectors is energy; this sector suffers from the current conflict, especially because Russia is a leading oil and gas producer. This dependence on Russian oil and gas resources will accelerate the development of new energy solutions and technology to save energy. Probably we will also see progress with small-scale nuclear power plants. This development also means increased demand for electric vehicles, new airplane engines, and other new transportation solutions.
- Supply chains and logistics had issues already during the pandemic; the Ukraine war has made those issues bigger. This means local production and more resistant supply chains. We’ve already seen this in the semiconductor industry, e.g. Taiwan alone is a huge risk in the chip industry.
- Food and farming are also critical resources that need more local solutions. Ukraine has been a considerable food producer, and Russia and Ukraine are essential exporters of fertilizers and their ingredients. Technology also offers new opportunities for farming in new ways, e.g., vertical farming.
The significance and limitations of public funding
If we look at the areas listed above, we can say it is really a combination of very back-to-basics things and very advanced high-tech. A common factor is that governments, alliances (such as NATO and the EU), and the public sector have more interest in these areas, and public funding will start playing a more critical role in these areas.
At the same time, climate change and sustainability have been important drivers of public investments, and are very important for safety and life in the future. Actually, many of the above-listed areas are crucial for the fight against climate change and other ecological challenges as well as national security (some would say climate change is a national security issue). For example, renewable energy, more effective logistics, and new solutions for farming are essential for sustainable development. And actually, Covid already created similar needs and emphasized the role of the public sector. We can say we have a sequence of events that drives new similar priorities.
The news from Ukraine now is horrible, and the obvious priority is to end the war and suffering, and protect the rights of innocent people. At the same time, we must prepare for the new reality. Many governments start new initiatives, but governments lack the resources and capacities to implement these new solutions. It will be up to private companies to innovate in order to solve emerging challenges. This also means new business opportunities.
All these crises seem to be driving technology development and investments back to basics. Maybe fancy mobile apps and 20%-more-efficiency SaaS services are not so important anymore when we must think of solutions for human health, safety, security, and basic needs. Public sector funding is becoming more important in some sectors; still, many private investors most probably realize that the future opportunities lie more in making something much more significant than all these VC investments made inside a bubble where we ignored the risks around us.