Technology and Geopolitical Expert, Arcano Research, Spain
Arcano Research is the analysis house of Arcano Partners, offering a subscription-based service that covers macroeconomics, geopolitics, and technology. Our technology research helps business leaders understand technology changes so they can make action-oriented strategic decisions. Our economic insights encompass critical global topics by geographic blocks with both short-term and long-term perspectives, empowering our customers to make informed investment and strategic decisions.
Can you comment on how Arcano Research adds value to the companies it works with?
At Arcano Research, we combine both cyclical and structural analysis to provide insights that enable businesses to stay ahead of technological changes and seize opportunities. Our research bridges the gap between various economic and technology factors, offering a holistic view that supports informed decision-making and strategic planning. Our approach integrates a comprehensive understanding of global and local economies, monetary policy, geopolitics, and market dynamics with a keen focus on the impact of emerging technologies. This is why we have over 300 clients with diverse profiles, including more than 50 family offices, over 40 private equity firms, and 75 real estate profiles.
Our value proposition stands out for our independence, which allows us to act as anticipatory agents in an educational manner, serving as a filter and time saver for decision-makers in the real economy.
One of the latest studies released by Arcano Research talks about Generative AI and employability scenarios. Can you tell us how these topics are related?
Generative Artificial Intelligence (GenAI) is potentially the most transformative technology since the Internet due to substantial investments, technical advancements, and user-friendly applications as the solution both empowers some jobs and replaces others, making reskilling and upskilling critical for companies. Our study anticipates that GenAI will double worker productivity, particularly among software developers, lawyers, and finance professionals. We also predict a net unemployment rate of around 2% in the medium term. Unlike past industrial revolutions, GenAI is more likely to automate these white-collar jobs, though, advancements in AI-enabled humanoid robotics may eventually lead to job displacement in blue-collar sectors as well.
While GenAI is still in its early stage, the technology is expected to create numerous jobs, mitigating some of the net unemployment caused by automation and preventing wage deflation for affected workers. The most significant job growth will likely occur in STEM fields who are called upon for their need to not only securely develop and deploy these new solutions, but to more effectively work with the data these models produce. Furthermore, GenAI will transform many job roles, enabling workers to focus on higher-value intellectual tasks rather than routine ones. This shift will necessitate continuous skill development and better training for workers to maintain their value in the labor market.
We are at the dawn of a new platform shift that will fundamentally reshape our interactions, restructuring how companies operate and how we operate in the world. This transformation not only changes how we engage with our environment but also unlocks numerous new possibilities for innovation and growth.
Is the scenario that you describe reflected in every European country equally?
European countries are experiencing unequal impacts from new technology solutions due to three main factors: the rate of adoption, labor market composition, and social safety nets. For instance, Italy and Spain have directed the largest amount of EU funding to boost their AI investments, while the United Kingdom and Germany lead in investment and AI-driven research driven by private investments, influencing the pace of AI adoption in these countries. Despite these variations, the decreasing costs of developing and deploying GenAI, along with an expanding market of both open and closed-source solutions and the technology's ease of use, suggest that widespread adoption across Europe is likely within this decade.
The unequal impact of GenAI also stems from differences in labor market and sectoral composition within each country’s GDP. European countries where professional services dominate employment, such as in Western Europe, will be more exposed to the productivity benefits and automation risks of GenAI. Conversely, those with stronger primary and secondary sectors may be less affected by this technological disruption. To mitigate the potential impact of automation and avoid social unrest due to sluggish job creation, more generous unemployment insurance and robust upskilling and reskilling programs may need to be introduced. However, countries with high fiscal deficits and public debt will struggle to cushion the unemployment blow.
Recognizing the competitive necessity, European firms are increasingly focused on building and testing GenAI minimum viable products (MVPs) before integrating them into their offerings.
With the previous answer in mind, how necessary is the use of new technologies for decision-making within the companies?
Scouting, adapting, and implementing new technologies is critical for companies to thrive in the modern world. Management should start with a three-pronged approach: technology radars, solution radars, and a comprehensive AI strategy. This first step involves identifying technologies like GenAI that will have a horizontal and vertical impact on their business in the short, medium, and long term, driving growth, disrupting sectors, and transforming operations. Once the most pressing technologies and use cases are identified, companies should conduct a thorough scouting effort to review and deploy the best solutions internally. These activities should align with a larger AI and data strategy, ensuring the use of accurate, high-quality data for better decision-making. These strategies must be dynamic, continuously evolving to adapt to company changes and customer needs.
Our research highlights how disruptive new technologies can be, exemplified by the educational company Chegg. Following the release of ChatGPT, which students used for tutoring, Chegg experienced a significant drop in stock price and recently cut 23 percent of its staff. This underscores the necessity for companies to proactively adapt to new technologies to maintain competitiveness and resilience.
Can you comment on how technological developments affect other aspects of European society and economy in areas such as Logistics?
Technological advancements, especially in AI, GenAI, and automation, significantly impact various aspects of European society and economy, including logistics. Analyzing processes of a supply chain, thanks to AI algorithms, is a key first step to reduce bottlenecks and improve speed and productivity at companies. For example, the German software firm Celonis partnered with snack-food supplier Mars to use GenAI for combining truck loads, cutting shipping costs, and speeding up delivery. This collaboration has resulted in an 80 percent reduction in manual processes, lowering shipping costs, reducing emissions, and improving shipment times. Additionally, automation technologies such as autonomous vehicles and drones are transforming transportation and warehousing, enhancing speed, reliability, and safety while reducing labor costs. These innovations make the logistics sector more responsive and resilient, crucial for the broader economy by ensuring the seamless movement of goods and services. Amid growing global trade tensions and geopolitical shocks, such as the conflict in the Red Sea causing ships to reroute around Africa instead of using the Suez Canal, reducing shipping costs in supply chains is increasingly vital.
On the other hand, what is the importance of cybersecurity in company transactions? Has cybersecurity and data protection become a more relevant topic as more technological advances are reported?
The rise of GenAI has significantly increased the frequency, severity, and sophistication of cyber threats. Since the release of OpenAI’s ChatGPT in November 2022, there has been a staggering 4151% surge in malicious phishing messages. Additionally, real-time deepfake videos that can convincingly impersonate individuals in both audio and visual forms have made securing systems and personnel even more critical. For instance, an employee at a multinational firm was deceived by a deep fake video call, leading him to transfer $25 million to fraudsters. Research indicates that human error causes approximately 90 percent of cybersecurity breaches, highlighting the vulnerability posed by sophisticated phishing attacks despite advanced security measures.
To counter these threats, it is crucial to implement AI-enabled cybersecurity solutions capable of swiftly identifying and patching security breaches, detecting unauthorized access, and ensuring that both systems and employees work together to uphold cybersecurity objectives. The relevance of cybersecurity and data protection has indeed escalated, with regulations like the European Union's General Data Protection Regulation (GDPR) and the Network and Information Security Directive 2 (NIS2) emphasizing the importance of safeguarding personal data. NIS2 introduces measures to hold top management accountable for gross negligence during security incidents, shifting some of the cybersecurity responsibility away from IT departments. Though as a final point, implementing multifactor authentication can prevent most phishing attempts and increase company security when coupled with a strong AI-cybersecurity detection tool.
Speaking of data protection, what is needed to then advance these new cybersecurity regulations? Do you think it’s a topic that should be discussed by the governments as well as private companies?
Creating effective cybersecurity regulation presents a twofold challenge. First, companies are often slow to comply with current cybersecurity standards. Second, regulations tend to lag behind the rapidly evolving cyber threats. Businesses struggle to quantify the return on investment for new cybersecurity measures, such as hardware, software, and employee training. However, reframing the risk in terms of long-term reputation damage and financial loss can clarify their Return on investment (ROI). With the average cost of a data breach at $4.45 million per incident and over 75% of consumers unwilling to buy from a company that fails to protect their data, the stakes are high.
Addressing this issue requires companies to adopt a government-like approach and vice versa. Companies must recognize that many cyber threats are sophisticated attacks by state or state-sponsored actors engaging in corporate espionage or targeting businesses in adversarial nations. This means the threat comes from highly skilled professionals, not amateur hackers. Governments need to acknowledge the limitations of private companies facing these sophisticated attacks and work closely with them. This involves implementing clear, understandable regulations and maintaining regular communication to inform businesses about emerging threats.
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