The Invasion of Ukraine Teaches to Invest Only in Democracies

On February 24, Russia started its large scale invasion of Ukraine. As we have many colleagues in Ukraine, we felt the shock personally. We had to cancel an evacuation flight to Antalya, which we unfortunately planned exactly on the date of the invasion for around 40 colleagues, as the airports closed. On the other hand, a number of colleagues had already evacuated to the Lviv area. A few others went abroad, to Turkey, Poland or Romania.

In the following weeks, almost all other colleagues and their families moved to the safer areas in Western Ukraine. To cover for relocation expenses and other emergencies, we contributed to the creation of an emergency fund: UAid.charity. This allowed to help more than 200 families in these extremely difficult times.

Impact for distributed Icecat limited

The business impact for Icecat was actually remarkably limited. We suspended activities in Russia, where our business footprint is relatively small. Further, only a few of our hundreds of Ukrainian colleagues joined the army or volunteered part-time to provide aid. And, our EU and US hosted services remained completely unaffected. The development teams, even the Ukrainian ones, continued their jobs after having moved to safety. And the same for editorial teams. To further mitigate the contingency of war, we created an Istanbul office for existing and new outsourcing staff. Which added one more content and development hub to our already distributed company.

World changed

Far more impactful is that the invasion and its horrors changed the modern world as we know it. Not only has business with Russia and Belarus become extremely difficult and “undesirable”. Also the energy transition accelerates, Ukraine requests EU membership, and, supply shocks fuel the post-COVID-19 recovery inflation even more. Suddenly, interest rates are on the rise, housing markets cool down, and consumers develop a depressed outlook on their personal finances. Even the scenarios of the 1970s, dubbed stagflation, are dusted of. Although, I am not sure if high inflation coupled to low economic growth is the most realistic scenario, it is still a possibility we have to reckon with.

Invest in democratic markets

What we know for sure is that the cheap central bank money bubble is deflating quickly. That lending will become more expensive. That bankruptcy ratios for highly indebted companies will increase. And, that efficiency gains through digitization of value chains, including e-commerce, will continue at a fast pace. At the same time, the new environment forces us all to make choices. Whether to continue to invest in dictorially-led countries or to fully abstain. We continue to make the choice to focus our investments on democratically organized markets. To avoid to have to say sorry in the next decade.

Martijn Hoogeveen

Founder and CEO of Icecat NV. Investor. Ph.D.