5 insights and 3 predictions from Davos

A summary of Davos is really not possible given that there are many simultaneous public sessions, as well as private by-invitation gatherings, spread over four, dawn-to-midnight days. All that one can do is summarise the Davos that an individual experienced, somewhat broadened by other participants’ takeaways.

1. A point of view depends on one’s perspective.

The reality of how different speakers and panellists saw the world was highly dependent on the world they were experiencing.

The Europeans were at the centre of the discussion but the most unsure of their institutions and their future: given the recent European Central Bank tightening; the surge in the Swiss franc and weakness in the euro; real worries about deflation spiralling out of control; doubts on whether they had the leadership to carry out the fiscal and structural reforms necessary to put their economies back on track; and the worry of home-grown terrorism.

Two statistics that were shared from the stage illustrate the challenges facing Europe and the need for significant structural reform:

• The continent has 9% of the worlds’ population, 25% of the world’s GDP, but 50% of its pension liabilities.
• At today’s euro exchange rate, with all the various work and pension rules, a European employee costs a multinational firm twice that of an equivalent American worker for the same job.

The Asians were surprisingly quiet. The Premier of China came to assure everyone that while the Chinese economy was slowing, they were hoping that entrepreneurial innovation and more investment in business versus infrastructure would turn things around. The Chinese were eager to prove to the western leaders who believe China is hard to do business in, and that the growth story for their firms is over, that this is not true.

Interestingly, the Chinese themselves are moving their investments outside the USA, with more Chinese direct investment outside of China than foreign direct investment in China. The real star from China was Jack Ma of Alibaba who, in addition to his great humility, has a focused vision of enabling small businesses and building a marketplace of two billion, in a way that’s increasingly global but connected to China and Asia.

Many business people accompanied India’s Finance Minister and, while there was a new-found enthusiasm for the country given the new government, it was surprisingly not mentioned in many economic conversations. So much so, that at the end of the session on global economics a prominent Indian business leader went up to the stage and said plaintively: “You forgot to talk about India”.

If there was a ‘belle of the ball’, it was the United States. The strength of the economy, from growth to a strong dollar to innovation, was called out again and again. The US felt like it was the new emerging market. The Europeans were particularly concerned about their lost decade on innovative technology, noting that they had failed to develop a Google, Facebook, Tencent or Alibaba. The Americans noted how hard it is to start a business in Europe and the work and labour rules.

Latin America was, as far as I could tell, somewhat missing in action, while the Africans were beginning to emerge. One of the best lines was “First we get the news, and then much later we get perspective”. An African entrepreneur noted that Africa was not an “Ebola-infested continent”, because only three of 54 countries had Ebola, and one of them had controlled it on its own. Here was a continent with a billion people, 75% under 25 years old, six of the 10 fastest growing economies in the world, and more advanced mobile payments than the West. The key challenges in Africa remain lack of skills and the balkanisation of the continent into 54 countries where people and goods find it hard to move.

Davos teaches one to be aware that what one sees depends on where one stands and where one comes from.

2. Organisations are struggling between the past and the future.

Two driving forces of globalisation and digitisation are challenging every organisation, whether it is public or private. These institutions were built for a slower moving, top-down, Western-centric, analogue reality and now have to deal with a fast-moving, multipolar, start-up and digital mindset. As someone asked: “Would the EU be designed as it is, if it were designed today?”

During a conversation between the recent or current heads of intelligence agencies (yes, MI6 and stuff) they bemoaned how difficult things had become for security services, noting that five years ago they did not have to deal with:

• extremists from inside their own countries,
• cyber warfare,
• Snowden revelations, and
• having to get judges to agree not to wire-taps, but unleashing algorithms on large swathes of data.

The CEO of Dow and Old Mutual at a Bain breakfast noted the key reason for their recent success was changing their organisations via investment in talent, bringing in new blood and building externally-driven, customer-focused, team-oriented cultures.

The CEO of Dow has said that it is critical for everyone to understand the strategy of his firm and behave in a way called ACT now, where the A stands for Aim high, C stands for Customer first and T stands for it’s Their business (make decisions like “it’s Your business”).

The CEO of Dow had such trouble changing the mindset of his management that he changed his management. Between 2005 and today, 195 of the top 200 managers are new! If companies cannot change people’s mindsets they will change the people. Thus it is key to re-invent and learn and grow and adapt to new circumstances.

The world seems to be moving along two realities. The world of the future and the world of established organisations and governments that is built on the lessons of the past and is generating less and less value today.

You could feel the angst about this two-speed world when the author of the Second Machine Age described government and organisational dynamics as a struggle “between those who seek to preserve the past from the future and those who seek to protect the future from the past”.

3. Trust – if one can build it – will be a new competitive advantage.

Edelman released their latest Trust Barometer for 2015. There is a clear breakdown of trust between people and organisations of every sort: whether it is corporations, NGOs or governments, they are trusted by less than 50% of the people. The only stars are intelligence agencies that are, despite the Snowden revelations, seen positively by 70% of folks.

One of the industries that surprisingly is losing trust is the technology industry. There seems to be anger, which I picked up in Davos, by the non-technology companies against the technology firms, which is also reflected in the Edelman survey.

The issue seems to be we are forgetting that it’s people we are dealing with: people who resent how fast technology is upending their lives and their jobs; people who see their jobs replaced by machines, and hear tech folks talking about seceding from the United States. Edelman noted that Silicon Valley has a growing PR problem.

This needs to be fixed because in many ways technology is truly liberating and provides amazing new opportunities. The digital divide that people worried about does not hold true and in fact mobile phones, networks and other technology are letting David take on Goliath. Tech is opening up information and education and health care for billions.

However, as the CEO of Manpower noted, there is a real and growing mismatch of skills between the skills the future is looking for and the skills that people have today, especially in the developed world. There, technology is a double-edged sword where it brings and takes away, while in the emerging world it is a catalyst and enabler.

In a connected world where interoperability will be key, trust will be critical. As noted during a breakfast, I attended, “Who will I trust with my data?” or even “Who will I trust with the keys to the Internet?”

I was surprised to hear that before the US allowed ICANN to become a global organisation the Chinese had created a new route to the internet and were threatening to divide the world into two internets! When Skype does not connect with Facetime, when Facebook and Google glower at each other, when institutions old and new are questioned, it’s time to build trust.

4. Uncertainty has always existed – but so many things are now certain.

Many of the superstars of finance and industry noted how none of them predicted that oil would be half the price of six months ago or that deflation would be a huge issue in the developed world, nor did they foresee ISIS, or the amazing recent strength of the United States.

When business people say they do not want to invest because of uncertainty, you have to wonder which dream world they are living in. Life by definition is uncertain. Until someone arrives from the future at Davos, we pretty much are guessing and extrapolating trends.

However as I finished five days at Davos these things seemed certain if one takes a longer-term, five-to-10-year view.

• The world will become more multipolar versus Western-centric. Today 88% of the world’s population is in Africa, Asia and Latin America and – with the exception of the US – so are all the top 10 growing economies. They are embracing free markets of a sort, enabling technology, empowering women and embracing science to enhance food, energy and medical requirements. Melinda Gates noted that in the past 25 years, half of the world’s population had been lifted from poverty and that, in the next 15 years, another half will be.
• The world will grow old outside of Africa and India. In 2014, there were 650 million people over 65. By 2050 that number will be two billion. Faster than digital growth is the growth in old people. Older demographics, if extrapolated, will see Japan become a third smaller in 50 years and two thirds smaller by 2150.
• Organisations, institutions and laws will need to be redesigned to a world where individuals walk around with supercomputers in their pockets. This year’s iPhone 6 carries 650 times the processing power of a 1995 Pentium. In India the number of smart phones will go up from less than 20 million at the beginning of last year to 250 million at the end of this year. These are not phones but highly connected computing devices that will change not only society and industry but also government and financial institutions. We are focusing too much on Facebook and Google and Alibaba and not enough on the seismic change billions of connected highly empowered people within the next few years will bring about. 

5. There is so much to learn, to do and to look forward to…  

I will end with half a dozen seemingly random statements or facts that made my list of further study to mine for insights. Imagine how many incredible thoughts and facts I missed at Davos since I could only be in one place at a time and probably missed all the most elite closed confabs. Here goes:

• Bitcoin and blockchain are likely to revolutionize money. It is likely to become the currency of the Internet, since it addresses the lack of trust in financial institutions, speaks to the need of the unbanked and leverages network technology. It’s in the early innings and there is too much focus on the roller coaster price changes. With that being said, I would recommend everyone buy a bit coin (it’s now about US$ 240 as I write this) and begin to understand it. In the US, Coinbase is an ideal wallet. The book to read on this topic is The Age of Cryptocurrency by Paul Vigna and Michael Casey.
• Three key words – awareness, authority, oversight – will be needed to regain and build trust. Are people aware of how their data is being used and what the laws are? Is there someone who gives authority to lawmakers or data companies on how data is used and is there a way we can see how our data is being used or is there an oversight government authority that watches those who process our data?
• Women will be the economic engine of the future: in a panel on “Equality through Parity” it became clear that women are key to economic uplift in the emerging world (and a focal point for most organisations like the Gates Foundation) and to superior growth all over the world (including Japan) if they are treated fairly in the workforce. As the Prime Minister of Norway, Erna Solberg, noted, we do not need to build an economic case for why women should be treated equally, it’s just the right thing to do.
• The workplace of today is increasingly obsolete and non-productive: a Bain study found that technology is making meetings easy to schedule today versus the past, and the cc: address line expands unnecessary email to such an extent that the individual at work spends 20 hours in meetings, 10 hours on email and eight hours doing everything else. In addition, junior supervisors generate 1.3 “full time equivalents” of work and senior supervisors generate 4.3 “full time equivalents of work”. Organisations and work need to be modernised.
• The world is making us more connected and more disconnected. We sit in a room connecting with others outside the room while not talking to those who sit across the table. We connect to worlds outside our communities but not to what is going on outside our windows. Maybe a bit of analogue is good since we are carbon-based life forms enabled with silicon objects, and not silicon-based life forms carrying around carbon-based flesh.
• The future is arriving faster than we can imagine: the rate of progress and change is heating up. It’s not just mobility and computing, but robotics and communication and much, much more. Cars now drive better than humans and will soon drive 10 times better than humans. Nano and biotechnology will make science fiction reality and all this will happen in the next decade if not sooner. Hold on tightly to your mobile devices!

Author: Rishad Tobaccowala is Chief Strategist at Publicis Group and Chairman of The Tobaccowala Foundation. This article was first published on his blog. 

Image: A train leaves Davos, Switzerland..