I have one more presentation before Davos comes to an end -- moderating the "risk wrap-up" from the forum. It's likely to be heavy on media, very light on participants ... 9am on sunday. Grr.
Some random bits: I spent some time with Iceland President Olafur Grimsson -- thoroughly impressive, talking about his government's response after two massive europe-shaking risks (a financial crisis and a volcano). How do you get such a capable head of state from such a tiny country? Let's get him on as European commission president or some such. Apparently, volcanic eruptions are increasingly likely in iceland because of climate change -- unmelted glaciers limit eruptions by "tamping them down," melted glaciers not so much. I had no idea.President Grimsson is also oddly into pineapple. Grabbed a heaping plate from an otherwise distributed fruit bowl and plowed right through it. (Ed note: Could it be there's no pineapple in Iceland?) I hadn't thought of that.
Theme today: Northern European heads of state and fruits of preference. Great buffet lunch today, sponsored by the Norwegian government. Think red king crab, reindeer with mushroom sauce, and milk pudding with cloudberries. I bumped into Norwegian Crown Prince Haakon later on (yes, we talked some politics, but it's Sunday and I'm tired) and gave the cloudberries very high marks. He said norwegians frequently make cloudberry liquor at home).
The recent food marketing institute's announcement that food packaging will now have front of package easy to understand nutritional information made me think the (oft derided and hierarchical) world economic badge system should be updated too. I mentioned to Harvard law prof and stand up guy David Kennedy, he thought a little box listing net worth, Google hits, and political orientation would be helpful. I might add pet ownership (never trust someone that doesn't have a dog).
I've had my big furry hat here all week in an effort to keep warm trudging up mountains ... and it's been perfectly pleasant outside. So I haven't worn it. Not so historian Tim Garton Ash, who is wearing his even more outlandishly furry hat pretty much everywhere. Can't miss him.
That's it for Davos, we now return to our regularly scheduled programming ...
I moderated a panel on "fat tails" today. The general idea being that however optimistic the baseline (and reasonably consensus) expectation for the global economy, there's much more volatility in potentially extreme outcomes -- the fat tails of the distribution. Which can be dangerous, but can also represent opportunities.
Four CEOs on the panel (Swiss air, Aviva, Third point, AMEC) and the new South African finance minister, so a nicely broad/comprehensive group. Ther were some interesting points.
1) A clear distinction to be made between fat tails (which are intrinsically knowable and, at least in principle, manageable) and black swans (the literal bolt from the blue). Possible that black swans "should" be fat tails when companies have their eye off the ball. Nice in principle, but it doesn't usually work that way.
2) There was surprisingly little concern raised about Europe. The euroskepticism is really the hallmark of the europundit crowd, not the business community, which means it tends to get over-egged. Consistent worries about the environment, and the move from mitigation to adaptation. Where there's some good work being done around understanding the impact of the dramatically changing energy mix, less so on business impact of dramatically changing climate patterns.
3) Cybersecurity a big ominous worry across the board, but much more of a black swan. Folks don't know what they don't know ... and it unnerves them. They feel like they need to resource it, but aren't sure how.
4) Too many people have been saying that chief executive officers are also becoming chief risk officers. nonsense. they may be becoming more sensitive to and aware of risk. But chief risk officers are generally folks that try to tell you how you can lose money -- and so are themselves treated as a risk to be mitigated internally, by executives driven by growth.
5) I very impressed with Pravin Gordhan the South African minister. He was mostly concerned about protectionism and currency controls (externally), social dislocation and broad income disparities (internally). With a few words for the U.S.-China conflict. Fair enough.
6) My buddy Dan Loeb (third point) is now sympatico with obama policy (which was decidedly not the case six months ago -- Obama's not a fat tail.
7) I cold called two friends in the audience with tough questions. Ex-PWC CEO (and WEF trustee) Sam DiPiazza, and starwood CEO Fritz van Paasschen. Both responded gamely. My appreciation.
I sat down with my buddy Undersecretary of State Bob Hormats at the Morosani Posthotel. About 20 minutes in before his assistant received news that there had been an explosion in the building earlier, somebody set off a smoke grenade. Who knew? Security in the building was unruffled. That information didn't change the conversation, which was mostly U.S.-China, since he did a lot of the lifting to ensure that there were no sudden bumps in the road during last week's Obama-Hu Jintao summit.
Later I was invited to speak at an exceptionally interesting (but off the record) dinner hosted by NYSE CEO Duncan Neiderhauer. There were 75 CEOs in attendance -- KKR's Henry Kravis, Bank of America's Brian Moynihan. Everyone actually stuck around until 10:30, leaving me entirely too buzzed to sleep, but really needing a few hours before a very early start. I compromised with flybys to two of the "nightcap" dos that are the hallmark of the after 10 set.
How much changes in a few hours. All the Egypt tensions have taken a decidedly (and deservedly) large chunk of the attention at the forum, the policy types uneasily consumed, the business community curious. Rumors swirled around last night's google party that Egyptian President Hosni Mubarak had fled the country were being circulated by a friend of opposition leader Mohammad El Baradei (clearly not true, but i heard it three times nonetheless). The vodaphone ceo confirmed that all internet traffic had been cut off (clearly true, but nice to hear directly from a source). A Turkish minister saying the Egyptians had it coming and that a greater turkish role in the region was necessary (clearly open to interpretation).
Personally, i can't see Mubarak stepping down short of massive violence. But it's a tough call. We'll see.
Just spent a fun hour at the annual BBC World Debate. This year the topic was the question of global leadership, presenting grist for lively discussion. The format is pretty standard here -- they have four on the panel and another four in the front who they turn to for debate and questions. I was one of the latter. Originally I saw U.S. congressman (and Davos fixture of late, oddly enough) Barney Frank listed to sit next to me… but when I bumped into him beforehand, he said he wasn't showing up to sit in the audience and ask questions. Sad, as he usually causes some trouble. No dearth of status issues at Davos.
Speaking of last minute substitutions, U.S. House Majority Leader Eric Cantor was supposed to be on the panel, which also would've mixed it up. But he got stuck/snowed in back in Washington. So, the Council on Foreign Affairs President Richard Haass stepped in, and actually did an extremely credible job last minute. Mostly because he was so balanced, standing solid ground on core policy principles while coming across as a thoroughly reasonable American (as opposed to, say, JP Morgan's Jamie Dimon, who a couple of hours later got thoroughly flogged as a rapacious and repugnant banker type by French president Nicolas Sarkozy).
Panelist Christine Lagarde, French minister of Economic Affairs, was mostly talking G-20 with France hosting the next summit meeting. Which provided the me-too plug of the forum so far, as Polish Minister of Foreign Affairs Radoslaw Sikorski stood up with an impassioned plea that the G-20 could be really effective and show leadership if only we brought in a few other of the world's key countries. Like Norway and the world's 21st largest economy… Poland. Say what? At which point I stood up and said it would be great if we could actually get to a G-20… or a G-21 with… (derisive pause) Poland. The challenge was that we didn't actually have either. Lagarde actually laughed. Which gave me the chance to kick off a fairly lively debate on values and leadership.
Victor Chu of First Eastern Investment provided the China line -- China's still a developing country. Give them time. The train has left the station on Chinese leadership. And with great velocity. But it hasn't actually arrived anywhere yet. More G-zero. I'm having fun with this.
I headed over to the Coca Cola reception last night, with President Clinton as the guest of honor. It's an annual do, and a good one. Muhtar Kent, one of the most cosmopolitan and diplomatic CEOs I've ever met (his recent Japanese toast to Chinese president Hu Jintao notwithstanding), is always a pleasure to watch holding court. Clinton actually didn't look so hot, gaunt, and his hands were noticeably trembling. I found that much more upsetting than I would've expected. I'm not sure I'm ready for Clinton to get really old.
I was talking with a friend who runs a big Ethiopian company (he's actively rooting for the Egyptian government to collapse ... he says the Ethiopian leadership all believes a failed state in Egypt is better for Ethiopia in the Nile. So we've got somebody to go long on if Egypt collapses. Always good to know). All of a sudden one of the Coke guys comes up to me, needs me urgently. Makes me wonder what that could be about.
Turns out the president of Tatarstan is there, Rustam Minnikhanov (Little Khan in Russian?). Who speaks Russian, but no English. And there's nobody else at the reception that's a Russian speaker. So that would be me. I ended up keeping him company for a while. Relevant views: ex-Yukos (jailed) CEO Mikhail Khodorkovsky should basically be shot. Western oil companies shouldn't be trusted with equity swaps (he may want to hold down the Medvedev line on that). Nobody needs to worry about security at the upcoming Sochi Olympics. And otherwise reminisced a bit about Kazan. Just in case you wanted the down low on Tatarstan.
Speaking of random head of state visits, I met with Jakaya Kikwete, president of Tanzania for a bit. Charismatic, friendly, and more than willing to talk. But I didn't expect to meet him and wasn't sufficiently up to speed on local politics, so we ended up with a little broader Africa banter.
I'm apparently working my way through the T's. Seriously. Turkmenistan didn't send anyone (though I actually know the president there reasonably well, long story for another time)...and oddly, the WEF folks just let me know some Tunisian officials want to meet with me. Wonder what that's going to come to.
Did a bit of the post-dinner receptions after. Completely packed, so you basically go from person to person chatting and make 20 feet of progress in an hour. New social norm I'd like to implement at Davos -- don't exchange cards if a band is playing. Chatted with Sorkin for a bit -- he got his luggage back. I passed on the infamous out of town Oleg Deripaska party (unlike the other parties that have end times, his invitation says 10pm until late ...). I had very early events scheduled for the morning. Not so for Harvard economist Ken Rogoff. .. who got in around 2:30 ... and was thoroughly caffeinated in the hotel lobby as I was leaving. My Davos strategy is get sleep until Saturday.
There's an interesting distinction to be made between Davos and the G-20. The Davos agenda is much more coherent. That's largely a matter of self-selection -- the people who come to Davos are largely folk that accept/support a Western-led globalization model and the values that accompany it. So, you get lots of talk about support for open borders and concern about immigration policy, lots of support for free trade, much worry about the threat of protectionism.
There are guests who don't share the agenda, some of whom are a seriously big deal, largely to be assessed/engaged by the WEF community. And there are some appointed gadflies here to stimulate debate. But it's a very coherent/cohesive group; there's really something to the whole "Davos man" (and yes, largely still men, different debate) thing.
But the world increasingly doesn't reflect that. Which provides a backdrop of very serious uncertainty to the pervasive economic optimism that's infusing the place. How long is the U.S. dollar able to remain the world's reserve currency? How long can the West attract the world's top talent? What happens as the leverage continues to decrease and the players making the key decisions affecting the world (even while not leading it) no longer share the same values in the halls of Davos?
For this year, at least so far, there are no answers to those questions. But they're not going to go away.
* * *
I bumped into my colleague David Rubenstein, the Carlyle founder, this morning. The biggest surprise for him is that nobody was interested in blaming the business community for anything this year. True enough.
I asked whether he was surprised about the underlying optimism from the business community, given how much of the global economic burden in the West has just been shifted to the shoulders of the public sector. He said he was amazed anybody's still buying U.S. Treasuries. A stronger response than I expected. But directionally what I was wondering about.
I hosted a dinner last night along with a couple of Harvard folks -- economic historian Niall Ferguson and economist Ken Rogoff. It seems Ferguson and I have been facing off a lot recently -- him doing the run-up to today's changing geoeconomic environment (starting from about the 14th century) and me looking ahead. This time, Ken was there to keep us honest on facts and figures.
Niall's pretty much a Davos fixture, with a studied but effortless presentation style and pretty extraordinary range when it comes to European/Eurasian/Asian historical trends. He also tends to get a haircut right before the summit, and so looked disarmingly boyish. (I guess that puts me in the middle, since Rogoff has a rather more adult do.)
The talk moved swiftly to whether Asia (and China in particular) has the ability to structurally eat the west's lunch. Niall thinks so -- and points to six "killer apps" that the west has dominated for a couple of centuries that now the east has picked up (things like innovation and competition). I'm skeptical on the innovation side, but generally they're strong drivers.
My primary rejoinder was to what extent China has also imported some killer apps from the west that are going to prove, well, problematic, for their model. The first, and the less controversial, is growth. When they get to around $10,000 per capita (from just under half that at present), growth's going to slow substantially. The economy has to be restructured, and largely into the hands of consumers ... out of the hands of the state. An extremely difficult thing for a consensus-driven state capitalist system to do.
But there's a second, more controversial "killer app": representative government. Not in the sense that Beijing is moving towards western-style democracy. But rather that over time, the Chinese government has indeed become much more responsive (and has had to become much more responsive) to the demands of the domestic constituency. That's a trend that's likely to prove extremely difficult to slow down. It's also one that likely makes the Chinese government more short term...and less strategic. One of the biggest advantages China has had (in addition to extraordinary amounts of productive cheap labor) is the ability to direct resources strategically in a way that the west, with their continual electoral cycles and need to placate constituents, really can't. When does that start seriously changing in China? Quite possibly at the worst possible time...when there's a slowdown.
Anyway, at the end of the presentation, we did a snap poll of the roughly 75 attendees at the dinner: how many thought emerging market growth was, on balance, a good or a bad thing for the developed world? A plurality actually voted "bad." (I'd say 40/45 percent, 25 percent good, and the rest thoughtfully abstaining). Food for thought.
FABRICE COFFRINI/AFP/Getty Images
Big plenary kickoff today was Russian president Dmitry Medvedev. Aside from the "will he, won't he" scheduling snafus behind the scenes, there was a bit of a dustup when he apparently hammered his chief economic advisor, Arkady Dvorkovich, for implying that the trial of ex-Yukos CEO Mikhail Khodorkovsky could negatively impact the investment perspective on Russia in Davos. Didn't seem the wisest move for the (relative) liberal advisor -- Prime Minister Vladimir Putin explicitly said this fellow should stay in jail. I wouldn't be crossing him. Wonder how long Dvorkovich lasts.
For his part, Medvedev explicitly avoided talk of the trial. He started with a pointed mention that Russia shouldn't be lectured. He went on too long, ended with a 10 point agenda for Russia's reform/investment-attracting plans. It was generally ho-hum -- the audience was skeptical, likes the charisma and almost indifferent arrogance of Putin, but is increasingly uninterested by the softer, less effectual side of Russian power.
Other interesting bits:
I sat down for lunch with the Arab League secretary general, Amre Moussa. He overheard me talking about Netanyahu's meeting with Vice President Biden ... his ears perked up, and we ended up breaking bread. Good fellow to talk with at Davos, not much of a Middle East contingent here ... so he's not all that busy (more on the WEF's western orientation later--there's a lot worth considering there). My main takeaway: I came away much more concerned about Egypt's stability/trajectory than I was entering the meeting.
Most amusing bit: he's the first person I've ever met at Davos who asked me about my identity before answering a question. It was something about Israel/Palestine and he stopped and asked ... are you Jewish? From Israel? I gamely replied that I was at Davos, isn't everyone? (Ed note: I'm German/Armenian Catholic from Boston. Go Celtics!) To which, give him credit, he chuckled.
I've made the G-Zero my buzzword for Davos this year. Mostly because the G-20 doesn't work.
So while there's an abundance of economic optimism at Davos this year -- the latest indicator being PricewaterhouseCoopers' annual CEO survey, which showed their respondents' investment sentiment is now as positive as it was before the financial crisis -- it's coming against a backdrop of a world with neither the capacity nor the inclination to provide the leadership to respond to increasingly troubling global challenges (trade, currency, climate, proliferation...).
A few reasons for this: 1) The world moved to a larger number of countries at the table (harder to coordinate) with 2) economic values that don't line up (harder still). With all this happening 3) in the context of the old G-7 nations consumed with domestic economic turmoil -- Europe struggling to maintain the eurozone, japan absent from global strategy, and even in the now rebounding United States, two years on, there's no Obama doctrine. And with 4) emerging markets wanting to continue to be emerging markets, it's not a recipe for a new world order.
For the year after the financial crisis, collective panic got you something that looked like a G-20. But once the panic subsided, the "new reality" that is the topic for this year's Davos agenda, is an absence of direction and coordination.
Apparently the G-Zero term is making the rounds. After a meeting this morning, my buddy Fred Kempe(president of the Atlantic Council) buttonholed me to say that at the opening economic plenary, Martin Sorrell (Sir Martin as it turns out, CEO of the global advertising firm WPP) was talking about the lack of global governance and the G-Zero.
It got more fun a couple of hours later, when Bloomberg's Tom Keene, chairing a session on global resilience, pulled me out of the audience to talk about the G-Zero, saying that I was "ruining the day" of panelist Il Sakong, chairman of the South Korean presidential committee for the G-20 summit. It hadn't been my intention. We got into it for about 10 minutes, with Dr. Sakong finally asking "well, if the G-20 doesn't work, what do you want us to do?"
Hey, I'm a political scientist, not a politician. I said the G-Zero isn't aspirational, it's analytic. Unfortunately, it's also where we are.
Davos is now in full swing -- the Congress Centre is heaving. One of the temptations confronted with such a crush of folk is to hang out with the people you already know ... and the more you come here, the easier it is to do it. But you don't learn as much that way. So when I remember, I try to push myself a bit.
That was the decision this morning. It's breakfast time, Harvard economic guru Ken Rogoff is sitting in the hotel cafe with his meal, and so I start walking up to say hi and coordinate a dinner we're doing together tonight. But then I notice someone who looks oddly familiar sitting by himself in the corner. Turns out to be Capt. Chesley B. Sullenberger, hero pilot from the "miracle on the Hudson." Not who I expected to bump into (turns out he's doing a speech on leadership tomorrow night).
He introduced himself as Sully, and we ended up having a thoroughly lovely breakfast. Don't know exactly what his leadership speech is going to be, but a few pre-speech thoughts from the captain in a Davos context.
1) Individuals matter. Sully understood he was in the position to have meaningful national impact after the crash, and it strikes me he's taken his spokesman/"change agent" role as seriously as his role as a pilot on that fateful morning. In an environment where the American political system -- to say nothing of the global political landscape--can seem incredibly resistant to productive change, that's an inspirational message for the Davos attendees.
It reminded me of Mikhail Gorbachev and the collapse of the Soviet Union. And, more skeptically, why we're not likely to see that kind of a move from the more consensus-oriented of China's leadership. Committees rarely reform themselves out of power.
Andrew H. Walker/Getty Images
See images from the World Economic Forum in Davos.
The Davos crowd has its mojo back. You've got a plush, revamped Congress Centre, a duet of Swiss 10-foot horn blowers welcoming at the entrance, hot potato soup with freshly sliced black truffle at the opening reception, and a group of 2,000+ global elites, most of whom are (finally, two years plus after the financial crisis) making (what they consider real) money again. And expecting more of same.
That's certainly the case with the bankers, who are back in force this year. With Lloyd Blankfein becoming a fixture at the White House, there's not much downside for Jamie Dimon coming to schmooze in the Alps. No talk of (or panels about) compensation, and not much grumbling about it. Not much focus on climate change in the sessions--have heard a little hand wringing on that front. But only a bit ... if the first evening is any indication, attendees this year want to get their growth on.
In a few informal conversations at the opening reception, the overwhelming intention was to focus on the bright side. Even one of the largest Greek shippers was waxing poetic about the Papandreou government ... how they're taking austerity seriously and getting their economy in order. And while you wouldn't want to invest in Greece right now, the shipping industry is picking up. Good to know.
But if it's upbeat, it's also everyone talking their own book. There's very little coordination, very little governance. And while the behind the scenes WEF meetings are furious with Sarkozy-initiated bilaterals to help prep for a productive G-20 in Cannes at the end of the year, there's no agenda setting ... either on currencies, trade, financial regulation, or what-have-you. Which discomfits the WEF leadership -- they've organized Davos on the notion of the shared values of globalization for some forty years, but those values were primarily western, bringing the developing world closer to the west ... their labor, manufacturers, consumers, and profits. That notion of globalization, at least, feels thoroughly forgotten.
A couple of quick tidbits from the halls to add:
When you have a G-20 to deal with, being a minister doesn't buy what it used to in Davos. Ask the Colombian finance minister, who apparently flew in this morning without a registration or a hotel room ... and ended up flying right back to Bogota. In the old G-7 days, it was a lot easier to make those late exceptions...
Russian president Dmitry Medvedev was on again, off again at least three times with his plenary scheduled for tomorrow. It's happening, he's on his way ... despite the terrorist bombings at Domededovo airport. Also, found it interesting that the Russian government announced planes were only 20 minutes delayed later on the day of the attack. The Russians aren't about to be cowed by terrorism. Or, for that matter, public opinion.
And my buddy, New York Times journalist (and last year's Davos "it" fellow) Andrew Ross Sorkin, who picked up the wrong suitcase at Zurich airport...and realized he had somebody else's suits when he pulled up two hours later in Davos. Sneakers, no boots. Must see how he's holding up tomorrow...
Ian Bremmer will be blogging from inside the 2011 World Economic Forum this week.
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.