Report from Davos 2009

Davos_2009012 Just returning from the World Economic Forum in Davos, Switzerland. Wow, what a sea change from 2008. Rampant pessimism, gloom, worried faces, a stunned, humbled crowd.

Here's my quick personal summary. I will have a few more Davos posts later this week.

Vladimir Putin was very impressive. Cocky, defiant, confident, quick, smart, tough. He blamed the U.S. investment bankers and the American system for the financial meltdown, "...it wasn't supported by reality, it had to collapse." He made Russia sound great -- "We're cutting taxes, cutting regulation, firing up innovation, looking to work well with our neighbors." One of the few (the only?) investment bankers in attendance turned to me during Putin's speech and said, "Hey, I'm moving to Russia -- it sounds great over there!" When Michael Dell offered to extend his company's help in IT, Putin slapped him down, replying that Russia had superb and superior IT -- they didn't need Dell's or anyone else's help.

Oh, and by the way, Putin wants to dump the dollar as the world’s reserve currency.

The panel of "economic geniuses" convened to give their view of the future. This was the same stellar group that last year said that we would have a mild recession, if one at all. Steve Roach (last year's only prescient pessimist) from Morgan Stanley said that, "...you cannot underestimate the dangers of the economic moment."  He said that 2009 would be the first year since World War II that worldwide GDP would have negative growth. There is a “Multi-year adjustment coming.” He said that we would have recovery later in 2009 with anemic, 2.5% growth in worldwide GDP in 2010, 2011, and very likely 2012.  The economists believe that the big factor is consumer confidence. That will only bounce back if we get: 1) a way to sort out the asset mess and get pricing back, 2) quick fiscal stimulus, and political action.

Some of the socialist-minded Europeans were in heat about how nationalization is the only way out of this mess. There was a hell of a lot hand-wringing about four conflicting topics: Too much nationalization, not enough nationalization, inflation, and deflation. Clearly, no one knows what the hell is going on…

Where on else in the world can you go to a small cocktail party and hang with Peter Gabriel, Jet Li, and Mark Zuckerberg?

Maria Bartiromo from CNBC had a staged economic debate. Lot of yelling and screaming for the cameras. The head of the NYSE, Duncan Neiderauer,  was excellent -- he said that we should use existing regulations and just extend them to formerly unregulated worlds like hedge funds and private equity -- we don't need new regulation. Steve Schwarzman, private equity whipping boy, looked lost, was incoherent. Steve made the argument that capital limits should be lowered, adding more leverage to the system. I wonder what the weather’s like on Steve’s planet. He kind of reminded me of that squirrel in one of last year’s Super Bowl commercials that screams in the middle of the road as a car speeds up on him. The banking types on the panel haven’t grokked the situation yet -– we’ve gone from a world controlled privately to a world controlled by public policy makers, and their defacto bosses –- the voters. That’s why you can’t buy new jets, pay yourselves big bonuses, and remodel your office using antique Chinese parchment. Because you’re now working for Mr. and Mrs. Jones from Topeka Kansas.

One of my favorite moments. Howard Lutnick of Cantor Fitzgerald ridiculed the bail-out, saying: “What, do you want the banks to go back to being boring and plodding?” At which point the CEO of Lloyd’s Bank in the UK said, “Hey, we almost went bankrupt 10 years ago. We brought the bank back by being boring and keeping risk in check. That’s why we’re in better shape today than most banks in England.”

Why is it that famous bloggers who are bathing in social are so sour face-to-face? With the exception of Robert Scoble who is a great, funny guy, I’m not sure I’d like to have a drink with most of that lot…

File it under, “Standing on the deck of the Titanic with 30 minutes to sink-time screaming for a waiter to bring you dinner and a martini” A session of old media types (Steve Forbes, the editor of the FT, others) talked about where they are headed given demographic changes, the death of print ads, social, etc. The room was full of old-line reporters (and one out of work reporter) who want the clock turned back to their old, comfortable world of daily deadlines and classified-padded budgets. Jeff Jarvis, who teaches at the Columbia School of Journalism jumped up and said, “Hey, that world is gone forever. Grab a camera, a blog, Twitter, and whatever new technology becomes available to deliver the news and stop whining. If you want to be a journalist from now on, that’s what it’s going to take.”

I asked Shai Agassi, the guy who’s trying to convince governments to fund his electric car infrastructure plan, when the economy is going to turn. He said that it will be 2025, unless his plan gets rolled out. Glad to see that Shai’s arrogance hasn’t flagged since he left the IT business…

Tom Friedman of flat earth fame hosted an MIT energy initiative breakfast on green. I’ve always found this guy to be ego-control challenged, but he had some good points. My favorite: When he’s in China, audiences say, “Hey, you guys in the U.S. and Europe burned CO2 for centuries to improve your lives, now it’s our turn.” Friedman’s comeback is: “OK, go for it. But while you’re building coal-fired power plants, we’re going to be innovating in clean tech. And we’ll get a big head start – we’ll dominate the next 100 years of energy, way beyond oil and coal. And you’ll have to buy it all from us.”

With all of the gloom, venture capital appeared to be shining through. I bumped into a bunch of VCs (Benchmark, Accel among others) who are successfully raising big pots of money and believe that this downturn will be a great time to invest. Prices will be low, great people will be available, companies will be looking for new innovations to turn themselves around.

A Davos scene. Banker comes out of the Jamie Dimon dinner. Reporter runs him down and demands to know the brands and vintages of wines served. JP Morgan is the only major bank at Davos and the press wants to try and catch them in an “AIG moment.”

IT/BT emits 2% of the total CO2 into the environment. But the goal is for the rest of the industries (power generation, cars, construction, etc) to use IT/BT to become more efficient and reduce their emissions by 80% over the next 20 years. So IT/BT emissions may go up, but it will help everyone else to go down.

Davos is expensive, ego-deflating (especially if you’re a nobody like me), exhausting, maddening (everyone wants to talk, a lot), exhilarating, time consuming, educational, and mind-expanding. I hope I was able to give a flavor...

Please post if you have any comments or questions regarding Davos.

Comments

re: Report from Davos 2009

Jeff Jarvis teaches at City University New York's Graduate J-School...

re: Report from Davos 2009

I recently started reading your messages on twitter and was following your Davos updates. Was curious to see what you would write in a detailed post.It seems, The pervasive theme of gloom seems to have got the agenda out of of sync. This is the sense I have got from most coverage on the topic. Incidentally this is the first time I really followed any news on the same.Would like your views on the discussions on Health related aspects as mentioned in the Davos Agenda document. Were they fruitful and do you think there is going to be any significant work on Health given the economic environment ?Also I did like your comment on Davos gets it wrong ...Thanks for a great post.

re: Report from Davos 2009

Thanks for that review - nice to get the off background reactions to things. I was able to watch a bit via video, and my sense was that the western leaders are confused, have mixed messages and lack of economic understanding - with each choosing to place their own political slant. I found Wen, Putin, and Aso refreshing.

re: Report from Davos 2009

Will look forward to more on Davos, but based on what I've read here, I'll be curious how you will structure your reports. Sounds like a collision of varied viewpoints completely devoid of a common thread. Underscores the severity of the problem and thus complexity of solving it.Steve

re: Report from Davos 2009

Mr. Colony--I plugged your blog today on Twitter. One of the best single blog posts I've ever read. Informative, insightful, compelling and delivered some "needed" clarity.The media has been giving a "weak confidence" report out of Davos, but you gave us something more to digest.To comment on the part "Clearly, no one knows what the hell is going on…" I sure as heck don't have the answer (from an American standpoint), but what keeps coming to me, is, this whole thing is going to work out as it needs to.Seems we're lacking long term vision, and while much debate is apparent, and necessary, I am most concerned that while there is this "rush" to call for change to the global economic system, and while some voices are calling for a new economic order, the reality is, what has worked for many years before these problems "exploded into global consciousness", still fundamentally works.Maybe some profound adjustments are needed to fine tune the system, and to be fair, we need to think about this from a global community standpoint. The world is getting smaller, as technology allows us to be "real time" connected. While our global cultures may differ, we all want a good life and a shot at succeeding.I just think the "influentials" of the world might remember “what has historically worked to generate the most wealth and opportunity”, during a time of confusion and low morale. Some higher "long term" wisdom, and confident thinking is needed.Sincerely,Scott M. Iseman

re: Report from Davos 2009

George, thanks so much for your narrative.Uncertain economic times demand risk management: people won't move their money towards places where the rules are not well-defined. Accordingly, Duncan Neiderauer sounds like a voice of reason. Wholly new regulations come with scant precedent, which creates enormous risk. Neiderauer's proposal to extend exiting regulatory frameworks to hedge funds and private equity minimizes risk and for that reason makes a lot of sense.At the same time, I hope President Obama and Congress remember two things: (1) When Venezuela's Hugo Chavez nationalizes private assets willy-nilly, he makes it riskier for other nations to invest in Venezuela. When our US government takes unprecedented action into the private sphere, government needs to make sure that the interests of entrepreneurs and investors are not disproportionately penalized. In a similar vein, last year's ill-timed comments made by senators about IndyMac and AIG triggered enormous sell-offs in those businesses. It is the same as yelling "fire" in a crowded theatre. (2) When economies tank people stop taking care of their personal health. Many of the world's pandemics started during times of economic malaise, taking a poor economic situation and crippling whole communities. President Obama should ensure ample supplies of vaccines and at least minimal staffing of the CDC.

re: Report from Davos 2009

George, thanks so much for your narrative.Uncertain economic times demand risk management: people won't move their money towards places where the rules are not well-defined. Accordingly, Duncan Neiderauer sounds like a voice of reason. Wholly new regulations come with scant precedent, which creates enormous risk. Neiderauer's proposal to extend exiting regulatory frameworks to hedge funds and private equity minimizes risk and for that reason makes a lot of sense.At the same time, I hope President Obama and Congress remember two things: (1) When Venezuela's Hugo Chavez nationalizes private assets willy-nilly, he makes it riskier for other nations to invest in Venezuela. When our US government takes unprecedented action into the private sphere, government needs to make sure that the interests of entrepreneurs and investors are not disproportionately penalized. In a similar vein, last year's ill-timed comments made by senators about IndyMac and AIG triggered enormous sell-offs in those businesses. It is the same as yelling "fire" in a crowded theatre. (2) When economies tank people stop taking care of their personal health. Many of the world's pandemics started during times of economic malaise, taking a poor economic situation and crippling whole communities. President Obama should ensure ample supplies of vaccines and at least minimal staffing of the CDC.

re: Report from Davos 2009

Thanks, George for an insider view. I am nearly surprised that you did not have to sign a non-disclosure. Just a joke. Sure, when things get uncomfortable people want to retreat to save ground ... old-style reporting, nationalization, and more. But there is no way back. The door to the past is closed by quantum physical uncertainty. Sorry, no time machines. But Washington said that those who forget their past are doomed to repeat it. There is a lot we can learn from what happened, but as you can see there are many who won't and that is the greatest danger we face.

re: Report from Davos 2009

As an old Yankee Group colleague, let me assure you you're not "a noboby" in anybody's book, though I appreciate the humility.Along those lines, is it possible to view a video of the panel I understand you chaired in Davos? Not all of us made the guest list!

re: Report from Davos 2009

To Adrian: Thanks for the Jeff Jarvis info.To Syamant: There were lots of health sessions at Davos, but I didn't attend. I'd say that health is in the top seven topics every year.To Steve: This report is particularly ADD owing to its summary structure. More structured posts coming.To Scott: Yes, long-term vision is a necessary antidote. The problem for the Davos crowd is that business leaders have shareholders to placate in the short term. And political leaders have many voters out of work. They must achieve a modicum of stability before framing the future.To Bob Wells: Hey buddy -- it's been a long time. There were no public video cameras in our session although Robert Scoble was taking a lot of pics.

re: Report from Davos 2009

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