This year marked the 50th anniversary of the World Economic Forum. WEF founder Professor Klaus Schwab reiterated his commitment to the stakeholder model that he proposed in 1971. But the public-private partnerships envisaged by Schwab and proven in the past five decades through successful work in vaccines and HIV had a missing link this year. Government leaders were absent, leaving the stage largely to the private sector. CEOs and business leaders, who came armed with hard, measurable commitments such as Black Rock’s pledge to put sustainability as a top investment criterion and Microsoft’s commitment to be carbon negative by 2030, were the stars instead of supporting cast. These displays and guarantees of genuine action as opposed to just talk were a welcomed and significant change. There was also an eerie calm-before-the-storm feeling, with Brexit due at the end of January 31 and the China-U.S. trade deal papering over a deep rift that seems to auger a world of parallel technology platforms. Here are a few observations from the panels I attended:
- Global Britain — here are two schools of thought on Britain freed from the European Union. The first is the optimistic theory of a Singapore in Europe, living on brains and free markets, attracting disruptors who keep Britain ahead of the curve. Britain will reconnect with the world, asserting itself as a fulcrum between China, the U.S. and Europe, using its status as the most generous nation in humanitarian aid. The other more pessimistic view is that of a receding power having to choose among the three large power centers. The country will continue to shrink its manufacturing sector, which has already gone from 30 percent of GNP in 1970 to 9 percent in 2020 and with major risk of dislocation of the auto sector. Note that the UK now ranks second from the bottom in trust in institutions, just above Russia.
- Global Economic Outlook — Three percent growth for 2020, according to IMF. The coronavirus will have a significant effect on China. India and Latin America growth rates will slow, (Brazil and Mexico now 1 percent growth). European growth to slow to 2 percent from 1 percent. U.S. to grow 2 percent. There is a big concern about negative interest rates in Europe. Sixty-five percent of wealth in Europe is held by families in the fifth or sixth generation. In Africa, 65 percent of wealth is held by first or second generation. Meanwhile, the U.S. is No. 2 in the WEF Global Competitiveness Index but No. 27 in the Social Mobility Index, lowest of the OECD nations.
- Digital Skills Training — The French Government is training people from lower income strata, giving each € 500 toward learning skills; one million have signed up already. Meanwhile, the Danish Government is mandating that companies give workers the time and financial leeway to retrain in mid-career. Soft skills such as adaptability and curiosity are vital; so is distance work, so that young people can do coding from home. PwC has already begun the reskilling of 70 percent of its workforce. Google has set aside $1 billion for the European market as part of its “grow with Google” initiative which aims to get participants IT certified in 9 months. Part of the reskilling includes training around the ethical implications of technology product development.
- Artificial Intelligence — Technology companies are recognizing the need to counter human bias. A perfect example is in policing, where there needs to be optimization for justice as well as efficiency. Brad Smith, president of Microsoft, quoted John F. Kennedy, “Technology has no conscience. It is up to people to respond to the changes that are unleashed.” Europe is delaying facial recognition technology until it believes there is an adequate regulatory structure.
- Companies in Society—Smith said that Microsoft is committing $750 million to affordable housing in Seattle. He said that companies need to speak out on issues of the day when it affects their customers (privacy, security), when the employees need a voice (after El Paso shooting), when it is a tax policy issue (carbon pricing) or when it is related to employee lifestyle (housing, education in local market). In the run-up to the meeting, there were a series of announcements by companies, including Citigroup’s commitment of $150 million to impact investing and Starbucks’ aspiration to become resource positive, including the preliminary target of cutting carbon, water and waste by 50 percent by 2030.
- Advanced Manufacturing — Smarter supply chain is necessary due to disruptions caused by tariffs, with more decentralization and individualization. The industrial Internet of Things already has 50 million connected devices. Connectivity will move from ethernet to cloud, enabling more robotics with a 5-G bandwidth. There will be no limits on forging and casting with 3-D printers coming on stream. Developing markets such as India are getting much better at manufacturing, though there is some concern about job loss through automation.
- Cities — Riyadh is building a subway system that aims to reduce driving by 25 percent. The city also wants to recycle all its municipal waste. In Amsterdam, the office building stock is already 50 percent certified sustainable, with tax incentives to get the other offices to a “C” level. Cities are banding together through the C40 to implement policy changes such as tolls for cars in city centers and ways to reduce the digital divide. Singapore has implemented a carbon tax of $3.50 per ton on its 40 largest polluters; this needs to get to $40 per ton to be effective. We will get to environmental sustainability only with social sustainability.
- Water Resilience — Agriculture is the largest user of water (70 percent) followed by industry (25 percent) and home use (5 percent). The key to agriculture water use reduction is move from spray to drip irrigation. One hundred fifty companies are responsible for one-third of total water footprint. It is possible to cut water consumption in factories by 40 percent, using digital twin representation of factory floor and putting sensors on top of any process. Finance experts have set up water benefit accounting to show net positive water impact and valuation of watershed. There will be a coalition launched on World Water Day including Ecolab, Unilever and Microsoft which aims to let consumers know how a product is made and how much water is consumed.
- Future of Media — Mainstream media players are optimizing their platforms for reader retention; they model the readers and put the right stories in front of them. There is also a move to participate in the value chain. Yahoo Sports will now go into sports betting. Conde Nast no longer separates the jobs of editor and publisher; everybody is incentivized to get to a subscriber goal.
- Youth Mental Health — There will be a global campaign, “Speak Your Mind,” that aims to get youth to talk about their depression before it is too late (a person dies somewhere in the world every 40 seconds by taking his or her own life). This campaign will try to build a movement owned by the community, with emotional literacy as the core. Youth has significant fears about future job prospects given the pace of technological change and is also disturbed about environmental degradation.
- Democratic Capitalism — This was my favorite panel, highlighted by a sparky debate between conservative thinker Professor Niall Ferguson and Martin Wolf, a long-time contributor to the Financial Times. Wolf said that companies were being asked to solve fundamental global issues due to failure of government. He added that democracy requires trust, an informed citizenry and equal opportunity, all of which are presently in short supply. He suggested that capitalism be amended to maximize social and environmental criteria. Ferguson came out swinging, reaffirming Milton Friedman’s concept that the sole purpose of business is to pursue profit. He wanted more courses on the evils of communism in the Soviet Union and China. “We have the complete death of intellectual diversity in universities. We need to teach democracy and history. The ratio of Democrats to Republicans in the professor ranks is 14 to 1. Intellectuals are betraying capitalism, hostile to free thought and free markets.”
The challenge for all of us in business is to find a way to change capitalism that makes democracy do better. That means business should take the lead on retraining, sustainability, artificial intelligence and the battle for truth, looking to government to establish the playing field and enforce the rules. But the temptation for businesses, particularly those in the U.S., might be to stand aside and not act until the election has concluded. That would be a costly mistake because many of these issues demand immediate action. Paul Polman, former CEO of Unilever, said, “The cost of acting is less than the cost of inaction. We need to make the system more inclusive; thereby we de-risk the government process.”
Richard Edelman is CEO.
