I have just returned from a two-week trip to Europe, including a week at the World Economic Forum in Davos. It was a Davos of dark shadows, potential economic slowdown, impending Brexit and a clash of the titans (China and the U.S.) on trade. Many global leaders chose not to appear (Donald Trump, Xi Jinping, Emmanuel Macron, Theresa May, Justin Trudeau) and their substitutes (Jair Bolsonaro, Shinzo Abe, Angela Merkel) failed to sketch a compelling vision. For CEOs, it was a changing of the guard, with Paul Polman of Unilever taking one last tour and technology executives Satya Nadella, Tim Cook, Marc Benioff and Dan Schulman emerging. Artificial intelligence, robots, and regulation of technology and data were consistent themes. Attendees left this year’s forum puzzled by the rising political risk implicit in populism and the loss of consensus around free trade and wary of the unsettled nature of the populace despite a full-employment economy. Here are highlights of sessions I attended during the week:
- Brazil— President Jair Bolsonaro described a deep ethical and moral crisis in his country. “I will not accept partisan interference which breeds corruption,” he insisted. “I will do away with ideological bias. Cabinet members will be appointed for technical skills only.” He referred to his Justice Minister, formerly a chief justice who ran the Lava Jato effort, as a significant partner in reform. He promised a balanced budget, tax reductions, cuts in state spending, opening to foreign investment and deeper trade relations with key partners. He also promised to end criminality and to bring tourism back to “what it should be.”
- Japan— Prime Minister Shinzo Abe looked forward to the G20 meeting in Osaka. He spoke about Japan as a leader in technology for sustainability. He said scientists in his country are on track to make hydrogen a legitimate energy option, cutting the cost by 90 percent so that it is priced equivalent to natural gas. He continues to be an advocate for more women in the economy, saying that he is still a “drill bit” for change. And he noted that he will push AI and IOT (Internet of Things) education for the middle-aged, so that the workers are not left behind.
- Germany— Chancellor Angela Merkel spoke of a need for European foreign policy cohesion, especially on China, Russia and the U.S. She proposed a European Security Council, in response to the American de-emphasis of NATO. She was eloquent about the need for shared prosperity, saying, “Even progress is the pre-condition for social stability.”
- China— Vice President Wang Qishan was incredibly blunt in his speech, rejecting trade barriers and claiming the high ground in the dispute with the Trump administration. “China was a victim of foreign aggression leading to a century of darkness,” he said. “Now we are taking a pragmatic approach, free of the fetters of dogma…we reject the actions of bullies.” He added, “It is not fair to interfere in the development of technology. We need to respect the independent choices of companies and jointly build the rules for tech.” He went on to say that the problem of the West is the unfair distribution of gains because of the “focus on efficiency over equity. Imbalances in trade are inevitable…Western countries should take care of those who feel the imbalance.”
- State Owned Enterprises in China— I went to two sessions with SOEs, who came to Davos to attract multinationals as partners in their effort to modernize the sector. Xiao Yaqing, who oversees all of the SOEs, made several commitments: “We will reform based on market principles. We will meet the standard of listed companies in effective use of capital. We will de-leverage the companies. We had too many companies swarming into industries such as steel; this is now changing. We will have better governance and transparency about financial results.”
- Social Safety Net— I was on a panel that aimed to develop recommendations for government and business as workers are displaced in the Fourth Industrial Revolution. Kristian Jensen, the Danish Finance Minister, proposed a mandatory pension plan for employees of sharing economy firms, with cost split between business and government. Universal Basic Income was discussed, with the conditions that it is universal and unconditional. The most constructive comment came from Francois Riahi, CEO of French insurer Natixis, who has alerted the 20 percent of his workforce most in danger of job loss from automation, so that they can be retrained. There was a pitched debate about whether a company has the obligation to retrain all of its workers or only those who will remain in the company after implementation of technology. And just as hot a debate elsewhere was whether AI would destroy jobs or empower workers to higher-level roles.
- Future of Work— It was noted that 47 percent of jobs will be disrupted in the next 20 years; we need to look at tasks, not jobs. Satya Nadella of Microsoft said it is “less about resumes and more about skills.” Brian Moynihan, CEO of Bank of America, said he had reduced his workforce from 305,000 in 2010 to 204,000 in 2018, while business at the branch banks had risen by 10 percent per year in the interim and pay for those who remained had risen by 6 percent a year. “We let attrition be our friend,” he said. “We also take people off line for six months for specific retraining. We are also moving toward a flatter organization. Over time we will want 40 percent of our staff to have STEM or IT background.” There was a recommendation for a life-long retraining account.
- Robots— I attended a fascinating session with three professors from the University of Tokyo who were giving robots assignments that humans cannot perform. Professor Shoji Takeuchi is developing a robot that absorbs the mosquito’s ability to detect human sweat, then is deployed in earthquake zones to find survivors. Another professor is working on developing robots that become training units for young surgeons, able to absorb touch and feel, giving feedback to the senior doctors, replacing cadavers or animals.
- Sustainability— I attended a session on the oceans. An increase in the Earth’s temperature of 1.5 degrees Celsius will cause lasting damage to the coral reefs, “causing mass extinction of marine wildlife.” There are 150 million tons of plastic waste in the ocean, with 8 million tons of new waste added each year. One of the important events in Davos was the launch of a Plastics Alliance, which unites consumer product companies and plastics producers in an effort to collect and recycle. The plastic in the ocean is breaking down into micro-plastics that are now finding their way into fish stocks. Mining in the ocean has begun, for example near Hawaii and off of the east coast of Africa, in order to offset the monopoly on supply by China on certain rare earths such as cobalt. One risk is that such mining creates a sediment plume that endangers fish. The sense of urgency around addressing the ocean’s needs and climate in general was palpable.
- Press Freedom— Reuters put together a panel on the threat to free press. The killing of Washington Post columnist Jamal Khashoggi in the Saudi Embassy in Turkey, was cited by Marty Baron, Managing Editor of The Washington Post, as an example of a “reporter being murdered for expressing an opinion.” Stephen Adler, Editor-in-Chief of Reuters, showed a chilling chart of the number of journalists murdered in the past year, asserting that there can be no democracy without a free press. Kumi Naidoo, Secretary-General of Amnesty International said, “We need to be able to do three things: Assembly, Association and Expression.”
- Opioids— This was a stunning panel. It takes only five days to become addicted. Doctors in the U.S. are over-prescribing, giving 30 pills after a knee operation or dental procedure. A U.S. insurer is now allowing reimbursement for only a three-day supply. That same insurer is using Orlando, Florida, as a test bed for alternative strategies to fight addiction.
- LGBT Panel— I was asked to join the Pride Momentum panel, the first-ever discussion of the topic at Davos, in the Congress Center. This was a deeply moving event. Richard Quest, CNN anchor, opened the session by walking around the room, saying that he had to recognize the significance of the panel, that in fact this community had officially “made it.” Beth Brooke-Marciniak, Global Vice Chair at Ernst & Young, talked about her experience in corporate America and how much better still the business community could be in offering the same opportunities to LGBT employees for international transfer or advancement. Multinational businesses are where the opportunity lies, to lead and control what we can, and over time to use that soft power to influence cultures and countries.
I left Davos with a clear understanding that corporate chieftains are prepared to step into the void left by a dysfunctional and dyspeptic government sector. This year’s Edelman Trust Barometer findings that 75 percent of respondents want CEOs to lead and not wait for government and that the same percentage trust “My Employer” more than any other institution became a rallying cry for the CEOs. It is right that business takes this leadership role, especially in the retraining of workers about to be displaced by technology. The rebuilding of trust is in your hands.
Richard Edelman is president and CEO.