The World Economic Forum in Davos is a big circus and a spectacle, but also a seismograph for the state of the world. In focus: a gloomy economic forecast, Ukraine and the turning point for tech companies.
After five days in Davos, there is a feeling of fullness and emptiness: everything has been said, many times and by many, at hundreds of panels, sessions, receptions and parties. The planet is analyzed. But are we clear? It’s been a long time since there was such a struggle for hope, for the right amount of optimism.
The days here begin with big breakfasts and the first top-class discussions, they end with “nightcaps” until late after midnight. In between: many encounters, often by chance. And the question then is whether one is wiser or more confused. Whether the world elite has achieved something at the World Economic Forum or not – which leads to the eternal criticism of Davos: whether such meetings are still up to date and worthwhile.
Well, of course this Davos is a bubble, a circus and spectacle, and yet somehow unique because the “results” are rather invisible. If the five-day meeting in the Swiss mountains didn’t work, 2,700 people wouldn’t come – unless they felt elite peer pressure and were afraid of missing out.
I have sorted the whole thing for you, not comprehensively and conclusively, but in small excerpts, as I experienced it; and that’s why I’m giving you the World Economic Forum in three sentences. Because Davos is definitely a seismograph, even if there is a lot of herd instinct here in the analysis of the globe.
“2023 will be a tougher year than 2022” (Kenneth Rogoff, Harvard economist)
Kenneth Rogoff told me this sentence on Monday, when the halls and hotels were slowly filling up and I met him in the convention center. The phrase was interesting because it stood out as a warning. For the majority of politicians and business leaders spread optimism and hope this year, at a time when people long for hope and not for repeated descriptions of crises, which are now summarized as “poly crises”. “The recession will be milder than expected” – or fail altogether. That was roughly the consensus formula that the IMF reiterated earlier this week. At best, central bankers like ECB boss Christine Lagarde dampened the spirit of optimism in Davos by repeatedly emphasizing that inflation was simply too high. The message: they stand ready to raise interest rates further.
But Rogoff was even more cautious: “2023 will be a very difficult year,” he said. Because 2022 was still a good year in terms of growth data (around three percent). A recession is likely in 2023. And if it fails, well, then we’re talking about growth in Europe of 0.1 percent at best. “The warm weather – global warming! – was Europe’s friend,” Rogoff said.
But wasn’t 2022 bad enough with the war? That will continue in 2023, according to Rogoff. “Lately there’s been some good news that you just cling to. Everyone is grasping at straws when they think the worst is over.” phew So no hope after all?
We are probably experiencing a preliminary stage of what the Berenberg economist Holger Schmieding described as the “Spring of Relief” in our podcast “The Zero Hour” a few months ago. When people feel they have survived the winter without those abysses that have been conjured up for weeks, then the mood will change.
In addition, after so many crises and shocks, many experts, CEOs and economists themselves are unsure whether their models are still predicting everything. The reality for companies is that they are still sorting their supply chains, commodities are expensive and interest rates are higher, and all of that between re-, near- and friendshoring plans. A look at China shows how diffuse hopes are: the opening after the Covid reversal should bring a boost to the global economy – Rogoff agrees. However, if China starts to demand more oil and gas again, this could heat up prices. Millions of Chinese tourists traveling the world again could also spread a new Covid variant.
“Focus on Ukraine, not Putin – and his nuclear nonsense” (Boris Johnson)
Ukraine was omnipresent, not only with several events and their “Ukraine House” on the promenade in Davos. The commitment to support the country was often expressed and invoked – by EU Commission President Ursula von der Leyen, prime ministers like Mark Rutte from the Netherlands or American senators (the Biden government was hardly represented in Davos).
Twice Volodymyr Zelenskyj was connected live, once on the day of the tragic death of his interior minister. Zelenskyj’s wife gave a speech at the convention center. The “Ukrainian Breakfast” on Thursday was particularly moving, not only because of the minute’s silence, but also because of the number of participants and celebrities.
On the podium were Blackrock boss Larry Fink and Goldman Sachs CEO David Solomon, as well as Canada’s finance minister Chrystia Freeland – who used to work as a journalist in Ukraine – and Boris Johnson, the former prime minister of Great Britain. If you listened to him, you could feel why you sometimes miss him. He got a lot of applause from the Ukrainian guests, his early and many trips to Kyiv are not forgotten. Johnson said the West is still too fixated on Putin and his “nuclear nonsense.” He will not use nuclear weapons. One shouldn’t keep worrying about Putin’s head. “Focus on Ukraine, not on Putin,” Johnson said. “Give them the tanks! They will win, we must help them win as soon as possible.”
Interesting was the role of Larry Fink and David Solomon. Goldman Sachs and Blackrock are working in the background, in association with billionaires like the Australian Andrew Forrest, on a reconstruction plan for Ukraine – with a mixture of foundation and platform that is being worked on real and virtually with Ukrainians. Goldman Sachs sent its own people to Kyiv as consultants in the fall, and Larry Fink agreed with Selenskyj at the end of the year that Blackrock would support and advise Ukraine on investments after the end of the war. “We will create a new Ukraine,” said Fink, who estimated the cost of reconstruction at $750 billion. “Ukraine will be flooded with capital.” The country could become “a beacon of hope”.
The plans are reminiscent of the typical American “nation building”, which always comes across as a bit too big and idealistic. But it is exciting that the largest asset managers and banks in the world – who certainly also smell business – are already thinking about the time after the war.
“It’s now showtime for tech companies” (Satya Nadella, CEO Microsoft)
Every year in Davos, the major technological trends and transformations are discussed and described, be it Industry 4.0, artificial intelligence – of course the miracle chatbot ChatGTP or quantum computers, the potential impact of which in the distant future was discussed several times this year.
But this time the mood was different because many in the tech industry have fallen to the hard bottom of their balance sheets – there’s no money to be made just by imagining the future. “It’s now showtime for tech companies,” said Satya Nadella in Davos, the head of Microsoft. Ironically, at the same time it was announced on the distant US west coast that Microsoft was laying off 10,000 people.
The software group is thus joining a wave of layoffs, be it at Meta, Amazon, Alphabet or Salesforce. During the digital boom phase during the pandemic, these companies hired thousands of breathless people. Nadella says the tech industry now needs to deliver, adopt and scale their products – so that they become mainstream and deliver value to customers. In times of inflation, that would mean: How can software help to reduce costs and increase productivity?
You might be wondering where is climate change in all of this. Well, like the inflation, the recession and the peace in Europe, it continued throughout the days and panels. Tenor: We know what to do. Something is finally happening, but not enough.
Greta Thunberg, who traveled to Davos after her theater performance in Lützerath three years after her famous “The House is on Fire” speech, complained about the latter. She said the world elite continues to put profits before the planet. The US politician and climate protection activist Al Gore also recalled in a furious angry speech that despite all the promises, CO2 emissions would continue to rise – the five-day traffic jam of black limousines, which rolled through Davos at walking pace, had the effect of a smoking memorial here .
What remains? The world is falling apart – and good that we talked about it? I think it’s less a question of downplaying problems or blowing them up. But that one recognizes them, understands them and believes in their solvability. Because otherwise only paralysis and powerlessness remain.