Davos 2024: Key Takeaways

The tranquil alpine town of Davos undergoes a striking transformation each January. Over 30,000 visitors, significantly outnumbering its permanent residents, converge here to attend the World Economic Forum’s annual meeting. This event is akin to a business and political Disneyland, attracting CEOs, national leaders, finance ministers, social entrepreneurs, and more, who engage in lively debates on the most pressing issues. As a member of The Forum of Young Global Leaders community, I had the privilege of participating this year.

Remarkably, most businesses along the town’s main commercial strip, the Promenade - encompassing cafes, ski gear, and clothing stores - vacate, leasing their premises to various global organizations. These entities construct temporary "houses" for promoting their messages or services during the five-day conference.

This year, the Promenade was dominated by three groups: 1) Organizations specializing in artificial intelligence, 2) Governments from regions like India and the Gulf countries, benefiting from the rapid reshaping of the global geopolitical landscape, and 3) Financial and media powerhouses.

My experiences at countless panels, small group meetings, and one-on-one discussions in the congress center led me to conclude that the Promenade’s occupancies mirror the predominant themes of the week. Here are my key insights:

Artificial Intelligence: For every opportunity there’s a risk to watch out for

We are witnessing a speedy democratization of powerful technological tools. These are making it to the hands of both good and bad actors, which is likely to unleash economic productivity, yet also present unprecedented threats.

On the positive side, we're seeing improvements in healthcare, education, and various professional services. For instance, the UAE has introduced a personalized tutor for every student in the country. Microsoft is developing a battery that requires 75% less lithium than traditional ones, underscoring technology’s potential in advancing science.

However, discussions also emphasized AI’s transformation of the security landscape. Ukraine’s Minister of Foreign Affairs highlighted the revolutionary role of drones in warfare, and a top bank executive mentioned fending off 5 billion daily attacks on its technology infrastructure, double the number compared to last year.

The future of jobs in the AI era was a hot topic, with most participants believing that AI won’t take someone’s job, yet a person using AI will.

Curious about the tech revolution? Watch this discussion on what a post-quantum cryptography world may look like.

Macro and markets: A more benign outlook might be leading to complacency

Last year's economic resilience, despite the Fed's intense monetary policy tightening and various geopolitical shocks, surprised many.

Given the positivity that is now priced into both equity and fixed income markets, many investors and bank executives highlighted the risk that the market may be becoming complacent. Question around whether inflation would come down as smoothly as is currently discounted emerged, in an environment in which tensions in the Middle East are disrupting global trade, and wage pressures in countries like the US remain elevated.

Our CEO Sergio Ermotti joined the conversation and shared that after the Credit Suisse acquisition, 瑞银集团 is not only larger, but also stronger and more diversified. He expressed concerns around how regulatory arbitrage is leading to a sharp growth in credit provision outside the banking sector. He also reminded regulators that banks are facilitators between savers and investors, and in this vein can support, but cannot be in full control of the world’s transition to net zero.

Geopolitics: A fragmented world is boosting the status of middle powers

Attendees recognized our entry into a multipolar world, with an expected acceleration in geoeconomic fragmentation. The Dutch Minister of Economic Affairs strikingly referred to the economy as a "battlefield." Professor Chris Miller, author of "Chip War," reminded the audience that roughly 90%of all the advanced chips in the world are manufactured in Taiwan, a much larger concentration than that for instance is present in global oil markets. Mitigating this source of global economic vulnerability will take a very long time materialize, even considering the more assertive industrial policy the US is today adopting. The weaponization of finance, and the implementation of export controls, were additional topics of deep concern for executives and many policymakers alike.

Representatives from geopolitical “swing states" like the Gulf countries and India expressed confidence in their strategic positioning. There was a consensus that Latin America, too, stands to benefit as a reliable commodity provider, leader in the energy transition, and potential manufacturing hub. Sadly, very few Latin American policymakers were in attendance. The private sector appeared rather lonely in trying to adapt to this new world. In a similar vein, European executives and entrepreneurs repeatedly expressed wishes that the bloc’s economic, regulatory, and financial integration would occur at a faster pace in order to increase competitiveness.

Finally, plenty of time was dedicated to discussing the outlook for the many elections taking place this year, the impact they could have on domestic and international affairs, and the threat that artificial intelligence can pose on electoral processes worldwide. US internal-tensions were the most actively debated, with few daring to make electoral predictions, yet with some members of the US business community apparently coming to terms with a second Trump term.

Energy Transition: COP28 offers hope, yet much more work remains be done in climate finance

There was a sense that what Dubai’s COP28 conference achieved was meaningful in terms of a newfound global consensus to shift away from fossil fuels. At the same time, there was widespread skepticism around implementation, considering the equivalent of 5% of global GDP is estimated to be required every year to finance the energy transition. The fact that world is currently tracking at roughly one sixth of that amount speaks to the enormity of the challenge.

Scientists in attendance reminded participants that even if the world stopped burning fossil fuels today, global warming would still exceed the 1.5 degree Celsius threshold given how much damage has already been done. Increased investment in mitigating impact seem inevitable. Emerging markets have the most acute need for capital in this area, yet investors are seeking enhanced political and currency risk guarantees to increase their engagement.

In sum, for all the fascinating conversations that took place during the conference, seasoned participants often reminded attendees that “sentiment” and “predictions” coming out of this annual meeting do not always age well, that nobody knows for certain what the world will look like in coming years, and that the only way for corporations and governments to survive is to remain agile and adaptable to incoming circumstances.

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