Among top concerns at the World Economic Forum: fix the global economy, sort out executive pay, create sustainability, and enhance collaboration
The World Economic Forum has wrapped up and the small, Swiss town of Davos has been returned to the skiers. Here are my top 10 themes from the five-day event. 1. The state of the world is not good. The theme of Davos was "Rethink, Redesign, Rebuild," which may have sounded a bit grandiose to some people. I doubt many attendees think this now. The world clearly needs fixing. Figures cited at the Forum show we're a long way from being out of the woods on the global recession. Jobs are and will continue to be a huge issue. It is estimated that unemployment in the world jumped by 50 million during the recession, and that the number of working poor increased by 200 million. But the financial meltdown and recession are arguably symptoms of bigger systemic crises and deep institutional failures. There is growing recognition that many of the organizations and institutions that have served us well for decades, even centuries, are no longer capable. Many of the pillars of economic and social life have come to the end of their life cycles. In 2009, the U.S. auto industry—the epitome of the industrial economy—collapsed. The upheaval is now spreading to other sectors, from universities and science to entertainment and media and to government and democracy. The continuing collapse of many newspapers in the U.S. is a storm warning. Further serious problems loom. Lack of access to fresh water is a catastrophe for humanity. Some 2.8 billion (or 44%) of the world's population already lives in high water-stress areas and the number will increase to 3.9 billion by 2030. In a world of growing capacity, global poverty is getting worse. Ten children die of hunger every minute, and a third of the world's population languish in slums. Almost everyone, including the scientists at Davos, is deeply troubled by climate change. We need to reinvent out energy grids and transportation systems and reindustrialize the planet. We're running out of time. 2. Everywhere new collaborative models are emerging to solve global problems. Our systems of global cooperation are not rising to the many challenges we face. The global warming conference in Copenhagen has become a metaphor for failure. I believe the Forum itself is an example of the global multi-stakeholder cooperation that is picking up where nation states and formal institutions left off. The global humanitarian response to the Haitian earthquake is showing us what is possible. The 7.0 magnitude earthquake isn't just a Caribbean island crisis, but a world crisis. Millions of people and thousands of institutions have responded in nontraditional ways, donating time, money, goods, and services via new technologies such as texting, Twitter, Facebook, and YouTube. Social media have become the preeminent tools to connect people around the world, empowering them to become active participants in relief efforts. As leaders stalled in Copenhagen, new networks of problem-solvers were taking over. Thanks to Web 2.0, the entire world is beginning to collaborate—for the first time ever—around a single issue: the changing weather. For the first time we have a single, affordable, global, multimedia, many-to-many communications system, and an issue on which there is nearly nonpartisan consensus. Citizens, businesses, and governments all have a stake in the outcome. Indeed the global consensus emerging on climate change is that solving the crisis will require leadership from every country and every social sector. There are 100 million people on Facebook Causes—the biggest application on Facebook. These are not just people talking to each other. They are organizing activities in the physical world. I heard of dozens of examples at Davos. 3. Rethinking the financial services industry's role in society. The mood at Davos was widespread: Banks need to be reined in, the sooner the better. U.S. banking executives used to be the stars of Davos. Now they are a low-key, humble, and dour-looking group. Last year at Davos everyone was in a degree of shock. This year, a better term would be "fed up." Fed up with banks that are "too big to fail," with government bailouts, with the human costs of this crisis, and with an industry that got out of control. For some CEOs the crisis warrants a critical reevaluation of market capitalism. My wife and I attended the reception of one of the world's largest financial institutions and were greeted with eerie enthusiasm by the CEO and several of his top executives. They stood at the door in a wedding-style line greeting, thanking every guest, delighted to see some new faces at their sparsely attended event. Even The Wall Street Journal reports an international backlash at Davos; "Bankers are on the run." 4. Executive pay, especially for bankers, needs fixing. There was a very strong sentiment that exorbitant executive compensation needs to be corrected. The biggest targets in discussions were bankers and other architects of the financial crisis. Many damaged their own firms, some to the point of bankruptcy. They paralyzed the commercial credit market for tens of thousands of companies and today are unable or unwilling to loan money to entrepreneurs. To have set aside billions of dollars for bonuses just after they were bailed out by the government was viewed by almost all attendees as unconscionable. 5. Sustainability's time has come. Business is moving from talk to action. As one executive put it: "It's no longer about the green economy; it's about the economy." Sustainability is the central issue many businesses face. Over 90% of consumers say they would buy sustainable goods and services. External costs need to borne by the companies that generate them. Companies such as Nike (NKE) could turn goods such as running shoes into a service by leasing them; when the shoes are no longer useable, Nike could take responsibility for the waste. Fresh thinking on the part of entire industries, such as the GreenXchange launched at Davos by Nike and other companies, is required. CEOs everywhere at Davos said we've now arrived at the point where sustainability must be integrated into the business strategy: What is a business and how it does it operate and relate to the rest of the world? We'll see if they walk the talk. 6. The world needs better governments. Some governments in Central America and Africa are just holding on and many are dysfunctional. Governability is becoming an issue for G20 countries, too. One leader said the U.S. is on the brink of being "ungovernable." A Chinese executive responded thusly when asked to defend his country's lack of democracy: "So we should adopt the American system where lobbyists run everything and nothing happens?" Business takes it as a given that lobbyists control Congress. Politics have become polarized and when someone in the political middle gets elected they can't do anything. The best predictor of democratic survival is per capita income. In some countries portions of the government have been captured by interest groups. Some undemocratic countries are proving competitively stable and economically healthy. The current economic crisis shows that national governments and domestic regulation are inadequate to deal with the challenges of the global economy. There are also dangers of protectionism and isolationism. Citizens in most countries resist increased taxes. We see crises in funding government operations. In many countries citizens lack basic services. It is difficult to cut costs without cutting critical government services. 7. It turns out that the Internet does change everything. The much-discredited phrase from the dot-com period is not just geek speak. The Internet and social networks were central to many discussions here. The digital age seems to be coming of age. I participated with CEOs of most of the important social networks in a session called The Power of Social Networks. A few minutes into it, we solicited questions from Facebook. In the first two minutes, 6,000 questions appeared. New business models are emerging in every industry and throughout society. I've argued that social networking is becoming social production and that a new mode of production is emerging—changing not only how we make software or encyclopedias but physical goods like motorcycles, too. I was also a panelist at a private session asking the provocative question: "Will social networks replace the nation state?" Of course the answer is no, but it's significant that we can ask the question. If Facebook were a country, it would be more populous than Russia. Nation states have based their authority on control of individual identity, association, and currency within territorial boundaries. Now social networks operating across geographical frontiers have the potential to offer all these things. They also offer the potential for power divorced from traditional political systems. What are the prerequisites for the emergence of the first digital nation-state? 8. Girls, women, and gender: A sea change is underway. There was lots of buzz about women's emerging purchasing power, known as the Power of the Purse. The expected worldwide increase of women's income by 2013 is $5.1 trillion, which is greater than China's expected growth of $3 trillion for the same period. Deep interest was evident in the so-called girl effect—that investing in girls offers the biggest ROI in the developing world. In African countries female illiteracy is almost a third higher than that of men. Every year of schooling increases a girl's future earnings by 20%. By earning more and influencing how money is spent, women acquire a stronger voice in all aspects of their lives. Although women are becoming stronger financially, they are still very weak politically. Countries should be more aggressive at finding female candidates for public office and should seek them outside the regular channels. Increased financial and political power will bring responsibilities. Women could be key in refocusing our political and economic efforts away from consumerism. 9. We need new measures of progress. There is growing agreement that gross domestic product and gross national product are flawed tools for measuring the health of a country, and that we should instead emphasize the idea of gross national well-being or something similar. Just as some companies have moved to "triple-bottom line" reporting to assess their impact on society, many economists argue that GDP and GNP measure activities that are detrimental to society while ignoring activities that are beneficial. A pandemic, for instance, increases drug sales and visits to doctors, thereby driving up GNP. Volunteer work or work in the home is not recognized as contributing to GNP. Some governments and academics have developed a wide array of yardsticks to more accurately capture how well and healthfully a country is growing. The key now is to have these new tools recognized as legitimate and to encourage their widespread adoption by governments, the private sector, and the media. Forum attendees realized they could play a real role by promoting the use of more accurate indexes in their home countries. 10. A new big idea: The Global Commons. As with village parks, we need new global parks in the global village. Some of the global commons areas are well-recognized, such as our atmosphere, oceans, and space, but there are less obvious areas that exist, or should be created, such as know-how concerning sustainability. Conventional wisdom says you should control and protect proprietary resources and innovations—especially intellectual property—through patents, copyrights, and trademarks. That's often the wrong approach. Contributing to "the commons" is not altruism; it's the best way to build vibrant business ecosystems that harness a shared foundation of technology and knowledge to accelerate growth and innovation. A good private sector example came when more than a dozen pharmaceutical companies abandoned proprietary research and development projects to support open collaborations such as the SNP (single nucleotide polymorphisms) Consortium and the Alliance for Cellular Signaling. Both projects aggregate genetic information culled from biomedical research in publicly accessible databases. They also use their shared infrastructures to harness resources and insights from the for-profit and not-for-profit research worlds. These efforts are speeding the industry toward fundamental breakthroughs in molecular biology—innovations that move us toward an era of personalized medicine and treatments for intractable disorders. Nobody gives up potential patent rights over new end products. By sharing some basic intellectual property, companies bring products to market more quickly. One overarching theme at the conference is the confidence that young people hold great potential. We face a lot of work if we don't want to pass on a damaged planet to our children. At the final session at Davos, we watched six inspiring young people present on stage their hopes and ambitions. There were more than a few tears in the audience.