"The mood of Davos is always a counter-indicator," says Harvard University historian Niall Ferguson. "It's a consensus not to be believed in. The more complacency there is, the more I'm worried."
So what did we glean during five days at the World Economic Forum's annual meeting in Davos? Well, everyone agrees that China and India are Really Important, though no one seems to have a clue whether to rejoice or despair as economic power shifts. Investment bankers would like us to pretend the credit crunch never happened so they can go back to bonus as usual. And for those people clever enough to look past the middle of next week, anxiety over the outlook for food and water security is enough to cause some sleepless nights.
Frankly, though, we knew all of that before the threat of global warming was exacerbated by transporting thousands of executives and associated gawkers to Davos. (Although we did learn that when you trap the great and the good in a small Swiss ski town, the taxi drivers—almost invariably driving Audis—can charge $2 per minute and more to get you from an undernourishing conference center to your overpriced restaurant or accommodation.)
More compelling were the flashes of heat revealing the tensions that lurked beneath the surface. An attempt led by JPMorgan Chase (JPM) Chief Executive Officer Jamie Dimon and Barclays (BCS) chief Robert E. Diamond Jr. to lower the curtain on the financial crisis backfired. Dimon's warning about the risk of "bad policies" prompted a lecture on "moral values" from French President Nicolas Sarkozy. And when Diamond expressed "very heartfelt thanks" for government bailouts of his industry, French Finance Minister Christine Lagarde retorted that "the best way to say thank you is to start lending, keep compensation reasonable, and improve your capital levels." (The previous day, Goldman Sachs (GS) announced a $12.6 million stock bonus for CEO Lloyd C. Blankfein for 2010, and raised his base salary to $2 million this year, from $600,000.) "There is a high level of public anger," says Robert J. Shiller, an economics professor at Yale University. "There's a sense the good guys are coming last."
Though regulators and bankers clashed, the mood music emanating from the private lunches and off-the-record briefings left the impression that Europe's sovereign debt crisis is reaching its endgame. Spain and Greece are earning plaudits for belatedly tackling their swollen deficits. That's giving German politicians the ammunition they need to hustle a bond-backed bailout past their taxpayers. As evidence of the newfound optimism that default can be averted, the spread between the rate investors demand to lend to Greece and what they'll accept from Germany has narrowed to a three-month low.
The corners and coffee bars of the conference center illustrated how the mobile technology wars were panning out. Anecdotally, at least, Apple's (AAPL) iPad has obliterated the laptop among note takers and Web surfers, while the iPhone is the favored confidante of the chattering classes. Research in Motion's (RIMM) BlackBerry, though, is still the e-mail device of choice. "The iPad is the gizmo of the year," says Joe Saddi, chairman of global consulting firm Booz & Co. "I have a BlackBerry, iPhone, and iPad. They all have different uses." Jim Balsillie, RIM's co-CEO, displayed his BlackBerry PlayBook tablet prototype slated for release later in the year. He kept mum, however, on his battle plan for engaging with Apple.
A personal highlight was listening to Bono of U2 and Peter Gabriel debating with Daniel Ek, co-founder of the Spotify music service, about whether musicians will ever get paid a fair price for digital distribution of their songs.Trekking halfway up a mountain to get to a party was made worthwhile after we persuaded Bono to serenade us with an up-close-and-personal rendition of Two Shots of Happy, One Shot of Sad, a song he co-wrote with U2 guitarist The Edge, hoping that Frank Sinatra would record it—and one that seems to sum up Davos quite well.
The bottom line: While tension between regulators and bankers occasionally surfaced, the mood at Davos was more optimistic than in recent years.