What's Really on the Davos Agenda

It officially focuses on innovation, but the specter of global recession promises to dominate the discussion at the World Economic Forum

Davos is the tiniest of Swiss ski villages, with snowpacked streets that are never fully cleared. For one week each year, the global elite alights and engages for the World Economic Forum. It's a frenetic series of secret meetings, open discussions, serendipitous encounters, and public displays about the key economic and political issues of the day. Workshops, panels, sessions, and plenary sessions take place in one large conference center and dozens of hotels throughout the village.

Most of them occur over food—breakfast, lunch, dinner, and nightcaps. It's where Angelina Jolie talks about African refugees, the two founders of Google (GOOG) put on a grand party with the best wine in the world, and Tony Blair sings with Bono to raise money for the Gates Foundation. It costs a small fortune to attend—several tens of thousands of dollars—and you have to be invited. And at the center of all the activity is the founder of this most amazing event, Klaus Schwab, who is planning to extend the "Davos moment" throughout the year, with subsequent meetings planned for China, India, New York, and elsewhere.

There will be two topics at this year's main event, to be held Jan. 23-27. One is innovation. The other is recession. The official theme of this confab of the fabulously rich and powerful is "The Power of Collaborative Innovation." This will be the focus of dozens of panels, workshops, and speeches on the rise of social media and how corporate leaders can harness it to create better models for business, education, health care, and even political systems. But the unofficial agenda will deal with the sharp drop in U.S. economic growth, raising the specter of global recession. You can bet that all the heads of the European, Asian, and American central banks will be in Davos doing their own version of collaborative innovation, trying to coordinate interest-rate cuts to stem the recessionary tide rolling in.

Angry Euros Armed with Strong Euros

There will be a lot of angry finger-pointing as well. Last year, an army of slick-haired, Wall Street private equity and hedge fund guys turned up to show the doubting Europeans the clever and kindly face of American market capitalism. To the Europeans who wanted more regulation of SIVs, CDOs, and other arcane and opaque financial instruments, they condescendingly explained that the markets would take care of everything. To the Europeans who complained that private equity and hedge fund wheeling and dealing were distorting economic growth, they gently suggested that the Old Country was out of touch with the new reality of financial innovation.

Turns out the Europeans were right. The subprime junk packaged and repackaged as top prime credit collapsed and is taking the rest of the U.S. economy (and perhaps the world economy) down with it. The Europeans are hoping their economies have "decoupled" from the U.S. for the first time, but they probably haven't and they're going down, too. So if the slick-haired guys can still afford to hop their private jets to get to Davos this year, they're going to find a lot of really angry Euros armed with really strong euros.

If the Europeans are angry, the Americans will be nervous. Sovereign wealth funds (BusinessWeek.com, 1/10/08) (read government-run financial institutions with trillions of petro- and export-surplus dollars) are buying into Citibank (C), Merrill Lynch (MER), and other icons of American financial capitalism. Representatives from most of them will be there (many of the Middle Eastern players are longtime Davos participants who have represented their governments over the years) to tell the world that there is nothing to worry about as they gobble up assets.

They may not have slick-backed hair but they will be this year's soothers of wrinkled brows. The session on "Myths and Realities of Sovereign Wealth Funds" on Jan. 24 will probably be packed.

Tony Blair Meets China Mobile

The innovation sessions at the World Economic Forum are increasingly the most popular, jammed full of business people from the U.S. and Asia especially. Much of the discussion will be about the fundamentals of innovation—tools, metrics, methodologies—and the ways of making it a predictable process. The first session of the WEF opens with a big workshop on where innovation is headed. "Defining Innovation" features panelists including Larry Keeley from Doblin, Tim Brown from IDEO, Kigge Hvid from Europe's INDEX, William McGlashan from venture capital outfit TPG Growth, and Kiyoshi Kurokawa, science adviser to the Prime Minister of Japan.

The opening plenary stars ex-British Prime Minister Tony Blair, Henry Kissinger, JPMorgan Chase's (JPM) Jamie Dimon, Pepsico (PEP) CEO Indra Nooyi, Wang Jianzhou of China Mobile, and others. But many attendees skip the heavy political stuff to take the opportunity to ponder existential issues and have some fun. They attend sessions on science, philanthropy, music, and psychology. This year, there will be a presentation entitled "Happiness—How Much Can You Take?" Another, "Solving the Mysteries of the Mind" will probably be jammed.

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