- Insider’s Matt Turner and Cadie Thompson share their biggest takeaways from the World Economic Forum.
- Several of the executives they spoke with said the economic picture had lightened in recent weeks.
- AI and ChatGPT were popular topics, even from those who warned of the risks.
Davos was back.
More than 1,500 business leaders descended on Davos in the Swiss Alps last week for the World Economic Forum’s annual meeting. We were there to take it all in.
Davos always gets a lot of attention and criticism. One banner hanging from a balcony above the main congress center last week read: “Wow this is what corruption looks like.”
But from a reporting perspective, Davos is an incredible opportunity to meet with executives and government officials from around the world and across industries in a very short space of time.
We had 50 meetings, plus breakfasts, lunches, dinners, panels, and parties. It was intense and stimulating.
One of the most oft-asked questions there is: What are the themes you’re picking up on? With that in mind, we put our notes together to define four themes that came up over and over.
These don’t capture everything, of course, but they should give you insight into what’s on the minds of the business elite.
There’s going to be a recession. It’s no big deal.
Several of the executives we spoke with, from places like New York, Shanghai, Munich, London, and Zurich, said the economic picture had lightened in recent weeks.
In particular, some pointed to China’s reopening as a positive development for the global economy.
Kweilin Ellingrud, a senior partner at McKinsey in Shanghai, told Insider the full effects of this were likely to kick in during the second quarter, with a surge in spending around travel, luxury goods, and dining. That may benefit Western brands, even as local companies pick up market share.
There were also positive signals for the US-China relationship, with Chinese Vice Premier Liu He taking the stage with a speech emphasizing “strengthening international cooperation.”
Ellingrud said there was an increased understanding that there would be US-China competition in some places and cooperation in others. Caroline Cox, the chief legal, governance, and external-affairs officer at BHP, the world’s largest mining company, said she, too, sensed a more-constructive tone from China.
In the US, meanwhile, there are signs that inflation is slowing, even as the job market shows continued strength.
US jobless claims came in at 190,000 — fewer than expected — during the week of the meeting. And as one major bank CEO noted, that’s before any real spending from the Inflation Reduction Act or Infrastructure Investment and Jobs Act has kicked in. And Russia’s invasion of Ukraine has driven a boom in defense manufacturing, with firms replacing weaponry that’s been shipped to Ukraine.
“There’s a lot more optimism now, particularly in the labor market,” Becky Frankiewicz, ManpowerGroup’s president of North America, said. “So you saw the eurozone unemployment reached a historical low; the US labor market is on a 50-year low for unemployment. And so the labor markets are defying the odds of economic principles.”
Lastly, a warmer-than-expected winter in Europe has taken some of the pressure off energy supplies there.
To be sure, what these executives were largely describing is a more-positive (or less-negative) assortment of likely outcomes for the global economy, rather than a fundamental shift. Most still expect a global recession that’s more keenly felt in Europe.
”My personal view is: I think that if we have a recession in the US, there’s a really good chance that could be very short and shallow,” Paul Knopp, the CEO of KPMG, said. “If there is one, the global picture is more complicated.”
Still, it’s a subtle shift in tone after months of doom and gloom. Jörg Ambrosius, the chief commercial officer at the investment giant State Street, called it “some light at the end of the tunnel.”
AI will change everything
You couldn’t get far into any discussion at Davos without the topic of artificial intelligence and ChatGPT, in particular, coming up.
“I have never seen this much excitement about anything in my life,” Omar bin Sultan al-Olama, the United Arab Emirates’ minister of state for AI, digital economy, and remote-work applications, told Insider.
Mihir Shukla, the CEO and a cofounder of Automation Anywhere, likened ChatGPT to how self-driving cars captured people’s imagination. And Coursera’s CEO, Jeff Maggioncalda, described ChatGPT as a mind-blowing “game changer.”
While Microsoft basked in the glow of ChatGPT’s hype, some of its rivals were left gritting their teeth and warning of the risks.
Alphabet, which has long been a leader in AI, has found itself on the back foot, for example. The T in ChatGPT stands for transformer, an architecture introduced in a 2017 research paper from Google. The week of Davos, Alphabet published an explainer on its approach to AI signed by execs including CEO Sundar Pichai.
“We understand that AI, as a still-emerging technology, poses various and evolving complexities and risks,” the post said. The timing of the paper sure didn’t seem coincidental.
It wasn’t just tech giants warning of the risks, with executives discussing everything from mass-produced misinformation to significant impacts on the labor market.
One exec said they’d heard a CEO at Davos say ChatGPT would replace a huge swath of his customer-service workforce within a few years, for example. Shelley Stewart III, a senior partner at McKinsey, said there would be a much-greater need for occupational switching and retraining as some jobs changed or were eliminated by the advent of AI.
“With every technology, there is good and then there’s bad,” Rima Qureshi, Verizon’s chief strategy officer, told Insider. “I’m a firm believer that in the long run, the good wins out over the bad, but we have to be aware that there are pitfalls with every technology.”
For sustainability, a question of how
The climate crisis, sustainability, and the energy transition were front of mind for many in Davos.
But according to Abby Klanecky, the chief marketing and client-services officer at the management consultant Kearney, many companies are still looking for a place to start.
“We get the what and the why,” she said, describing conversations with clients around sustainability. “But give us a practical guide for how to do this.”
Put another way, “the anxiety is there, but knowing how to act is not,” John Granger, the CEO of IBM Consulting, said.
The pressure is on. Many companies have set net-zero goals without necessarily having a concrete plan for how to achieve them, executives who spoke with Insider said.
John Waldron, the chief commercial officer at Honeywell, said there would likely be increased governance around those net-zero goals, which would force companies to either comply or roll back their targets.
And significant changes in operations are required for many, emphasizing the need to start acting sooner rather than later.
“Companies can’t carbon-offset their way to net zero,” Waldron said.
Several of those who spoke with Insider highlighted the need for much-greater collaboration among companies — and a willingness to experiment.
Granger called for “radical collaboration” across industry verticals, a point echoed by Klanecky.
“None of the problems we’re talking about can be solved by one company,” she said.
And Ambrosius from State Street said there’s a need to act now, with the knowledge that some experiments may fail.
“We’re going to give it a hard try, and if eight out of 10 things fail, that is a better outcome than not doing anything,” he said. “Waiting is no option anymore.”
BHP’s Cox said that many of the technologies required for the energy transition hadn’t arrived yet.
She pointed to BHP’s work testing different fuels in shipping, from biofuels to liquified natural gas, as evidence of the need for experimentation.
One dark cloud for many: the complexity of getting projects approved. Several mentioned US Democratic Sen. Joe Manchin’s permitting-reform efforts, which have hit a wall in the Senate, as evidence of what’s required.
Your boss wants you back at work. Why?
Wanting to bring everyone back to the office is akin to “raging against the dying of the light of the old model.”
That’s according to Nick Studer, the chief executive of the management consultant Oliver Wyman. He said he found the discussion around the return to the office an “incredibly sterile debate.”
First, there needs to be a redesign of the work that is done in the office, and then there needs to be a redesign of the office itself, he said.
“We want to be together when there is a task that requires us to be together,” he added. “Not every task does.”
Real-estate leaders, meanwhile, noted that many office buildings would become obsolete. Some could be transformed into residential dwellings, but others may need to be torn down.
“You will have a lot of obsolete buildings at the end of the day which are not suitable to be upgraded, or it is financially not viable,” Christian Ulbrich, the CEO of JLL, said. “So we have to repurpose those buildings in some form or fashion, or they will be empty and will be taken down at some point in time.”