Wednesday, 4 February 2009

Lessons from Davos- the Emerging Post-Crisis World...

"Nothing is going to stop deleveraging; the economy has to reset," Ballmer, Microsoft's CEO said, as part of a joint interview with EMC CEO Joe Tucci on CNET.

I think we should pay particular attention to the words used- "the economy has to reset". My reading of what i saw last week in Switzerland at the WEF-Davos annual meeting corroborates this -what is going to emerge at the end of all of this is not the bounce back of same markets and a global economy, but a completely different looking global landscape- i.e., a RESET, after the continuing meltdown and deep distress.

In Formula1, there is an adage- that winning moves are made in the turns, not on the straights. Now, in this very sharp turn, is perhaps the time to think about what will be the new emerging landscape, and hence start to place bets/ realign focus and make some moves that take you forward.

So peering into the looking glass, what lies ahead? What is the that new global landscape going to look like? It would be impossible to predict the future accurately, however i offer the following points based on what i heard and saw at Davos:

  1. I think we have seen the end of the era for the financial services industry- for the last 25 odd years, this industry has been the dominant hotspot for the brightest talent, offered the most opportunities for growth and prosperity and has generally dictated terms to the rest of the economy. With the current crises of confidence, the reckless abandon with which this industry has forgotten that "risk" existed, and with the "state ownership" of this industry, i think it is going to be very difficult for this industry to claw its way back into the #1 spot again.
  2. A dramatic increase in influence of emerging markets, China in particular. 2009 will be the first year where ALL economic growth in the global economy (whatever is left of it, that is) is driven by emerging markets. As the Western consumer, the engine of global economy deleverages dramatically, new growth is going to be driven totally and completely by emerging economies, and the rest of the world will clamour to be there- accelerating the process of growth. Also, many of these economies, india in particular, have very limited exposure to the contagion, and have significant chunk of their growth being driven by home markets. All this is going to mean that these nations will increasingly play bigger and bigger roles in the global political landscape. In Davos, there was talk of the G2 (China and America) and what that meant for the rest of the world
  3. Tech avatar 3: As the world grapples with monumental problems, there is no sector that has the propensity to help as much as the technology sector- be it in automotive electronics, or clean tech, be it in regulatory compliance or in media, technology industry has perhaps the single biggest role to play in creating discontinuity- so watch out for a tech led surge in markets
  4. A dramatic undervaluing of the "bailout" economies: Much as i understand the need for these, Bailouts made –particularly if they are with borrowed money, are a bad thing- they spend today, and allow the burden of repayment to be shifted to generations to come in the form of increased taxes- not too different a concept from the poor loans that were behind the current credit crisis in the first place. These economies will be paying off their binge spending loans, for years to come...so watch out, those with exposure to the $, £ etc.,

Lastly a small point- i had a very interesting chat with David Aikman, senior director of the WEF, and head of the YGL community. He mentions that unlike previous years, there has been unprecedented clamour to get into content sessions at the event and delegates were very keen to attend sessions-listening rather than speaking. Might i offer that one of the silver linings to this crisis is that it is teaching us a bit of humility, and increasing the value of those things that are valuable, eg Knowledge?


 

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