Davos Man’s dirty secrets
It’s the time of year when everywhere I turn, I read tweets and posts about Davos, which was a huge part of my life for 10 years. I’m a long way from the mountaintop these days, but I find that too many people don’t understand some basic truths about the Annual Meeting of the World Economic Forum.
The Forum’s often-stated mission is: “Committed to Improving the State of the World.” There were moments that a few other subversives and I used to say that it was a bit like the signs you see entering a London borough: Croydon: The Brighter Borough. Sounds nice, but it’s meaningless.
I don’t think — and, in the day, I didn’t think — that’s quite fair. The Forum is truly committed to improving the state of the world, and some of the corporations that are members are wholly on board with that mission. The problem is that, for all the good intentions, and plenty of good actions, an organization that is at heart a grouping of the world’s largest corporations isn’t necessarily in the best position to improve the state of the world, particularly in an era of the Arab Spring and Occupy.
The Forum does its best to mitigate this, inviting a decent share of civil society leaders and trade unionists. But just as the academics and Nobel laureates that grace the Forum are, as one of those distinguished attendees once told me, the dancing bears at the circus, the non-corporate leaders in Davos are on the fringe, not at the center of action.
When I first went to Davos in 1993, then-Viscount Rothermere (who was the ultimate owner of Euromoney PLC, the joint venture partner with WEF in World Link, the magazine I ran) told me that the real mission of the Forum was much simpler. Don’t Offend Anyone.
If your goal is to offend no one, you have a host of problems. Some are obvious. Taiwan and Tibet shall never pass your lips (WEF is hardly alone in this constraint). Plenty of rotten presidents and prime ministers get welcomed with open arms.
That comes with the territory. More difficult is the need to put corporate leaders on panels with relatively little regard to whether they have any original ideas, or any ability to talk about them. The dark, dirty secret you learn when you run the program at Davos is that the vast majority of CEOs have nothing to say. That doesn’t mean they are bad CEOs. It’s just that there is no correlation between being a successful business leader and having interesting ideas and the ability to express them.
Tackling healthcare for the very poor
This year in Davos, there is a lot of talk about transformations and new business models that will be important in our global economic recovery. In healthcare, new models will be a significant part of expanding access to patients in need. While it is clear there is lots of growth potential in emerging markets, it’s also important to address the larger societal challenges associated with this growth. This is especially true in the developing world where access and affordability are major issues.
Nearly half of the world’s population lives on less than $2 per day. I was recently in India, where I got to see firsthand what this means. According to the latest estimate from the World Health Organization, there are more than 835 million people across rural India — more than twice the entire population of the United States. Only 35 percent of these people have access to essential medicines. For those of us in the developed world, this is a seemingly unimaginable gap.
As CEO of a global healthcare company, I believe it is critically important to help improve the health of people everywhere by expanding access to medicines in a sustainable way. However, there are many obstacles to delivering care in developing countries, and overcoming them requires adapting to local needs. Poor infrastructure, poverty, inadequate sanitation systems, unclean drinking water and a lack of trained health workers all compound the problem. The question is: With problems so large, how can we be part of the solution?
At Novartis, we realized it was important to take a step back and consider not just how we can enter a market but also how we can adapt to better consider local conditions. We saw that there was a need for a new model in emerging markets like India. That is why we developed Arogya Parivar, meaning “healthy family” in Hindi. This is what we call a “social business” model, meaning it blends corporate citizenship with entrepreneurship.
While many have highlighted the cost of medicine, there is not enough emphasis on solving the associated distribution and social challenges. Arogya Parivar addresses what I believe are the two most important issues in developing countries: healthcare education and infrastructure. The program works by recruiting and training locals to become health educators and tour villages, schools, and health centers. They conduct community health meetings and talk directly to patients about disease prevention and encourage them to seek timely treatments. Also, the local teams address the infrastructure issue by organizing health camps — mobile clinics that provide access to screening, diagnosis and therapies to patients in remote villages who don’t have regular access to healthcare. In 2010, we hosted more than 3,000 health camps, reaching an estimated 140,000 people.
To make treatments more available and affordable, we also sell over-the-counter medicines in smaller packs with doses for only one to three days. While patients need to purchase the packs more frequently, one local doctor mentioned that this helps them better track a patient’s compliance and helps keep weekly out-of-pocket costs low. Importantly, this initiative turned profit-positive this year after four years of losses. This is critical for its sustainability.
Our model is based on the understanding that access to medicines in the developing world is bigger than a pricing issue. Insufficient infrastructure and lack of healthcare access are larger problems that need to be addressed. What is needed is entrepreneurship that creates jobs, expands access to health education and works closely with patients in the context of local customs. Health solutions must be tailored to meet diverse local needs.
A Van Winkle return to Davos and to real problems
It was well past midnight in late January 2000 when an investment banking contact called my Davos hotel room to share the latest details on Vodafone’s hostile bid for Mannesmann. That was news, but the huge hostile takeover was no longer the largest deal in history. It had been displaced a few weeks earlier by the agreed merger of AOL and Time Warner. Such was the talk of the World Economic Forum. The great and the powerful had gathered together to celebrate the success of business and, especially, of finance.
Exuberance over technology and venture capital was almost limitless back in 2000, thanks to the seemingly limitless rise of the tech stocks. Dotcom startups were all the rage. When Japanese Internet mogul Masayoshi Son finished one panel, he was assailed by a gaggle of entrepreneurs waving business plans for him to peruse. In full disclosure, this columnist two weeks later signed up to establish the online financial commentary business that eventually became Reuters Breakingviews.
Coming back to this gathering 12 years later is a Rip Van Winklerian experience. The old world and its little worries look positively quaint. Back then, at what in retrospect proved to be the height of the Great Moderation, business was booming, the Nasdaq still had another 20 percent or so to climb, companies were merging like mad; everything looked rosy. President Bill Clinton parachuted in to give a victory lap. Even the demonstrations that took place against neoliberalism and world trade now look quaint. Defacing a McDonald’s is a far cry from overthrowing governments.
The economic moderation turned out to be built on financial excess. That AOL deal – hailed as visionary by all the delegates of 2000 – has become the poster child for foolish corporate finance. The Nasdaq is a third lower than 12 years ago (before adjusting for inflation). And the banks – what can I say? From triumph to tribulation.
The political world also looks much more treacherous. Geopolitics has not yielded to the irresistible forward march of free market capitalism, and peace no longer looks like something to be taken for granted. The 9/11 attacks spawned wars in Afghanistan and Iraq – the kinds of conflicts that in 2000 were supposed to be a thing of the past.
The World Economic Forum has changed with the times. The rise of the BRICs has brought greater diversity to the audience, which is a good thing. It has also brought many more people – so many, in fact, the organizers have expanded their caste system. There is now a dizzying number of different badges, each offering differing levels of access and status. It’s much easier to be here and still be excluded from the elite – much like the feeling of many of the world’s dispossessed.
The most striking difference, though, is in the increased complexity and severity of the questions confronting the collection of top business people, politicians, investors and academics. Europe’s sovereign debt crisis keeps trundling forward, bringing to the fore thorny challenges to sovereignty, the role of central banks and the solvency of nations. Instead of Clinton smiling from the podium, this year’s keynote address came from the troubled German Chancellor Angela Merkel, the leader with the most cards at the debt crisis table.
Making the business case for a healthy workforce
The role that today’s workplace plays in health and well-being is often debated. People spend much of their time at work, and wellness at work matters. Employers generally find that healthy employees contribute to business success, but the exact quantitative relationship between improvements in employee health and corresponding improvements in employee productivity and engagement remains elusive.
At the same time, employees around the globe are increasingly subject to non-communicable diseases – primarily cancer, heart and chronic pulmonary diseases, and diabetes. Many such diseases have their root in obesity or tobacco use, and thus to a large extent are preventable. Worldwide, non-communicable diseases cause an estimated $2 trillion in losses each year in economic activity, as well as the premature deaths annually of 18 million people still in their productive years. That’s why the World Health Organizations tags such non-communicable diseases as “the world’s biggest killer.”
For the past two years, the Workplace Wellness Alliance has been tackling the problem. Triggered by a call to action during the 2010 World Economic Forum, this consortium began with 13 companies and now has more than 100 major global employers representing 4.5 million employees worldwide, all dedicated to ensuring that – regardless of country or industry – optimum employee wellness is a priority in the workplace.
As the consortium has grown in size, so has its influence. In fact, the corporate social responsibility newswire CSRwire recently named the rapid growth of the Workplace Wellness Alliance as a “Top 10 CSR Moment of 2011.”
Specifically, the Alliance is helping establish a global standard of wellness – through metrics and best practices contributed by its member companies – to improve workforce health and productivity. Already, it has collected homogeneous health metrics from more than 150,000 employees across 20 global companies. These will help establish a measurable global workplace health baseline and provide the structure, tools and processes essential to maximize efforts against chronic diseases. It also has established a database of real-life case studies that describe successful workplace wellness programs.
It’s a critical effort. In the U.S., chronic illnesses affect more than one in three workers, with treatment costs accounting for about 75 percent of our national healthcare spending annually.
The consequences are equally dire elsewhere. In the Russian Federation, every employee on average loses 10 working days a year to chronic disease and injury. In the United Kingdom, the cost of mental ill-health to employers was estimated at 25.9 billion British pounds in 2006. The societal implications are far-reaching as well. In Taiwan, if you’re diagnosed with diabetes or cardiovascular disease, your chances of being hired are reduced by 19 percent and 27 percent, respectively.
There is no “business case for a healthy workforce”.
It’s an oxymoron.
The only rational “business case for a healthy workforce” is to quietly get rid of an employee when he/she (or their family) becomes a healthcare burden to the employer, since it directly affects the bottom line.
This also includes the ongoing need for “preemptive action” on the part of an employer to keep its employee base as young as possible, since an older workforce tends to cost more, but without generating any additional efficiency that drops profits to the bottom line for investors.
US jobs are “outsourced”, not only because of direct labor cost, but also to avoid having to pay the “overhead” associated with a US work force, which includes, among other things, health care costs that are rising rapidly each year.
No matter how you look at it — from a financial investment standpoint — maintaining a business in the US versus overseas is a lose-lose proposition.
And, taking the US economy as a whole, the fewer individuals insurance companies have to spread the risk over, the higher the healthcare costs to the employer.
Then the cycle begins again, ad infinitum.
It’s the dirty little secret about healthcare no one wants to talk about, but it exists nevertheless.
What we REALLY need to do is to take the employer out of the equation altogether, thus reducing business overhead costs, which are a direct conflict of interest for any employer, and then we can REALLY focus on a “healthy workforce”, plus a whole lot of other social problems that contribute to an unhealthy US workforce.
The underlying problem is that neither government nor business can seem to understand that maintaining this employer-based health care system is destroying this country, no matter how you choose to look at it.
What we REALLY need is a healthcare system like many European countries, which would probably give us better coverage for less cost.
The underlying problem is that moving to a healthcare system that really works, would gore too many “sacred cows” in the healthcare industry.
What we REALLY need is way to force healthcare changes on an industry that is unwilling to reform itself.
The underlying problem is the healthcare industry has too much clout with the federal government to ever allow that to happen.
Which brings us back to square one again — a massively overburdened healthcare system, that delivers poor results, and costs a fortune to boot.
Privatizing this system is guaranteed to make matters even worse than they are now — just like privatizing other industries has done. It is NOT the solution.
Why doesn’t someone tell the truth for a change as to what is really wrong with our healthcare system?
Recognizing the problem would at least be a start to correcting it, which would be a lot further than we are today, since we are clearly moving in the opposite direction from any solution that will work.
PseudoTurtle
CPA/MBA
George Soros on what the 2012 election means for Wall Street and why he’s a traitor to his class
The following is an excerpt of an interview between Reuters Global Editor-at-Large Chrystia Freeland and investor George Soros.
Chrystia Freeland: I’d like to turn now, if we may, to the United States, where politics and the economy are also quite volatile. You were a very early supporter of President Barack Obama. What report card do you give him now?
George Soros: Well, look, either you’ll have an extremist conservative, be it Gingrich or Santorum, in which case I think it will make a big difference which of the two comes in. If it’s between Obama and Romney, there isn’t all that much difference except for the crowd that they bring with them. And that’s not very encouraging on either side because Obama’s administration is a bit exhausted — a lot of the talent has left — and the Republicans would have to, or a Republican candidate would have to, bring in probably an extremist vice-president.
Chrystia Freeland: But isn’t there actually quite a big difference between even a President Obama and a President Romney when it comes to questions of taxation, particularly taxation of the so-called 1 percent, issues like carried interest? Do you see any difference there?
George Soros: Well, that is the big difference, and that has led my hedge fund community to abandon Obama in favor of any Republican because they don’t like to be taxed. I personally believe that when it comes to policy, you shouldn’t be pursuing self-interest, but the public interest. And I think that the income differentials are too wide and ought to be narrowed.
Chrystia Freeland: Are you one of Lenin’s useful idiots?
George Soros: Pardon?
George Soros on Germany’s view of the Euro Zone crisis and the future of Italian bonds
The following is an excerpt of an interview between Reuters Global Editor-at-Large Chrystia Freeland and investor George Soros.
Chrystia Freeland: With me now is George Soros, the legendary investor, philanthropist, and I think we’re allowed to call you a philosopher as well, Mr. Soros. What do you think? Do you accept that title?
George Soros: Yes. I would like to.
Chrystia Freeland : Can you enlighten us a little bit more about the German thinking, because Germany after all has done pretty fantastically with the German economy. And Germany has more at stake in the survival of Europe than any other country.
George Soros: Yes.
Chrystia Freeland: If they’re so smart, why are they doing something that you think makes so little sense?
George Soros: You look at it from their point of view. They have the most successful economy, so why can’t the rest of Europe be like them, right? It’s a very reasonable argument to make. Unfortunately it’s false because you have a closed system, the euro clearing system, where Germany is a constant creditor. Well, you can’t have everybody be a creditor in a closed system. For every creditor there has to be a debtor. The credits and the debits have to be balanced out. So the Germans are asking the impossible. It happens to work for them, and so even as Europe is pushed into a deflationary debt spiral, Germany will do relatively better than the others. Germany will continue to rise, and the heavily indebted countries that have to pay heavy risk premiums will actually be, and are already, in a recession. So the balance of trade, or competitiveness imbalance, will continue to rise. Germany will keep on going up, and the rest of Europe — well, the heavily indebted countries — will continue to sink.
The problem with capitalism is democracy
The rich and powerful at Davos debated capitalism today with a defense that invoked Winston Churchill’s famous dictum on democracy. “Democracy,” Churchill told the House of Commons, “is the worst form of government, except for all those other forms that have been tried from time to time.”
Carlyle Group Managing Director David Rubenstein suggested in his historical comparison is that capitalism is not perfect but it’s the best we’ve got.
While the Time Davos panel, entitled “Is 20th century capitalism failing 21st century society?” acknowledged a desire to reduce inequality, there was a shrug of resignation about the way forward and an absence of solutions.
Indeed, one business member of the panel, pressed by a question from the audience, acknowledged there was only so much they could fix in a 90-minute panel. That may go to the heart of the World Economic Forum annual meeting itself: while it admirably raises the attention of complex issues by debating them with the media world watching, it can’t be expected to resolve them in this snow-capped Swiss town.
And it couldn’t in a forum like this which was, as Alcatel-Lucent CEO Ben Verwaayen grumbled, a “battle of nostalgia.”
It was an outdated debate which started in spirited form when Sharan Burrow, general secretary of the International Trade Union Confederation, accused business leaders of “losing their moral compass” and urged them to “stop the greed”.
“The right debate is about how we get the innovation and creativity we need,” Verwaayen countered. “We need to talk about innovation, real sustainability and reforms – not about corporations and greed. It’s about decision-making. We have to go for transformation. We have to talk about job creation, not job security.”
Let’s end world hunger
Last year was a milestone year for raising awareness and advancing a global dialogue about the challenge of doubling food production by 2050 to combat hunger and malnutrition and meet the needs of a fast-growing population. Recent attention paid to the birth of the 7 billionth human on earth did much to help drive this global conversation. But looking ahead to 2012 and beyond, our challenge – in fact our imperative – must be to translate this momentum into action.
In 2000, the United Nations member states, together with international organizations, challenged the world to come together to address the Millennium Development Goals, first among them being the eradication of extreme poverty and hunger. We now have but three short years remaining to meet these goals. While much has been debated about the analytics and measurements driving the goals themselves, the simple, incontestable fact is that to thrive — and in many cases to survive — we as a global society must address poverty and hunger.
The two problems are inextricably linked. And we must come together – CEOs and NGOs, those focused on increasing productivity and those focused on environmental sustainability – if we are to have any hope of being successful.
According to the World Food Program, hunger is the number one health risk in the world, killing more people than malaria, AIDS and tuberculosis combined. By 2050 there will be 9.5 billion people living on earth. Today, nearly 1 billion people are already suffering from hunger and malnutrition in some of the fastest growing regions of the world. The challenge of doubling food production by 2050 will become more difficult as key resources become increasingly scarce and a changing climate creates unforeseen obstacles.
There is broad-based support for tackling hunger, which has been a key point of discussion in leadership meetings including the G20 and the World Economic Forum as well as the United Nations General Assembly meetings. While we can point to significant strides in areas like combating malaria and access to education, the most recent Millennium Development Goals Report indicates that our progress in addressing hunger has plateaued, and may have worsened in some regions.
One of the biggest challenges we must overcome in addressing hunger is blending a technical approach to farming that increases productivity with an environmental approach that promotes sustainability. I am excited by recent advances by the private and public sectors in creating solutions for farmers that increase yields per acre while at the same time requiring fewer environmental resources — notably water, which is often so precious in developing countries. It is this type of innovation that will enable us to produce more from the same, if not a smaller, footprint on the planet. I am confident that with the right set of diverse partners around the table, we will continue to bring solutions to the farmers who feed us and provide the materials used to clothe us.
At Davos I will meet with leaders from other companies and representatives of governments and civil society groups as part of the initiative focused on sustainable agriculture called the New Vision for Agriculture Initiative. Monsanto is one of the 26 global partner companies of the World Economic Forum providing strategic leadership and championship of the initiative. This will be a great opportunity to work with our peers to build on the ideas put forward in 2011 at the World Economic Forum.
There is a hugely obvious reason for poverty and hunger.
People with no resources to care for children have them anyway. It doesn’t mean we have to kill people. But we could provide birth control to people who want it. And we could stop telling unbelievably poor people (like Haitians) that birth control is a sin. Somehow that seems evil.
Wipro Chairman Azim Premji
Azim Premji, billionaire chairman of Indian outsourcing giant Wipro Ltd, tells Chrystia Freeland that despite conventional wisdom, China may not be a safer investment bet than India.
This is an excerpt of a full interview conducted at the World Economic Forum in Davos, Switzerland. Look for the complete interview on our Davos page.
from Mohamed El-Erian:
Davos at a distance
I’ve never been to Davos, despite attempts by many over the years to persuade me to go. Don’t get me wrong. I understand that it is a special event for many people, and for many reasons. It is anchored by wide-ranging and engaging agendas, and participants get to mingle with a global cornucopia of important people. It is also the place to see and be seen for heads of state, politicians, academics, thought-leaders, media pundits, CEOs, and movie stars.
The annual meeting of the World Economic Forum in that intimate setting remains one of the year’s hottest tickets, but its organizers want their event to be much more than what it currently is—a big, prestigious talk-shop. They want it to influence policy at the national, regional, and global levels.
Yet, over the years, and in the context of an increasingly unsettled and uncertain world, Davos has not had much impact.
I get a range of responses when I ask attendees why so few, if any, of the interesting discussions that have taken place in those beautiful Swiss Alps have led to change that improves the lives of most people.
Some say the strength of the typical Davos agenda is also a weakness. The topics are overly ambitious. In trying to cover too much for too many, breadth trumps depth.
Others cite the inherent difficulty of distilling the opinions of such a varied group of people into specific action points. This is never an easy endeavor, and it becomes a virtually impossible one when it involves so much wealth and so many egos.
Then there are those who believe that too much time is spent arguing about what has happened—especially when things have gone horribly wrong—and too little time is devoted to what lies around the next corner, and the one after that.
Davos is networking, it’s where politicians can officially meet with their paymasters, it’s where wannabes and slimey fake businessmen run aroundtrying to sell themselves. And it’s full of something that rhymes with pull grit. The WEF does do some decent research, but it is a business enterprise, let us never forget that. The statistic I would like to see is how many jobs did those billionaires eliminate in the past 5 years.
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Resident Davos Expert
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