Felix Salmon

Why the irrelevance of Davos is good news

Felix Salmon
Jan 27, 2014 09:17 UTC

No crisis can last forever, and the main lesson I’m taking from the 2014 World Economic Forum is that, at least as far as the world’s elite are concerned, we’ve finally put the financial crisis behind us. There are still a lot of things to worry about, of course, both political and economic. But this was by far the least economically interesting Economic Forum I’ve been to.

Now admittedly I’ve been coming to this conference during extremely interesting times. My first WEF was in 2008, when the credit crisis was top of mind; in all of the conferences since then, the unquestioned center of the proceedings has been the various conversations — formal and informal, public and private — between all the financial-sector bigwigs who attend. Finance ministers, central bank governors, bank CEOs — this was their conference, and it was important because they controlled the levers at the heart of all the world’s major economies.

Last year, I got a brief glimpse behind the curtain when I made it into an invitation-only discussion of monetary policy. The intellectual firepower in the room was absolutely astonishing: great central bankers of the past and present; Nobel laureates in economics; policymakers with decades of deep immersion in the issues at hand. The level of discussion was unremittingly high, and it was clear that everybody in the room was getting real value out of it.

This year, by contrast, economic issues were pretty much an afterthought. Sure, the central bankers and finance ministers all still turned up, and had the meetings they always have. But no one seemed to care. There was dutiful discussion of tapering, for instance, but it was clear that no one’s heart was really in it.

Similarly, while there has never been any shortage of heads of state at the WEF, and while there have even been quite a few foreign ministers in attendance, the reason for the big-name politicians’ presence has always been clear: they want the support of the international economic community. As a result, the job of any given president at Davos is pretty simple: give speeches, appear on panels, take bilateral meetings — and push a simple message at every opportunity. My country is open for business, we welcome investment, our civil society is strong, the opportunities are amazing.

This year, that changed. Two heads of state were in the spotlight — Shinzo Abe, of Japan, and Hassan Rouhani, of Iran. In both cases, the narrative diverged subtly from the economic focus so familiar to the Davos elite. Questions of Abenomics took a back seat to concerns about the new Japanese prime minister’s belligerence, and whether he might be moving towards a real conflict with China. And Iran, of course, is always a political issue first, with economic questions coming a distant second.

At the same time, there was a real urgency in Davos about two national disasters — Syria and Ukraine. Davos is endemically optimistic: its entire raison d’être is for leaders to come together with the purpose of making the world a better place. But this year provided the exception to the rule. Never have I seen a consensus in Davos, on any subject, as grimly pessimistic as I saw with respect to the probable course of both Syria and Ukraine. And so, for all that US foreign minister John Kerry was dashing around holding meetings and giving speeches, there was a real undertone of futility at Davos 2014.

After all, there’s no way that an annual four-day World Diplomatic Forum, held in some remote ski resort, could ever gain momentum. Davos, at its best, is a schmoozefest: it’s a place where CEOs from all over the world can get to know each other socially, and reassure each other that they think the same way and can do business together. For that kind of thing, a series of short meetings and well-lubricated “nightcaps” is perfect. But international diplomacy runs on a very different schedule, and in any case the big-name politicians are the one group which still gets to retain a cordon of aides, preventing the kind of serendipitous mingling at which Davos excels.

This year, as the Davos center of gravity shifted from the economic to the geopolitical, it seemed if anything less relevant and important than ever. Davos is fueled by talk, the more vapid and platitudinous the better. Such talk has real value, to the talkers: it’s a way of creating weak social bonds (which are actually more important than strong social bonds), and it helps to create the illusion that we’re all closer together than we are in reality. (One of my first Davos Moments, back in 2008, involved a 20-minute conversation in a shuttle bus with a very likable ayatollah.)

In the world of international diplomacy, on the other hand, the big personalities already know each other — or have made a tactical decision that they don’t want to. Talks can drag on for months or years, and positions are fought fiercely. There are no problems here that 20 minutes of meditation, or a boozy encounter at the Salesforce party, are likely to solve. As we learned in 2011, the institutionalized shallowness of Davos is incapable of providing any kind of constructive engagement on genuinely salient geopolitical issues.

The irrelevance of Davos is, arguably, good news: it’s a sign that the economic crisis is over, at least if you’re a member of the 0.01%. And the WEF was never designed to be any kind of replacement for the UN: it can’t be faulted for the intractability of the Syria crisis. In fact, Davos 2014 was in many ways the most honest WEF that I’ve been to. Business was conducted, friendships were cemented, and countless panels were convened on matters of Global Importance, mostly featuring men in suits who were a little bit vague about what exactly they were expected to contribute. Seen up close, there was a lot to learn; seen at a distance, it was basically a formless smudge.

Davos 2014, then, was all very fun and busy for the people who made it up the alp. But there was no reason whatsoever for anybody outside Davos to care what was going on. And that’s exactly how it should be. Don’t be fooled by the huge amount of media coverage the conference receives: most of it simply comprises the work of journalists trying to justify their junket. But this year more than ever, Davos was like any other conference: it had value only to the people who attended. Let’s hope (because none of us wants another global economic crisis) that it stays that way.


Did you post something on this? Where’s the link?

“Last year, I got a brief glimpse behind the curtain when I made it into an invitation-only discussion of monetary policy. … The level of discussion was unremittingly high, and it was clear that everybody in the room was getting real value out of it.”

Posted by dedalus | Report as abusive

Davos FOMO

Felix Salmon
Jan 22, 2014 00:11 UTC

Andrew Ross Sorkin is a very old Davos hand — he’s been coming for years, he knows the ropes, he knows what happens and what doesn’t. Which is why his column this week is so very odd.

Whatever their reasons for staying away, the leaders of some of the largest and most transformative companies are demonstrating, with their absence, the difficulty of convening a global conversation with all the main stakeholders…

At a time when globalization has so transformed business and economics, and at an event that bills itself as drawing the top stakeholders, it easy to understand why it is so difficult to make progress on the big issues when so many key people are not in the room.

This fundamentally misses what Davos is about. Sure, if you ask Klaus Schwab, the autocratic chief of the World Economic Forum, he’ll tell you that Davos is all about “convening a global conversation” and trying “to make progress on the big issues”. But I don’t think that even he believes his own rhetoric — after all, he never tires of complaining that the Forum is being commandeered by the big companies whose dues have made him extremely rich. It’s entirely possible that Sorkin is the only man in Davos who seems to genuinely believe that the purpose of Davos is to put Schwab’s ideals into practice.

The fact is that there is no global conversation; there is no “room”. (Or if there is a room, it’s the room which holds the IGWEL meeting, which is open only to public officials: the entire private sector is explicitly excluded.) If you’ve ever tried to throw a dinner party for more than ten people, you’ll know that it very soon becomes impossible for all those people to participate in the same conversation — everything fractures very quickly. A highly formal setting with a tough moderator might be able to double that number, but when you’re talking about an event with thousands of delegates, simply being in the same Alpine town as everybody else hardly means that you’re part of some grand conversation which is going to improve the state of the world.

For instance: the Pope made a minor splash, today, by sending a message to the Forum, in which he calls, among other things, for “deeper reflection on the causes of the economic crisis affecting the world these past few years”, which should in turn result in the assembled CEOs adopting a “precise responsibility towards others, particularly those who are most frail, weak and vulnerable”, along with “integral promotion of the poor which goes beyond a simple welfare mentality”. To which I can only say: yeah, good luck with that. While it might be self-evident to the Pope that the global financial crisis was caused by a failure to care about the weakest members of society, that’s not exactly a viewpoint which is going to be forcefully articulated at tomorrow’s panel on the “Global Financial Outlook”, wherein various bank CEOs will talk about “consequences of continued monetary expansion” and the “impact of regulatory shifts and harmonization”.

Of course, the panels themselves are pretty much a sideshow. The secret to Davos’s success is no secret at all: you invite a very carefully hand-picked group of people to travel thousands of miles to a small and remote Swiss town, and then ask them to stay there, generally, for a good four or five days. You remove them from their normal gatekeepers and power structures, and force them to mingle in a space which is too small to fit them all comfortably. The result is a series of more or less serendipitous meetings, and an opportunity for the global elite to get to know each other in a largely agenda-free context. That’s why so many journalists come to Davos every year: it’s not because anybody is committing news, but just because it’s a rare opportunity to talk off the record with extremely important people, and to get a bit of a feel for what they’re like, as people.

The conclusion one draws from such meetings will not come as any surprise: CEOs are pretty normal people, who have a pretty shallow understanding of most things in the news, and who can often be stupid and/or obscene, especially when drunk. Yes, they have money and power, but that doesn’t make them particularly insightful or admirable. Often, the exact opposite is the case.

Why do these CEOs come to Davos? It’s not to reflect painfully on their failure to live up to the Pope’s calling. Instead, Occam’s razor absolutely applies, here: the simplest explanation is absolutely the correct one. They come because they are invited; because they can get their companies to pay for it; because it’s generally considered a hot ticket that lots of people want; and because they get to rub shoulders with heads of state and global celebrities.

Which is not something anybody will say in public, of course. The official reasons for coming are much more serious: Jamie Dimon “one top bank chief executive” told Sorkin that “it would take me an entire year, and I don’t know how many flights, to see the number of people I can in three days at Davos.” That might even be true, or true-ish, for Dimon. But Dimon is the schmoozer-in-chief in a high-touch client-service business: one of the main ways in which he’s managed to stay on top at JP Morgan Chase is precisely his political ability, and the way in which he can charm just about any client in a CEO-on-CEO meeting. Most CEOs don’t have that job, and their meetings in Davos are therefore much less integral to what they do.

Davos is a town of insecurity: everybody worries that they’re missing out on something better than whatever it is they’re doing. But the ultimate missing out is not coming at all.

Are all these powerful CEOs so insecure that they worry about missing out on Davos if they don’t come? Yes, they really are. Once you get that coveted invite, it’s much harder to say no than it is to say yes. The true lesson of Davos is nothing about making the world a better place; it’s that even global plutocrats get stars in their eyes when presented with the opportunity to hang out with Bill Clinton, or when they get an invite to the Google party featuring Mary J Blige. Schwab shouldn’t bellyache so much about such parties: after all, panels on the global mining industry don’t make for much of a junket. The parties and the extra-curricular activities are the real reason that half the attendees even bother turning up in the first place.


Felix, ”

“But Dimon is the schmoozer-in-chief in a high-touch client-service business: one of the main ways in which he’s managed to stay on top at JP Morgan Chase is precisely his political ability, and the way in which he can charm just about any client in a CEO-on-CEO meeting” (snip)

I thought he ‘stayed on top at JP Morgan Chase’ the same way Dick Fuld did @ Lehman Bros: via his supine, submissive board of directors.

Posted by crocodilechuck | Report as abusive

You keep using that word. I do not think it means what you think it means.

Felix Salmon
Jan 28, 2013 10:04 UTC

This year’s Davos was all about tail risk — or, more to the point, the absence thereof. The ECB’s Mario Draghi said — more than once — that he had “removed the tail risk from the euro”. His colleague Ignazio Visco went almost as far, saying that only a few tail risks remain. The EU’s Olli Rehn talked about how there’s “no tail risk” any more. The IMF’s Zhu Min said that “In Europe, the tail risk has been moved off the table”, which was exactly the same language also used by Ray Dalio. Bank of America CEO Brian Moynihan said that “euro tail risk is now sorted”. The FT editorialized about the best policy response when “the tail risk of renewed financial chaos is reduced”. Even Nouriel Roubini declared that tail risks have declined in the past six months, although they haven’t gone away. And that was just the on-the-record comments: off the record, many more people, including at least one official US representative, were saying the same thing.

It was enough for both incoming Bank of England chief Mark Carney and UBS’s Alex Weber to start cracking jokes about how tail risks had been reduced on Wednesday and downright eliminated by Friday. As Stephanie Flanders says, Davos wouldn’t be Davos if people weren’t constantly talking about the need to avoid complacency — but for once, this year, “there seemed a genuine risk of it breaking out”.

There’s a worrying trend here, and it’s not complacency. Rather, it’s the use of the term “tail risk” to mean “priced-in and foreseeable euro crisis”. Last year, everybody was worried that Greece could end up leaving the euro, and those worries were reflected in European markets. This year, those worries have abated somewhat. But please, let’s not use the term “tail risk” to refer to such things.

We live in a fat-tailed world: everybody at Davos would probably agree on that. But here’s what none of them seem to understand: tail risks, by definition, can’t be measured. If you can look at a certain risk and determine that it has gone down, then it’s not a tail risk: it’s something else. Let’s say that last year there was a 25% chance that Greece would leave the euro: if something has a 25% chance of happening, it’s not a tail risk any more, it’s just a risk. If you’re planning a trip to the Grand Canyon, you might think about buying travel insurance to cover yourself in the event you are seriously injured. But when you’re right up at the edge of the canyon and the ground starts slipping beneath your feet, at that point you have to actually do something to avoid injury or death. The risk has gone from being theoretical to being real — and at that point it’s not a tail risk any more, it’s a real possibility with a scarily high probability.

The World Economic Forum spends many millions of dollars every year looking at risks both imminent and remote. It’s a useful exercise, and helps to remind us how complex the world is: with so many moving parts, it’s impossible for anybody to have much success as a predictor of the future. What’s not a useful exercise is to try to quantify the world’s risks, and to make determinations as to whether the tails are getting thinner.

And it’s certainly not a useful exercise, when markets have calmed down a little, to turn around and say that something as momentous as a fully-fledged euro crisis was only ever a “tail risk” to begin with. It wasn’t: it was much more imminent than that, and in order to avert it the EU had to venture far into the realm of policy actions which only a few months earlier would have been unthinkable. (Including effectively writing off a large amount of the money Greece owes the official sector.)

Tails are the realm of unknown unknowns. They can be positive, like the discovery of antibiotics, or they can be negative, like the uncovering of Bernie Madoff. In markets, they’re not even real-world events at all: they’re just any large move of say three standard deviations or more. Such moves happen almost every week, in some market somewhere, and they happen pretty much randomly. Measuring risks is good; seeing those risks diminish is pleasurable. But let’s not refer to measurable risks as “tail risks”. Because tail risks are always hidden, and unexpected.


Great article and great comments.

Posted by M.C.McBride | Report as abusive

Branding and anti-branding, Davos edition

Felix Salmon
Jan 28, 2013 09:10 UTC

Frank Tantillo has a good overview of the inescapable country-branding exercises that happen in Davos every year; this year Azerbaijan was rivaling India in the ubiquity stakes, while countries like Peru and Japan made do with events.

Countries in Davos behave much like corporations: they brand themselves, they throw parties, they maneuver to ensure that their high-level representatives appear on the most important panels. And while the highest-profile heads of state, like Angela Merkel, are at the very top of the Davos pecking order, the general mass of presidents and prime ministers (there were more than 50 heads of state in attendance) are clearly less important, here, than Davos stars like Larry Summers, Henry Kissinger, or even Nouriel Roubini. The question to ask yourself is: given the choice, who would the average global CEO or hedge-fund manager rather meet. And put like that, it’s easy to see how Danny Kahneman outranks the president of Guatemala.

As a result, countries and corporations alike (including Thomson Reuters) put a significant amount of time and money into trying to capture the attention of the assembled plutocrats. Those efforts range from big public ad campaigns (Azerbaijan) to small intimate dinners (Google), with lots of off-the-record schmoozing in between. If you’re a high-level journalist in Davos (Fareed Zakaria, say), you’ll be swamped with invitations to have an informal discussion with various presidents and prime ministers: while it’s commonplace to note how Davos is great at allowing CEOs to set up dozens of meetings with each other, it’s less well understood how Davos serves the same kind of speed-dating function for interactions between governments and the international press.

There’s always the risk, however, that a carefully-orchestrated branding strategy will backfire. For instance, the prize for the most obnoxious party in Davos — which was won by the Wine Forum in 2011 — was easily snaffled this year by Sean Parker and Ian Osborne, who spent some mind-boggling amount of money putting together a party which (I swear I’m not making this up) was billed as a “future of philanthropy nightcap”. (In Davos, for reasons I’ve never understood, any party which starts after dinner has to call itself a “nightcap”.)

Parker and Osborne, who decided to throw their party under the auspices of a semi-fictional special-purpose company called The Montagnard Group, flew in both John Legend and Mark Ronson for the event: the scuttlebutt was that Jay-Z turned them down. There wasn’t just an expensive sommelier with a very high-end wine list; they brought in someone else to do the same thing with whisky. They also transformed a local Davos nightclub, putting up walls, installing taxidermy, and getting half of Davos asking why on earth these guys thought it was a good idea to schlep a stuffed water buffalo up an Alp, especially one with green lasers shining out of its eyes. Generally the whole thing reeked of excess, which maybe explains why Lloyd Blankfein stayed for hours, and how the party was the hottest ticket in town, with normally-sensible CEOs all but begging for an invite.

The Montagnard party was particularly weird because it wasn’t promoting a company or country: it felt like a piece of obscenely expensive performance art, sending up the way in which conspicuous consumption gets rebounded as “philanthropy” in order to give it a veneer of sophistication. Or maybe the whole thing was just an elaborate joke, decipherable only to Parker, Osborne, and their co-host, Marc Benioff of Salesforce. Either way, it was exclusive, expensive, and excessive: it allowed the real Sean Parker to handily trump anything the Justin Timberlake character in The Social Network could have dreamed of.

Which brings me to Russia. The Russian Federation, like most countries at Davos, was engaged in both overt and covert branding. And while the overt branding was a huge success, the quieter schmoozing backfired massively.

The big Russian Federation party, interestingly enough, took place at exactly the same time as the Sean Parker party, and it was a triumph. Where Parker had a carefully-tended guest list, the Russian doors were wide open; where Parker had fine wines, the Russians had trays of vodka shots; where Parker’s party was dominated by men in suits, the Russians found a much happier crowd, determined to party, dressed down rather than up. The entertainment was Leningrad, a 14-piece gypsy-punk band (think Gogol Bordello, but better), and the venue was a huge white tent erected across from the train station, which helped to avoid the overheating problem endemic to popular Davos parties.

The event was as unapologetically Russian as the Olympic opening ceremonies were unapologetically British: rather than putting a tasteful national twist on a standard Swiss party, those of us who couldn’t speak Russian or decipher cyrillic were happily baffled by most of what was going on. (The bafflement chez Parker was rather different.) The vodka and Champagne were flowing freely, the crowd was pogoing madly, and the whole thing succeeded spectacularly in being that rarest of Davos events: a place where you could genuinely enjoy yourself and let your hair down, rather than eyeing name badges and mingling politely.

There was corporate sponsorship — Vadim Belyaev, the chairman of Otkritie Financial Corporation, joined the band gamely at the end of the evening — but the night really belonged to the revelers. This was the party where you found the TV-station technicians who had been freezing on top of the Conference Center all day; the drivers and waiters and musicians and other support staff whose job is to be as invisible as possible most of the time; generally, the 99% of Davos, rather than the 1% that you normally hear about. This year in particular, when the number of parties shrank and door policies tightened up across the board, it was fantastic to see a party where literally everybody in Davos was welcome.

The morning after its party, however, Russia ran straight into a PR nightmare stemming from a much more exclusive event. Prime minister Dmitry Medvedev was in town, and gave an off-the-record press briefing to some 20 international journalists. The ground rules were clearly designed so as to prevent any of Medvedev’s comments being made public, but when Medvedev said something which could easily be interpreted as a direct threat against Hermitage Capital’s Bill Browder, a number of the journalists in the meeting went immediately to Browder to tell him what the Russian prime minister was saying about him. And then Browder, who understandably cares more about his own personal safety than he does about the nuances of Chatham House attribution, immediately went on the record to Reuters, telling the world what he had heard.

In the space of less than 24 hours, then, Davos saw Russia at its best and at its worst: open and closed, free and fearsome, fun and deadly. On net, maybe the country would have been better off just buying a bunch of ads on the side of buses. But probably no one in Russia — least of all Dmitry Medvedev — much cares.

Russians know how to have a good time, and they also live in an incredibly violent state-dominated society. Neither of these things is exactly a secret, and no one’s looking to change anybody else’s mind on either front. Anybody doing business in Russia today is doing so with their eyes wide open. Let the rest of the world go to Davos to present itself in the best possible light. Russia will just continue being Russia — in good ways and in bad.


Not surprised to hear this take on Sean Parker’s party. I’d be more surprised if he’d done something classy and tasteful.

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The downswing in Davos parties

Felix Salmon
Jan 23, 2013 10:56 UTC

Andrew Ross Sorkin has placed himself on the party beat at Davos: since nothing has happened yet, the main thing to report is that everybody’s Friday-night dance card is looking pretty forlorn. The Google party being canceled we could live with, but the cancellation of the Accel party is bigger news — people really loved that one. Yahoo’s cocktail party early in the evening isn’t going to make up the difference, and Sean Parker’s nightclub event, while surely hard to get in to, is certainly going to turn into the kind of loud and overcrowded sausage party that makes you wonder why you even wanted to go there in the first place.

Sorkin’s headline asks whether the Davos party is over. The answer is no, of course — but it can be interesting to keep an eye on the permanent tension between the World Economic Forum, on the one hand, and Davos more generally, on the other. The two are generally considered interchangeable, which annoys the WEF no end: the vision of Klaus Schwab is for a pretty austere conference taking place at the Conference Center, with little or nothing going on in the rest of town. But of course no self-respecting global organization is going to pass up this annual opportunity to impress thousands of plutocrats by any means necessary.

The result is endless and futile overt and covert strong-arming by the WEF to (a) try to minimize the number of non-WEF events in Davos; and (b) try to ensure that insofar as non-WEF events are certainly going to happen, at least they don’t clash too badly with the formal WEF program. And since the covert strong-arming wasn’t working very well, the WEF is getting more overt, with a very detailed Code of Conduct that they make all participants agree to when they register for the conference.

“Concern is growing,” explains the Code, “that the unique and special nature of the Annual Meeting is being jeopardized by behaviour and activities contrary to the ‘spirit of Davos’”. As a result, everybody here is “expected to respect the non-commercial nature of the event”; “avoid organizing private events or functions that conflict with the programme of the Annual Meeting”; and “not extend invitations to guests who are not registered participants in the Annual Meeting”. On top of that, it’s an explicit violation of the Code to “pay honoraria to speakers at private events or activities organized during the Annual Meeting regardless of whether or not they are participants in the Annual Meeting”.

Not everybody respects the code, of course. Ukrainian billionaire Victor Pinchuk flouts it most visibly, every year, with a huge event at the Morosani hotel. But even the WEF-iest companies seem to be happy to break the code whenever they feel like it. Pepsico CEO Indra Nooyi, for instance, has been a co-chair of the entire meeting in the past, and is still deeply involved in the organization. And yet at lunchtime today she’ll be at something called the Pepsico Cafe, not particularly close to the conference, hosting a lunch with — of all people — Derek Jeter.

Still, the pendulum does seem to be swinging back, a little bit, from Davos towards the WEF. And that’s probably a good thing if only because it might allow the people here to get a bit more sleep. Davos will never be relaxing, of course. But this morning I was very impressed to hear Heather McGregor, the FT’s Mrs Moneypenny columnist, declare after doing a TV hit that she was heading back to her flat to sit back and enjoy the spectacular Alpine view, rather than launching headlong into conference schmoozing. Maybe the smart new way of organizing private events at Davos is to make sure that they only involve yourself.


Down with the Code! Hail to the plutocrats! Let them have cake, and eat it too!

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Davos: Google grows up

Felix Salmon
Jan 8, 2013 23:36 UTC

Bloomberg has just found out that the big Friday-night Google party, one of the hottest and loudest and most gruesome events in the annual Davos calendar, is not happening this year; no one is going to miss it. No reason was given for the decision to cancel the party, but the message is a clear one: Google has matured, now, and is going to be a lot smarter about the way it schmoozes Davos.

Google has historically had something of a charmed existence at Davos, mainly because it arrived there under the wing of one of its biggest and most important investors, Jim Breyer of Accel Partners. Breyer is a Davos networker extraordinaire, and knows exactly how to use the conference to his best advantage: my guess is that he gets more valuable high-level facetime over the course of the week than just about anybody, including Bill Clinton.

One way that Breyer does that is by ingratiating himself with the people who matter the most by holding pretty much the only large-scale event where everybody who’s invited, goes. The Accel party has been going on for 18 years now; held in the lovely Kirchner museum, it has always featured an absolutely spectacular wine list; if you’re fortunate enough to score an invite, you will be able to help yourself to some of the greatest wines and Champagnes in the world, all while surrounded — of course — by an elite group of some of the richest and most important people in the world. It’s almost the Platonic ideal of what people imagine Davos parties to be.

When Google started being invited to Davos, its executives had Breyer to show them the ropes — and they also started co-hosting the Accel party. Before long, it was known as the Google party, and was the hottest ticket in town; everybody wanted to go, and eventually it just became too much: too many people trying to get into too small of a space to drink too few wines.

So in 2007, Google struck out on its own. The Accel party remained, but now there was a separate Google party on the other side of the street, in the Belvédère hotel. It was held in the biggest space that the biggest hotel in Davos had to offer, and became one of the two huge parties held in that space every year — the other being the McKinsey party, the night before. Every year, the scene is the same: late at night, when all the dinners are over, the world’s plutocrats converge into a narrow hallway, at the end of which are ID scanners telling bouncers whether you’re On The List or not. If you manage to get past them, you find yourself in an insanely hot and loud party, with lots of drinks, a little food, and seemingly infinite numbers of drunk men in dark suits. It’s essentially unbearable for more than a couple of minutes, and there’s absolutely nothing pleasurable about it.

These parties are eye-wateringly expensive, and I’ve never understood why any corporation would willingly pay for something which so few people actually enjoy. The parties certainly get the hosts a lot of buzz: all day, people will ask you whether you’re going to the McKinsey party, or the Google party. So I guess your company’s name gets mentioned a lot, in the context of something which is superficially desirable. But Google doesn’t exactly have what you’d call a name-recognition problem.

So last year, Google tried a different tack. It still kept its big party at the Belvédère. But it also closed down everybody’s favorite coffee shop, and hosted a series of exclusive dinners there, catered by world-class chefs. Private dinners have always been at the top of the Davos food chain: the smaller and more exclusive the private dinners you get invited to, the more important you are. So Google put a lot of effort into curating amazing tables with first-class food, conversation, and wine.

That kind of thing is vastly more enjoyable for Google’s executives than standing in a sweaty corridor peering at name badges and trying to remember who this drunk gentlemen might be. And it’s much more pleasant for Google’s guests, too. So this year, the other shoe has dropped: while the private dinners will remain, the big obnoxious party is a thing of the past.

The move is a sign of two things. Firstly, Google has learned how to really get the respect of the Davos crowd: invite a very select group of people to something truly special and unique, rather than herding them like sheep into something which feels like the ninth circle of hell. And secondly, Google no longer has the kind of insecurity which results in somebody saying “we need to throw a really big party”. Necessarily, the number of people invited ton one of Google’s dinners is going to be only a tiny fraction of the number of people invited to the party at the Belvédère. And some of them will be cross that they didn’t get an invite. But, so be it. Google might not be evil, but it can live with people being annoyed at it.

I only wish they didn’t have to close down the Kaffee Klatsch in order to host their dinners. That place really did have the most amazing coffee.

*Update: I’m not sure where I got it into my head that Breyer was a big Google investor, he wasn’t. (Maybe I was confusing Google with Facebook?) But Google did start co-hosting the Accel party very early on in its corporate life.


Davos makes me happy and sad. Happy because there is a doomsday asteroid named Apophis coming for us, and sad because it probably won’t hit us before the next meeting. Well, I guess I can hope that a norovirus breaks out.

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The relational aesthetics of Davos

Felix Salmon
Feb 27, 2012 15:59 UTC

Nick Paumgarten was told repeatedly, both before and during his first trip to Davos, that he couldn’t possibly get it right after going only once. But he had to try, and he ended up delivering what might be the best description of Davos yet: accurate, well-written, keenly observed.

The Davos of Niall Ferguson, for instance, tells you pretty much everything you need to know about Niall Ferguson:

“What this is is Brownian motion, with human beings,” Niall Ferguson, the financial historian, said one morning, outside the Congress Hall, as his eyes darted about. Vikram Pandit (Citigroup) marched by, and then Brian Moynihan (Bank of America). “Last year, I bumped into Tim Geithner, and he said, ‘We’re going to prove you wrong with our fiscal policy.’ ” At that moment, Ferguson was jostled by a woman who was pushing swiftly through the center, with an entourage of journalists and aides. “Hello, Christine!” he said. It was the I.M.F. chief, Christine Lagarde. She touched his shoulder in greeting. Ferguson turned back to me. “See there? Right on cue.”

Paumgarten decided not to fillet Davos, in the end, although he easily could have done. He goes surprisingly easy on Richard Stromback, for instance, the founder of the you-couldn’t-make-it-up Piano Bar Partners. Stromback’s LinkedIn page identifies him first as “Davos” and second as “YGL”, which is another way of saying “Davos”; his current positions include both “Managing Partner at Piano Bar Partners” and “Young Global Leader at World Economic Forum”.

And Paumgarten also went easy on the Global Shapers, the new set of ultra-earnest twentysomethings who infested Davos this year but who in the end didn’t even get mentioned in his piece.

He even ends with a scene which could have been dictated to him by Klaus Schwab, the Forum’s founder. Davos is glistening; “The mountains, newly covered in snow, sparkled beyond the rooftops. Snow misted down from the pines like pixie dust; now and then, as the sun warmed the boughs, clumps fell noiselessly to the street.” Two men, leaders in their respective fields, engage in a fruitful interdisicplinary conversation about what each can do for the other, after the executive had attended the scientist’s WEF panel earlier in the day. Finally, the two “exchanged cards, shook hands, and parted ways.”

Such genuine and useful encounters do happen in Davos, normally at the rate of once per attendee per year. But they’re not really what Davos is about. Paumgarten gets that the monks and the scientists are “window dressing”, but I think what he misses is the way that that they’re being wheeled out as brain-ticklers for the financiers and plutocrats who actually pay for the whole thing.

In the case of Victor Pinchuk’s annual panel discussion, the power relationship is clear: many of the people up on stage (Jeff Koons last year, Chelsea Clinton this year) are not invited to the WEF meetings at all, and have simply been summonsed by Pinchuk in a highly-conspicuous display of just how rich and important he is. Other famous people flit in and out of Davos while barely being noticed: this year, for instance, Paumgarten’s New Yorker colleague Malcom Gladwell was flown in by Deloitte, gave a speech to a select group of clients at dinner, and then immediately left.

But even within the Forum and the conference center itself, the economics are clear. Paumgarten says that the big spenders “subsidize the scores of academics, scientists, artists, journalists, and N.G.O. chiefs who attend for free” — but that’s putting it politely. The truth is that the academics, scientists, artists, journalists, and NGO chiefs are there for the big spenders, and would immediately be uninvited if the big spenders didn’t want them to be there. And the genius of Klaus Schwab is to persuade those academics, scientists, artists, journalists, and NGO chiefs that being invited to Davos is a great privilege, rather than something they should charge for.

Schwab tells Paumgarten that “you cannot buy your way in” to Davos, but the astonishing number of hedge fund managers with white badges puts the lie to that. The hedgies are ubiquitous at Davos, and they love to talk about how brilliant it is to be able to organize a private dinner with Larry. And when Paumgarten says of the meetings at Davos that “all that’s missing is the hourly rate”, I think he’s wrong twice over. For one thing, companies justify the immense cost of Davos by working out the cost per hour-long meeting, and working out how much those same meetings would cost to organize elsewhere. And for another thing, certain big-name “gets” really do ask for money if you want them to attend your dinner. One of them even included the contact details of his speaking agency in the “Not for Distribution” press release announcing his attendance.

All of which explains the power dynamics of Davos. The CEOs and hedgies might be paying for everything, but in a sense that just makes them the punters, rather than the stars of the show. It’s the people who don’t pay, but whom everybody wants to get, who have the power — whether they’re politicians or Nobelists or rock stars. And then of course, always, above it all, is Klaus Schwab himself, manipulating the puppet strings and keeping everybody on their toes, convinced that they’re missing the real action, wherever that might be. It would be a masterful exercise in relational aesthetics, if only anybody but Klaus himself were able to actually observe it.


Thanks for share

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Why Davos is ignoring Occupy

Felix Salmon
Jan 26, 2012 13:44 UTC

If you’re Europe, and your struggling people are called “Greeks”, and your rich people are called “Germans”, then the World Economic Forum will spend pretty much limitless amounts of time and effort on attempts to understand the dynamics between the two and (doomed) plans to try to prevent it from turning into a fully-blown crisis.

On the other hand, if you’re a country — the USA, say — and your struggling people call themselves “the 99%” while your rich people are called “Davos delegates”, then your fundamental asymmetries will be studiously ignored — and, indeed, encouraged.

I went to one session on executive compensation yesterday, which was filled with global CEOs of various stripes. And a couple of questions that Lance Knobel would like to ask were, amazingly, raised: should there be some kind of cap on CEO compensation? Maybe in terms of the ratio between the CEO’s pay and that of the average employee? The answer came swiftly and unanimously: no.

The problem of CEO compensation, it turns out, is not really a problem at all: if you look at most companies, the amount they spend on executive compensation is not really a big part of their revenues. Of course there shouldn’t be any kind of regulation. And capping pay only makes sense if you cap corporate size, and no one wants to do that.

That said, there is one outstanding problem with CEO pay: the time when you most need executive talent is not when things are going great, but rather when things are going badly. And often, in that case, compensation structures linked to stock options and the like turn out to be largely worthless. We’re good at paying CEOs in good times, but we should probably come up with ways of paying them more in bad times, too. After all, that’s when they really prove their mettle.

That panel really helped me understand the general Davos attitude towards Occupy. The delegates here don’t feel threatened by it, so much as they just feel a bit indignant at how misguided it is. Obviously, in a big inchoate sense, inequality is a problem. And maybe Occupy is a manifestation of that problem. But the Davos crowd is not even close to listening carefully to what Occupy has to say: they’re evidence of the problem, but they’re not remotely helpful when it comes to solutions.

As Lance says, “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”. It’s another way in which Davos feels past its prime. It’s not helping to change the big world problems, in Europe: the best it can do is identify them. And it’s utterly divorced from the movements which really might make a difference.

But hey, at least the skiing is good this year.


y2kurtus, I looked at the figures provided and at the risk of defaming Wikipedia’s accuracy, I seriously doubt some of those figures. The only way they can even remotely come close to reality is if they are not including indirect government involvement – for instance knowing where the government ends and the IRGC and clerics start in Iran is a toughie.

Apart from NZ and possibly Japan, I can’t imagine living in any of the countries over 40%. Taiwan is very nice and so is Korea. Turkey used to be very nice but i would be concerned about the direction it is taking.

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Why Europe’s crisis can’t be averted

Felix Salmon
Jan 26, 2012 11:59 UTC

I got a glimpse this morning of what Lance Knobel calls Davos’s “class distinctions, even if you have a white badge” — I was invited to a breakfast meeting under the auspices of something called the Industry Partnership Meeting for Financial Services. Which reminds me of that great line from In the Loop :

What you have to do is you’ve got to look for the ten dullest-named committees happening out of the executive branch. Because Linton is not going to call it “The Big Horrible War Committee”. He’s gonna hide it behind a name like “Diverse Strategy”, something so dull you’re just gonna want to self-harm.

This morning’s breakfast appears nowhere on the official Davos program, but because it was an exclusive by-invitation-only event, it managed to become by far the most high-powered session I’ve yet seen, with a large number of shiny-hologram badges and more big-name economists and central bank governors than you’d think possible. They came because this really was an interactive session, where they can talk in a serious and structured way with each other at a very high level.

This being the WEF, there was lip service paid towards the idea that a group of smart and powerful people, if you get them all in the same room, could come up with ways for the international community to improve the state of the world. But the actual participants didn’t show any sign of believing that: they were insightful with respect to diagnosing the state of the world, tentative in proposing solutions, and downright skeptical when it came to handicapping the likelihood that any of those solutions might actually be implemented.

And indeed there was a strong strain of thought which basically said that we already have the optimal level of international cooperation, and that more would not necessarily be better. Consider the two major currencies of the world: while the euro/dollar exchange rate has certainly been volatile over the course of the crisis years, it hasn’t moved as much in total as it did before the crisis, and there’s no sense at all in which we have had a currency crisis. To a very large degree, this is a function of successful international cooperation: the world’s major central banks all talk to each other regularly, and when they needed to do so they quietly and efficiently opened up unlimited swap facilities with each other. Those swap facilities didn’t cost money, in terms of government budgets, but they were an incredibly effective crisis-fighting tool.


Effectively, the unlimited swap lines have solved most of the global liquidity problems, and have prevented the otherwise very scary prospect that a liquidity run could become a self-fulfilling insolvency process. But that of course doesn’t mean that the world’s economies are all solvent. And so the question then arises: if you want to attack solvency rather than liquidity, is international cooperation (i.e., giving the IMF a massive fiscal bazooka) the best way to do so? And the answer there seems to be no. The biggest solvency problems are the problems within the Eurozone, and it is ultimately Europe’s job to get the necessary cash together if it wants to avert a series of fiscal crises.

Germany and other big northern European countries are running very large trade surpluses: they can remit cash to the periphery if they have the political will to do so. And if they don’t have the political will to do so, there’s no way in which the US, China, and the rest of the world can or should step in to try to save the likes of Greece and Portugal.

This kind of thinking is very much in line with the realism, or fatalism, which I’ve seen a lot of in Davos this year. If you control your own currency — if you’re the US, or China — then ultimately you control your own fate, and you only have yourself to blame if you go belly-up or suffer a major crisis. Certainly the rest of the world won’t come to your rescue. That’s one reason why China has such enormous foreign reserves: it needs them as insurance against a crisis. And it also explains why the yuan is not convertible, and there’s a waiting list of 800 companies who want to go public on Chinese stock exchanges but aren’t being allowed to do so: the Chinese government is keeping tight control of its economy and the way that its companies are financed, because once you lose that control, it’s impossible to regain.

In Europe, of course, the politics of transfer payments are much more fraught — and also much harder to understand. One very senior economist told me as we exited the meeting this morning that he too was decidedly unclear on the details of how TARGET2 works, even though he’s meant to be an expert on such things and he knew that it was crucially important. Similarly, while it’s surely very germane and important that the Bundesbank has more reserves than the ECB, what that means in practice is not at all obvious.

Politically, we still seem to be very far away from a fiscal solution to Europe’s problems, and the baseline scenario has to be that we’re not going to get one — ever. The result is likely to be a series of countries exiting the euro, and/or the “East Germanification” of much of Europe’s periphery: flows of money and human capital away from countries like Greece and Portugal, and towards the more prosperous countries with healthy economies and substantial trade surpluses. Essentially, those countries would become holiday resorts for the north, with all the real economic activity being concentrated in more prosperous nations. If you’re a smart young Spaniard, it’s much more attractive to seek your fortune in the UK than it is to take your chances in a deflating country with a stratospheric youth-unemployment rate.

Certainly there seems to be no belief at all, even among the well-intentioned technocrats at Davos, that coordinated international action will or should solve this particular crisis. And the inevitable conclusion is that the crisis is not going to be averted: it’s only going to get worse. It’s a very scary prospect — but one which it’s very important for global elites to come to terms with. And that’s exactly what they’re doing in Davos this week.


Enough with this misery. Europe has probably turned the corner. Fiscal consolidation is now well underway. See the IMF’s latest report on global fiscal developments:


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