Reflections from Davos 2018

by Dominic Barton

This year’s World Economic Forum (WEF) has just concluded—it was my ninth, and last, Davos as managing partner. In a sense, Davos is a window into much of the work we do across the firm—with our clients and on the most significant issues of our time.

Six themes we heard:

1. Growth, growth, and more growth – The mood was very upbeat, with a strong consensus that the synchronized economic advance we are seeing around the globe is real. A WEF poll of 1,300 executives captured the bullishness, with 57 percent convinced the economy will improve over the next 12 months—the most upbeat reading since the survey began seven years ago.

2. What could go wrong? – Beneath the prevailing optimism, we heard a number of worries, which I take as a healthy sign and a guard against overexuberance:

  • the financial risks associated with massive liquidity and high debt levels
  • threats to cybersecurity – “We need a digital Geneva Convention,” as one tech leader suggested
  • intensifying geopolitics that may spark small shocks or worse, large misjudgments that can lead to conflict. As one senior technology executive said: “There has never been a time when the macroeconomic outlook and the geopolitical outlook have been so disconnected.”
Senior Partner Vivian Riefberg joined a panel at a local secondary school on “Suffering in Silence: Tackling Depression.” It was moderated by CNNMoney and organized by local students. She was one of five McKinsey delegates to WEF, who also included: Cornelius Baur, Gary Pinkus, and Kevin Sneader.

3. Power politics – Competing nationalist aspirations were clear as government leaders including the United States, India, Britain, Canada, and Germany, as well as heads of numerous other countries (more than 20 European prime ministers and 10 African heads of state were in town) made pitches for job-creating investment. China’s ambitious Belt and Road Initiative, which could drive investment across Eurasia at a level 12 times that of the post-World War II Marshall Plan, dominated conversations on what will likely be a renewed global push for more and better infrastructure.

All this jostling for investment and influence, however, also increased anxiety that the big fear last year—an outbreak of renewed protectionism and trade tensions—could become real in 2018. Davos opened with the announcement of new US tariffs on solar panels and washing machines, mostly from China and South Korea, and concerns about the future of the North American Free Trade Agreement (NAFTA).

4. Get ready for an even more intense wave of corporate transformation – Our conversations with many large and well-performing corporates, from telecom to pharma to banking to energy and more, convinced us that the radical restructuring of portfolios we’ve seen to date is just a prologue. The driver is a quest for new engines of growth. One extreme example was a company that is considering shifting its core business to something entirely new—and at the same time moving its headquarters to a completely new geography.

Impressions at the Annual Meeting 2018 of the World Economic Forum in Davos.
January 21, 2018 / Copyright by World Economic Forum / Manuel Lopez

5. The next innovation imperative will be social innovation – Business’s role will be critical here. As the tech giants are fast learning, low costs and convenience are not sufficient. They were hammered hard at Davos, as they have been in the press, over their market dominance, use of data, privacy policies, and the like. BlackRock CEO Larry Fink summed up the current expectation in his pre-Davos letter to CEOs: “Society is demanding that companies, both public and private, serve a social purpose.”

Two societal challenges remain unchanged from last year’s WEF: reskilling workers to keep up with technology advances and ensuring that the gains from growth are more widely shared. Adding to these is a need to radically rethink education systems to meet the life-long learning requirements of the 21st century.

6. Talent as a CEO priority – Since I am a coauthor of a soon-to-be-published book, Talent Wins, which draws heavily on the thinking of our Organization Practice, it was heartening to hear how often the critical importance of recruiting, developing, and managing one’s human capital came up this past week. People agreed with our call to engage CEOs on talent, to focus attention on the “critical 2 percent” that drive disproportionate value (and are not always at the top of the org chart), and to deploy talent as thoughtfully as they do capital. Getting this right will be crucial to building enduring institutions that can survive and thrive in turbulent times.

And finally, one comment from an Indian CEO that seemed to capture the overall tenor of WEF 2018: “How the mood changes. A year ago, it was doom and gloom. Now the sun is shining. Time to stop talking and start doing.”

Never miss a story

Stay updated about McKinsey news as it happens