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World Economic Forum Annual Meeting 2008

The Power of Collaborative Innovation


Davos, Switzerland 23-27 January
COMMITTED TO
IMPROVING THE STATE
OF THE WORLD

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not necessarily reflect those of the World
Economic Forum.

World Economic Forum


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REF: 150208
Contents

Page 3
Preface

Page 4
Executive Summary

Page 10
Economics and Finance: Addressing Economic Insecurity

Page 14
Geopolitics: Aligning Interests Across Divides

Page 18
Business: Competing While Collaborating

Page 22
Science and Technology: Exploring Nature’s New Frontiers

Page 24
Values and Society: Understanding Future Shifts

Page 26
The WorkSpace

Page 28
Acknowledgements

1 | World Economic Forum Annual Meeting 2008


2 | World Economic Forum Annual Meeting 2008
Preface

“The Davos Man and Woman are aware of all


the challenges and, in a pragmatic way, they do
what they can to mitigate the risks and address
the challenges. They also see the opportunities
in the world. But if we don’t address the
challenges, even the greatest opportunities will
not be enough to guarantee the future of
humankind.”

Klaus Schwab, Founder and Executive Chairman, World Economic Forum

Participants in the World Economic Forum Annual The power of collaborative innovation was a most
Meeting 2008 convened in Davos at a time of great apt theme for a second crucial reason. It served to
anxiety in the world. The turmoil in the financial underline the need for new and imaginative ways to
markets and the continuing conflict in the Middle mitigate global risks and the importance of
East were naturally of immediate concern. achieving tangible results or value. While some may
Mounting awareness of the epochal challenge of criticize us for our continued optimism amidst
climate change and the looming threat of global gloom, we must never discard our positive attitude
terrorism, two issues that were addressed in the for irrational pessimism.
opening plenary session, heightened our shared
sense of urgency. We should be neither paralyzed by despair nor
casual in our concern.
In such times of stress and disquiet, we truly
understand the value of the Davos Spirit of This is a time for sincere pragmatism and a new
inclusiveness, openness and commitment to brand of collaborative leadership to address the
improving the state of the world. The Annual many priorities on the global agenda. We look
Meeting theme – The Power of Collaborative forward to continuing our collaboration with
Innovation – was a fitting focus for two reasons. Members and Partners at our regional meetings
First, it highlighted that a multistakeholder approach and through the many Forum initiatives and
is critical for any authentic and viable solutions to industry activities this year.
global problems. The World Economic Forum has
underscored that, since the first Davos meeting 38 Klaus Schwab
years ago, government, business and civil society Founder and Executive Chairman
must engage each other to find effective
approaches to the most pressing issues. This year,
we placed particular emphasis on corporate global
citizenship, the principle that companies must be
involved in addressing the major challenges we
face today, aligning their engagement in society
with their business goals. This commitment is at
the core of what the Forum stands for.

3 | World Economic Forum Annual Meeting 2008


The Power of Collaborative Innovation
Executive Summary

“In spite of the economic crisis, can we Collaborative innovation is far from the norm in
look beyond that and view Davos as a international affairs, not least because the
structures of global governance have not evolved
collection of minds to address issues for nearly three generations. Nation states, even
that can be addressed? My hope is that those working closely together, will not be able to
we are here not only with a can-do address future global challenges if business and
spirit, but with a must-do spirit.” civil society are not engaged at the outset. In the
current context, the World Economic Forum
provides a unique platform for multiple stakeholders
Indra K. Nooyi, Chairman and Chief Executive Officer, PepsiCo, to address a range of global, regional and industry
USA issues. Fostering collaborative innovation becomes
all the more critical in a time of heightened
Participants in the World Economic Forum Annual uncertainty.
Meeting 2008 focused on the tools for addressing
the many challenges emerging as a result of the
shifting power equations in the world. The Power of “Globalization is forcing changes in how
Collaborative Innovation is arguably the last remedy people collaborate in a fundamental
to the stresses of intense globalization that have way. You need stronger and stronger
been evident in financial market volatility, widening
collaborative political leadership. If we
income disparities, and in conflict zones around the
world. As former British Prime Minister Tony Blair are interconnected and the world is
observed in the closing plenary session: interconnected, the only way for the
“Globalization is forcing changes in how people world to work is to have a set of
collaborate in a fundamental way.” Blair added: “If
common values. We have no option but
we are interconnected and the world is
interconnected, the only way for the world to work to work together.”
is to have a set of common values. We have no
option but to work together.” Tony Blair, Prime Minister of the United Kingdom (1997-2007);
Member of the Foundation Board of the World Economic Forum

4 | World Economic Forum Annual Meeting 2008


Among the outcomes of the Annual Meeting:

• Japanese Prime Minister Yasuo Fukuda unveiled


a five-year, US$ 10 billion fund to support efforts
in developing countries to combat global
warming – a move to ensure that top priority is
given to climate change at this year’s G8 Summit
in Hokkaido. In addition, Japan aims to create a
new multilateral fund with the US and the United
Kingdom to mitigate changes in the earth’s
climate as a result of global warming.
“I am optimistic about the future. The
• The Bill & Melinda Gates Foundation announced
question is if the economic growth of
a US$ 306 million package of agricultural
development grants “designed to boost the India and China will slow down if the
yields and incomes of millions of small farmers in global economy slows. I don’t think the
Africa and other parts of the developing world so impact on China will be very big.”
they can lift themselves and their families out of
hunger and poverty”. Wang Jianzhou, Chairman and Chief Executive, China Mobile
Communications Corporation, People’s Republic of China
• The World Economic Forum, Forum Member
companies and the United Nations launched
initiatives to facilitate broader and deeper private
sector support of humanitarian relief operations.
Among the programmes established: Agility, TNT
and UPS, three leading logistics and transport • The World Economic Forum launched a landmark
companies, are joining forces to help the report on the interfaith dialogue between Muslim
humanitarian sector with emergency response to and Western societies. Islam and the West:
large-scale natural disasters. Annual Report on the State of Dialogue was the
result of in-depth research and polling in more
than 40 countries. The report is intended to be
an annual global reference on the state of
dialogue among faiths that will increase interfaith
communication and strengthen efforts to deepen
understanding.

• The World Economic Forum released the first


part of the most comprehensive investigation into
private equity: The Globalization of Alternative
Investments Working Papers Volume 1: The
Global Economic Impact of Private Equity Report
2008. The study focuses on the demography of
global private equity deals, the willingness of
“There is no time to lose in addressing private equity-backed firms to make long-term
climate change. We have a readily investments globally, and the impact of private
equity investments on the employment levels of
available means of taking action
firms in the US and corporate governance in the
without waiting for the agreement on a United Kingdom.
post-Kyoto framework. It goes without
saying that aiming at the most efficient • The Forum’s Global Education Initiative (GEI)
designated Rwanda as the launch country for a
use of energy is now an obligation
pilot programme of the initiative. In partnership
upon humanity.” with the Education For All Fast Track Initiative
(FTI) under the banner of the Global Education
Yasuo Fukuda, Prime Minister of Japan
Alliance (GEA), the Forum will provide the
platform to combine the strengths of the private
sector and foundations to achieve education for
all in low-income countries.

5 | World Economic Forum Annual Meeting 2008


• Mayors, regional governors and the private sector • The Forum conducted an innovative outreach
launched the World Economic Forum’s SlimCity exercise with the online video website YouTube,
Initiative, an exchange programme between cities asking people from around the world to answer
and companies to support action on resource “The Davos Question” – What one thing do you
efficiency in urban areas, focusing on energy, think that countries, companies or individuals
water, waste, mobility, planning, health and must do to make the world a better place in
climate change. 2008? More than 2 million people took part, and
business, government and civil society leaders
• British Prime Minister Gordon Brown, Microsoft from the Annual Meeting posted replies. Among
Chairman Bill Gates, Irish musician Bono, H.M. those submitting video responses: President
Queen Rania Al Abdullah of the Hashemite Shimon Peres of Israel, President Abdoulaye
Kingdom of Jordan, United Nations Secretary- Wade of Senegal, President Hamid Karzai of
General Ban Ki-moon, World Economic Forum Afghanistan, former US Secretary of State Henry
Founder and Executive Chairman Klaus Schwab, A. Kissinger and Irish musician Bono. The
Nigerian President Umaru Musa Yar’Adua, and resulting global conversation may be viewed at
Cisco Chairman and Chief Executive Officer John www.youtube.com/Davos
T. Chambers issued a joint statement vowing to
make 2008 a turning point in the fight against • Fourteen global CEOs and company chairmen
poverty. The world is facing a “development representing a range of industries and regions
emergency”, they said, pledging to “work issued a call to their peers to join collaborative
together to help the world get back on track to efforts to strengthen public governance
meet the Millennium Development Goals.” frameworks and institutions as a core element of
their approach to corporate citizenship.
“This is not a great year in the US for
far-sighted and imaginative economic The Annual Meeting agenda was organized under
policies. We need to activate world five sub-themes – Economics and Finance:
trade talks and strengthen the global Addressing Economic Insecurity; Geopolitics:
Aligning Interests Across Divides; Business:
international system.”
Competing While Collaborating; Science and
Technology: Exploring Nature’s New Frontiers; and
Henry A. Kissinger, Chairman, Kissinger Associates, USA Values and Society: Understanding Future Shifts.

6 | World Economic Forum Annual Meeting 2008


World Economic Forum Reaches Millions with the Davos Conversation
Ahead of the Annual Meeting, the World Economic Forum In Davos, the Forum set up a special Davos Conversation
created the first-ever global video conversation between corner where all participants were encouraged to reply to
the general public and the world leaders who were these videos uploaded by the YouTube users, or to simply
participating in Davos. By the last day of the Meeting, the answer the Davos Question. Over 110 participants, including
Forum reached a worldwide audience of over 7 million with President Shimon Peres of Israel, President Abdoulaye Wade
the Davos Question on YouTube. of Senegal, President Hamid Karzai of Afghanistan, musician
Bono and actress Emma Thompson along with numerous
In the run-up to the Annual Meeting the Forum had asked business leaders used the special video corner to record
the Davos Question: “What one thing do you think countries, their messages. Watch the best responses here:
companies or individuals must do to make the world a better http://www.youtube.com/view_play_list?p=749732FFD312CA7F.
place in 2008?” Nearly 300 people, including some of the
Forum’s Members, sent in personal video replies. The best “The Davos Question and the Davos Conversation video
were shown during the opening and other selected plenary corner were the embodiment of our Annual Meeting theme:
sessions at the Annual Meeting 2008. The topics most often ‘The Power of Collaborative Innovation’,” said Klaus Schwab,
included development, economics, education, environment, Founder and Executive Chairman of the World Economic
climate change, energy, water, governance, human rights, Forum. The Forum is currently planning to continue the video
values and technology innovations. You can check out the conversation with YouTube at some of its regional meetings.
best replies on the following website:
http://www.youtube.com/profile_favorites?user=thedavosquestion

Economics and Finance: Addressing Geopolitics: Aligning Interests Across Divides


Economic Insecurity
Collaborative innovation is the framework to
The unfolding financial crisis should be viewed as a address major global challenges linked to the
chapter in a much larger, more profound story – the intensification of globalization.
rebalancing of global wealth away from the West
and toward the emerging economies of Asia and • The legacy institutions of global governance are
the Middle East. not capable of tackling the many interconnected
and complex challenges of a multipolar world.
• The shift of economic power from West to East is • Collaboration among nation states is not
an epochal transformation that is taking place sufficient to address pressing global problems.
faster than anticipated. The participation of business and civil society is
• The challenge to policy-makers and needed.
businesspeople is how to address the more • Climate change is an immediate test of whether a
dangerous side effects of global growth such as new brand of collaborative and pragmatic
widening income disparities, inflation and leadership can lead to real and lasting results.
environmental degradation. • The world is in transition. The US is too strong to
• The decoupling of global growth from the US stand on the sidelines, but too weak to go it
economy is premature, but there is a new alone. The state is no longer the most important
dynamic with the rapid growth of China and other point of reference for many populations.
emerging economies shortening and softening • There are global challenges that simply require
the US downturn. greater collaboration such as the Doha Round of
• Charting a more equitable and sustainable Trade negotiations and the Middle East peace
course for global growth will require long-term process. And there are those that will require
investments in human capital, education, health greater innovation to solve such as rapidly ageing
and environmental protection. societies, urbanization and food security. But the
• Greater coordination of macroeconomic policy, most pressing challenges for humankind, such as
beyond just the G8, is needed given the limits of climate change, terrorism and non-proliferation
traditional monetary and fiscal policy in a global will require both collaboration and innovation.
economy.

7 | World Economic Forum Annual Meeting 2008


Business: Competing While Collaborating Science and Technology: Exploring Nature’s
New Frontiers
To survive and prosper in the rapidly evolving global
marketplace, companies must win the war for Science and technology are progressing so fast
talent and innovate rapidly but also, where that advances are challenging our assumptions
appropriate, collaborate - even with the about the human experience. While death remains
competition. inevitable, when and how it happens is now less of
a mystery.
• As worldwide markets reward swift and agile
companies, mobile technology has become a • Deeper understanding of the essence of our
powerful tool for empowering consumers and individuality, DNA, may help us to be more in
connecting customers and clients with product control of our health and lifespan. Meanwhile, the
and service providers. finality of paralysis is being challenged by
• In addition to shifts in technology, the global developments in neurotechnology and
business climate continues to be profoundly regenerative medicine. In addition, advances in
affected by shifts in power from developed genetics are providing new weapons against
economies to emerging markets including Brazil, cancer.
Russia, India and China, which are spawning • These developments are changing the rules of
multinational companies of their own that are the labour force, the calculus of healthcare and
effectively competing against established our concepts of age, equality and privacy.
corporations from the West. • Highly bespoke diagnosis and treatment is
• Globalization is decentralizing power, while challenging the traditional assumption that each
demographic differentials are heightening the person needs, and is entitled to, a common slate
fight for talent. of medical procedures. However, patients and
• Web collaboration is distributive; open source doctors fear that people with a genetic
results in robustness but not innovation. How to disposition to disease will face discrimination and
innovate is less complicated than discovering that employers or insurers might reject them.
what to innovate. • While science may decrease our mortality, the
• The practice of corporate global citizenship is total cost of healthcare will rise.
crucial for a company to succeed in this context. • Businesses are fundamentally altering the way in
which they conduct research. They are
increasingly relying on collaborative research
rather than large-scale integrated research that
invents a new technology from top to bottom.

8 | World Economic Forum Annual Meeting 2008


Values and Society: Understanding Future The Forum would like to thank the distinguished
Shifts Co-Chairs of the Annual Meeting 2008, who led
many sessions and provided valuable insights and
Globalization’s impact on cultures, societies and wisdom. They were:
values must be the subject of deeper, more Tony Blair, Prime Minister of the United Kingdom
qualitative analysis. Increasing interconnectedness (1997-2007); Member of the Foundation Board of
has not always led to secularization or the World Economic Forum
homogenization. Often, in fact, it has exacerbated James Dimon, Chairman and Chief Executive
divisions. Officer, JPMorgan Chase & Co., USA
K. V. Kamath, Managing Director and Chief
• The growth of economic opportunity as a result Executive Officer, ICICI Bank, India
of globalization must be combined with a sense Henry A. Kissinger, Chairman, Kissinger
of values centred on the notions of justice and Associates, USA
freedom to ensure its sustainability over the long Indra K. Nooyi, Chairman and Chief Executive
run. Officer, PepsiCo, USA
• Burgeoning urban populations place enormous David J. O’Reilly, Chairman and Chief Executive
strains on existing infrastructure, particularly in Officer, Chevron, USA
Asia and Latin America. Urbanization must be Wang Jianzhou, Chairman and Chief Executive,
made sustainable. China Mobile Communications Corporation,
• While consuming less is a difficult message in People’s Republic of China
much of the world, developing market
consumers have the economic motivation to “get
more for less” which promotes demand for
energy-efficient products.
• It is not necessarily faith that brings people into
conflict but rather politics and the pursuit of
economic and military power, as well as the
manipulation of ideology, whether religious or
secular.
• To foster cross-cultural understanding, public and
private learning institutions must work to promote
empathy. The Internet can play a critical role in
education to bridge divides.

9 | World Economic Forum Annual Meeting 2008


Economics and Finance:
Addressing Economic Insecurity

“If everyone tries to consume the way


America has consumed, the world is not US Mortgage-backed Securities
Value erosion
viable.”
US sub-prime mortgage-backed securities prices, by rating*

100

AAA
Joseph E. Stiglitz, University Professor, Columbia University, Banks
annouce
USA 80 write-downs

Fed Funds
cut 25 bp

It might be tempting to lay the blame for the 60


Largest
sub-prime
A
unfolding financial crisis at the feet of bankers like lender declares
bankruptcy Two bulge-bracket
hedge funds reach
creditor settlement
Jérôme Kerviel, the young trader whose 40

Central banks Bank


misadventures have allegedly cost Société coordinate
first liquidity
run on
Northern BBB-
20 injection Rock
Générale US$ 7.3 billion, to castigate the supposed SWF’s begin
bail out
greed of investment banks or to demonize the Fed Funds
cut 50 bp
of banks

0
derivatives at the heart of the turmoil. But what Jan
2007
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

became clear during discussions at this year’s * ABX series 06-2. The ABX are credit default swaps based on sub-prime mortgage securities.
Source: Thomson Financial; press accounts

Annual Meeting was that the sub-prime crisis roiling


global financial markets is but a dramatic and
costly chapter in a much larger, more profound It may not seem like it to those watching their
story - the rebalancing of global wealth away from portfolios plummet, but this trend is not all bad
the developed economies of the West towards the news. The rising prosperity of the East is lifting
emerging economies of Asia and the Middle East. millions out of poverty and is even spreading to the
poorest corners of Africa. The challenge to policy-
“When this is over we will wake up and realize that makers and businesspeople as the crisis subsides
the issue is that the transformation of wealth and will be how to alleviate the more dangerous side
information and industrial activity is taking place at effects of global economic growth – rising inequities
a pace none of us has ever experienced,” said within nations and a worsening global environment.
Michael S. Klein, Chairman and Co-Chief Executive Climate change has underscored the limits of
Officer of Markets and Banking at Citi. Or as development: without dramatic advances in
Kishore Mahbubani, Dean of the Lee Kuan Yew resource efficiency and reductions in emissions,
School of Public Policy, put it: “We are entering a universal prosperity is environmental suicide. “If
completely new era of world history – the end of everyone tries to consume the way America has
Western domination. In the Industrial Revolution consumed, the world is not viable,” said Nobel
there was a rapid increase in living standards of Prize-winning economist Joseph E. Stiglitz.
50% in one lifetime. In Asia today in one lifetime
you will see an increase of 10,000%.”

10 | World Economic Forum Annual Meeting 2008


Results of the World Economic Brainstorming
The Greatest Threat to Global Growth

1. Recession in the United States 15.90%

2. Greater Income Inequalities 2.20%

3. Rise in Energy and Commodity Prices 5.70%

4. Severe Global Credit Crunch 11.00%

5. Mismanagement of Current Crisis 18.10%

6. Broad-based Collapse of Confidence 16.70%

7. Rise of Protectionism 4.40%

8. Overreaction to the Threat of Recession 7.50%

9. Lack of Coordinated Response/Leadership 18.50%

One of the most remarkable features of the current obligations, or CDOs, that allowed lenders to sell
crisis is how widely it was predicted. “A year ago their risks on to investors searching for yields, the
we said there was an underpricing of risk,” recalled quest for which fuelled a boom in lending to home
European Central Bank President Jean-Claude buyers with poor, or sub-prime, credit.
Trichet. Indeed, participants at last year’s meeting
warned of a bubble in the US housing market and CDOs were repeatedly repackaged and resold to
of a worrying proliferation of complex credit investors paying with borrowed funds, creating a
derivatives. mountain of leverage that is now collapsing. What
was a liquidity bubble has instead become a
Underlying the flood of money into mortgage- liquidity crunch as holders of CDOs search in vain
backed securities was a tsunami of global capital, for anyone willing to buy or lend. “It’s not mistrust
fuelled by growing Asian export earnings that has that other institutions will go bankrupt,” said Walter
helped finance America’s swelling debt and kept B. Kielholz, Chairman of the Board of Directors at
global interest rates and inflation low. Credit Suisse, “It’s mistrust that if I lend to them
they may not lend to me, so I’ll keep my money.
This so-called liquidity bubble was good for And that was something that I in my career had
emerging economies, providing them with cheap never seen before.”
capital to pay off their debts and finance
development and trade. The boom in global growth
Equity Market Volatility
and investment has surpassed the resource
Crash of 1987 stands out as the most volatile S&P500 event over the past 55 years
industry’s ability to supply it, sending prices for 0.023

commodities soaring. Record prices for oil, metals 0.021


1987 Crash
S&P 500 volatility (12 month std dev)

and food have been a boon to nations that export 0.019


Gulf war 2
them. 0.017
9/11
0.015 Oil crisis 1 Dot-com
Asian crisis
0.013
Booming markets and easy money also put Cuban
Missile
Falklands
0.011 Crisis Oil crisis 2 Gulf war 1
pressure on financial managers to take greater Suez Vietnam Sub-prime
0.009
risks, and borrow more money, in search of higher Average
0.007
returns. “If you are in a risk business, one of the 0.005
easiest ways to grow is to leverage up,” observed 0.003
1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

James Dimon, Chairman and Chief Executive


Officer of JPMorgan Chase & Co. The industry
Source: World Economic Forum
responded with innovative collateralized debt

11 | World Economic Forum Annual Meeting 2008


predict a US recession, which could lead to a
sharp slowdown in demand for raw materials and
manufactured exports and with it slower global
growth. If that happens, countries and regions with
stronger fiscal positions, like China, East Asia and
Latin America are likely to be able to cushion
themselves better than those with heavy overseas
debt, like Eastern Europe.

But a sharp debate took place between those who


say the world still depends on US demand and
“We are entering a completely new era those who believe that the emerging markets’
boom has produced enough momentum that,
of world history – the end of Western
combined with Europe and Japan, the world is less
domination. In the Industrial Revolution reliant on the US. “When the US catches a cold,
there was a rapid increase in living maybe the rest of the world catches a sniffle, but
standards of 50% in one lifetime. In certainly not pneumonia,” noted C. Fred Bergsten,
Director of the Peterson Institute for International
Asia today in one lifetime you will see
Economics. On the contrary, Bergsten argued that
an increase of 10,000%.” the world may experience its first episode of
Kishore Mahbubani, Dean, Lee Kuan Yew School of Public “reverse coupling” in which reasonably rapid growth
Policy, Singapore in China and other economies softens and shortens
the US downturn.
Predictably, the sub-prime debacle has sparked
calls for regulatory reform, in particular the Perhaps the best indication of the changing
harmonization of regulations internationally to balance of economic power, though, is the list of
prevent banks from “regulatory arbitrage”. who has been bailing out the big banks wounded
“Regulation is fragmented,” said Malcolm Knight, by the sub-prime fiasco. Swollen with revenues
General Manager and Chief Executive Officer at the from oil, electronics and public savings, sovereign
Bank for International Settlements. “There has to wealth funds have become the latest global
be more conformity in the way these regulations financial force, sparking concern that they may
are implemented across jurisdictions.” have more than profits in mind as they buy up
strategic assets in developed countries.
The US Federal Reserve and other central banks
are also under scrutiny. Some argue that their Largest Sovereign Wealth Funds
efforts to pump liquidity into money markets and
Over US$ 2 trillion held by the largest SWFs
lower rates to stave off recession are critical to
$700
keep the global financial system working. Others 600

say such moves only reward investors for their


Assets, 2007 (US$, billions)

500

excesses and encourage continued American 400

profligacy. “The Fed’s attitude is that they are here 300

to clean up after bubbles burst, not prevent them 200

from happening in the first place,” said Stephen S. 100

0
Roach, Chairman for Asia at Morgan Stanley. “This
UAE (Abu Dhabi)-ADIA

Norway

Singapore-GIC

Kuwait

China-CIC

Russia

Singapore-Temasek

Qatar

US (Alaska)

Brunei

S. Korea

Malaysia

Venezuela-NDF

Canada (Alberta)

Taiwan

Kazakhstan

Chile

UAE (Dubai)-Istithmar

UAE (Dubai)-DIC

Oman

is a dangerous and irresponsible and reckless way


to run the world’s largest economy.”

Now there are concerns that the sub-prime


Source: Standard Chartered (2007)
mortgage crisis will spread to other credit markets
– areas dependent on cash-strapped US
consumers such as auto loans, as well as markets Bankers point out that sovereign wealth funds have
for other exotic credit derivatives. been ideal investors, taking only small stakes and
serving as silent, long-term investors. Moreover,
The billions in losses suffered by banks and other their investments help ensure that some of the
investors could go so far as to reduce credit money spent on oil and electronics finds its way
available to corporations to invest. The real back to the US. Nonetheless, scepticism has
question, however, is what impact falling housing emerged about whether the funds’ owners –
prices will have on US consumers and the global particularly those that are non-democratic
economy. While policy-makers extolled the governments – would refrain from interfering if their
resilience of the US economy, many economists national interests were at stake.

12 | World Economic Forum Annual Meeting 2008


Sovereign Wealth Funds: A New Development
The rising importance of sovereign wealth funds (SWFs) • There is virtually no difference between going to a
received much attention at the World Economic Forum SWF for investment capital and going to a state
Annual Meeting 2008, fuelling concern about their pension fund in the US.
potential political influence. Many agreed that the • If high oil prices continue to channel surplus funds
growing financial clout of SWFs – government- into the coffers of the major exporting countries,
controlled funds estimated at US$ 2.5 trillion in assets – sovereign investments could reach US$ 15 trillion
should be welcomed, not opposed, by global policy- within the next five years. This growth will inevitably
makers because: make SWFs major players in the global capital
markets.
• SWFs represent a valuable pool of stable, long-term
capital, and have reduced, rather than increased, “So far as we can see, these investments
capital market volatility.
have been made on commercial, not
• SWFs not only contribute to domestic economic political grounds. We welcome that type
stability but to the stability of the global economy as
well. of investment, whether it is from an SWF
or anyone else.”

Robert M. Kimmitt, US Deputy Secretary of the Treasury.

of corporate investment and development are not


adequate. “The world is getting better, but it’s not
getting better fast enough, and it’s not getting
better for everyone. We have to find a way to make
the aspects of capitalism that serve wealthier
people serve poorer people as well,” said William
H. Gates III, Chairman of Microsoft Corporation. “If
we’re going to find a sustainable way to help those
who can’t pay, we have to use self-interest and
caring – capitalism and philanthropy – to direct
attention to people who have been left behind.”
“When this is over we will wake up and
realize that the issue is that the Top Sovereign Wealth Funds
transformation of wealth and Perceived levels of transparency and investment approaches vary
Strategic

information and industrial activity is UAE (Dubai)-DIC


Malaysia
taking place at a pace none of us has Qatar
UAE (Dubai)-Istithmar
Investment approach

China Singapore-Temasek
ever experienced.”
Libya Singapore-GIC

Michael S. Klein, Chairman and Co-Chief Executive Officer, S Korea


UAE (Abu Dhabi)-ADIA
Markets and Banking, Citi, USA Brunei
Oman
Conventional

Kuwait
Algeria Norway
Taiwan
Venezuela-NDF US (Alaska)
Kazakhstan
Ultimately, however, the wealth of exporters alone Russia
Chile
Canada (Alberta)

will not solve the enduring problems confronting the Low


Assets (2007): Over US$ 500 billion
Level of transparency High

global economy. Charting a more equitable and US$ 250-500 billion


US$ 100-250 billion Commodity fund
<US$ 100 billion Non-commodity fund
sustainable course will require long-term
Source: Standard Chartered (2007)
investments in human capital, education, health
and environmental protection. Conventional models

13 | World Economic Forum Annual Meeting 2008


Geopolitics: Aligning Interests Across Divides

“There is not one challenge in the “The United Nations is often a bystander on
world today that will get better if we geopolitical issues,” said Nandan M. Nilekani,
Executive Co-Chairman of Indian IT group Infosys
approach it without confidence in the Technologies. “The Security Council is still
appeal and effectiveness of our ideals – structured with members from 60 years ago. The
political and economic freedom, open G8 is still not ready to expand its membership to
markets and free and fair trade, human include the new countries. The World Bank is
finding that its capital flows are dwarfed by private
dignity and human rights, equal capital and it’s time to find a new role in this world.
opportunity and the rule of law.” The IMF voting patterns are based on 60-year old
rules. The Doha Round of trade discussions has
Condoleezza Rice, US Secretary of State
been going on for the last 10 years. When we look
at every dimension of global coordination we find
that there is not enough coordination happening
and things are just falling apart.”
Collaboration is most certainly the best way to
develop effective approaches to these many global To prevent such a breakdown requires collaborative
risks. But cooperation among nations will be innovation. In business, “innovation”, strictly
insufficient if the responses involve obsolete tools of speaking, is the turning of a concept into
diplomacy and statecraft – commissions that report commercial value. Applying innovation in
but do not act, resolutions and declarations with no geopolitics is the turning of an idea – a new policy
bite, international protocols that major powers or approach – into valuable results, or viable
refuse to sign, or multilateral organizations which solutions. “The power of collaborative innovation,”
key nations can opt out of or undermine with a said former British Prime Minister Tony Blair in
veto or refusal of funding. The global governance advance of the Annual Meeting, “is the answer to
institutions that exist today are legacies of the post- all the big global challenges we are facing.”
World War age and the cold war era. They are not
equipped to tackle the challenges of a multipolar The linkages among issues means that any
world, are simply too weak, or are hobbled by the effective approach to a problem will require action
burden of lowest denominator consensus. across several fronts and by many actors including
business, civil society and citizens. Nobel Peace

14 | World Economic Forum Annual Meeting 2008


“Water is today’s issue; it is the oil of It was in the series of sessions on water,
this century.” particularly the WorkSpace session, that the urgent
need for collaborative and innovative approaches
Andrew N. Liveris, Chairman and Chief Executive Officer, Dow was most evident. Ignorance of the many problems
Chemical Company, USA associated with water supply in the world and
inaction are already having severe consequences –
conflict, malnutrition, displacement, disease and
death. “Water is today’s issue; it is the oil of this
Prize laureate Al Gore and Irish musician Bono century,” warned Andrew N. Liveris, Chairman and
made this point as they underscored the Chief Executive Officer of Dow Chemical Company.
connection between climate change and poverty. Added UN Secretary-General Ban Ki-moon: “Too
Gore argued that individual actions to conserve often where we need water we find guns instead.”
energy were not enough to deal with the climate
crisis. “They’re important and making changes of
Per Capita Water Consumption Worldwide
those sorts can build a political consensus,” he
explained. “But, in addition to changing the light Per capita water consumption rising in both developed and developing countries

bulbs, it is far more important to change the laws 60

and the treaty obligations that nations have.”


50
Cubic metres per person per year

Many government leaders at the Annual Meeting 40

including Blair stressed that the Israeli-Palestinian


30
conflict and the stability of the Middle East is not
simply a matter for politicians and diplomats. It 20

impinges on the rest of the world because of its 10


motivational link to global terrorism and its impact 1995 2025 1995 2025

on energy markets. The international business 0


Developed countries Deveoping countries
community obviously needs to support the peace
Source: IFPRI and IWMI, "Global Water Outlook to 2025: Averting an Impending Crisis" (2002)
process for it to succeed.

15 | World Economic Forum Annual Meeting 2008


But is the new brand of leadership – the kind that is At the Annual Meeting, geopolitical collaborative
focused on finding collaborative and innovative innovation was very much on display in the ASEAN
solutions – for real? To be sure, we have seen the session, with three heads of government, six
application of collaborative innovation in the past. ministers and the organization’s secretary-general
The creation of the UN peacekeeping forces, the on the Congress Hall stage. It was a bold
establishment of the International Criminal Court, statement by 10 disparate countries that, while
the conclusion of landmark conventions such as they may have different cultures, traditions and
the Law of the Sea and the global banning of histories, and while they may have even fought
landmines were collaborative innovations in their each other on the battlefield, they share a common
time. Today, it is critical to apply collaborative future. Indeed, they must – and not just because by
innovation to even bigger geopolitical challenges. joining forces in an ever-closer union they become
a more powerful market or a more attractive
Two immediate tests of whether this concept is destination for foreign direct investment, but
more than a Davos ideal are the challenges of because only by banding together can they fully
concluding a post-Kyoto international framework and effectively address the multiple risks that
for mitigating global warming and resolving the threaten the future of their people.
Israeli-Palestinian conflict by the end of this year. It
is far from clear that these two goals can be And it is not just nation states that have to sit at the
achieved. What is clear is that nations are table. In session after session, the message of
beginning to understand that business as usual is inclusiveness was clear: business and civil society
simply unacceptable. “Globalization is forcing must join with government. The only way for the
changes in how people collaborate in a ideal of collaborative innovation to be a reality – as
fundamental way,” said Blair. “You need stronger it must be – is for the international community to
and stronger collaborative political leadership.” The set common values to underpin a globalization that
“good news” is this, he concluded: “If we are is fair and just.
interconnected and the world is interconnected, the
only way for the world to work is to have a set of A group photo in Davos said more than any of the
common values. We have no option but to work statements the assembled public figures gave in
together.” support of the renewed push by the United Nations

16 | World Economic Forum Annual Meeting 2008


Securing Water for the Future
Water emerged as one of the dominant themes at the World The resource is often wasted because it has no economic
Economic Forum Annual Meeting 2008. No individual, firm or value, despite being the most precious and scarce resource
nation can escape the consequences of water scarcity. of all, said Peter Brabeck-Letmathe, Chairman and Chief
Executive Officer, Nestlé, Switzerland. “If we allow market
“The challenge of securing safe and plentiful water for all is forces to play a role in how to define the value of water, we
one of the most daunting challenges faced by the world could take a big step forward.”
today,” said UN Secretary-General Ban Ki-moon. He told
leaders in Davos that water stress poses a risk to economic Efforts to extract more and alternative energy sources such
growth, human rights, health, safety and national security, as shale oil or biofuels only speed the depletion through their
and that water shortages can lead to conflict, such as in own requirements for water. But, it was suggested that
Darfur and other parts of the world. market forces could work well under a cap and trade
approach similar to those applied to carbon dioxide.
Many participants, however, agreed that the water challenge
could be solved, using collaborative approaches, political will,
market mechanisms and innovative technology like those
which arose in response to global warming.

to achieve the Millennium Development Goals Cynics and devotees of zero sum diplomacy may
(MDGs). Together with UN Secretary-General Ban dismiss the idea of collaborative innovation as
Ki-moon stood Nigerian President Umaru Musa simplistic or naïve. Certainly, the power of this
Yar’Adua, British Prime Minister Gordon Brown, approach will be tested in a world where recidivism
H.M. Queen Rania Al Abdullah of Jordan, Microsoft lingers. At the Annual Meeting, formidable voices
Chairman and global philanthropist Bill Gates, Irish spoke of the residual ills of colonialism and took a
musician Bono and Cisco Systems Chairman and hard line on the enmities of a bygone age. History,
CEO John T. Chambers. This creative coalition, of course, cannot be denied. But if the state of the
they declared, was necessary to reinvigorate the world is to improve, then those truly committed to
international community’s flagging campaign. “The improving it cannot waste time eschewing the balm
goals look like they’re not going to happen, and the of forgiveness for the false satisfaction of revenge
G8 commitments made in 2005 look like they will and the easy languor of dwelling on past injustice.
not come off,” Bono complained. “This is a Instead, to forge ahead, as South Africa did after
scandal.” the end of apartheid, they should pursue truth and
reconciliation – collaborative innovation at its finest.
This unprecedented gathering to rally the
international community was emblematic of the
new geopolitics that globalization has spawned.
The greater interconnectedness of the world has
begotten a host of interconnected problems that
the old nation-state model was never meant to deal
with. Climate change, terrorism, regional conflict
and the rapid spread of infectious diseases are only
some of the modern global challenges that require
multiple approaches and the attention of multiple
actors. As the problems have expanded in scope,
so too have the number of players needed to
tackle them.

17 | World Economic Forum Annual Meeting 2008


Business: Competing While Collaborating

“We’ve been talking about the mobile In short, worldwide markets reward swift and agile
Internet and mobile stuff for a very long companies, and those that win the race for talent
and customers must be responsive to both. To be
time. And it’s obvious that with 3 billion truly responsive, corporations must be good as well
people and hundreds of millions of very as great.
high-end mobile phones, that there’s
going to be a huge revolution.” Mobile technology is changing the way businesses
interface with customers, and the way customers
Eric Schmidt, Chairman of the Executive Committee and Chief interface with one another. In China, home to the
Executive Officer, Google, USA world’s largest mobile network, this is particularly
true. “On New Year’s Day, we had about 5 billion
SMS New Year’s greetings,” said the man who runs
French poet Paul Valéry might have been the network, Wang Jianzhou, Chairman and Chief
forecasting for today’s multinational corporation Executive, China Mobile Communications
when he said that “the trouble of our times is that Corporation.
the future isn’t what it used to be.” New mobile
communications technology and Internet Worldwide, mobile phone owners total 3 billion and
advertising are revolutionizing the way business is may reach 4 billion in the next four years. “We’ve
done. Economic power is shifting away from the been talking about the mobile Internet and mobile
West, and corporations in other parts of the world stuff for a very long time. And it’s obvious that with
are emerging as new champions. To survive and 3 billion people and ... hundreds of millions of very
prosper in the rapidly evolving global marketplace, high-end mobile phones, that there’s going to be a
companies must win the war for talent, innovate huge revolution,” said Eric Schmidt, Chairman of
rapidly, but also, where appropriate, collaborate the Executive Committee and Chief Executive
effectively. Good corporate citizenship will also Officer of Google Inc.
attract customers, especially if such citizenship
underpins business models themselves. A parallel technological revolution is taking place in
advertising, with Internet and mobile ads surging

18 | World Economic Forum Annual Meeting 2008


and traditional television ads waning. The future is adequate skills training for the future. It must also
particularly bleak for old print advertising, but viral address the needs of the half of the Indian
marketing continues to grow as a cost-effective population that survives on less than a dollar a day.
alternative. Research is needed to determine what
types of Internet advertising work best. Globalization is decentralizing power, a trend visible
not just in the shift away from the West, but also in
In addition to shifts in technology, the global the shift of influence away from CEOs and towards
business climate continues to be profoundly customers and employees. To survive and prosper,
affected by shifts in the location of power. The successful multinationals must be ready to
emerging markets of Brazil, Russia, India and China collaborate effectively.
are drawing huge capital investments, and have
spawned innovative multinational corporations that The world is currently undergoing a demographic
compete on an even footing with established shift that amounts to an earthquake for business.
companies from the developed world. “We were With much of the planet experiencing a youth
bold, we were passionate in what we believed, we bulge, rates of mortality and fertility are falling in the
persevered, we were committed, and underpinning developed world, with average life expectancy
all of that was a sound business strategy,” said one projected to reach 100 by the end of the century. In
such new champion, Aditya Mittal, Chief Financial Europe, talent is increasingly mobile and thus tough
Officer of ArcelorMittal Limited and Young Global to retain: employees between the ages of 25 and
Leader. 34 spend an average of just 2.9 years in a job. In
Africa, a surplus of workers is driving immigration to
India in particular holds the potential for the north.
tremendous growth. Since reorienting from a
command economy to one driven by To retain talent, management must demonstrate
entrepreneurship, India has given birth to countless empathy for its needs and create attractive
innovations, and Indian corporations have scaled workplaces. Corporate boards must be diverse,
up their research and development budgets and CEOs must be able to manage across political
exponentially. However, for India to sustain its and cultural boundaries. Increasingly this means
growth over the long term, it must make sure that recruiting leadership from countries outside of
the 550 million of its citizens under age 24 have Europe and North America.

19 | World Economic Forum Annual Meeting 2008


Foreign-born CEOs “There has been a massive shift in
power to the consumer.”
One-third of FTSE 100 CEOs were born outside of the UK

35%
Mark G. Parker, President and Chief Executive Officer, Nike,
USA
30
foreign-born, as of 12 Dec 2007
Percentage of CEOs who are

25

20

15
networks are islands,” said Schmidt, while “an
10 open Internet produces more content, more users,
5 more revenue, more competition, more choices,
0
more growth.”
FTSE 100 (UK) CAC 40 (France) Xetra Dax (Germany) Fortune 100 (US)

The world’s top 1,250 companies spent 10% more


Source: New York Times; London Chamber of Commerce and Industry; press reports; company websites
on research and development in 2006 than they
did in 2005; but most innovation now comes
Customers are also enjoying more clout than ever, through collaboration with employees, customers
as businesses vie to learn from, and respond to and business partners. Still, the growing open
their needs. “There has been a massive shift in source community must not mean a total erosion of
power to the consumer,” said Mark G. Parker, intellectual property rights. Excessive IP regulation
President and Chief Executive Officer of Nike. “And will stifle growth; but forehanded policies that
the other thing that’s changed is the relationship nurture future innovation rather than protect past
isn’t just a company like Nike just communicating methods will make happy shareholders.
out to a consumer; it’s a dialogue.”
Finally, shareholders also respond to prudential
In an economy where a knowledge base is corporate global citizenship, and companies that
increasingly replacing a manufacturing base, and succeed must be good as well as great. By
where the Internet is breaking down corporate partnering with governments and civil societies and
walls, collaboration also means sharing information. working within core competencies, companies can
“We have to fundamentally decide whether you greatly benefit societies and improve their bottom
want closed networks or open networks: closed lines. One Edelman study of 5,000 consumers in

20 | World Economic Forum Annual Meeting 2008


2008: “Make or Break” Year for
nine countries found that 70% would pay more for Doha Trade Talks
a socially or environmentally responsible brand. But
such responsibility must be integrated into the After more than six years of stop-start
essence of the companies - and emblazoned in the negotiations, the Doha talks between members
hearts of its employees - for it to resonate with of the World Trade Organization (WTO) have
ground to a halt. With less than a year before US
consumers.
President George Bush leaves office and with
fears growing of a global economic recession,
Stakeholders' Impact on Corporate Responsibility time is may be running out for reaching an
CEO Survey: Which of the following stakeholder groups have/will have the agreement to reduce tariffs, subsidies and
greatest impact on the way your company manages societal expectations?
promote freer and fairer trade.
60%

50 Despite important progress on technical issues


Percentage of respondents

40 over the past six months, trade experts at the


Next 5 years
Now

World Economic Forum Annual Meeting 2008


30
said that WTO members remain no closer to an
20
agreement. In particular, concerns persist among
10 developing countries that lower tariffs will unfairly
expose poor rural farmers to global competition
0
and jeopardize growth that would be a potential
Employees

Consumers

Governments

Local
communities

Regulators

Media/opinion
leaders

NGOs

Boards

Investment
community

Organized
labour

Suppliers

buffer against a global slowdown. Not reaching a


deal in 2008 would “give the wrong signals to
Note: Respondents could select as many as three stakeholders
the global economy. And this will be detrimental
Source: Feb 2007 McKinsey survey of 391 CEOs whose companies participate in the UN Global Compact
to everybody, most of all the developing
economies,” said Celso Amorim, Minister of
“It’s not what you do with your money after you’ve Foreign Relations of Brazil.
earned it that matters,” said H.M. Queen Rania Al
Abdullah of the Hashemite Kingdom of Jordan, a Failure in the Doha Round would also likely
Member of the Foundation Board of the World increase protectionist pressures around the
world and result in a rollback from the progress
Economic Forum. “But it’s how you’ve earned the
already made towards freer global trade. Pascal
money that determines your success and your
Lamy, Director-General, World Trade
value added to society.” Organization (WTO), Geneva, said a failure in the
talks could exacerbate the impact of a slowing
global economy and heighten geopolitical
tensions.

21 | World Economic Forum Annual Meeting 2008


Science and Technology:
Exploring Nature’s New Frontiers

We are born, we die. For the duration of our lives, In practical terms, these developments are sure to
we share this assumption about our common have a profound impact, altering the rules of the
mortality. We plan our affairs and measure our labour force, the calculus of healthcare, our
success against a traditional lifespan - career, concepts of age, of equality and of privacy. They
marriage, children, retirement. Our universal frailty will eventually force us to consider what the human
binds us, rich and poor, to the knowledge that at body is and what constitutes a full life. If nothing
some point we all get sick and perish. We just else, science is outpacing the public’s ability to
don’t know how. Or when. understand its accomplishments and weigh the
implications.
But in a series of off-the-record discussions with
top scientists, participants at the Annual Meeting The finality of paralysis, for example, is being
heard about how science is progressing so fast challenged by developments in neurotechnology
that it is challenging our assumptions about the that link the brain directly to machines. Once, a
human experience. Death remains inevitable, but severed spinal cord was irreparable. But by
the when is being pushed out by advances in implanting electrodes in the brain, doctors have
medicine. The how, too, may now be less a been able to allow at least one paraplegic to
mystery than a probability. By unravelling the very operate a robotic arm and surf the Internet with
essence of our individuality, DNA, we may be able only his thoughts. Cochlear implants can now
to forestall the inevitable, cheat death and alter restore hearing in many people. Deep brain
what we once simply accepted as grim fate. stimulators are being used to treat epilepsy and
Parkinson’s disease. Retinal prostheses have been
Major Causes of Death
used successfully to restore sight.
Chronic diseases account for 60% of fatalities worldwide*
Such developments hold out the possibility that
IDS

robotic limbs could be controlled by the wearer’s


ia
lar
HIV/A

is
ulos
Ma

Infectious brain to restore natural motion. Advances in


erc

diseases
Tub

Heart disease
bioengineering are already creating prostheses that
Other
allow almost natural movement, and even let their
wearers regain the ability to feel pressure and
weight. Soon, artificial legs will not only allow
Chronic
diseases
patients to walk on the beach, but to feel the sand
Cancer
Injuries
beneath their feet. New biomaterials could allow
Other
doctors to regrow nerves entirely.
tes
Diabe

* segment sizes indicate the share of world fatalities in 2005

Source: WHO

22 | World Economic Forum Annual Meeting 2008


Forecast Avoidable Costs of Chronic Disease serve in a role akin to Hollywood producers,
assembling different scientific actors and specialists
In the US, the avoidable indirect impacts (ie, productivity losses)
of chronic disease are four times as high as the direct costs to crack a specific medical problem.
$500

400 The concept of personalized diagnosis and


Avoidable costs (US$, billions)

treatment also challenges the traditional


300 assumption that each person needs, and is entitled
to, certain common medical procedures. They also
200
pose a problem for conventional healthcare
impacts
Indirect

100 systems, which rest on democratic principles of


equality – the expectation that all citizens should be
Direct
costs

0
Cancer Heart Hypertension Mental Diabetes Pulmonary Stroke
treated the same. The value of genetic analysis lies
Disease Disorders Conditions
in the fact that one patient should not be treated
Note: Avoidable costs are those that could be eliminated by reasonable improvements in behaviour and treatment. Direct costs
are treatment costs. Indirect impacts are losses in output due to absenteeism, “presenteeism” and other productivity reductions
like another.
Source: The Milken Institute, “An Unhealthy America: The Economic Impact of Chronic Disease" (2007)

Patients and doctors fear that people with a


These developments hold out hope to accident genetic predisposition to disease will face
victims, paraplegics and amputees, as well as to discrimination, that employers or insurers might
victims of diabetes and strokes. Some wonder, reject them. Genetic revelations also present
however, how long it will be before synthetic body another ethical dilemma: whether the knowledge of
parts become part of the cosmetic surgeon’s a likely illness will improve one’s quality of life. Does
arsenal, allowing us to enhance not only our informing a patient they are likely to develop an
appearance but also our performance. incurable and fatal disease within the next decade
help them? How will it affect their role in society?
Advances in genetics, meanwhile, are providing
new weapons in the fight against cancer. Science may ensure our lives are longer, but will
Biomarkers can now be used to identify individuals they necessarily be fruitful? By decreasing our
at risk and treat them. By exploring the genome, mortality, the total cost of healthcare will rise. As we
scientists expect to uncover the primary reasons are better able to prevent and bounce back from
for virtually all common diseases within the next five acute injury and disease, health systems will need
years. Using their understanding of the genome, to shift attention to the rising cost of chronic
scientists are compiling a cancer genome atlas that diseases such as diabetes, obesity and other
identifies which genes control susceptibility to lifestyle-related diseases like lung cancer.
certain cancers. Researchers have already Governments are already stepping in to limit factors
identified genes that control the risk of adult-onset contributing to chronic disease: banning smoking,
diabetes, asthma, breast cancer, hypertension, for example, or unhealthy foods. New York City
macular degeneration, prostate cancer and heart monitors diabetics’ blood-sugar levels to reduce
disease. treatment costs, while Japan plans to require yearly
medical checkups for citizens over 50. The burden
Greater understanding of genetics promises to of chronic disease is so large, many say, that it
revolutionize medicine, allowing doctors to develop could alter cultural traditions about which
therapies that pinpoint afflicted areas - even behaviours are private and which are the concern
individual cells in the body. Genetics already make of society at large. Medicine may become more
it possible for physicians to compile treatments personalized, but your health will become a matter
tailored to each patient - “genomic medicine”. An of public interest.
account of the medically significant genes in a
person’s DNA is now available for about US$ Public and Private Health Expenditures
1,000.
Healthcare spending was over 15% of GDP in the US in 2004

Insurers and regulators expect that such


Health expenditure as a percentage of GDP, 2004

16%
individualized treatments will save them money,
even though they are likely to cost individual
12
patients much more. Genomic medicine also poses
a challenge to the conventional model for drug
Private

8
discovery and development: clinical trials for a
Public

market of one are impossible and lack the scale 4


companies need to justify investing in developing
such treatments. Scientists say this is likely to force 0
profound changes to the pharmaceutical industry, China India Japan France US

perhaps favouring smaller companies that can


Source: WHO

23 | World Economic Forum Annual Meeting 2008


Values and Society: Understanding Future Shifts

“Very often, it is not faith which brings


For many, principles continue to be defined by faith.
us into conflict. It is politics and the
“You can’t really have modernization without
pursuit of economic and military power, values,” said Theodore Cardinal McCarrick,
and the violent reactions they produce. Archbishop of Washington DC (2001-2006). “And
It is often the manipulation of ideology, where do the values come from? They come from
our religious traditions.” While some in the 20th
whether religious or secular.”
century predicted a secular future, today the
Abdullah Ahmad Badawi, Prime Minister of Malaysia opposite is true, with adherents to Islam and
Christianity comprising over half of the world’s
Shifts happen - but some shifts are easier to see population. And while strife in the Middle East
than others. We frequently study globalization dominates headlines, war is not a necessary by-
through such measurements as trade, capital flows product of religious pluralism. “Very often, it is not
or labour movements. But globalization’s impact on faith which brings us into conflict,” said Abdullah
cultures, societies and values calls for a much Ahmad Badawi, Prime Minister of Malaysia. “It is
deeper, more qualitative analysis. While some argue politics and the pursuit of economic and military
that the global marketplace tends to whitewash power, and the violent reactions they produce. It is
regional differences, increasing interconnectedness often the manipulation of ideology, whether religious
between cultures has not always lead to or secular.”
secularization or homogenization. Often, in fact, it
has exacerbated divisions. For the next century to To foster cross-cultural success, both public and
be one of peace and prosperity, societies must private learning institutions must promote empathy
adapt to such trends as urbanization, and adopt and understanding. The Internet represents the
new paradigms for intercultural relations, education greatest change, and holds the greatest
and even nutrition. educational potential, as an increasing number of
students in the developed world are graduating
The danger lies in a situation where this does not with degrees from online programmes. The new
happen, and “people see globalization as technology provides great hope for democratizing
something done to them rather than something access to education. But for the bottom billion
that, if it is guided by the right value system, worldwide, with no access to the Internet, even
actually can bring about a more just world,” said primary education is out of reach. Today, 800
former British Prime Minister Tony Blair. “And so I million adults cannot read, and over 200 million
think you have got to combine this economic children toil in the workplace rather than study in a
opportunity with a sense of values that are around school. Government, business and civil society
notions of justice as well as notions of freedom.” share a collective burden to ensure that no child,
anywhere in the world, is left behind.

24 | World Economic Forum Annual Meeting 2008


City Economies in 2010 “There is no contradiction between
Eight cities join the ranks of urban economic powerhouses, half from the US and half from developing countries modernization and faith if they are
rooted in values.”
Mahdi Hadavi, Founder and President, Porch of Wisdom
Cultural Institution, Islamic Republic of Iran

Urbanization must also be made sustainable. If the


world is to stem the effects of climate change, then
cities must lead the way. Already, 786 mayors have
signed a “local” Kyoto Protocol, pledging to reduce
Estimated GDP (US$, 2005, PPP) carbon emissions by 20%. Some mid-sized cities
>US$1 trillion
US$ 500 billion - 1 trillion have outpaced megacities in their reforms. San
2005 2010 2015 2020 US$ 250 billion - 500 billion
Source: "Which are the largest city economies in the world and how might this change by 2020?", Francisco, for example, now boasts a recycle rate
PricewaterhouseCoopers
of nearly 70% on all waste products. Other cities
are aiming to enhance public transportation and
Worldwide, the most striking societal shifts are have begun offering incentives for clean and
happening around urban areas. Today, over half the efficient energy sources.
world lives in a city; by 2050, the fraction is
expected to top three-quarters. Making urban Global food chains are also evolving in tandem with
environments safe and sustainable requires not only the urban landscape. New tastes, menus and diets
enlightened leaders but also a supportive private are pushing local food manufacturers into
sector and mobilized citizenry. unsustainable monocultures. New consumer trends
burden not only national healthcare systems, but,
Burgeoning urban populations place enormous through its supply chain, ecological systems as
strains on existing infrastructure, particularly in Asia well. Certain distributors are partnering with small,
and Latin America. “If we think the situation is bad local farmers to provide healthy products through
now,” said Terry Hill, Chairman, Arup Group of the sustainable agriculture. But consumers must vote
United Kingdom, “we should think about what is for those products with their forks, if they are to
coming. Every city we know is experiencing stress make the new supply chains viable.
on its infrastructure, yet everyone wants to live in a
city.” Public and private sectors must work together Overall, while societal shifts brought on by
to provide upgrades, understanding that a road is globalization may seem beyond our control, we can
not just a project but also a means to foster manage change by adhering to a common set of
accessibility, a hospital not just a cost but also an underlying principles. “Globalization is a fact,”
investment in a healthy society. concluded Blair, “but the values that govern it are a
choice.”

25 | World Economic Forum Annual Meeting 2008


The WorkSpace
The WorkSpace – the workshop with a difference – draws out the collective intellect and creative
capabilities of participants to explore concrete opportunities for improving the state of the world.

The WorkSpace put the Annual Meeting theme – The Power of Collaborative Innovation – into action. Participants collaborated
to find new ways of tackling some of the most critical issues on the global agenda for 2008.

26 | World Economic Forum Annual Meeting 2008


Below are insights from just four of a series of sessions in the WorkSpace. To view all photos, graphics and summaries from
the WorkSpace at the Annual Meeting 2008, visit www.weforum.org/annualmeeting/workspace.

27 | World Economic Forum Annual Meeting 2008


Acknowledgements

The World Economic Forum would like to thank its Strategic Partners for their valuable support of the World
Economic Forum Annual Meeting 2008:

ABB E*TRADE FINANCIAL Reuters


ABN AMRO Bank Electricité de France (EDF) Roland Berger Strategy
Accel Partners Emirates Group Consultants
Accenture Ernst & Young Saudi Basic Industries
Alcoa Fluor Corporation Corporation (SABIC)
AMD Forbes Siemens
American International Group Goldman Sachs Silver Lake
(AIG) Google SK Group
Apax Partners Heidrick & Struggles Standard Chartered
ArcelorMittal HP Swiss International Air Lines
AT&T HSBC Swiss Re
Audi Infosys Technologies Travelport
Avaya Intel Corporation UBS
Bahrain Economic Development Investor Unilever
Board JPMorgan Chase UPS
Bain & Company KPMG VimpelCom
Barclays Capital Kudelski Group Volkswagen
Basic Element Lehman Brothers VTB Bank
Bombardier Lenovo WPP
Booz Allen Hamilton McKinsey & Company Xenel Group
The Boston Consulting Group Manpower Zurich Financial Services
BP Marsh & McLennan Companies
BT (MMC)
Burda Media Merck & Co.
CA Merrill Lynch
Cerberus Capital Management METRO Group
Chevron Corporation Microsoft Corporation
Cisco Systems Morgan Stanley
Citi Mubadala Development
Clayton, Dubilier & Rice Company
Clifford Chance NBC Universal
The Coca-Cola Company Nestlé The World Economic Forum
Credit Suisse Nike would also like to thank Dogan
Deloitte NYSE Euronext Holding, Dogus Group, Invest In
Deutsche Bank The Olayan Group France Agency, Koç Holding,
Deutsche Post World Net PepsiCo Sabance Holding and Swarovski
Dubai Holding PricewaterhouseCoopers for their support.
Dubai World Reliance Industries
DuPont Renault-Nissan

28 | World Economic Forum Annual Meeting 2008


29 | World Economic Forum Annual Meeting 2008
Contributors

W. Lee Howell is Senior Director, Head of Asia and Global Agenda. Sheana Tambourgi is
Director, Head of Annual Meeting Team. Stephanie Janet is Director, Head of Annual Meeting
Operations. Stéphanie Nassenstein is Senior Team Coordinator, Global Agenda.

The report writers were Wayne Arnold, Alejandro Reyes and E. Benjamin Skinner.

The Annual Meeting Programme is prepared by Irene Casanova, Economics; Nathalie Cerutti,
Faculty Management; Agustina Ciocia, Global Competitiveness; Lena Hagelstein, Geopolitics;
Paola Hjelt, Values, Arts and Culture; Nour-Eddine Iguimdrane, WorkSpace; Jasmin Lamrani,
Partnering Against Corruption; Emma Loades, WorkSpace; Kali Galanis, WorkSpace; Dorothée
Ozzello, Public-Private Partnerships; Pearl Smandari, Global Competitiveness; Tiffany West,
Business; and Christian Zellner, Science and Technology.

Associate Director, Editing: Nancy Tranchet

Design and Layout: Kamal Kimaoui, Associate Director, Production and Design

Photographs by swiss image.ch and Richard Kalvar/Magnum

Special thanks to PricewaterhouseCoopers for their help in preparing data and statistics
underpinning this report.

The World Economic Forum would like to express its appreciation to the summary writers for
their work at the Annual Meeting 2008. Session summaries are available at:
www.weforum.org/annualmeeting/summaries2008

30 | World Economic Forum Annual Meeting 2008


This publication is also available in electronic form on the World Economic Forum website at the following
address:

www.weforum.org/pdf/summitreports/am2008

The Report is also available as a PDF at: www.weforum.org/pdf/summitreports/am2008.pdf

Other specific information on the World Economic Forum Annual Meeting 2008 can be found on the following
links:

Annual Meeting www.weforum.org/annualmeeting


Annual Meeting Programme www.weforum.org/annualmeeting/programme
Davos Conversation www.weforum.org/davosconversation
Davos Question www.youtube.com/davos
Interviews www.weforum.org/annualmeeting/interviews
Knowledge Concierge www.weforum.org/annualmeeting/knowledgeconcierge
Open Forum www.weforum.org/openforum
Partners www.weforum.org/annualmeeting/partners
Photographs www.flickr.com/photos/worldeconomicforum/sets
Press releases www.weforum.org/pressreleases
Session Summaries www.weforum.org/annualmeeting/summaries2008
Webcasts, Podcasts & Vodcasts www.weforum.org/annualmeeting/webcasts
WorkSpace www.weforum.org/annualmeeting/workspace

31 | World Economic Forum Annual Meeting 2008


The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and
industry agendas.

Incorporated as a foundation in 1971, and based


in Geneva, Switzerland, the World Economic
Forum is impartial and not-for-profit; it is tied to
no political, partisan or national interests.
(www.weforum.org)