Despite the ever-increasing connectedness of global populations, the annual World Economic Forum (WEF) continues to provide an invaluable opportunity for thought leaders to meet in person and discuss the issues of the day. The theme of this year’s gathering in Davos, Switzerland, ‘shaping a global architecture in the age of the fourth industrial revolution’, brought together diverse strands of thought for discussion and dissemination.
My focus at this year’s conference was the impact of digital technology on the world of business. Here are five key takeaways from my time at WEF 2019.
1. The hype around AI has outrun the reality
All three of the sessions I attended on artificial intelligence (AI) were full and attracted lines of people outside their doors. It seems everyone wants to know about AI, but very few people really know what they are talking about when they speak on the subject. There were two schools of thought on display at WEF 2019: the incrementalists and the radicals.
The incrementalists highlighted that AI is not, in fact, a new phenomenon and has been around since the 1950s. True, this technology is increasingly advanced. But it is useful to think of current breakthroughs in areas such as deep learning as ways of making computers more powerful. Those in this school noted that most of the actual use-cases for AI centre on speeding up and improving the quality of existing business processes. Standing in contrast to them were the radicals, who told the gathered crowd that the world was experiencing the fastest adoption of a new technology ever, and exciting and scary consequences were just around the corner. They pointed out that a small group of mostly American and Chinese companies completely dominate the field of AI research, and we are all marching to their drumbeat.
I found myself aligned with the incrementalists. Hype has definitely outrun reality in this arena, as it so often does with new technologies. One executive revealed that, on a scale from zero to 10, his company was still a one in terms of harnessing value from AI.
We all need to monitor what is happening in this sphere, but the early-mover advantage is going to be small and fleeting outside the narrow world of tech.
2. Digital currency regulation may not be inevitable
Last year’s WEF sessions on blockchain technology were apparently hugely oversubscribed. This year, there were quite a few empty seats. Bitcoin has crashed and practical use-cases for blockchain technology are still few and far between. Still, panellists managed to get themselves into a bunfight over the topic.
The academics and government-types argued that, as soon as Bitcoin or some other digital currency started to be used regularly, central bankers would move in and regulate it. This has happened countless times over the course of history.
The libertarian blockchain evangelists were having none of it. They argued that decentralised currency was the natural evolution of the basic protocols of the internet; humankind will benefit enormously from bypassing central authorities and taking control of currency.
A nice resolution of these polar positions emerged in the form of a company called BitPesa, which uses blockchain technology to manage currency transactions in and between African countries like Kenya and Senegal. Currency markets in Africa are thin, poorly regulated and expensive, so blockchain is able to provide immediate speed and cost savings in that context.
The long-term potential of blockchain is enormous, but it needs to gain the trust of users to realise that potential. The best way to do this is by solving basic problems like remittances and currency trading in Africa not by dreaming up new currency regimes that make central banking obsolete.
3. The changing raison d’être of the firm
There were several sessions on new digitally-driven business models at WEF. Most people at Davos now understand the basic logic of technology platforms and how powerful platform companies - from Facebook to Tencent to Uber - have become.
What we are still struggling to grasp is just what their consequences and, in particular, their unintended consequences, will be. One speaker commented on the 400 million bicycles that were scrapped when too many competing firms got into a race to become the bike-sharing platform in China. Another contributor based in Africa noted that platform companies were bringing short-term benefits to consumers, but killing off innovation by locals with potentially damaging long-term consequences.
Others were more relaxed about the current state of affairs. For example, the case that Amazon is harming consumer welfare, stifling innovation or making excess profits is currently very hard to sustain. The rise of platform-based companies has ushered in a “golden age” for developers, who can now reach huge markets and commercialise their ideas much faster than they were once able to.
I had the chance to contribute to that discussion when I spoke on a panel focussed on the changing nature of firms in a world of platforms and ecosystems. Building on ideas developed by my colleague Michael Jacobides, I argued for the revision of these organisations’ whole raison d’etre. In the industrial era, firms created value through the products they made and sold. In today’s digital era, firms create value through the set of relationships they orchestrate with others. The value, in other words, is in networks not assets. This explains why companies with very few tangible assets or employees have such stratospheric market valuations and represents a very different way of thinking about the purpose of firms.
4. Big companies need to use our data more transparently to regain trust
Two of tech’s most important CEOs – Daniel Zhang, the incoming head of Alibaba, and Satya Nadella of Microsoft – also spoke at WEF 2019.
The men had very different styles: Zhang is a mild-mannered former accountant, fluent in English but cautious in his public statements; Nadella is charismatic and cerebral, happy to push the agenda.
Yet ultimately, their pronouncements on data, privacy and trust were remarkably similar: data is a factor of production, we need to measure and account for it properly, and we need to recognise that individuals own their personal data. Companies need to become much better at self-regulation, they need to push for transparency in how data is used and they have to embrace government involvement in these issues, for example Europe’s GDPR laws (this last point was made by Nadella, not Zhang).
There is nothing really new here, but it’s heartening to hear top CEOs making these arguments. Interestingly, Facebook and Google, which are the companies most in the firing line on data privacy, were not represented on the programme.
Data privacy is a huge issue and we are going to see a lot more regulation, either self-imposed or by governments, over the next couple of years.
5. Take responsibility for your employability
One statistic I heard quoted on more than one occasion at this year’s conference was that 68% of primary school children will end up in jobs that don’t yet exist.
This figure, presumably from WEF research, suggests there is little to be worried about in terms of technology stealing our jobs. Yes, there will be some temporary dislocation as old jobs disappear and new ones are invented, but, as with previous industrial revolutions, the labour market will take care of itself. Most panellists seemed to accept this argument (even those from labour unions) and so the conversation shifted to the reskilling and upskilling of workers. So who is responsible for all this reskilling?
Some speakers emphasised the role of governments, for example Switzerland’s highly effective vocational apprenticeship scheme.
But there was a strong view that individuals need to take much more control of their own destiny and that companies need to facilitate this. It’s already happening: ING Bank’s “steer your career” programme is all about providing funding and support to help people train themselves up and to enhance their personal employability.
More than just a talkfest?
WEF 2019 produced some good debates, some new perspectives, but very few ground-breaking new ideas. Davos isn’t the sort of place where revolutionary concepts are first brought to light. The process of arranging the agenda and selecting the speakers is too carefully-thought out to allow for such serendipity.
That is not a criticism. Davos isn’t a hothouse for new ideas – it is an orchestrator of important debates. It brings different parties together and it encourages them to generate a shared point of view about what needs to be done. That’s not enough to change the world, but it’s a good step in the right direction.
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