After a three-year hiatus, the World Economic Forum Annual Meeting in Davos, Switzerland, came back with a vengeance, just as a fragmented world confronts a confluence of crises.

The global meeting of government, business and community leaders—the first in three years—can’t quite be described as optimistic, among the 600+ CEOs, 200 cabinet ministers, 50 heads of government and 20 central bank governors who attended the event. But after a year marked by war, inflation, energy shortages and pandemic fears, the general view of Davos 2023 was, “hey, things could be a lot worse.”

In this episode, host John Stackhouse offers his key learnings during his visit to the Swiss Alps. Alongside his special co-host Naomi Powell, Managing Editor of RBC Economics and Thought Leadership, John takes us through the memorable moments and key themes from this year’s #WEF2023 in Davos. From complications arising from the war in Ukraine, to the energy transition and the global innovation landscape, listen to John’s front-row seat perspective.

Hear from some of the world’s top leaders and thinkers, including Matthew Prince, CEO of IT security firm Cloudflare, Ursula von der Leyen, President of the European Commission, and Svein Tore Holsether, the CEO of Yara International, a leading crop nutrition company.

John also talks about the macro and micro trends discussed at the forum, and where Canada can lead. Also, what was the general sentiment around prospects for 2023 among world leaders? Listen in and find out.

Episode Notes

John Stackhouse shares his takeaways from Davos 2023, click here to read the piece called, “The Meh-conomy & Matterhorn-sized risks: 12 themes for a fragmented world.” John also penned daily “dispatch from Davos” editorials, which you can read on his LinkedIn page.

For more information about the World Economic Forum, click here.

Speaker 1 [00:00:01] Hi, it’s John here. And today I’d like to welcome back a special co-host. Naomi Powell is our managing editor of economics and Thought Leadership. She’s at the helm of many of our teams, major research reports.

Speaker 2 [00:00:13] Thanks, John. It’s great to be back.

Speaker 1 [00:00:15] It’s great to have you.

Speaker 2 [00:00:16] So you are just back from the World Economic Forum in Davos, Switzerland. This was the first time the event has been held in-person, at least in a few years, thanks to the pandemic. I’m interested to know what it was like and what were the key moments that you took away with you when you came back to Canada?

Speaker 1 [00:00:33] Well, talk about ironies that a couple of thousand people at least flew or traveled by whatever means to this little town in the Alps when we’ve just been through a crash course in doing so much remotely. In fact, I was thinking the last major international conference in some ways was the World Economic Forum in 2020. And then the pandemic hit and everything was supposed to change, including how we approach conferences.

Speaker 2 [00:01:00] Yeah, I was thinking the same thing. COVID 19 was supposed to spell the end of conferences like this, and that didn’t happen. You’re right. We’re in more of a hybrid world and we’re still trying to figure out how that works. But I do think there’s a sense still out there, after everything we’ve been through, that if you’re going to hold a big in-person conference like the one you just described with hundreds of people flying in, it has to count. So what was accomplished, do you think, in-person that couldn’t have been accomplished virtually. Why does an in-person Davos still matter?

Speaker 1 [00:01:29] I think there is a human interaction that just doesn’t happen on Zoom or whatever your preferred platform is. You do bump into people. You do have more honest conversations in person. And while Davos has this image of being elitist and, you know, in many ways it is it also is impressive how many people from different parts of the world come and get to interact. And I’m not just talking about businesspeople, artists, community leaders, scientists who wouldn’t be on those Zoom calls with CEOs or with government folks. I’d say if there was kind of a major accomplishment at this Davos, it was a reckoning with IRA, the Inflation Reduction Act, the monumental piece of U.S. legislation that has really accelerated a lot of clean tech investing. I didn’t appreciate until I was there just how rattled the Europeans are by this. I mean, this has been an existential challenge. Europe has fought for decades that it is the leader in renewables. And suddenly America, the great champion of fossil fuels in many European minds, is the champion of renewables, while also being the champion of fossil fuels, especially of oil and gas. The commitment to Ukraine was also pretty important. And while a lot of that has advanced through electronic and digital communications, there’s nothing like people being together to really solidify that. And government leaders, especially from North America and Europe, did come together and recommit themselves to Ukraine, not just for the year ahead, but for the years thereafter. One thing that did stand out to me is that all roads lead back to technology, whether it’s the climate crisis, the war, or ensuring the world’s population is being fed and fed sustainably. The development and implementation of technology is always at the core of how we’re going to tackle global challenges. Global problems do require global solutions, and this year’s Davos theme was cooperation in a fragmented world. And from what I saw, cooperation may be more needed, but it’s also more aspirational than ever. This is Disruptors, an RBC podcast. I’m John Stackhouse.

Speaker 2 [00:03:55] And I’m Naomi Powell. John, I have a feeling you have a lot to tell us, so let’s get straight into it. Our audience, the disruptors audience is always keen to hear about technology. What can you tell us about the kind of presence that Tech had at Davos this year?

Speaker 1 [00:04:15] Well, Davos has been the great champion of the so-called fourth Industrial revolution. This idea that advanced technologies, especially artificial intelligence, are really transforming every sector and a lot of aspects of society around us. And that’s a theme we’ve been engaging with on disruptors for a number of years. That’s coming to a head with a lot of economic realities. Many in the tech world have not lived with high interest rates, and they’re now seeing that. They’re now hearing from investors that they’ve got to operate their businesses differently and they’ve got to think about innovation differently. So that kind of collision of tech ambition and economic reality was really visible in in Davos during the forum. Big tech companies like Microsoft and Amazon announced tens of thousands of layoffs, giving a indication of the mood in the tech world. And yet at the same time, there were scientists and technologists there showcasing how quickly artificial intelligence and chat are moving in all sorts of spheres. And that’s not going to slow down even in a tougher economic environment. The science and technology is that powerful. And if there was a message certainly to business operators and business leaders at Davos, it was do not take your eye off the fourth industrial revolution as you’re perhaps managing a bit more tightly through a recession or near recession because your competitors, rivals or innovators, wherever they may be, are going to be doing some pretty extraordinary things this year.

Speaker 2 [00:05:51] So what does that mean? What sorts of tools to leaders have at their disposal to spur that along?

Speaker 1 [00:05:57] Well, Chat GPT is the favorite topic, maybe topic du jour, but it is really starting to disrupt fairly basic aspects of lots of businesses call centers, for instance, where chat bots we’ve had for years, but they’re becoming much more sophisticated. And in fact, it’s during economic downturns or tight economic periods where legacy businesses start to look very aggressively at transformative technologies, not just for innovation, but for cost savings. And I suspect we’re going to see more of that in in the year ahead.

Speaker 2 [00:06:31] But exciting. So the war in Ukraine, you mentioned it before, it’s still a big global issue and it’s going to continue to be as we enter into the second year of the war. What was your sense of how leaders are looking at this second year?

Speaker 1 [00:06:44] Well, it was impressive how resolute certainly European and North American leaders are to stand with Ukraine, a common phrase as for as long as it takes. But there are concerns. There are concerns that, you know, another year of war is not only going to be costly, first and foremost to Ukraine and Ukrainians, but to the many allies who are funding the war and supplying weapons. Can that go on for another year, especially if there is a recession in the West? That question is being asked, how determined will Russia be with the expected spring offensive? Will it be an all-out assault? Will there be weapons that we all have feared might be used? What will Russia throw at us? And I think the Ukrainians are very mindful of that. But their European allies are also starting to think through the consequences of that. One aspect of the Ukrainian war that I didn’t fully appreciate until I was in some conversations at Davos is how sophisticated the fight has been in the cloud. We’ve never had a war on this scale during the cloud computing era, and we’ve got a lot of serious players who are engaged in this kind of cyber warfare, including the United States. It was interesting to hear from companies like Cloudflare, which is a major player in the cloud that has worked with Washington, with American intelligence organizations, as well as with Ukrainians, to both contain what Russia might do in the cloud, to shut down Ukrainian digital operations or the Ukrainian Internet, but also to create space for Russians who want to get beyond the cyber controls of the Kremlin. I witnessed an incredible conversation with Cloudflare’s Matthew Prince. Here’s a clip.

Speaker 3 [00:08:34] Yeah. So if we go back to a year ago today, we were starting to see in Derbyshire coming out of the region. That made us very worried that Russia was going to invade. And so we immediately reached out to authorities that we work with, got in contact with the Ukrainian government and provided our services to protect their critical infrastructure from cyber attacks. When the invasion actually happened, we terminated. Any Russian government affiliated customers from using our infrastructure. And then we worked with law enforcement and experts to say, what do we do next? And while there were some calls for us to pull out entirely what we saw when we talked to the U.S. government, when we talked to European governments, was that there was an important need for organizations like Navalny’s group Bellingcat, which is a Cloudflare customer, to be able to still get their message out. And they are themselves constantly under attack from Russian authorities. And so in order to protect them, we had to have some of our infrastructure still running inside of the country. And we made that determination that that was the right thing to do.

Speaker 2 [00:09:50] That’s incredible. So a Silicon Valley company was able to tip off the authorities of an invasion.

Speaker 1 [00:09:56] Yeah. Welcome to the second battlefield, as many people called it. And this is kind of the war of the future. It’s also the war of the present. It is being fought with artillery and humans, but is also being fought in the cloud.

Speaker 2 [00:10:09] So, John, what about energy? We’re in the midst of an energy crisis. You know, Western sanctions against Russian oil and gas has accelerated that. And it’s also complicated, an already tricky transition to greener fuels. So Europe has so far managed to avoid an energy crisis. Can you give us a sense of how it’s managed to pull that off and what’s next?

Speaker 1 [00:10:30] Well, a bit of international cooperation, some strategic planning and luck, I would say, is how Europe has pulled this off there. There was a great sigh of relief at Davos that the energy crisis has not expanded or been as acute as many had expected. In fact, gas prices are down to pre-pandemic levels in Europe, and there seem to be enough supplies to see Europe through probably this calendar year. But everyone’s worried about next winter. How did Europe get through this winter? Well, warm weather helped a lot. China being in lockdown was a huge factor because China is a major gas importer and a lot of those supplies were diverted to Europe. And then there was significant cooperation, particularly with the United States, to get not only American gas, but gas from American allies to Europe to ensure that it got through this winter. Can all that happen again? Well, maybe some of those forces can be replicated, but there’s no control over weather. And if Europe is hit by another blistering hot summer or a freezing cold winter next year, it’s going to be a lot more challenging all the more so if China is back in the international energy market.

Speaker 2 [00:11:41] So Europe’s talking about doubling its current renewable energy capacity.

Speaker 1 [00:11:45] It’s ambitious and it’s interesting to hear the Europeans, led by the Germans saying we are going to be all renewables by, you know, mid 2030s, maybe even 20, 30. But when you talk to, you know, people who have to literally get shovels in the ground, they’re reminding us as well as Europeans, that Europe doesn’t move that quickly, especially on major projects. Europe has a reckoning under way in terms of its approach to regulation, which ironically was one of the reasons Britain pulled out of out of the EU was just the heavy regulation. Well, that’s holding up some some important renewables development. There’s also supply chain challenges, which we keep hearing about, but there isn’t enough skilled labor or basic materials like steel to build new wind farms or LNG import terminals that are needed to help with that transition. But one thing that was absolutely clear from the Europeans is that they are going to spend whatever it takes to keep pace with the United States on renewables. Whether they can change regulations or not is another matter, but the money will be there. And that was said quite clearly by Ursula von der Leyen, the president of the EU Commission.

Speaker 4 [00:12:56] That means that together the European and the United States alone. Putting forward almost €1,000,000,000,000 to accelerate the clean energy economy. This has the potential to massively boost the path to climate neutrality. But. It is no secret that certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of some of the targeted incentives for companies. So this is why we have been working with our United States friends to find solutions, for example, so that EU companies and EU made electric cars can also benefit from the Inflation Reduction Act. Our aim should be. To avoid disruptions in transatlantic trade and investment. We should ensure that our respective incentive programs are fair and mutually reinforcing. And we should also set out how we can jointly benefit from this massive investment, for example, by creating economies of scale across the Atlantic or setting common standards.

Speaker 2 [00:14:21] So critical to the eBay’s and the other clean tech that von der Leyen was talking about are semiconductors. And I’m glad you raised supply chains earlier, John, because one of the things that was supposed to have happened by now after the pandemic is there were supposed to be a lot of reshoring, of manufacturing, of these goods. That hasn’t really happened.

Speaker 1 [00:14:40] You’re absolutely right. Naomi There is a gap between rhetoric and reality on a number of these files, but supply chains in particular, we have all heard the rhetoric about the need and desire to move chip production from Taiwan, particularly to the United States. Some of that is underway. Big companies like Intel are building facilities in North America and Europe. But even the CEO of Intel said it took decades to move the locus of the supply chain for chips to Asia. It’s going to take decades to get it back to to the west. And of course, the EV revolution is going to accelerate. So where will the chips come from for all these electric vehicles coming onto the market? It’s important to note that the electronic content and the chip content in EVs is significantly higher than in the current generation of automobile. So those chips are going to be critical to the EV supply chain, and the manufacturing of them is not going to be on American soil probably any time soon. So a couple of things are happening. First of all, chip companies are working with kind of the last generation of chip manufacturing, which is more prevalent in in the West and trying to upgrade that and also work with EV parts makers to make them, frankly, a little less demanding in terms of what chips can do. And then in the spirit of ensuring that word, we hear a lot of there’s other countries, India first and foremost, that are really trying to make a move on this change. India is very proud that it has been winning mandates for products like the iPhone and is spending a huge amount to get semiconductor and chip manufacturing to shift to India. So game on. It’ll be interesting to see how the the geopolitics of Chipmaking continue in the years ahead.

Speaker 2 [00:16:39] Okay. We’re going to take a quick break. But coming up, more of our conversation with John Stackhouse and his rundown of the World Economic Forum in Davos. You’re listening to Disruptors and RBC podcast, I’m Trinh Theresa Do. I’d like to share with you our latest agriculture report from RBC Economics on Thought leadership, called the Transformative Seven Technologies that Can Drive Canada’s Next Green Revolution. In it, we identify seven key agtech innovations we believe can both meaningfully reduce emissions and present opportunities for Canada to lead. Some, like anaerobic digesters, carbon capture and precision technology, are ready to scale now. Others, like vertical farms, plant science and cellular agriculture, will be key solutions.

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Speaker 2 [00:18:30] Welcome back. John, you had a front row seat at the World Economic Forum in the Alpine village of Davos. I read that China was notably absent this year, or if at least not absent that much more quiet than they have been in the past. That’s a pretty big shift in tone from, you know, pre-pandemic Davos, when Xi Jinping, sort of emboldened by this booming Chinese economy, came out swinging at the West. What can you tell us about that?

Speaker 1 [00:18:54] You’re absolutely right. It seems like yesterday, although it was five or six years ago when President Xi was there, saying essentially we will fill the void created by Donald Trump’s America and America first thinking. You can count on China to help the world through the climate transition, to help the world through energy changes. You don’t see that. You don’t hear that in Davos. Certainly not. Not this year. In fact, the leading voice for China was there in some ways to make amends, to reach out to the West and say, we don’t want a trade war. You probably don’t want one either. But it was very interesting to hear a Chinese leader. And in this case, it was Liu Hay, the vice premier, called for a dialing down of the Cold War rhetoric to call for more open trade and investment. And to suggest that China wants to work with the West. Also interesting to hear a number of Western political voices, including from the United States. Republicans and Democrats say, no, we’ve kind of moved on and we don’t want to be as nearly cooperative with China as we were a decade or two ago. Now, some of this is politics that plays well on Main Street in a lot of countries. Business, trade and investment continues to thrive between America and China and Europe and China. So reality and rhetoric may have a bit of a gap there, too. But I think we’re going to see this chill between the West and China for a good while. In fact, one of the warnings I heard repeatedly the West was how China may be a greater security threat to the West than, let’s say, Russia. And those threats are often in cyberspace. And we’ll probably see even more concerns raised this year about what China may be doing.

Speaker 2 [00:20:37] What do you think is behind that softening in tone from China? Is it just that their domestic problems are becoming so overwhelming right now that they’re not up for posturing on the world stage?

Speaker 1 [00:20:48] We’ve heard the warning that China will grow old before it grows rich. For a number of years, and that is playing out. We’ve seen this intersection of demographics and economic growth. And the Chinese are very worried about that. How are they going to support sustain an older population? How will they keep the economy humming with fewer people? Well, it’s going to take investment. It’s going to take technology and it’s going to require trade. They will need the world’s major economies buying more sophisticated products from them in the years ahead. So that’s going to require a different and more open approach to trade.

Speaker 2 [00:21:28] So China, like a lot of countries, is very much focused on tech. China needs the West to buy the technologies that it’s working very quickly to to develop. So do other countries. We need tech to make a lot of things happen for us, the green transition and beyond. But this requires innovation and a lot of it. So who is at the forefront and where does Canada rank in terms of our innovative capacity?

Speaker 1 [00:21:53] Well, I think it’s clear that the innovation leader and the planner continues to be the United States. It is firing on all cylinders in a whole range of sectors, fueled, if you will, by that Inflation Reduction Act. It is extraordinary how much investment capital is shifting to the United States. How many people who want to be pioneers in agtech or in building technology or in artificial intelligence are shifting or returning their focus to the United States, because that’s where the greatest opportunities are. As we were discussing earlier, Europe is trying to catch up, and that’s going to be interesting to see, see what it does. And China, you know, it hasn’t shut down its innovation machine, but a couple of years of lockdown have really been a setback. So it’s got slow economic growth. It’s got a society that is no doubt scarred by those marathon lockdowns. And it’s got a whole bunch of customers and trading partners who are not as cooperative. So I suspect we’re not going to see innovation coming out of China like we might have a few years ago. And we’ll see the United States continue to really tower over a lot of a lot of global innovation. What a great opportunity for Canada. We’ve got an open border. We’ve got common cultures and a common language. We have engineers and entrepreneurs who go back and forth. We’ve got Americans investing in Canada and Canadians investing in the United States with a freedom that you don’t see. In many other parts of the world. But Canada, like Europe, is going to have to really come to grips with whether we’re doing enough to play at the level that the United States is playing at. I think we’ll see in the federal budget, presumably in March, a number of commitments that try to up Canada’s game in terms of tax incentives and fiscal spending. But one of the quiet concerns has to be our own regulatory pace. We don’t move as quickly as we need to in terms of approving projects, approving investments, scaling opportunities. There are improvements, but there’s going to have to be a lot more if we’re going to move at pace with where the U.S. is going.

Speaker 2 [00:24:17] You know, another issue that the U.S. is going all guns at is food insecurity and cutting emissions in the ag sector. That’s something you’ve looked at a lot on this podcast. What was being said about that in Davos?

Speaker 1 [00:24:29] Quite exciting to see agriculture as a point of focus for so many business leaders as well as government leaders. I think one of the Awakenings last year was how fragile food systems can be in many parts of the world, including our own. We all saw shortages on the grocery shelf and don’t want to see a lot of those in the future. At the same time, I think a lot of countries are realizing that producing more food could come with more emissions. So how do we address that? Well, the best way to address it is through agriculture, because soil, it’s the new gold soil is going to be capturing a lot more greenhouse gas emissions in the years ahead than it has in the past. And there’s a lot of innovation going on in Europe and the United States and Canada will be accelerating this, I suspect, in the in the months and years ahead that allow us to see large swaths of land and of soil used for an economic advantage, but also for a climate advantage. Fertilizer was also a big topic of conversation, as we heard from Sven Tori Hall Sutter. He’s the CEO of Yara International, a Norwegian chemical company that produces, distributes and sells nitrogen based mineral fertilizers. Here’s what he had to say.

Speaker 3 [00:25:44] What are we really as a fertilizer company? Well, we are replacing nutrients that we removed from the field when we take the crop away. Right. And if there’s no value to nature, well, then you mine the soil of its nutrients and you leave that behind. Then you move on and you destroy nature to get to the nutrient because that’s free. But if it rodders, think about it from a business perspective that we put back, that the nutrients be removed, not more, not less. And think about this more as a soil health perspective, healthy soil, healthy crops. Then we have a very different business model. And so for us, this has been a trigger, but we’ve already been preparing for this.

Speaker 2 [00:26:25] Yeah, that’s fascinating. I do think this is one area where Canada has all the assets. It needs to be a leader and a leading voice. So as we come to a close, John, how did Davos leave you feeling about 2023?

Speaker 1 [00:26:37] Well, it’s going to be a risky year, starting with the global economy. We may or may not have a recession in many parts of the world, but at the same time, we’re probably going to have higher interest rates for longer than we might have anticipated even a few months ago because of labor shortages, because of these supply chain challenges and because of the determination of central banks not to get it wrong this time in terms of fighting inflation. So that creates a bit of a tenuous economic environment for a lot of investors. But, you know, it’s at times like these where the advantage goes to the brave, to the courageous, to people who are able to look beyond the current year, to the growth that will follow in 2024 and beyond, and be making the changes, the investments, the commitments this year that will put them ahead of their competitors. There’s also geopolitical risks out there, and the one that I kept hearing about that isn’t getting a lot of headlines is Iran. We all know about the protests in Iran and perhaps the the fragility of the regime there. If Iran wobbles more in the coming year, that’s going to have a big disruption on global markets, including oil. It will destabilize the Middle East, maybe for the better, depending on your point of view. But is another risk that we have to sort of factor into how we see the year ahead.

Speaker 2 [00:27:57] It’s interesting. So it’s a year to be bold. You published a piece summing up your thinking on Davos on RBC Economics website, where you also describe it as a year to hold your ground.

Speaker 1 [00:28:07] Yes, that was a clear message from a lot of business leaders that they may not be bullish about the year ahead, but they are optimistic things will accelerate perhaps in 2024. But that’s why you hold your ground today. Don’t see ground and start to look for those critical investments and opportunities that will allow you to really make a move in the years ahead.

Speaker 2 [00:28:28] John, this is such a pleasure. It’s one thing to read about Davos and all the things that go on there. It’s a lot different to talk to somebody who’s been there and can share their impressions firsthand. Thank you for doing that today.

Speaker 1 [00:28:39] Absolutely. My pleasure, Naomi.

Speaker 2 [00:28:41] And thank you also for inviting me to co-host today. I’m Naomi Powell.

Speaker 1 [00:28:45] And I’m John Stackhouse. This is Disruptors, an RBC podcast. Talk to you soon.

Speaker 2 [00:28:52] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com, slash disruptors.

Jennifer Marron produces "Disruptors, an RBC podcast". Prior to joining RBC, Jennifer spent five years as Community Manager at MaRS Discovery District and cultivated a large network of industry leaders, entrepreneurs and partners to support the Canadian startup ecosystem. Her writing has appeared in The National Post, Financial Post, Techvibes, IT Business, CWTA Magazine and Procter & Gamble’s magazine, Rouge. Follow her on Twitter @J_Marron.

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