During last night's reception, the founder of WEF, Dr. Klaus Schwab told us "first timers" that we should not expect to sleep while at Davos, 'You can sleep when you get back home' were his exact words. I thought that this was said in jest but I am learning the truth in these words. Last night I was finally able to get to bed at 2AM and had to get up at 6AM. The sessions today will continue until 2AM so I am not sure if I will get any sleep at all. In light of this, I hope that you will not be very harsh on me with respect to spelling or grammatical errors. Update 2008: Economics The theme of the first conference that I attended was a discussion of issues likely to dominate global economy in coming 12 to 18 months. Panelists were Ferenc Gyurcsany (Prime Minister of Hungary), Ngozi Okonjo-Iweala (Managing director of the World Bank), Stephen S. Roach (Asia Chairman of Morgan Stanley), Nouriel Roubini (Chairman, Roubini Global Economics), Yu Yongding (Director, Institute of World Economics and Politics, Chinese Academy of Social Sciences) and Kamal Nath (Commerce Minister of India) – moderated by Michael J. Elliot (Editor, Time International). Mike Elliot began the discussion by informing that last year's panel had forecasted continuation of the goldilocks economy with steady growth. The only dissenter was Roubini who worried about the housing bubble, credit crunch and high oil prices (guess what – that is what we are facing now!!!). It seemed that Roubini was right or lucky or both – who knows? Roubini and Stephen Roach concurred that the US is likely entering a recessionary period that will be long and protracted. Strong actions by the Federal Reserve Bank would result in a shallower recession but will not avoid it altogether. In addition, a looser monetary policy is likely to sow the seeds of the next asset price driven bubble. The causes of the current problems, according to Stephen Roach, lie in the Federal Reserve ignoring asset price inflation and allowing the housing bubble to inflate to irrational levels. Although the panelists agreed that the 75bp cut in Fed Funds rate was an appropriate response, they criticized the timing of this cut. In other words, the cut seemed to be timed to respond to financial market volatility rather than economic concerns. There was quite a bit of discussion about whether the emergence of China and India as strong economic drivers implied that the world economy has been decoupled from the US economy, i.e., will the US recession have a large negative impact on the world economy? The consensus was yes – the US recession will hurt global economic growth (global economy will still grow but the growth rate is likely to be down from 5% to 3-3.5%). This is a large problem for developing countries – China needs to generate 24 million new jobs annually and last year, with 9% GDP growth, it created only 10 million new jobs. With the expected slowdown in growth, their job creation objectives will suffer. Similarly, even though African growth has been 5%, it needs to be 7% per annum. There seemed to be a rough consensus that India is the only country whose economy is not very closely coupled with that of the US and, therefore, India may escape suffering through a large negative impact from the US slowdown. I am not so sure that India would escape the negative impacts if the US economy were to be down significantly Although the recession in the US is expected to result in reductions in commodity and oil prices, the big concern from the panel was the expectation of continued high food prices. Food prices have doubled in the last few years (wheat, edible oil, etc.). According to Stephen Roach, ‘Food is not optional if you want to live’ – definitely a statement that I can agree with without reservations!!!. Therefore, with the continued growth in the developing world, there is expectation of continued increase in food demand. On the other hand, farmland is not increasing and some farmland is being diverted towards crops required for the production of bio-fuels. According to Yongding, this is a big problem for China. China needs a balance between economic growth (need to create 24m jobs per year) and inflation (food prices, high liquidity because of high surpluses). An economic slowdown takes away the option of increasing interest rates to slow down inflation. Overall, according to this panel, the outlook for the world economy over the next 12 months seems to be quite pessimistic. Let us see if they are wrong again like last year and the economy shakes off the sub-prime crisis as a short-term perturbation or if we are really in a prolonged slump. The sense that I had upon leaving this conference is that the world’s foremost economists are just human – their forecasts are too biased towards yesterday’s trends – whether it is on the upside like last year’s forecasts or on the downside, like today’s. Even I can project today’s situation into the future …….. perhaps there is another career for me yet : ) Progress on Climate Change This panel consisted of Bruno Lescouer (SVP of Electricite de France), Christian Mumenthaler (Chief Risk Officer of Swiss Re insurance), Rajendra K. Pachauri (Chairman, Intergovernmental Panel on Climate Change), James E. Rogers (Chairman and CEO of Duke Energy) and Tulsi R. Tanti (Chairman of Suzlon Energy). The discussion on this panel was interesting in the sense that every one agreed that measures need to be put in place immediately to combat climate change but the discussion was short on specific measures and how to get these implemented through the political process. The members were cautiously optimistic that emissions of greenhouse gasses are expected to grow until 2020 but that then this trend will reverse and, by 2050, the emission of greenhouse gasses will be down by 50%. Some points of note were:

1. 40% of the power generation capacity is expected to be replaced in the next 5-10 years and, once implemented, this new technology will lock in emissions characteristics for 25-30 years. Therefore, it is critical that the replacement technology is ‘green’
2. Developed countries with sufficient installed electricity capacity should really focus on energy efficiency where there are still a lot of low-hanging fruits. On the other hand, developing countries that are installing large electricity infrastructure projects should focus on clean energy solutions
3. Nuclear is the only green solution for baseload power and should not be neglected
4. Need progress on six fronts: Electricity generation, transportation, industrial efficiency, buildings and construction, agriculture and forestry. The policy solutions for each of these is different but the common theme is carbon emissions. Therefore, some method of pricing carbon – carbon tax, cap & trade, etc. is essential for the market to develop efficient solutions.
5. Real progress will only happen once individual countries decide that focus on ‘green energy’ is in their national interest.

Overall impression was that the panelists (who represented views from different countries) would like rest of the world to come around to their individual point of view. In other words, lots of discussion about the need for international cooperation but there were significant underlying differences of opinion around all proposals that have been considered to-date. Bottom line, in my view, is that the world recognizes the immediacy and criticality of the problem. The world also recognizes this as a global problem for which global solutions must be found. At this point, however, the consensus breaks down because of the different economic and political situation for different economies (US, EU, developing countries, etc.) and the strategies that different countries must implement to meet their objectives. My opinion is that a global carbon cap and trade system should provide a good compromise but the issue still remains as to how to assign caps to different countries. I remain suspicious about the world agreeing on a solution and aggressively implementing it until another violent environmental event delivers a global wake-up call. Having said that, there was little discussion during this panel about investment in projects that can mitigate the impact of violent environmental events, i.e, the focus seemed to be entirely on how to reduce emissions with little discussion on how to recover from the inevitable environmental events over the next 2-3 decades. Technology This panel consisted of William J. Amelio (CEO of Lenovo), Glenn A. Hutchins (Founder and co-CEO, Silver Lake), Randall L. Stephenson (Chairman and CEO, AT&T), Cher Wang (Founder and Chairman, HTC-VIA) and moderated by John Markoff (Senior science writer, The New York Times). The discussion was around mobile computing as the next wave of technological advancements – nothing new here. Quite a bit of discussion that innovation is happening in the Silicon Valley but also in China, India and Europe – duh!! One really interesting issue that Bill Amelio of Lenovo talked about was the fact that Lenovo has no headquarters. Their executive staff is dispersed to where their facilities are so that the executives stay in close touch with the customers. The executive committee meets at various Lenovo facilities around the world. This touched a nerve for me – I have worked for large companies – both in the field and at the headquarters. I must say that I have learned to abhor the headquarters staffers who believe that they are the bosses, when in actuality, the company exists only because of its customers and the operations that serve and satisfy these customers. As a headquarters staff member, I always considered my role to be of service to the operating people. Sadly, most headquarters people think that the operations exist to serve them. There was quite a bit of discussion around specific technologies and whether these were disruptive or not. It was amazing to me that in an industry where disruption happens very quickly and regularly, there was not a high level of concern over the new technologies or business models that are on the horizon. For example, everyone defined the iPhone as a new gadget. I, however, think that this is a new business model, not dissimilar to iTunes. I think that the future of the iPhone is as a mobile business and entertainment device – business input comes from the company servers (e-mails, etc.) and entertainment from iTunes (movies and music). As such, duplicating iPhone-like phone devices will not be sufficient for Apple’s competitors. Another key issue that emerged from the panel was that the electronics industry has pretty much given up control over basic research and depends upon startups to feed their technology pipeline. This is, of course, very different from the situation in greentech and nanotech industries, where the companies have to develop the technology, applications engineering expertise and the product delivery infrastructure to succeed in commercializing their technology. Dinner I normally don’t get to hob nob with famous authors, but was able to sit next to two great authors and listen to another four. I sat next to Chris Abani (fiction writer from LA) and David Bodino (non-fiction writer from the UK). Also on the table were the political editor of The Economist and the European editor of the New York Times. What a fantastic and wide-ranging discussion we had which has nothing to do with cleantech or the global economy or other heavy topics. Elie Wiesel (Holocaust survivor and Nobel Prize winner) spoke during the dinner. We talked about how stories can be used to tell the truth that people don’t want to hear and how fantasy (or our mental image) is so much more satisfying than the reality. My overall impression of the day was that this event brought together fascinating leaders in various fields for some really serious discussions and some light discussions that re-charge the brain and allow one to take flights of fancy and, through that, potentially come up with really creative solutions. Well, it is 2AM again and I am falling asleep on the keyboard ….. so until tomorrow, good night.