Creating “Shared Norms for the New Reality”

Colin Dyer
Chief Executive Officer
Jones Lang LaSalle

The theme of this year’s Davos meeting is “Shared Norms for the New Reality.” It may be too early to draw any conclusions about shared norms, but there is definitely a new reality on display. As I said this morning in interviews with BBC World TV and BBC World Service Radio, there is a general sense of rising confidence, and any new reality growing out of this optimism will clearly have to include China, India and other high-growth countries as major players in the world economy.

Growing optimism

Continuing on from the comments yesterday, the shift away from the recession obsession of 2009 and ’10 was even more evident today. Then there were huge concerns about the causes of the recession, how to prevent it happening again, how to regulate the financial system, or who should get the blame. (The bankers and many politicians stayed away, so were not even around to hear the criticism!)

But these have clearly become yesterday’s problems and yesterday’s agenda. Even the subject of financial regulation has taken a back seat to an optimistic, forward-looking mood. And not just on the part of business leaders, but among politicians and economists too.Three-speed growth

One commentator talked about three-speed economic growth: Asia Pacific growing at 7 percent on average annually, the Americas at 3-4 percent, and Europe at a steady 2 percent. With those rates, businesses are feeling very good about their prospects for the next few years, and by the way, that is very much how I feel about our own firm.

Companies are seeing demand gain momentum. U.S. business leaders, for example, talk about their domestic markets picking up from September of last year. And with most corporations actually coming through the recession in good shape, and feeling confident about their organizations and their financial position, they are ready to invest for growth in these recovering economies.

Concern about government

But there is a lot of concern among business leaders on one subject: government. Particularly in the U.S. and Europe, people are worried about annual fiscal deficits and about growing levels of national debt, with no apparent political will to cut spending and take difficult measures. That concerns the business people here because of impacts on, first, their tax rates, and, second, the level of demand in the economies they sell into. I have heard it framed in simple terms: “Private sector employees live with less job security and pay tax to support public sector employees who have better benefits and job security.” That summarizes the issue.

As an aside for our U.S. colleagues, there was only muted reaction here to President Obama’s State of the Union address. The China TV interviewer did ask about it, and I said it was encouraging that the president had picked up on business themes and a business agenda to promote jobs growth. Recognizing the need for government to dialogue with business on issues like taxes, regulation and trade laws will help build confidence in U.S. business, and in businesses operating in the U.S.

The “New Reality”

Given that trend of three-speed growth, companies are predictably looking for expansion in developing countries. So while they are beginning to invest for modest levels of growth in Europe and the U.S., they’re seeing the biggest opportunities in Asia. Our clients feel the same way: A recent survey of 200 of the corporates we serve showed overwhelming agreement that the biggest strategic opportunities are in the East.

That takes us straight back to the “New Reality” theme. Before the meeting, I was seeing very high levels of email traffic from Indian companies—requests for meetings and appointments, invitations to events, opportunities to present to them. That impression is even clearer in Davos. There is a very large contingent of Indian business people and government officials here. Russia and China are also strongly represented.

The New Reality is about giving these major, sophisticated countries, with 40 percent of the world population, an increasingly clear voice in world economic and political affairs.

Looking back, you can see that with their 10 percent growth rates, the economic clout and relevance of China and India have increased dramatically over the last five years. But the major shock caused by the recession and Great Financial Crisis in 2008-10 masked the progress that they were making, economically and politically.

With the recession behind us, these countries are taking a new and much more confident stance. They look at the world from a different perspective, from the position of their own success and their great prospects. They are not willing to be lectured by Western economists, business people or politicians, because they see that their own economies are in much better shape. And they have little patience with Western countries that have brought themselves into financial difficulties and, once again, show no will to fix the damage. It is only when you find yourself among a balanced cross section of world business leaders, compared to being surrounded by your own countrymen, that you really understand this perspective.

So there’s a new assertion of position, a sense of pride that the Chinese, Indian, Brazilian or Russian way of doing things is very respectable and doesn’t need advice or “approval” from the West. The challenge is how the global community will accommodate the increasing voice of these countries. A world which used to be run by the G-7 major powers is increasingly being overtaken by the broader G-20 group. In fact, one projection has seven G-20 members – China, India, Brazil, Russia, Mexico, Indonesia and Turkey – matching the size of the G-7 economies by 2020.

But that isn’t just a numbers game. There are aspects of this New Reality around risk management, social responsibilities and other topics which I’ll investigate a little further later in the week.

Respect

President Medvedev of Russia, and his delegation, traveled to Switzerland to fulfill his speaking obligation here. He came despite the huge emotional impact and political implications of the Moscow bombing on Monday. Medvedev said that he did that to say to terrorists that they would not disrupt his ‘business as usual.’

For me, that deserves respect.

The big winner at Davos

It’s based on evidence of my observations, but clearly the big winner at Davos is…. Apple. Last year, I would say about 10 percent of people here had iPhones. This year, iPhones and iPads have close to a 50 percent market share.

So in Davos at least, Blackberry has not been up to the competitive challenge from an aggressive and innovative competitor. There’s a lesson in that for all companies who may think they’re in a strong position and don’t need to develop, innovate and keep a sharp eye on the competition. That lesson applies to our firm, too. We are a great company, we strive to be leaders in all of our businesses, and we are the firm that is constantly trying new things, innovating and bringing fresh ideas to our clients.

If we do not, others will take our position. Call it the Apple effect.

Tomorrow I’ll be a panelist at a session called, “The Unrecoverable Error: How to Avoid It.” It’s about working through tough situations and should provide some good material for tomorrow night.

For now, best regards,

Colin Dyer

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Categories: World Economic Forum 2011