Jon Zehner: Final Learnings from Davos

Jon ZehnerThis snow goose was blown off-course yesterday and I didn’t write my last blog for Davos , but I haven’t forgotten and I did want to summarize my perspectives from the last day.

As the wandering albatross/investors sessions finished on Friday, I was able to get to some of the sessions that related to other topics:

Learned the following:

  • The U. S. has reduced its energy costs in the last few years by three times as a result of the shale gas revolution (shift of coal to gas) and horizontal drilling. Fracking is part of this change, but has been around for 60 years and is not the only driver. The experts believe that other countries (Argentina, China and Libya are all high on the list) have the potential to do similar things given their geological attributes, but the U. S. is far ahead due to the clear rule of law, the depth of skilled oil and gas entrepreneurs and the support of local and regional governments. Europe’s electricity costs are now three times those of the U. S. This is similar to some crows being creative and finding new food sources that are readily available and allow them to spend much less time foraging than other crows.
  • Robots will significantly grow in terms of their sophistication and usage and this will have a near-term impact on societies and may well impact job creation and the types of jobs that are available to the current generation of emerging job seekers. In the ornithological world this is roughly similar to eel grass largely disappearing for many brent geese as a food source due to disease, forcing brent geese to find less valuable food sources such as winter cereals.
  • A panel of economists/central bankers including Christine Lagarde of the IMF, Governor Kuroda of the Central Bank of Japan, and Mark Carney, Governor of the Bank of England, as well as Larry Fink of Blackrock concluded that 2014 will be more volatile than recent years but will still end up in a good place. Their concerns centred around the remaining risks in the global economy that result from structural reforms (e.g. Solvency II), tapering risk and the still low inflation rate in several countries making these economies vulnerable to shocks that could result in deflation. In contrast, the wandering albatrosses seem to be more focused on the causes and timing of the next downturn. This is roughly like a flock of red-faced cisticolas being concerned about finding their next food source while the flock leaders are worried about the peregrine falcon circling overhead as well as the sustainability of the water in the current watering hole.

Jon

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  1. Bradley Butterfield January 27, 2014 at 8:49 pm #

    Hello, Jon. Your writing piqued my curiosity in the WEF debates this year. As virtual spectator I heard speakers’ predictions of positive growth and outlets for spending 2-3 years of pent-up cash. I also heard more interesting messages of global hard power and soft power differentials. In one debate on Chinese-American-European cooperation a speaker hinted at China’s preference for military power, especially in the East China Sea Islands conflict. The head of Dalian Wanda went on to speak of China’s growing soft power and of his own desire for a transnational empire. The latter comments were certainly more topical with regard to the debate focused on economics not politics. Like a Eurasian Cuckoo laying eggs in the nests of fellow birds, Mr. Wang Jianlin has indicated a desire to acquire multiples of billions of dollars in assets abroad annually. Soft power is certainly on the minds of the canny entrepreneurial class. There is real potential for these bird analogies to explain economic theory—I’m hooked. Thanks.

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