Annual Meeting 2007

Shaping the Global Agenda: The Shifting Power Equation

Davos, Switzerland 24-28 January

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Contents
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© 2007 World Economic Forum

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No part of this publication may be reproduced or
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photocopying and recording, or by any information
storage and retrieval system. Page 3
Preface
REF: 150207

Page 4
Executive Summary

Page 8
Economics: New Drivers

Page 14
Geopolitics: The Need for Fresh Mandates

Page 18
The Davos WorkSpace – CEO and Future Series

Page 20
Business: Leading in a Connected World

Page 26
Technology and Society: Identity, Community and Networks

Page 30
Acknowledgements
 Preface
“ We are living in an increasingly schizophrenic
world where economies are booming and
global signs are promising but underneath are
“
economic, political and social risks as well as
imbalances and inconsistencies.
Klaus Schwab
Founder and Executive Chairman of the
World Economic Forum
The World Economic Forum Annual Meeting again
offered participants – both those in Davos and those
joining us through the Internet – the opportunity to
examine the many critical forces affecting the global
agenda, gain a deeper understanding of these
pressing issues and create fresh ways to meet the
challenges ahead.
The theme of the Annual Meeting 2007, Shaping the
Global Agenda: The Shifting Power Equation, struck a
chord with participants, reflecting the unease we all
feel living in times that both inspire great optimism and
raise grave concerns. Positive sentiment about the
vibrant global economy and the prospects for
continued growth was matched by persistent anxiety
about ongoing shifts in the geopolitical landscape and
the difficulty of addressing such complex problems as
poverty in Africa and instability in the Middle East. The
growing economic and strategic importance of
emerging economies and resource-rich nations, the
recognition of the urgent need to address climate
change, and the exciting but sometimes disquieting
implications of new community models, often virtual in
nature, gave the assembled business, government
and civil society leaders much to discuss, digest and
act upon.
The focus on the shifting power equation across
economic, political and social relationships served to
highlight how the thinking of leaders has evolved over
the past years. Whether on the G8 agenda, or that of
business, not only did participants agree on priorities –
climate change and the need for sustainable
development were certainly at the forefront – but they
also formed a consensus on the shape any response
must take: the only way to create effective solutions is
through the combined effort of leaders from business,
government and civil society to identify problems
clearly, discuss the relevant issues and understand the
trade-offs.
The World Economic Forum Annual Meeting 2007
drew leaders from business, government, international
institutions, non-governmental organizations,
universities and other communities. Together with our
Members and Partners, we renewed our commitment
to driving the global agenda forward through
consensus building and meaningful action. We look
forward to continuing the conversations and exchange
of ideas that began in Davos at our regional meetings
and through Forum initiatives and industry activities
over the coming year.
3 | World Economic Forum Annual Meeting 2007
 The Shifting Power Equation – Executive Summary
“ Perspectives are changing. The fact
Angela Merkel
Federal Chancellor
of Germany
The theme of the World Economic Forum Annual
Meeting 2007 – Shaping the Global Agenda: The
Shifting Power Equation – underscored the particular
challenge of this period of rapid globalization. “We are
living in an increasingly schizophrenic world where
economies are booming and global signs are
promising but underneath are economic, political and
social risks as well as imbalances and
inconsistencies,” said Klaus Schwab, the Forum’s
Founder and Executive Chairman. “We want to make
sense of this world and shape the global agenda,
taking into consideration the fragilities of global
development and global systems. This is the unique
contribution we make each year – to analyse the state
of the world, the challenges, risks and opportunities.
We sort out our priorities and come out with solutions
to our problems.”
“ The rise of China, India and other
countries in Asia is not a threat but an
opportunity. When you see the incredible
consumer market opportunity for global
businesses, it is quite extraordinary. The
shifting power equation does not have to
mean that there are winners and losers.
“ between Israeli and Palestinian business leaders
Michelle Guthrie
4 | World Economic Forum Annual Meeting 2007
is that a completely new global
balance of power is being created.
“ “
Davos, as E. Neville Isdell, Chairman and Chief
Executive Officer of The Coca-Cola Company, put it, is
the “epicentre of engagement.” The Meeting’s
outcomes amply illustrated the unique approach that
the Forum brings to the global agenda through
participating government, business, media, academic
and civil society leaders from across countries,
continents and cultures. It was precisely because of
this potent mix of actors that, at this Meeting more
than any previous one, the Davos community defied
the risks, concerns and lingering doubts to move from
awareness and commitment to concrete action on
climate change and sustainability.
Among the outcomes of the Annual Meeting:
• Decision by 30 trade ministers to restart the Doha
Round of global trade negotiations at the sub-
ministerial level which subsequently led to a full
resumption of the talks
• Formation of the Climate Disclosure Standards
Board, a new international partnership to establish a
generally accepted framework for climate risk-
related reporting by corporations
• Establishment of a joint Israeli-Palestinian business
council to encourage and facilitate cooperation
and to reinforce economic relationships and help
peace building efforts
• Creation of an alliance of leading companies to
bring power to villages in sub-Saharan Africa
Globalization is the single greatest
economic engine of our time
“
• Agreement among four global accounting firms to
work with the World Economic Forum Partnering
Against Corruption Initiative (PACI) to support the
fight against corruption
• Renewed affirmation of support for the PACI from
the heads of the World Bank, the African
Development Bank, the Asian Development Bank,
the European Bank for Reconstruction and
Development and the International Finance
Corporation
• Release by the World Economic Forum and the
Reinventing Bretton Woods Committee of the final
report on a two-year, public-private review of the
international monetary system in cooperation with
G20 governments
Another notable outcome from Davos was the
recognition that the Forum and its partners in the
business community and civil society have a
responsibility to promote open discussion of
globalization, both its advantages and disadvantages,
how those benefits can best be enhanced and
shared, and how the negative effect can be reduced
and those affected helped. “Most people who are hurt
or think they are hurt by globalization know it,” said
Renault President and Chief Executive Officer Carlos
Ghosn, who is also the President and Chief Executive
Officer of Japanese automaker Nissan. Added
Unilever Group Chief Executive Officer Patrick Cescau:
“Globalization is worth defending. It is also worth
being explained.”
Tony Blair
Prime Minister
of the United Kingdom
The Annual Meeting agenda was designed to help the
2,400 participants in Davos and those outside who
joined the conversation through the Internet – perhaps
through their Second Life avatars – to understand the
many aspects and implications for business and
societies of globalization and the shifting power
equation. The programme was organized under four
sub-themes – Economics: New Drivers; Geopolitics:
The Need for Fresh Mandates; Business: Leading in a
Connected World; and Technology and Society:
Identity, Community and Networks.
The Forum would like to thank the distinguished
Co-Chairs of the World Economic Forum Annual
Meeting 2007, each of whom provided invaluable
support to the proceedings and brought their
considerable experience and wisdom to the
discussions.
Michelle Guthrie, Chief Executive Officer, Star
Group, Hong Kong SAR
E. Neville Isdell, Chairman and Chief Executive
Officer, The Coca-Cola Company, USA
Sunil Bharti Mittal, Chairman and Group Managing
Director, Bharti Enterprises, India
James J. Schiro, Group Chief Executive Officer and
Chairman of the Group Management Board, Zurich
Financial Services, Switzerland
Eric Schmidt, Chairman of the Executive Committee
and Chief Executive Officer, Google, USA
5 | World Economic Forum Annual Meeting 2007

“ are hurt by globalization know it. Most
Carlos Ghosn
President and Chief
Executive Officer,
Renault, France;
President and Chief
Executive Officer,
Nissan, Japan
Economics: New Drivers
While globalization has resulted in an unprecedented
expansion of global trade and investment that has
spurred the world economy to grow at its fastest pace
in three decades, lifting hundreds of millions out of
poverty, the benefits are not evenly shared. Renewed
efforts are needed to mitigate the negative effects of
globalization.
• Growing unease, in particular about job creation
and security, could lead to political backlash. To
counter this, both government and business have to
better communicate the benefits of globalization.
More measures must also be taken to insulate
workers from the negative effects of competition in
the increasingly global labour market.
• Greater attention must be paid to the impact of the
rising tide of capital flooding through the world’s
financial markets and the fact that financial
innovations are deepening the connections among
global markets.
• Urgent steps must also be taken to combat the
negative effects of increased industrialization and
energy consumption related to rising living
standards. Because of the difficulty in forging a
global consensus on an approach to climate
change, nations should undertake unilateral efforts
to limit carbon emissions and support international
mitigation efforts, such as carbon trading
programmes.
• Efforts are also required to plan for coming
demographic imbalances, focusing on job creation
for the young and pension and healthcare reforms
to address ageing populations.
6 | World Economic Forum Annual Meeting 2007
Most people who are hurt or think they
people who benefit do not know it. What
“
we need to do is come in with concrete
cases and messages.
Carlos Ghosn
Geopolitics: The Need for Fresh
Mandates
The international community’s capacity to handle the
complex and fast-changing global agenda is
hampered by the sometimes perplexing shifts in
power relationships that are playing out, particularly
the emergence of new poles of influence and non-
state actors.
• While the US remains the dominant world power, its
position is increasingly challenged or constrained by
new emerging players such as China and resource-
rich Russia, as well as states with nuclear
capabilities and ambitions such as North Korea and
Iran.
• This new world order requires a fresh, pragmatic
approach to global governance and management of
the global agenda, including the reform of
international institutions and agreements to
rebalance relationships in the world to acknowledge
power shifts.
• The ultimate power shift is the rise of non-state
actors – no longer a term that instantly connotes
malevolence as it had in the past. Grassroots
movements, communities, civil society and
companies are forging novel partnerships to
develop new solutions and tackle global challenges
such as climate change.
From left to right: Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer, Google, USA; E. Neville Isdell, Chairman and
Chief Executive Officer, The Coca-Cola Company, USA; James J. Schiro, Group Chief Executive Officer and Chairman of the Group Management
Board, Zurich Financial Services, Switzerland; Michelle Guthrie, Chief Executive Officer, Star Group, Hong Kong SAR; Sunil Bharti Mittal,
Chairman and Group Managing Director, Bharti Enterprises, India
Business: Leading in a Connected
World
The proliferation of technology, global risks and the
multiplying pressures from rapid globalization have
increased the responsibilities of companies and their
leaders, challenging them to find new and innovative
approaches to doing business. Chief executives must
now look beyond shareholder interests and cater for
the needs and concerns of a wider group of
stakeholders.
• The CEO’s main task is to enhance collaboration
and develop new partnerships to address everything
from the challenge of research and development to
strategic issues such as climate change.
Companies cannot rely on old command-and-
control models.
• Companies also face rising pressures from
technology-empowered consumers, employees who
want to work for socially responsible enterprises,
and shareholders who demand greater transparency
and better governance.
• The expanding role of emerging markets both as a
destination for investment and as a source of
investor capital is raising difficult questions about
everything from national security to clashing
cultures. In emerging markets, CEOs must also
address the particular challenge of human resource
management.
• Intense scrutiny and stress on the management of
public companies are increasing interest in
privatization and fuelling in part the rapid expansion
of private equity investment. But private ownership
does not shield companies from the pressures to
which they must respond.
Technology and Society: Identity,
Community and Networks
The rapid convergence of telecommunications, cable
television and the World Wide Web is driving the
growth of new services that blur the line between
audience and producer, resulting in an explosion of
user-generated information, entertainment and
services. The impact of this power shift is affecting
everything from corporate communications to
elections, from the way companies conduct R&D to
the social behaviour and privacy of individuals.
• The expansion of customer-generated content and
online communities on popular websites such as
YouTube and Second Life have perplexed
incumbents but opened tantalizing new business
opportunities.
• As they develop in quality, virtual worlds could
become the common interface for all Internet usage.
• The growth of online communities is spurring
debate about the ability of the Internet to break
down barriers based on geography, nationality, sex
or appearance. The practice of using avatars is also
raising questions about the impact on social
interaction and psychological health.
• Grave concerns about privacy, security and online
fraud threaten to derail the future of Internet
commerce.
• IT advances are changing the way institutions and
companies collaborate within their organizations and
with each other, particularly in R&D.
7 | World Economic Forum Annual Meeting 2007
 Economics: New Drivers

“ I worry about how the US responds to the fact that its hyperpower status in terms of wealth
“
has to be reduced. It doesn’t mean that the US is any worse off but the US response is
something that the world has to worry about.
“ India is a willing partner on climate change, but clearly it’s not a willing punching bag because it
has its limitations. A billion people are going to be consuming a lot of services and goods that
“
will create emissions. We will need technology; we will need money. But India will be willing to
Laura D. Tyson align with the world.
Sunil Bharti Mittal

Laura D. Tyson Min Zhu Montek S. Ahluwalia Sunil Bharti Mittal

Professor of Group Executive Vice- Deputy Chairman, Chairman and Group
Economics, University President, Bank of Planning Commission, Managing Director,
of California, Berkeley, China, People's India Bharti Enterprises,
USA Republic of China India

Since the opening of China and the fall of the Soviet
bloc, the ideological shackles of the cold war have
been cast aside, reuniting the world’s biggest markets
and ushering in a gilded age of growth, the likes of
which has not been seen since the Industrial
Revolution.
The United States is still an economic powerhouse,
but it has been largely supplanted at the forefront of
growth by China and India and other emerging
economies. “The world is no longer as dependent on
a single locomotive,” said Economics Professor Laura
D. Tyson. Even the once-moribund economies of
This astonishing growth in global wealth is creating its Perhaps the biggest challenge stems from the uneven In short, this new period of global growth is producing
own problems, however. Widespread pollution is distribution of surging global wealth. Millions are being many of the same imbalances and inequities that
wreaking havoc on the environment, causing changes lifted out of poverty, it is true. Rising fortunes are during the Industrial Revolution gave rise to
to the climate that sustains life itself. Booming spawning a new cosmopolitan class of global super- nationalism, fascism and communism. Many fear that
demand for resources has created shortages of raw rich – free to roam where taxes are lowest. Yet similar reactionary or even retrogressive forces could
materials, sending commodity prices up and thrusting incomes among the politically powerful middle class again be rising.
resource-rich nations into disproportionate positions of that they leave behind are rising more slowly – so
influence (see Figure 1). slowly that to many it seems as though they are Heading off the political backlash will require a
standing still or even slipping behind. “They have a concerted effort by both governments and business to
Figure 1 World Commodity Prices and Demand from BRIC Nations diminishing sense that we are all in the same boat,” better publicize the benefits of globalization. “Most
As the developing world consumes more metals, prices are rising said former US treasury secretary Lawrence H. people who are hurt or think they are hurt by
350 Summers, now the Charles W. Eliot University globalization, know it. Most people who benefit do not
300 Professor at Harvard. know it,” said Carlos Ghosn, who heads Renault and
Index (100=1996)

Europe and Japan are enjoying growth as China and 250

Nissan. “What we need to do is come in with concrete
200
India provide new sources of labour and consumer cases and messages.”
150
demand that are helping to keep the cost of capital 100

low as global incomes rise.

“
50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Let’s face it: to manage globalization in
Steel consumption
Aluminium consumption
Steel price
Aluminium price
developing countries a huge amount of
Copper consumption Copper price

Source: Datastream; International Iron & Steel Institute; World Bureau of Metal Statistics
energy has to be put politically – at least in
an open society – on arguing these issues

“ Insecurity threatens globalization

and the growth that we are enjoying
“
today. There is a danger that some
The mountains of wealth are exerting new and little
understood pressures on financial markets. Prosperity
has created a demographic paradox: lower birth rates
that are leaving the wealthiest nations short of new
and educating the public. You need a
comparable debate in the wealthy
countries that isn’t happening.
“
societies will look inward. workers to help finance the rising cost of healthcare Montek S. Ahluwalia
E. Neville Isdell and retirement among older generations.

8 | World Economic Forum Annual Meeting 2007 9 | World Economic Forum Annual Meeting 2007
 From left to right: Gloria Macapagal Arroyo, President of the Philippines; Felipe Calderón-Hinojosa, President of Mexico; John McCain, Senator
from Arizona (Republican), USA; Paul D. Wolfowitz, President, World Bank, Washington DC; Ellen Johnson Sirleaf, President of Liberia

Urgent steps also need to be taken to mitigate the programmes, even in the absence of a global Ultimately, the negative impact of a rapidly globalizing
negative side effects of globalization. Climate change consensus on what form those efforts should take. labour market will increasingly affect workers in
is an especially critical global priority. While developed Some also argue that, because a multinational developed countries, which could lead national
countries to date have the highest carbon emissions, solution is unlikely to emerge in time to reverse climate politicians to promote greater insulation of domestic
fast-growing developing economies are rapidly change, efforts must be made to prepare for the employment and protectionism. How can this be
catching up (see Figure 2). China is expected to inevitable impact of it. avoided? Some suggest a kind of universal tax on the
surpass the US as the top producer of greenhouse “cosmopolitan” class – those who can most benefit
gases by 2009. Another vexing issue is the rising tide of capital from globalization – or at least some form of
flooding through the world’s financial markets, though international tax harmonization. Others believe the
Figure 2 Developed vs Developing World Carbon Emissions it is not clear if anything can or needs to be done to answer may lie in shifting the burden of health
Developed world countries are major emittors of carbon dioxide, to date address this development. Cheap capital has been a insurance to the state and beefing up public
30 boon to developing nations, lowering their financing unemployment insurance. “We have to move the
25 costs and enabling them to dig their way out of debt. social protections from the basis of the corporation to
metric tons of carbon dioxide)
Carbon emissions (billion

20 But to compensate for low interest rates, investors are the basis of society,” said Columbia University
15 taking advantage of cheap funding costs to make Economics Professor Joseph E. Stiglitz. “The
10 more leveraged investments. An increasing amount of While most funds do not disclose their portfolios, recognition of that is a change in mindset.”
5 public pension funds and private savings are flowing many have been investing increasingly in sophisticated
0 into hedge funds (see Figure 3) and private equity and little understood instruments such as credit
1903
1906
1909
1912
1915
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002

funds, which in turn use unconventional investments derivatives. With multilayered, leveraged investments
Developing nations Developed nations to generate higher returns. including funds of funds, institutional funds and hedge
Source: World Resources Institute funds, bankers and regulators worry that the impact of
any financial shock could be amplified. “Countries
Figure 3 Hedge Fund Assets need to do their homework to reduce the risks of
Hedge funds manage 30 times more assets today than they did in 1990
While efforts are being made to improve energy these instruments and investing habits. We need to
efficiency in China and India, breakneck economic 10,000 $1,400 improve documentation and address legal issues,”
Assets under management (US$, billion)

9,000
growth is taking a devastating toll on the $1,200 said Chilean Central Bank President Vittorio Corbo.
Number of funds

8,000

environmental health of these nations. Despite the 7,000 $1,000

6,000
recent jump in oil prices, research for greener energy 5,000
$800

$600
by the world’s largest polluter, the United States, has 4,000

3,000 $400
been shrinking. Given the rising costs associated with 2,000
$200
1,000
climate change, it has become clear that nations 0 0

should undertake unilateral efforts to limit their own 1990 2000 2006

carbon emissions and to support international efforts Funds Assets

to reduce emissions, such as carbon trading Source: Hedge Fund Research Inc.

10 | World Economic Forum Annual Meeting 2007 11 | World Economic Forum Annual Meeting 2007
 Getting the Doha Round Back on Track
On the penultimate day of the World Economic Forum
Annual Meeting 2007, World Trade Organization
(WTO) Director-General Pascal Lamy told participants
that the discussions among the 30 trade ministers in
Davos had given new impetus to the stalled Doha
Round. “Today’s ministerial meeting has put quite a lot
of energy into the notion that the landing zone is in
sight,” said Lamy. Added Kamal Nath, India’s Minister
of Commerce and Industry: “Despite the cold outside,
we have been able to defreeze the talks that were
frozen.” Days later, negotiators at the WTO in Geneva
agreed that full talks to set a framework for concluding
the Round would resume. The negotiations were
suspended in July 2006 largely due to disputes over
agricultural tariffs and subsidies.
“ It has to be more than a lowest-common-
“
denominator deal that doesn’t generate
trade flows.
Susan Schwab
US Trade Representative
“ We are now in the endgame. Either way, this
12 | World Economic Forum Annual Meeting 2007
Reshaping the International Monetary System
Estimates of Potential World Gains from Doha The World Economic Forum and the Reinventing The report includes a selection of the papers prepared
Will they be enough to persuade governments to incur relevant costs? Bretton Woods Committee (RBWC) issued at the for the project that offer specific proposals for reform
$350
World Economic Forum Annual Meeting 2007 the final in such areas as strengthening the international
300
report of a two-year review of the international adjustment process, improving crisis prevention and
Estimate of potential gains in
global income (US$, billions)
World Bank estimates
250 Carnegie Endowment estimates
200
monetary system conducted in cooperation with the resolution instruments, and modernizing and
150 Group of 20 (G20) governments. Entitled The rationalizing the governance of the system’s principal
100
International Monetary System, the IMF and the G20: institutions. Among the notable proposals is one
50
0
A Great Transformation in the Making?, the report presenting a new “business model” for the IMF.
Full liberalization Likely Doha scenario*/Central Doha scenario**
concludes that a critical mass of governments Another outlines significant yet feasible improvements
* World Bank likely Doha scenario entails reducing agricultural tariffs 44% by developed countries and 21% by
developing countries, and manufactures tariffs by 50% by developed countries and 33% by developing countries
appears ready to try to adapt international financial in the exchange rate system that could help prevent
** The Carnegie Endowment central Doha scenario entails agricultural ad valorem equivalents (AVEs) reduced by 36%
by developed countries and 24% by developing countries (excluding LDCs), and manufactures AVEs reduced by 50% by
developed countries and 33% by developing countries (excluding LDCs). institutions to a world characterized by increasingly large, persistent economic imbalances of the kind that
Source: World Bank, Carnegie Endowment large cross-border private capital flows, wider threaten world financial stability today.
geographic distribution of economic activity and
deepened regional macroeconomic and international
“
Earlier, the World Economic Forum’s International trade policy coordination.
Business Council (IBC) of leading CEOs from both An important transformation of the international
developed and developing countries had called for a From 2004 to 2006, the Forum and the RBWC monetary system appears to have begun in
revival of the Round. “The impasse with the Doha organized a series of public-private roundtables on which the Group of 20, by virtue of its relatively
Round threatens to undermine growth and the spread different aspects of the international financial
of economic opportunities to all,” the IBC warned in a
statement. “Trade is the most effective means we can
offer to the members of the global community
struggling to lift themselves out of poverty.”
architecture in cooperation with selected finance
ministries and central banks of the G20. Seven
different G20 governments hosted these discussions –
co-chairing them with the Forum and the RBWC –
informal and representative nature, may well
features are forged.
“
prove to be the crucible in which its primary
Richard Samans
supported by a research programme in which leading Managing Director, World Economic Forum
public, private and academic experts prepared more
than 50 discussion papers.
is going to end in success or failure in the next
two to three months. It would be a terrible
“
misjudgement if we allow what we have now
to slip away.
Peter Mandelson
Commissioner, Trade, European Commission, Brussels
13 | World Economic Forum Annual Meeting 2007
 Geopolitics: The Need for Fresh Mandates
“ We, as representatives of the states,
cannot solve everything alone and
cannot solve anything at all unless we
rapidly improve our partnerships with
“
business, academia and society as a
whole.
Micheline Calmy-Rey
President of the Swiss
Confederation and
Federal Councillor of
Foreign Affairs,
Switzerland
The fickle weather in Davos during the week of the
World Economic Forum Annual Meeting was oddly
appropriate. The initial warmth and lack of snow were
naturally a palpable reminder of global warming, a
priority issue this year, while the on-off precipitation
and up-down temperatures that gave way to steady
sun on the final day reflected the unpredictability of
world events and how quickly situations can change.
As sessions began, participants were digesting US
President George W. Bush’s announcement in his
State of the Union address that the US would reduce
oil dependency by 20% over the next 10 years. During
the Meeting, reports that American military forces
were targeting alleged Iranian agents in Iraq raised
concerns about a potential conflict between the US
and Iran. By the traditional farewell lunch on the sunny
Schatzalp, many were talking about the decision the
day before by 30 trade ministers assembled at Davos
to restart the Doha Round of global trade
negotiations.
“ example, the renaissance of Asia to a large extent on
Insecurity exists everywhere – in the East
and West. We have to think about common
goals and looking for the proper solutions in
all cultures to find common ground, fight
hope for a better future.
“
extremism and insecurity, and then we may
Mohammad Khatami
14 | World Economic Forum Annual Meeting 2007
“ The power equation is becoming a more
complex differential equation. Power is
being diffused horizontally and vertically
“
to make power more multilevel and
multipolar.
Timothy Garton Ash
Professor of European
Studies, University of
Oxford, United
Kingdom
The world has a lot on its plate. The global agenda in
this world of rapid globalization – for good or ill – runs
long with issues demanding constant attention.
Among the most pressing: instability in the Middle
East, particularly Iraq; communal strife in Africa,
notably Darfur; the threat of terrorism; the proliferation
of materials and weapons of mass destruction; public
health crises stemming from the spread of infectious
diseases; energy security worries, coupled with the
need for urgent action on climate change; the
consequences of the economic and political rise of
large emerging markets, including China and India
(emerging markets now constitute half the world
economy); and the struggle to conclude the
multilateral trade talks.
The international community must focus on these and
other problems even as shifts in the geopolitical
landscape make it even more difficult to do so.
Consider the arrival of new centres of power, nations
or regions made influential by commercial clout,
energy resources and nuclear capabilities. For
the back of surging economic growth in China and
India, each with a population of more than one billion,
is steadily pulling the geopolitical centre of gravity
across the Pacific Ocean. The new power players
challenge and, in some cases, constrain US
dominance.
Meanwhile, the quest for energy security is driving the
foreign policy strategies of many countries and leading
to new international alliances. Resource-hungry China
has been busy forging relations in Africa, and
elsewhere, to secure its energy needs (see Figure 4),
taking a value-neutral, non-judgemental approach that
can be a welcome alternative to countries tired of
hectoring by the West about governance reform and
human rights. In addition, the world has awakened to
the threat from rogue states and failed states that
could become havens for militant extremists. Finally,
non-state actors both benign and malevolent – from
committed NGOs and popular bloggers to terrorist
groups and unknown viruses that could spawn
pandemics – have also emerged as influential players.
“The power equation is becoming a more complex
differential equation,” said Oxford University Professor
Timothy Garton Ash. “Power is being diffused
horizontally and vertically to make power more
multilevel and multipolar.”
Figure 4 Africa's Trade with China
China has become an important strategic partner
$25,000
Trade (US$, millions) 20,000
15,000
10,000
5,000
0
1996 1997 1998
Exports to Africa
What this means is that old attitudes and ways of
thinking have to be discarded. Ideology-driven, cold
war-era approaches can no longer address the more
fluid and complex problems of the world.
“Perspectives are changing,” said German Chancellor
Angela Merkel. “The fact is that a completely new
global balance of power is being created.” East-West,
North-South, left-right – the adversarial or competitive
paradigms of the past century no longer apply.
Instead, in this age of heightened risks, what is
required to confront the many challenges facing the
international community is a new pragmatism that is
based on a willingness to take a fresh look at issues,
to adopt new ways of governance, to look for
commonalities rather than focus on differences with
other countries, to implement new mechanisms for
cooperation that involve business and civil society, to
institutionalize new power relationships, and to
manage a fair rebalancing of the global power
equation.
In his address at the closing plenary, Tony Blair called
for just such adjustments that would aim at creating a
“more muscular” multilateralism. “A key part of our
international dialogue must now be strengthening the
instruments and institutions – those between
governments but also those within civic society – that
can build capacity,” said the prime minister. “We need
new networks, new relationships between countries
1999 2000 2001 2002 2003 2004 2005 and between people that mobilize the practical means
of effecting change.” Blair proposed that the United
Imports from Africa
Nations Security Council be expanded, that UN
Source: IMF structural and administrative reforms push ahead, that
15 | World Economic Forum Annual Meeting 2007
 Mohammad Khatami
President of the
Islamic Republic of
Iran (1997-2005)
the International Monetary Fund and the World Bank
consider merging, and that the G8 plus Five (Brazil,
China, India, Mexico and South Africa) become
institutionalized. The basis for regional blocs including
the European Union (EU), now unwieldy with 27
members, must be revised to make them more
effective, Blair added. Weak groups such as the
African Union should have a stronger voice.
Such pragmatic approaches are already in progress.
Pascal Lamy, Director-General, World Trade
Organization (WTO), Geneva, reminded participants
that the Doha Round is all about “rebalancing” the
global trading system in favour of developing
economies. At a session reviewing the progress over
the past 40 years of the 10-member Association of
South-East Asian Nations, the leaders of Malaysia, the
Philippines and Vietnam stressed the significance of
ASEAN’s decision in December 2006 to draft a charter
that would create by 2015 an EU-style union, once
considered impossible for the region. These are bold
steps for treacherous times.
It was, however, the final session of the Annual
Meeting, focusing on the theme of human dignity, that
brought home the boldest message of the Meeting.
Social entrepreneurs, civil society leaders and
representatives of the Young Global Leaders
Community gave testimony to the power of
responsible individual and group action to make a
difference. The ultimate power swing was undeniably
clear: people are taking a stand and demanding
action. It is the mandate of voters, households,
communities, shareholders, stakeholders and
organizations driving commerce and social
development that bestows legitimacy. “We, as
16 | World Economic Forum Annual Meeting 2007
Abdullah Ahmad
Badawi
Prime Minister of
Malaysia
representatives of the states, cannot solve everything
alone and cannot solve anything at all unless we
rapidly improve our partnerships with business,
academia and society as a whole,” said President
Micheline Calmy-Rey of the Swiss Confederation.
The global networks of individuals, civil society and
companies are driving enormous power shifts. This is
especially true on climate change and sustainability
where novel partnerships have been formed to move
forward where governments have lagged. Companies
understand that sustainable practices are profitable
and responsible. Just before the Annual Meeting,
three US energy companies – General Electric, Alcoa
and Duke Energy – announced their support for a
“cap-and-trade” system and the setting of targets to
reduce greenhouse gases by as much as 30% within
15 years. “It’s about time to get moving,” said Alcoa’s
Chairman and CEO Alain J. Belda. At Davos, a
consortium of companies and NGOs agreed to set up
the Climate Disclosure Standards Board that will
coordinate carbon emission requests and standardize
information received from companies.
It was Jordan’s King Abdullah II who best summed up
the importance and urgency of questioning the
existing geopolitical power equations. “World-shaping
events and changes are not just challenges; they are
choices,” he observed in an address to participants.
“We have the power to shift the equations – whether it
is peace and war, or poverty and prosperity – by what
we do together to understand and take action. Now is
not the time to isolate good ideas in professional silos.
Nor can we accept walls between different peoples
“ The real threat to mankind is
and faiths.” As UK Chancellor of the Exchequer
Gordon Brown put it: “We are shaping the agenda in a
new way. The age of the smoke-filled rooms is over.”
The Business of Peace
The launch of this business initiative took place
against the backdrop of intensifying diplomatic efforts
to restart negotiations to end the Israeli-Palestinian
conflict. In a session at the Annual Meeting in Davos in
which they participated together, Palestinian Authority
President Mahmoud Abbas and Israeli Vice-Prime
Minister and Minister of Foreign Affairs Tzipi Livni
reiterated the commitment of both sides to resuming
talks. “The Middle East is in dire need of peace and
the Palestinian-Israeli conflict is one of the most
serious conflicts that requires a solution,” Abbas said.
Added Livni: “We must stick to the vision of two
states living side by side, together in peace.”
At the World Economic Forum Annual Meeting 2007,
the Forum announced the decision by 14 Israeli and
Palestinian chief executives in Davos to create an
Israeli-Palestinian business council. They had agreed
to establish the group as an initiative of the World
Economic Forum with the mission “to encourage and
facilitate constructive cooperation between Israeli and
Palestinian business leaders to reinforce their
“ Peace should be done in a double helix: a line
parallel but not dependent.
“
of politics and a line of economy – inseparable,
economic relationship and to help peace building
Shimon Peres
efforts.” The council, which will bring together some Vice-Prime Minister of Israel
200 Palestinian and Israeli CEOs, is to hold its
inaugural assembly during the World Economic Forum
on the Middle East at the Dead Sea in Jordan on
18-20 May 2007.
“
ignorance, poverty and illiteracy.
Abdullah Ahmad Badawi
Prime Minister of Malaysia
17 | World Economic Forum Annual Meeting 2007
The Davos WorkSpace
CEO and Future Series
This year the World Economic Forum expanded the highly successful
WorkSpace concept, offering both the CEO series and the Future
series. The first series allowed participants to address a number of
strategic business challenges in a hands-on manner. The second
considered potential societal and technological changes and their
implications for the individual and for business. Using the dynamic
environment and dedicated design team, the resulting sessions
produced some of the most forward-looking and stimulating moments
at Davos. The following are abbreviated summaries of three workspace
sessions.
Living in the Connected World of 2015
Walking in the shoes of fictional characters, participants considered how
they would get on in a future world. Groups were predictably creative. For
example, “Dan”, the San Francisco activist, would use his cobbled-
together virtual network (acquired both legally and illegally)
to further his green causes. His motto: “Liberation
through flexibility”. “Toshiko”, meanwhile, would
not leave home unless she wanted to; the
world would come to her. She would work
as a marketing representative for products
targeted at local senior citizens. Watching
over her children virtually as they make their
way between home and school, most of her
meetings with friends and colleagues would
happen via hologram.
One group dreamed up a gadget that delivers
multimedia (music, art, entertainment) in ways that positively stimulate the brain
to entice people to be happy and do good works. Another group predicted that
there would be healthcare for all based on an all-inclusive understanding of a
person’s medical history, habits and practices.
Most participants emphasized that secure universal online access in local languages
would be required to make any of the visions of a better world emerging from this session
happen.
18 | World Economic Forum Annual Meeting 2007
Visualizing the Successful Enterprise
Participants walking into the Studio WorkSpace did not expect to find bags of bricolage on the
tables. But creating useful tools and sturdy structures from everyday objects allowed them to
consider how they would design new organizational models and approaches for their
businesses and lives. During two hours of brainstorming, they came up with ideas,
including proposals for new products. The common denominator was that the starting
point for each concept was a set of values.
Many participants also stressed the importance of the customer – in the broadest
meaning of the term, not just clients and buyers but also employees, suppliers
and even competitors. One group, whose jerry-rigged model literally imploded,
found that that their “volcano of ideas” grew too quickly – a problem mirrored
in real-life start-ups. They retooled and added organizational elements to their
product offering to make the rebuilt model more robust. It remained
standing!
Finding Future Talent
Recognizing the increasingly fierce competition to attract the best and
brightest, participants at this workshop discussed how to create and adopt
strategies that take into account the motives of high-flyers from different
cultures and generations. With those aged between 22 and 30, for example,
a good education, upward mobility, digital and technical skills are a given.
They have huge ambition and know-how to work collaboratively; they want to
get rich quick. The 30 to 50 year olds, by contrast, are looking for employers
that offer psychological as well as financial rewards; those over 50 typically
want to give something back to their community, are less controlling and more
humorous but at the same time more sceptical.
Participants also considered cultural variations – how the distinctive practices and
perspectives typical of, for example, Chinese firms differ from those of Europe or India.
Sometimes proximity does not mean affinity, they learned. One Indian CEO observed that
his British operations seem to be more in tune with his home unit than with his German
division. Clearly, common values and challenges link companies across the world – in particular
the need to offer real opportunities for career development. But many participants argued that
the talent problem in Asia is unique, requiring solutions specific to the region.
19 | World Economic Forum Annual Meeting 2007
 Business: Leading in a Connected World
“ If companies think the market for talent
is competitive now, they’d better watch
“
out. It will be a lot more competitive in
10 years.
Saeed Al Muntafiq
Chairman, Tatweer,
United Arab Emirates
A decade ago, the to-do list of a typical company
chief was already long. Yet, that was before the
Internet and other new technologies had seriously
begun to reshape business models; before major
scandals in companies in the US, Europe and Asia led
to heightened disclosure rules and transparency
standards; before 9/11 and the SARS virus and bird
flu underscored how global terrorism and public health
crises could disrupt commerce; and before the
movement against globalization and the drive for
greater corporate social responsibility gained traction
on the streets and in boardrooms.
Today, the CEO’s life is much more complex. Looking
out for shareholders is not enough; a progressive
corporation must also consider its stakeholders, the
wider community of those with a legitimate interest in
an enterprise’s business and its impact on people and
the environment. Leading a company is naturally
much more challenging. Technological advances, the
expansion of global trade and trading regimes,
demographic trends, the changing geopolitical
landscape and shifting social norms have rendered
many classical ways of doing business insufficient,
inefficient or even obsolete. “We haven’t abandoned
leadership, but we’ve given leadership more
information about what it needs to respond to,” said
Goldman Sachs Group Chairman and CEO Lloyd C.
Blankfein.
20 | World Economic Forum Annual Meeting 2007
“ We understood very early on that the only
“
assets we have are our brand and the
trust of our customers.
Eric Schmidt
Chairman of the
Executive Committee
and Chief Executive
Officer, Google, USA
But the proliferation of information is only one factor.
The proliferation of pressure points and the
globalization of business are driving companies to
restructure and revise their operating methods. Top-
down hierarchies are giving way to fresh ways of
collaboration and innovative partnerships both within
and between companies, across borders and cultures,
and among the private sector, government and civil
society. “The CEO is no longer the master of the
universe,” said Cristóbal Conde, President and Chief
Executive Officer of SunGuard. “The number one
operating job is to keep, maintain and enhance the
collaborative systems where people share know-how
and work together on common programmes. That’s
the role of the CEO in the new world.”
Common endeavours may range from research and
development to long-term strategic planning. Climate
change is an example. This year’s Annual Meeting
signalled that, in the absence of strong and cohesive
global political leadership on the issue, business is
squarely leaping from awareness to action. As energy
costs have mounted, public attention has focused on
environmental degradation. For successful enterprises,
practising sustainability has become more than savvy
public relations; it is a business imperative, even a
matter of profitability, in both emerging and
established markets.
This requires inventive thinking – new carbon trading
programmes are an example – and a willingness by
incumbents to work with rivals and unfamiliar players.
The recent decision by major US energy companies to
create a “cap-and-trade” system aimed at reducing
greenhouse gas emissions by as much as 30% within
15 years and the launch at Davos of the Climate
Disclosure Standards Board may in future be regarded
as landmark steps in the business community’s
acceptance that on this crucial global challenge they
must lead.
Indeed, CEOs today function less as architects of rigid
policies and guardians of orthodoxy and are more and
more “meaning makers” who build adaptive,
innovative cultures. Top managers cannot rely on old
command-and-control techniques to respond to the
growing power of tech-empowered consumers and
the increasing demands of investors and employees.
Take the pressures from customers. That the
consumer is the central focus of business is not new,
said Coca-Cola International’s President and COO
Muhtar A. Kent. “Our business is always driven by the
consumer.” What has changed in recent years is the
“ The CEO is no longer the master of the
universe. The number one operating job is to
keep, maintain and enhance the collaborative
systems where people share know-how and
work together on common programmes.
That’s the role of the CEO in the new world.
“ he argued. For other public companies, however, the
Cristóbal Conde
President and Chief Executive Officer, SunGuard, USA
increasing ability of users, consumers and citizens to
articulate preferences and shape business. In some
markets, they can literally make or break a brand
overnight. “We understood very early on that the only
assets we have are our brand and the trust of our
customers,” explained Eric Schmidt, Chairman of the
Executive Committee and Chief Executive Officer of
Google.
Technology has obviously played a major role in the
empowerment of the consumer. Web 2.0 – Internet
platforms such as Facebook.com and MySpace.com
in which users determine their own environment and
create not just their own content but their own
communities – is perhaps the newest driver of rising
consumer power. Users no longer depend on
companies to determine their Web experience, but
instead can customize the products and services they
use or create blogs that challenge the very legitimacy
of a company they might choose to take on.
Businesses also face increasing pressure from
shareholders through regulatory requirements such as
the disclosure rules under the Sarbanes-Oxley Act in
the United States. Though filing procedures are
burdensome, the result for business is not necessarily
negative. K. V. Kamath, Managing Director and Chief
Executive Officer of India’s ICICI Bank, explained that
his company tightened procedures to meet Sarbanes-
Oxley standards. “The pluses outweigh the minuses,”
pressure of these regulations and the demands of
shareholder accountability have spurred them to
consider going private.
21 | World Economic Forum Annual Meeting 2007
Finally, employees are increasingly another source of Figure 5
pressure on management. They not only possess new
technologies for organizing but are also amassing new
Deal value (US$, billion)
M&A Acquirers Are Increasingly Sourced in Emerging Markets such as Sarbanes-Oxley. New ownership allows But at Davos, there were voices questioning whether
$450 struggling companies to reinvent their images for a private investors who may have a keen eye on the
400
350
more competitive market. Private owners offer more bottom line give appropriate consideration to hidden

bargaining strength due to what many business 300 unified input, in comparison to scattered shareholders. costs – and necessary goals – such as environmental
leaders perceive is an international shortage of 250

200
Private finance fuels innovation, with private equity sustainability. Public companies may be feeling more
talented workers. Participants offered anecdotal 150 backing roughly half of all IPOs in the US last year pressure from these newly powerful market players,
evidence of the strengthened role of employees. One 100
alone. and managing boards may be driven to consider
50

company adopted environmentally progressive policies 0 “buyout scenarios” and the potential benefits of being
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
due to grassroots organizing by employees. Another Figure 6 Private Equity: A Major Force in Global M&A privately held. Yet public or private, companies today
posted its entire employee manual online as a “wiki” Emerging markets targets *through 3 November
Steady growth over 45 years are subject to extraordinarily diverse pressures and
online document so that any member of the company Emerging markets acquirors 30% demands to which they must respond. These include
could modify procedures. Source: Thomson Financial the need for transparency in a world of empowered

Private equity as a percentage

US

of global M&A deal value

20 consumers and employees, the growing acceptance
Europe
Many businesses have shifted away from hierarchical These concerns have underscored the challenge of Global
that sustainability means profitability and a
organization models to looser networks of human resources management, particularly in fast- 10 corporation’s responsibility towards multiplying
collaborators, Harvard Business School Professor growing emerging markets. In hyper-growth stakeholder groups.
Rakesh Khurana argued. “We are at an inflection point companies with up to triple-digit growth rates, 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
where the right organizational model is up for grabs.” attracting and retaining talent is enormously difficult.
The net effect of these shifts is that the traditional top- Turnover rates for these companies can run as high as Note: Based on geography of target

down business organization tends to be less efficient. 100%. “If companies think the market for talent is Source: Thomson Financial; Bain analysis

Meanwhile, companies must be increasingly
responsive to their constituencies.
Increasingly, these constituencies are in communities
that may be far removed from a company’s nominal
base. The globalization of business through direct
investment and mergers & acquisitions has meant that
companies must now cater to stakeholders across the
world in both established and emerging markets (see
Figure 5). This has led to controversies over national
security, the use of state money by enterprises
purchasing stakes abroad, and the economic
consequences of cross-border takeovers including job
losses and cultural differences.
competitive now, they’d better watch out,” said Saeed
Al Muntafiq, Chairman of Tatweer. “It will be a lot more
competitive in 10 years.”
With all these management challenges and the
proliferation of risks that the CEO must keep on top
of, it is no wonder that private equity investment has
“ We haven’t abandoned leadership, but
we’ve given leadership more information
about what it needs to respond to.
“ “ We have to move the social
protections from the basis of the
corporation to the basis of society.
“
exploded in recent years (see Figure 6). Private equity Lloyd C. Blankfein
Joseph E. Stiglitz
accounted for roughly 20% of global merger & Chairman and Chief Executive Officer, Goldman
University Professor, Columbia University, USA
Sachs Group, USA
acquisition activity in 2006, up from 3% nearly a
decade ago. Private investment certainly offers
advantages over public ownership in today’s business
environment. Managers can focus on direct operation
of the business rather than regulatory requirements

22 | World Economic Forum Annual Meeting 2007 23 | World Economic Forum Annual Meeting 2007
Technology and Innovation in Financial Services: Scenarios to 2020
Technology and Innovation in Financial Services: Scenarios to 2020
Global Ivy League Next Frontier
TRULY OPEN, GLOBAL
INCREMENTAL INNOVATION FS MARKETS FUNDAMENTAL INNOVATION
PRIMARILY DRIVEN BY INCUMBENT, PRIMARILY DRIVEN BY NEW ENTRANTS
GLOBAL FS PROVIDERS AND SPECIALIZED PLAYERS
Innovation Islands
Back to Business Leap-
the past as usual frogging
FS MARKETS
LOCAL
Understanding the Future of Financial Services
and the Financial Markets
Increasing Internet access, the rise of mobile
technologies and digital security concerns have fuelled
questions as to how technology and innovation could
shape the future of financial services. Thus, 56 partners
of the World Economic Forum from the IT and FS
sectors, together with experts from across the world,
collaborated to produce three contrasting worlds: one
dominated by a small number of global universal banks;
another with many highly specialized, interconnected
service providers; and a third where regional blocs
innovated at different speeds. These scenarios have
provoked much interest in follow-up work, especially
around the following points:
1. The degree of consumer trust in digital transactions
cannot be taken for granted. How identity security
is resolved will substantially shape which
technologies consumers will demand to access
financial services.
2. Robust strategies are needed to drive financial
inclusion for the next one billion; these strategies
need to be original and correspond to specific, local
needs. The World Economic Forum is working with
the government of India, IDRC and others on a draft
proposal.
Similarly, uncertainty surrounding the huge growth in
alternative investments such as hedge funds and
private equity vehicles has sparked political calls for
greater regulation and scrutiny. Hedge funds manage
30 times more assets today than they did in 1990 and
private equity accounted for about one-fifth of global
merger and acquisition activity in 2006, up from 3%
nearly a decade ago. Indeed, the sharp growth of
24 | World Economic Forum Annual Meeting 2007
private equity investment in recent years has triggered a
global debate about the transparency and
accountability of privately held companies. To better
understand these trends, the World Economic Forum
Investors Industry Partnership announced the launch of
the Globalization of Alternative Investments (GAI)
project. Supported by investor groups, this initiative
aims to collect information on, and deepen
understanding of, corporate ownership models that
offer alternatives to classic public ownership. Working
through the Forum’s Global Competitiveness Network
and Global Risk Network, participants in the GAI will
engage policy-makers, academics and regulators to
assess accurately the investment environment in
various countries and the real impact of alternative
investments on global and regional financial systems.
The Globalization of Alternative Investments’ first project
will study the global economic impact of private equity
investment. This will include roundtable discussions
within the investor community and with key policy-
makers and experts.
$500
A Sectoral View of Private Equity Deals
High-tech, telecoms and healthcare now represent a third of total deal value
450
400
350
300
250
200
150
100
50
0
1995 1996 1997 1998 1999 2000 2001 2002
Carbon Reporting: A New Standard
The World Economic Forum launched an international Although in recent years awareness of the importance
partnership of seven organizations to establish a of climate-related disclosure has risen sharply among
generally accepted framework for climate risk-related corporations and their boards and shareholders,
reporting by corporations. Founding members of the reporting of comparable information in annual reports
Climate Disclosure Standards Board (CDSB) include remains the exception rather than the rule.
the California Climate Action Registry, Carbon
Disclosure Project, Ceres, The Climate Group, The CDSB will convene an advisory committee to
International Emissions Trading Association, World include industrial, financial services and accounting
Economic Forum Global Greenhouse Gas Register firms as well as other key stakeholders. In preparation,
and World Resources Institute. CDSB members met in Davos with representatives of
Alcan, American International Group (AIG), Capital
CDSB members have agreed to align their core Group, Duke Energy Corporation, Ernst & Young,
requests for information from companies to ensure Royal Dutch Shell, JPMorgan Chase,
that they report climate change-related information in PricewaterhouseCoopers, SUN Group, Swiss Re and
a standardized way that facilitates easier comparative Tokyo Electric Power Company. They also conferred
analysis by investors, managers and the public. The with UK Secretary of State for Environment, Food and
focus will be on the disclosure of the following key Rural Affairs David Miliband, California State Assembly
climate issues in company annual reports: Speaker Fabian Núñez, and UN Environment
Total emissions Programme Executive Director Achim Steiner.
Assessment of the physical risks of climate change
Assessment of the regulatory risks of climate
change
Strategic analysis of climate risk and emissions
management
“ This is a welcome effort to streamline the
growing demands on companies and to
“
“
Other
Metal & Steel improve objectivity for disclosure of climate-
Finance Climate change and the implications on
Food & Beverage
Construction/Building related information.
Consumer Products
Utility & Energy
business process and disclosure are finally
Chemicals Jorma Ollila
Dining & Lodging becoming the topic of discussion that they
Real Estate/Property
Transportation
Professional Services
Retail
Healthcare
Telecommunications
deserve to be. We are enthusiastic and
supportive participants in this dialogue.
“ Chairman, Royal Dutch Shell, Netherlands
Computers & Electronics
2003 2004 2005 2006
Paul J. Ostling, Global Chief Operating Officer, Ernst &
Source: Dealogic Young, United Kingdom, and Willem Bröcker, Global
Managing Partner, PricewaterhouseCoopers,
Netherlands
25 | World Economic Forum Annual Meeting 2007
 Technology and Society: Identity, Community
and Networks

“ The operating systems of the computers

we’re using are so vulnerable…. We
need to get the people who make the
“ “ The virtual world will grow up to be a
‘low-res’ version of reality.
“
cars not to leave the keys in the car.

Vinton G. Cerf Mitchell Kapor

Chairman of the President, Kapor
Board, Internet Enterprises, USA
Corporation for
Assigned Names and
Numbers (ICANN),
USA

Technology is the handmaiden of globalization, But for many, these new arenas represent a tantalizing Figure 8 Largest Social Networks Approaching Page Views of Major Portals

yielding economies of scale, flattening supply chains
and increasing the mobility of manufacturing, services
and capital. In the past decade, however, no
new business opportunity – a virtual marketplace Social networking universe features a few large players
(eg, MySpace, Facebook) and many smaller players
where one can generate very real revenues and
40
profits. According to some estimates, revenues tied to Yahoo (CAGR: 23%)

Monthly page views (millions)

technology has had the impact that information user-generated video alone are expected to exceed 30
MySpace (CAGR: 249%)
technology has. The spread of high-speed digital US$ 850 million by 2010. Real businesses now use
20
technology and the Internet protocol is fuelling the virtual markets to advertise and sell their goods and MSN (CAGR: -1%)

convergence of telecommunications, cable television services; likewise, members of virtual communities 10

Google (CAGR: 67%)

and the World Wide Web, and with them the have learned how to earn real money selling virtual Facebook (CAGR: 230%)
0
entertainment and communications industries. New goods. There is now a billion-dollar-a-year market for August
2005
August
2006

services have emerged that blur the line between products that exist only in online games such as
audience and producer, spawning user-generated Second Life. Some 100,000 people in China Scene from the Second Life Congress Centre Source: comScore, Hitwise US Consumer Generated Media Report (Nov 06),
Bear Stearns, eMarketer, News Corp, Bain analysis

information, entertainment and services.
From the loneliest blog to popular websites like
YouTube, Flickr, Facebook and Second Life, the
Internet has become host to a brave new world of
services that use the network as a canvas upon which
customers create their own masterpieces, establish
new identities and carve out new communities that
transcend geography. “It changes how we view
human interaction,” said John Gage, Chief Researcher
and Vice-President at Sun Microsystems.
For industry incumbents, this is a confusing new
landscape, with shifting consumer patterns; no one is
sure whether it is best to concentrate on providing
meanwhile are playing World of Warcraft in 12-hour
shifts, then selling their hard-won game assets and Conversely, the ability to take on an anonymous
powers to clients. In the same way that the spread of e-mail, chat rooms identity using an avatar can be liberating. But the
and the Web did a decade ago, the growth of online increasingly real social interactions afforded by online
Many predict that such virtual worlds will eventually communities (see Figure 8) is spawning interesting venues such as Second Life are also causing debate
become the common interface for all Internet debates about the ability of the Internet to break down on the impact of these virtual communities on our
communications. “The virtual world will grow up to be barriers based on geography, nationality, sex or psychological health and community life. One-third of
a ‘low-res’ version of reality,” said Mitchell Kapor, appearance. The Internet’s capacity as a limitless those who play the online game Second Life report
President of Kapor Enterprises. warehouse for information and user-generated that they spend more time in the game than in the real
encyclopaedia – or “wiki” – has made tracing an world. “We should be aware that we may be
Figure 7 Download Times and Bandwidth individual’s past as simple as a Google search, turning modifying ourselves as well as our online personas,”
As bandwidth grows, video download times will lower dramatically almost everyone into a public figure. No longer can said Baroness Susan Greenfield, Director, The Royal
20,000
one escape his past by moving to a new town, or Institution of Great Britain.
Forecast
5,000 even a new country. “With technology comes the long
tail of infamy,” noted Young Global Leader Shai
Minutes to download

“
500

infrastructure, content or both. The music industry has

been perhaps most profoundly affected, thanks to the
50

1
DVD movie
Blu-ray disc
HD movie Agassi, President of the Product and Technology
Group at SAP
With technology comes the long tail of
infamy.
“
portability of digital recordings. As faster network 0.1
30 min TV show

speeds become more common, television and film are Shai Agassi
0.01

undoubtedly the next in line for the Internet invasion 1993

28.8K
1997
56K
1998
1.5 Mbps
2004
3 Mbps
2005
6 Mbps
2006F
30 Mbps
2015F

Modem Modem Cable Modem Cable Modem Cable Modem Verizon Fios
(see Figure 7).
Source: Nielsen Net Ratings; Communications Engineering & Design; Frost and Sullivan;
Morgan Stanley; TiVo; Bain analysis

26 | World Economic Forum Annual Meeting 2007 27 | World Economic Forum Annual Meeting 2007

Online anonymity can also harbour malicious
intentions, sexual predators, white-collar criminals and
even terrorists. The rise of online crime has sparked
calls for a system that tracks the real identity and even
location of anyone using the Internet. “The police will
love it and we will love it. It will be a business
opportunity,” said John Gage, Sun Microsystems’
Chief Researcher and Vice-President. Opponents of
such a system argue that it would only reduce online
privacy, giving authorities too much control over public
communications and reduce the Internet’s power as
an outlet for political dissidence and uncensored
debate. Many already fear that the growing amount of
information we supply over the Internet, or to devices
that connect to it, are creating a virtual surveillance
network that could be abused by governments or
hijacked by criminals.
Grave concerns about privacy, security and online
fraud threaten to derail the very future of Internet
commerce. The explosion of unwanted spam e-mail is
a vivid example of how online miscreants are
jeopardizing the future of this new sector. Most spam
is generated by malicious programs that enter
personal computers over the Internet and then
surreptitiously collect and disseminate private
information from e-mail addresses to bank account
passwords. Linked together over the Internet, these
remote spy programs form virtual computing networks
that can be used to commit even more sophisticated
crimes. Companies registering domain names need to
make greater efforts to ensure that they know the true
28 | World Economic Forum Annual Meeting 2007
identity of their owners. And computer operating
systems should be reconstructed so that the
information received over the Internet cannot also be
used to execute programs. “The operating systems of
the computers we’re using are so vulnerable,” said
Vinton G. Cerf, Chairman of the Board of Internet
Corporation for Assigned Names and Numbers
(ICANN). “We need to get the people who make the
cars not to leave the keys in the car.”
The spread of collaborative knowledge building
among online communities was an unexpected part of
the Internet’s evolution, even if in hindsight it seems an
inevitable progression of the Internet’s original function
of exchanging information among scientific
researchers. Now, the ability to facilitate borderless
collaboration is altering the very concept of how
institutions and companies conduct R&D. Companies,
and even financial institutions, can now spread
problem solving across a broad universe of diverse
intelligence. How such collaborative models of
innovation will shape the world of patents and
intellectual property rights is still unclear. But
companies are already trying to devise new
commercial techniques for harvesting and mining the
wealth of information that exists on the Internet.
“ We should be aware that we may be
“
modifying ourselves as well as our online
“ For the millions of children whose voices are
personas.
Baroness Susan Greenfield
Step Up Action on Education
Given that basic education is a right for every child,
there is a compelling moral, social and economic case
for setting education as the top priority on the
development agenda. This is the motivation behind
the World Economic Forum Global Education Initiative
(GEI).
At the World Economic Forum Annual Meeting 2007,
key stakeholders met privately to step up efforts to
meet the considerable challenges in education,
notably the Millennium Development Goal of universal
primary education. Among the leaders participating in
the discussions were Prime Minister Ahmed Mahmoud
Nazif of Egypt, UK Chancellor of the Exchequer
Gordon Brown, H.M. Queen Rania of the Hashemite
Kingdom of Jordan, as well as the leaders of several
international and donor organizations and the CEOs of
companies that are partners in the Forum’s Global
Education Initiative (GEI) including Cisco, Intel and
Microsoft. Young people from around the world gave
their views in a session on youth. “We challenge you,
the economic powerbrokers, to put your words and
our hopes into action,” said Yoo-Sun Andrea Choi, a
student from South Korea.
not being heard, let us commit to take a
“
stand, and take a step, and make real strides
for child survival and education.
H.M. Queen Rania of the Hashemite Kingdom of
Jordan
29 | World Economic Forum Annual Meeting 2007
Building on the success of the Jordan Education
Initiative, launched during the Annual Meeting 2003,
and similar initiatives in Egypt and the Indian State of
Rajasthan, the meetings on education at Davos signal
the start of the second phase of the GEI. The
partnerships between government, civil society and
the private sector at the local and international levels
have been catalysts for education reform. They have
also demonstrated how effective multistakeholder
collaboration can be. This has widened interest in
expanding the model to other sectors such as
healthcare. At the Annual Meeting, for example, Tarek
Kamel, the Egyptian Minister of Communications and
Information Technology, led preliminary discussions to
establish the Egyptian Health Initiative.
A cornerstone of the second stage of the Global
Education Initiative will be a new partnership with
UNESCO, which was launched during the Annual
Meeting 2007. Business leaders stressed the
importance of moving quickly to ramp up efforts. An
immediate outcome will be a major conference
between leading donor countries and organizations
this year. Key agenda items will include how to secure
long-term sustainable funding for education reform
and the role of multistakeholder partnerships.
Acknowledgements

The World Economic Forum would like to thank its Partners for their valuable support of the World
Economic Forum Annual Meeting 2007:

Strategic Partners Annual Meeting Partners

ABB Lehman Brothers Agility

ABN AMRO Bank McKinsey & Company Arcelor Mittal Steel Company
Accel Partners Manpower Barco
Accenture Marsh & McLennan Companies Burda Media
Alcan (MMC) DuPont
Alcoa Merck & Co. Electricité de France (EDF)
AMD Merrill Lynch Gallup International
American International Group METRO Group Invest in France Agency
(AIG) Microsoft Corporation LUKOIL Oil Company
Apax Partners NASDAQ MasterCard
Audi Nestlé Moore Capital Management
Avaya Nike Morgan Stanley
Bahrain Economic NYSE Group Nomura Holdings
Development Board PepsiCo Saudi Arabian General
Bain & Company PETRONAS Investment Authority (SAGIA)
Barclays Pfizer SICPA
Bombardier PricewaterhouseCoopers St Paul Travelers
Booz Allen Hamilton Qatar Airways Swiss International Air Lines
The Boston Consulting Group Reliance Industries
BP Reuters
BT Saudi Basic Industries
CA Corporation (SABIC)
Cisco Siemens The World Economic Forum
Citigroup SK Group would also like to thank MTV,
The Coca-Cola Company Swiss Re Swarovski and Warner Music
Credit Suisse UBS Group for their support.
Deloitte Unilever
Deutsche Bank VimpelCom
Deutsche Post World Net Volkswagen
Dubai Holding WPP
E*Trade Xenel Group
Ernst & Young Zurich Financial Services
Fluor Corporation
Goldman Sachs
Google
HP
HSBC
Infosys Technologies
Intel Corporation
JPMorgan Chase
KPMG
Kudelski Group

30 | World Economic Forum Annual Meeting 2007

Contributors

Ged Davis is Managing Director at the World Economic Forum. Jonathan Schmidt is Director, Head of This publication is also available in electronic form on the World Economic Forum website at the following
Global Agenda. Sheana Tambourgi is Director, Head of Annual Meeting Team. Stephanie Janet is Principal, address:
Head of Annual Meeting Operations.
www.weforum.org/pdf/summitreports/am2007
The Annual Meeting Programme is prepared by Gregory Bernarda, WorkSpace; Irene Casanova,
Economics; Nathalie Cerutti, Faculty Management; Kali Galanis, WorkSpace; Annabel Hertz, Global The Report is also available as a PDF at: www.weforum.org/pdf/summitreports/am2007.pdf
Governance; Paola Hjelt, Values, Arts and Culture; Nour-Eddine Iguimdrane, WorkSpace; Emma Loades,
WorkSpace; Katherine Milligan, Geopolitics; Stephanie Nassenstein, Team Coordination; Anand Phanse,
Business; Hui Wang-Haymoz, WorkSpace; Christian Zellner, Science and Technology Other specific information on the World Economic Forum Annual Meeting 2007 can be found on the
following links:
Vidhi Tambiah is Associate Director, Content Development, at the World Economic Forum. Samantha
Tonkin is Senior Media Manager at the Forum. They worked with Mary Bridges, Wayne Arnold and Annual Meeting www.weforum.org/annualmeeting
Alejandro Reyes to produce this report. Programme www.weforum.org/annualmeeting/programme
Themes www.weforum.org/annualmeeting/themes
Associate Principal, Editing: Nancy Tranchet Participants www.weforum.org/annualmeeting/participants
Partners www.weforum.org/annualmeeting/partners
Design and Layout: Kamal Kimaoui, Associate Principal, Production and Design Open Forum www.weforum.org/openforum
WorkSpace www.weforum.org/annualmeeting/workspace
Photographs by swiss-image.ch and Richard Kalvar/Magnum Issues in Depth (Interviews) www.weforum.org/annualmeeting/indepth
Session Summaries www.weforum.org/annualmeeting/summaries2007
Special thanks to PricewaterhouseCoopers for their help in preparing data and statistics underpinning Webcasts, Podcasts & Vodcasts www.weforum.org/annualmeeting/webcasts
this report. Photographs www.swiss-image.ch/Y249M7AC/INDEX.htm
Press releases www.weforum.org/pressreleases
Weblog www.forumblog.org
The World Economic Forum would like to express its appreciation to the summary writers for their work at Davos Conversation www.weforum.org/davosconversation
the World Economic Forum Annual Meeting 2007. Session summaries are available at:
www.weforum.org/annualmeeting/summaries2007

All session summaries from both the CEO and Future series can be downloaded from:
www.weforum.org/annualmeeting/workspace