Founder of Davos has interesting comments on capitalism

In what to me is a surprisingly under-reported story, Klaus Schwab (the founder of the annual World Economic Forum conference at Davos) says that capitalism is out of whack.

This comes from a man who embraces free markets and who for 41 years has been bringing world CEOs and political leaders together for elite brainstorming sessions.

Excerpts from the stories referenced at the bottom:

"I'm a deep believer in free markets but free markets have to serve society," he said in Davos, a ski resort tucked away deep in the Swiss Alps. He lamented excesses and "lack of inclusiveness in the capitalist system."

Other quotes: "Capitalism, in its current form, no longer fits the world around us."

"We have failed to learn the lessons from the financial crisis of 2009," he goes on. "A global transformation is urgently needed and it must start with reinstating a global sense of social responsibility."

The official program: "the necessary conceptual models do not exist from which to develop a systemic understanding of the great transformations taking place now and in the future."

As a systems thinker, this to me is encouraging, and the perfect application for System Dynamics modelling.

"Conventional modes of decision-making have become outdated," he announces, arguing that we must now consider the young, the poor, the unemployed. He insists on "the need to integrate new non-state actors who want to have their say ... we need new models where governance processes on all levels integrate these newcomers in the most collaborative way."

We must "seriously address the social impact of globalization," he says. "Growing inequities within and between countries and rising unemployment are no longer sustainable ... We must rethink our traditional notions of economic growth and global competitiveness, not only by focusing on growth rates and market penetration, but also, equally — if not more importantly — by assessing the quality of economic growth."

Again, Scwab is looking at a systems view, including longer term sustainability.

Schwab wonders, "How sustainable is it and at what cost to the environment? How are the gains distributed? What has become of the family and community fabric, as well as of our culture and heritage? The time has come to embrace a much more holistic, inclusive and qualitative approach to economic development."

And in an interesting comment:

"The success of any national and business model for competitiveness in the future will be less based on capital and much more based on talent. I define this transition as moving from capitalism to 'talentism'."

Kudos to Terry Milewski of CBC and Angela Charlton of Associated Press, and their organizations, for reporting on this important perspective from an influential business leader.

The CBC has covered it, and here is a link to the AP interview.

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My prediction for 2012

You likely know from my book "The Prediction Trap - and how to avoid it" or by hearing me speak that I think predicting the future is a dangerous idea. That's because once a person or organization has made a prediction, it is natural for them to look for information that supports that prediction and filter out information that contradicts the prediction.

Nevertheless, there is a prediction which I will make for 2012 which I think is not only safe, but helpful. That prediction is:

2012 is going to be unlike 2011 (or any other year from the past for that matter.)

I feel safe in making this prediction because the significant driving forces on the horizon all suggest scenarios in the economic, social, and political arenas that we have never seen before. No matter how these driving forces combine, 2012 will surely look different from past years.

I also feel safe in making this prediction because Mark Carney, the the governor of the Bank of Canada, also recently said similar things in a speech to the Empire Club/Canadian Club. (Jeffrey Simpson commented on this speech in the Globe and Mail.) Carney said that "current events mark a rupture" in the world economy and described in a very frank manner the situation around the world and the uncertainties that exist for the world economy.

I also believe that unlike most predictions, the prediction that "2012 will not be like the past" is a helpful one. If you use this prediction as a guiding principle, then both at work and in your personal life you will not get stuck in "The Prediction Trap." You will continuously question your assumptions, that part of your filter that - while maybe accurate from the point of view of the past - may prevent you from seeing changed circumstances.

Change is a challenge for most people, not because they don't "like" change, but because it takes effort to develop a skill, a process, or an opinion. Change means we need to learn new things, and new ways of behaving, and that takes effort.

But change also offers an opportunity for those willing to invest the effort in dealing effectively with change. We have seen bad decisions from governments in Europe, the U.S., and Canada and from businesses as well worldwide. Many of these this bad decisions were based on the hope that the clock could be turned back, that things could be put back to "normal," where normal looks like the past.

I think there is still a lot of this magical thinking going on; ideas such as borrowing one's way out of debt, or expecting an economy to grow while at the same time introducing severe government cutbacks, or hoping consumers will both save more and spend more at the same time. In fact, the overriding magical thinking in many of these decisions is the idea that growth of anything can continue forever.

So 2012 will be different - you can take that to the bank (though they may not want to hear it.) How will you prepare for 2012?

　

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