Davos Men (& Women)

"Davos Man" is a neologism referring to the global elite of wealthy (predominantly) men, whose members view themselves as completely "international". I think it is a good thing that this definition has evolved over the past 50 years of this conference being held. 

There are a few drawbacks to this forum which this quote highlights well:

Niall Ferguson. Senior Fellow, Hoover Institution on Cognitive Dissonance. "There is a cognitive dissonance at the heart of Davos. Publicly, you have to agree with Greta Thunberg and be part of the virtue signaling community on climate change. But privately, you're all agreeing with Trump. You can't be outwardly too supportive. The reality is, is that if Europe cannot get some sustained economic growth, the Green Deal is just going to amount as another drag on German manufacturing and on the Euro zone as a whole.

I think privately  a lot of people were listening to POTUS and thinking 'you know what? He's actually been doing the stuff we should be doing: fiscal stimulus.' Everyone says the German's should do it. The U.S. has done it. They're probably thinking 'we should have some of that.'"

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Mr. Ferguson was just one of many global political and business leaders to join the CNBC's Squawk Box team in Davos over this past week. For the record, I watch more television this week than I do the entire year, to be certain. 

Cognitive dissonance aside, these individuals represent a slew of successful and influential men and women. I always find this week incredibly interesting as they all descend on a small town in Switzerland as "Masters of the Universe."

It is important to highlight, the majority of the perspectives below are from CEO's who represent public companies and therefore have shareholders. They ALL have stakeholders and BOD's. When expressing their views, they are not expressing them as private citizens. Their voice represents the view of, most of the time, the highest ranking member in their respective company. What they say can move markets. It can move their share price. They have a responsibility to not be dishonest in their views, but possibly pander a bit to what is expected they say.
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​Here are some snippets...

Mike Corbat. CEO, Citi on Fiscal Policy. "One of the things that has happened (globally) is we have become very reliant on monetary policy...in terms of entitlement reform and creating sustainability. The challenge when you get to where we are with low rates, or negative, is governmental balance sheets being called into question, and a lack of the creation of fiscal sustainability- it creates vulnerabilities. Part of the challenge of quantitative easing is that gap naturally widens. Those people that own assets, they increase. People that don't, have easy access to money."

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Ray Dalio. CEO, Bridgewater Associates on Inflation. "Cash is trash. They're going to print money. You have to have a certain amount of gold in your portfolio. There are 3 sets of monetary systems that happened. First, it had intrinsic value, you carried around gold coins. Then they came up with the idea of banks, or central banks, what they do is create certificates that are claims on those notes. We broke that in 1971. Then you have a fiat monetary system, which means you can print whatever amount of money you want. The depreciation of the exchange rate and the printing of money over the next few years will be the biggest thing."

Bill Ford. CEO, General Atlantic on Capital Discipline. *investors forcing companies to move more quickly towards profitability than growth.* "Capital discipline is back. 2018 and 2019, companies lost focus on business model, on capital utilization, on governance. What we are seeing now is the pendulum swinging back. How you use your capital matters. How you focus on your business model to reach profitability matters."

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Paul Tudor Jones. Chairman, Just Capital, CEO, Tudor Investment Corp. on Current Conditions. "We are in the craziest monetary, fiscal mix in history. It reminds me a lot of 1999. We had 1.6% PCE, 2.3% CPI. We have the exact same metrics today. The difference is the Fed Funds was 4.75%. Today it's 1.62%. Back then we had a budget surplus. Today we have a 6% deficit. We just had 3 rate cuts because we have this external crisis."

Stacey Cunningham. President, NYSE on IPO Markets Changing. "We shouldn’t categorize it as a bad year. It certainly was a good year. I think what we saw at the end of the year is investors start to ask questions that they hadn’t really been asking before, as we saw the difference between companies performing well when they had strong profits or a path to profitability and those that had more explaining to do as to how they were going to get there."

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Larry Kudlow. National Economic Advisor to POTUS on Stakeholders. "I think any responsible company has to think about these things. You're talking about labor management relations, about community relations. I think that's a good thing. I don't think that should get in the way of profits and earnings because that is what drives the system. And judging from the stock market, the outlook there is still very good. We are opposed to a government-run, socialist economy. Beyond that, stakeholders are a good thing, it's just acting responsibly. But you can't forget the profit motive- that's what makes the whole thing run."

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David Rubenstein. Co-founder, Carlyle Group on Economy. "There are a few issues. 1) we have a lot of debt we have to pay off at some point: $23T. If rates go up, that could be a problem. 2) we have income inequality and lack of social mobility. The people at the top are doing very well but people at the bottom aren't rising up. We have a large issue with literacy. 14% of people in the U.S. cannot read above a 4th grade level. 80% of juvenile delinquents cannot read, 2/3's of those in our federal prison system are functionally illiterate. 3) eventually, we're going to have to deal with the entitlements issue. We have a lot of money we need to pay people and we probably cannot pay them fully as much as promised."

Scott Minerd. CIO, Guggenheim Partners on the Federal Reserve. "With the Fed pivot, we got a revival in economic activity, we've got the trade war on hold now. There are a lot of reasons to be positive on the economy. An old adage says 'expansions don't die of old age, the Federal Reserve kills them.' I would show them (NY Fed Reserve) how M2 growth is slowing down, and how they were being more restrictive than they realized. The quantitative tightening while the Fed was raising rates was a double whammy."

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Bob Dudley. CEO, BP on Energy Market. "This energy transition is moving really fast. Any company that doesn't move will be completely off with society- albeit, you have to remain economic. It's not a get out of hydrocarbons. The world does need a lot of hydrocarbons going forward. Needs all forms of energy. It needs less emissions but more energy. Carbon capture storage (like Microsoft) does require deep pockets. I hope the tech companies will sort of join forces with us (the energy companies) to develop these together." 
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​*The realities of fossil fuels: "We'll have 2B more people on the planet, we'll need a third more energy by 2040. We'll have the equivalent of a new U.S. and China entering the world."

Paul Hudson. CEO, Sanofi on Drug Innovation. "It's an incredible moment for scientific innovation in general. Rare diseases, really debilitating life disorders. We have an opportunity to work with the FDA, which is why we are taking advantage of that. It's a great time for data transparency to speed up innovation...We have to make a vaccine to stop someone getting infected, 6, 7, 8 years in advance. We are asked to then reconcile our prices, which makes it very challenging."

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Jamie Dimon. CEO, JP MorganChase on Growth. "One reason why rates are low is because growth has been so slow. For the past 11 years, we had 23% growth, it should have been 40%+. That would have been normal. It was our own bad infrastructure policy, work skills policy, litigation, regulation, taxation. But what we did is slow growth. Slow growth means less need for capital, lower growth, lower wages. Fiscal isn't just spending money. It is spurring things that create growth...If it were up to me, I would MAKE Congress compromise."

On Socialism: "I don't think people understand what socialism is. Socialism is when the government controls companies. There is no example where the government controls companies that they do it well and they don't start to use it for votes. They don't want competition. If you have two government-owned companies, why have competition. They do it for jobs and votes. They have bad allocation of capital. They become corrupt over time. It doesn't mean capitalism is perfect." ​

Penny Pritzker. Former U.S. Commerce Secretary on Wealth Tax. "I don’t believe in a wealth tax. I don’t believe that will achieve the outcomes that are being promised. You know, should someone like me pay more in taxes? Yes. We pay a lot in taxes. But should we pay more to address inequality? Probably. But, I don’t think the wealth tax is the way to get there. I don’t think blowing up our health care system is the way to get there. So, I struggle with the policies."

James Gorman. CEO and Chairman, Morgan Stanley on Economy. "I am always surprised why people are surprised the market is at an all-time high. In a global economy that is growing, by definition corporate earnings are growing. Unless you cut, the market should finish every day at an all-time high. Now of course it doesn't. But if you stand back from a chart, it looks like a straight line, from bottom left to top right."

On Banking Sector. "Banks have been the unloved sector over the last couple of years...Historically, I always thought you sold banks at 2.5 times book and you bought them at 1.25. Post crisis at the new capital levels those ratios dropped. We were trading at 1 times book, .9 book. And we just came off record earnings- how is this possible? So the banks have been undervalued and you will see a lot of movement in the bank stocks."

On Analyst Expectations. "The questions of 'Did you reach your goals yet? Did you reach them?’ ‘Yeah, we kind of did. So, relax a little bit.’"

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Ginni Rometty. CEO, IBM on Technology Balance. "When you talk about privacy. This is not a tech discussion. this is a values-based discussion that the country has to talk about. Decide who should draw the line where. And the who is Congress, if they're the ones that makes laws. We already have conventional rules: what a Priest knows is protected. What your doctor knows is protected. We need to do that for the digital age. And then uphold that."

On Precision Regulation. "This is what is needed. We have to compete in this world, against every country. You want to have innovation flourish and you have to balance that with security. If you said 'completely regulate AI'- that isn't the answer. The answer is precision regulation means 'such as, regulate the use of AI in some cases, not the technology itself.' Facial recognition. You probably think that's good. To get through an airport safely, to find a criminal. Those are good uses. To violate your civil liberties, it's not."

Stephen Pagliuca. Co-Chairman, Bain Capital on Private Equity. "There’s a misnomer out there with all the politics: private equity is not about cost cutting, it’s about growth. No one wants to buy a company that is shrinking. And so, we spend all of our time thinking, how do we grow companies? How do we do more R&D? How do we invest in new products?"

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Adena Friedman. CEO, NASDAQ on 2020 IPO Market. "The pipeline (for 2020) of IPO prospects, is very strong. Very interesting. I would say that both in terms of private equity companies--private equity health companies, as well as technology companies, the biotech industry continues to be very strong."

Glenn Hutchins. Chairman, North Islands on False Optimism. "The Trump tax cuts were touted to generate 3-4%, the number is now about 2.5%. My main concern back then was that I didn't think adding $1T in debt to our U.S. economy at a time period in which we were in recovery, and should have been reducing the debt load for our future generations, was correct. Countries lose their sovereign credit rating when they take on an immense amount of debt at this period in the cycle. I still have a great deal of concern on the fiscal policies of the administration."

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Darius Adamcyzk. CEO, Honeywell on CapEx Spending​. "I’m a little bit worried about second half in terms of how people are going to act, are they going to wait after election, is that going to have some impact? I see this year, a little bit different. I see this year as a little bit of weaker first half, but better second half based on trade, fiscal policies, etcetera."

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Robert Smith. CEO, Vista Equity Partners on Capitalism. "For the first time since 1930, we have the biggest disparity in both wealth and income, and we have to do something about that."

"Capitalism is the most efficient system on the planet for uplifting humanity generally. But of course, in general we go up but we have pockets that do not participate. African-American's have not traditionally participated.  In fact you look at the Southern Homestead Act, red-lining around your communities, the inability to actually gain a foothold in the capital part of capitalism so they have always been part of the labor part. We need to drive them through policy, individuals and philanthropy."

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Alex Karp. CEO, Palantir on Immigration and ICE. "We started this contract under Obama. And obviously, there’s a lot of concern, legitimate concern about what happens on our border, how it happens, and what does the enforcement look like? Certainly, it’s a de minimis part of our work, finding people in our country who are undocumented. But it’s a legitimate complex issue. My personal position is we acknowledge the complexity. The people who are protesting, whom I respect, should also acknowledge that complexity."

Dan Schulman. CEO, PayPal on Cybersecurity. "Security has to be one of the biggest concerns that any business has. The average American business gets attacked 4 million times a year. The average consumer around the world loses an identity or as identity theft every two seconds. So, this is a major problem. Financial firms get attacked millions of times practically every day."

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Michael Wirth. CEO, Chevron on Markets. "We’ve moved from a period of time where there was a belief we were approaching peak oil. And now we’re in an era of abundance. And it’s really the U.S., and it’s the unconventional horizontal drilling, hydraulic fracturing, which has changed. So, you really have a market now that is less prone to these volatile excursions."

General Antonio Gutteres. U.N. Secretary on Global Tensions. "We live in a difficult period where geopolitical tensions are also having an impact on the economy. Because they generated, as you know, the trade tensions, technology tensions are even bigger in my opinion than trade tensions. And I think that these have slowed down growth and has contributed to the difficulties that the global economy is facing."

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Marc Benioff. CEO, Sales Force on New Capitalism. "We are introducing a new capitalism here. Stakeholder capitalism. Which is a more sustainable capitalism, a more equitable capitalism, a more fair, and more just, capitalism. And it’s not like the old capitalism."

On Doing Both (Changing the World & Making Money): Everybody realizes that, you know, we’re in a planetary emergency. And we need to make changes. And business is the greatest platform for change. And if you ask what the narrative has been here at Davos, there has been a tremendous narrative around what can we do to improve the state of the world? 

Making money is easy, but doing the right thing is not. And eventually every company comes to that point. And we’ve seen that over and over again. We don’t have to look at history to understand that leadership eventually is about what you do and who you are.

If business is really the platform for change, and you have this amazing tech company platform, what are you doing with it? Are you using it to make the world better? Or are you just using it to make money? And I think that that really is, you know, the choice here in Davos and in some ways, it’s a false choice. You can do both."

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If you have made it this far, good for you & I very much appreciate you taking the time! It would be silly to not draw attention to the lack of diversity. A few women, one African-American. The people above, albeit originating from different nations of origin, they all kind of look the same: white males.

This has long been the case in executive leadership. These men are all brilliant and have absolutely earned the right to be in their respective positions, I want to make that clear as daybreak. But diversity is important. I think the best, smartest, savviest person should get the job, hands down. But, the world is changing, and we have to change with it.

​When selecting board members, some companies look strictly for former CEO's. The view above of leadership clearly shows that would narrow the pool in terms of diversity significantly. If certain demographics of people aren't even in the room, how will they have the chance to change the world?

I will leave you with what I found to be a very uplifting discussion with David Solomon. For those of you who don't know, he is definitely not your average CEO. He takes the Subway, gets his own coffee and has a side hustle as a DJ. That's not the status-quo. And I think that's pretty cool!

David Solomon. Chairman & CEO, Goldman Sachs on Stakeholders. "You know, our first-priority is to serve our shareholders, to drive long-term returns for our shareholders. But I’m a big believer that unless you take care of your stakeholders more broadly in the medium and long-term, you won’t deliver outstanding returns. So, I think it’s very, very important. We think a lot about, you know, our platforms and things we do, and we try to contribute in ways that we think improve market structure and the capital markets broadly...I think from a governance perspective, diversity on boards is a very, very important issue. And we have been very, very focused on it. And so, we’re trying to find ways to encourage that. And I come from a position of my own experience where I look at the Goldman Sachs board. We have four women out of 11. We have a black lead director. I really value the diverse perspectives, you know, I’m getting which are helping me run the company. I look back at IPOs over the last four years and the performance of IPOs where there’s been a woman on the board in the U.S. is significantly better than the performance of IPOs where there hasn’t been a woman on the board. So, starting on July 1st in the U.S. and Europe, we’re not going to take a company public unless there’s one diverse board candidate with a focus on women and we’re going to move toward 2021 requesting two. And we realize that this is a small step but it’s a step in a direction of saying, you know what, we think this is right, we think it’s the right advice. And we’re in a position also because of our network to help our clients if they need help placing women on boards. And so, this is an example of our saying how can we do something that we think, you know, is right and helps move the market forward?"

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