Davos Worries About a ‘Polycrisis’

Hand-wringing in Davos

Andrew here. I’m attending the World Economic Forum with DealBook’s Lauren Hirsch and a team from The Times to capture the mood and behind-the-scenes action among the world leaders and the C.E.O.s who’ve made their annual pilgrimage to the Swiss Alps.

Speaking of which: Davos is normally full of hand-wringing over the state of the world, but it feels especially pronounced this year. (That isn’t necessarily reflected in the crowd of corporate pop-ups on the Promenade, one of the town’s main thoroughfares, nor in the cocktail party schedule.)

The word of the event is “polycrisis,” a term we’ve been hearing in countless meetings and gatherings. The word — apparently coined in the 1990s, then used in 2016 by Jean-Claude Juncker, the European Commission’s president at the time — now refers to the swirl of global emergencies that include economic slowdowns and rising inflation, the war in Ukraine and more.

The World Economic Forum itself has embraced the term in its annual report, citing the challenges that globalization, the beating heart of the conference, was meant to solve. Among them is climate change, a topic whose relevance is perhaps best reinforced by the barely snow-touched streets of Davos itself. Executives here told DealBook that they were frustrated with a lack of progress on issues like a global framework to tackle things like climate-risk disclosures.

Is Davos becoming more and more of a giant business conference despite its high-minded mission statement? This year, many of the world’s most influential heads of state aren’t here: The only Group of 7 leader present is Chancellor Olaf Scholz of Germany. The highest-ranking Biden administration official set to attend is Marty Walsh, the labor secretary, though lawmakers like Senators Joe Manchin and Kyrsten Sinema are present.

But C.E.O.s are well-represented, including Amazon’s Andy Jassy, JPMorgan Chase’s Jamie Dimon, Microsoft’s Satya Nadella, Pfizer’s Albert Bourla and countless others. Many aren’t participating in public panels, either; they’re holding private meetings with existing and prospective clients at hotels scattered across town. One C.E.O. said he was in back-to-back 30-minute meetings every day from 7:30 a.m. through 7 p.m., before heading to countless dinners.

Criticism of Davos is high this year. Bill Browder, the financier and anti-Putin activist, has drawn outsize attention after Semafor reported that the World Economic Forum had asked him to pay $250,000 to attend after charging him $70,000 in previous years. (He’s still attending private events to raise attention for his anti-Russian advocacy.)

Meanwhile, the comedian Russell Brand is seemingly devoting his talk show to criticizing the conference and how it’s tackling global problems. Greenpeace mocked Davos’s environmental aims by noting the enormous flock of private jets taken to the gathering. And the hedge fund mogul Dan Loeb, a onetime fixture of the Davos scene who stopped coming a few years ago, joked in a reply to Mr. Browder, “I remember when going to #Davos was prestigious and elite. I’m sure it’s still fun however.”

HERE’S WHAT’S HAPPENING

Alibaba draws a meme stock activist. Ryan Cohen, whose investments in GameStop and Bed Bath & Beyond helped stoke rallies in their shares, amassed a stake in the Chinese e-commerce group last year, The Wall Street Journal reports. Mr. Cohen has been pushing Alibaba for bigger stock buybacks; more broadly, he appears to be interested in investing in Chinese companies.

The E.U. reportedly plans to warn Microsoft about its Activision Blizzard deal. The European Commission will soon present the tech giant with its objections to the $69 billion takeover, according to Reuters. While it’s unclear whether the antitrust watchdog will move to block the transaction, this is the latest sign of the growing regulatory pushback for Microsoft.

China builds a lead in A.I. research. Chinese researchers in 2021 published roughly twice as many academic papers on the topic as their American counterparts did, and were also cited more frequently by other researchers, according to a study by Nikkei and the scientific publisher Elsevier. That underlines the growing tensions between the two countries over what they view as a vital technology.

Wyoming lawmakers propose a ban on electric cars. A group of state legislators are seeking to end sales of new electric vehicles there by 2035 in an effort to protect Wyoming’s oil and gas industries. The bill is the inverse of efforts by other states to eventually ban gas-powered cars, and comes as electric vehicle sales are becoming a bigger part of overall global car sales.

China’s double dose of bad news

China disclosed today that its population shrank last year — in what experts warn may herald an irreversible decline — while its economy just delivered one of its worst performances in decades.

The developments show that China, for decades the engine of global growth, is now entering a demographic crisis as some of the key drivers of its economy are under threat.

More people died in China last year than were born for the first time since Mao Zedong’s Great Leap Forward, an experiment that caused widespread famine and death, despite efforts to bolster the birthrate. Meanwhile, the country’s economy grew 3 percent last year — well short of Beijing’s 5.5 percent target — as lockdowns under a “zero Covid” policy hit manufacturing and consumer spending.

The end of “zero Covid” is stoking hopes for a global rebound. China’s economy performed better than analysts had expected in the fourth quarter — though many economists think official data was exaggerated — and is forecast to bounce back this year. Chinese consumers, free to travel again, are set to resume spending at home and abroad. As the world’s biggest consumer of commodities, China’s reopening will most likely bolster the businesses of metals and energy exporters. And as it is the world’s largest exporter of manufactured goods, global supply chain disruptions are expected to ease.

But bigger problems hang over any recovery. The declining population aggravates China’s long-term structural challenges, including the costs of managing an aging population while not producing enough new workers; Beijing’s growing scrutiny of private enterprise; a crisis in the property sector, a longtime pillar of growth; and rising pressure from the U.S. and the West on matters like semiconductors and A.I.

Is Beijing doing enough? Michael Pettis, an expert on the Chinese economy at the Carnegie Endowment for International Peace, argues that Beijing faces unbalanced economic growth: Wealthier eastern provinces are thriving, but larger, more rural areas are being hit by economic decline and rising emigration. “For me the really big question marks concern the political implications of the ‘two’ diverging Chinas, and how Beijing decides to resolve them,” he tweeted.

Musk’s latest legal fight is set to begin

Elon Musk has his hands full these days, including with running Twitter after taking the company private last fall and with Tesla having to discount prices to fend off rivals. But starting today in a San Francisco federal courtroom, he will be occupied with something else: a trial over his 2018 plan to take Tesla private.

The legal battle, brought by disaffected Tesla shareholders, is the latest involving a tweet in which Mr. Musk said he was weighing a buyout of the company with “funding secured.” He ultimately didn’t go through with a deal, but that tweet led to a lengthy battle with the S.E.C. Now, if he loses, he could be forced to pony up billions of dollars in damages.

Mr. Musk has long argued that he did nothing wrong. The Tesla C.E.O. has consistently said he believed that he had the backing of Saudi Arabia’s sovereign wealth fund when he posted his now-infamous tweet. (The fund’s chief told Mr. Musk that it hadn’t committed to such a deal, according to texts that emerged in court filings.) The S.E.C. and the litigious Tesla investors said that was a reckless and untrue tweet, something this trial’s judge has already said he agreed with in another case.

This trial revolves around the question of whether investors lost money trading Tesla shares as a result of statements by Mr. Musk that courts found false. Legal experts say that could be tricky. As of Friday’s close, Tesla shares are up more than sixfold since Mr. Musk’s August 2018 “funding secured” tweet, but it’s worth remembering that shortly after the post, Tesla shares whipsawed for several weeks, falling by more than 10 percent at one point.

Mr. Musk’s prospects of victory may have been undermined by Twitter. News reports describing his leadership of the social network as erratic — and the ill will that has stirred up among sectors of the public — have “saturated” the Bay Area, his lawyers argued in court. That made it hard to find an unbiased jury for the trial, they argued, though the presiding judge rejected their request to move proceedings to Texas.

Expect a cavalcade of prominent witnesses. Among those set to testify are Larry Ellison of Oracle, a former Tesla board member, and James Murdoch, a current one.

“What’s happening in class is no longer going to be, ‘Here are some questions — let’s talk about it between us human beings,’” he said, but instead “it’s like, ‘What also does this alien robot think?’”

— Antony Aumann, a philosophy professor at Northern Michigan University who caught a student using ChatGPT to write an essay. Schools are rushing to revamp their classes to guard against potential cheating via A.I. tools.

The week ahead

Corporate earnings, and economic data releases on U.S. housing and British inflation — here’s what’s happening this week.

Today: United Airlines reports earnings.

Tomorrow: U.S. retail sales (excluding cars) for December will offer a report card on the American consumer. Economists polled by Dow Jones are forecasting a 1 percent year-on-year decline in sales.

Thursday: December housing starts and building permits will provide an update on the health of the U.S. housing market. Netflix and Procter & Gamble report.

THE SPEED READ

Deals

• Steve Pagliuca, a co-chairman and longtime deal maker at Bain Capital, plans to retire from the private equity firm. (WSJ)

• Unions representing workers at the University of California called on the institution to cut ties with Blackstone, after the school invested $4 billion in the private equity group’s huge real estate fund. (Bloomberg)

Policy

• TikTok has reportedly proposed a costly reorganization and more transparency into its content-recommendation algorithms to Washington policymakers to avoid being banned in the U.S. (WSJ)

• Social media executives could face could face jail time for failing to protect children online under a proposed law in Britain (BBC)

Best of the rest

• CoinDesk broke big stories about FTX’s meltdown, but it now faces a new challenge: covering troubles at its parent company, Digital Currency Group. (NYT)

• How lawyers suing MSG Entertainment are getting around the company’s efforts, including the use of facial recognition technology, to bar them from entering its venues. (NYT)

• “What the end of the U.S. shale revolution would mean for the world” (FT)

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