Klaus Schwab, the founder and executive chairman of World Economic Forum, said that ‘what we are seeing now will determine everything over the next 10 years.’ Reem Mohammed / The National
Klaus Schwab, the founder and executive chairman of World Economic Forum, said that ‘what we are seeing now will determine everything over the next 10 years.’ Reem Mohammed / The National

WEF founder Klaus Schwab tells Abu Dhabi of the fourth industrial revolution



It was a bravura performance by Klaus Schwab to unveil the 2015 global summit of the World Economic Forum in Abu Dhabi.

The 77-year-old founder and executive chairman of the WEF – who says he has the fitness levels of an athletic 50-year-old – led the opening plenary with obvious enthusiasm and relish. Even after 44 years of running the forum, he appears resolutely committed to “improving the state of the world”, as the WEF’s mission statement has it.

“All of you in this room must understand the power of the changes that are happening in the world. What we are seeing now will determine everything over the next 10 years, and you must not underestimate the power of the transformation ahead,” he told the 1,000-strong audience, which included leading members of the UAE ­Government.

The “fourth industrial revolution” and its implications for business, policymaking and governance are Mr Schwab’s latest enthusiasms. He believes that – after the great changes wrought over the past 200 years by industrialisation, mass production and computerisation (the previous three revolutions) – mankind is on the brink of a another transformational leap.

“It will not come in waves this time, like in the past. It is coming as a tsunami whose effect will be felt everywhere. You will have to show agility and entrepreneurship to survive the changes coming, because it will change everything. In the future, it is not the big fish that will eat the small fish. It will be the fast one that eats the slow,” he said in suitably apocalyptic tones.

The WEF attendees lapped it up, especially when he engaged them in what appeared to be an impromptu bit of audience interaction. “I want a show of hands. Who would you take advice from for a life-limiting illness – a human doctor or a robot? Who would you like to judge you if you are accused of a crime – a robot or a human judge?”

And who, he might have asked, would you like to run the WEF in the future – me, or somebody different, maybe younger, maybe female, maybe somebody better able to deal with the transformational era ahead?

Because that is clearly how he is thinking. This year has been transformational for the WEF organisation, and will be even more significant for Mr Schwab himself, if the changes he is proposing come to fruition.

Founded in 1971 in the Swiss Alpine town of Davos, where it still holds the annual meeting that has become its hallmark, for most of its existence the WEF was run as a Swiss non-profit making organisation, governed by that country’s corporate laws. This year, it became a fully-fledged international organisation, like the Red Cross or the World Health Organization.

That change will probably affect the running of the WEF only minimally, but a bigger change is also in the offing, as Mr Schwab explained to the summit audience. “In corporate terms, I am both chairman and managing director, but we have decided to split those roles. I intend to hand on one of them to somebody else,” he said.

Speculation about who that would be was “premature”, he added, but there are a number of candidates on his mind. Christine Lagarde, the managing director of the IMF and a member of the WEF’s board of trustees, who got a personal mention from Mr Schwab on the summit stage, is a candidate, but there are other female trustees who might be considered.

Gordon Brown, the former British prime minister who is a consultant to the WEF and was prominently in attendance at the Abu Dhabi summit, is also mentioned for a big WEF job.

Whoever takes over the baton from Mr Schwab is unlikely to tinker much with the WEF’s basic mission, not least because the founder will still be very much involved with his ­brainchild.

Its aim will remain to “engage political, business, academic and other leaders of society in collaborative efforts to improve the state of the world”, but there is likely to be a shift of emphasis towards offering more practical and pragmatic solutions to global problems.

“Rethinking global challenges,” is the way the WEF officially puts it.

That would help to overcome one of the abiding criticisms of the WEF – that it is a talking shop divorced from political and economic reality, “all hot air in a cold climate” as has been said of the Davos shindig.

The other criticism Mr Schwab sometimes gets from its members, whom he calls “strategic partners”, is that they pay too much for their partnership at the WEF’s series of global events. About 120 companies will be asked to stump up 600,000 Swiss francs (Dh2.2 million) this year, while another 1,000 organisations will pay 50,000 Swiss francs to be mere “participants”.

Being asked for such big fees might make some rethink their approach, or get involved instead in some other part of the proliferating global “forum industry”. r Schwab recognises the competitive threat, but believes the WEF has distinct ­advantages.

“We are different. We are a community, not just a conference. When we increased the fees the last time, not a single strategic partner dropped out,” he said.

In the internet age, there is also a more profound change facing the WEF and other such international talking shops. “My prediction is that in 20 or 30 years, people will not go to conferences any more. The digital dimension will change how people interact and how conferences are done,” he said.

If so, the business world would lose one of its most influential and enjoyable events. Sitting around a computer screen in a conference room in head office just would not be the same as the bracing Alpine air of Davos, or the balmy heat of Yas Island.

fkane@thenational.ae

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UAE currency: the story behind the money in your pockets

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

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BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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UAE currency: the story behind the money in your pockets