Annual Meeting 2007
Shaping the Global Agenda: The Shifting Power Equation
Davos, Switzerland 24-28 January
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Page 3
storage and retrieval system.
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 The focus on the shifting power equation across
offered participants – both those in Davos and those economic, political and social relationships served to
joining us through the Internet – the opportunity to highlight how the thinking of leaders has evolved over
examine the many critical forces affecting the global the past years. Whether on the G8 agenda, or that of
agenda, gain a deeper understanding of these business, not only did participants agree on priorities –
pressing issues and create fresh ways to meet the climate change and the need for sustainable
challenges ahead. development were certainly at the forefront – but they
also formed a consensus on the shape any response
The theme of the Annual Meeting 2007, Shaping the must take: the only way to create effective solutions is
Global Agenda: The Shifting Power Equation, struck a through the combined effort of leaders from business,
chord with participants, reflecting the unease we all government and civil society to identify problems
feel living in times that both inspire great optimism and clearly, discuss the relevant issues and understand the
raise grave concerns. Positive sentiment about the trade-offs.
vibrant global economy and the prospects for
continued growth was matched by persistent anxiety The World Economic Forum Annual Meeting 2007
about ongoing shifts in the geopolitical landscape and drew leaders from business, government, international
the difficulty of addressing such complex problems as institutions, non-governmental organizations,
poverty in Africa and instability in the Middle East. The universities and other communities. Together with our
growing economic and strategic importance of Members and Partners, we renewed our commitment
emerging economies and resource-rich nations, the to driving the global agenda forward through
recognition of the urgent need to address climate consensus building and meaningful action. We look
change, and the exciting but sometimes disquieting forward to continuing the conversations and exchange
implications of new community models, often virtual in of ideas that began in Davos at our regional meetings
nature, gave the assembled business, government and through Forum initiatives and industry activities
and civil society leaders much to discuss, digest and over the coming year.
act upon.
3 | World Economic Forum Annual Meeting 2007

The Shifting Power Equation – Executive Summary
“ “
Perspectives are changing. The fact
“ Globalization is the single greatest
“
is that a completely new global
economic engine of our time
balance of power is being created.
Angela Merkel Tony Blair
Federal Chancellor Prime Minister
of Germany of the United Kingdom
The theme of the World Economic Forum Annual Davos, as E. Neville Isdell, Chairman and Chief • Agreement among four global accounting firms to The Annual Meeting agenda was designed to help the
Meeting 2007 – Shaping the Global Agenda: The Executive Officer of The Coca-Cola Company, put it, is work with the World Economic Forum Partnering 2,400 participants in Davos and those outside who
Shifting Power Equation – underscored the particular the “epicentre of engagement.” The Meeting’s Against Corruption Initiative (PACI) to support the joined the conversation through the Internet – perhaps
challenge of this period of rapid globalization. “We are outcomes amply illustrated the unique approach that fight against corruption through their Second Life avatars – to understand the
living in an increasingly schizophrenic world where the Forum brings to the global agenda through • Renewed affirmation of support for the PACI from many aspects and implications for business and
economies are booming and global signs are participating government, business, media, academic the heads of the World Bank, the African societies of globalization and the shifting power
promising but underneath are economic, political and and civil society leaders from across countries, Development Bank, the Asian Development Bank, equation. The programme was organized under four
social risks as well as imbalances and continents and cultures. It was precisely because of the European Bank for Reconstruction and sub-themes – Economics: New Drivers; Geopolitics:
inconsistencies,” said Klaus Schwab, the Forum’s this potent mix of actors that, at this Meeting more Development and the International Finance The Need for Fresh Mandates; Business: Leading in a
Founder and Executive Chairman. “We want to make than any previous one, the Davos community defied Corporation Connected World; and Technology and Society:
sense of this world and shape the global agenda, the risks, concerns and lingering doubts to move from • Release by the World Economic Forum and the Identity, Community and Networks.
taking into consideration the fragilities of global awareness and commitment to concrete action on Reinventing Bretton Woods Committee of the final
development and global systems. This is the unique climate change and sustainability. report on a two-year, public-private review of the
contribution we make each year – to analyse the state international monetary system in cooperation with The Forum would like to thank the distinguished
of the world, the challenges, risks and opportunities. Among the outcomes of the Annual Meeting: G20 governments Co-Chairs of the World Economic Forum Annual
We sort out our priorities and come out with solutions Meeting 2007, each of whom provided invaluable
to our problems.” • Decision by 30 trade ministers to restart the Doha Another notable outcome from Davos was the support to the proceedings and brought their
Round of global trade negotiations at the sub- recognition that the Forum and its partners in the considerable experience and wisdom to the
ministerial level which subsequently led to a full business community and civil society have a discussions.
resumption of the talks responsibility to promote open discussion of
“ The rise of China, India and other • Formation of the Climate Disclosure Standards globalization, both its advantages and disadvantages, Michelle Guthrie, Chief Executive Officer, Star
Board, a new international partnership to establish a how those benefits can best be enhanced and Group, Hong Kong SAR
countries in Asia is not a threat but an
generally accepted framework for climate risk- shared, and how the negative effect can be reduced E. Neville Isdell, Chairman and Chief Executive
opportunity. When you see the incredible
related reporting by corporations and those affected helped. “Most people who are hurt Officer, The Coca-Cola Company, USA
consumer market opportunity for global or think they are hurt by globalization know it,” said Sunil Bharti Mittal, Chairman and Group Managing
• Establishment of a joint Israeli-Palestinian business
businesses, it is quite extraordinary. The Renault President and Chief Executive Officer Carlos Director, Bharti Enterprises, India
council to encourage and facilitate cooperation
“ Ghosn, who is also the President and Chief Executive James J. Schiro, Group Chief Executive Officer and
between Israeli and Palestinian business leaders
shifting power equation does not have to
Officer of Japanese automaker Nissan. Added Chairman of the Group Management Board, Zurich
and to reinforce economic relationships and help
mean that there are winners and losers.
Unilever Group Chief Executive Officer Patrick Cescau: Financial Services, Switzerland
peace building efforts
Michelle Guthrie
“Globalization is worth defending. It is also worth Eric Schmidt, Chairman of the Executive Committee
• Creation of an alliance of leading companies to
being explained.” and Chief Executive Officer, Google, USA
bring power to villages in sub-Saharan Africa
4 | World Economic Forum Annual Meeting 2007 5 | World Economic Forum Annual Meeting 2007

Most people who are hurt or think they
“ are hurt by globalization know it. Most
people who benefit do not know it. What
“
we need to do is come in with concrete
cases and messages.
Carlos Ghosn
Carlos Ghosn
President and Chief From left to right: Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer, Google, USA; E. Neville Isdell, Chairman and
Executive Officer,
Chief Executive Officer, The Coca-Cola Company, USA; James J. Schiro, Group Chief Executive Officer and Chairman of the Group Management
Renault, France;
Board, Zurich Financial Services, Switzerland; Michelle Guthrie, Chief Executive Officer, Star Group, Hong Kong SAR; Sunil Bharti Mittal,
President and Chief
Chairman and Group Managing Director, Bharti Enterprises, India
Executive Officer,
Nissan, Japan
Economics: New Drivers Geopolitics: The Need for Fresh Business: Leading in a Connected Technology and Society: Identity,
Mandates World Community and Networks
While globalization has resulted in an unprecedented
expansion of global trade and investment that has The international community’s capacity to handle the The proliferation of technology, global risks and the The rapid convergence of telecommunications, cable
spurred the world economy to grow at its fastest pace complex and fast-changing global agenda is multiplying pressures from rapid globalization have television and the World Wide Web is driving the
in three decades, lifting hundreds of millions out of hampered by the sometimes perplexing shifts in increased the responsibilities of companies and their growth of new services that blur the line between
poverty, the benefits are not evenly shared. Renewed power relationships that are playing out, particularly leaders, challenging them to find new and innovative audience and producer, resulting in an explosion of
efforts are needed to mitigate the negative effects of the emergence of new poles of influence and non- approaches to doing business. Chief executives must user-generated information, entertainment and
globalization. state actors. now look beyond shareholder interests and cater for services. The impact of this power shift is affecting
the needs and concerns of a wider group of everything from corporate communications to
• Growing unease, in particular about job creation • While the US remains the dominant world power, its stakeholders. elections, from the way companies conduct R&D to
and security, could lead to political backlash. To position is increasingly challenged or constrained by the social behaviour and privacy of individuals.
counter this, both government and business have to new emerging players such as China and resource- • The CEO’s main task is to enhance collaboration
better communicate the benefits of globalization. rich Russia, as well as states with nuclear and develop new partnerships to address everything • The expansion of customer-generated content and
More measures must also be taken to insulate capabilities and ambitions such as North Korea and from the challenge of research and development to online communities on popular websites such as
workers from the negative effects of competition in Iran. strategic issues such as climate change. YouTube and Second Life have perplexed
the increasingly global labour market. • This new world order requires a fresh, pragmatic Companies cannot rely on old command-and- incumbents but opened tantalizing new business
• Greater attention must be paid to the impact of the approach to global governance and management of control models. opportunities.
rising tide of capital flooding through the world’s the global agenda, including the reform of • Companies also face rising pressures from As they develop in quality, virtual worlds could
•
financial markets and the fact that financial international institutions and agreements to technology-empowered consumers, employees who become the common interface for all Internet usage.
innovations are deepening the connections among rebalance relationships in the world to acknowledge want to work for socially responsible enterprises, The growth of online communities is spurring
•
global markets. power shifts. and shareholders who demand greater transparency debate about the ability of the Internet to break
• Urgent steps must also be taken to combat the • The ultimate power shift is the rise of non-state and better governance. down barriers based on geography, nationality, sex
negative effects of increased industrialization and actors – no longer a term that instantly connotes • The expanding role of emerging markets both as a or appearance. The practice of using avatars is also
energy consumption related to rising living malevolence as it had in the past. Grassroots destination for investment and as a source of raising questions about the impact on social
standards. Because of the difficulty in forging a movements, communities, civil society and investor capital is raising difficult questions about interaction and psychological health.
global consensus on an approach to climate companies are forging novel partnerships to everything from national security to clashing Grave concerns about privacy, security and online
•
change, nations should undertake unilateral efforts develop new solutions and tackle global challenges cultures. In emerging markets, CEOs must also fraud threaten to derail the future of Internet
to limit carbon emissions and support international such as climate change. address the particular challenge of human resource commerce.
mitigation efforts, such as carbon trading management. IT advances are changing the way institutions and
•
programmes. • Intense scrutiny and stress on the management of companies collaborate within their organizations and
• Efforts are also required to plan for coming public companies are increasing interest in with each other, particularly in R&D.
demographic imbalances, focusing on job creation privatization and fuelling in part the rapid expansion
for the young and pension and healthcare reforms of private equity investment. But private ownership
to address ageing populations. does not shield companies from the pressures to
which they must respond.
6 | World Economic Forum Annual Meeting 2007 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 India is a willing partner on climate change, but clearly it’s not a willing punching bag because it
“
has to be reduced. It doesn’t mean that the US is any worse off but the US response is has its limitations. A billion people are going to be consuming a lot of services and goods that
“
something that the world has to worry about. will create emissions. We will need technology; we will need money. But India will be willing to
align with the world.
Laura D. Tyson
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 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
bloc, the ideological shackles of the cold war have own problems, however. Widespread pollution is distribution of surging global wealth. Millions are being many of the same imbalances and inequities that
been cast aside, reuniting the world’s biggest markets wreaking havoc on the environment, causing changes lifted out of poverty, it is true. Rising fortunes are during the Industrial Revolution gave rise to
and ushering in a gilded age of growth, the likes of to the climate that sustains life itself. Booming spawning a new cosmopolitan class of global super- nationalism, fascism and communism. Many fear that
which has not been seen since the Industrial demand for resources has created shortages of raw rich – free to roam where taxes are lowest. Yet similar reactionary or even retrogressive forces could
Revolution. 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
The United States is still an economic powerhouse, influence (see Figure 1). slowly that to many it seems as though they are Heading off the political backlash will require a
but it has been largely supplanted at the forefront of standing still or even slipping behind. “They have a concerted effort by both governments and business to
growth by China and India and other emerging diminishing sense that we are all in the same boat,” better publicize the benefits of globalization. “Most
Figure 1 World Commodity Prices and Demand from BRIC Nations
economies. “The world is no longer as dependent on said former US treasury secretary Lawrence H. people who are hurt or think they are hurt by
As the developing world consumes more metals, prices are rising
a single locomotive,” said Economics Professor Laura Summers, now the Charles W. Eliot University globalization, know it. Most people who benefit do not
350
D. Tyson. Even the once-moribund economies of Professor at Harvard. know it,” said Carlos Ghosn, who heads Renault and
300
Index (100=1996)
Europe and Japan are enjoying growth as China and Nissan. “What we need to do is come in with concrete
250
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
Let’s face it: to manage globalization in
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
developing countries a huge amount of
Steel price
Steel consumption
Aluminium price
Aluminium consumption
Copper price
Copper consumption
energy has to be put politically – at least in
Source: Datastream; International Iron & Steel Institute; World Bureau of Metal Statistics
an open society – on arguing these issues
“ Insecurity threatens globalization The mountains of wealth are exerting new and little and educating the public. You need a
“
understood pressures on financial markets. Prosperity
and the growth that we are enjoying comparable debate in the wealthy
“ has created a demographic paradox: lower birth rates
today. There is a danger that some countries that isn’t happening.
that are leaving the wealthiest nations short of new
societies will look inward. workers to help finance the rising cost of healthcare Montek S. Ahluwalia
and retirement among older generations.
E. Neville Isdell
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
it is not clear if anything can or needs to be done to answer may lie in shifting the burden of health
Figure 2 Developed vs Developing World Carbon Emissions
address this development. Cheap capital has been a insurance to the state and beefing up public
Developed world countries are major emittors of carbon dioxide, to date
boon to developing nations, lowering their financing unemployment insurance. “We have to move the
30
costs and enabling them to dig their way out of debt. social protections from the basis of the corporation to
25
metric tons of carbon dioxide)
Carbon emissions (billion
But to compensate for low interest rates, investors are the basis of society,” said Columbia University
20
taking advantage of cheap funding costs to make Economics Professor Joseph E. Stiglitz. “The
15
more leveraged investments. An increasing amount of While most funds do not disclose their portfolios, recognition of that is a change in mindset.”
10
public pension funds and private savings are flowing many have been investing increasingly in sophisticated
5
into hedge funds (see Figure 3) and private equity and little understood instruments such as credit
0
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
Developed nations
Developing nations to generate higher returns. including funds of funds, institutional funds and hedge
funds, bankers and regulators worry that the impact of
Source: World Resources Institute
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 improve documentation and address legal issues,”
10,000 $1,400
Assets under management (US$, billion)
9,000
growth is taking a devastating toll on the said Chilean Central Bank President Vittorio Corbo.
$1,200
Number of funds
8,000
environmental health of these nations. Despite the $1,000
7,000
6,000
recent jump in oil prices, research for greener energy $800
5,000
$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
Assets
Funds
carbon emissions and to support international efforts
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 Reshaping the International Monetary System
On the penultimate day of the World Economic Forum The World Economic Forum and the Reinventing The report includes a selection of the papers prepared
Estimates of Potential World Gains from Doha
Annual Meeting 2007, World Trade Organization Bretton Woods Committee (RBWC) issued at the for the project that offer specific proposals for reform
Will they be enough to persuade governments to incur relevant costs?
(WTO) Director-General Pascal Lamy told participants World Economic Forum Annual Meeting 2007 the final in such areas as strengthening the international
$350
300
that the discussions among the 30 trade ministers in report of a two-year review of the international adjustment process, improving crisis prevention and
Estimate of potential gains in
global income (US$, billions)
World Bank estimates
Carnegie Endowment estimates
250
Davos had given new impetus to the stalled Doha monetary system conducted in cooperation with the resolution instruments, and modernizing and
200
Round. “Today’s ministerial meeting has put quite a lot Group of 20 (G20) governments. Entitled The rationalizing the governance of the system’s principal
150
of energy into the notion that the landing zone is in International Monetary System, the IMF and the G20: institutions. Among the notable proposals is one
100
50
sight,” said Lamy. Added Kamal Nath, India’s Minister A Great Transformation in the Making?, the report presenting a new “business model” for the IMF.
0
Full liberalization Likely Doha scenario*/Central Doha scenario**
of Commerce and Industry: “Despite the cold outside, 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
we have been able to defreeze the talks that were appears ready to try to adapt international financial in the exchange rate system that could help prevent
developing countries, and manufactures tariffs by 50% by developed countries and 33% by developing countries
** The Carnegie Endowment central Doha scenario entails agricultural ad valorem equivalents (AVEs) reduced by 36%
frozen.” Days later, negotiators at the WTO in Geneva institutions to a world characterized by increasingly large, persistent economic imbalances of the kind that
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).
agreed that full talks to set a framework for concluding large cross-border private capital flows, wider threaten world financial stability today.
Source: World Bank, Carnegie Endowment
the Round would resume. The negotiations were geographic distribution of economic activity and
suspended in July 2006 largely due to disputes over deepened regional macroeconomic and international
“
agricultural tariffs and subsidies. Earlier, the World Economic Forum’s International trade policy coordination.
An important transformation of the international
Business Council (IBC) of leading CEOs from both
monetary system appears to have begun in
developed and developing countries had called for a From 2004 to 2006, the Forum and the RBWC
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
“ informal and representative nature, may well
It has to be more than a lowest-common- “
of economic opportunities to all,” the IBC warned in a architecture in cooperation with selected finance
“ prove to be the crucible in which its primary
statement. “Trade is the most effective means we can ministries and central banks of the G20. Seven
denominator deal that doesn’t generate
features are forged.
offer to the members of the global community different G20 governments hosted these discussions –
trade flows.
struggling to lift themselves out of poverty.” co-chairing them with the Forum and the RBWC –
Richard Samans
Susan Schwab supported by a research programme in which leading Managing Director, World Economic Forum
US Trade Representative public, private and academic experts prepared more
than 50 discussion papers.
“ We are now in the endgame. Either way, this
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
12 | World Economic Forum Annual Meeting 2007 13 | World Economic Forum Annual Meeting 2007

Geopolitics: The Need for Fresh Mandates
“
“ We, as representatives of the states, The power equation is becoming a more
cannot solve everything alone and complex differential equation. Power is
cannot solve anything at all unless we being diffused horizontally and vertically
“
rapidly improve our partnerships with to make power more multilevel and
“
business, academia and society as a multipolar.
whole.
Micheline Calmy-Rey Timothy Garton Ash
President of the Swiss Professor of European
Confederation and Studies, University of
Federal Councillor of Oxford, United
Foreign Affairs, Kingdom
Switzerland
The fickle weather in Davos during the week of the The world has a lot on its plate. The global agenda in Meanwhile, the quest for energy security is driving the What this means is that old attitudes and ways of
World Economic Forum Annual Meeting was oddly this world of rapid globalization – for good or ill – runs foreign policy strategies of many countries and leading thinking have to be discarded. Ideology-driven, cold
appropriate. The initial warmth and lack of snow were long with issues demanding constant attention. to new international alliances. Resource-hungry China war-era approaches can no longer address the more
naturally a palpable reminder of global warming, a Among the most pressing: instability in the Middle has been busy forging relations in Africa, and fluid and complex problems of the world.
priority issue this year, while the on-off precipitation East, particularly Iraq; communal strife in Africa, elsewhere, to secure its energy needs (see Figure 4), “Perspectives are changing,” said German Chancellor
and up-down temperatures that gave way to steady notably Darfur; the threat of terrorism; the proliferation taking a value-neutral, non-judgemental approach that Angela Merkel. “The fact is that a completely new
sun on the final day reflected the unpredictability of of materials and weapons of mass destruction; public can be a welcome alternative to countries tired of global balance of power is being created.” East-West,
world events and how quickly situations can change. health crises stemming from the spread of infectious hectoring by the West about governance reform and North-South, left-right – the adversarial or competitive
As sessions began, participants were digesting US diseases; energy security worries, coupled with the human rights. In addition, the world has awakened to paradigms of the past century no longer apply.
President George W. Bush’s announcement in his need for urgent action on climate change; the the threat from rogue states and failed states that Instead, in this age of heightened risks, what is
State of the Union address that the US would reduce consequences of the economic and political rise of could become havens for militant extremists. Finally, required to confront the many challenges facing the
oil dependency by 20% over the next 10 years. During large emerging markets, including China and India non-state actors both benign and malevolent – from international community is a new pragmatism that is
the Meeting, reports that American military forces (emerging markets now constitute half the world committed NGOs and popular bloggers to terrorist based on a willingness to take a fresh look at issues,
were targeting alleged Iranian agents in Iraq raised economy); and the struggle to conclude the groups and unknown viruses that could spawn to adopt new ways of governance, to look for
concerns about a potential conflict between the US multilateral trade talks. pandemics – have also emerged as influential players. commonalities rather than focus on differences with
and Iran. By the traditional farewell lunch on the sunny “The power equation is becoming a more complex other countries, to implement new mechanisms for
Schatzalp, many were talking about the decision the The international community must focus on these and differential equation,” said Oxford University Professor cooperation that involve business and civil society, to
day before by 30 trade ministers assembled at Davos other problems even as shifts in the geopolitical Timothy Garton Ash. “Power is being diffused institutionalize new power relationships, and to
to restart the Doha Round of global trade landscape make it even more difficult to do so. horizontally and vertically to make power more manage a fair rebalancing of the global power
negotiations. Consider the arrival of new centres of power, nations multilevel and multipolar.” equation.
or regions made influential by commercial clout,
Figure 4 Africa's Trade with China
energy resources and nuclear capabilities. For In his address at the closing plenary, Tony Blair called
“
China has become an important strategic partner
example, the renaissance of Asia to a large extent on for just such adjustments that would aim at creating a
Insecurity exists everywhere – in the East $25,000
the back of surging economic growth in China and “more muscular” multilateralism. “A key part of our
and West. We have to think about common India, each with a population of more than one billion, international dialogue must now be strengthening the
20,000
Trade (US$, millions)
goals and looking for the proper solutions in is steadily pulling the geopolitical centre of gravity instruments and institutions – those between
15,000
across the Pacific Ocean. The new power players governments but also those within civic society – that
all cultures to find common ground, fight 10,000
“ challenge and, in some cases, constrain US can build capacity,” said the prime minister. “We need
extremism and insecurity, and then we may 5,000
dominance. new networks, new relationships between countries
hope for a better future. 0
and between people that mobilize the practical means
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
of effecting change.” Blair proposed that the United
Mohammad Khatami
Exports to Africa Imports from Africa
Nations Security Council be expanded, that UN
Source: IMF structural and administrative reforms push ahead, that
14 | World Economic Forum Annual Meeting 2007 15 | World Economic Forum Annual Meeting 2007

Mohammad Khatami Abdullah Ahmad
President of the Badawi
Islamic Republic of Prime Minister of
Iran (1997-2005) Malaysia
The Business of Peace
the International Monetary Fund and the World Bank representatives of the states, cannot solve everything The launch of this business initiative took place
consider merging, and that the G8 plus Five (Brazil, alone and cannot solve anything at all unless we against the backdrop of intensifying diplomatic efforts
China, India, Mexico and South Africa) become rapidly improve our partnerships with business, to restart negotiations to end the Israeli-Palestinian
institutionalized. The basis for regional blocs including academia and society as a whole,” said President conflict. In a session at the Annual Meeting in Davos in
the European Union (EU), now unwieldy with 27 Micheline Calmy-Rey of the Swiss Confederation. which they participated together, Palestinian Authority
members, must be revised to make them more President Mahmoud Abbas and Israeli Vice-Prime
effective, Blair added. Weak groups such as the The global networks of individuals, civil society and Minister and Minister of Foreign Affairs Tzipi Livni
African Union should have a stronger voice. companies are driving enormous power shifts. This is reiterated the commitment of both sides to resuming
especially true on climate change and sustainability talks. “The Middle East is in dire need of peace and
Such pragmatic approaches are already in progress. where novel partnerships have been formed to move the Palestinian-Israeli conflict is one of the most
Pascal Lamy, Director-General, World Trade forward where governments have lagged. Companies serious conflicts that requires a solution,” Abbas said.
Organization (WTO), Geneva, reminded participants understand that sustainable practices are profitable Added Livni: “We must stick to the vision of two
that the Doha Round is all about “rebalancing” the and responsible. Just before the Annual Meeting, states living side by side, together in peace.”
global trading system in favour of developing three US energy companies – General Electric, Alcoa At the World Economic Forum Annual Meeting 2007,
economies. At a session reviewing the progress over and Duke Energy – announced their support for a the Forum announced the decision by 14 Israeli and
the past 40 years of the 10-member Association of “cap-and-trade” system and the setting of targets to Palestinian chief executives in Davos to create an
South-East Asian Nations, the leaders of Malaysia, the reduce greenhouse gases by as much as 30% within Israeli-Palestinian business council. They had agreed
“
Philippines and Vietnam stressed the significance of 15 years. “It’s about time to get moving,” said Alcoa’s to establish the group as an initiative of the World
Peace should be done in a double helix: a line
ASEAN’s decision in December 2006 to draft a charter Chairman and CEO Alain J. Belda. At Davos, a Economic Forum with the mission “to encourage and “
of politics and a line of economy – inseparable,
that would create by 2015 an EU-style union, once consortium of companies and NGOs agreed to set up facilitate constructive cooperation between Israeli and
considered impossible for the region. These are bold the Climate Disclosure Standards Board that will Palestinian business leaders to reinforce their parallel but not dependent.
steps for treacherous times. coordinate carbon emission requests and standardize economic relationship and to help peace building
Shimon Peres
information received from companies. efforts.” The council, which will bring together some Vice-Prime Minister of Israel
It was, however, the final session of the Annual 200 Palestinian and Israeli CEOs, is to hold its
Meeting, focusing on the theme of human dignity, that It was Jordan’s King Abdullah II who best summed up inaugural assembly during the World Economic Forum
brought home the boldest message of the Meeting. the importance and urgency of questioning the on the Middle East at the Dead Sea in Jordan on
Social entrepreneurs, civil society leaders and existing geopolitical power equations. “World-shaping 18-20 May 2007.
representatives of the Young Global Leaders events and changes are not just challenges; they are
Community gave testimony to the power of choices,” he observed in an address to participants.
responsible individual and group action to make a “We have the power to shift the equations – whether it
“
“ The real threat to mankind is
difference. The ultimate power swing was undeniably is peace and war, or poverty and prosperity – by what
clear: people are taking a stand and demanding we do together to understand and take action. Now is ignorance, poverty and illiteracy.
action. It is the mandate of voters, households, not the time to isolate good ideas in professional silos.
Abdullah Ahmad Badawi
communities, shareholders, stakeholders and Nor can we accept walls between different peoples
Prime Minister of Malaysia
organizations driving commerce and social and faiths.” As UK Chancellor of the Exchequer
development that bestows legitimacy. “We, as Gordon Brown put it: “We are shaping the agenda in a
new way. The age of the smoke-filled rooms is over.”
16 | World Economic Forum Annual Meeting 2007 17 | World Economic Forum Annual Meeting 2007

WorkSpace
The Davos
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.
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
Living in the Connected World of 2015 and even competitors. One group, whose jerry-rigged model literally imploded,
Walking in the shoes of fictional characters, participants considered how found that that their “volcano of ideas” grew too quickly – a problem mirrored
they would get on in a future world. Groups were predictably creative. For in real-life start-ups. They retooled and added organizational elements to their
example, “Dan”, the San Francisco activist, would use his cobbled- product offering to make the rebuilt model more robust. It remained
together virtual network (acquired both legally and illegally) standing!
to further his green causes. His motto: “Liberation
through flexibility”. “Toshiko”, meanwhile, would Finding Future Talent
not leave home unless she wanted to; the Recognizing the increasingly fierce competition to attract the best and
world would come to her. She would work brightest, participants at this workshop discussed how to create and adopt
as a marketing representative for products strategies that take into account the motives of high-flyers from different
targeted at local senior citizens. Watching cultures and generations. With those aged between 22 and 30, for example,
over her children virtually as they make their a good education, upward mobility, digital and technical skills are a given.
way between home and school, most of her They have huge ambition and know-how to work collaboratively; they want to
meetings with friends and colleagues would get rich quick. The 30 to 50 year olds, by contrast, are looking for employers
happen via hologram. 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
One group dreamed up a gadget that delivers humorous but at the same time more sceptical.
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 Participants also considered cultural variations – how the distinctive practices and
there would be healthcare for all based on an all-inclusive understanding of a perspectives typical of, for example, Chinese firms differ from those of Europe or India.
person’s medical history, habits and practices. 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
Most participants emphasized that secure universal online access in local languages division. Clearly, common values and challenges link companies across the world – in particular
would be required to make any of the visions of a better world emerging from this session the need to offer real opportunities for career development. But many participants argued that
happen. the talent problem in Asia is unique, requiring solutions specific to the region.
18 | World Economic Forum Annual Meeting 2007 19 | World Economic Forum Annual Meeting 2007

Business: Leading in a Connected World
“ “
If companies think the market for talent We understood very early on that the only
“
is competitive now, they’d better watch assets we have are our brand and the
“
out. It will be a lot more competitive in trust of our customers.
10 years.
Saeed Al Muntafiq Eric Schmidt
Chairman, Tatweer, Chairman of the
United Arab Emirates Executive Committee
and Chief Executive
Officer, Google, USA
A decade ago, the to-do list of a typical company But the proliferation of information is only one factor. This requires inventive thinking – new carbon trading increasing ability of users, consumers and citizens to
chief was already long. Yet, that was before the The proliferation of pressure points and the programmes are an example – and a willingness by articulate preferences and shape business. In some
Internet and other new technologies had seriously globalization of business are driving companies to incumbents to work with rivals and unfamiliar players. markets, they can literally make or break a brand
begun to reshape business models; before major restructure and revise their operating methods. Top- The recent decision by major US energy companies to overnight. “We understood very early on that the only
scandals in companies in the US, Europe and Asia led down hierarchies are giving way to fresh ways of create a “cap-and-trade” system aimed at reducing assets we have are our brand and the trust of our
to heightened disclosure rules and transparency collaboration and innovative partnerships both within greenhouse gas emissions by as much as 30% within customers,” explained Eric Schmidt, Chairman of the
standards; before 9/11 and the SARS virus and bird and between companies, across borders and cultures, 15 years and the launch at Davos of the Climate Executive Committee and Chief Executive Officer of
flu underscored how global terrorism and public health and among the private sector, government and civil Disclosure Standards Board may in future be regarded Google.
crises could disrupt commerce; and before the society. “The CEO is no longer the master of the as landmark steps in the business community’s
movement against globalization and the drive for universe,” said Cristóbal Conde, President and Chief acceptance that on this crucial global challenge they Technology has obviously played a major role in the
greater corporate social responsibility gained traction Executive Officer of SunGuard. “The number one must lead. empowerment of the consumer. Web 2.0 – Internet
on the streets and in boardrooms. operating job is to keep, maintain and enhance the platforms such as Facebook.com and MySpace.com
collaborative systems where people share know-how Indeed, CEOs today function less as architects of rigid in which users determine their own environment and
Today, the CEO’s life is much more complex. Looking and work together on common programmes. That’s policies and guardians of orthodoxy and are more and create not just their own content but their own
out for shareholders is not enough; a progressive the role of the CEO in the new world.” more “meaning makers” who build adaptive, communities – is perhaps the newest driver of rising
corporation must also consider its stakeholders, the innovative cultures. Top managers cannot rely on old consumer power. Users no longer depend on
wider community of those with a legitimate interest in Common endeavours may range from research and command-and-control techniques to respond to the companies to determine their Web experience, but
an enterprise’s business and its impact on people and development to long-term strategic planning. Climate growing power of tech-empowered consumers and instead can customize the products and services they
the environment. Leading a company is naturally change is an example. This year’s Annual Meeting the increasing demands of investors and employees. use or create blogs that challenge the very legitimacy
much more challenging. Technological advances, the signalled that, in the absence of strong and cohesive Take the pressures from customers. That the of a company they might choose to take on.
expansion of global trade and trading regimes, global political leadership on the issue, business is consumer is the central focus of business is not new,
demographic trends, the changing geopolitical squarely leaping from awareness to action. As energy said Coca-Cola International’s President and COO Businesses also face increasing pressure from
landscape and shifting social norms have rendered costs have mounted, public attention has focused on Muhtar A. Kent. “Our business is always driven by the shareholders through regulatory requirements such as
many classical ways of doing business insufficient, environmental degradation. For successful enterprises, consumer.” What has changed in recent years is the the disclosure rules under the Sarbanes-Oxley Act in
inefficient or even obsolete. “We haven’t abandoned practising sustainability has become more than savvy the United States. Though filing procedures are
“
leadership, but we’ve given leadership more public relations; it is a business imperative, even a burdensome, the result for business is not necessarily
The CEO is no longer the master of the
information about what it needs to respond to,” said matter of profitability, in both emerging and negative. K. V. Kamath, Managing Director and Chief
universe. The number one operating job is to
Goldman Sachs Group Chairman and CEO Lloyd C. established markets. Executive Officer of India’s ICICI Bank, explained that
keep, maintain and enhance the collaborative
Blankfein. his company tightened procedures to meet Sarbanes-
systems where people share know-how and Oxley standards. “The pluses outweigh the minuses,”
“ he argued. For other public companies, however, the
work together on common programmes.
pressure of these regulations and the demands of
That’s the role of the CEO in the new world. shareholder accountability have spurred them to
Cristóbal Conde consider going private.
President and Chief Executive Officer, SunGuard, USA
20 | World Economic Forum Annual Meeting 2007 21 | World Economic Forum Annual Meeting 2007

such as Sarbanes-Oxley. New ownership allows But at Davos, there were voices questioning whether
Finally, employees are increasingly another source of Figure 5 M&A Acquirers Are Increasingly Sourced in Emerging Markets
struggling companies to reinvent their images for a private investors who may have a keen eye on the
pressure on management. They not only possess new $450
400
more competitive market. Private owners offer more bottom line give appropriate consideration to hidden
technologies for organizing but are also amassing new 350
Deal value (US$, billion)
unified input, in comparison to scattered shareholders. costs – and necessary goals – such as environmental
bargaining strength due to what many business 300
Private finance fuels innovation, with private equity sustainability. Public companies may be feeling more
leaders perceive is an international shortage of 250
200
backing roughly half of all IPOs in the US last year pressure from these newly powerful market players,
talented workers. Participants offered anecdotal 150
alone. and managing boards may be driven to consider
evidence of the strengthened role of employees. One 100
50
“buyout scenarios” and the potential benefits of being
company adopted environmentally progressive policies 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
privately held. Yet public or private, companies today
due to grassroots organizing by employees. Another Figure 6 Private Equity: A Major Force in Global M&A
are subject to extraordinarily diverse pressures and
posted its entire employee manual online as a “wiki” Steady growth over 45 years
*through 3 November
Emerging markets targets
demands to which they must respond. These include
online document so that any member of the company Emerging markets acquirors 30%
the need for transparency in a world of empowered
could modify procedures. Source: Thomson Financial
Private equity as a percentage
US
of global M&A deal value
consumers and employees, the growing acceptance
20
Europe
that sustainability means profitability and a
Many businesses have shifted away from hierarchical These concerns have underscored the challenge of Global
corporation’s responsibility towards multiplying
organization models to looser networks of human resources management, particularly in fast- 10
stakeholder groups.
collaborators, Harvard Business School Professor growing emerging markets. In hyper-growth
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 competitive now, they’d better watch out,” said Saeed
responsive to their constituencies. Al Muntafiq, Chairman of Tatweer. “It will be a lot more
competitive in 10 years.”
“ “ We have to move the social
We haven’t abandoned leadership, but
Increasingly, these constituencies are in communities
“
“
that may be far removed from a company’s nominal With all these management challenges and the protections from the basis of the
we’ve given leadership more information
base. The globalization of business through direct proliferation of risks that the CEO must keep on top
corporation to the basis of society.
about what it needs to respond to.
investment and mergers & acquisitions has meant that of, it is no wonder that private equity investment has
Lloyd C. Blankfein
companies must now cater to stakeholders across the exploded in recent years (see Figure 6). Private equity
Joseph E. Stiglitz
Chairman and Chief Executive Officer, Goldman
world in both established and emerging markets (see accounted for roughly 20% of global merger & University Professor, Columbia University, USA
Sachs Group, USA
Figure 5). This has led to controversies over national acquisition activity in 2006, up from 3% nearly a
security, the use of state money by enterprises decade ago. Private investment certainly offers
purchasing stakes abroad, and the economic advantages over public ownership in today’s business
consequences of cross-border takeovers including job environment. Managers can focus on direct operation
losses and cultural differences. 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
FS MARKETS
INCREMENTAL INNOVATION 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 Carbon Reporting: A New Standard
and the Financial Markets
Increasing Internet access, the rise of mobile private equity investment in recent years has triggered a The World Economic Forum launched an international Although in recent years awareness of the importance
technologies and digital security concerns have fuelled global debate about the transparency and partnership of seven organizations to establish a of climate-related disclosure has risen sharply among
questions as to how technology and innovation could accountability of privately held companies. To better generally accepted framework for climate risk-related corporations and their boards and shareholders,
shape the future of financial services. Thus, 56 partners understand these trends, the World Economic Forum reporting by corporations. Founding members of the reporting of comparable information in annual reports
of the World Economic Forum from the IT and FS Investors Industry Partnership announced the launch of Climate Disclosure Standards Board (CDSB) include remains the exception rather than the rule.
sectors, together with experts from across the world, the Globalization of Alternative Investments (GAI) the California Climate Action Registry, Carbon
collaborated to produce three contrasting worlds: one project. Supported by investor groups, this initiative Disclosure Project, Ceres, The Climate Group, The CDSB will convene an advisory committee to
dominated by a small number of global universal banks; aims to collect information on, and deepen International Emissions Trading Association, World include industrial, financial services and accounting
another with many highly specialized, interconnected understanding of, corporate ownership models that Economic Forum Global Greenhouse Gas Register firms as well as other key stakeholders. In preparation,
service providers; and a third where regional blocs offer alternatives to classic public ownership. Working and World Resources Institute. CDSB members met in Davos with representatives of
innovated at different speeds. These scenarios have through the Forum’s Global Competitiveness Network Alcan, American International Group (AIG), Capital
provoked much interest in follow-up work, especially and Global Risk Network, participants in the GAI will CDSB members have agreed to align their core Group, Duke Energy Corporation, Ernst & Young,
around the following points: engage policy-makers, academics and regulators to requests for information from companies to ensure Royal Dutch Shell, JPMorgan Chase,
assess accurately the investment environment in that they report climate change-related information in PricewaterhouseCoopers, SUN Group, Swiss Re and
1. The degree of consumer trust in digital transactions various countries and the real impact of alternative a standardized way that facilitates easier comparative Tokyo Electric Power Company. They also conferred
cannot be taken for granted. How identity security investments on global and regional financial systems. analysis by investors, managers and the public. The with UK Secretary of State for Environment, Food and
is resolved will substantially shape which The Globalization of Alternative Investments’ first project focus will be on the disclosure of the following key Rural Affairs David Miliband, California State Assembly
technologies consumers will demand to access will study the global economic impact of private equity climate issues in company annual reports: Speaker Fabian Núñez, and UN Environment
financial services. investment. This will include roundtable discussions Programme Executive Director Achim Steiner.
Total emissions
2. Robust strategies are needed to drive financial within the investor community and with key policy- Assessment of the physical risks of climate change
inclusion for the next one billion; these strategies makers and experts. Assessment of the regulatory risks of climate
need to be original and correspond to specific, local change
“
needs. The World Economic Forum is working with A Sectoral View of Private Equity Deals
Strategic analysis of climate risk and emissions This is a welcome effort to streamline the
the government of India, IDRC and others on a draft High-tech, telecoms and healthcare now represent a third of total deal value
management growing demands on companies and to
proposal. $500
“
“
450
improve objectivity for disclosure of climate-
Other
Metal & Steel
Climate change and the implications on
400
Finance
Similarly, uncertainty surrounding the huge growth in related information.
Food & Beverage
350
Construction/Building
business process and disclosure are finally
alternative investments such as hedge funds and Consumer Products
300
Utility & Energy
Jorma Ollila
Chemicals
250
private equity vehicles has sparked political calls for becoming the topic of discussion that they
Dining & Lodging
“ Chairman, Royal Dutch Shell, Netherlands
200 Real Estate/Property
greater regulation and scrutiny. Hedge funds manage Transportation
deserve to be. We are enthusiastic and
150 Professional Services
30 times more assets today than they did in 1990 and Retail
100
Healthcare
supportive participants in this dialogue.
Telecommunications
private equity accounted for about one-fifth of global 50
Computers & Electronics
0
merger and acquisition activity in 2006, up from 3% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Paul J. Ostling, Global Chief Operating Officer, Ernst &
nearly a decade ago. Indeed, the sharp growth of Young, United Kingdom, and Willem Bröcker, Global
Source: Dealogic
Managing Partner, PricewaterhouseCoopers,
Netherlands
24 | World Economic Forum Annual Meeting 2007 25 | World Economic Forum Annual Meeting 2007

Technology and Society: Identity, Community
and Networks
“ “ “
The operating systems of the computers The virtual world will grow up to be a
we’re using are so vulnerable…. We ‘low-res’ version of reality.
“
need to get the people who make the
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 new business opportunity – a virtual marketplace Social networking universe features a few large players
(eg, MySpace, Facebook) and many smaller players
and increasing the mobility of manufacturing, services where one can generate very real revenues and
40
and capital. In the past decade, however, no 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 Google (CAGR: 67%)
10
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 August
2005 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. 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
From the loneliest blog to popular websites like powers to clients. In the same way that the spread of e-mail, chat rooms identity using an avatar can be liberating. But the
YouTube, Flickr, Facebook and Second Life, the and the Web did a decade ago, the growth of online increasingly real social interactions afforded by online
Internet has become host to a brave new world of Many predict that such virtual worlds will eventually communities (see Figure 8) is spawning interesting venues such as Second Life are also causing debate
services that use the network as a canvas upon which 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
customers create their own masterpieces, establish communications. “The virtual world will grow up to be barriers based on geography, nationality, sex or psychological health and community life. One-third of
new identities and carve out new communities that 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
transcend geography. “It changes how we view President of Kapor Enterprises. warehouse for information and user-generated that they spend more time in the game than in the real
human interaction,” said John Gage, Chief Researcher encyclopaedia – or “wiki” – has made tracing an world. “We should be aware that we may be
and Vice-President at Sun Microsystems. individual’s past as simple as a Google search, turning modifying ourselves as well as our online personas,”
Figure 7 Download Times and Bandwidth
almost everyone into a public figure. No longer can said Baroness Susan Greenfield, Director, The Royal
As bandwidth grows, video download times will lower dramatically
For industry incumbents, this is a confusing new one escape his past by moving to a new town, or Institution of Great Britain.
20,000
Forecast
landscape, with shifting consumer patterns; no one is even a new country. “With technology comes the long
5,000
sure whether it is best to concentrate on providing tail of infamy,” noted Young Global Leader Shai
Minutes to download
“
500
“
Blu-ray disc
With technology comes the long tail of
infrastructure, content or both. The music industry has Agassi, President of the Product and Technology
50
HD movie
been perhaps most profoundly affected, thanks to the Group at SAP
5
infamy.
DVD movie
1
portability of digital recordings. As faster network 30 min TV show
0.1
Shai Agassi
speeds become more common, television and film are 0.01
undoubtedly the next in line for the Internet invasion 1993 1997 1998 2004 2005 2006F 2015F
28.8K 56K 1.5 Mbps 3 Mbps 6 Mbps 30 Mbps
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

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

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