Davos creator Klaus Schwab still believes it can bridge divides

But before there was a Davos, there was just a self-described ‘nobody’ with an idea.

World Economic Forum founder and executive chairman Klaus Schwab Picture: AFP

The annual gathering of chief executives, politicians, philanthropists and others at Davos, Switzerland, has become a prominent symbol of the global elite. But before there was a Davos, there was just a self-described “nobody” with an idea.

“I had described what is today called the stakeholder concept,” says Klaus Schwab, who in the late 1960s was an obscure professor for business policy in Geneva. “And at the same time, I had the idea: why not create a platform where the stakeholders could meet, where business leaders could meet with government people, with people from civil society, with academia, and so on?”

The first Davos gathering was held in 1971, which makes this year’s meeting the 50th. It was a shoestring affair, funded personally by Schwab and with borrowed money (some from his Swiss parents), and with a European focus (it was called the European Management Forum).

Speaking in the Manhattan ­office of what is now the World Economic Forum, Schwab, the executive chairman, traces his interest in personal connection to his childhood, first in neutral Switzerland during World War II, and then in the chaotic aftermath.

“My father was working for a Swiss company, and also was tasked for the International Red Cross, so he had the possibility to move across the border,” says Schwab. “For me, during the war, there was a line which was a borderline. And when we crossed the line on the one side, we had to be worried. On the other side, we had peace and stability. I always was interested in: how do you create dialogue?”

In the 1960s the young academic had stints at Berkeley and Harvard Business School that were eye-opening. “I came from a very traditional German-Swiss family, and suddenly to be exposed to the hippy world, that was for me a cultural shock,” he says. “It taught me to be open for different, let’s say, perspectives in life.”

Once launched, the annual Davos gathering grew quickly. Schwab was a good networker who connected with several prominent businessmen. Early ­attendees included Don Keough, longtime president and chief operating officer of Coca-Cola, and consumer activist Ralph Nader.

Meanwhile, the international crises of the 1970s, including the 1973 oil embargo and Yom Kippur War, pushed the event’s horizons outward.

“People suddenly worried, ‘What’s happening outside our country?’,” Schwab says. “In the mid-70s, we became very global.”

In that era of slow growth and high inflation, Schwab promoted a capitalism that, besides shareholders, counted employees and societies as stakeholders, or as he says, “free enterprise with a social orientation”. It anticipated the recent declaration by the Business Roundtable that aims to define a corporation’s purpose as serving “all Americans”.

He says the concept is often misunderstood. “Stakeholder responsibility means not necessarily that you give money to some third party; it means that you use your know-how, your capacities to address social or environmental issues,” he says.

“It’s not so much a contradiction between profit and society, it’s a contradiction between short term and long term.”

It has become more relevant again in recent years, he says, as the very successes of globalisation have cast light on the “winners and losers”.

“People would say you cannot leave parts of the population behind any more,” he says, citing protest movements that have broken out around the world. “Those left behind don’t care whether, say, a large part of the population in China is doing much better. And they have the capability with social media to organise themselves and to become a tremendous political force.”

After development in the past half-century that was for the most part “linear”, he says, the planet now faces large and somewhat abstract “tipping points”, from climate change to mass migration to artificial intelligence. Advances quickly outstrip the capacity of existing institutions and laws, which adds to the social ferment.

Exacerbating the challenges, he argues, are new technologies that grow ever more complex. “We created the automobile. ­People could understand what it is,” Schwab says. “But today’s new technologies, like artificial intelligence, or if you go even further to speak about symbiotic biology or quantum computing, people cannot understand any more, in a direct way, what the impact on their life will be.”

Serving as a facilitator, Schwab has long aimed to put the World Economic Forum in the middle of bridging the divides in the world. Today it has grown to be an independent international organisation under the auspices of the Swiss government, much like the Red Cross.

With hefty membership fees, it has $US345m ($500m) in annual revenue and 800 employees and offices in half a dozen cities, and holds events all year long, including an annual meeting in China. Besides the more than 1000 members and partners, Schwab works assiduously to forge ties with business and world leaders, including Chinese leader Xi Jinping and US President Donald Trump, who is scheduled to speak in Davos.

“I think you need permanent co-operation between the public sector and the private sector to update continuously the rules of the game,” Schwab says. “And if you want to work internationally together, I don’t think any more a central organisation will fit the bill. I think what you have is a network of national organisations working very closely together.”

The forum has faced plenty of criticism, including internally, as a gathering of self-involved elites who preach virtue more than they practice it and are out of touch with real-world concerns.

Schwab is defensive about those critiques, arguing that the group does more good than not. “It’s not only unfair, it’s incorrect,” he says. “Whatever you do, you have people who are making decisions. I would label them decision makers on a political level, on a business level.”

As he prepares for the 50th meeting at Davos, he is also emphatic that capitalist-minded business leaders can address the challenges of the era.

“If I take what has happened the last 50 years, every indicator you take, we have made progress,” he says. “I’m a believer that humankind has made progress. I’m really an optimist.”