Greetings, delegates and Davos-watchers!
On the last full day of the World Economic Forum, the Black Eyed Peas played the Salesforce party and the skies stayed kind, barring some fleeting late-afternoon droplets. (“It’s raining,” Christine Lagarde, president of the European Central Bank, told her companion as they walked down the Promenade—but it wasn’t really.) At 1pm Thursday, the farewell lunch begins.
If the world manages to worry even Kristalina Georgieva, the ever-gregarious director of the IMF, then the WEF is right to be as subdued as it has been this week. In a panel moderated by Fareed Zakaria, Georgieva said geopolitical frictions are creating new faultlines in the global economy. She is wary, she said, of “the risk that we are going to walk into a world with more fragmentation, with trade blocs and currency blocs, separating what was up to now still an integrated world economy.”
The emergence of a Sino-Russian bloc against the West will entail drastic reformulations of supply chains and trade routes, and it will compel developing nations to ally with one side or the other. The economic benefits of globalization will erode; the political and social relations between countries will unravel. “I was raised on the other side of the Iron Curtain. I hated it,” Georgieva said. “And I can tell you it scares me that we’re sleepwalking after the hot war into another cold war.”
🌲 The brute economics of deforestation
During a discussion about how to discourage people from deforesting the Amazon basin, bankers and politicians offered rosy schemes for “agroforestry” and “financing the forest.” The lone skeptic was Ricardo Hausmann, a political economist at Harvard. “Let me tell you how distorted this market is,” he said:
“Europeans are willing to pay $100 per ton of CO2. The equilibrium price in Colombia has been hovering between $3 and $5. A hectare captures about five tons a year for about 20 years, and then it stabilizes. At $5, that’s $25 (per year). They put half a cow per hectare. You need two hectares for one cow, in that region. Half a cow is worth more than $25. So you’d rather put a cow than leave the forest… The prices are not there yet, because the markets in Europe don’t know if the forest they’re paying for is going to be there tomorrow. They don’t know if they’re paying for reforestation, because that’s going to create a new incentive: to deforest, so that you can reforest.”
🚧 Constructing the metaverse
In a panel about “making the metaverse,” each panelist began with a definition:
- “The next iteration of the internet…the part where it gets less flat.” —Chris Cox, chief product officer, Meta
- “A single shared place we would inhabit together as humans.” —Philip Rosedale, founder, Linden Labs and co-founder, High Fidelity (describing his original vision for Second Life)
- “A new form of expression.” —Omar Sultan Al Olama, minister of state for artificial intelligence, digital economy, and remote work applications, United Arab Emirates
- “The seamless merging of our digital and physical worlds.” —Peggy Johnson, CEO, Magic Leap
Much of the discussion focused on avoiding the mistakes the tech industry made on social media, including the unintended consequences of predicting user behavior to target content and advertising. But Meta’s metaverse, at least, won’t be ad-free. “If you want free services at scale,” Cox said, “advertising is the natural business model for it.”
🏔 Meta Davos
The WEF, meanwhile, is building its own metaverse, called The Global Collaboration Village, in collaboration with Microsoft and Accenture. It promises to “bring together key global stakeholders—international organizations, governments, partner companies and civil society organizations—to imagine alternative futures, explore ideas in an immersive way and envision what the future world could be.”
Will it replace real-life Davos in the near future? One of your Quartz correspondents donned a VR headset to meet with a handful of other delegates in a prototype of the village. It’s still a little rough around the edges, and it’s still a conference center, though the Alpine mountains and lakes are dramatic and colorful. You can create your own avatar, travel to different spaces, and pick things up with your hands (we picked up baobab fruit in the demonstration). But you don’t get to have legs; our guide told us that avatars’ legs look weird when they move quickly, so they opted to display floating torsos instead. As in the physical Congress Centre, there are lots of screens around, and strangely, their presence made the rest of the experience feel more real.
💰 Owing it
A Wednesday panel on the outlook for global debt was dripping with moral subtext. Brazil’s minister of economy, Paulo Guedes, bragged that his country had removed fiscal stimulus and tightened monetary policy faster than more developed countries. Daniele Franco, Italy’s minister of economy and finance, defended his country’s decision to increase its debt-to-GDP ratio by 21 percentage points, expanding the government’s balance sheet to avoid sending households into extreme indebtedness. (Between 2019 and 2021, Italian households saw just a 2 percentage point rise in debt, while their bank deposits increased.)
The panel also called out bad creditors at a time when several emerging economies are at risk of debt distress. Gita Gopinath, deputy managing director of the IMF, noted that the longer it takes to restructure poor countries’ debts, the worse it is for both creditors and debtors. Yet, China has not been supporting the G20 framework for dealing with debt restructuring, as Franco noted. China is the largest creditor to African countries, which have been the first to apply for the new framework.
❓ Quotable
“I just want to remind everyone that questions do end with a question mark.”—Panel moderator and organizational psychologist Adam Grant, clearly knowing his audience.
😵 Psychedelic Davos
On the Promenade, sandwiched between the usual cryptocurrency pavilions and corporate schmooze-boxes, is a new addition this year: the Medical Psychedelic House of Davos. One of your Quartz correspondents heard about it from a stranger at a bar, and was intrigued. Was the House intending to take Davos’ parties up a notch? What in the World Economic Forum was going on inside?
The House temporarily inhabits a nightclub called Platzhirsch, and the darkened, red-lit, low-ceilinged space seems to encourage a microdose of acid or a shroom or two. But although the House’s parties run late every night—”I got home at 3am last night,” Marik Hazan, the founder, said—there are no psychedelics on offer. “Some people assume that,” he said, but he doesn’t want to infringe any of Switzerland’s strict laws. “The WEF sent secret police to watch us every evening, the first couple of days.”
Instead, Hazan said, the House’s mission is to educate Davos attendees about the benefits of psychedelic-assisted therapy. In 2018, Hazan co-founded Tabula Rasa, a VC firm that funds companies pioneering psychedelic treatments, and he is watching with avid interest as MDMA (molly or ecstasy) inches closer to FDA approval for trauma care. Tabula Rasa has raised money from a “smorgasbord of folks,” Hazan said: an ex-Merrill Lynch banker, a crypto millionaire, smaller institutional investors. “There’s a lot of folks interested from the crypto community.”
On Wednesday evening, Hazan, who has a smooth head and profuse beard, could only spare 15 minutes for Quartz, in the nightclub’s office, surrounded by shelves of cup noodles and liquor bottles. Shortly thereafter, he went on stage to introduce a long-haired member of the Intercollegiate Psychedelics Network, who urged students to pursue psychedelic research. An audience of two dozen had gathered: older Davos Men in suits, younger people, most holding glasses of (what looked like) green tea. And Deepak Chopra, the wellness maven, waited in the wings to speak.
⌚ Watch yourself
Speaking of Chopra, he kicked off the day’s programming at the Equality Lounge. After Chopra spoke about time and timelessness, Female Quotient founder Shelley Zalis, who was interviewing him, mentioned that her late father never wore a watch because he didn’t believe in measuring time. Intoned Chopra, “You’re not supposed to say that in Switzerland.”
👀 What to watch for today
Meet the press. On the last half-day of the WEF, two events consider the threats facing journalists today, all over the world but particularly in Ukraine. At 9am (livestreamed), Edward Felsenthal, the editor in chief of Time, asks panelists how governments and companies can protect a free press. An hour later, journalists talk about the realities and dangers of reporting from the war in Ukraine.
The chancellor speaks. At 11am, just as the WEF’s programming winds down, German chancellor Olaf Scholz speaks in the vast Congress Hall. Given the preoccupations of the last few days, it will come as no surprise to see Ukraine, Russia, and the future of Europe as the big themes of his address.
🌐 News from elsewhere
Ukraine set its terms for diplomatic talks with Russia. Volodymyr Zelenskyy stated that Russia must pull back its troops to their pre-war positions. Russia, meanwhile, Russia said it would release Ukraine grain exports if sanctions are lifted.
China announced a 33-point stimulus package. The policies are designed to “get the economy back on a normal track,” though analysts have questioned its efficacy as a zero-covid strategy remains in place.
World leaders responded to the Uvalde, Texas school shooting. Pope Francis called for gun control, while Zelenskyy tweeted that the people of Ukraine “share the pain” of Americans.
India, the world’s largest sugar producer, is restricting exports. The announcement followed India’s earlier ban on wheat exports, and Brazil’s canceled sugar export contracts last week, marking a global rise in food protectionism. Thailand, a major food exporter, stands to benefit.
The US central bank may raise rates more aggressively than anticipated. Federal Reserve minutes released yesterday indicated faster, higher rate hikes to combat inflation.
The largest-ever crypto fund was announced. US venture capital firm Andreessen Horowitz raised $4.5 billion to back crypto and blockchain companies. The news arrived amid weeks of crypto market upheaval.
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Our best wishes for a productive day. Today’s Need to Know: Davos was brought to you by Samanth Subramanian, Heather Landy, and Katherine Bell, with contributions from Nate DiCamillo.