Tomorrow starts the World Economic Forum (WEF) Annual Meeting, one of the biggest gatherings of global market movers and shakers. It’s a whos-who of bigwigs from politics, finance, academia, and commerce, talking about economic trends and what we should do about them. Sounds pretty important, right? Maybe.
Today we’ll talk about what the World Economic Forum actually does and try to figure out if it’s something that individual investors need to pay attention to.
So What is the WEF?
In 1971, WEF founder Klaus Schwab invited a few hundred executives from around Western Europe to join him at the Davos Conference Centre in the Swiss Alps. His goal was to improve management practices and get executives to take their employees and local communities into account along with their shareholders and customers.
By 1974, the leaders realized that politics and economics were also inseparable from business and the annual meetings were expanded to included political leaders. The annual meeting quickly became a forum for international communication and in 2015 the WEF gained recognition as an International Institution for Public-Private Communication.
What Does it Do?
The organization is all about sharing information, networking, and brainstorming. They release in-depth reports on trends in business, economics, and society and bring together people with influence who can find solutions to global problems. This includes issues that countries all over the world are facing, like gender equality in the workforce and major conflicts between specific countries.
What Can the WEF Do About This Stuff?
Officially: nothing. The WEF doesn’t actually have any power to make decisions or enforce them. In most cases, it can’t even implement programs. But unofficially, the WEF is important. It brings together some of the most powerful people from different sectors and different parts of the world. In the past, it’s provided a neutral meeting place where world leaders could talk to each other without too much political red tape.
It also provides an opportunity for commercial executives to collaborate about the bigger issues that affect their industries, letting them look at things from a global perspective rather than being forced to put everything into the context of quarterly or yearly earnings. This has created awareness of issues that have an impact on people around the world and led to ideas and connections that become useful down the line.
Davos: The WEF Annual Meeting
To this day, the WEF’s flagship event is the same annual meeting begun in 1971. It’s invitation-only and is attended by hundreds of heads of state, executives, NGO leaders, journalists, and “prominent cultural, societal, and thought leaders” (to quote their website). As in past years, this year’s theme is globalization. Or more specifically, “Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution.” Subtopics will include geopolitics, economics, industry, cybersecurity, human capital, and institutional reform.
The Effect on the Market
There is no formal way for the WEF or the annual meeting to have an effect on the market. It can’t enact policy or sign trade deals. But decisions can be made that will then be taken back to governments and industry to be put into play.
However, the power of the WEF Annual Meeting is that it’s informal. Leaders can meet outside of official conference venues and we can’t eavesdrop on those conversations. Private investors and analysts can’t be sure they’re getting the whole picture, making it hard to predict what decisions will stick and how they’ll play out in practice.
But that doesn’t mean you shouldn’t pay attention. Following the WEF Annual Meeting is a great way to gain a new perspective. It can give you insight into the worldview of our planet’s economic, intellectual, and political elite and what they believe the future holds for the global economy.