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Hub Culture Salon: Swiss Global Risk

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2nd Oct 2008

Hot on the heels of the 2007 World Economic Forum in Davos, Hub Culture gathered a small collection of influentials for another dinner salon discussion, this time focused on the global risk outlook for 2007.

Originally scheduled for Davos, the craziness of the Forum meant that things didn't really come together until a bit later, so the dinner was held over the weekend in St. Moritz instead. It featured a collection of key figures in global real estate, private aviation, commodities, energy and financial consulting.

Switzerland is a discreet sort of place, and most of the guests asked Hub to keep their names and companies private, so for those purposes we will just go with descriptions as follows:

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Michael, a financial consultant

Tanya, a global energy company

Selina, a global commodities company

Richard, private aviation and transportation logistics

Fabrice, private aviation and transportation logistics

Pascale, luxury spas Heidemarie, global real estate

Held at Cascade, a modern Italian restaurant in the heart of St. Moritz, the first thing to notice was that the resort of St. Moritz has changed. Chic as ever, a new building completed last year and designed by Norman Foster dominates the main thoroughfare, and on both sides luxury apartments look out over the frozen lake and surrounding vistas. It reflects the private air of the resort, but underlines the growing spate of uber-private wealth in formerly public places.

Consensus took awhile, and can be divided between long term, creeping risk and short term event risk. A wide variety of subjects quickly presented themselves, but it was clear that everyone was very upbeat about their own business prospects for the year. What could derail the party? Heidemarie is CEO of the Swiss arm of an exclusive real estate company featuring properties costing upwards of $100 million. Security is top of mind for her clients, and as the world's wealthy hedge against terror risk in major hubs (New York, London, Paris) the Swiss are seeing a boom in ultra-luxury real estate.

Her top risk moving forward? A terror event.

As for the real estate, they are expecting another record year, and when asked what makes the difference between a $20 million chalet or villa and a $100 million villa, she smiles and says "The view."

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Richard ruminated on the political situation - as the global reputation of the US continues to fray, the emergence of Iran's surging power in the Middle East, combined with new tensions in Syria, figure highly. Richard's company moves the world's power brokers, from heads of state to CEOs, and is an exclusive private transporter of entirely new types of depressing cargo: prisoners to Guantanamo Bay in Cuba, terror suspects under questioning by the US government, and on occasion, negotiators and conflict supplies.

Al Gore's Inconvenient Truth featured heavily as Michael weighed in on the cost of climate change. A regular mountain skier, its common knowledge among the Swiss that glaciers are retreating everywhere, and here everyone nodded in agreement: the Alps are warmer, the snow is higher, and the consequences are real.

Some academics in this sector, according to Michael, make the case for drastic atmospheric changes in short, revolutionary bursts - ideas to fear because of their vast macro implications. Supply and demand for world commodities such as steel and oil are also setting the stage for continued appreciation in commodities - but Selina warns that these trends are cyclical.

Another terror event might shut down demand temporarily, but places always rebuild, which can put huge strains on the global supply chain, already running at full capacity. A good example? Bosnia - where they can't make enough steel to keep up with reconstruction demand now that peace is a solid reality.

Tanya insists the danger remains in energy demand - shortages in production leave their alternative technologies well positioned, but the overall rising cost of energy is leading to inflationary pressure in consumer sectors worldwide. Her company is the global leader in carbon reclamation - technology to pull carbon particulates from the air, so they expect rapid growth regardless of the political situation.

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Our notes on bird flu reemerging in Indonesia and the rising risk of contagion in the global health sector drew nods from Pascale, but the group soon centered on Fabrice's citation of inequality as the greatest threat facing everyone. While all the other risks facing us now are event or singularly based, inequality is a larger, more intractable problem that no one at the table could see a solution around. It was not about the world's poor, or the unbanked, or the uneducated, but the growing classes of people in Zurich, Paris, London, and across the US who are "working poor", and just able to keep their head above water.

Even a successful group like this can see the writing on the wall - the corporate machine that many of the group work for in varying capacities will discard them by their mid-40s, if they even stay that long. Pensions are dwindling, and even the corporate meritocracy are finding it hard to stay ahead. Given a prolonged downturn the social pressure of greater and greater numbers not benefiting from the economic agenda may have serious consequences. It is the vague certainty of this risk, and a prevailing sense that little can or will be done about it, that seemed to capture the table's imagination.

Perhaps it resonated because it is a form of risk that each individual could imagine personally, as opposed to unlikely EVENTS, such as distant war and disease. The social creep of inequality and a growing sense of elites versus others in the developed world, seems good for neither business or society in the long run. A sobering thought, until someone pointed out that frequent travelers aren't allowed to donate organs anymore because more than four flights a year dries out your organs so much that they are unsuitable for transplantation.

Doesn't that mean flying is worse for our health than ever thought? Urban legend? Probably, but proof that the world is full of risk. No one is going to stop traveling (or enjoying a Martini or two) on account of a dried out liver, or hang up their cell phone because it fries your ears, brain and throat, or stop living based on the fears that are out there.

Thanks gang!