Davos: Craig Barrett on the Post-Crisis World

logo.jpgThis week I am representing Intel at the Annual Meeting of the World Economic Forum in Davos, Switzerland. Many just refer to this annual event as “Davos”. Intel has been involved in Davos over the last two decades and for a number of reasons it has become recognized as the one of the most influential annual meeting of global leaders from the private sector, public leadership and civil society. And on Intel’s behalf, I plan to represent and convey technology’s role in solving major global problems and improving human lives.

The theme of this year’s Annual Meeting is “Shaping the Post-Crisis World”, and no surprise this dominates much of the discussion – in formal meetings, panel sessions, hallway conversations and media interviews. One question posed to me concerns the new economic model that I see emerging once the dust settles from this crisis. And then whether I believe the resulting model will lean toward a European approach – with more redistribution, more environmental and social concerns and higher taxes? And is America ready for such a model?

I believe the current economic crisis is a perturbation on a larger global trend. The decline in housing prices, the subprime mortgage mess, and the overt speculation in the financial sector are all serious but they are merely short term symptoms of a bigger systemic change. Although it is difficult to predict when the current crisis will moderate, it seems clear that the longer term trends are bound to be more important in determining the winner and losers in the 21st century. With the inclusion of 3B new participants in the world’s free economic system over the last decade or so we are bound to see major shifts in economic power and global competitiveness. Some of the first obvious signs of this shift have been the rise of a manufacturing industry in China and a software/services industry in India. Fundamental to these changes are the ease of movement of capital, ideas, and information, the presence of well trained and knowledgeable workers, and government policy aimed at attracting investments. None of these environmental parameters are going to change in the foreseeable future and as a result, governments and economies will have to decide if they want to compete or they want to pursue isolationism and the economic decline associated with stagnant markets. The means of competition are very straightforward in principle but rather more complicated to put into practice. Economic competitiveness will be driven by smart people (a good education system), smart ideas (investment in research and development) and the right environment to promote investment in innovation (government policy on taxes, IP protection, availability of venture capital, etc). Any economy which ignores these three fundamentals will be left behind.

Thus a debate over whether the US system is better or worse than the European system misses the point. The point is that worldwide competition is here to stay – capital will move to the points of highest return – intellectual capital will follow opportunity – competitiveness and success will be determined by who does the best job on the fundamentals. As such, the ‘right model’ for the future is one which recognizes the necessity of making the decision to compete and then puts in place the right policies and systems to grow smart people and smart ideas and then create an environment to bring them together to do something wonderful.

For much of the last half of the 20th century competition and success were dictated by geographic location – if you were born in the US or Western Europe or Japan you were almost guaranteed a high standard of living and economic prosperity. Now the rules have changed. Country of birth is no longer destiny. We all have to compete if we want a bright future and it seems that much of the developed world would rather talk about how unfair and distasteful competition is rather than make the decision to compete and then get down to the difficult task of actually competing.

So, let’s move the debate from the US vs Europe to competing in a new world. Right now it seems those 3B new capitalists from the developing economies are more interested in competing than their counterparts in the developed world. As Wayne Gretsky said, skate to where the puck is going, not where it is now. I hope that the Davos leaders will follow Gretsky’s advice.

32 Responses to Davos: Craig Barrett on the Post-Crisis World

  1. Rk says:

    But how can we when the global market when it is broken?
    Our system of capitalism is built on the presumption of honesty, respect for the rule of law, and the assumption that institutions of stature and credibility (such as banks,rating agencies,etc) will tell the truth.
    At the moment we have a highly skewed system – US is hanging together because we can freely abuse our privelage as the global reserve currency. For a truly balanced global system to emerge these problems must be engineered out – and as such we (the west) have a hugh mountain of debt to pay down?
    Not as simple as it all seems.

  2. Michael Pitcher says:

    That is a great article, well said on competition, it seems that we Americans are so focused on being fair, wether it be the rich paying their fair share, or what’s in it for me – Read Stimulus – That we have forgotten how to compete, and what it means to compete.

  3. Greg Colton says:

    I wasn’t aware of the debate, but upon reading your summary of it, it certainly smacks of human nature: Too over debate the past while missing a fundamental change coming in the present and future. Thanks for surfacing the discussion to employees Craig. An economic and competitive inflection point to be sure.

  4. winux38 says:

    I have a lot of respect for you Mr Barrett and a lot of respect for Intel as well but I don’t beleive you are fully right.I am currently working in the biggest europeen sime company and I think that problem is not really competition one against the others or at tleast not just on an economical model. The real problem we have to think about is what is the model of society we really want and what do we want to leave to our kids? It is clear that if china and India behaves like US and Europe, the life of the world can be counted. I am not saying that we need to go back to middle age and forget all the need, help wellness we can get from technology whatever it is. I am just saying that profit, competition, perfomance,… have to be directed in order to put the people in the emiddle of the scene. For sure new comers want to compete as they have much more to gain than to loose but we need to learn from the big mess created by this crisis. We live today in a world where challenges are enourmous and could generate a lot of opportunities in term of business and growth but we have to accept to change the referential we use to judge, assess, rank, companies. Finance is just one part of the equation it is time to address the biggest ignored part up to now: the people. Global warming, food shortage, water shortage, alternative energies are domains where bright people with good education are needed. COmpetition is needed to make things better. I am again not saying that we have to forget profit, ROI, margin and so on but more saying that these are factors that industires have to optimize but it is far to be enough. It is time to introduce other elements like impact on environment, people, society,social responsibility and not something companies put in their top page to provide the world with a good face but really fundamentals values which are as important or even more than pure finacial parameters. In this case Yes I agree for competition, growing smart people and so on..
    It is our responsibility to avoid new entrants to make the same mistalke as the ones we did we all have to growth and there is still a tremendous job to be done but it radically needs to be done differently

  5. Jerry says:

    Craig, perhaps 6-8 years ago,I sent you an email. The gist of it was, when globalization and outsourcing succeed in tanking the US Economy, what are we going to do? Your response was “we believe Intel can do quite well in a US recession, because so much of our business is done overseas”.
    Clearly the events of the last year should point out how incorrect you were. We’re now paying the price for years of neglect of the western economies. Greed and the inability to look beyond the next quarter’s balance sheet caused this.
    Now one can wonder how globalization contributed to the current crisis. It’s simple. In response to the dearth of manufacturing jobs in the US, we built houses. Bankers created ever more creative ways to get people into those houses. Eventually multiple factors combine to bring it all down….the loss of manufacturing jobs, the oil bubble…the credit crisis.
    Corporate greed, in all it’s facets, caused this.

  6. Santhosh Viswanathan says:

    Great Article and the essence that i can see is that it all boils down to human capital and the flexibility it has in the 21st century. Often in times of downturn this element is easily igonored , layoffs forms the first option to ensure that the analysts are happy , one country that i see in asia who is proactive in addressing this approach is singapore , where in tough times the government encourages / invests in training and skill up , its a larger view that looks beyond these current times and prepares people to face the buyont tomorrow. The key is how many companies and governments do that , especially when is comes to keeping talent or harnessing talent from elsewhere , being an indian in the last few years i have seen that many mature coutries ensure that talent feels at home , from indian food to communities that ensure that your never really away from home . This change of cultural acceptance , diversity and unity will be the key need ahead and economies who make these changes early will reap the benefits of a globalised world . We have heard many debates on globalization , on the benefits and the cons but in essence i think we do need to accept that its here to stay and countries, companies who accept this and use their energies to harness the benefits will be the companies that lead in the 21st century.

  7. Nicolas Gagnon says:

    No country or empire has ever succeeded economically by closing itself. The temptation is great in these time of crisis, but history tells us this is not the solution.

  8. Rk says:

    A reader comments “it seems that we Americans are so focused on being fair”…
    Listen – we’ve got this far precisely because the systemis NOT fair at all. We had a golden privilage – because we can borrow on the gloabl market in our own currency.
    The game is NOT fair – but stacked in our favour. So we live it larger and the time had come to release our privilage – stop infinite borrowing of others savings – and let globalisation begin.
    Globalisation has not actually begun yet – Only the opening gambit were we try to stack the game in our favour beforehand! :-)

  9. AS says:

    A fundamantal problem that free societies face is whether thay can compete with controlled economies without undergoing re-structuring that will be distasteful to some. It is quaint to mention a top notch education system and modern infrastructure, but the fact is not one private company will step forward and fund those ventures without some immediate benefit being in the effort for them. The US, Western Europe and Japan developed high standards of living for most of their citizens because governments funded and bore the burden for efforts that do not bear immediate results, like primary, secondary and higher education, and fundamental scientific and engineering research. Today’s loud debate about “earmarks” make funding any effort that does not show immediate promise impossible. Earmarks often lead to future products and new markets, that fact is being missed. Where would companies like Intel and Cisco be without government funding of an infant internet?

  10. Krish Raghuram says:

    Craig, thank you for this perspective. There is one part that deeply worries me about the US – how the legal system has re-inforced the “blame-game” and “lottery” mentality among its citizens. I’m referring specifically to the unconscionably high damages awarded against corporations or any segment seen to have deep pockets (like doctors).
    This is resulting in us becoming a high-cost and inefficient society, and the current actions in Washington D.C are very short-term in nature (extend medicare to the jobless rather than push tort-reform to cut down the cost of health care).
    What are we doing to build a groundswell of support for long-term actions? I should also add that I’m completely convinced by the Fair Tax arguments after reading books and articles on the subject (eliminate the IRS and institute a 23% federal sales tax on new sales), and this is a way for the US to show the way to the rest of the world.

  11. Jim says:

    I’m quite afraid of the word “redistribution”. Redistribution of what? Personal wealth? And controlling the world markets through the fear of global warming. And taxing the working man so that only the rich can flourish? Capitalism and the free market ecomomy have allowed America to be the envy of the world. We need to bring developing nations up to our level of success and lifestyle, not bring us down to the level of a third world dictatorship. As Vaclav Klaus stated in his book Blue Planet in Green Shackles, “Communism was replaced by the threat of ambitious environmentalism. This ideology preaches Earth and nature, and under the slogans of their protection – similarily to the old Marxists – wants to replace the free and spontaneous evolution of mankind by a sort of central (now global) planning of the whold world”. Is this what Intel wants?

  12. peter macnamara says:

    I agree with the views of “winux38″ that we have to look at a lot of fundamental issues before deciding the strategy for the next 100 years. Our current model is broken because it was based on greed, a lack of respect for the value of labour and raw material and the assumption that markets and revenue can continue to grow at an infinite rate. The western nations have given us many great models both politically and economically which are copied by the rest of the world. Now that we’ve come to the end of over 250 years of boom (beginning with the industrial revolution in Europe) and seen the weaknesses which have caused the end of this particular model it is now up to these same nations to think hard about the future model and help drive world opinion to build it. Expecting newly developing nations to take the place of western led thinking and experience is to ignore the lessons of history and perpetuate the very issues whxih have come to harm us all

  13. Carol says:

    I have to agree with some of the others commenting. Human greed and our willingness to grow and compete at any cost got us into the situation that we’re in today. Companies need to act holistically considering their impact to the environment, people, and profit. It’s sad how quick American corporations are willing to abandon the workers of the country that built and made them successful when they can get the job done a little cheaper somewhere else. This is just an act of laziness and demonstrates a lack of creativity. There are creative ways to be profitable without laying off the workforce that built these companies.

  14. Kyle says:

    Globalization didn’t cause this crisis. Profligate central banks and their manipulation of interest rates did, along with regulatory policies that encouraged the securitization of debt (this scored better in the risk models, so required less capital reserves.) There was nothing extraordinary about what happened; it was a textbook credit mania, if your econ textbooks are Austrian.
    Globalization is inevitable. It’s also good; see the law of comparative advantage.
    Domestically, the housing and financial sectors are overbuilt. They need to shrink, not to be saved! The same will be true of whatever sectors are inflated in the next bubble the central bank creates.

  15. Casey Thielen says:

    While Mr Barrett’s point that competitiveness is the fundamental question is certainly true, the very apparent answer is that we do want to compete. Speaking from a U.S. perspective, this is fundamentally what has built the U.S. into what it is today.
    The VERY NEXT question is how can we compete most effectively? This is where the question of U.S. vs European vs other types of economic models becomes extremely important. While our current U.S. leadership seems very intent on modeling our next decade in the U.S. after the European model, a very hi-level macro-economic view of history over the past 50-100 years makes apparent the general outcome of these respective models. However, we see that the U.S. is at its pinnacle and is starting into its decline economically (in all ways, actually), and one of the reasons for this is our drift away from the fundamental principle of rewarding personal effort (it is certainly not the only reason, though). At this point, I think the U.S. will have to badly stumble before the people of this nation realize the mistakes that are being made due to some fundamental misconceptions.
    Perhaps it will not be too late to take action by that time, but we will see.

  16. David says:

    CRB – Was there any discussion at Davos related to the importance of Ethics and Trust in the Post-Crisis-World. It is great that Intel has such a strong Corporate Social Responsibility Program and living / functioning Code of Conduct. Do you think we can use these items as competitive differentiators going forward – Generation X/Y are interested? What message would you have for the employees as we face financial insecurity and job uncertainty?

  17. Garth says:

    This is a great article; it’s forward thinking and it is in conflict with proponents of big gov’t, centrailized planning or a paternalistic society. Those who believe that gov’t were instituted to take care of every failing of the human condition, will soon find that the same gov’t have taken away all Hope, creativity and ultimately their success and spirit. Let’s not follow the model of Old Europe, they are on the decline.

  18. William says:

    Craig brings a new, fresh and different point of view about this global crisis. I suggest to our Costa Rican management to consider publish this article in the local newspapers and send it by e-mail to a gropup of selected influential leaders. Basicallt by the educative content of his reflexion

  19. Hugues Mathis says:

    Dear Craig, what you say seems reasonable but I think we’re missing the urgency in here. The urgent issue is to prevent the exhaustion of the planet. While in Davos, did you have a chat with the Swiss complaining about the melting down of their glaciers ? (though I’m not so much worried about them than about people in develping countries’s coastlines and along the paths of Hurricanes).
    Let’s go make/invest in making batteries for electric cars – seriously. That would be outstanding CSR. This we can impact. On the global economy and the remanence/revival of competitiveness, although all Intel we are, I’m not sure we can do much except follow the trend.
    Hugues.

  20. scott says:

    Actually one of the root assumptions here is flawed; economic winners typically do not “win” by competing; they minimize risk by minimizing the amount of actual “competition” that occurs. The “winners” are those with excess resources that others deem valuable enough (labor, oil, ..) that they are willing to trade for their resources; the “winners” are the ones with the resources percieved as most valuable. The US once had resources in energy, mining, farming and the IP to exploit the industrial revolution. Now we are innovating with our remaining IP and making as much profit as possible from manufacturing offshore. We are past peak oil, manufacturing is moving offshore and we are consuming less than we produce.. That offshore value add will eventually stick to the economies where the factories are cannot be ignored. Should we continue to be positive and try as hard as we can to use what resources we have (innovation, optimism, drive and persistence) to “not loose”? Of course! But lets’ still take the European approach of being pragmatic about our resources and their efficient utilization, and leave behind as obsolete the arrogant behaviour that stemmed from a belief in infinite resources.

  21. John Domogalla says:

    Competition is glorious, it might mean the whole field rises, but it usually means few winners and many losers. It means your basis is a zero sum game where there is not enough to go around. So don’t worry about the winners they’ll be ok what about the losers. Not the drunks, I mean those with decent education or skills that can’t yet support a family. I don’t know either. The target is to involve everyone at the level they can produce, not to chose one over the other. Individuals find it very hard to self-direct. Most of us work in large networks, or corporations because the products of today are far more complex. Do you know how to turn a 35nm transistor into a google server?
    Its not that our corporations are failing us, they just have too small a mission statement. So people are going to look to government to paint a bigger picture. Balance ownership-power and contribution-labor so every one has the self esteem they want and doesn’t claim wealth by their indispensible nature in the economic chain. That’s your goal, not to represent corporate interests.

  22. TF says:

    Yes, I would agree with the term “competing in a new world” versus debating the different systems. Competing in a new world, in my mind, would include the major focus of competing against “vices” such as unethical conduct, weak mgmt/monitor etc (which to me) are the major contributors to the iterative economic battles that the world goes through almost every decade since centuries ago.

  23. Shivesh says:

    Firstly, great article by Dr. Barrett!
    I think he put it best by telling what 3 things (smart people, smart ideas and right environment)any country needs to be called “Developed” (or to become developed).
    In my opinion the first 2 things (smart people and ideas) are universal, meaning each country, civilization, culture possess this (yes the western world, the oriental, the middle eastern, African et al). The only thing some developed countries have and the rest of the world dont have is the environment or if we take it further the right “time”. Throughout history we have seen such “time” in possession of various cultures/civilization: The great Gupta dynasty in India, The Greeks had their time during Alexander, the Persians, the Egyptians, The Romans, The Aztec Empire, the British Empire, the Chinese empire (i may be missing others), and currently the free society of USA. So in my view every nation/region/culture has their “time” to prosper and then pass the baton to the other nation/region/culture/civilization . But what remains, of it when it passes is it creates its own momnet in history (a learning model for the future generations to come). I am not saying that US/Europe has reached that stage, but at some point, inspired by these developed nations, rest/part of the world will develop and outdo them because not only they will borrow the learnings from these nations, but will add their own to them.
    Well though my perspective is based from an historical (and probably little philosophical) standpoint, it is a perspective which is easily verifiable.

  24. Shivesh says:

    Firstly, great article by Dr. Barrett!
    I think he put it best by telling what 3 things (smart people, smart ideas and right environment)any country needs to be called “Developed” (or to become developed).
    In my opinion the first 2 things (smart people and ideas) are universal, meaning each country, civilization, culture possess this (yes the western world, the oriental, the middle eastern, African et al). The only thing some developed countries have and the rest of the world dont have is the environment or if we take it further the right “time”. Throughout history we have seen such “time” in possession of various cultures/civilization: The great Gupta dynasty in India, The Greeks had their time during Alexander, the Persians, the Egyptians, The Romans, The Aztec Empire, the British Empire, the Chinese empire (i may be missing others), and currently the free society of USA. So in my view every nation/region/culture has their “time” to prosper and then pass the baton to the other nation/region/culture/civilization . But what remains, of it when it passes is it creates its own momnet in history (a learning model for the future generations to come). I am not saying that US/Europe has reached that stage, but at some point, inspired by these developed nations, rest/part of the world will develop and outdo them because not only they will borrow the learnings from these nations, but will add their own to them.
    Well though my perspective is based from an historical (and probably little philosophical) standpoint, it is a perspective which is easily verifiable.

  25. Beav says:

    Competition and success do not have to lead to greed. More than any other company I know, Intel generously allows volunteer service during working hours, matches United Way contributions dollar for dollar and provides large financial gifts for international disasters. Have we forgotten that We’ve just logged over 1 million volunteer hours in 2008? Each person has the right to reap the rewards of their harvest however they may choose and attitudes cannot be mandated.

  26. Clark says:

    I strongly urge every Intel employee to read Thomas Friedman’s excellent book, “The World is Flat.” In it, he discusses what factors are changing (forever) the global competitive landscape. You will also hear echoes of Andy Grove’s discussion with Charlie Rose on America’s future as you read the book. We are not in Kansas anymore…

  27. David Tran says:

    Seems like some reader comments create a false dichotomy between being the best competitor on the one hand, and being a force for societal good on the other.
    Craig lays out a model for any country to compete well but says nothing about what the end goal of this competition should be. Suppose we apply this model to become the best producer/exporter of green renewable goods, as the Netherlands arguably did with wind energy, or to convert gas-powered cars to electricity (Andy Grove has talked a lot about this). All the while still making a nice tidy profit.
    In other words, let’s not get stuck in the dated notions pitting economy against ecology or social good. Instead let’s harness the power of the free market and channel it toward a better balance between private profits and the greater good.

  28. Jeff says:

    An annual meeting of global leaders should be reminded; Wisdom, from and of Truth, is greater than all the knowledge and achievements that can be obtained through the machinations of human industry. One must keep primary the fundamental truth that all this activity is for and around the human person. One human thought is more valuable than the whole of the universe. If one does not know or at least have faith to believe this, then this falls on deaf ears. Reward and success in all of human endeavor will be realized by all and for all, when the dignity of the individual human life and person becomes primacy. With greater knowledge and authority comes proportionally higher responsibility. If those at the helms of human industry knew how much responsibility, power and influence they truly had on the plight of global humanity, they may fall to their knees and loose the strength to persevere. The virtue required is fortitude with a super-natural goal. All decisions made with courage in the light of this truth, come with their own reward here, now, and later.

  29. Andy Miga says:

    What this message is telling us between the lines is: US employees, be ready for lower pay and/or layoffs. One roughly equals another, as you may be rehired by the industry at a lower compensation package.
    And there is no choice. To be competitive as a corporation, this business must do what others do, preferably better.
    In the 19th century capitalism, there were no environmental standards, work time and wage standards, injured workers were thrown out to the streets. Every business had to do this then, just to be competitive.
    This changed, not by a compassion of the industry (come on!), but by government regulations. It worked well for most of the 20th century.
    Welcome to the 21st century!
    Not-so-Flat World: In those other competing countries, there are no environmental standards, work time and wage standards, injured workers are thrown out to the streets.
    What is the industry going to do? Exploit it! Any business has to do it to remain competitive!
    Where is the government? Well, there is no World Government, yet. And unfortunately, there is enough political, cultural, ethnic and religious differences that such a government will not exist soon, be stable and effective, or perhaps could not ever exist. Or perhaps, it will be dominated by corporate power and worker-minded regulations will not be possible.
    Welcome to the 21st century capitalism!

  30. DH says:

    What is the cure to much of the present ill? Two words: “Stop cheating”. Entire banking and market systems need to stop cheating, or rather be made to stop. Ideals only work if there’s no cheating. Who knows the depth and breadth of the group that depends on this same cheating? Perhaps we owe it our way of life! How do we change something to which we have little control and even less knowledge about?

  31. janunezc says:

    The world mr. Barrett is describing is rather a world of opportunity instead of a world where destiny is defined by already-set-variables.
    The opportunity is there, those three fundamentals are quite true: Smart People, Smart Ideas and appropriate environment.
    There are other fundamentals I would include, but they will ultimately fall within one of those three.
    I have been thinking on top priorities a country should focus to emerge stronger from this so called crisis. Those priorities seem not to have changed from pre-crisis times:
    1. Food
    2. Education/Science
    3. Health
    The difference between pre-crisis and crisis times is that we are now more urged to prioritize out other stuff that does not contribute to these fundamental priorities.
    So, this crisis continues to be an opportunity to become lean/mean and reshape our future.