1/31/2018 Prophecies Made in Davos Don't Always Come True - The New York Times

Prophecies Made in Davos Don’t Always Come True

By Andrew Ross Sorkin January 21, 2013 8:13 pm

You’re going to be hearing a lot of predictions over the next several days. Be leery.

Some of the world’s biggest names in business and politics are descending on the snowy enclave that is Davos,
Switzerland, for the annual meeting of the World Economic Forum, which begins Tuesday evening. They are there to talk big
ideas — and perhaps more important, to rub elbows and do business over Champagne and cheese fondue. (Yes, I’ll be there,
too.)

Invariably, there will be panel discussions filled with provocative prognostications about the state of the economy,
politics, technology and an assortment of other issues. But if you’re looking to the Alps for the wisdom of crowds, the wisdom
of this crowd of the global elite may not be the most accurate.

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The predictions that have emanated from Davos always have a ring of plausibility to them, in part because of the
credibility of the speakers. But all too often they fall short.
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1/31/2018 Prophecies Made in Davos Don't Always Come True - The New York Times

Here is just one example: Bill Gates, the co-founder of Microsoft and global philanthropist, has made the pilgrimage to
the Alps for more than a decade and made a series of somewhat famous — or infamous — predictions.

When asked about Google back in 2003, he didn’t have an upbeat outlook on the company’s future nor its founders.

“These Google guys, they want to be billionaires and rock stars and go to conferences and all that,” Mr. Gates said. “Let us
see if they still want to run the business in two to three years.” (Larry Page, a co-founder, is the chief executive.)

And the next year, Mr. Gates followed up that prediction with this marvel of what the future would look like: “Two years
from now, spam will be resolved.” (If only.)

Broader predictions about the economy have been even more miss than hit. In 2011, ahead of what turned into a full-
blown economic crisis in Europe that threatened the existence of the euro, Christine Lagarde, the French minister of finance at
the time, declared: “I think the euro zone has turned the corner. Let’s not short Europe and let’s not short the euro zone.” (If
you had bet against the euro zone then, you would have made a small fortune.)

And it is not just recent predictions that have been, for lack of a less polite word, off. Abby Joseph Cohen, the longtime
Goldman Sachs market analyst, announced in Davos in 2000, at the height of the technology bubble, that she expected a big
year for stocks, with the Standard & Poor’s 500-stock index gaining 10 percent. Of course, the S.& P. 500 did nearly the
opposite, falling 9.1 percent that year, followed by two more years of declines that totaled a 34 percent drop. (In fairness, Ms.
Cohen revised her prognosis several months after her trip to Davos and told her clients to sell stocks.)

How’s this for an anti-prescient panel? In 2001, the World Economic Forum put together a panel on “the shape of the 21st
century corporation.” Among the headliners were Ken Lay, the chief executive of Enron; Carleton S. Fiorina, the chief
executive of Hewlett-Packard; and David H. Komansky, the chief executive of Merrill Lynch. (We know how their tenures
turned out.)

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1/31/2018 Prophecies Made in Davos Don't Always Come True - The New York Times

In 2006, about a year and half before the credit crisis was upon us, Martin Halusa, the chief executive of Apax Partners,
declared that he expected to see a private equity fund of $100 billion within a decade.

News flash: private equity funds have become smaller, not bigger. He has three years to see his prediction come true, so
stay tuned.

And then there was Davos 2008, about eight months before Lehman Brothers collapsed and the global economy spiraled
downward. What did C. Fred Bergsten, senior fellow and director emeritus of the Peter G. Peterson Institute for International
Economics in Washington, have to say about the state of the economy? “It is inconceivable — repeat, inconceivable — to get a
world recession.” (A year later, he defended his words, saying, “through the first three quarters of last year, my prediction was
correct.”)

That’s not to say every prediction said in Davos is wrong. Nouriel Roubini, known as Dr. Doom, announced in Davos in
2007, “The risk of some crisis happening is rising.” And while he turned out to be right, he was roundly criticized for being too
pessimistic by Michael Lewis, who wrote a critical piece about doom and gloom of some academics. His piece was titled,
“Davos Is for Wimps, Ninnies, Pointless Skeptics.”

Did Mr. Roubini really know the full extent of the crisis brewing? Of course not. But directionally, he was correct.

Having said that, he was back playing Dr. Doom last year in Davos and predicted that Greece would default within a year
and that Portugal was next. George Soros, the billionaire investor, was also sounding the same alarm about Greece’s eventual
default. “The odds are in that direction,” Mr. Soros said. (That hasn’t come true — at least not yet.)

That same year, Mario Draghi, the president of the European Central Bank, had it right: “We know for sure that we have
avoided a major, major credit crunch, a major funding crisis.” (Of course, he could help control the outcome.)

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1/31/2018 Prophecies Made in Davos Don't Always Come True - The New York Times

What about the wisdom of the collective crowd, not just the individual predictions? If you’re looking for the mood of the
corner office — even if it is a fleeting mood — the annual meeting of the World Economic Forum is actually a pretty good
litmus test.

PricewaterhouseCoopers does a survey of many of the participants that it reveals on the first night of the conference.
While the results would not have helped investors in 2008 (the group was still quite bullish), listening to the results in 2009,
2010 and even 2011, the view was generally on target.

But, of course, it is the individual predictions that receive the most attention. I remember paying particular attention to
this one: In 2008, the futurists and technology forecasters Peter Schwartz, a co-founder of the Global Business Network, and
Paul Saffo of Stanford University declared that they expected the publication of newspapers to end by 2014. Luckily, the
prediction track record in Davos isn’t great.

A version of this article appears in print on 01/22/2013, on page B1 of the NewYork edition with the headline: Prophesies Made in Davos
Don’t Always Come True.

© 2017 The New York Times Company

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