Davos hosted ‘one of the strongest collections of CEOs in the world,’ BCG chair says

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Boston Consulting Group Global Chair Rich Lesser joins Yahoo Finance Live to discuss the World Economic Forum in Davos, Switzerland, recent geopolitic shifts, how COVID has changed global trading, and technological resilience.

Video Transcript



LAURA ALBER: I think everybody is worried right now. I mean, I think affecting everybody's mindset.

ENRIQUE LORES: There are significant challenges when we look at the impact of inflation, the impact of the war, the increase of energy prices, the situation in China. Each of these things could drive for our recession.

GINA MASTANTUONO: The tone has been much less pessimistic than I anticipated. And certainly, while recession is likely in many economies, the thought about soft landing and not as deep, the fundamentals are much stronger.

CHUCK ROBBINS: Overall, I sense there's still more optimism here than what's sort of being portrayed relative to this fear of a recession.

- Well, those were just some of the big names out of Davos talking inflation and the global economy. Now earlier, I caught up with Rich Lesser, Boston Consulting Group Global Chair, and we discussed the landscape for businesses in a fragile economic environment. Take a listen.

RICH LESSER: It's very interesting, because like you, I read all the headlines going in and I expected to have a set of conversations with leaders around the world that were on average pretty negative, and that was not the mood I picked up. I mean, there's certainly a huge amount of uncertainty, there's no question. We learned when we did this virtually last January that things can change radically, even within a few months. So no one's underestimating the uncertainty.

But I think on average, there's much more optimism than I had expected to hear. To be honest, personally, I went into it more optimistic than what I was reading in the newspapers, but that was echoed not in every conversation, but in many of them. And I think people see some pretty good signs on the economic front as it relates to the US economic inflation.

Core inflation is pretty reasonable the last few months. I think Europe's weathering the energy, storm better than people anticipated. We're lucky it's a milder winter. Energy stocks are pretty good.

And obviously, what China has to go through in this month and next month is pretty brutal. But I think the expectation is that by the last three quarters of this year, it should be pretty strong again. So I would say overall, now when you get beyond the economics, certainly there are concerns about what's happening in Ukraine, that the war seems to be being prolonged. You have geopolitical tensions that remain high, even if they seem to have maybe improved a touch.

So there are elements that are a bit challenging still and, not a bit, very challenging. I don't want to underestimate that. But economically, I think it's far less gloomy than I anticipated.

- And as we've been mentioning here, in person for the first time in a long time, but we didn't see a lot of G7 leaders attending this. We saw some CEOs, including Elon Musk, declining the invitation. Is there something that ends up getting lost when you don't have as many CEOs or you don't have as many G7 leaders at an event like this?

RICH LESSER: So, I saw, I think there were a lot of business leaders here. I mean, I can't ever remember seeing Elon Musk at a World Economic Forum. I'm sure he must have come over the last decade, but I mean, so there are some people who have never come or rarely come. But there were a lot of CEOs.

The Alliance of CEO Climate Leaders where I'm the Chief Advisor, we had 80 CEOs of big companies in a room talking about how we accelerate progress on climate. All those companies to be able to join have to have already made big commitments. I mean, it's probably one of the strongest collections of CEOs in the world.

There were a number of government leaders there, certainly, who spoke during the week. But I do, at least what I read, was perhaps a few less than normal. But there were also a lot of the leading NGOs there. So I found the collaboration across public, private, social sectors to be pretty good, actually.

- And you figure this sort of collaboration is more important than ever when you look at what happened with the COVID fallout, when you look at things like Russia's invasion of Ukraine. I mean, we've really seen some seismic economic and geopolitical shifts here. So I want to talk about BCG's newest report predicting the shakeout about what this means for the global winners and losers on the other side of this. Which are the trade dynamics that you think have the most impact potentially on markets?

RICH LESSER: So first, I think that the report in particular highlighted the strength of ASEAN, a strong trading partner to many of the major economies around the world and given all the desire to diversify supply chains a bit create more resilience. And so it should come out as a winner in terms of overall flows. But you're right, I do think one of the most interesting implications is that we're seeing that for decades, global trade has led overall economic growth.

And that for this year, it lagged a bit, and that, that might continue in the years ahead. I do think when we don't have a robust trade regime, obviously, it's not optimal from an economic point of view, but as we see, there are other considerations that are going into that right now. And we do still see an enormous amount of things flowing globally.

Our young people are probably more connected globally than they've ever been. There's more knowledge of new ideas and new products flowing around the world. So I think the trade report is an accurate depiction of what's going on in the physical flows of goods, but we shouldn't underestimate that in many, many ways it remains a highly connected world.

- So then as a CEO who's watching all of this unfold, how do they navigate these changes ahead?

RICH LESSER: So first of all, there are so many more degrees of uncertainty and pressure that a CEO faces today, even than five years ago, that we just have to acknowledge it is a different world. And I hear that, I see that personally, having been a CEO for so many years and talking to so many CEOs now, and that is the world we're living in. I think it puts a premium on resilience, a premium on agility, a requirement to make investments that allow one to navigate those new sources of data, faster inputs.

So we talk a lot about what you do with data. And as we're seeing so rapidly evolve the AI landscape, to be able to interpret signals faster, to be able to respond more effectively, and to really contribute to resilience. Resilience is not just about going from just in time to just in case inventories. It's about the way you use data and information, the way you learn, the way you work across an ecosystem so that supply partners understand each other's situations and the way you build deeper relationships with customers that are stronger relationships, often leveraging better insight into what their needs are and helping them to know how to respond to uncertainty and winning their trust as a business partner. So I mean, those elements of a CEO's job and how they need to lead their organizations are so much greater than they were a few years ago.

- And, of course, we have to talk about the China reopening picture and what that means for CEOs. How are they viewing this? Because we know there was something of an adversarial relationship when the Biden administration was first trying to navigate what was happening with COVID and the fallout there. But as China reopens, and there does seem to be a lot of optimism really tied to China's reopening, how did you see CEOs discussing that?

RICH LESSER: So I'd say mostly, look, I think everyone believed that at some point China would need to reopen. I think most people were surprised, in a year of many surprises, at the very end of the year, the speed of that reopening was a surprise to many. And of course, there's concern from just a human life standpoint of what could happen in China and the impact on people there, some of whom are vaccinated, but perhaps not as protected as certainly populations where many people have already gotten COVID and built some immunity naturally as well as through vaccines.

So there's a concern about that and what it could mean. But I think from a pure economic standpoint, I think getting beyond this quickly and having China be in a stronger place, I think most of the world believes it needed to happen sometime. The thought was the band aid, so to speak, would be pulled off very slowly. In fact, it will come off quite quickly.

Then when you say, what it means? I think most people think that's a good sign for global economic growth, that China should have a good rebound, maybe not in Q1, but in the 3 quarters that follow. I do think there's a little bit of concern about what that might mean for raw material inflation, if China's demand picks up a great deal.

If there's a lot of pent up demand among Chinese consumers, that we might see a resurgence in some of the supply side inflation. On the flip side, some of the inflation caused by supply chains that are disrupted and all of the things we saw last year with the shutdowns, that should minimize. So on net, my sense is from an inflation point of view, it's probably more good news than bad news, but only time will tell.

- Well, that was my conversation with Rich Lesser, Boston Consulting Group Global Chair.