Kenneth Rogoff can pinpoint the moment he started to grow concerned Donald Trump would be the next U.S. president: It was when Rogoff’s fellow attendees at the World Economic Forum’s annual meeting last January said it could never happen. “A joke I’ve told 1,000 people in the months since leaving Davos is that the conventional wisdom of Davos is always wrong,” says the Harvard professor and former chief economist of the International Monetary Fund. “No matter how improbable, the event most likely to happen is the opposite of whatever the Davos consensus is.”

The repeated failure of business and political elites to predict what’s coming—last year, that included the U.K.’s vote to leave the European Union—doesn’t strike those returning this month to the Swiss Alps as very funny. After a year in which political upsets roiled financial markets and killed off the careers of once-dominant Davos-going politicians, the concern for delegates attending this year’s meeting isn’t that their forecasts are often wrong, but that their worldview is.

In its four decades of existence, the WEF has nurtured a broad consensus in favor of globalization and open markets. At its core is the notion that capital, goods, and people should be able to move freely across borders, a principle that can deliver huge benefits to those with education and money but seems terrifying to those without either. For the 3,000 people who will convene in the small Swiss town from Jan. 17 to 20, the 2017 event could be a moment of reckoning. At speakers’ podiums, coffee bars, and the ubiquitous late-night parties, they’ll be asking themselves whether Davos has become, at best, the world’s most expensive intellectual feedback loop—and, at worst, part of the problem. “Since the recession, the boom has benefited the upper-income earners and done little for those in the middle or on less. That’s the backlash,” says Nariman Behravesh, the chief economist for research provider IHS Markit. “The Davos vision of the world has not delivered a broad-based economic recovery.”

David Fuller's view

I think Kenneth Rogoff is right.  Obviously many things are discussed at Davos but there is usually a dominant subject or theme, at least according to the press, and the consensus is generally wrong. 

Why does this happen?  After all, the people attending are generally highly intelligent, if not always analytical or introspective.  Could it be a smear on the part of envious press attending along with other observers who are not principle attendees?  Presumably not if Kenneth Rogoff says “the conventional wisdom of Davos is always wrong”. 

Could it be guilt mixed with fear, leading to a first-class ticket on the Titanic mentality?  They may not be literally at sea but the analogy has relevance as they are sheltered in luxury on a frozen alp.  Presumably they can only go downwards from there. 

There is also a typically behavioural answer.  When a number of different people are confined in close proximity, whether it be at Davos, in stadiums, or large open-plan financial dealing rooms, they quickly become susceptible to groupthink. In other words, their individual thoughts and opinions will be subconsciously suppressed, as they become part of the developing crowd view.  This form of bonding can occur for a combination of different reasons, including friendship, admiration and even fear.  Groupthink is as powerful as it is unanalytical.    

We should monitor reports from Davos, if only because any conventional wisdom could be a contrarian indicator.  Trump’s tweets could be a topic, as they currently are everywhere else, but what conventional wisdom might they produce in Davos?  We will soon know but if it is fear of war with China or Russia, or just a routine impeachment, I might have to buy more commodities.