Davos: Delight over the recovery, fear for the bigger picture

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At the World Economic Forum in Davos, several speakers spoke of their "Davos moment" – the moment they had an epiphany.

Mine occurred when I was on a panel about how governments can engage citizens in new ways. I was discussing the emerging crisis of legitimacy of our democratic institutions. Around the world, governments are having difficulty getting things done and doing the right things. In many countries civic engagement by young people has been growing, but young voter turnout is declining. They are becoming alienated; many agree with the bumper sticker, "Don't vote. It only encourages them." Protests are rising in number.

I was interrupted by another panelist, a young man who, among other things, cofounded Avaaz.org – a network of 34 million people focusing on big issues. He said: "Don, I don't understand your point. Why is this a crisis? Why is it bad that these fossilized institutions are now being understood to be no longer relevant by a growing portion of the population, particularly young people?"

Welcome to the age of disruption.

An eerie atmosphere marked the Davos event – delight about the uptick in the global economy contrasted with deep fear about the bigger picture. Salesforce.com CEO Marc Benioff was ebullient about the economy, saying, "The economic crisis is over!" (Computer-maker Michael Dell interrupted him, quipping, "Yeah it feels great, just like 2007.") But in the next breath, Mr. Benioff pointed out there are looming broader concerns that could be devastating for business and humanity. He talked about environmental damage, the reality of climate change, automation sucking jobs out of the economy and dysfunctional governments.

There was consensus that a new technology revolution is bringing some tectonic changes. We will go from 2 billion to 7 billion Internet users over the next decade, but that's just the beginning. Cisco Systems chief executive John Chambers describes the next wave as "the Internet of Everything." Soon there will be trillions of objects online as the physical world around us becomes smart and networked.

The downside is something, new – an era of permanent structural unemployment.

Welcome to the "jobless recovery." Eric Schmidt from Google said that we're into two or three decades in which jobs will be the dominant issue. Decades ago, a wave of computer-generated automation wiped out blue-collar jobs. This was followed by a wave of outsourcing that affected some white collar workers. Now a new wave of robotics and networked-inspired automation is targeted at knowledge work.

Technology is convulsing entire industries and wiping out professional and management jobs. Amazon.com turned book retailing on its head and is now transforming retailing itself, devastating big box stores like Best Buy. Parts of the magazine industry have been wiped out and newspapers are under financial pressure. Education is ready for massive disruption from MOOCS – Massively Open Online Courseware. Legal Seafood uses robots to remove shells from shrimp. Bill Gates reported that he's working on robots that can pick crops better than humans can. Pharmacists will be replaced by drug dispensing computers, 3D printers will print homes, and you will hail an autonomous vehicle rather than a taxi.

"This is a new phenomenon that is coming on very fast," Mr. Benioff said. Noting the global epidemic of youth unemployment, Cisco's Mr. Chambers said, "We're close to losing a generation of young people."

One essential ingredient to help grapple with these new problems is education. During the industrial revolution people coming off the farms and the leaders of society understood that we needed public education. Everybody needed to go to school. What is our response today? There needs to be a similar revolution in education as we transition to the digital economy.

In emerging economies it's about literacy, basic skills and knowing the importance of measures such vaccinations. In the developed world, students need higher order critical thinking skills. The biggest demand is for graduates in the so-called STEM: science, technology, engineering and mathematics. One executive described how his daughter was graduating from Stanford in engineering and stopped interviewing after 22 job offers – some with big signing bonuses.

Still, we also need embrace lifelong learning and bolstering the capacity to think. One educator called for STEAM – adding in Arts to STEM. All graduates need to synthesize information, solve problems and place ideas on context. Maybe every STEM student should be forced to take some liberal arts courses and every history student should have to take a computer-programing course.

Others argued that a key to overcoming the problem is entrepreneurship. Studies show that 80 per cent of new jobs come from companies 5 years old or less. Given the right conditions to take root and flourish, "gazelles," as Mr. Schmidt calls them, are the foundation of innovation, growth and prosperity. They see opportunity in a new way, bring fresh thinking to the marketplace, and fuel the creative destruction that makes market economies resilient. For many young people, being entrepreneurial and creating their own jobs will be the surest path to employment.

The good news is that it's never been easier or cheaper to start a business. One study found that readily available resources such as open source software, cloud computing, and the rise of virtual office infrastructure has driven the cost of launching an Internet venture down from $5-million in 1997 to less than $50,000 today.

Over all, it was refreshing to hear leaders acknowledge that solutions to global problems must be multistakeholder and that creative and responsible businesses have a role to play. In the 20th century, nations built global institutions to facilitate joint action and address global problems. But in the 21st century, we need new tools and power structures. Today's challenges demand solutions that transcend the traditional boundaries of the nation-state.

Example: I attended a private dinner with Ban Ki Moon, and the senior leadership of the UN along with about 20 CEOs of large companies and a few civil society leaders. The topic was climate change and CEOs agreed that solving this problem should not be viewed as a cost, but rather that it will create a new kind of economy with jobs and prosperity. The UN Global Compact, a multi-stakeholder network run out of the UN, is organizing a global summit this September, where business and civil society will have an equal role to governments in creating a global mobilization to address the problem.

Reflecting on the experience, I'm reminded that we have much work to do and that business will be key to transformation. There were no corporations at the table at Bretton Woods in 1944 or 1945 when we created the United Nations. Today, most people see companies as critical pillars of society that need to step up, get engaged and do the right thing – if for no other reason that business can't succeed in a world that's failing.

Don Tapscott is Executive Director of the Global Solution Networks program at Rotman School of Management, University of Toronto.