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British Prime Minister Gordon Brown (R) speaks with South African President Kgalema Motlanthe after a session 'Reviving Economic Growth' at the World Economic Forum on Jan. 30. FABRICE COFFRINI/AFP/Getty Images
Davos can deliver insights it doesn't necessarily intend.
The key messages that seemed to flow from four days of speeches, panels, "bilaterals" (i.e., chatting with someone), cocktail parties, and press briefings were these:
1. Everyone stupidly failed to see the financial calamity coming except roughly four economists who now must be heeded in everything they say and all they predict.
2. The private sector has ruined the global economy and can no longer be trusted.
3. Government is ascendant, with regulation closest to godliness.
4. These conclusions are correct and will stand the test of time.
What I took away instead was this: Beware conventional wisdom and groupthink. Be skeptical of tidy explanations for complex past events. Be even more skeptical of confident predictions of future human behavior. Don't fight the last war.
It's true that collectively we failed to predict the horror of the financial crisis that the world now faces. Many journalists, including ours, did write presciently about toxic mortgages, housing meltdowns, and over-leveraging of the financial system. And a number of economists and business leaders did recognize that we were living in a bubble and that it would eventually burst. But so many variables were interacting with so much complexity—including the ever-mysterious x-factor of human psychology and behavior—that you'd have to be lucky as well as brilliant (or just really lucky) to bet right on the precise timing and the exact form the collapse would take.
We understand some of the factors that contributed to the mess we're now in. But I suspect that—in part to comfort ourselves, as well as to choose villains, and possibly a few heroes—we are oversimplifying the story line and assuming we know more than we do. There's still much more to be learned, and the exploration of something so complicated requires a good deal of skepticism and humility.
It's true that many business leaders triggered or at least helped facilitate the wild risk-taking that preceded the collapse; many should be faulted for that. And it's true that regulators and regulations failed to protect the public; they should be faulted for that. It doesn't follow that we should entirely disregard the experience, creativity, and even good will within the private sector and replace the professionals' business judgments with those of Congress and government employees. The fact that smart people were wrong doesn't mean there's no value to brainpower and accumulated knowledge, not to mention innovation. Of course smarter, more effective regulation is needed, but we may be fighting the last war—and reverting to old, unsuccessful models—if we conclude that because business hasn't behaved wisely, government necessarily will. We need to be as skeptical of one as of the other, and remain open to meaningful, practical solutions from either sector.
The conventional wisdom at Davos in 2007 was that private equity and hedge fund managers were the new power players and therefore knew more than everyone else. The conventional wisdom in 2008 was that sovereign wealth funds were ascendant and would be exerting enormous influence over global businesses. Are this year's collective certainties any more reliable?
I don't know what's going to happen next month or next year. Those who predicted collapse are now doubling down and predicting deeper collapse. Their reasoning turned out to be right in 2008. But investing and team sports remind us that last year's winners are often this year's losers. Just ask commodities investors or New York Giants fans.
Adler is editor-in-chief of BusinessWeek.