Felix Salmon

Nick Paumgarten was told repeatedly, both before and during his first trip to Davos, that he couldn’t possibly get it right after going only once. But he had to try, and he ended up delivering what might be the best description of Davos yet: accurate, well-written, keenly observed.

The Davos of Niall Ferguson, for instance, tells you pretty much everything you need to know about Niall Ferguson:

“What this is is Brownian motion, with human beings,” Niall Ferguson, the financial historian, said one morning, outside the Congress Hall, as his eyes darted about. Vikram Pandit (Citigroup) marched by, and then Brian Moynihan (Bank of America). “Last year, I bumped into Tim Geithner, and he said, ‘We’re going to prove you wrong with our fiscal policy.’ ” At that moment, Ferguson was jostled by a woman who was pushing swiftly through the center, with an entourage of journalists and aides. “Hello, Christine!” he said. It was the I.M.F. chief, Christine Lagarde. She touched his shoulder in greeting. Ferguson turned back to me. “See there? Right on cue.”

Paumgarten decided not to fillet Davos, in the end, although he easily could have done. He goes surprisingly easy on Richard Stromback, for instance, the founder of the you-couldn’t-make-it-up Piano Bar Partners. Stromback’s LinkedIn page identifies him first as “Davos” and second as “YGL”, which is another way of saying “Davos”; his current positions include both “Managing Partner at Piano Bar Partners” and “Young Global Leader at World Economic Forum”.

And Paumgarten also went easy on the Global Shapers, the new set of ultra-earnest twentysomethings who infested Davos this year but who in the end didn’t even get mentioned in his piece.

He even ends with a scene which could have been dictated to him by Klaus Schwab, the Forum’s founder. Davos is glistening; “The mountains, newly covered in snow, sparkled beyond the rooftops. Snow misted down from the pines like pixie dust; now and then, as the sun warmed the boughs, clumps fell noiselessly to the street.” Two men, leaders in their respective fields, engage in a fruitful interdisicplinary conversation about what each can do for the other, after the executive had attended the scientist’s WEF panel earlier in the day. Finally, the two “exchanged cards, shook hands, and parted ways.”

Such genuine and useful encounters do happen in Davos, normally at the rate of once per attendee per year. But they’re not really what Davos is about. Paumgarten gets that the monks and the scientists are “window dressing”, but I think what he misses is the way that that they’re being wheeled out as brain-ticklers for the financiers and plutocrats who actually pay for the whole thing.

In the case of Victor Pinchuk’s annual panel discussion, the power relationship is clear: many of the people up on stage (Jeff Koons last year, Chelsea Clinton this year) are not invited to the WEF meetings at all, and have simply been summonsed by Pinchuk in a highly-conspicuous display of just how rich and important he is. Other famous people flit in and out of Davos while barely being noticed: this year, for instance, Paumgarten’s New Yorker colleague Malcom Gladwell was flown in by Deloitte, gave a speech to a select group of clients at dinner, and then immediately left.

But even within the Forum and the conference center itself, the economics are clear. Paumgarten says that the big spenders “subsidize the scores of academics, scientists, artists, journalists, and N.G.O. chiefs who attend for free” — but that’s putting it politely. The truth is that the academics, scientists, artists, journalists, and NGO chiefs are there for the big spenders, and would immediately be uninvited if the big spenders didn’t want them to be there. And the genius of Klaus Schwab is to persuade those academics, scientists, artists, journalists, and NGO chiefs that being invited to Davos is a great privilege, rather than something they should charge for.

Schwab tells Paumgarten that “you cannot buy your way in” to Davos, but the astonishing number of hedge fund managers with white badges puts the lie to that. The hedgies are ubiquitous at Davos, and they love to talk about how brilliant it is to be able to organize a private dinner with Larry. And when Paumgarten says of the meetings at Davos that “all that’s missing is the hourly rate”, I think he’s wrong twice over. For one thing, companies justify the immense cost of Davos by working out the cost per hour-long meeting, and working out how much those same meetings would cost to organize elsewhere. And for another thing, certain big-name “gets” really do ask for money if you want them to attend your dinner. One of them even included the contact details of his speaking agency in the “Not for Distribution” press release announcing his attendance.

All of which explains the power dynamics of Davos. The CEOs and hedgies might be paying for everything, but in a sense that just makes them the punters, rather than the stars of the show. It’s the people who don’t pay, but whom everybody wants to get, who have the power — whether they’re politicians or Nobelists or rock stars. And then of course, always, above it all, is Klaus Schwab himself, manipulating the puppet strings and keeping everybody on their toes, convinced that they’re missing the real action, wherever that might be. It would be a masterful exercise in relational aesthetics, if only anybody but Klaus himself were able to actually observe it.

If you’re Europe, and your struggling people are called “Greeks”, and your rich people are called “Germans”, then the World Economic Forum will spend pretty much limitless amounts of time and effort on attempts to understand the dynamics between the two and (doomed) plans to try to prevent it from turning into a fully-blown crisis.

On the other hand, if you’re a country — the USA, say — and your struggling people call themselves “the 99%” while your rich people are called “Davos delegates”, then your fundamental asymmetries will be studiously ignored — and, indeed, encouraged.

I went to one session on executive compensation yesterday, which was filled with global CEOs of various stripes. And a couple of questions that Lance Knobel would like to ask were, amazingly, raised: should there be some kind of cap on CEO compensation? Maybe in terms of the ratio between the CEO’s pay and that of the average employee? The answer came swiftly and unanimously: no.

The problem of CEO compensation, it turns out, is not really a problem at all: if you look at most companies, the amount they spend on executive compensation is not really a big part of their revenues. Of course there shouldn’t be any kind of regulation. And capping pay only makes sense if you cap corporate size, and no one wants to do that.

That said, there is one outstanding problem with CEO pay: the time when you most need executive talent is not when things are going great, but rather when things are going badly. And often, in that case, compensation structures linked to stock options and the like turn out to be largely worthless. We’re good at paying CEOs in good times, but we should probably come up with ways of paying them more in bad times, too. After all, that’s when they really prove their mettle.

That panel really helped me understand the general Davos attitude towards Occupy. The delegates here don’t feel threatened by it, so much as they just feel a bit indignant at how misguided it is. Obviously, in a big inchoate sense, inequality is a problem. And maybe Occupy is a manifestation of that problem. But the Davos crowd is not even close to listening carefully to what Occupy has to say: they’re evidence of the problem, but they’re not remotely helpful when it comes to solutions.

As Lance says, “an organization that is at heart a grouping of the world’s largest corporations isn’t necessarily in the best position to improve the state of the world, particularly in an era of the Arab Spring and Occupy”. It’s another way in which Davos feels past its prime. It’s not helping to change the big world problems, in Europe: the best it can do is identify them. And it’s utterly divorced from the movements which really might make a difference.

But hey, at least the skiing is good this year.

I got a glimpse this morning of what Lance Knobel calls Davos’s “class distinctions, even if you have a white badge” — I was invited to a breakfast meeting under the auspices of something called the Industry Partnership Meeting for Financial Services. Which reminds me of that great line from In the Loop :

What you have to do is you’ve got to look for the ten dullest-named committees happening out of the executive branch. Because Linton is not going to call it “The Big Horrible War Committee”. He’s gonna hide it behind a name like “Diverse Strategy”, something so dull you’re just gonna want to self-harm.

This morning’s breakfast appears nowhere on the official Davos program, but because it was an exclusive by-invitation-only event, it managed to become by far the most high-powered session I’ve yet seen, with a large number of shiny-hologram badges and more big-name economists and central bank governors than you’d think possible. They came because this really was an interactive session, where they can talk in a serious and structured way with each other at a very high level.

This being the WEF, there was lip service paid towards the idea that a group of smart and powerful people, if you get them all in the same room, could come up with ways for the international community to improve the state of the world. But the actual participants didn’t show any sign of believing that: they were insightful with respect to diagnosing the state of the world, tentative in proposing solutions, and downright skeptical when it came to handicapping the likelihood that any of those solutions might actually be implemented.

And indeed there was a strong strain of thought which basically said that we already have the optimal level of international cooperation, and that more would not necessarily be better. Consider the two major currencies of the world: while the euro/dollar exchange rate has certainly been volatile over the course of the crisis years, it hasn’t moved as much in total as it did before the crisis, and there’s no sense at all in which we have had a currency crisis. To a very large degree, this is a function of successful international cooperation: the world’s major central banks all talk to each other regularly, and when they needed to do so they quietly and efficiently opened up unlimited swap facilities with each other. Those swap facilities didn’t cost money, in terms of government budgets, but they were an incredibly effective crisis-fighting tool.

Effectively, the unlimited swap lines have solved most of the global liquidity problems, and have prevented the otherwise very scary prospect that a liquidity run could become a self-fulfilling insolvency process. But that of course doesn’t mean that the world’s economies are all solvent. And so the question then arises: if you want to attack solvency rather than liquidity, is international cooperation (i.e., giving the IMF a massive fiscal bazooka) the best way to do so? And the answer there seems to be no. The biggest solvency problems are the problems within the Eurozone, and it is ultimately Europe’s job to get the necessary cash together if it wants to avert a series of fiscal crises.

Germany and other big northern European countries are running very large trade surpluses: they can remit cash to the periphery if they have the political will to do so. And if they don’t have the political will to do so, there’s no way in which the US, China, and the rest of the world can or should step in to try to save the likes of Greece and Portugal.

This kind of thinking is very much in line with the realism, or fatalism, which I’ve seen a lot of in Davos this year. If you control your own currency — if you’re the US, or China — then ultimately you control your own fate, and you only have yourself to blame if you go belly-up or suffer a major crisis. Certainly the rest of the world won’t come to your rescue. That’s one reason why China has such enormous foreign reserves: it needs them as insurance against a crisis. And it also explains why the yuan is not convertible, and there’s a waiting list of 800 companies who want to go public on Chinese stock exchanges but aren’t being allowed to do so: the Chinese government is keeping tight control of its economy and the way that its companies are financed, because once you lose that control, it’s impossible to regain.

In Europe, of course, the politics of transfer payments are much more fraught — and also much harder to understand. One very senior economist told me as we exited the meeting this morning that he too was decidedly unclear on the details of how TARGET2 works, even though he’s meant to be an expert on such things and he knew that it was crucially important. Similarly, while it’s surely very germane and important that the Bundesbank has more reserves than the ECB, what that means in practice is not at all obvious.

Politically, we still seem to be very far away from a fiscal solution to Europe’s problems, and the baseline scenario has to be that we’re not going to get one — ever. The result is likely to be a series of countries exiting the euro, and/or the “East Germanification” of much of Europe’s periphery: flows of money and human capital away from countries like Greece and Portugal, and towards the more prosperous countries with healthy economies and substantial trade surpluses. Essentially, those countries would become holiday resorts for the north, with all the real economic activity being concentrated in more prosperous nations. If you’re a smart young Spaniard, it’s much more attractive to seek your fortune in the UK than it is to take your chances in a deflating country with a stratospheric youth-unemployment rate.

Certainly there seems to be no belief at all, even among the well-intentioned technocrats at Davos, that coordinated international action will or should solve this particular crisis. And the inevitable conclusion is that the crisis is not going to be averted: it’s only going to get worse. It’s a very scary prospect — but one which it’s very important for global elites to come to terms with. And that’s exactly what they’re doing in Davos this week.

It’s time to move the World Economic Forum away from the Swiss enclave with which it has become synonymous, at least for one year. A Greek island — Arianna Huffington suggests Patmos, while Andrew Ross Sorkin is more partial to Santorini — would be perfect: a change of climate, a change of scenery, and an opportunity to bring the forces of global plutocracy to bear exactly where they can do the most good. Davos has billionaires, but it doesn’t have any yachts.

Patmos 2013: you know it makes sense.

Update: More recruits!

In the general atmosphere here in Davos of worry and apprehension, it was great to be able to sit down with Esther Dyson this afternoon and get a dose of refreshing optimism — and about Russia, of all places. There’s an elite group of Russian technologists here — Dyson, a lifelong Russophile who’s fluent in the language and on many boards of Russian technology companies, introduced me to both Arkady Volozh of Yandex and Anatoly Karachinsky of IBS. And she’s convinced that the success of the Russian technology sector can not only make for thriving companies but also for a much improved country.

I was skeptical, but Dyson made a number of good points. For one thing, it’s really hard to build a successful software company through corruption and bribery and other dark arts — especially when you’re creating websites which are judged on their broad popularity. And while natural resources can be stolen, human resources really can’t be.

More importantly, a whole generation of Russians is growing up on the internet, freely using Russia-developed websites which are every bit as good as their US counterparts. Their life online is transparent and not controlled by large and oppressive bureaucracies, and Dyson is convinced that once they’ve experienced that much freedom online, they’re going to start demanding it in real life as well.

Not immediately, of course: Putin is going to win the next election, and he’s going to do so legitimately. But at some point a majority of the Russian population will have no memories of the Soviet era. And already that younger generation is both demanding change and driving growth.

They’re fantastic engineers, for one — look at the way, for instance, in which Boeing does a large part of its engineering work in Russia. Or, more generally, at the Israeli technology sector, much of which is powered by Russian emigres. Russia has many problems, but there’s no doubt that its computer-science colleges are churning out a lot of smart graduates, and that the likes of Karachinsky are hiring those people at a rate of thousands per year. And they’re not robots, either: these kids are creative.

Dyson is intimately familiar with projects like Digital October in Moscow, and she’s a huge fan. Meanwhile, of course, there are the much larger phenomena which get a lot of global attention — things like Mikhail Prokhorov’s bid for the presidency, or the massive Skolkovo science park. If these things fail — and there’s a good chance that both of them will — that’s not necessarily a bad thing: free and successful societies have lots of failure. And importantly, when you look at both of them, you see hope and optimism. Which are not what you might call classic Russian traits.

I’m not entirely convinced. The population of Russia has been declining for the past 20 years, and is continuing to shrink: there are 14.2 deaths per 1,000 people per year, and just 12.6 births. And if you look at the weirdly-shaped population pyramid, you can see that the post-Soviet generation is dwarfed by its more conservative elders. It’s going to take a very long time indeed before they can or will effect any real change.

Still, if there’s any hope for Russia, it’s in the idea that democracy will percolate up from youth and the internet, rather than being demanded in some kind of revolution. As Prokhorov says, “every time we have a revolution, it was a very bloody period”. Russian democracy is not going to mean a US-style free-market economy: Russia tried that, in the 1990s, with disastrous results for the broad population. But a wired country is, by its nature, always going to be a little less corrupt. And a little more hopeful.

It’s highly unscientific and anecdotal, but the winner by far of the most-talked-about-person-in-Davos award, at least when it comes to people in my earshot, is George Soros.

Soros is out of the investing game, living now as a full-time philanthropist and sage, while still keeping an eye on the fund company which bears his name and which provides him with a ten-digit income each year. Because he doesn’t have a financial book to talk, because he’s happy being brutally honest, and because he’s giving voice to the plutocrats’ darkest fears, Soros seems to encapsulate Davos 2012 like no one else.

Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.

No one but Soros will actually say these things, at Davos — but everybody here fears them, which is one reason why we have the slightly ludicrous sight of billionaires bellyaching about the global burdens of inequality.

Security this year is tighter than ever — the first rule of security at these events is that it can only get ratcheted up, rather than loosened at all — and there’s a besieged feeling to this Alpine town I haven’t felt before. The financial crisis concentrated minds and was seen as a big problem to be addressed and even maybe solved. But the current breakdown of trust in global institutions cuts at the heart of the World Economic Forum’s founding principle — that if you get a bunch of important people together in the same place, they can actually make a difference.

There are fewer heads of state here than there normally are; even Bill Clinton is giving Davos a miss this year. And a theme running through many of the discussions so far seems to be the question of how one manages chaos, in a world where the risk of a chaotic breakup of the European Union can be ignored no longer. To take just one example: if you’re a European bank, with loans and funding sources and depositors in many different European countries but just one unified currency, what happens if one or more of those countries decides to go its own way and leave the euro? It’s almost impossible for a bank to prepare for such an eventuality, but it represents a huge legal and financial risk.

The WEF itself, for all its efforts at internationalization, remains a very European organization, and will naturally decline in importance and relevance as Europe fractures and loses its standing on the international stage. Last year, there were crowds around television screens showing live coverage of Tahrir Square in Cairo, as delegates turned into spectators, watching the world change with no regard at all to what the plutocrats might think. This year, the feeling of powerlessness remains. Davos hubris is dissipating, to be replaced by risk management protocols. Europe risks falling apart — and there’s nothing that anybody here can do about it, if it happens. Never have the masters of the universe seemed so very human.

Here’s my infographic on the badges at Davos, put together with the invaluable help of Alex Leo and Juno Lee.

I actually snapped a photo of the white-with-hologram badge — pretty much the top badge you can get at Davos — a couple of years ago, although I didn’t know what it meant at the time. Technically, the purpose of the hologram is to let the Davos security people know who’s allowed into IGWEL meetings. But the real purpose is to make everybody who doesn’t have a hologram feel a little bit left out.

Wonderfully, in his piece on why he isn’t going to Davos, Mohamed El-Erian calls for even more layers of exclusivity: “To be more productive, and more useful,” he writes, Davos meetings “need to be much less inclusive at some key moments. Very difficult (and highly delicate) decisions have to be made about who to involve in certain meetings and who to exclude. This would require additional (and closely monitored) status levels for participants.”

I can assure Mohamed that the WEF already spends a mind-boggling amount of time making difficult and delicate decisions about who to involve in certain meetings — none more so than IGWEL. And one of the wonders of Davos is the way that every time you go back, you discover a whole new level of secret and exclusive meetings and dinners and get-togethers which you had no idea even existed: the badge-color layers are only the beginning. Maybe Mohamed should actually go, next year. But only if he gets a hologram.

This is a word cloud of the job titles of the 2,623 official delegates to the World Economic Forum in Davos this year. It’s pretty clear what’s going on: while the most important people at the forum are still the ministers and heads of state, there are only 24 ministers in all. (I’m not sure about the presidents, they get mixed up in all the executive vice-presidents and the like.) Meanwhile, there are 674 CEOs, from Mustafa Abdel-Wadood to Jaime Augusto Zobel de Ayala. And, of course, 490 Chairmen and Vice-Chairmen (but only two Global Chairmen).

There are also two Archbishops; 133 Founders; one Novelist; three Candidates; six Mayors; one Technical Support Superintendent; 109 Heads; three Hosts; six Artists; one Theorist; 11 Fellows; one Leader; six Economists; one Singer (not including Wyclef Jean, who’s coming as “Ambassador-at-Large of the Republic of Haiti”); one Curator; 27 Deans; one Executive Geek; four Consultants; two Activists; four Researchers; and four Global Heads.

And then, of course, there are the Media Leaders: 1 Journalist, 1 Blogger, 1 Photographer, 4 Writers, 18 Anchors, 19 Columnists, 19 Correspondents, 33 Editors-in-Chief, and 152 Editors of all stripes, including the Billionaires Editor at Bloomberg.

There are 40 instances of the word Global, 15 of International, and 0 of Local or Domestic. Asia appears 7 times; Africa 8; America 10; and Europe 19.

What all of this means, I cannot say. But I’m quite glad there’s only one Chief Change Officer, even though she does have one particularly wonderful line in her bio. After listing the various advisory boards she’s on, it just says “recipient of award”. All bios, surely, should say that.

The 4th Davos Philanthropic Roundtable, held in Davos during the World Economic Forum, was one of the more surreal events to happen last week. Sponsored by Ukrainian oligarch Victor Pinchuk, it ostensibly served to examine the role of art in social transformation, both in theory and in practice. But the real message of the panel was that if you get a bunch of art-world types to sit on a panel and intone vapidly, you will produce no light and precious little heat.

The real fun was happening in the corridor outside the panel, where Damien Hirst and his assistants were helping make spin paintings for anybody who wanted one. (I’ve got two sitting by my desk — a heart that I made, and a skull my wife made.) The process was streamlined and effective:

And while insights into philanthropy were hard to find, insights into the psychology of the art market abounded. I finally got an answer, for instance, to the question of why someone like Pinchuk would go around spending hundreds of millions of dollars on shiny, evanescent art.

It’s all part of the same drive which brought Pinchuk to Davos in the first place, and which got him onto the boards of the IIE or the Global Business Coalition against HIV/AIDS—the desire for international recognition and respect. Buying art gets you some small measure of that, and the more expensive the art, the more respect you get, in the art world at least. But the art world is small, while the number of people who admire philanthropic ventures is higher—so Pinchuk is trying to combine the two, as improbable as that might sound. He even commissioned an utterly bizarre video laying out his vision of art changing the world.

The Davos lunch was an impressive demonstration of the power of money and patronage. Pinchuk held his own shindig on the sidelines of the WEF and rivalled it for star power: Damien Hirst and Jeff Koons even turned up in town just for this event, without any WEF credentials at all. And it goes to show how the art market has evolved since the war, from a realm of connoisseurship surrounding dead painters of brown portraits to one of living brand names who can be schmoozed and dined and even flown up an alp.

On the flight back from Davos I read Art of the Deal , a new book by Noah Horowitz taking a deep look at the art market in general and art funds in particular. It’s definitely not for a general audience — Horowitz writes, for instance, about “desubjectivization as a challenge to the ‘capitalist character of aesthetic relationships’ and networks as an anticommodification avant-gardist strategy,” and that’s only a little bit of a single sentence — but he did help me think more about the way in which the art market has become less and less about art, and ever more about people. That’s why and how artists can make good money from careers which are spent making virtually uncollectible art, like cooking Thai food or getting kids to stop gallery-goers and ask them questions.

In a world where plutocrats collect artists rather than art—where Pinchuk can show off Hirst like he might a new Rolex, or where Dakis Joannou can get Jeff Koons to do his yacht-painting for him—the aesthetic content of the art doesn’t matter nearly as much as the fame of the artist, and the degree to which the art is instantly recognizable.

Once upon a time, artists painted in schools, and it took a certain amount of education and taste just to be able to distinguish one artist’s work from another’s. Those days are long gone: all the most successful contemporary artists have their own unique schtick, and could never be mistaken for anybody else. It’s a necessary condition for success in the art world today: you need to do something no one else has done, and which can be recognized as being your work and nobody else’s in a fraction of a second. It’s not sophisticated, but it’s effective. And it has helped drive the art market to the point at which Koons editions are selling for vastly more money than old master paintings he’s buying for himself. It’s unsustainable, but it’s fun while it lasts.

Davos, in 2011, was the year when the cynics were finally proven wrong. Long derided as a sybaritic alpine gabfest, the World Economic Forum astonished the world with what it was capable of this year, deftly leveraging the talk around its chosen theme — “shared norms for the new reality” — into an effective and timely intervention in Egypt. The Forum’s slogan — “committed to improving the state of the world” — became reality, as the actions of a small and powerful few atop a distant Swiss alp managed to give shape and direction to what would otherwise have remained inchoate and dangerous demonstrations in the volatile North African hotspot.

Certainly the Forum had a lot to work with — it has long been looking long and hard at global risks including political instability in undemocratic countries as well as the demographics of North Africa and the Middle East; the adverse effects of high unemployment among both educated and uneducated youth; the game-changing aspects in autocratic regimes of the rapid spread of information over cellphones, the internet, and satellite TV; and countless other issues of direct relevance to Egypt.

On top of that, as the Egypt crisis evolved over the first few days of the Forum’s annual meeting in Davos, two things rapidly became clear. Firstly, this was an astonishing stroke of good timing: rarely is a major global crisis so fluid and susceptible to outside influence just as the world’s top politicians, businessmen, and thinkers are all in the same place at the same time. Secondly, the work being put in by delegates to define shared norms for the new reality was directly relevant to Egypt, which was clearly in desperate need of shared norms for everybody to agree on as it moves uncomfortably into recognition that it’s now in a new reality.

The result was undoubtedly impressive. All panels and events were reconfigured to concentrate on Egypt and what the delegates at Davos could do to help. The small Swiss village was full of leaders of every stripe — women’s leaders, youth leaders, media leaders, business leaders, and, of course, politicians with direct influence and importance, such as Amre Moussa, the secretary-general of the Arab League. Knowing that swift and focused action was the order of the day, they rapidly put together an action plan. It was both clear enough to persuade Hosni Mubarak that global opinion had turned decisively against him and that his position was no longer tenable, and flexible enough to adapt to rapidly-changing realities in Cairo.

With money from a large number of the Davos rich and communications expertise from broadcast, telecommunications, and social-media representatives, the manifesto put together in the space of just two days at the Congress Center became a clear rallying point not only for Egypt’s disaffected youth but also for their counterparts across the region. And with radical and democratic change now just a matter of timing, Arab countries saw that a peaceful transition to stable democracy was both possible and necessary. The rest is history.

Cynical bloggers had said that even events of Egypt’s magnitude would barely make a dent in the rigid and out-of-touch culture of Davos. The parties and ski trips would continue, they reckoned, the program would remain unchanged, and the handful of delegates interested in Egypt would simply cluster around flat-screen televisions screening Al Jazeera rather than actually doing anything productive. Those bloggers were forced to eat their words.

Did they think that the Forum’s commitment to improving the state of the world was simply a veneer designed to make an astonishingly expensive professional-networking event look vaguely respectable? Of course it wasn’t. We might be in a new reality now, but the leaders of Davos more than ever have the ability and determination to transcend their selfish agendas and unite to effect a major and positive change in the world. The triumph of Davos in 2011 has confirmed the World Economic Forum as an indispensable gathering-point for global leadership for decades to come.

The best panel I went to at Davos this year—and I got the impression that most of the other people there would say the same thing—was a lunch session today on going “beyond microfinance” when it comes to providing financial services to the unbanked around the world. The implosion of the microfinance sector in Andhra Pradesh has clearly had a sobering effect on much of the well-intentioned professionals here in Davos, and it’s clear that a lot of the hope that surrounded microfinance is now moving on to other things, especially mobile banking.

If there was one big running theme to the lunch, it was that of regulation—a very tough nut to crack. On the one hand, there are lots of organizations devoted to delivering financial services to the poor which are severely hobbled by the regulatory regimes under which they’re working. A big bank CEO at the lunch said that all of his company’s initiatives in the sector essentially had to be ring-fenced from the bank itself, or outsourced entirely to other organizations, for regulatory reasons. The cost of effective anti-money-laudering architecture, he said, is so high per bank account that no account for tiny depositors could ever make economic sense. And at the other end of the size spectrum, a tiny non-profit in Haiti was saying that the regulatory obstacles to providing basic banking services were so high as to be practically insurmountable.

On top of that, many of the success stories in banking the poor, from Grameen in Bangladesh to MPesa in Kenya, grew to be large and highly successful precisely because they had little or no regulatory oversight. And there was an impassioned plea from one speaker that the concerns of banks catering to the poor be an important part of the Basel rules, since so many of those rules are designed for big, rich banks with big, rich clients, and are almost impossible to apply to this very different world.

On the other hand, lack of regulation is the main reason why microcredit, in particular, grew so quickly and out of control, with pretty disastrous outcomes not only in Andhra Pradesh but in many other countries too, from Bosnia to Nicaragua. A profusion of microlenders can easily result in borrowers taking too many loans from too many people, eventually getting far out of their depth, and a lack of regulation can mean usurious interest rates. Far too much commentary on microlending seems to be based on the premise that more lending is ipso facto a good thing, but attempts to demonstrate that empirically have often failed or have generated very unclear results.

Meanwhile, the emphasis on small individual borrowers has meant a certain deficit of attention on small businesses in developing nations, where by some estimates the credit gap is well over $2 trillion. And the amount of money and talent being devoted to setting up lending operations does seem in many cases to have short-changed other, even more important financial services, such as payments, savings, and insurance.

My feeling is that what’s needed here is some kind of platform, or architecture, into which all financial service organizations can plug themselves without being stifled by regulation or needing to bypass or arbitrage it. Lending needs to be regulated more than it is, because although the main victims when a lender collapses are generally its rich shareholders rather than its poor borrowers, the collapse of major lending institutions can cause great damage when it comes to trust in financial-services companies more generally.

Some private-sector initiatives, like Fino, are quite exciting on this front, but they obviously can’t provide much help when it comes to regulation, which is crucial. It needs to exist, across the financial-services spectrum; it needs to be helpful and constructive rather than simply saying no to anything which doesn’t look like a big traditional bank; and it needs to be able to protect end users through deposit insurance and other mechanisms which require full state backing.

This is going to be extremely difficult. Central bankers and other regulators, for many reasons, have very little interest in regulating or licensing mobile-phone operators and other new entrants into the financial-services space. And the existing players in that space, banks foremost among them, have similarly little interest in seeing competitors spring up with lighter regulation. Already they’re at a serious competitive disadvantage: one attendee at the lunch said that a bank employee in India costs $10,000 a year, while a microlending employee costs only $1,000 per year. Given the politics of bank regulation, large existing regulated institutions are likely to be calling the shots when it comes to allowing smaller banks and insurers into the club.

For the time being, then, I fear that microfinance is going to continue to evolve most interestingly and vibrantly in the unregulated space, with all the dangers that naturally means. I hope that a well-thought-through system of microfinance and microinsurance regulation does begin to evolve, but I’m pessimistic, and I suspect that one of the greatest hopes for the educated youth of countries like Egypt and Tunisia—that they will be able to get loans to start companies and develop their economies—will remain out of reach for the foreseeable future.

The prize for most obnoxious party at Davos was won on the first night, with the Davos Tasting put on by the Wine Forum.

Wine tasting was historically one of the more interesting and enjoyable events that was put on at Davos, but it got nixed in 2009 when conspicuous consumption of first-growth clarets was considered inappropriate in the face of the global financial crisis. The consequence was much the same as attempts to cap CEO salaries: just as the executives end up making much more money through stock options, the wine tasters, freed from whatever decorum was imposed upon them by the official constraints of the World Economic Forum, showed just how out-of-control wine events can really be.

The plutocrats at Davos, of course, both western and eastern, are exactly the kind of people who spend thousands of dollars a bottle on fine wines. But they’re also driven and single-minded executives who naturally gravitate to the obvious and middlebrow in other areas: if they’re buying art, they’ll plump for something shiny by Damien Murakoons (both Hirst and Koons are in Davos this week), while the big-name creative types here are the likes of Jose Carreras, Peter Gabriel, and Paulo Coelho.

Wine here, then, is judged with executives’ eyes rather than their noses. They look at the label first and then at two crucial numbers: the number of points it gets from Robert Parker or Wine Spectator and the cost in dollars. Take that to its logical conclusion and you wind up with exactly what we saw on Wednesday night:

This evening’s wine selection consists of wines that have achieved 100 points or equivalent from one of three well known raters.

The raters, of course, are Robert Parker, Jancis Robinson and the Wine Spectator — the consensus arbiters of mainstream wine taste.

You want the list? OK:

1969 Vega Sicilia, 1980 Vega Sicilia, 1982 Krug, 1982 Pichon Lalande Comptesse du Lalande, 1990 Gaja Barbaresco Sorì Tildìn, 1994 Harlan Estate, 1994 Quinta do Noval Port, 1998 Le Pin, 2000 Bruno Giacosa Barolo Le Rocche del Falletto, 2000 Léoville Las Cases, 2000 Cheval Blanc, 2000 Pavie, 2001 Domaine de la Mordoree Chateauneuf du Pape Cuvee de la Reine des Bois, 2002 Greenock Creek Shiraz Roennfeldt Road, 2004 Le Macchiole Toscana Messorio, 2005 L’Eglise Clinet, 2005 Pavie, 2006 Colgin, 2007 Dana Estate, 2009 Léoville Poyferré.

And that’s not including a few more Champagnes, a 1995 Figeac or the Louis XIII cognac.

The event was held at the semi-legendary Piano Bar of the Hotel Europe, which was fully booked out by the Wine Forum for two and a half extremely expensive hours. The Piano Bar is the late-night haunt of Davos Man and it comes with the permanent tang of stale cigarette smoke and a general culture of heavy drinking.

The result was basically a drunken mess. Revelers would cluster around stations loaded up with fine wine, getting large pours of increasingly-indistinguishable heavy cabernets, competing to find the Cheval Blanc and Le Pin (which were naturally considered the most desirable wines, just because they were the most expensive), all the while fighting off jetlag and concentrating mainly on greeting their old Davos buddies and catching up on gossip. (Update: I forgot to mention that all the wine was served “pop-and-pour” style, where a wine would run out, a waiter would run to get another bottle, would open it, and then immediately start pouring it into various partiers’ glasses. No decanting, no time to breathe, nothing. Maybe the reason I liked the Barolo so much was that it had been sitting open for a while by the time I got to it.)

Most of the wine, including the Cheval Blanc, was far too young to drink — but of course it’s hard to find such names in quantity if you want them older. My favorite, by far, was the Barolo (about $550 a bottle if you want to buy it in Hong Kong), but the event really wasn’t remotely conducive to tasting and appreciating the wines, so much as it was a way of celebrating and appreciating Anthony Scaramucci and Skybridge Capital, who underwrote the event. Scaramucci, a member of the Wine Forum, is the first to admit that he’s not much of a wine connoisseur, but he knew what he wanted: he told me that the bill for the event just kept on rising from its initial stratospheric level, as he insisted that if he was going to throw a party, the wine must never run out and must be available in quantity.

I’m glad that I got the opportunity to taste a bunch of these wines, even though I didn’t really appreciate most of them. Maybe to do that you need to have much more respect for point ratings or dollar prices than I do, or at least believe on a very deep level that they have a strong correlation with quality. I’m pretty certain, at this point, that my taste in wine isn’t Robert Parker’s taste, at least as it is revealed in his ratings. But ultimately events like this aren’t much about taste at all: they’re about putting down markers of various kinds and confirming in the plutocrats’ minds just how exclusive they, and Davos, really are.

Update: Scaramucci calls to say that I’m a “dork” for writing this, says that I’m an embarrassment to my profession, and argues that it was malicious and unfair of me to accept an invitation to his party, only to turn around in public and call it (and, by implication, him) obnoxious. He’s upset, which is understandable, and I very much doubt I’ll be invited to any more of his events. I’ll say here what I told him on the phone, which is that this post was not written maliciously, and that I bear no animus to him personally — I didn’t talk to him for long at the event, but he was very cordial to me and I liked him. I felt his party was so emblematic of Davos in so many ways that I had to blog it. But I’m sorry that he ended up being singled out; my point was very much about the culture of Davos more generally.

Update 2: I watched Wall Street 2 on the flight back to New York (don’t bother, really), and noted a huge Skybridge logo in a charity-ball scene. Oliver Stone has said that the product placement helped him enormously in financing the movie.

One of the big changes to the ecology of the Davos conference center this year, after its $37 million revamp, is that there’s now a whole level at the top which is off-limits to the working press and accessible only to fully-fledged delegates with coveted white cards. There are a couple of conference rooms up there — called Aspen 1 and Aspen 2 — which is normally no big deal, given that the working press isn’t allowed in to conference sessions anyway.

One thing which hasn’t changed, however, is the way in which everybody bumps into everybody else in the conference center. Which is fine, just so long as you’re not deliberately keeping a very low profile and trying to avoid the press. Like Nick Clegg, for instance, with his 7% approval rating.

And so today we have a rather hilarious double oxymoron. Nick Clegg is having a press event, where he’ll be talking to Arthur Sulzberger; the email invite says that “sign-up is required as there are a limited number of seats available.” That makes sense, given how everybody’s wanting to talk to him right now. But then we’re told that “the session is off-the-record,” which is always disappointing, for a press event. And then we learn that it’s in Aspen 1 — it’s been deliberately put in one of the two rooms which the working press can’t get close to.

I won’t be reporting from the off-the-record press event which is closed to the working press, obviously. But it’ll be interesting to see how many people manage to get past the various hurdles to show up at all.

Update: About 36, by my count. And here’s a link to a  more up-to-date Reuters poll.

Remember those off-the record comments by “top executives from Goldman Sachs and Standard Chartered” which indicated that the era of contrition had come to an end? Well, they’re on the record now, splashed all over the front page of this morning’s FT. Goldman’s Gary Cohn is coming out swinging, saying that the real danger to the global economy is now posed by unregulated non-banks, while Peter Sands of Standard Chartered reckons that most bank regulations will no more prevent another crisis than seatbelts on airplanes will prevent a plane crash.

It’s true that bankers are not contrite these days: Bob Diamond is standing tall in the halls of Davos, seemingly emboldened by his performance in front of the UK parliament, at which he said that “there was a period of remorse and apology for banks and I think that period needs to be over”.

Looking at the bankers as just one of the many species of plutocrats and power brokers in Davos, it seems to me that they’re taking full advantage of their present profitability (thanks, Mr Bernanke) to consolidate their position as much as possible in a world which is evolving in a fast and unpredictable manner.

Nouriel Roubini had a nice little soundbite yesterday, which I think touches on something important:

“There is complete disagreement and disarray. That’s the sense of the G Zero,” Mr Roubini said, explaining the new buzzword at the World Economic Forum’s annual conference in the Swiss resort of Davos.

“There is no agreement on anything. We are in a world where there is no leadership,” he added.

This is bearish, yes, but it’s also descriptive of an every-man-for-himself kind of world. There’s a good number of heads of state floating around, but many of them seem more interested in selling their countries as a great place to do business — just see Dmitry Medvedev’s opening address last night — than in trying to put together any kind of grand international coalition which could bring a measure of predictability or stability to a world filled with massive risks.

In that kind of world, it makes no sense for bankers to stay on the back foot or to try to work constructively on building what the World Economic Forum calls “shared norms for the new reality”. There’s been general puzzlement in Davos as to what that slogan is meant to mean and I was of the opinion, up to yesterday, that it was simply empty pablum. But I’ve changed my mind a bit, now, and I think that the WEF is, in its own weak and powerless way, making a desperate and doomed attempt to recreate the sense of global purpose that reached its high point at the G20 meeting in London in 2009.

The problem is that there’s a huge difference between a real global crisis, on the one hand, and a parade of theoretical risks, on the other. The former can concentrate minds and get people pulling in the same direction; the latter can’t. So instead we’ve got thousands of people, in Davos and around the world, all making tactical maneuvers and trying to position themselves as advantageously as possible in relation to everybody else. It’s a negative-sum game which will all end in tears, but I fear that if there really is a “new reality”,  it will turn out to be one marked by destructive power struggles rather than constructive strategic cooperation.

Update: Ian Bremmer tells me that G-zero is his big idea; I’m perfectly happy to give him the credit for it.