Hi and welcome back to Semafor Business. I’m writing from the World Economic Forum in Davos, which i͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
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Hi and welcome back to Semafor Business. I’m writing from the World Economic Forum in Davos, which is predictably cold, snowy, and self-important. Two days in, the mood is notably negative, as a recession looms and a large Ukrainian delegation keeps the war top of mind.

But guess what? The Davos consensus is basically never right. It’s too optimistic ahead of crashes. It says it takes a global view, but has missed the rise of factionalism and nationalism. And like any clique, it’s vulnerable to groupthink, and so whatever vibe starts to gather momentum by Tuesday is baked into an intellectual cement by Friday.

Read on for a tour of Davos’ historical duds. And if you want more, sign up here for our daily digest, from Ben Smith, Steve Clemons, and me.

Also in today’s newsletter, my colleague Bradley Saacks found the last honest investor on Wall Street. Not really, but Andreas Halvorsen’s Viking Global is the rare fund to have taken steep write-downs on its private investments last year.

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Buy/Sell

➚ BUY: WFH. Remote work isn’t going anywhere — only one out of every 10 Manhattan office workers is in-person for the full week, and three-quarters of European workers who have returned to the office would rather not, according to a survey by travel health insurance agency SafetyWing.

➘ SELL: WFC. Wells Fargo reported a 50% drop in fourth-quarter profits on Friday. The San Francisco-based lender is still paying for its fake-accounts scandal that already cost it two CEOs.

Semafor Stat

The profits Norway is projected to bring in from oil and natural gas sales this year, according to consultant Wood Mackenzie, a six-fold increase from 2021. That’s more than $37,000 in profits per Norwegian citizen, who benefit from the nation’s energy sales via the massive $1.2 trillion sovereign wealth fund.

Liz Hoffman

Don’t bet on the Davos consensus

THE NEWS

As a potential global recession looms, world leaders and business executives kicked off their confab in Davos yesterday in their first traditional January gathering since the COVID-19 pandemic hit.

BlackRock CEO Larry Fink, Chinese Vice Premier Liu He, and U.S. climate envoy John Kerry are expected to attend to discuss the state of the world and offer some solutions. (Notably absent this year: a major Russian delegation, whose party space on the town’s main promenade is now India House.)

LIZ'S VIEW

There are plenty of legitimate gripes about Davos. It’s elitist. It’s hypocritical. It’s opaque; it shares little about where its $400 million-plus in revenue goes. All fair. My gripe is that it’s wrong, consistently, about important things.

In early 2008, as the mortgage crisis was unfolding, C. Fred Bergsten of the Peterson Institute for International Economics told attendees at Davos: “It is inconceivable — repeat, inconceivable — to get a world recession.”

Fast forward to 2016, when the conference’s 96-page report on global risks didn’t even mention the two events that would define the turbulence of that year: Donald Trump becoming president of the United States and the U.K. leaving the European Union, despite the fact that both issues were live wires. Trump won his first primary two weeks after the conference wrapped, and two weeks after that, David Cameron scheduled the Brexit vote.

“The consensus here is very, very upbeat,” Michael Sabia, who then oversaw $300 billion as the CEO of Canada’s second-largest pension fund, told me in 2018. What followed were two years of slowing economic growth.

And of course, 2020. By the time that in year’s conference kicked off, the coronavirus had sickened at least hundreds of people in Asia. The U.S. had confirmed its first case. But not only did the virus fail to prick the sterile gauze of optimism that surrounded Davos, it barely registered at all.

As I write in my forthcoming book on the pandemic and its toll on the economy, Davos should have been a warning. Its attendees were CEOs and heads of state, with lines of sight deep into the global economy and the power to shape it.

Instead attendees dipped into communal fondue fountains and the crowds were shoulder-to-shoulder at a late-night piano bar. A panel called “The Next Super Bug” spent much of its 40 minutes on the overuse of antibiotics. A pavilion on the promenade rented out for a 300-person dinner co-hosted by Zoom — a company that would become a household name in just a few weeks — was sparsely attended.

Welcome to the world’s most expensive echo chamber, where nobody makes friends by being a bummer.

unsplash/Damian Markutt

The Davos consensus is shaped and refined as the weeklong conference goes on, passed among attendees alongside the plates of toothpicked olives and Gruyère cubes. By Friday it approaches canon.

And it is almost always wrong. An investor could do well boiling it down to a few investment theses and building a basket of assets to match — then wagering against it.

I’m hardly the first person to have pointed this out. Glenn Hutchins, the veteran investor who delights in needling his peers, says it nearly every year he’s there.

He’s not going this year, but shared some thoughts on why he thinks the consensus consistently blows it: “There’s nothing wrong with consensus views, but the key is to ask yourselves, where might we be wrong? Where are the blinders? And Davos isn’t conducive to that. You’re in an intense environment with very little time and very thin air.”

The real problem, he says, is the right people being asked the wrong question. “What a potash CEO in Canada can tell me about his next 12 months of production and what that might mean for agricultural production is way more valuable than asking for his views on globalization.”

The World Economic Forum itself, in an uncharacteristic spasm of self-awareness, summoned two psychology professors to a panel in 2017 on why people are so bad at predicting the future. In response to the charge that Davos Man is always wrong, one of them had this muted defense: “That’s actually not true…Whether the Davos Man is more accurate than the dart-throwing chimpanzee is another question.”

Forecasting is hard. (I was one of those in the packed piano bar in 2020!) But the attendees at Davos aren’t chimpanzees with darts. If they were less blinded by their desire for things to be good, more wisdom might actually come down from the mountains each January.

ROOM FOR DISAGREEMENT

There are a lot of smart people at Davos and sometimes they get it right. For example, the World Economic Forum identified “massive digital misinformation” as a major risk in 2013, years before lies weaponized by social media would threaten democracies.

And Davos isn’t biased in favor of being wrong, it’s biased in favor of being optimistic and, to a large degree, globalist. That’s an increasingly tough combination as self-interested nationalism and anti-democratic factionalism threaten to undo, in messy fashion, what once looked like a steady march toward a liberal, borderless global economy. Davos was less well-covered in the 1990s, the decade that produced the North American Free Trade Agreement and the euro, but I’d bet the consensus was more on the mark then.

Jay Clayton, former chairman of the U.S. Securities and Exchange Commission, has a slightly different view on why Davos Man so often errs. “The middle class does what it wants to do, not what you want to do,” he told me this week. The rarified air, both in the Alps and the lives of the elite, is too disconnected from consumers that power the economy.

I didn’t attend last year, but reports from journalists who did suggested that world leaders, humbled by just how badly they’d seen around the corners lately, had all but given up trying.

The Wall Street Journal’s James Mackintosh found no consensus among attendees, noting that the world’s confusing stumble out of the pandemic had left leaders each feeling their own part of the elephant, blind to the whole. Some were buoyed by the strength of consumer spending, while others were concerned about gathering geopolitical storm clouds. But neither camp was sure.

Ben Smith, Steve Clemons, and I will be bringing you insights from the Alps all week. Just don’t assume any of them will be right.

Evidence

Davos may ostensibly be aimed at helping the developing world, but make no mistake about who’s giving the advice.

Bradley Saacks

At least one investment firm is facing the music on startup valuations

THE SCOOP

Unlike many of its peers, $37 billion investor Viking Global survived a volatile year in the public markets, but wrote down many of its private startup stakes.

Its more realistic approach about private tech valuations could put pressure on rivals to do the same. That may set up another bad year for investors that back those kinds of startups.

The firm’s main hedge fund that invests in public stocks fell 2.5% in 2022, according to people familiar with the matter. Peers like Tiger Global, Lone Pine, and Coatue lost significantly more in the public markets.

Those competitors, though, have used their vast private holdings — in companies such as Stripe, ByteDance, Brex, and more — to act as a buffer against these public losses, occasionally valuing their stakes much higher than other investors, according to a recent data analysis by Bloomberg.

Viking is the opposite. While their public book was hedged and managed to weather the rocky markets last year, the firm was aggressive in internally marking down stakes in private companies such as Druva and Impossible Foods. The firm’s fund that invests in private companies was down more than 23% last year, according to people familiar with the performance.

Unsplash/Steinar Engeland

BRADLEY'S VIEW

Viking’s approach should have investors like Cliff Asness rejoicing

The billionaire founder of investment manager AQR just put out another take in his long-running campaign against private “make-believe” valuations.

At the same time that public markets were thrashed last year, venture deals dried up and valuations cratered, but investors were often slow to update their marks or overly optimistic about the potential of their portfolios. Investors like Asness, whose gains and losses can be seen daily in his firm’s exchange-traded funds (ETFs), felt as though private investors were in just as much pain — if not more — but weren’t being realistic with themselves or investors.

ROOM FOR DISAGREEMENT

Viking’s private portfolio is much different than that of Tiger and Coatue. While the latter firms have focused on a variety of sectors, Viking’s private investments have been heavily concentrated in the life sciences and biotech spaces — which can often hinge on a specific drug or device. That makes valuations somewhat difficult to nail down.

NOTABLE

Intel

The duo betting on Pinduoduo. Hayden Capital, a New York-based hedge fund run by Fred Liu and Philip Kor, sent a 37-page memo to investors on Chinese agriculture ecommerce platform Pinduoduo, arguing the company was “far too cheap” even though its stock had risen more than 50% over the last year.

Shares in Pinduoduo, which brands itself as a “virtual bazaar” that connects farmers directly to consumers, will surge thanks to its focus on cost-sensitive shoppers, the memo states. A growing demographic in the mainland thanks to slowing growth, its core consumers set it apart from rival platforms Alibaba and JD.com.

— Bradley

Text

One Good Text with... Mrinal Manohar

More than half of business leaders think crypto (digital money, maybe fake, prone to scams) and blockchain (digital ledger that basically amounts to better bookkeeping) are interchangeable terms, per a new report from enterprise blockchain startup CasperLabs. We asked CEO Mrinal Manohar whether there’s any hope.

What We're Tracking

BOJ Governor Haruhiko Kuroda
Reuters/Kim Kyung-Hoon
  • Eyes on Tokyo: Japan’s central bank surprised the market in December when it loosened its stranglehold over the country’s bond market, allowing 10-year interest rates to reach 0.5%. The possibility of another shocking decision at Wednesday’s meeting has divided economists (all but one of the 43 surveyed by Bloomberg say there will be no change) and traders (who pushed interest rates past the BOJ-imposed cap in anticipation of an increase).
  • An interest(ing) return. JPMorgan Chase CEO Jamie Dimon said Friday that his bank will “have to change saving rates” to compete against money-market funds and certificates of deposit, yielding 4% or more compared to the two basis points Chase offers its top savers. The portion of higher rates that are passed on for consumers’ benefit — known as deposit beta — increases the longer hikes continue. In 2016, 12% of the rate increases went back to savers. It jumped to 42% in 2018.
Ahem

A crypto comeback story? The founders of bankrupt crypto fund Three Arrows Capital, whose locations are unknown, are raising money for a new platform to invest in digital asset bankruptcies. The name: GTX, presumably the natural successor to now-defunct FTX.

A fundraising pitch, obtained by crypto publication The Block, focuses on getting the 1 million users of FTX onto the new platform, which plans to fill the “power vacuum” in the industry. No word yet if indicted FTX founder Sam Bankman-Fried, an investor in Semafor, is planning a new venture called Four Arrows.

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— Liz and Bradley