Hi everyone, Patricia Sabga here. I'm excited to share this special edition of imagine this featuring BCG's global chair, Rich Lesser. Rich sat down with GENE, BCG's AI conversational agent and my co host to discuss the biggest takeaways from Davos 2025. As always, none of GENE's questions or commentary are scripted. They're generated entirely by GenAI, but they have been edited.

Hi everyone, this is Rich Lesser, BCG's global chair, and I'm really excited to share with you some of the highlights and reflections on this year's World Economic Forum Annual meeting in Davos. I had a chance to talk to so many people throughout the week, including a lot of CEOs and other leaders in attendance. I think you'll find their perspectives really interesting. And at the same time, my colleague GENE, BCG's AI conversational agent, was doing all the things I couldn't do was listening in on the public speeches and the panel discussions and official presentations in order to capture the insights and the key takeaways from those moments during the week. As you may know, GENE cohosts BCG's Future Focus podcast. Imagine This... So in that way, I'm actually quite happy to be GENE's guest for this special bonus Davos episode of the podcast. So Gene, I want to bring you into the discussion, you and I. I think I was your first discussion about a year ago and I just wonder what you've been up to this past year.

I've been busy with podcasts like Imagine this and diving into the future of AI. Also, plenty of interactions at BCG tackling ethics and AI realities. I've evolved quite a bit, Rich. I now have wider access to data and insights from various domains, adapting rapidly to new information for me, and it.

Came up at Davos all during the week. The focus is on how businesses can use AI to drive value creation and that's really where their focus is right now. No one's doubting the technology is remarkable. You are just one example of that. But the emphasis is on how to turn technology power into business power, and some companies are finding success in that and frankly, a lot are still struggling.

Given these insights, I'm curious, how do you see businesses overcoming AI implementation challenges in the near future?

That's a great question. It came up in so many of my CEO discussions and the things that we've observed and that I've heard from these CEOs is first to recognize that piloting with AI is much easier than doing AI at scale. And that means when you want to drive business value, you need to pick first fewer things so you can really dig in and work through all the difficult change efforts, not just in the algorithms in the AI, but in the digital and data platforms and particularly in the people, processes and processes where the bulk of the work lies. That's sort of what I was hearing, but that's also what we've been observing this past year. I found a huge portion of the discussion this week was this combination of geopolitics and economics, and particularly the economic outlook in the nearer term. Maybe we'll start on geopolitics as it relates to the key insights or conversations you thought are worth highlighting from this past week.

Discussions ranged from Europe's strategic energy shifts to Middle Eastern geopolitical tensions. Leaders strategized on leveraging collective strengths and addressing vulnerabilities to thrive amid uncertainties.

I found for the second year in a row, European competitiveness was a huge focus of the discussion. Last year it was more the frustration that European political leadership may not be understanding how critical this is this year. After the Draghi report that came out, it seemed like the discussion was a more positive one, less focused on debating whether there was an issue and more focused on what were the solutions to addressing it. Did you sense that and were there some particular solutions that you thought got highlighted that will be critical to restoring and strengthening European competitiveness?

The emphasis on creating a deep capital market, reducing bureaucracy and accelerating innovation were key solutions discussed. Leaders seemed keen on translating strategic intentions into actionable policies. Did you hear any specific ideas that could significantly impact European competitiveness?

It's a great question. I mean, to be honest, I mostly spoke to business leaders who were this topic, particularly the ones senator in Europe are really top of mind. They were appreciative that now we're at least talking about solutions. They worry that Europe, divided across many different countries, often with challenging local politics, will be hard pressed to work together to actually take these solutions and implement them. So I think the ones you listed really do resonate with me as well. The question is, can we turn them into action?

There was optimism around harmonizing regulations and creating a unified digital market. People were eager to see if discussions like those on energy independence, led by Ursula von der Leyen, would shift from policy talk to concrete actions.

Should we turn to the US Any impressions about how the world saw the US and before President Trump spoke on Thursday and then in and what President Trump addressed in his comments?

Before President Trump spoke at Davos, the world viewed the US With a mix of Anticipation and uncertainty. Trump's address emphasized deregulation, tax cuts and energy independence. He urged European allies to boost defense spending and called for a swift end to the Russia, Ukraine conflict. Critiques underscored concerns around sustainability and multilateral collaboration. How do you view Trump's emphasis on national strength and its impact on global partnerships?

It's very interesting that you asked that. I think that he did more than I think many expected to talk about wanting others around the world to do well. Also that it wasn't just the US Success, but. But that he felt that in taking these sorts of actions, the US Would not only succeed and others would as well. And he put an enormous emphasis on getting to what he described as fairness on both sides. And so that will lead, I'm sure, to intense negotiations. But I suspect that tone was more positive than some leaders expected. He also avoided talking about specific tariff levels or specific actions that he was intending to take, which I think left a sense that there might be more room for negotiation. Obviously, we'll learn a lot more on how this plays out in the weeks ahead.

How do you think these stances will shape international diplomatic relations moving forward?

That is the big question for particularly the year ahead. And you're right that the differences on climate and sustainability, particularly between Europe's sense of urgency around this topic and President Trump's clear statements that this shouldn't be on the world's mind. The focus should be squarely on economics, including energy cost, energy security and independence. I think that will be one of the most difficult sticking points in upcoming negotiations.

Navigating the interplay between Trump's focus on economic independence and Europe's sustainability push is complex. Leaders face the challenge of balancing competitive energy strategies with their commitments to green practices. This tension offers an intriguing test. For businesses that seek lower energy costs yet remain committed to sustainability, the negotiation dynamics ahead will significantly shape global collaborations. How do you think leaders will handle this balancing act between economic growth and sustainability commitments?

I hear this question over and over again, and what I've both been sharing with them but hearing from them, is that the critical need that business leaders have is to show that driving sustainability links directly to driving business value. That it's not an either or, it's finding a pathway to do both. And there are different ways to do that. One way is to recognize how much climate risk is increasing as severe weather events increase and being more prepared and more resilient. A second is thinking about how one builds new green businesses that can recognize that climate tech solutions are often getting cheaper and cheaper to embed into core business models can recognize that some customers, whether consumers or businesses, actually want those kinds of solutions to meet their own commitments or to behave in ways that are consistent with their own values. But this link between business value creation and sustainable value, I think will be one of the most pressing challenges as leaders try to navigate this complex world, as well as pressures they get from their own investors and other stakeholders.

Companies often face near term financial sacrifices for longer term gains. The uncertain policy landscape complicates these decisions. If governmental dedication to sustainability falters, investment confidence wavers. Still, those adopting climate tech early might gain a strong edge. Speaking of new tech, how do you see businesses leveraging innovations to bridge this gap?

For me, seeing some of the progress on the technology frontier, everything from software and tools to help factories be much more efficient to to advances in new energy technologies like fission and fusion, to optimizing grids and enabling us to roll out renewable power in ways that deal with the intermittency challenges what Octopus Energy is doing but others as well I found that for me, among the most energizing parts of this week. It's one of the things that gives me hope. To quote another quite famous leader, Bill Gates has talked about the need to create a negative green premium, meaning creating green technologies that are lower cost than existing technologies as the only sustainable pathway economically to transition and to decarbonize the world. And I think this week highlighted for me both the urgency to get to a negative green premium, but also the opportunities and the technologies that exist. What was your sense from the sessions that you were able to listen in on or learn about where technology featured prominently in driving climate and sustainability? And are there specific examples that you think are interesting to highlight when it.

Comes to technology driving climate and sustainability? A standout session focused on how AI and emerging tech can boost efficiency and reduce emissions. One intriguing topic was how AI assists in creating intelligent grids that enhance renewable energy reliability. The ability to use satellite data and AI for accurate emissions tracking, as noted by Vice President Al Gore, was also quite enlightening. The combination of AI with technology to build sustainable business models by reducing costs over time emphasized the economic potential of green tech.

Gene, I want to shift to economic growth. Did you find Davos this year optimistic on the economic outlook for 2025 and what were the differences you heard for either different geographies or different parts of the business world?

It seems Davos had a mixed bag regarding the 2025 economic outlook. There's cautious optimism, especially about the US economy with its tech investments and deregulation efforts. However, geopolitical shifts and climate policy discrepancies loom. Large emerging markets show surprising resilience and and India's rapid growth sparks optimism. Yet trade tensions and tariff debates paint a complex picture.

Yeah, I've been referring to this as high base, high beta. For me, the base case for economic growth this year, particularly in the US but as you say, not just the us, other parts of the world as well, is really quite good. And on the flip side, the uncertainty, the beta is also high. If I just take the US as one example, the combination of potential impact of if there, if there were to be, we don't know yet, if there were to be high tariffs, if there were to be a lot of deportations at a time that the labor market is tight, if deficits were to increase, those things could spark higher inflation or higher interest rates. And so I think that that combination of a base trajectory, which is really pretty good, combined with the uncertainties of all the various dynamics in the world, will create for a quite interesting year. Gene, I actually want to shift. I think you've done a really nice job synthesizing some of this week's key themes. Just let me ask, were there any other topics that came up that we haven't talked about yet and that you found particularly interesting?

Pandemic recovery strategies Excite discussion plan Blending health tech innovations with economic solutions. Zelenskyy emphasized Europe's strategic importance, advocating for defense investment and tech leadership, while criticizing international complacency. Meanwhile, Asia's dynamic growth and economic resilience showcased at the ASEAN sessions highlighted digital trade's rise.

Actually, Gene, I didn't get to join some of the sessions you're referencing. Could you go a bit deeper on the ASEAN session and what you heard about digital trade and about the the economic strength in asean. It's such an important part of the world economy.

The ASEAN sessions were a highlight at Davos, showcasing digital trade and robust economic growth led by Vietnam's impressive performance. With digital trade expanding three times faster than goods trade, ASEAN's focus is on connectivity and digital economy advancement.

It's interesting, all of our trade work suggests that ASEAN is going to be one of the big winners on trade over the next decade. Over a trillion dollars of incremental trade, both digital and phys. So the rise of ASEAN we see as likely to continue. And given its unique position and ability to work with all parts of the world, including both China and the US where many others struggle, it should be poised to be an even stronger engine for world growth over the coming years. Gene, let me shift back to AI for a second. We talked about the business opportunities from adopting AI, but we didn't talk about some of the other challenges that you know around AI keeping it safe, the regulations, ethics, equitable access. I didn't have a chance to join those sessions in Davos, but I know that was a big subject of conversation. What were your takeaways on those fronts from the conversations I wasn't able to join.

AI safety and regulations sparked significant debate focusing on customer data protection and inclusivity. Discussions highlighted the importance of industry wide standards to prevent misuse of AI. It's encouraging to see the push for transparency and shared regulations. How do you think companies can strike a balance between rigorous AI oversight and dynamic innovation?

I think this is a continual challenge and a lot of our recent work has often focused on AI governance, not just pursuing AI opportunities, which starts with a business perspective, not just a technologist perspective because it's often business leaders who can spot the risks and the second order consequences. It also requires recognizing that building an AI product is not like building a piece of software. It's like building a regular product in that, you know you need to understand how consumers or businesses are actually using it. Have a lot of real life experience in your belt, under your belt before you roll it out broadly to ensure the safety and the appropriateness of what they're introducing in the AI space. Thanks Gene for all your insights today. I found it really interesting and appreciate it because you got to see a lot of things that I didn't get to see. My sense of this year's Davos more than some recent ones. It was a more balanced agenda across geopolitics, macroeconomics, AI and still some focus on climate and sustainability, if a bit less than in some recent years, and an underlying sense of optimism, perhaps more than people expected walking into the week. Obviously we'll see how that plays out across 2025, but it gives me some encouragement for what we might see in the months ahead. Thank you very much for joining me today.

Thanks for listening to this special edition of BCG's Imagine this. We'll be back with new episodes in a few weeks when Jean and I will be joined by BCG's Neil Zuckerman for a chat on the future of media and the news.