Author: Dave McKay

As President and CEO of RBC, Dave McKay is reimagining the future of financial services to help RBC’s clients thrive and communities prosper. Since joining the bank as a co-op student in computer programming, Dave has been building innovation into the company’s DNA. An unwavering champion of big ideas and creativity, he continues to actively transform RBC for the future, harnessing the power of transformational technologies to deliver more value to clients through unique partnerships and the best and most personalized experiences possible.

In his home market, Dave is a passionate advocate for Canada’s future prosperity and preparing youth for the future of work.

I’ve been to Davos five times, and don’t miss the icy sidewalks and endless security lines. But when the World Economic Forum last week brought together government leaders, CEOs, community activists and scientists for a digital Davos, I did miss the informal conversations and was reminded why connectivity is so important.

Like the old movie title says, being there matters. The hallway conversations, the opportunity to read a room, the chance encounters—these are the real strengths of Davos, just as they are the real strengths of our offices, labs and schools. It’s why we’re all yearning to be back together as soon as it’s safe, even if it means having to navigate the odd icy sidewalk.

This year’s virtual Davos tried to address the challenges shaping 2021: the race to vaccinate the world, the effort to kick-start economies, the fight to flatten the climate curve, the long journey to racial justice, and the struggle to detox social media. Here’s some of what I took away:

Vaccine politics could prolong the pandemic

Vaccine nationalism may be the biggest challenge to our world right now. We will get through it, but the next few months could be politically bumpy. Germany, a leader, has vaccinated less than 5% of its population, and made clear it’s going to take care of its own population first. Other wealthy countries are struggling to get supplies, while the world’s poorest countries worry they will be shut out. And that puts everyone at some risk, as the more the virus circulates, the greater the risk of mutation. There are concerns of a “persistent pandemic,” but vaccine distribution is just one piece of the puzzle. Public health systems need to be strengthened in the poorest countries. The World Health Organization needs to be revised and reformed, too, as it’s the only body that can help us all understand the virus and how we can contain it, collectively. The politics of the pandemic are not likely to ease up.

Joe Biden can’t unite the world

China’s Xi Jinping helped kick off the week with a stern message to the new U.S. president and his allies. Any effort to insert values into trade could lead to a new Cold War. We may be headed that way anyway. As Biden pushes for an “an alliance of democracies,” Canada and the European Union will try to revive global trade in a new fashion that’s as much about values as it is about value. As German Chancellor Angela Merkel put it, multilateralism “doesn’t simply mean co-existence.” While we may see a revived World Trade Organization, it’s not likely to be an all-powerful body. Expect more regional trade blocs, and what Spain’s foreign minister called an age of “strategic autonomy.” Ironically, this effort to “re-globalize” misses the digital revolution that transcends borders. The Europeans, Australians and others may want more control over the cloud-based economy that’s thriving in the pandemic. But they’ll need to convince Biden they’re not out to stifle Silicon Valley and the platforms that Washington is happy to criticize at home, and defend abroad.

Get ready for smart supply chains

The regionalization of trade is leading to a rethinking of supply chains, and not just because of vaccine and PPE shortages. Countries are looking at strategic sectors, especially ones rooted in technology, to balance supply and demand more safely. As Canada is discovering the hard way—through vaccines—this may lead to trade-offs between efficiency and resilience. National security may come into play, too, as we witness the growing connectedness of every tool and appliance in our lives. Regions everywhere will want more control over the Internet of Things, just as they do the Internet of words, pictures and money. That means that, as we rebuild supply chains, we’ll need to put an even greater premium on R&D, to ensure manufacturing centres are integrated with innovation centres. Brawn and brain, in other words. Masayoshi Son, the Japanese investor behind SoftBank, believes this approach may fuel the next big disruption, in logistics and mobility. He thinks autonomous vehicles can be to the 2020s what smartphones were to the 2010s. We’ll see. But in the decades ahead, auto plants are likely to depend on artificial intelligence and cybersecurity as much as steel and aluminum. Based on patent data, Son is convinced only two countries—the U.S. and China—will dominate this new space race, and they’ll be central to the smart supply chains of tomorrow.

Climate change, the next catalyst of innovation

Mary Barra came to our virtual session with a plan. The General Motors CEO laid out her vision for a company focused on “Zero Crashes, Zero Emissions, Zero Congestion.” She’s trying to make GM climate-friendly, as she watches Elon Musk’s taillights on the electric highway. But the GM plan to be all-EV is as much about innovation as emissions. Entire sectors will emerge—or be remade—through the 2020s as consumers look for technology to transform their lives, and governments spend trillions to lay the groundwork of a new economy. BlackRock founder Larry Fink, a Davos regular, published his annual letter during the Forum, urging CEOs to see the climate transition as an opportunity not just for the climate. He figures the world will need $50 trillion more in new investment by 2050 to meet our sustainability goals. That’s already leading to plans for a Hydrogen Valley in Europe (to do for energy what Silicon Valley does for computing) and proposals for new power grids along the U.S. interstate network. As Bill Gates told the Forum, the biggest cuts in emissions this decade will come from technology, not changes in behaviour. His new word for climate change: “catalytic.”

Increasing trust is the challenge of post-COVID capitalism

Davos is the birthplace of “stakeholder capitalism”: the idea that, to thrive in the long term, business needs to balance returns to shareholders with returns to customers, employees and communities. This mindset led many companies in the depths of the pandemic to find ways to make and distribute emergency supplies and develop vaccines at breakneck speeds. In North America, corporations were also among the first to step up to the challenges of Black Lives Matter, changing employment and procurement practices while many governments were still talking. It’s one reason the latest Edelman Trust Barometer (a survey of 33,000 people globally) found business is now the most trusted institution—ahead of government, media and religious organizations—and the only institution seen as both ethical and competent. That’s not necessarily comforting. Trust in all institutions is important to the well-functioning of markets and an economy, as well as society. Coming out of the crisis, business will need to do more to help those institutions strengthen themselves, if a new kind of stakeholder capitalism is to endure.

Money’s cheap; judgment is not

The COVID crisis has created a new generation of fans for John Maynard Keynes, and his theories about government spending. Can it do the same for another legendary economist from the 1930s, Joseph Schumpeter, and his belief in creative destruction? Governments and business may soon need to come to grips with the lasting economic damage of the crisis and consider which sectors stand a chance of rebirth, and which don’t. The stock market rewards companies at the forefront of change. But it may be politically tougher for governments to do the same. That’s too bad, as they can reap the reward if their countries become transformation leaders. In 2020, many of those governments got by throwing money at the entire economy. In 2021, they’ll need to be more selective—and appreciate how low interest rates can be a rising tide even for leaky boats. François Villeroy de Galhau, governor of France’s central bank, expressed concern his fellow policymakers focus too much on liquidity and not enough on solvency. Kewsong Lee, the CEO of Carlyle, was less diplomatic, asking policymakers if they’re keeping “zombie companies” alive. David Solomon, the CEO of Goldman Sachs, argued markets tend to eventually separate the good from the bad and the ugly. It will take discipline from governments to know when to let the Schumpeterian forces prevail.

A new social dilemma: speech or reach?

Our virtual gathering was haunted by the January 6 attack on Capitol Hill, and what it exposed in social media and democracy. The heads of major tech companies assured us they were ahead of the mob on most counts. Susan Wojcicki, YouTube’s CEO, explained how her platform is using AI and bots to take down thousands of misleading or offensive videos every day, usually before more than a handful of people have seen them. YouTube’s owner, Google, just opened a second “safety engineering” centre, to add more human surveillance. The platforms are rightly concerned about stifling free speech, especially in a pandemic when so much needs to be expressed and shared. But as many media and advertising executives pointed out, it’s not just speech that’s the problem; it’s reach. The platforms use algorithms to amplify the reach of different types of content, and most of us don’t know how they work. Governments may need to lean in more, to examine those algorithms, regulate harmful speech, and hold tech companies to account for allowing abuses to propagate. “Responsible conduct” can be a new norm for tech, as it is for other companies that rely on the public good. More public vigilance will be needed, too. As we confront the next stage of a pandemic, and its aftermath, our collective success may just hinge on the most important word of the 2020s: trust.

Over the coming weeks, we will begin to see the extent of economic damage caused by the pandemic and the necessary lockdown of our society. This quarter alone will likely see the biggest economic decline any of us have witnessed, with job losses and business closings that could affect our communities and country long after the virus is contained.

In moments like these, it’s natural to think only about the immediate challenges, but we also need to think about the next stage of recovery, so we don’t lose that opportunity when it comes.

Since the onset of the COVID-19 crisis, I’ve talked with dozens of clients – from the country’s biggest companies to retail mortgage holders – and worked closely with my global peers and our governments to understand the complexity and risks we’re facing. Many of us are now recognizing we are unlikely to see a V-shaped economic recovery, as we were hoping just a few weeks ago, and will need to work hard in the coming months to bend the downward curve back to a narrow U.

It won’t be easy. Even if social restrictions are largely gone by summer, the economic scar tissue will remain and take time to heal. To its credit, the federal government has put together critical relief packages, worth more than $100-billion, and more will be needed from Ottawa and our provinces.

Now it’s time to execute, without a moment to lose. Over the coming days, we need to pull together as Team Canada to get these historic commitments to owner-operators, innovators, social entrepreneurs and families in every corner of the country and the economy. Many companies have just days left to keep their payrolls intact. Many families will struggle to make ends meet in the coming months.

The purpose of these historic investments, though, is about more than surviving today; it’s about shaping the economy of tomorrow. And that means moving from defence to offence, as the best Team Canada always does.

To make that shift, we need to think about the next normal, as there won’t be an old normal to return to. Global trade migration is not likely to go back to the old model. International movement won’t press a “resume” button any time soon. Shoppers, diners and tourists may choose to stay away from each other for a while. Even the sharing of technologies and innovations may not flow again like they did only a few months ago.

For a relatively small country such as Canada, which has benefited in so many ways from an open world, those are significant challenges. That doesn’t mean we should give up on globalization. But it does mean we need to think, for the first time in decades, about how to be more self-reliant in the areas that matter most to our competitiveness and prosperity.

Here are some of the tools we have to do that:

Capital

Canada has a strong balance sheet, one of the world’s best. The federal government is starting to leverage it more ambitiously and will need to continue to do so, which means Canadians need to be comfortable assuming more collective debt. We also have many of the world’s strongest banks, insurance companies and pension plans, each with good, well-regulated balance sheets that can be harnessed for our economic recovery. Canadians have worked hard since the global financial crisis of 2008 and 2009 to strengthen those foundations and to preserve and protect capital; now is the time to get that capital to work and invest in the entrepreneurs and innovators who can build the markets and supply chains of tomorrow.

Trade

We’ve been able to take for granted the free flow of critical supplies, from medical equipment and drugs to food and agriculture products. That may not be so true in the next normal. Our governments, leading enterprises and academic institutions need to determine how to best develop and protect more resilient Canadian supply chains. Of course, a more self-reliant Canada could become a more expensive Canada, as we don’t have a significant domestic market. We’ll need the best of our innovators to develop and apply technologies to drive the next generation of productivity gains, and with it a new Canadian competitiveness.

Technology

The crisis has given many organizations the chance to see how to work differently, and connect with customers differently. If we harness new technologies across all sectors – including government – we can accelerate our shift to a more competitive and inclusive economy. And we can ensure these technologies help us better prepare for future public-health challenges. It’s not just organizations that need to evolve, though. Using its balance sheet, Canada has the chance to invest in the next generation of infrastructure – satellite-driven rural broadband, for instance, and smart cities – that will foster more ingenuity, resilient communities and secure livelihoods. We need to see the coming recovery as a digitally driven recovery, powered by data and engineered by Canadians with skills to take on the 2020s.

Skills

To make this shift, we need to transform the way we learn and train, so our companies and communities are better equipped for a new paradigm of disruption. Through Royal Bank of Canada’s $500-million Future Launch commitment and Humans Wanted research series, we’ve spent the past few years engaging employers, educators and students to focus on the future of work. Our schools, colleges and universities have responded with important strides that make Canada’s education system among the world’s best. But if we’re teaching and learning after this crisis as we did before, we will have failed.

Youth

Unfortunately, a new generation of Canadians will be bearing the economic scars of the COVID-19 crisis here for many years. If we get behind them now, they can help lead the recovery and the rebuild. As a digitally savvy generation, they’ve been fast to adapt to this new normal. It’s why RBC has committed to keeping the close to 1,400 students we offered summer jobs to, even though some won’t have workplaces on Day 1. That’s okay. Most will be working from home and help us reimagine all we can build together. They are the future; they can help take us there.

Over these trying and tumultuous months of this crisis, I’ve been inspired by RBC’s 85,000 employees who have transitioned a global operating system with remarkably little disruption. Beyond just doing things differently, I see us doing things better, which will be critical to ensuring a successful recovery that accelerates into a vastly changed world. That’s why I’ve asked every one of our leaders to keep notes on what they’re learning and how they’re thinking about the next normal.

I’ve stressed to them two words: speed and scale. We need those twin forces to drive our business forward. We need them in public policy, too, to develop solutions at the speed of our shared problems and to ensure solutions get to a scale we’re seeing elsewhere in the world.

Over the coming weeks, we will need to move faster than we may be comfortable with and strive for a scale that’s bold and ambitious. We’ll also need to keep pace, even as we’re confronted by questions that give us pause about how we can collectively move from crisis to recovery.

We will need to lay out plans for re-engagement, to determine which parts of society can open up first and how we can approach that narrow door without sparking a social stampede.

We will need to invest aggressively in mass testing for COVID-19 and adopt new approaches to monitoring, to better understand where the virus is and how best and most humanely to contain it.

We will need to protect all Canadians as we come to grips with the prospect of co-existing with the virus, domestically and globally, before a vaccine or effective treatment is developed and produced at scale.

How we respond to those questions and work together in the weeks ahead will be remembered for years. How we rebuild from there will be remembered for generations.

We know this crisis is already different and deeper than anything we’ve seen. We should also know it can be the beginning of a new economic chapter for Canada, one that allows us to thrive and prosper in a digital age.

We’ll need to work together – something Canadians are good at, even under stress. We’ll need to think about offence as well as defence. And we’ll need to see this not only as Canada’s challenge but also Canada’s moment.

That can be our next normal.

This article originally appeared in the Globe and Mail.

Virtual Davos: 7 Challenges for COVID and Beyond