Xavier Sala-i-Martin

This conference has four main parts. In the first part, Professor Sala-i-Martin explains the Hummingbird Effect: a phenomenon used by economists to explain how an innovation that occurs in a sector, ends up having huge effects (positive or negative) in different sectors that apparently have not a direct relationship. To illustrate this effect, he explains the history of glass, analyzing a whole chain of phenomena and innovations that took place since the invention of transparent glass, the discovery of the “enhancing” powers of concave lenses to the consequent improvements in water treatment, sanitation and personal hygiene.

The second part analyzes the consequences of the Fourth Industrial Revolution, the greatest industrial revolution in history, where the physical, biological, digital and mental worlds are converging. Unlike the previous revolutions that were caused by the emergence of a new technology, the current revolution combines the emergence of dozens of new technologies in the fields of robotics, AI, big data, disintermediation, nanotechnologies, 3D printing, digital medicine, the uberization of capital and the cognitive sciences, only represent a few of these innovations. The question we ask ourselves is: What will be the consequences of all these changes? Are we going to lose jobs at the hands of robots? History shows that in all previous industrial revolutions, men have ended up creating more jobs than those that were destroyed. But will it be different this time?

The answer to this question is analyzed in the third part of the conference, using the Hummingbird Effect perspective: the direct changes of the Fourth Industrial revolution are easy to analyze, and the consequences are going to be mostly positive, just like the previous revolutions. The global consequences are very difficult to measure due to the Hummingbird Effect and the extraordinary speed at which changes are happening. Here, through examples of unforeseen effects of a technology in other sectors, we analyze the emergence of Airbnb or the passenger transport market on Uber and how the financial market its been transformed with new FinTech technologies.

In the last section, Professor Sala-i-Martin addresses how governments and companies around the world should face these challenges. The Hummingbird Effect tells us that the changes that are coming are totally unpredictable. The key to survival is the capacity for adaptation: whatever changes may come, the companies and countries that will survive are those that can adapt to this new (uncertain) situation. The main challenges are analyzed in three different areas: human capital, organizations and regulation.

Specifically, regarding regulation, in a world where technologies change at the speed of light, legislators are being left behind. Yet, it is necessary and urgent to analyze the ethical implications and the challenges posed by the introduction of new technologies to define where limits should be established.

The main conclusion is that the speed of the changes we are facing, in addition to the unpredictability of the Hummingbird Effect, make the Fourth Industrial revolution “the mother of all revolutions”. And we still have not thought about how to deal with it.

The world is changing really fast. An underlying concern to world leaders, CEOs and business executives is that amid the fourth industrial revolution, the acceleration of innovation and the speed of disruption are hard to anticipate (and fully understand). Across all countries and industries, there is clear evidence that the new technologies are having a major impact on our lives and reshaping our economic, social, and cultural environments. Thus, we are all called to understand the rapid changing environment, and now more than ever relentlessly innovate.

Professor Sala-i-Martin is one of the economists who led the intellectual revolution of “endogenous growth”: a revolution that emphasizes the need for nations to grow through ideas and innovation. As an expert in growth, Sala-i-Martin explains what countries (and companies) must do to establish an environment that enables citizens and businesses to create, develop and implement new ideas that will allow them to progress and grow.

As Chief Economic Advisor to the WEF (since 2003), Professor Sala-i-Martin has had the privilege to track countries and industries all over the world. Hence, he has a unique perspective on innovation and competitiveness, and is able to identify successful practices and patterns of those countries, companies and business leaders that have thrived over the last decade amidst challenges.

He knows the only way to make the most of this challenging times is by optimizing our innovative capacity. Therefore, he is keen to emphasize how innovation can (and must) occur in all sectors and countries; and demystifies the idea that it only occurs on rich countries or on specific high-tech sectors (that specifically focus and invest in R&D). As he has been able to track, some of the most recent successful business innovations have occurred in traditional industries, where new business models and competitors have disrupted, such as Nespresso and Starbucks in the coffee industry, Zara in clothing and retailing, IKEA in the furniture industry, Cirque du Soleil in entertainment and Uber in the transport industry. These examples prove that all kinds of businesses can thrive and achieve economic growth when new ideas are actually transformed into business opportunities.

No one can depict the future. However, by preparing ourselves (and the future generations) to implement an innovative and creative mindset we will be able to better cope with the changing new world orders and novel business environments. Thus, it’s important to keep questioning yourself: what have you done different today?

Marco Polo visited China (between AD 1271 and 1291) and was amazed by its progress. In The Book of Wonders (1300), he explained that the Chinese had gunpowder, glasses, porcelain, paper currency, and a variety of technologies that were far superior to those found in Europe. In 1976, when Mao Tse Tung died, China was one of the poorest countries in the world. How is it possible that a great economic and technological power eventually became the poorest country in the world? The answer to this important question is fascinating, as today´s Western world is committing the same mistakes that China made centuries ago: and if it does not correct its course, it could embark on a path to decline that could last eight hundred years!

One of the reasons that explained the Chinese superiority at the moment was its enormous trading network. The era of maximum Chinese wealth corresponds to its era of maximum commercial exposure. However, once they were the world´s economic power, the Ming dynasty decided to close its borders to protect itself from foreign influences, implementing an isolationist policy towards trade.

Throughout history, there are many examples of countries that have implemented policies that enhance or hinder international trade. The spectacular economic success of China and the rest of East Asia is an example of how trade can be a driver of economic growth. It also exemplifies the dangers that the rise of protectionism and isolationist policies around the world, can pose to the global economy. Overall, international trade is beneficial and has spurred technological diffusion as well as the development of the knowledge led economy and innovation. However, all policies have their shortcomings and so does international trade. Even though the overall effect on the economy is positive, not every citizen benefits from it. In fact, there are workers who lose their jobs. These “globalization losers” serve as a breeding ground for the rise of demagogic and populist politicians who use their discontent to propose policies that will have the opposite effect: they will benefit only a few at the detriment of the majority.

It’s clear that governments should implement policies that help the “losers of globalization”. Contrary to popular belief, the key policy is not redistribution taxes and subsidies. The correct policy is to provide the tools so that the losing workers have an easy transition to a new job. And this means a new way to educate them: a new education system is required, to really ensure that today´s students are prepared to deal with the challenges imposed by globalization and to be more competitive to face the changing future. Professor Sala-i-Martin thoroughly explains how the new education system should be.

The story of FC Barcelona depicts one of the most extreme, impressive and successful organizational transformations in sports history; after half a decade of economic and competitive drought, a new board of directors led by Joan Laporta took over the club in 2003.

Seven years later, the club had won four Spanish Leagues, two UEFA Champion Leagues, three Spanish Supercups, a European Supercup, a King’s Cup, and a World Club Cup; by 2010 it was “the best sports club in the world” for second consecutive year, and had an accumulated economic surplus of over 131 million Euros.

In this powerful conference, Professor Sala-i-Martin explains how the most important and controversial decisions made by the club in the last few years such as hiring Frank Rijkaard and Pep Guardiola, making a strong bet on the low tier teams, and the “crazy” decision to be the only club without a commercial sponsor on its shirt turned out to be the right ones.