Connected, cosmopolitan and high IQ’d – The rise of a new global elite

It’s that time of the year when high-powered executives, academics and government officials all over the world gauge their importance and place in the world with a simple metric. And that is where they rank in the Davos pecking order: were they invited at all?, did they receive only a general pass or were they asked to moderate, chair or participate in a panel? who shows for their cocktails etc. The yearly spectacle which is Davos can be described as a modern day temple devoted to the worship of high achievement, smarts and wealth. If Mt. Olympus was the gathering place of the gods of ancient Greece, Davos can probably be termed the gathering place of the gods of the modern era: high achieving businessmen and policy makers. Something must be said about the resourcefulness displayed by Klaus Schwab – the Swiss academic who founded the World Economic Forum – in transforming a sleepy ski resort in the middle of nowhere to probably the single greatest annual concentration of wealth, power and prestige in recent human history. However, Davos is in my opinion only a manifestation of larger trends occurring in the world.

The first is the rise of a global elite and the increasing similarity between people with great wealth and power, even if they are from different ends of the world. As noted recently by the Economist, the banker in New York may be more culturally similar to fellow bankers or moneymen (/women) in Mumbai , Shanghai or Johannesburg than they might be to their own neighbors in the Bronx or Brooklyn. The rise of a global marketplace in higher education has made many executives and government leaders from various countries to be alumni of a disproportionately small number of elite institutions, primarily in Europe and the United States. Many of them have further gone ahead to work for a smaller handful of firms – largely investment banks and consultancies – that are generally regarded as the biggest magnets for the “best and brightest”. They all share similar characteristics: an expensive education, an obsession with being regarded as the best and a high level of comfort with a global world. This phenomenon may have an impact of dampening the sometimes positive effects of national loyalties, cultural heritages and differing intellectual aptitude. A global firm may assemble executives from 20 different countries and not have a hint of intellectual, socio-economic or ideological diversity. This in itself may not be bad if it were not for the potential that it has for fostering “group think”: a pattern of thought which the recent financial crisis has shown to be potentially troubling.

The second point is the change in the nature of the new breed of wealthy people, especially in the United States. It was the case in 19th and early 20th century America that the wealthiest people were tough, roughhewn men such as Vanderbilt, Rockefeller and Carnegie with little formal education but lots of grit. They were simple men who joined gold rushes, went wildcatting for oil and built railroads. Many of them would definitely not have been admitted into the elite academic institutions of their day, although they did get some kicks from doling huge sums to such institutions after they made a pile of money. The 2nd half of the 20th century, turned this model on its head especially with the rise of the technology and finance sectors. A lot of the wealth that has been created – and many of the millionaires – have come from two sectors: finance and high technology, which demand a higher than average level of education and intelligence. The Hedge Fund and Private Equity sectors has been prodigious in minting a lot of multi-millionaires every year and these are not “plain-speaking townfolk” who raised themselves by the bootstraps with little education. No, these are high school valedictorians, chess champions, Ivy-League graduates with high-priced MBAs from top business schools. These are literally the “smartest guys in the room”. The same is true – to a possibly greater extent – in the high tech industry. It takes a level of mathematical aptitude that is not present in most of humanity to be accepted into Computer Science Phd programs in places like Stanford and MIT: places that have produced a lot of tech millionaires and billionaires. These guys are smarter than you and would like you to remember that!

This in itself is great but it has implications for class relations. The world has moved from medieval-era class relations predicated on the relations between the landed aristocracy and their serfs to Victorian-era relations between mill owners and the near-permanent underclass who toiled in such mills. The world has become far more meritocratic than at any point in its history and people have risen to great positions from diverse backgrounds. However, a new aristocracy has emerged and it’s the “aristocracy of the brainy”. Today’s aristocrats have attended the best universities across the world, worked for a handful of “brand name” companies and congregate at forums such as Davos and Bilderberg. It would be difficult to choose a point in human history when education and wealth has been so positively correlated. The difference in the lifetime earnings potential between people with high school diplomas and college degrees have widened significantly in the last couple of decades. Even within college graduates, those with degrees from a handful of colleges regarded as “top tier” will earn far more than those with degrees from places no one has ever heard of. Furthermore, the range of middle class occupations available to folks with high school diplomas continues to shrink daily.

This situation has socio-political implications with the most extreme being class warfare. People who sense they were trapped in a permanent underclass have taken out their frustrations on their better endowed neighbors in the past: the French Revolution was as much a revolt against monarchy as it was a backlash by the poor against the landed aristocracy. While this is very unlikely in the modern era, some of the “soak the rich” sloganeering and debates about corporate bonuses of the past 3 years (though somewhat justified) can be described as “distant cousins” of class warfare. This may also account for the poor performance of many business executives in recent election cycles, with some being resented for having made a lot of money in the corporate boardrooms while the rank and file felt pain. Carly Fiorina caught a lot of flak for cutting jobs and earning bonuses even though she was only doing her job to maximize value for shareholders! I think in the final analysis, governments and companies must come together to look out for the ordinary people who lack the degrees that have become so critical for success. Assembly-line workers who lose their jobs should be given aid in retraining, community colleges should be better funded to give people a hope of some form of tertiary education. And more importantly new growth sectors that will employ huge numbers of non-college graduates need to be created to sustain social harmony. I hope these issues find their way into the discourse in the snow-covered mountains of Davos!