Intro:
Welcome to Markets Plus, where leading experts from across BMO discuss factors shaping the markets, economy, industry sectors, and much more. Visit bmocm.com/marketsplus for more episodes.
Dr. Laurence Mussio:
Hi, in canton Graubünden, where at 1,560 meters above sea level, the air is thin and the motorcades are plentiful, and the world just took a very sharp turn in Davos. I'm Laurence Mussio, I'm chair of The Long Run Institute and special advisor to the CEO of BMO Financial Group.
Now, in this corner of Switzerland, it's famous for the Romansh language, it's beautiful, ancient, it's very resilient. Though for one week each January, the official dialect in Davos shifts unmistakably to what we might call Plutocrat, the Pachois of Power, the lingua Franco capital seeking safe harbor. But beyond the security cordons, the private chalets and the theatrical motorcades and all of that, what was it actually like this year? We've seen the headlines. It's been a really consequential World Economic Forum. Donald Trump eyeing Greenland as though it were a prime parcel of Manhattan real estate available for acquisition. Mark Carney, the Canadian Prime Minister delivering what amounted to a strategic ultimatum. If we're not at the table, we'll be on the menu. And meanwhile, there was also techno optimists that proclaimed a new age of AI abundance, even as the old architecture of the global order groaned audibly under the strain.
So today, we have the ultimate insider's view. Joining us is Deland Kamanga, group head of wealth management at Bank of Montreal Financial Group, and one of 850 delegates to the World Economic Forum. So, welcome to you, Del. You were an eyewitness to what historians may one day call a hinge moment. One of those rare weeks where the trajectory of events visibly shifts. And so, welcome back to sea level. What did the rest of us miss? What did you see?
Deland Kamanga:
Well, first of all, I didn't know that it was 850 delegates. They did say though that it was the busiest Davos ever, and it certainly felt like that. We arrived on the Tuesday afternoon, and so most people land in Zurich and then actually had to take a helicopter to Davos. We of course landed in Zurich and then drove to Davos, it was about two hours. So that's how you arrive, you have to drive in or a helicopter in. You can't actually fly in because you can't land in Davos, imagine that. And for us though, arriving Tuesday afternoon was actually quite good because literally we got to the front. You first have to go into the ice palace, get your badge, then you can go to your assigned hotel. For people who arrived on the Monday, we were told that it was two hours waiting to get to the ice palace to get your badge.
Dr. Laurence Mussio:
Wow.
Deland Kamanga:
For us, it was about 30 seconds. But no, it was a great vibe. Very, very busy. Lots and lots of traffic. But you could definitely feel a very consequential Davos.
Dr. Laurence Mussio:
Yes. Most of us have not had, of course, the privilege of being in Davos and especially at the World Economic Forum. I mean, I've been there in the summertime, but nobody's there, but it's a beautiful place.
Walk us down the promenade for a second. Davos is a place of, or it has been a place of polite global cooperation. The historian and my friend, Sir Niall Ferguson, called the mood this year, "Manic dissonance." Right? So for our clients listening, did you feel that there's a mix or what he saw? I'd be more interested to hear what you saw as a delegate, a mix of panic about the end of the old order, but also a lot of maybe excitement about AI and about possibilities. So, maybe take us through that a little bit. Does that track with what you're-
Deland Kamanga:
So, it's interesting because you would think that it was this whole panic about the end of the world order. Actually, when you talk to people, what was the most talked about was quantum, energy, and AI. And I would say for the most part, it was very positive, very productive, and very optimistic. I would not say that you left there with a feeling of pessimism or concern that, oh my goodness, what's going to happen in the geopolitical situation? No, it was much more, my goodness, we were at this inflection point and the growth from here could be tremendous. Right?
The talk around AI, you definitely had two camps on the AI conversation. One camp is, this is going to cause 20 to 30% destruction of jobs and we're going to have to find things for these people to do. But I would say more of the conversations that I was a part of and the speeches that I saw like Jensen Huang as an example, was much more about actually, this is going to create a lot of jobs.
The example Jensen Huang gave was other radiologists saying radiologists should have been completely eliminated from AIs. AI is completely involved with radiology. What they found is that radiologists have a task and they have a purpose. The task is to review these scans, AI allows them to review far more scans, far more accurately. Their purpose is to serve patients. So, because AI has helped with the task, they can do far more tasks, they're far more efficient in the tasks, which allows them to serve far more patients. So there's actually more radiologists today than there've ever been. Right? So it was a really, I felt like a very optimistic on what the future holds and much less the other argument, which is, there's going to be less jobs.
Dr. Laurence Mussio:
Right, right. And this is one of the reasons why we wanted to get you mic'd up here with this podcast, and especially just a few days after the World Economic Forum, and the reason is that there seem to be two versions of Davos. One is, okay, it's the Greenland gamble. It is the Carney speech, which we can go into a little bit later. And then there are the people, the eyewitnesses on the ground, as you felt it, so that is somewhat of a dissonance. You're there and you're saying it is about actually taking maybe a longer run technological, [inaudible 00:07:02] technological transformation and so forth. Right?
Deland Kamanga:
At the end of the day, it was only a few speeches really that were focused on that. You had Zelenskyy's speech, you had Carney's speech, and you had President Trump's speech, but that's it. Most of the other speeches were about all these other things, about AI, about energy, and that's what most people were talking about.
Of the heads of state, one interesting speech was the Indonesian President who'd been in power for a year. And he was talking really about the future of his country and how much potential was in his country. How he's just formed a $1 trillion sovereign wealth fund, and he came to Davos to talk about this $1 trillion sovereign wealth fund. A country that actually has a smaller GDP than Canada. So very, very positive and optimistic about the growth and the opportunity in his country.
Dr. Laurence Mussio:
Right. In some ways it's the elephant in the room, because there are fundamental shifts happening. But when you get a group of business people together, they're talking about a different long run.
One of the things that really struck me at least about the reportage is that shift that you're talking about, the abundant shift. So we pivot from, let's say, talking more about sustainability than in talking about abundance. You talk about energy, AI, AI needs massive amounts of power. Now, did the energy talk seem like more of a green conversation or a massive energy expansion conversation?
Deland Kamanga:
Yeah, so, great, great, great, great question. So first of all, the whole energy conversation in different buckets was all about how much more energy we need. So Jensen Huang talked about that.
Then you had people who were talking about the solution to that energy need. So, maybe the best example of solutions was Elon Musk, when he spoke. He claimed that in two to three years, they'll be able to set up data centers in space. Basically, his argument was that 99% of the energy in the world can come from the sun. That's all the energy we really need. So, we could have the data centers up in space, we could have the solar panels towards the sun. He talked about the cooling because it's like -5 Kelvin or something like that. The cooling can be brought in from space, and actually it'll be lighter in space to have some of the very, very heavy chips that they're going to have in the future. So, he said that's a solution.
Then secondly, he claimed, and I've said this to people and I wrote it down, and I've said this to people and people tell me that this is not true, but I'm just a reporter. Okay? [inaudible 00:09:44]. So he said that a 100 by 100 mile solar farm can create over 100 gigawatts, up to 500 gigawatts of energy, essentially enough to power America. Now, I've said this to multiple people and they said that's not true.
Dr. Laurence Mussio:
Not true yet, maybe.
Deland Kamanga:
Not true yet, maybe. But the feeling is that we have the capability through sustainable solutions if necessary, and some future technology by getting things into space, to get the power that's necessary to provide the energy that's needed for the data centers.
It was also going back to the jobs situation and back to the Jevon's Paradox example. One speaker said, "Because we need so much energy, yes, AI might displace certain jobs that we know of are here today, but we actually need people building these nuclear power plants, building all of the connectivity that we need for the data centers, that that's going to create jobs. And we just don't have enough of those skilled trades to actually do some of those things yet. And that's where we're going to have to invest and we're going to need more and more people. So, there will be jobs that might be created in different areas."
Dr. Laurence Mussio:
Yeah, I like to think of it as the ghost and the body, because a ghost is the cloud. This discussion over the last 20 years of everything is dematerializing, but it's not true because as you say, you actually need the physical body, the infrastructure in order to power these.
Deland Kamanga:
That's true.
Dr. Laurence Mussio:
But it seems like the investment posture really seems to be shifting. So, from mitigating downside risk in energy to capturing upside from infrastructure expansion, so the whole conversation seems to have flipped on its head. But in terms of Canada, Canada possesses a lot of hydroelectric capacity and nuclear expertise, vast national gas reserves, etc. And I wonder, in terms of our strategic assets, those seem to be actually even more important today than they are and that seems to be one of the quiet messages coming from the WEF.
Deland Kamanga:
Yes. Well, so it's funny because when you talk to people who are there who were knocking to get their view of us, that is absolutely what they know of us. At the end of the day, they do know us for our natural resources and they do value us for our natural resources, especially mining, and not just mining in Canada, but mining all over the world. And so, talking to people from all over the world, they really do know and respect our mining expertise.
Dr. Laurence Mussio:
Yeah. And as many of our listeners will know, BMO's Metals and Mining Conference is the global leader in this. And so, that is a manifestation of in many ways how the bank has been a pillar of national development, national economic development for two centuries. I think that's a really important point, Del, because one of the things that the opportunity for Canada is to become a keystone power and not just a quarry. Because if they see this as a quarry-
Deland Kamanga:
Yeah, that's right.
Dr. Laurence Mussio:
... to say, "Well, we'll just extract and so forth." And that's where the financial institutions, I think, come in really strategically to say, "Well, this can be financed, but we need to be looking beyond that in some ways."
One of maybe perhaps the lighter aspects, or it seems like one of the lighter aspects is the social element of the... And that is so important because to meet people, there's an old cliche that banking is a relationship business, it's a cliche for a reason, it's absolutely true. Now, BMO has been coming to that mountain for 40 years, right? In the days of Bill Mulholland when they were starting out, and BMO every year has a special dinner for its clients. Take us through that a little bit.
Deland Kamanga:
Yeah. No, that's very important because what happens is that when you're there, it's an opportunity to meet people from all over the world who you wouldn't get as easy an opportunity to see face-to-face. It's one thing to meet people via Microsoft Teams or Zoom, but to be able to see that many people face-to-face in one place, that's what makes such a big difference. And you'd asked me earlier to walk down the promenade. So, the way the village is set up, the ice palace where the Spengler Cup is every single year, people think about that, that's the main hockey area. And then beside that is the Congress Center, and then above that is the promenade where you have a lot of cafes and restaurants, etc.
So during the Davos event, those cafes and restaurants are rented out by different companies. One company whose name I won't tell you, has a main cafe on the end of the promenade, and they bought the whole building, own the whole thing, and then rented out to the cafe owner for the rest of the year. So they have it one week of the year, let's call it two weeks of the year. So you go from place to place, and that's where people have their different events and different dinner parties and different things. And it's a great opportunity to meet people and to talk to people from all over the world.
We have an event at the Alpine Gold Hotel, which is also where President Trump was purported to have stayed. And we have a dinner there where we'll bring in Canadian talent. So, we'll have a Canadian artist. Every year we'll have a different artist from Canada, and we'll have a dinner there, which is really an opportunity on the last night for people to relax, let their hair down, and enjoy something that is really Canadian-centric. And we have different CEOs and different leaders from different companies, and it's a great opportunity for them to really talk to us and for us to get to know them and spend some time with them. And that's where I get to what I was talking about.
What was the feel? Because now we're almost down at the last day. What was the feel? What do you get out of it? And that's why I say it really was an optimistic AI energy and the future of the growth, the productivity growth that we could see. And I said, well, it was much more that than it was anything, any kind of pessimism on geopolitics.
Dr. Laurence Mussio:
That's, I think, an amazing insight because one of the things that people will see the Davos and the World Economic Forum is this kind of Chardonnay swilling elites, etc. Although there might be Chardonnay there, it's like there are two things. One, it's a high level focus group. Right?
Deland Kamanga:
Yes. Good point.
Dr. Laurence Mussio:
Right? And your point about teams, your point about actually knowing something versus talking to someone off the record, and that is absolutely essential for trust. Right? So, it's like high level focus group, and then as we know, trust is migrating from institutions to businesses and to people. So, that is the first point.
The second point is, you're Canada's ambassadors in some ways, right?
Deland Kamanga:
Yes, yes.
Dr. Laurence Mussio:
Right? So that's why you insist on the, say, Canadian talent. And it might not seem to the average person as critical, but in the world, we have to represent.
Deland Kamanga:
That's right.
Dr. Laurence Mussio:
One of the things that people latched onto was the speech by Prime Minister Carney. Now, were you in the room or were you in a overflow room or what was the story there?
Deland Kamanga:
So, we were very fortunate for Prime Minister Carney's speech to literally be three rows from the front and the room was absolutely full, and his speech was very well received.
Dr. Laurence Mussio:
Amazing, amazing. And also this is about a week or 10 days out, and so people are trying to sift through it and trying to see whether there's a rupture, whether there's not, whether it was more intentional rather than accidental and so forth. In your view, what would clients of the bank take away from this kind of experience?
Deland Kamanga:
Yeah. I mean, I think when you look at, and I'm sure people have the opportunity to see it and even read the transcript, at the end of the day, what we took away from that speech was that Canada's about to grow here. We are actually with this prime minister on the precipice of incredible growth, because we are going to remove a lot of the interprovincial barriers, which depending on what you look at, we think that that could be 200 to 600 basis points in GDP growth, just removing interprovincial barriers. And he talked about that for Canada. He talked about not free trade agreements with other countries, but improving relations with some of these other countries that we've had poor relations with in the last decade. And so, that's new for us and that's an opening for us.
We have also historically, and I really look at this personally as a shame over the last 40, 50 years. We've under-invested in our military. Four of my six uncles on my mother's side were Canaan military, from World War II to Korea, to blue hats in Cyprus. We've under-invested in that military. Now we're going to, he said by 2030, significantly increase our investment. So, from a bank standpoint and from an economic standpoint, when we listened to the things that he was saying, this is incredible growth for Canada, very optimistic. We do need more customers. We do need to open up to improve relationships with countries that we haven't had relationships with. So, I thought it was great, and I think that's why he got the standing ovation.
Dr. Laurence Mussio:
It's so interesting to see the... It depends on the lens that you see all of these things, right? Because if it's always through... When you've got a hammer, everything looks like a nail. When you've got politics, it is always politics all the time. But one of the great things that you bring to the table is looking at it from a business and client perspective. And one of those perspective is, in Canada, we're seeing a trillion dollar wealth transfer generationally. Right? And so, after seeing the world in transition at Davos, how do we prepare for the next generation? You started to talk a little bit about that and the Canadian mundane language of interprovincial barriers as well that they're important, but what do we need to pass on to the next generation? We need to pass on not just capital, but maybe judgment, maybe the right partners. How do we make that happen?
Deland Kamanga:
Yeah. One of the things that we're trying to do here is we're trying to say, look, as you go through this transition, the reality is the population is aging. There is going to be this $1 trillion plus transfer of wealth, and families have to have a plan. There's something like 60 plus percent of families that are going through this in the next lot that do not even have a plan as to [inaudible 00:21:09].
Step one is actually getting yourself a plan as to how you're going to do this. And then step two is educating G2 on how likely it is that that business that they're inheriting is going to change, and managing that wealth is going to change. The need for professional advice today is more important than ever because quite frankly, one thing that's interesting, Dr. Mussio, which we forget, you never had this level of wealth transfer in the history of the world. This has never happened before. You never had this many people inheriting this much wealth ever in history. Massive middle class and this massive wealth transfer, and so advice is very important and getting that plan early is very, very important.
Dr. Laurence Mussio:
And this, in my view, is why it's so brilliant that you were a delegate at Davos because you can connect the mountain with the country and the short term with the long term. So, you've got the macro and the micro. So you were just exposed to the world in transition, all of those conversations with the macro and how that nets out for the client, for the operational intelligence. And I think that is the great value of being there for a week-
Deland Kamanga:
No, that's right.
Dr. Laurence Mussio:
... and talking to people. So we need global expertise, local expertise, and that specific kind of wealth management brilliance. And that I think when it brings it all together, then it's a powerful package for people.
Deland Kamanga:
Absolutely.
Dr. Laurence Mussio:
Del, thank you so much, this has been wonderful and a real privilege, and I hope we can do it again.
Deland Kamanga:
Absolutely. Thanks a lot, Dr. Mussio.
Dr. Laurence Mussio:
Okay. Thank you.
Deland Kamanga:
Thank you.
Dr. Laurence Mussio:
This has been the Markets Plus podcast, and we've been in conversation with Deland Kamanga, group head of BMO Wealth Management. And me, your humble servant, Laurence Mussio, Chair of The Long Run Institute and special advisor to the office of the CEO, BMO Financial Group. Thank you.
Outro:
Thanks for listening. You can follow this podcast on Apple Podcasts, Spotify, or your favorite podcast app. For more episodes, visit bmocm.com/marketsplus.
Disclosures:
The views expressed here are those of the participants and may not necessarily represent those of BMO Capital Markets, its affiliates or subsidiaries. For BMO disclosures, please visit bmocm.com/podcast/disclaimer.
