Davos 2019: Is There Too Little Competition Or Too Much? Rajan, Schwarzman, Moynihan Weigh In
Uncertainty seems to be the theme playing out at the World Economic Forum in Davos as companies discuss trade opportunities amid escalating tension between the world’s two largest economies and countries focusing on protecting their turfs.
Is expansion becoming more complicated in a global economy that's already showing signs of fatigue? What does this mean for competition and are companies too big to fail, or too big to manage?
Former Reserve Bank of India Governor Raghuram Rajan and C-suite executives from across the world address these questions during a panel discussion titled “Shaping A New Market Architecture”, in collaboration with CNBC and The New York Times.
Here are some of the themes that were discussed:
Is there too little competition or too much?
Talking of access to innovation and data, we have to see if it’s maintained for smaller companies, Raghuram Rajan, professor at Chicago Booth School of Business, said. “When a small player wants to do something close to one of the big players, venture capitalists refuse to fund it, calling it the kill zone,” he said. “That’s the zone in which the big player, if you’re really good, will take you over and if you’re really bad, will finish you off.”
Are we equally competitive on all sides?Raghuram Rajan, professor, Chicago Booth School of Business
Is there an upper limit after which scale and size don’t work?
Stephen Schwarzman, chief executive officer at Blackstone, said senior people in the business have to be visible to the people who work in that company.
Don’t like units larger than 250-300 people.Stephen Schwarzman, CEO, Blackstone
Agreed Rajan. “More than about too big to manage, it’s about too big to control,” he said. “Our corporations are becoming too big to control for our political systems.”
Yet, Schwarzman said, “Interestingly for us, we keep getting better as we get bigger because we know more. When you get to a certain scale, if you limit the amount of capital you have for strategy, you can keep inventing, then you do quite wonderfully well.”
Brian Moynihan, CEO at Bank of America, said the idea of a franchise is only about a decade or two decades old.
People forget that even though we’re large, it’s because the economy is large. And you take 13 percent of a large economy and it’s a sizeable business.Brian Moynihan, CEO , Bank of America
The China Factor
Rajan said the U.S. has been uncomfortable with any entity being too big. “This is a question of power,” he said. “With China coming up and Chinese corporations getting the scale, the question is whether the U.S. can cut down its corporations, or whether it has to let them operate at a different scale than it used to be comfortable with before.”
Is data the new oil?
Ruth Porat, chief financial officer at Alphabet Inc., said, “Data is like sunlight more than oil. Oil’s finite.” She, however, said fewer data are required to have a breakthrough in artificial intelligence. “We have seen in the breakthrough in breast cancer, we needed only a few 100 samples.”