Sandra Navidi - SuperHubs - How the Financial Elite and Their Networks Rule our World

So what is the magic formula of Schwab’s network power? Like many other top leaders, Schwab developed a theory at the outset of his career that would become the foundation of all his endeavors. According to the stakeholder principle, “the management of an enterprise is not only accountable to its shareholders, but must also serve the interests of all stakeholders, including employees, customers, suppliers and, more broadly, government, civil society and any others who may be affected or concerned by its operations.” He later expanded this concept to include global corporate citizenship, which views “corporations as stakeholders in global society, together with government and civil society.”1 Companies that have benefited tremendously from globalization are encouraged to take a socially responsible approach and give back. Schwab’s theory tapped into a worldwide trend, which at the WEF’s inception was only beginning to develop: globalization and the emergence of transnational power elites. The declining power of nation states, the lack of global leadership, and the emergence of powerful conglomerates have increased the relevance of the stakeholder concept. Based on Schwab’s theories, the WEF’s mission takes an all-inclusive approach, inviting representatives of nonprofit organizations and young global leaders without charge. The stakeholder principle provides the WEF with legitimization, authority, authenticity, and a purpose for its platform—to improve the state of the world.

Schwab slowly developed from a node to a hub and then a superhub. Apart from creating a sound ideology and distinguishing himself academically in Switzerland, he also earned a master’s degree in public administration from the Harvard Kennedy School of Government. There he gained international exposure, made numerous important contacts, honed his skills, and solidified his reputation. Among other innovations, he conceptualized the annual Global Competitiveness Report, which also includes sustainability considerations. Over the years, his brainchild has morphed into an authoritative research paper that commands global attention. Through his thought leadership, Schwab has cemented his status in the world community and accumulated an impressive fourteen honorary doctorates, seventeen national distinctions, and countless awards. He was also chosen to serve on the steering committee of the Bilderberg Group. He perfectly exemplifies the fact that every network needs a nucleus around which other nodes can circulate.

Schwab cleverly chose a secluded mountainous location devoid of distractions for the WEF’s annual gathering, where he could assemble a high concentration of superhubs. Moreover, he chose neutral Swiss ground and focused on participants’ commonalities rather than their differences. By stressing elements of homophily, he ensured a greater draw, as people tend to gravitate toward others with whom they have something in common.

For the longest time, the question of succession remained unaddressed, which prompted some to speculate that Schwab was either in denial or had simply not yet found anyone he deemed up to the task. Regardless of the fact that Schwab has no plans to retire, the official recognition of the WEF as an international organization in 2015 finally necessitated a formal succession plan and governance matrix to ensure the Forum’s sustainability and long-term success. However, Schwab’s iconic status, and the highly personal nature of his relationships, calls into question the future of the Forum should he one day resign. But until that day and forever thereafter, he will undoubtedly remain the superhub of superhubs.

FRIENDS WITH BENEFITS: CAPITAL NETWORKS = NETWORK CAPITAL

Today more than ever, power is defined by who is the most connected and knows how to best use those connections. Network strength provides network power, and the most successful executives reach the top not solely based on their analytical skills, but because of their strong relational aptitude. We all begin our professional lives with our own personal human capital, but at a certain level executives are expected to cultivate wide and deep professional networks. Relational capital is an intangible asset that reflects the value inherent in a person’s relationships. The more high-level the relationships and the greater their strength, the more valuable the “relational capital”. It is a prized asset, because in a knowledge economy where almost everything can be replicated, a person’s relationships are unique.

“Relational capital” creates “network capital,” which increases the “return on relationships.” An executive’s relational capital is considered most valuable, because it expands the institution’s own network and, thus, its profitability. Particularly in view of globalization, networks have become a distinct area of competition. Globalization has exerted upward pressure on quality and downward pressure on prices, which makes it harder for firms to distinguish their products and services. This makes human connections, which by their nature are highly personal and unique, even more coveted. They can be the decisive factor with regard to which banks are chosen to orchestrate landmark IPOs, which funds see billions of dollars in inflows, and which firms receive access to megadeals.

One of the most valuable resources is network intelligence, as we explored in Chapter 3. The most crucial information comes from other people, not theoretical resources, and this serves as a strong link among superhubs. In an age of constant information overload, relevant, timely, and private information from original sources is now an indispensable commodity. As Klaus Schwab noted, contextual emotional intelligence cannot be acquired in reading papers, but only through interactions with other people.2 Therefore, building a deep, diverse, and dynamic network is imperative for leaders, because in order to succeed they must remain informed, have access to opportunities, and the resources to be able to seize them. Strong networks enable superhubs to connect with peers and weak ties alike in order to weave an ever-tighter web that extends beyond the echo chamber of homogeneous thinking and covers any blind spots. Such alliances provide resources, support, and greater influence.

More an Art than a Science: Attraction + Interaction = Transaction

Human networks form according to laws that we can analyze and apply. But relationships also contain unknown variables, intangible aspects, elements that cannot quite be grasped. Why, when we enter a room, do we immediately click with or feel repulsed by some people? Why do we trust someone immediately while dismissing others right off the bat? Interpersonal chemistry is hard to grasp and more difficult to explain than the scientific laws of network science. But there are a few mechanisms that illuminate this invisible phenomenon, at least to some extent.

Throughout our lives, one of our innermost needs is to connect with other people. The degree of our cooperation and success differentiates us from other species. We are wired to build human rapport, and evolutionary history has fine-tuned our ability to do so. We have learned to assess others and discern subconscious signals by interpreting their voice, facial expressions, and body language. The more senses involved, the more accurate our assessment.

The face is the most expressive part of the human body; it divulges a wealth of visual clues about one’s emotional state. When we meet someone new, we decide within thirteen milliseconds whether or not we like them.3 People who are familiar make us feel comfortable, whereas foreigners put us on alert. These responses are triggered by the brain, which processes cognitive as well as emotional stimuli. The amygdala, which is part of the brain’s “survival system,” receives inputs from all senses and processes fear and emotional memories. Suspicious signals, which trigger distrust, activate the amygdala. In contrast, when we trust others, the brain’s prefrontal cortex, which is associated with cognitive processes, is activated. These reactions confirm that we can really only build profound relationships in person, because it is the optimal way to assess and connect with people.