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From geopolitics to AI – entrepreneurs and family businesses rethink a changing world at LO Generations 2024
At first sight, the Tuscan landscape appears timeless. Centuries-old villages nestled in rolling hills, where the finest wines and olive oils have been produced using the same techniques for hundreds of years, and vineyards and olive groves have been passed down through many generations of the same families.
Yet even in this ancient world, modernity is intervening, bringing both threats and new opportunities. Global geopolitical tensions are bringing uncertainty to exports, climate change is creating new risks for farming communities, artificial intelligence (AI) is promising to transform business models, and changing demographics are putting at risk some of the multi-generational family firms that have come to define the region.
That is why we chose Tuscany for our annual LO Generations Summit, as we brought together family business leaders, entrepreneurs, investors and the thought leaders of tomorrow to rethink the seismic shifts the world is going through, and to explore how investors should react.
As a privately owned bank with a more than 225-year history, and strong family links to our founders, Lombard Odier is ideally-placed to accompany entrepreneurs and family businesses on their journey through today’s fast-changing economic and social environment. Opening a series of deep-dive Summit panels, Samy Chaar, Lombard Odier Chief Economist and CIO Switzerland, began by exploring the global shift from “trade liberalisation to fragmentation.”
US direct investment into China as the manufacturer of the world has totally collapsed. But that money doesn’t disappear, it just reorganises
Europe’s place in the new world order
“We all grew up in a world that was characterised by trade liberalisation, free trade, globalisation. But we are now in a world that is dominated by a strategic competition between China and the US. We’re back into a form of bloc logic,” Samy Chaar explained.
“US direct investment into China as the manufacturer of the world has totally collapsed. But that money doesn’t disappear, it just reorganises. Now the US is looking for other sources to invest in so they can manufacture what they need – India, Mexico, Poland.”
“In principle, this is not new. This is how things were for decades after the Second World War, so there are important lessons we can draw from the past. After the War, the Marshall Plan to rebuild Europe was worth USD 1.5 trillion in today’s money. As the world fragments we’re now seeing a capex1 boom engineered by the Americans – investment from both the public and private sectors – that is worth double the Marshall Plan. Effectively, the Americans are putting two Marshall Plans into the system to adjust to this new fragmented world.”
“The name of the game is going to be for each bloc to de-risk from the other bloc. This means you want to depend less on the exports of the other bloc. You want to secure supply chains. You want to secure where you get energy from. That’s going to require a lot of investment.”
In the 1980s… the GDP of Italy alone was the same as China and India combined. Now China and India are 25% of world GDP, ten times Italy
Professor Enrico Letta, former Prime Minister of Italy, President of the Jacques Delors Institute and EU Rapporteur on the future of the Single Market, who joined Samy Chaar on stage, warned that while the US is grasping the nettle, Europe is falling behind.
“The red alarm to the European institutions is that on many issues we are lagging not only the US but also China,” Professor Letta said. “In the 1980s, when the Single Market was created, the GDP of Italy alone, for example, was the same as China and India combined. Now China and India are 25% of world GDP, ten times Italy.”
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“The key issue is that while we think of Europe as one single economic space, in reality, for many issues, Europe is just a geographical expression. For the EU to recover its strength, we must complete European integration, particularly in financial markets, telecoms, defence and energy. Fragmentation in these things is the key problem for us.”
An economy made from nature – a world made from air
However, Professor Letta warned, further integration faces political difficulties, in part due to EU efforts on environmental sustainability, which have led to protests and a rise in nationalism. “We can’t say to hundreds of thousands of workers in the automotive industry, that’s it, you’re out of a job. We can’t say to farmers, you’re going to lose 10% of your revenues because of the green transition. That won’t help EU integration. Some people say we need to delay. I don’t think that is the right approach. Instead, we need to find a way to finance the transition.”
The problem of not valuing nature is that we are paying for the cost of its destruction. All sectors of the economy are going to experience this cost
Dr Marc Palahí, Chief Nature Officer at holistiQ Investment Partners, echoed this call. With economic losses from climate change growing, delay is not an option, he said. “The global insured losses of the last five years due to climate change and nature degradation have doubled compared to the previous five years. The new normal is above USD 100 billion of insured losses per year. But that is only insured losses – the total costs are much higher. The problem of not valuing nature is that we are paying for the cost of its destruction. All sectors of the economy are going to experience this cost.”
However, Dr Palahí said, there is hope. By investing in nature itself, we can turn back the dial on climate change and biodiversity loss, while also discovering new economic value. Taking food production as an example, he explained that adopting a nature-based model, such as regenerative agriculture or agroforestry, could lead to a profitability increase for farmers of up to 35%, a three-fold land value appreciation, and, crucially, a 50% reduction in losses due to severe weather events. And by boosting soil health, today’s food systems could even turn from being a carbon emitter to a net carbon sink.
Across all sectors, he said, big brands will increasingly look for products that have been produced in harmony with nature. “So in conclusion,” he finished, “I am quite confident that the demand for nature-based assets, nature-based [climate] solutions and nature-based value chains will outpace the supply.”
Nicholas Flanders, Co-Founder and CEO of California-based carbon transformation company Twelve, highlighted the potential for technology to complement nature-based climate solutions, and the huge opportunity for investors. Twelve, he explained, now has the potential to use captured carbon to produce jet fuel with up to 90% lower emissions2, with partnerships worth hundreds of millions of dollars lined up with Microsoft, Alaska Airlines, and IAG. Twelve is also replacing oil as the input for multiple day-to-day materials, and have proven their technology by making the world’s first CO₂Made® sunglasses and car parts.
What if you could turn captured CO₂ into useful products. That’s what carbon transformation means. Our mission is to build a world made from air
“Carbon is not the enemy, it’s the way we’ve been using it,” he said. “You’ve probably heard about carbon capture and storage. That’s the process where you capture CO₂, but then what do you do with it? If you bury it underground that addresses emissions, but it doesn’t create any new value. What instead you could turn that captured CO₂ into useful products. That’s what carbon transformation means. Our mission is to build a world made from air.”
AI unlocks new creative potential
This focus on technology continued with Sofia Crespo, a Neural Artist whose ground-breaking digital artwork has appeared in New York’s Times Square and Paris’s Pompidou Centre. To answer the question, “Is artificial intelligence (AI) a threat or an opportunity?”, Sofia Crespo outlined how she has embraced AI to produce art borne from ‘big data’, unlocking creative potential that would otherwise not be possible.
“I see AI as a tool for extracting patterns from data,” she said. “Personally, I have limits on the things I’m able to imagine. And those limits are based on what I’ve been able to perceive across my life – it’s like my own personal dataset. Now we have big data and AI.”
However, referencing the importance of using AI as an assistant to humans rather than a replacement, she said, “AI isn’t something that gets used as a one click and it’s done. It’s important to have a dialogue with it. The technologies emerging today will change the way we perceive the world around us.”
As in many industries and sectors, she explained, AI is already transforming the art world. “What I see is that institutions are slowly starting to embrace digital art. Sometimes they do it silently, so not many people know it’s even happening. For instance, the Pompidou has just added NFTs (non-fungible tokens) to their collection. This isn’t being promoted much yet, but institutions are doing this, and by doing it they’re legitimising AI art.”
For a business that has existed for a long time you would think that its prime value is heritage. The truth is that to stay in the market you have to innovate
Family businesses – tradition meets innovation
Claudio Stefano Giusti, CEO and Owner of Acetaia Giusti, one of Italy’s oldest manufacturers of balsamic vinegar, also emphasised the importance of embracing change. Joined on stage by Marie-Christine von Pezold, Director Family Business Network Switzerland, he explained how he has taken the 419-year-old Giusti, now in its 17th generation of family ownership, from a turnover of EUR 1.7 million to EUR 20 million in just two decades, and built a presence in 80 countries.
Much like Lombard Odier’s philosophy – ‘rethink everything®’ – Claudio Giusti explained how long-term success for a family business means being always ready to innovate. “Longevity is connected to innovation. For a business that has existed for a long time you would think that its prime value is heritage. The truth is that to stay in the market you have to innovate. Another important thing is the people. Being human-centric is what makes the difference – the final purpose of everything we do is the people. If you invite the next generation to join you, there will be change.”
As the panels came to a conclusion, Xavier Bonna, son of a former Lombard Odier Managing Partner and soon-to-be Managing Partner himself, summarised the importance of this focus on the next generation. “We pass down the keys from generation to generation. This legacy is something we truly value.”
However, he said, “it’s not just about keeping traditions alive. It’s also about building a sustainable future. Each generation brings its own ideas, its own experiences, and helps to learn from each other. At Lombard Odier, this is part of our philosophy and the secret to our longevity. We constantly rethink the world around us.”
This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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