Explore how businesses can tailor responses to varied sources of disruption—from shifting tariffs to extreme weather and cyber threats at Davos 2026
At Davos 2026, leaders argued that disruption has shifted from episodic shocks to a “new operating model” of persistent volatility. NYSE President Lynn Martin rejected a narrow “AI bubble” framing, noting AI is “an enabler of all types of businesses across all sectors,” from energy to industrials, and predicted a strong 2026 for IPOs and M&A after a long drought. Sir Martin Sorrell described a world where globalization is “under attack,” urging companies to be more geographically nuanced and warning the biggest mistake is “making no decision at all.” JLL CEO Christian Ulbrich said the office market has bifurcated: record rents and demand for prime buildings, rising vacancy for “fringe” assets that must be repurposed. He also highlighted data-center constraints—“land, power and water”—with power the binding limit in the U.S. Cloudflare CEO Matthew Prince argued AI will be a defensive force multiplier in cyber, even if scams dominate headlines, and warned of “agentic commerce” disintermediating media and small businesses. Europe’s Pierre Gramegna pushed back on decline narratives, citing stable growth and “€40 trillion savings,” but called for structural reforms, a Savings and Investment Union, and more defense spending amid intensifying geopolitics.
Well, welcome to this panel session this afternoon. All disruptions are not equal. We have a terrific panel today to discuss disruption as a topic. Thank you for joining us. Well, you know, we thought that we were planning for a very different world. But here we are, a radically disrupted world. So many dimensions to it. We'll try and explore some of them this afternoon. And if I can welcome our guests, a panel guests. Pierre Gramegna, the managing director of the European Stability Mechanism, Lynne Martin, the president of the New York Stock Exchange, Matthew Prince, the co-founder and CEO of Cloudflare, sir Martin Sorrell, of course, founder and executive chairman of S4 capital, a digital advertising and marketing services company. Previous, of course, long term CEO of WPP, and Christian Ulbrich, CEO of JLL, a global commercial real estate and advisory services company. Together, they see how disruption is playing out over multiple industries and multiple geographies. How that is playing out in capital markets, how it's playing out in capital policy frameworks and of course, the ways in which it's shaping us all. So just a couple of words before we start the panel. For decades, disruption was seen as episodic a storm that arrived, damage that was caused, repairs that was done. It eventually passed. But over the past several years, of course, what we've seen is that that reality has changed. And certainly since the pandemic, we seem to be in constant disruption. At Alixpartners, the firm I chair, we started studying this about eight years ago. And what we found, of course, is that policymakers and central banks have got good at managing economic cycles and the cycles of disruption that are now causing us so many challenges day in, day out. The reality has changed. Disruption is now systematic, it's persistent and it's accelerating. It cuts across every industry, it cuts across every geography. It really dictates how the global economy is operating. This isn't a temporary deviation. It's now the new operating model, it seems, of the world. And of course, as leaders of businesses and organizations, we have to bring a different mindset, a mindset that accepts that disruption is the new normal, and not just weathering these disruptions, but seeing the disruptions as a strategic opportunity and how organizations can thrive within that disruption, within that volatility, rather than retreat from it across thousands of leaders. The the message is clear. The velocity is getting faster and faster. The external forces shaping our world, the geopolitical tensions, AI of course a massive issue, climate instability, demographic realignment. These things are not cyclical. They're deep. They're interconnected, interconnected. And they're leading to lasting shifts in the architecture of the global economy. And so as context for this discussion, the greatest risk, it seems, is not in making the wrong decision. The greatest risk, it seems, is making a decision based on a view of the world that just no longer exists. Disruption has become an organizing principle for all of us, but also an opportunity to be pursued rather than just a threat to be mitigated. And so for all of us building our organizations for profits, nonprofits, how do we build our organizations that thrive across multiple futures, not just one future? So in this panel, we're going to get under the surface of this, explore how the panelists see this. And maybe Lynn, I could start with you if that's okay. You know, I think you're the 68th president of the New York Stock Exchange, the largest stock exchange in the world, I think currently, with $44 trillion of assets under management. You know, you get such a wonderful view from the bridge over all of these businesses. Now, of course, we've had, you know, 17% growth in the S&P in 2025. Nobody would have foreseen that. But people are worried about an AI bubble, aren't they? They're worried that these seven stocks that maybe represent almost half of that growth have unsustainable valuations. Can this continue? How do you think about that?
Well, I would take a few steps back in that question, and that you've seen a broadening out of the companies that are having an accelerated growth trajectory, that are really driven off of their adoption of AI. If I look at the Dow, for example, the best performing stock in the Dow last year was caterpillar. So it wasn't one of the ones that you just mentioned. I think there is an appreciation in the market that AI is an enabler of all types of businesses across all sectors, and the benefits of AI are seen in multiple industries. If you look at, for example, the energy sector, what a great sector to invest in, given the power demands that are required in order to power AI, the industrial sector as well. When you think about data center development, things of that nature. So there's a variety of opportunities that are AI driven, that aren't in those names, aren't in those names that people think of when they think of AI.
So you're feeling bullish?
I'm feeling very optimistic.
26 A big year for IPOs.
I am very optimistic about 2026 in terms of IPOs, both on the number of IPOs as well as the size of the IPOs. And I think that's a function of the fact that really for the last four years, the IPO markets have been really quiet. Even last year where we saw a resumption of IPOs, only $45 billion of capital was raised in operating company proceeds. If I look back in 2021 again, that's that that's a tail event. But 154 billion was raised. So I think this year is going to be a very, very good year for capital formation in terms of IPOs as well as M&A.
And driven by earnings too.
Absolutely, absolutely.
The forecast of the S&P 500 is, what, about 12%, 15% for this coming year?
It's really going to be driven off of how the companies perform. But if you think about AI, to your point, if you think about AI, it's an enabler, not just of revenue. It's an enabler of efficiency as well. And you are seeing adoption importantly across the enterprise. A year ago we were talking about AI and it felt very much still in the ether. Like AI is a great topic. Here are the things it could do now. Davos 2026. Many of us are talking about, well, how have we applied AI to actually have positive outcomes.
So look Martin let's swing to you because I mean you've been around the block a few times. You know, you're a veteran of you're a veteran of the World Economic Forum. You've seen many crises come and go is, you know, the moment that we're living through, not just geopolitical, not just AI, but these multiple disruptions. Is this different than any other time?
It's so difficult to say, Simon. I mean, I'd say so with the benefit of hindsight in five years time, but. No, look, I think the world has changed. If that's the fundamental answer to your question, you know, the Ted Levitt globalization, consumers consuming everything in the same way everywhere has not gone completely, but it's under attack. And the three big geopolitical issues US, China, Russia, Russia, Ukraine or Russia and Iran are driving so much uncertainty that that clients really have got to do two things. Firstly, they've got to be much more nuanced in terms of geographical development. So just very simply, US, Latin America, Middle East and APAC and questioned over China because of Taiwan. But then you've got India and Indonesia and Vietnam. So it's not just old Asia, Japan and Australia and New Zealand, but new Asia to Europe in in the box seat in a big problem. Our clients see it as a cost opportunity not a revenue opportunity. Africa probably too many conflicts really. So two big things I think clients need to think about much more geographically nuanced approach and then implementing AI. In your opening, you said about decision making, I think the biggest issue is making no decision at all because that.
Biggest threat.
Yeah, because AI Lin mentioned about the growth of AI. What we've seen is the expansion of supply. So for example, the hyperscalers this year you're going to spend 550 billion on data facilities and whatever. It's a 3,035% increase over last year. Huge CapEx. They're squashing their opex, by the way, in marketing. But it's it's a really it's the supply. This is the beginning of the railroads. This is the building, the railroads. The question is about utilization and what we've seen, what has been disappointing to date. And I think it's because the fundamental earnings of the S&P 500, for example, Q3 of last year was 12% exclude the hyperscalers. It was 9% this Q4, last Q4, 6% going in, probably going to come out at ten, 11, 12%. And the forecast Morgan Stanley and Goldman for this year, probably around 12, maybe even more, which is huge. Weak dollar helps, but it's huge. So underlying profitability is strong. And therefore the need to change the disruption is lower. The two verticals that we've seen heavy disruption in an AI implementation are autos because of Chinese EVs and EVs coming in. You know, they can produce a Navy at $10,000 BYD with God's Eye or 25,000. Musk, who's on stage now, he can produce the cheapest thing. It's $35,000. So under attack. So that's one. And financial services the other, where we see companies like Nubank fintech platforms undercutting the branch bank. So the net net, I think we have to see a squeeze in the economy. And we're not going to get it this year because the big beautiful tax bill is going to spew out more, more consumer spending. And we'll have some big IPOs like SpaceX coming down the pike. So I think this year will be a good year. But what happens after the midterms if we get an economic squeeze? I think AI adoption will move to a much greater level. You know, turkeys don't vote for Christmas. And the willingness to change, particularly in big companies. It's not like yours, right? Which is a much more modern new model. But when you've got traditional, you know, you see it with Wbd and Paramount. Now what's that? Omnicom, IPG these are capacity reducing mergers in worlds that are being disrupted.
So let's come back to that in a minute because some big issues there, certainly from an alixpartners perspective, what we're seeing is that there's a there's much greater innovation. There is adoption at the moment. Adoption is way behind the innovation. But we'll come and explore that in a second. Kristin, we come to you and talk about property. Obviously, from your perch at JLL, you see the global property market. But I'd like to start off with the office market. The pandemic, of course, meant that everybody was working from home. Get back to work initiatives were patchy in terms of their ability to pull people back into an old working pattern. What do you see in the office market post-pandemic? Do you has it settled down? Do you see it as being permanently undermined? How do you see it?
Well, the office market has bifurcated very much between the best buildings, the best locations and then those fringe locations and the buildings, which aren't that great offices have to deserve the commute of the people who are working those offices. And so when you have great buildings, that take up is very high. In fact, the take up in 2025 was only 2nd to 2019, and 2019 was one of the best office take up years in the world in in history. And therefore the office market is actually much stronger. So the rhetoric which you read in the press is kind of running a little bit behind the facts, because at the same time, where we see record rents all across the world for the best buildings, we also see increasing vacancy. But the vacancy is for those fringe buildings, for those buildings which aren't kind of up to the standard of of the tenants, what they expect.
So Top End is doing well.
Top end is doing extremely well.
B and C grade space is going to have to be repurposed or rebuilt or or.
Some degree. Yes.
Let's talk about data centers, because obviously the AI narrative is dependent on this extraordinary growth in data centers. And maybe we can come on to this as well in a moment. But I mean, how do you see the demand for data centers, the ability to supply the data center demand?
Well, as we all read in the papers and we hear Davos data center demand is off the chart. And it's it's the demand for data center capability. There's massive capital available. But when you look about what you need for data center, you need you need land, you need power and you need water. And and so then you can figure out what the constraints are. You get out of out of towns in fringe areas. You may have the land, but you don't have the power. You may have the water. And so we have a real constraint for the right locations for data centers. And, and in some countries, especially in the US, one of the biggest constraints is power. We are lacking access to power. But so this will continue to evolve. It's a it's a moving target. Our own research as I expecting that we will double the amount of gigawatts which will actually be active in data centers over the next four years. So that but again, you know, the more power we find, the quicker we can build up the necessary grid, the faster we will see data centers, coming up. But they will also move now into other locations where where it's easier to deal with those three elements I just described.
That's great. Well, let's stay on the theme of data. Matthew obviously founded the greatest, cyber attack defense operations. Congratulations to your company. But, what's on many people's minds I speak to is, is AI going to be a force multiplier for cyber threat? You know, obviously, it turns out in all of the surveys that I read, that cyber attack is number one on the list of CEOs worry list. But is AI going to be a force multiplier and how should people think about it?
So first of all, I think there are going to be just a number of headlines that will be very scary that we're going to read people who have lost their life savings because a criminal called them pretending, you know, with AI to be their daughter who's been locked up in some Mexican prison. And they try to to get them out. Those are going to be horrible stories, but I think they're actually going to distract from what's really going on. The real force force multiplier of AI is on the defense. So Cloudflare at some level has always been an AI company. We take an enormous amount of data. We see over 20% of the internet flowing through our pipes. We run that against machine learning models, and we've been able to predict where there are new threats. And so the same way that the world woke up, you know, three years ago now to ChatGPT and was like, whoa! At the same time inside the walls of Cloudflare. That was when our own system started to identify new cyber risks that no human had identified before. So I think actually across the board, we're going to get safer because of AI, but we're going to have some horrible headlines in the meantime.
Right. And how do organization leaders, business or nonprofit, how do they stay sufficiently close to these developments to take the steps they should be taking to make sure they're protected?
Well, I think that, you know, that's one of the things that whether it's Cloudflare or one of the hyperscalers, we have the talent to be able to bring that information together and be able to really stay in front of whatever those those risks are. But I do think that if you are an executive at any organization today, thinking about how disruptive AI is going to be is going to be incredibly important. Right now. I think a lot of us are focused on, you know, is it going to take everyone's jobs or are we living in a James Cameron movie, some sort of Terminator scenario? To me, those are actually kind of distractions from what are the much more present threats, which are AI fundamentally is going to be a change in how people consume information, how they actually do commerce. And so I worry about things like what's going to happen to a media where all of the information that you're reading is from your AI system, rather than going to the original source, advertising stops working, subscriptions stop working. And I'm not sure how we fund journalism in that world. Even more scary, potentially. What happens to small businesses if every time that I'm buying something, I'm asking my AI agent to go out and do it on my behalf. Think about how many of the relationships that you have with small businesses are because of some emotional connection to that underlying merchant. I'm not sure that your AI agent is going to have that same emotional connection. I think that's going to be a massive disruption to small business.
In general. You raised that point, Bill Browder's dinner, and I think it's a really interesting point and that everybody's absorbed on, on the in the agent to agent world. What you have to do is flood, flood the system with information. So we had a conversation with the CEO of Samsung in Seoul a few months ago, where Samsung is developing content at huge scale because all these machines crawl better than we do crawling. So the more information is out there. That's right. So it's so storytelling at huge scale. Massive scale is going to be coming.
And that's going to be one of the things that the largest companies might have the resources to do a company like Samsung. But your local grocer or you know, the person who you've again, built as a small business, I think one of the most important things we're thinking about and partnering with companies like Mastercard and Visa and Shopify and others, is how do we create the tools so that business continue exists in the United States, 70% of employment is through small businesses, and I worry that they are deeply at risk of disruption.
Can I come back on that as well? So so what's really interesting in relation to what you just said is people don't realize that 70% of Alphabet's 300 billion now of advertising revenues, 70% of Meta's 200 billion, 70% of Apple, probably more of Amazon's 6570 billion and TikTok's 40 billion out of China comes from small and medium sized business. So I think it's a really interesting way. What you will see is the platforms start to develop end to end models, content creation, media planning and buying, which are aimed at trying to deal with exactly what you're talking about. And you're right, they're the engine of the economy.
Yeah, I don't think the world ends, but I do think we're going to have to adapt. And so if you're not paying attention to the fact that almost every business model from almost every company is going to change based on this new world of agentic commerce, based on this new world of AI, that you are in many cases, going to get disintermediated from your customer. That's where I think the real chance and risk is there going to be big winners, but they're also going to be huge losers as well.
Great. Well, I'd like to come back to the disintermediation and the advertising and marketing agency business in a minute. But Pierre, if I could turn to you and obviously you, lead the European Stability Mechanism, the lender of last resort in Europe. There's a narrative, isn't there, that Europe has lost its momentum, that it's got no growth, that it's lost its mojo. And, you know, not just coming from one place, but there's a US narrative that is gathering pace as you think about that. Number one, do you think it's true? Number two, if there is some truth in it, what are the 1 or 2 things, three things that, you know, political leaders, business leaders can do in Europe to get back onto the front foot?
So thanks for having me. And I enjoyed the the first part of discussion here about disruption, which is economic disruption that you're talking about. I will keep my remarks on geopolitical disruption afterwards. Hopefully we have time. So in that sense, I'm the odd man out. So I'm not jumping into that. I want to answer your question now, I can say that the glass is half full or half empty or half full because we had 1.4% growth last year. We will have something around 1.4. I know it's not spectacular, but with all the things happening and Europe being the old continent is a good result. 2% inflation, unemployment at lowest level. And you could say I'm overoptimistic. Let me give you another number that you probably know. There's 40 trillion savings in Europe, which is more or less the capitalisation of the New York Stock Exchange. So it seems European, savings could buy the whole, New York Stock Exchange just to, to mention that Europe is a powerhouse but is not taking enough risks. We do not invest a lot. In fact, a quarter of these savings stay on savings account or on on just accounts with very low yield. So that's our own fault. So what can we do. And I think there's three things. So I'll be very very short here. One one thing we must not forget is you have to do the structural reforms that you have to do. And that's national responsibility. It's no use to blame Europe. Europe is not functioning because countries are not doing their homework. Now, those countries that the European Stability Mechanism supported in the last decade have had to learn to do, reforms because that was the condition upon which they could get support.
Now, countries like Greece and.
Greece, Spain, Portugal, I mean, the economist has mentioned them as some of the top ten economies. They're not the largest ones. But still it shows that reforms bear fruit. Second thing is Europe has to deliver on the Savings and Investment Union. The letter report, the draggy report, they say, well, we do not use our savings well enough. We don't have enough opportunities at home, we do not take enough risks. And we have too many, too many barriers inside the single market. And in Europe. Now, single market is a success, was a success, but it was enacted 30 years ago. So in 30 years, it's a generation the economies have changed. All the things we're discussing about here is new economy. So we have barriers in the new economy, not in industry. And so we have to to do that. And last but not least, and I'll stop here if we have time to come back to geopolitics. Geopolitics is changing everything. When I took up this job three years ago, the managing director of the European Stability Mechanism, that was just before just just Ukraine war had just started. Geopolitics started to become really the common worry. But we were still in the old world. Is inflation a little bit too high? Is this or that in the economy this was millimeters happened something geopolitical. What we have witnessed the last three days, it changes the picture completely. It has an impact on stock exchange on on investment decisions. So I'll come back to it. But just to say that, dealing with geopolitics, is much more than just thinking about. And it's very important what the jobs you do and for your business line. But it can change it completely because the markets to which you can sell your services are not there anymore eventually. So maybe in the next round, I think if colleagues around this panel would give an input to that, is that part of your worries? Obviously what I hear is what is the potential growth here and there, and you assume that the customer base that you have is going to be larger and larger and larger because your products are good. But if geopolitics makes it that you cannot sell your goods or your services to half of the world.
You say that the Chinese, since April the 1st, have totally shifted the pattern of their exports. through US exports have gone down from about 1415% to 11%.
A good.
Example, they followed the BYD Huawei thing. You know, I get denied in America. I go to Latin America, I go to Africa, I go to APAC, I go to Middle East. And the big battleground is going to be Europe.
Yeah.
True. And and Europe's, you know, when you have Greenland and things like that. You know, what Europe has to decide is which way it's going to go or am I going to go both ways, you know, am I going to play both ends against the middle and have my alliance with the US and have my alliance with China?
If I may, I think we're here at the heart of a key problem of geopolitics. And it's a key problem that is being asked not only to us, but to the rest of the world. Also, I took the example in the former discussion here, in this wonderful place of Davos where you can speak very openly in Japan, there's something called kintsugi. So when a plate is broken, most people would throw it away, not in Japan, and especially if it's a precious plate. So I would take Europe is precious to construction is precious. We are the world champion of exports in percentage throughout the GDP. Nobody exports and imports as much as Europe. So for us, open open trade is absolutely key. But it's important for all the others. So what do you do. Do you repair the plate as kintsugi does with some gold and silver? In the end the plate looks good and doesn't break. We are exactly at that point in time, not only with the United States, with the rest of the world, all of us. Do we still go for international trade and international cooperation? Does do we really care about that? Because this is markets, this is potential. This is also more peace around the world. Or is it the the model is broken. The plate the Japanese plate is broken. We have to build alliances differently. You have seen a little bit of that in Europe. The agreement with Mercosur.
With.
Canada.
With Canada. So so I think to build this into your strategies. And although the end result of this is not known is key, I heard another report. Why don't you say you Europeans that now you build other relations and you give up on the United States? Well, because we are really we have an 80 year old cooperation and friendship and partnership with the United States, like my Japanese plate. Do you want to throw it away immediately? I mean, you also have to think medium term and long term on this. And so this is exactly the juncture we're in. And I think Europe until now has had the policy to say, okay, let's see how well we can organize the relationship with the United States, not only in terms of trade and goods and services, but also in NATO. It's key.
Yeah, but to give you the example of Saudi, Saudi's biggest trade partner is China, who's its biggest defense partner us, us. So it's managed to navigate without aligning. Right. Very very well. And I think that's that's the issue for us between stuck between China and the US I agree I mean I think it is a G2 world, not a G1 world. And and we have to get used to that. And the balance of power in the world is shifting bricks. Next 11 Global South E7 is bigger than G7. E6 without China is bigger than G7 without US, GDP wise. So the world is shifting.
And our challenge in Europe is to be more productive, to invest more than we are. Precious enough, and yes, worthy enough that we are still considered by the United States the main partner and main partner. I say not only trade of goods and services and maybe AI and technology, but I add security, rule of law, liberty, defending liberties and sovereignty. So this is a big, bigger picture. Maybe it doesn't speak to all of those who listen to us, but I'm sure it speaks to the panelists.
So let me ask you, maybe ask everybody for a quick round is what do you see the biggest disruption, AI and technology or geopolitics? And we've heard a lot this week about both, haven't we. What do you think is the biggest disruption of the two of them? You had to choose?
Well, I.
Definitely this AI because of all the geopolitics which are going on a lot from a business perspective is just noise, but it doesn't fundamentally change our business operations. And and most global companies are doing extremely well still despite all those geopolitics. But when you look at AI, if you get that wrong, I mean, talking about JLL and organization, with 115,000 employees and another 200,000 contractors who only work for us, this is a massive opportunity if we get it right. But if we get it wrong, it is a massive threat. And so I think that is much more important for us in our daily doing than than the geopolitics. Geopolitics can become easily a distraction. And so the challenge for leaders is that you kind of look through that noise, what is really changing your world and what is just noise.
Do everybody agree?
Well, I was asked this question last night. I actually think the two topics are interrelated. I don't actually believe that you can say AI or geopolitics. Geopolitics, because I believe that AI may be used as part of geopolitics and geopolitics will potentially.
I think that's exactly right, because supply chain, for example, it might be triggered by China or whatever. But then you have to use technology to, to, to improve the supply chain.
Correct. And of course, it turned out the pandemic was a dry run, didn't it? Because, you know, all of.
Overnight, absolutely.
Overnight the pandemic completely disrupted supply chains. Right. That was our that was our test case.
Right. And so overnight people went from thinking just in time to just in case. Right. And so if they couldn't get their global supply chains to work, then where could they get supply from? And so regional supply chains, local supply chains. And I think we've all learned from that and we've got better at doing it.
Just one thing on the AI, do you you were saying about AI adoption? Consumers have adopted AI faster than companies in our experience. And, and I almost think we're at at the very beginning of the impact of, I mean, we're building out all this capacity, the five, 50 billion that's being spent this year, which is 30, 35% more than last year. But real adoption has not happened yet. And so we're we're really haven't started to see. I mean, the interesting thing is the US productivity figures are incredible. In Q3, Q4, Howard Lutnick had the lunch today talking about even gave a forecast for Q1 of over 5% was his bet for Q1 of this year. So when you think about that, I mean, that's going to have a huge positive impact.
I think the reason for that is the consumer has a different consideration around his or her data than the enterprise has around his or her data. And you can't talk about the adoption and implementation of AI without having a data conversation.
The first party data fully integrated.
Absolutely. And that's where what Matthew does is so incredibly important, because you need to protect that data. That's a company's IP is its data.
And I think that that's a lot of what we're thinking about is how do we actually build those guardrails to enable companies to get as much out of out of AI as they can. But if we're already seeing the productivity gains in the US with relatively limited adoption, that's where there's an enormous amount and that's going to play into the geopolitics as well. And so I think the challenge for Europe is how does Europe get back on the innovation train? How do they get back to creating things that the world has to buy? And I think for so long, Europe has seen the solution to the problem as playing the geopolitics game, as opposed to playing the disruptive innovation game, a nod to my old, professor Clay Christensen, who who coined the term like, that's what we need is we actually need disruptive innovation where we're creating new things out of change. And that's, I think, again, where the real where AI is going to deliver that and where there's a huge opportunity if Europe can reignite.
That and China has China has a separate system.
It has a separate system. But boy, I you know, I hang out in Silicon Valley, I go to Beijing. The only place that feels like they're moving faster than Silicon Valley is Beijing. And now Beijing. Now Silicon Valley is adopting some of the 99 principles, you know, working six days a week from 9 to 9 every day. You feel that when you're in San Francisco now, that's coming back from Beijing. The if the world wants to compete with these places, the world has to get on board and innovate, innovate, innovate.
On innovation. You're 100% right. And I don't want to make the situation look nicer than it is. But we have a lot of disruptive technology coming from Europe being invented in Europe.
ASML I mean incredible.
Yes. And then when where does the the scale up happen that this is one of our problems, not the only one. So our capital market is not deep enough. I mean we as a European stability mechanism, we're issuing hundreds of billions of bonds. And we are market players. We understand how the market and the depth of the American capital markets equity market is huge. And so when companies want to scale up, well, they very often go to the United States for the equity market because that's where it is. So just that's just a fact. But so I want to say, it's not that there is a kind of attitude that we don't want disruptive, products and services, that there is no innovation. But scale up is one of the biggest issues that we have.
And one.
Of the challenges there has been the overregulation.
Exactly.
Of the market.
You're completely right.
In, in Europe. And that's an area where this administration in the US is actually.
For the first time.
For the first time, doing and moving fast.
Trump one didn't think about it. Biden didn't think about it. And you've actually, for the first time seen Trump two administrations say, we're going to say that we have gone overboard in regulation around the world, and it's time to let innovators innovate.
Absolutely.
Then back to you. You've been the beneficiary, haven't you, at the New York Stock Exchange of people coming to your exchange or coming to the US market because it's considered to reward growth, it's considered to be much better access to capital. So if you had any advice to Europe as they think about reigniting growth, what would you say?
I would say, look at your regulation is certainly an area and don't overregulate for the sake, for the sake of regulating.
Yeah. I was at a session with Rachel Reeves this morning.
The Chancellor you need to, like, just breathe.
You need to let innovation.
Regulation in 2728 markets. That's the problem, isn't it?
Exactly. And there's no harm.
In it's the deep the depth of the capital market.
Absolutely.
What I'm gonna do is I'm gonna stop for a moment and ask if there's anybody in the audience who would like to ask a question before I ask a couple more of the panel, any any questions at all from anybody? In which case we'll keep on going. I'd like to go, Matthew, to you on, on, digital and AI again and then perhaps back to you, Pierre, on question for Europe. So you had an outage, didn't you, at Cloudflare? I think it was a bug rather than a cyber attack. But as we all get increasingly dependent on our data and our access to the data, what did that teach you? And what should we learn from that?
The first thing was, I think Cloudflare is this invisible thing that when it's working, you don't know it exists. And so the first thing it sort of did was cause, you know, my, my uncle to call me and say, wow, you're kind of a big deal. You took down a huge proportion of the internet, which obviously isn't a good thing. But, but again, does make you appreciate that. I do think that we depend on a ton of infrastructure that's behind the scenes, that people might not always have a total awareness of. And we, as one of those infrastructure providers, have an absolute duty to make sure things like that don't happen. But that sort of technology, the sort of technology that Cloudflare provides, is needed in this world. We're seeing right now a botnet out of China, which is able to generate 30 terabits per second of traffic, that is, that is huge amounts of traffic. We believe we, and maybe only Google, are the only networks that can stand up to this type of threat. And so if we're going to have threats that are that large, you're going to need some large players that are going to be able to deal with those threats. And that's exactly what we're building and scaling up to. And and again, have an enormous obligation to make sure the internet functions as well as it does.
That's great. Quick follow on question. We haven't talked about quantum without throwing another spanner in the works. Is quantum going to make a difference to the security of the movement of data?
Well, you know, we I think have a unique view on quantum. So we partnered with Google in order to figure out and help NIST design the standards around quantum. And we have gone fully post-quantum, cryptographic secure across every single one of our products. If you look at the traffic that's being exchanged to Cloudflare today, more than 50% of it is post-quantum resistant. So a lot of people who are saying this is going to be this impossible challenge, we can never do it. We did it with software. We did it in less than six months. We did an enormous scale, and over time, we think that that's the right way for people to be behaving in this way. It is risk that the old cryptographic systems are going to be vulnerable to quantum computers. But it's also something that we know the solution for, and you can implement it in a way that's not impossible.
Do you see do you see regulators? You.
Know, we talk a lot about regulation. And certainly in our areas we think the cat is out of the bag. The Oppenheimer moment is gone. Do you do you agree with that or do you see the regulators starting to. And presumably if there's a very bad actor that you referred to from China or whatever about actor that does something heinous.
Yeah. From a, from a quant from so from a quantum perspective, I don't believe that anyone has a quantum computer today that can actually decrypt the information. But the risk is you can actually just record the information which has gone across the line and then in the future decrypt it there. And so for certain things, for secrets that still need to be secret ten years from now, you should be using something that is post-quantum resistant for the rest of the market. I think we've got some time in order to get their cyber in general, though. I think it's a it's a really complicated situation. We, for instance, thought that cyber attacks were going to massively increase right after Russia invaded Ukraine back in 2022. I sat on this stage inside. Cyber attacks against Europe are going to massively increase. It didn't happen. And the question is why the Russians had the ability to do it. But our theory is that once they did it, they knew that they themselves were vulnerable to attacks coming back at them. It's almost sort of a mutually assured destruction. And so it was interesting. What resulted in cyber attacks was actually the conflict in Gaza. And that then became a proxy through which the Russians could route attacks, blame it on Iran and Gaza and that area. And the attacks actually escalated after the Gaza conflict, not after the Russian conflict, even though it was Russia behind the scenes. So there's there's a cat and mouse game here, but I don't think we've I don't think we've gotten to sort of the full scale of cyber attacks that are possible, in part because I think every nation is so vulnerable, including Russia, including China, including the United States. And they know that if any of them come after each other, that they're going to get, they're going to get attack back.
The game has changed, hasn't it? Because I think companies, countries now understand that big tech is important. I mean, the threat to big Tech was, you know, they were getting bigger and bigger and bigger and more monopolistic or oligopolies. But that's gone in a way, because big Tech is essential to nation defense and nation offense. I was always struck by Alibaba. Remember when Jack Ma dropped the pen on Ant Financial with the regulator and was sort of shunned? I think the Politburo said we're going to cut it up into eight bits. It's still one company. Yeah. And I think they've realized that big tech and we've seen it in Ukraine and we've seen it elsewhere.
I think that's certainly true in the US with the with the second Trump administration. And I think that's true in China, where you're seeing more support of this. But I think at the same time, we should recognize that big tech has never been more vulnerable than they are today. Google's business model is very much under threat from the AI companies, and you've got what is effectively a startup that has come up and disrupted an enormous amount with a company like OpenAI, anthropic and others. Do you want to.
Give an opinion on OpenAI and funding and ability?
Oh no, no, I get it.
Code red there at the minute.
So this is a point about.
Balance sheets, isn't it? I mean, the borrowing that is being taken on now, the debt that's being taken on to in this arms race to capability, I mean, you may have a point of view on this from a market standpoint, but just the debt that is being taken on to make sure that you are the winner.
Oracle.
It's enormous.
Is it debt or is it an investment.
So well what's your view? I mean do you think this is going to be the thing that knocks us off track in 18 months time or whatever when we find it?
There's clearly a revenue opportunity though as well. When you when you look, you have to look at it on both sides, on companies are looking at at least the public companies are looking at it from the perspective of how do I manage CapEx and opex, right, with a return. And the market keeps the public companies accountable to to that.
Yeah. And you made this point earlier. People are squeezing their opex to put more into CapEx.
Yeah, I mean, we're seeing it. I mean, one of the interesting things is that the traditional correlation between corporate profitability and advertising revenue, it was a tight 1 to 1, almost 1 to 1 correlation. It's gone. Why is it gone? Well, partly it's because of the 300 billion or so in traditional media is on the slide. Wbd. And Paramount being the Comcast maybe the next whatever that comes under that sort of pressure. The second thing is the, the, the hyperscalers are spending money on CapEx. The third thing is that the hyperscalers are getting closer to clients. So we're becoming more validation than origination in a sense, and we have to build closer relationships. There are really six platforms, three western, three eastern that account for 70, 75% of digital of digital advertising or of global advertising and digital advertising. So it's a huge concentration. It won't be broken for the reasons we just discussing. And therefore we have to be validating. And even Google at 300 billion out of 1.2, that's 25% of the total, 300 billion out of 900 billion digital. So one third of digital, even Google, there's two thirds that clients have to worry about. So we have to validate one versus the other.
So talk to me about the so what does it do to the property market. What does it do to businesses like yours. Best of class businesses that advisors brokers and intermediaries and property managers. Is this going to completely rewrite the playbook for businesses like yours?
Well, the jury is still out for the time being. I think what's happening in our industry is what happens in many industries that the best companies are actually taking more share and are striving, and there's a consolidation play going on because the more the world is getting complicated, the more the best companies want to play with each other to decrease the complication, they can decrease. Because a lot of things we can't influence, but the things we can influence, we want to work on that. And so the best want to play with the best. And so for now, I'm not concerned about that at all. But I don't know what I don't know. But for the time being, we went early on on that technology journey. And and so there's a relative game relative within our industry. We are looking really, really good. But maybe there will be some disruption at some point from outside of the industry. But so far it's not visible.
And you'll pivot and change.
Simon thank you. I may just come in talking about Europe. We are probably under-investing that's clear, but I think we have now a very robust financial system, not only because of the European Stability Mechanism. We might have too many rules. I agree with you, but our financial system is extremely resilient.
I'm going to stop you at that point, because that's a wonderful moment to stop. And we're shortly out of time and.
And just to say the second thing for Europe, where I see potential is we have to spend much more on defense. We have underspend on defense, and we need to do much more on this. So to finish on a good note.
Two big thoughts. Thank you very much indeed. We're almost out of time. Remains to me, just to thank our panelists for engaging in incredibly thought provoking discussion. I think AI actually won the game between AI and geopolitics, but lots of opportunity and lots of adoption to lean into. Thank you very much indeed for being part of this discussion. Thanks a lot.
Thank you.
It's this. Thanks.