Dubai: Bubble or Boom -- The 1st Chicago Booth Dubai Trek

In they flew from far and, well, farther away: Chicago, D.C., Beirut, Islamabad, Delhi, and Paris. Twelve people from eight different nationalities descended on the small city-state in the night of the 13th of December with the intent of going where no Boothie or Boother had ever gone before (excluding deans Kole and Morton of course). For the first ever Chicago Booth Dubai Trek, some came with passports that needed no visas, while others had nothing but the hopes of making it happen at the gates. Luckily, everybody made it through, and the race, up and down the Sheikh Zayed Road, Dubai’s magnificent mile, started the second day without further delay.

Of the fifty odd local and international firms we reached out to, half were prompt to answer back and we scheduled meetings with sixteen of them. Another couple of consultancies asked for a closed list of participants. And of the 100 odd Private Equity firms that mushroomed in the region at breakneck speed, we were able to talk to four of them. Also, financial institutions from the retail to corporate to investment banks were all lined up for us to meet with. With no less than 30 in the UAE alone, Booth alumni in most institutions we visited heartily facilitated the setup, jubilated at our encounter and were thrilled to take our questions and their passport-holder souvenirs—all warm and friendly Chicago-style. And on a balmy December night, the alumni finally met the D-Trekkers at the trendy Calabar, situated just at a gold nugget’s throw from the tallest man-made structure in the world, the Chicago-Trump-Tower-looking “Burj Dubai” standing at shy under 2,600 ft—and boy does Dubai abound with superlative structures…

In the meetings, consultants flexed their muscles at how independent they are from the state of the economy—quite expectedly. They excitedly spoke of the work-life balance in Dubai, generous pay packages, expensive rents and crazy traffic, hot summers and warm winters, growth potential of the region and how all that translated in their work being much more exciting than what their peers are doing in mature markets. The six global consultancies we met had no different a speech than the usual: in good times, riding high, consulting clients mostly on growth strategies, while hiring like crazy to keep up with demand; in bad times, still proud to assist ailing companies to cut costs and restructure to survive, and, allegedly, proceeding with their hiring policy to stay ready for the next upturn. The life of a consultant is constantly awesome it seems. So optimism clearly set the consultants apart from the bankers in that place where nobody ever believed it could ever get cloudy a couple of months back.

And against the odds, we met more financial institutions than consulting firms or industry groups. Looking closely though, one can see why this isn’t surprising. Dubai, like most of the Arab world, has some characteristics that make it hard for outsiders to jump on the bandwagon without a significant presence in town; a history of trust, an established reputation, cut-throat honor codes and close-knit social networks make it hard for suitcase bankers to fly from London and hit the ground running, hoping to get a significant share of the delicious pie. That’s why most global investment firms had been keen on establishing themselves in Dubai as a hub to serve the region. And just like consulting firms, most banks did not fail to point out that the bulk of their work comes from the real gold mine of the region: the Kingdom of Saudi Arabia. Dubai is above all a base camp for the hub-and-spoke business models. On their appetite for recruiting, the bankers were all poker-faced at best and despite their similar unclear point of views, blurry analyses and discounted-of-Q4 numbers (in brief: doom for now, boom for another day), most of them failed to hide their fear about the uncertainty looming ahead of Dubai and the region. And even more so when it came to setting time lines and time framing economic cycles. Surprisingly however, all this didn’t prevent one global investment firm whose bankers looked gloomier than others from calling one of ours for an interview after our meeting. And the outcome was that they want him for another interview. The trick was that our friend, during our meeting, made sure to use a keyword dear to the ears of bankers in the Gulf: Saudi Arabia. And to look even sexier, our friend threw in another magical term in the region: Islamic Banking.

On their prospects about the future, bankers were much more reflective of the state of the financial markets and the economy in general however. They were all skeptical but had somewhat differing outlooks about the future. Yet, all agreed that the real estate boom is now going to come to rational proportions, as the market gets purified from both speculators and free-riders. The real estate dementia would grind to a halt. But albeit this healthy return to scale, most agreed that pride-laden landmarks, especially those funded directly by the Maktoum ruling family, are more than likely to be completed despite the fact that the credit crunch has caught up with the region. That said, nobody was really worried about Dubai’s economy, and most expected Abu Dhabi, the oil-rich big-sister state, still awash with cash, to come in for the rescue at any moment as soon as Dubai decides to slim down its less-than-rational list of development. So the World islands and other lalaland-ish projects will not be completed—at least not during this downturn…

And last but not least, this piece on the miracle-city of the Gulf would not be complete if we don’t dedicate a word or two to the infamous Dubai traffic. The only means of intra-city transportation offered to the public in the UAE is taxi cabs—in two versions of course: the Toyota for the average expats, and the Lexus to insure that those who cab it out of the DIFC (Dubai International Financial Center) during rush hours get ripped-off. Soon however, the Sheikh Zayed metro line—yet another reasonable project?—will be up and running. Then, they’ll probably have a shadow of a solution to the jam-packed Sheikh Zayed Road by having a hopefully little congested elevated train that barely covers the main vein of Dubai, a la Chicago Loop, and that little to no people would use in a place where everybody owns a car.

It is hard to say whether Dubai is a boom or a bubble. Even the bankers and consultants over there tried to dodge that question. It is obvious though that everybody is still there, still betting on the future and expecting this fresh and very young experiential economy to take its time and correct itself. In a place where it is a shame to fail, it is hard to even envision the doom and gloom scenario. As long as there is pride and a lot of ego involved—backed with black gold and megalomaniac ambitions—as it usually is in that part of the world, odds are things will be fine in a near future. As for the D-Trekkers, overwhelmed by the presentations they attended from dusk till dawn, they did not fail to investigate the truth about the work-life balance of Dubai. So every night was an occasion to go out… and, yes: some long lasting friendships kicked it off and some really close ties, indeed, did get created...