Pippa Malmgren - U.S. policy analyst

Dr Pippa Malmgren is an U.S. policy analyst. She served as Special Assistant to the President of the United States, George W Bush, for Economic Policy on the National Economic Council and is a former member of the U.S. President's Working Group on Financial Markets. From 2016 – 2019 she was a non-executive board member of the Department for International Trade.

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The future of leadership

Investors are grappling with so many issues they almost can’t think straight. Leadership is almost universally failing. Debt is relentlessly building. Geopolitical events are becoming more pressing. Regulators are becoming more aggressive with industry leaders. Monetary policy is ever more confusing. Inflation is lurking. Protesters and police are readying alike. And yet, the markets keep rising. Is it because innovation more than compensates for all this? Perhaps. But so few are able to truly keep up with the pace of innovation that it’s hard to believe that this alone is driving markets upward. Perhaps we are simply failing to comprehend how technology is radically changing the nature of markets. Our old mindsets are blinding us from seeing the new landscape.

For example, technology is not just making things faster and more efficient. Technology is now permitting humanity to convert atoms into bits. We are digitising every person, every thing, every motion and even every emotion. Quadrillions of data points are gathering in a kind of holographic but invisible data space that gives humanity something it has wanted since the beginning of time – a crystal ball that allows us to see reality far more precisely than we could ever see it by looking at it directly. The crystal ball allows us to understand the past and even foresee the future far better than ever before. It is a place where our Digital Doppelgängers reveal more about ourselves than we know about ourselves.

The digitisation of reality is occurring at many levels. In the realm of monetary policy and finance we see the introduction of electronic currencies. We hardly use cash any more. Banks and governments discourage its use. Instead, electronic payments are mainstream. This means money is no longer a physical bill in your pocket made up of atoms. Instead, it is a digital data point that resides in an account and can be electronically transferred to anywhere else at any time. What does this mean for the money supply? We used to count how many bills were in circulation. More bills meant more inflation. Today governments including China, The EU and others have announced their intention to issue sovereign crypto currencies. These will no doubt be exclusively electronic. That means they can double or halve the money supply with the stroke of a key. How will anyone count what is in circulation? What is the definition of money in circulation is an entirely electronic environment? Frankly, given the epic debt burden, one can easily imagine governments moving the money supply electronically as needed. Monetary policy in that world looks very different indeed.

We talk about personalized medicine but what about personalized interest rates? Governments and corporations alike now have access to all our data. They know when we binge buy Ben and Jerry’s ice cream and when we pay bills late because this data is freely sold on the internet to the highest bidder. People say “I have nothing to hide” but fail to comprehend that the bank can now see your divorce coming well before you can. Banks are already decreasing the credit limits for the lower earning partners in anticipation of the coming financial crisis that divorce inevitably brings. What happens to your interest rate? In future it will be electronically determined based on all your personal data. 

What happened to anonymity you say? AI kills anonymity. AI connects the dots between the various different silos of data and works out that it’s you and not anyone else. So, while monetary policy becomes more opaque, your financial situation becomes ever more transparent. This will mean governments may have more latitude to inflate away their massive debt with less scrutiny while you will have to manage your life with more scrutiny. We have barely begun to comprehend the implications of the changed balance of power between citizens and states and between companies and customers. But markets already recognize that profit margins will be increased and policy control over outcomes will be enhanced. Maybe that’s what’s making markets perform against all odds? We all need to get better at gazing into this new crystal ball.