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Pippa Malmgren is an American policy analyst. She served as Special Assistant to the President of the US for Economic Policy on the National Economic Council. She is the founder of the DRPM Group and co-founder of H Robotics. Pippa Malmgren will be a guest speaker at our New Year’s Conference in January 2016.

Dr. Philippa Malmgren helps companies, investors, policymakers and the public better understand how risk and prices will move across the economic landscape. She connects the dots, bringing together insights about markets, politics, policy and geopolitics that signal important and investable trends. Malmgren has an especially strong view on the importance of technology and manufacturing in modern economies and is the founder of a robotics firm in the UK, H Robotics, which builds drones.

In 2015 Malmgren published her book, Signals: the Breakdown of the Social Contract and the Rise of Geopolitics, which reached the number one best-seller position on Amazon four times.

Two opposing forces

Economic signals are everywhere, explains Malmgren in Signals, from supermarkets to military events. They reveal the story of a world economy in which most industrialised countries are deeply in debt. Central bankers have done their best to conjure forth inflation in the hopes that this will conquer deflation but the risk is that our daily lives, and the sustainability of governments, will be affected by two opposing forces bearing down; the downdraft of deflation – not enough jobs or income – and inflationary pressures in the form of wage demands from emerging markets, protein price rises and rental increases. There will be important consequences.

Breakdown of social contracts

Quantitative Easing is now catching people in a vice by pushing up their cost of living at the same time as their income falls. This breaks the vital social contracts that exist between the public and their governments and triggers many seemingly unrelated outcomes: social unrest in emerging markets, the movement of manufacturing and jobs back to the US and the West, improvements to the value added of emerging market firms, higher food and energy prices. The rising price, but shrinking size, of a steak, chocolate and an apartment not only cause pain at home, they also propel some emerging market nations to deploy their militaries to secure resources and protect their citizens from the adverse effects of inflation and deflation alike. This has already resulted in military confrontations and near misses between US, Chinese and Russian planes, warships and submarines.

Growth and innovation

The solution, according to Malmgren, is growth and innovation. Anonymous individuals are thinking what they can do to create cash flow for themselves. The question is whether states will permit individuals in the new social contract environment with the freedom they need to build tomorrow’s economy today. At the same time, governments are also innovating by trying to find new ways to tax the public harder to fill the gap between revenue and expenditure. One example can be found in the National Health Service (NHS) in the UK where the government is thinking of allowing people to pay a fee to jump the queue. The NHS is at the heart of the social contract between the government and the citizens of the UK and the proposal breaks this contract, going against what the public pay taxes for.

As would seem natural for a book about innovation, Malmgren used the most innovative platform to launch her book, namely crowd funding, raising 249% of her target in 15 days. Crowd funding is something that is dramatically changing the financing of businesses. Most employment in the economy is being created by firms employing fewer than 50 people; they can go to crowd funding to raise capital. This is a signal we should pay attention to and which should give us optimism for the future.

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Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager's skill, the fund's risk profile and management fees. The return may become negative as a result of negative price developments.