Cryptocurrencies and digital finance (“DeFi”) will catalyze an economic transformation on a par with the Industrial Revolution, according to Pippa Malmgren.
Philippa “Pippa” Malmgren is an economist and is the founder and CEO of IndraNet.ai, a Wisdom Exchange. She is a senior partner to The Monaco Foundry, a start-up incubator, and a special advisor to Avonhurst, a legal and consulting firm in the UK specializing in deals, policy and capital raising.
Malmgren was a keynote speaker at the Exchange ETF conference in Miami on April 12.
We are at a historical moment, she said, and about to adopt a new standard of money and a new financial system. That last happened in 1834, when British moved from “tally sticks,” which were a primitive physical record of assets and debt, to paper currency.
The British government was in debt and introduced paper money to pay it off. That scenario parallels the challenges facing the U.S. and its mounting fiscal deficits, she said.
“We are doing the same thing now,” Malmgren said. In Britain, it led to the Industrial revolution. “We are the same point, with blockchain or something like it and digital money.”
Unfortunately, Malmgren did not back up those predictions with a thesis that connected digital currencies to innovation on a par with the Industrial Revolution. Americans already operate in a society where transactions are routinely conducted electronically, via credit and debit cards, PayPal, Venmo and electronic transfers. That technology has made transactions convenient, but there is no evidence that it has been a driver of innovation – except among the providers of the payment technology.
Not only will digital currencies be transformative, but they will also happen at breakneck speed, according to Malmgren.
Buckminster Fuller documented that the growth of information in 1900 was doubling every century. By 1945 it was doubling every 20 years, in 1980 annually, and in 2020 it doubles every 12 hours, she said. “Images are driving our society, and in the future, we won’t look at paper annual reports.” Apple glasses, she predicted, will “put us in metaverse spaces where we experience an annual report.”
Maybe so, but virtual reality is unlikely to make annual reports more valuable to investors. That was achieved by making the underlying financial information digitally accessible through databases – the opposite of the entertainment that virtual reality provides.
But, according to Malmgren, “imagination is more important than analytical skills.”
“We have to understand how clients will receive information,” she said, “which may be different from how we [as advisors] view it.”
The key to the metaverse is that Mark Zuckerberg does not have a monopoly, Malmgren said, and “we need to think laterally not linearly.”
Another example of the massive change our economy will experience is with companies like Hopin, an on-line platform for conversations. It is valued $8 billion, yet it is a company without any headquarters.
Bored Ape Yacht Club is a marketplace for NFTs. According to Malmgren, it is creating “a revolution in finance,” because it is using a smart contract to allocate wealth through profits. Members pay $1 million to be involved in smart contracts where you don’t have to incorporate.
“People are making money playing games,” through platforms like Axie and Roblox, allowing companies to sell products to consumers faster and more profitably than through traditional channels.
Those companies don’t issue shares, according to Malmgren so there is no stock market to value them.
Developments such as those are provocative, but Malmgren did not make the case that they represent a sustainable or transformative trend. Companies incorporate and issue stock for good reasons – to raise capital and allocate risk. It may be that some ventures don’t need access to the capital markets because they are inherently profitable, seek to avoid regulation, or have some other motive. But those are small exceptions to a broad rule.
Malmgren was more persuasive when she spoke about world politics, although her remarks lacked a central theme.
Everyone in the strategic world understands that the war in the Ukraine is a nuclear threat, she said. “Putin is a suicide bomber with nuke straps to the chest. What does this mean?”
We are in several wars, according to Malmgren, with Ukraine, the virus, and within our political system. And there is a war on the “system of money” via inflation, she said. All of that forces us to get more engaged with taking risk.
Putin admires Peter the Great, she said, in part because he was born exactly 350 years ago. He had armies of mercenaries to build what became the Russian empire. Putin wants to restore the imperial borders of Russia and is using mercenaries.
Our announcement that we would not recognize Russia’s bank reserves sent the message to China that it needed to behave. That will change the way money flows, according to Malmgren. Putin’s strategy is to stop the flow of goods, especially wheat. In addition, lithium, potash and other real assets are taking on unprecedented value, shifting the emphasis in the U.S. economy from software to financing the flow of goods within the economy.
Putin wants Alaska and parts of Sonoma County (the Russian river valley, a wine-growing region) and Hawaii. He claims that Russia has historical, territorial claims to those lands.
She also noted that the Svalbard islands, in the Baltic Sea, had the fastest internet cable and was used by satellites until it was destroyed by the Russians in the early stages of the war in the Ukraine.
We must make a distinction between Putin and Russians, Malmgren said. “Don’t fire prima ballerinas [because they are Russian]. We need to bring Russia back into the world and give them grain once Putin is not in charge.”
Robert Huebscher is the founder and CEO of Advisor Perspectives
Cryptocurrencies and digital finance (“DeFi”) will catalyze an economic transformation on a par with the Industrial Revolution, according to Pippa Malmgren.
