FORGET TRADITIONAL ECONOMIC FORECASTING So much of industry has been disrupted Economist and entrepreneur Pippa Here is what she thinks are relevant for and continues to be, so why should we Malmgren thinks a traditional approach companies today based on common sense listen to traditional economists and their no longer meets our needs. Malmgren is signals. Her first point is advice about often wide-of-the-mark predictions? If the author of the best-selling Signals: How China: “China is no longer a leader as a you want to understand more about the Everyday Signs Can Help Us Navigate the competitive manufacturer. Foxconn, for global economy, geopolitical issues, the World’s Turbulent Economy. She also served example, the largest private employer in rise of technology and tech titans who as an economic advisor to the Bush China (Foxxconn assembles much of the may take over key parts of industry, it has administration. She believes we look at world’s iphone and ipads) have said they become harder to predict, partly because the world through a mathematical lens will build production facilities in the US. of volatility and to a certain extent but remain blind to the things that are That is a hell of a signal.” because the speed of change has hard to quantify. We need to embrace Another strong signal is the shift to digital increased. The financial crisis was our “common sense” eye alongside tradi- money. In the past, when there was too famously not predicted by most econo- tional analytics, and learn to read what much debt to pay off governments simply mists; Brexit came as a surprise as did she calls “signals”. abandoned the whole system of money Trump; and few called the rise of the far and accounting. It sounds radical but Brit- right in politics all over Europe. “Keep your data but remember that you ain did it in 1984 when they abandoned So are economists looking in the right can’t put a number on the anger that the Talley Stick system and introduced places? Can a more fit for purpose gives rise to a populist uprising, even paper money. “You will see governments approach work better? Certainly You- though the anger is real and changing do this again with blockchain in conjunc- Tube viewing can predict votes and the landscape of politics. The top man- tion with e-money,” she says. spending patterns. Twitter and Facebook agement of organisations, including the analysis can reveal economic patterns CEO, think they are navigating the com- Digital money will in effect eliminate the right down to whether individuals are pany but often they are cruising with a black market and therefore increase tax reducing spending or buying baby flight plan that is 10 years out of date. revenues. It will also make tax payments clothes. Even banks’ Big Data is a better They think China is cheap and therefore immediate: both revenue and timing fur- real-time predictor of GDP than any it’s the future. But today the least expen- ther help governments manage the his- economist with a few data points and an sive market for manufacturing is Mexico, toric debt burden. out of date poll. not China. Mexico is the new China.” On the US she says that many compa- nies don’t realise that the most dynamic location on the planet is the Mexico/ Texas region. They are the hottest emerging and industrialised economies anywhere, juxtaposed. They think the Trump wall will destroy that area. But To survive, treasury must reinvent itself To survive, treasury Mexicans are no longer going north as a function that cannot be replicated by because there are so many jobs at home sophisticated algorithms working over must reinvent itself and Americans are happy to fly over the truly integrated, real-time data transfer as a function that wall in search of profit opportunities, and analytics systems. How to start NAFTA or no NAFTA.” thinking about that? Well, it’s an axiom cannot be replicated of AI that computers find the things by sophisticated humans find hard (Big Data analytics) Five second summary easy and the things we find easy (identi- algorithms. If you keep being blindsided by fying a chair) hard. So maybe treasurers events like Brexit and Trump, then stop need to forget about number crunching drilling down into data and instead look and start thinking about becoming for common sense signals. If the Chinese internal change consultants – the link are manufacturing in the US then between an increasingly data-heavy but Shenzhen isn’t cheaper than Wisconsin wisdom-light finance function and the any more. Adjust to that change. If front line businesses. (For detailed uses of governments introduce blockchain in AI in finance, see page 10.) sync with e-money, expect that the debt will become easier to manage. Five second summary AI and automation will be adopted to cut staffing costs. To avoid redundancy So are economists looking in reinvent yourself as a value-added the right places? Can a more human to human interface. fit for purpose approach work better? www.eurofinance.com TREASURY PERSPECTIVES 2017/2018 // 9