Interview with the leading expert within the field of macroeconomics, David Roche
1. Tell us a bit about yourself?
For the past 25 years, I have been a Global Strategist at Independent Strategy, a macro investment research firm which I founded in 1994.
Prior to that, I worked in asset management at JPMorgan and then as Global Strategist at Morgan Stanley where I was an early proponent of moving away from global investment strategy as parochial country allocation. Instead, we focused on investment themes, based on fundamental long-term analysis, backed up by strongly held convictions.
Over the years we did exciting work on many major ‘turning points’ in global investment such as spotting the fact that we were entering a major deflationary cycle which would usher in decades of equities out-performance – we called it: Pricing Power to the People. Then there was the demise of the Soviet Bloc and the fall of the Berlin Wall, the sharp monetary tightening which caused the bond markets rout in 1994 and the genesis of the 1997 Asian crisis among others.
With the theory of New Monetarism, through our work on liquidity and the credit crunch, we warned of the coming Great Financial Crisis of 2008. That was followed by the next chapter in the crisis – the sovereign debt explosion which led to the rise of populism that the major western democracies are currently experiencing.
As you can imagine I travel a lot, but my current residence is in Hong Kong. I enjoy kayaking, hiking, and cycling – activities that take me away from the hustle of financial centers and help me reflect on investment themes with calm perspective.
2. You recently released a new book called Death of Democracy what is implied by this title?
Democracy, like any political system, has no God-given right to survive. It needs to justify its existence. Democracy provided the foundation for the capitalist system which has delivered higher and higher living standards over the past century or more.
But the global financial crisis demonstrated to everyone that there were failings within the system. And many of these failings were caused by the abuse of it. And the political classes had facilitated it. That placed democracy under the spotlight.
There have been other global trends that people have felt are working against them, like globalisation, technological change, and demographics. They have all fed into this desire for change. While democracy has historically proven good at absorbing shocks, it has failed to respond to these demands.
The gap has been filled by populists, who have a blunt message that appeals to people’s desire for simple solutions – someone else is to blame and they are the people to set things straight. The book addresses all of these issues.
3. How should companies prepare and respond to the hypothesis about new politico-economic models being formed?
Companies will find themselves in the crossfire far more. They provide fodder for the masses, whether it’s due to the profit motive or when companies find themselves accused of abusing their power and positions within the economy. They are vulnerable to rapid technological change – both from data and advances in computing power and the new technologies these facilitate. These combine with the need to re-balance the economy to counter environmental change, which applies to both climate change and broader ecological shifts that man-made activity has led to.
4. What actionable insights will the audience gain from your keynote?
Change is often violent and happens faster than people expect so being able to adapt to the changing political and economic landscape will become increasingly challenging. Understanding these risks will be critical to adapting to the transition.
Where to look, what to watch, where the dangers lurk and the opportunities lie. They will leave far better prepared for an uncertain and more volatile future.