Tag Archives: Geostrategy

The Four Drivers of Geostrategy : 1) Demographic change

In a previous post, Milo argued that strategic thinking should begin at the level of Geostrategy (See Start with Geostrategy or call it tactics). Geostrategy looks at how geopolitical factors inform, constrain, and affect business over the long term.  For convenience, you can place these geopolitical drivers into four categories that interact, evolve and change over time:  Demographics, Geography, Technology, and Culture.  It is “climate change” at the level of these geopolitical drivers– and especially the interaction among them – that create the economic and political “weather” of your firm.  These are often same forces that fund managers harness to generate “alpha” for their funds.  It is at their level that true strategy begins.   In this post, we’ll look at the first one, Demographics.

The Foundations of Lasting Strategy

The Foundations of Lasting Strategy

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Geopolitics and Investing: A Reading List

As I explain to my students at IE, the most any business school can hope to do is move you from unconscious ignorance to conscious ignorance of a subject.  In other words, a course can lay a firm foundation in a subject, and then provide a jumping off point for future self-study.  After my MIAF course “Geopolitics and Investing”, that usually prompts the question, “Where should I begin such self-study?”  How do I start to learn to generate “geopolitical alpha”?

As I said in an earlier post, there are certain key books that point you towards how to think like an intelligence analyst.  Because the skills of an intelligence analyst and a geopolitical investor overlap so much, I would also say that investors interested in geopolitics start with those key books.  In particular, if you haven’t mastered the critical thinking and the basic analytic  techniques described in Thinking in Time, Essence of Decision and The Thinker’s Toolkit, you are still in kindergarten as far as intelligence analysis is concerned.    Heuer’s Psychology of Intelligence Analysis (downloadable free from the CIA’s site here) is also immensely valuable.  None of these books will teach you geopolitical analysis per se, but they will give you a solid foundation in non-quantitative analysis.

One investor gets a grip on Geopolitics

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Start with Geostrategy, or call it Tactics

Many business people seem to operate under the unconscious assumption that they’ll gain a competitive advantage through a careful daily reading of the business press.  They won’t.  The same goes for fund managers seeking to generate “alpha”:  the business press alone certainly won’t get you there.

They’re also unlikely to gain a decisive edge by combining the daily parade of conventional economic data with stale “strategic” frameworks like the BCG Matrix (which dates back to 1968), Porter’s Five Forces (created in 1979), or Value Chain Analysis (introduced in 1985).   Anyone who has studied business in the last 30 years – including your competition – uses these.   They also probably read the same newspapers and buy the same economic data.   In short, the old-school “Business Strategy 101” toolkit is like a white shirt in your closet:  always safe, sometimes useful, but not a decisive business edge.   Face it:  apart from their other limitations (see below), these old strategy models are fully depreciated.  How is the unconsidered imitation of commonplace ideas “strategic”?

Fully Depreciated Thinking

There is no clearer path towards creating a strategically autistic culture or organization than by mistaking the very definition of strategy.  That’s why to gain a competitive advantage in today’s world, you have to do more.  In my view, that “more” starts by gaining an understanding of what actually constitutes business strategy, i.e. understanding the deep, structural forces that bear on the long-term success of firms, and how these forces can be engaged and harnessed.  In the classes that I teach at IE, I argue that these deep forces are geopolitical.  The metaphor that I use to explain my approach is that geopolitics shapes the climate of business, whereas the daily news and conventional economics – even macroeconomics – simply address the weather of business.

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How to Think like an Intelligence Analyst

To follow up on Philippe’s post about Thinking in Time:  at IE I teach a course called “Geopolitics” to Masters in Advanced Finance students, and “The Multinational Firm and Geostrategy” to Masters in Management students.  Students in those classes sometimes ask me to recommend books to help them “think like an intelligence analyst” and apply intelligence methods to analyzing business decisions.

I provide extensive bibliographies as part of my course syllabi, but often students want me to boil my recommendations down to a few key texts.  Call it a “getting started in intelligence for businesspeople” reading list.

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The Three Faces of Strategy

In their 2010 article in the MIT Sloan Management Review, “What Every CEO Needs to Know About Nonmarket Strategy”, David Bach and David Bruce Allen contend that sustained competitive advantage arises from engaging with “social, political and environmental issues” as part of corporate strategy.

I completely agree, but would make the case more strongly:  much of what passes for corporate “strategy” is actually tactics.  The same goes for much of the advice dispensed by illustrious “strategy” consulting firms.  “Strategy” sounds more important than “tactics,” so everybody calls whatever they’re talking about strategy, and then moves on to dispensing advice.  But what sounds like a linguistic quibble matters, because the distinction between these words bears directly on building a sustained competitive advantage in business.

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