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
Posted in Methodology & Tools, Theory
Tagged analysis, asset allocation, CIA, demography, economics, energy, event trading, forecasting, geopolitical alpha, Geopolitics, Geostrategy, Graham T. Allison, Hedge funds, Intelligence Analysis, investing, Luttwak, Richard Neustadt, strategic autism, Use of history
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.
Posted in Methodology & Tools, Theory
Tagged BCG Matrix, culture, demographics, geography, geopolitical alpha, Geopolitics, Geostrategy, Integrated Strategy, non market forces, non-market strategy, Porter's Five Forces, resources & routes, strategic autism, Tactics, technology, Value Chain Analysis
Today I was reminded of the perils of forecasting while reviewing a Department of Defense document, the Joint Operating Environment 2010.
“JOE 2010” as it’s called, is designed to provide the various branches of the US Armed Forces a joint perspective on likely global trends, possible shocks and their future operating environment. If you’re interested in geopolitics and strategy, I recommend that you take a look.
Apart from its inherent interest, JOE 2010 opens with a defense planning timeline that business and financial strategy practitioners – and anyone who consumes their work – would do well to bear in mind. I have reproduced it verbatim here:
1900 If you are a strategic analyst for the world’s leading power, you are British, looking warily at Britain’s Age-old enemy, France.
1910 You are now allied with France, and the enemy is now Germany.
Posted in Case study, Theory
Tagged black swan, China, Defense Planning, DOD, forecasting, France, Geopolitics, Germany, grand strategy, Internet, JOE 2010, Korea, NATO, non-predictive strategy, prediction, strategic autism, strategic surprise, strategy, UK, USSR, Vietnam