Tag Archives: Use of history

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

Continue reading

Advertisements

Soft Power, Cowering Embassies and Roman Forts

Joseph Nye, an eminent political scientist at Harvard, wrote a book about “soft power” a few years ago.  He followed that volume up by devoting a chapter to the concept in last year’s book The Future of Power.  So what is “soft power”?

According to Nye, whereas “hard power” grows out of a country’s military or economic might, soft power, “Arises from the attractiveness of a country’s culture, political ideals, and policies.”  In the Future of Power Nye examines what it means to be powerful in the twenty-first century, and how the US might set about retaining its place in the world.  He thinks soft power will be an important part of the mix, and I tend to agree.

But while I’m generally optimistic about the future of America’s place in the international order , one historical parallel related to soft power disturbs me:  the degree to which the threat of terrorism has led the US to create embassy buildings that appear to cower before contemporary threats.

Continue reading

Three Videos on Forecasting and Strategic Surprise

Many people are either beginning their  holidays or are already in the midst of them.  If you’re the type of person who  reads a blog like this, you probably already know what you’re hoping to read on your break.

Therefore, I thought I’d try a different approach and offer a summer watching list rather than summer reading list.  This list recommends three videos that you might consider for your travels or during your “down time”.   All address different aspects forecasting, uncertainty, strategic surprises and decision-making.  When you feel like a break from reading, give them a try.

Continue reading

Five ways to use history well

I have discussed the topic of the use of history for decision makers in a previous post about Richard Neustadt and Ernest May‘s analog framework. Historian Francis Gavin gave a very interesting speech for the Longnow foundation on the same question, but from a different angle. Gavin lays out five key concepts which, if properly understood and employed, should provide a firmer grasp on how historical analysis can be of benefit to decision makers.   I would also argue that they can benefit not just the policymakers but also the public at large.  These concepts are vertical history, horizontal history, chronological proportionality, unintended consequences and policy insignificance.

Continue reading

China’s Present, the World’s Future, and the Pretense of Knowledge

Last Tuesday I attended the Economist’s Bellwether Europe conference in London.  Several speakers raised ideas that made me want to follow up Philippe’s latest piece “Has China Peaked?”.

At the conference, many speakers and panelist (from regulators like the FSA’s Martin Wheatley, to economists like Roubini’s Arnab Das, to portfolio managers like Blackrock’s Richard Kushel) linked the future stability of the Eurozone and the prosperity of America to the continued growth of China.  Niall Ferguson was even more explicit, saying at one point that “The governor of the PBOC has far more control over the future of the US and European economies than either Ben Bernanke or Jean-Claude Trichet”.  I tend to agree that US and EU economic stability is tied to Chinese growth, but am worried by that fact,  and skeptical about Chinese “control” of their economy either through their Central Bank or through “administrative measures”.

The People's Bank

The image evoked by statements such as Ferguson’s (even though I am sure he is too smart to have intended it) is of a carefully calculating Zhou Xiachuan sitting behind a desk in Beijing pressing buttons and pulling levers – a man in commanding a linear, essentially Newtonian system.  The same tends to happen when people talk about the powers and actions of the Fed and the ECB.  Even so-called “centrally planned” economies don’t work like that.  Economies are not not machines, and they are not linear in the sense that once the behavior of its component pieces are understood individually, one simply needs to add them up to predict – and control via a Central Bank or other bureaucracy – the behavior of the whole.

A point which is not original but which bears repeating because it is so often forgotten is that Economics is not Physics, it’s a “Social Science” (a false metaphor if there ever was one).  As one scholar says “God gave Physics the easy problems” and the behavior of economies is non-linear rather than additive.

Continue reading

Has China peaked? An exercise in forecasting using Neustadt and May’s History framework

China has long been touted as the next leading power, and for many it seems that the question is no longer if China will overtake the US but when. Recently, however, a number of dissenting opinions have started to be heard. Economists point to the strong imbalances in China’s economy; political analysts observe that the political and social structure is unstable; human right activists warn of increasing censorship and repression, while historians suggest that, like the USSR in the late 80s, China’s communist regime has run its course and is on an unsustainable path. Indeed, “hard landing” stories about China have started to appear, by Roubini or by Gordon Chang.

Like any such debate, or lack of debate (instead, it is a series of proclamations), positions are often taken being selective about facts, based on false analogies, shallow extrapolations, ideology, or just plain ignorance. This is problematic because regardless of what we think about China, the country does matter to us in many ways. What can we do about this, then?

Continue reading

The use of history for business decision makers: Neustadt and May’s analogs framework

One of the characteristics of a disruption is that one has to deal with a new situation for the first time. Hence, almost by definition, one doesn’t have any prior experience to draw upon, and often no existing framework to use.

Does that mean that radically new situations must be dealt with without referring to the past experience? In their book, “Thinking in time”, Richard E. Neustadt and Ernest R. May think not. They argue that there is always an analog, ie a past situation decision makers can refer to, but on the conditions that the similarities and differences with the present situation be clearly understood.

Continue reading