“Gradually, then Suddenly”: Why Change Has Become So Quick (Part Two)

“Gradually, then Suddenly”:

Why Change Has Become So Quick (Part Two)

by Dee Smith, CEO

[part two of two]

If you ask a room full of people what color the sky is, those who answer will almost always say “blue.” But is the sky really blue? About half of the time, it is black sprinkled with stars. At other times it can be grey, orange, yellow, red, all these colors at once, or even green or purple.

The sky is blue much less than half of the time. So why do almost all of us say it is “blue”?

We do it because it is a practical shorthand, or “heuristic,” that might not be perfect or rational but will enable us to keep moving forward. Heuristics let us categorize things and move through life without expending too much thought. If you see a coil on a stove that is orange in color, you will assume that it must be hot before you assume that someone painted it with orange glow paint.

We are entering a time in which such rules of thumb, developed for an earlier era, are becoming unreliable and deceptive. They can be serious impediments to our success and even to our survival. For the reasons discussed in the first instalment of this article, the near future is becoming less and less predictable. Specifically, it is becoming less like the immediate past and less like anything that we might expect on the basis of previous experience—what we think we “know.” And so the rules of thumb that come from that experience—the heuristics—are increasingly likely to lead us astray and threaten us.

How do we deal with this?

First, if it looks like a duck, walks like a duck, and quacks like a duck, do not assume that it actually is a duck!

Second, avoid thinking fast—which relies on assumptions, biases, and heuristics—and focus on thinking slow, as Daniel Khaneman and Amos Tversky described in the famous book Thinking, Fast and Slow, a distillation of work for which they both won a Nobel Prize. And as you change your way of thinking, you might want to remove a few words from your working business vocabulary. These include “always,” “never,” and “I’ve seen this before.” Today, it is always better to believe you have not seen it before.

Expectations have a great deal to do with what we see and understand. If you expect to see the same things that you have seen in the past, your mind will often filter out any elements that are different. In a situation of rapid change, this ingrained mental process is guaranteed to lead you to the wrong conclusions. So you need to train your mind to expect different patterns and at the same time not to expect a repeat of what you know. In other words, avoid getting comfortable.

Third, inculcate some new mental models. For example, look at the data—the indicators—that are before you. If you jettison preconceived ideas, then what do they really tell you? Think about “what-ifs.” What might you see if a situation began to emerge that was very different from anything that you had learned to expect? Imagination is your friend in understanding divergent situations, which is why intelligence failures are often called “failures of imagination.” A useful thought trick is to suppose that a situation you encounter is the opposite of what it seems to be, and then go from there.

Mental agility is an equally critical skill. Be prepared for eventualities—but in a general way—because these days you don’t know what is going to happen, or where, or how, or when. Be prepared to turn on a dime, and then turn on a dime again.

Monitoring elements of interest to detect early warnings—subtle signals that can tell you if change is coming—can be very valuable, but it needs to be ongoing. And you also need to be attuned to paying attention to conflicting or “abnormal” signals. Major changes often announce their arrival through subtle and contradictory indicators, also called anomalous indicators because they violate expected patterns.

The single most important tool, however, is an analytical mindset. To deal with complexity and emerging risk, be objective and systematically investigative. Don’t be political, polemical, or emotional. You might not like what you are forced to confront—you will almost certainly not like some of it—but flying blind because you refuse to accept what the evidence is telling you would be even worse. “That can’t be the case” is another phrase to remove from your vocabulary.

None of this is easy or “natural.” It is more work—it requires more energy—to think through things instead of choosing the “automatic pilot” that heuristics provide. The autopilot can fly you straight into a mountain. 

In a time of pervasive change, if you continue to employ existing and preconceived ideas, frameworks, or mental models, you will miss the signals, misinterpret or misunderstand them, and make profound mistakes.

The near future will not be easy to navigate. There are no fixed or “right” answers, only what is effective in circumstances that are constantly changing but does not contradict or betray your values. If you open your mind to seeing new patterns and finding new approaches, a course can be charted much more effectively.

As a very wise CEO once told me, “All conditions are temporary.”

Turkey’s Autocrat Shifts the Balance (I&W)

Turkey’s Autocrat Shifts the Balance

During the NATO summit in July 2023, a sudden change in policy was announced: Turkey would not veto the application by Sweden for admission. In apparent exchange, Turkey would receive F-16s from the United States along with access to advanced upgrades for its existing F-16s. As part of a “general normalization and improvement” of relations with the EU as well as with the United States, Sweden would work closely with Turkey on “counter-terrorism.” Turkish accession talks with the EU would resume, along with discussions about the Turkish role in the European Customs Union and the possibility of visa-free travel for Turks to the 27 countries of the Schengen Area.

The news was generally received in the Western press with a mixture of delight, incredulity, and suspicion, especially as Erdoğan had repeatedly denounced the behavior of the West during his campaign to win the presidential election of May 2023. How could a country, or at least a president, alter his course so suddenly and so dramatically?  

One point to bear in mind is that capriciousness is part of Erdoğan’s autocratic style.  The persona that he affects as a political leader is often volatile and irascible. He frequently berates Turkey’s citizens, shouting at them as a disappointed and exasperated father while he castigates other nations and their leaders for their failure to treat Turkey, Turks, or Muslims in general with the respect he believes they deserve.

As second point is that autocratic caprice has been part of modern Turkish political tradition.  Since the founding of the republic in 1923, Turkish politicians have rarely hesitated to embark on ambitious programs of social engineering. The first president, Kemal Atatürk, transformed the subjects of the sultan into citizens of a new secular society, changing their clothing, their names, their alphabet, and their language. Erdoğan was intent on promoting a revolution in attitudes toward the history of the Turkish nation and especially the Ottoman Empire, the last and greatest of the Muslim empires, which collapsed in the aftermath of the First World War. He was determined that it would no longer be seen as an embarrassment.

This affected foreign policy. Under Erdoğan, Turkish strategists became increasingly interested in extending their reach into lands that the Ottomans had lost, or into regions they had not controlled but were nonetheless seen as part of the wider Turkic world of Central Asia. Since the 19th century, of course, Central Asia had been under the control of the Russian Empire and then the Soviet Union. Indeed, Russia still assumes that the Central Asian republics remain within its sphere of influence. But, many Uzbeks, Kazakhs, and other inhabitants of the region are increasingly inclined to disagree, seeing Russia as an imperial power to be resisted.

As Russia weakens, strategists in Ankara have become aware that the opportunity to realize the Pan-Turkic dream of the late 19th and early 20th century is growing, especially if it is understood in terms of the “soft power” implied by closer cultural and economic ties. Even when relations with Russia seem relatively cordial, therefore, it is not seen in Turkey as an ally. Although it is not really an enemy, at least at the moment, it will definitely be seen as a rival and an obstacle.

It should be emphasized that a pan-Turkic Central Asia is not just a romantic fantasy. A region in which Chinese, Iranian, and Russian areas of influence meet is undoubtedly of strategic interest for the United States. America’s rivals possess far more extensive ties than its bureaucrats or corporate executives could hope to acquire by themselves; Turks, therefore, are ideally positioned to support American aspirations if they so choose. Turkish religious, linguistic, and cultural affinities have existed for many centuries and Turkey is not only an American ally but also a member of NATO. This gives it a status to exploit in the former Ottoman lands.

Erdoğan is sometimes misunderstood as merely an Islamist politician. It is more accurate to say he recalls the fusion of Islam and Turkish nationalism that was encouraged by Kenan Evren and the generals who led the coup in 1980 against the ineffective coalition of Süleyman Demirel. This is one of the reasons why his alliance with the MHP on the far right of the political spectrum has not diminished the support that he receives from more conservative or traditional Muslims. He offers something that very different sections of Turkish society can admire, or at least support in elections.

Turkish neo-Ottoman nationalism is enough to get Erdoğan his electoral majorities, however slim (just 4% in 2023). His reversal of position on Sweden and NATO in July was a sign of how much Erdoğan values Turkey’s membership in the alliance, not because of any shared values but because it could serve, in the moment, his strategic goal of neo-Ottoman revival. Erdoğan has long since proved he can provoke the West; that was always just one stage in a broader agenda.

Niger’s Anti-Foreign Coup (I&W)

Niger’s Anti-Foreign Coup

The coup in Niger on 26 July was rightly condemned by the United Nations, the European Union, the United States, and France. It was also denounced by the Economic Community of West African States (ECOWAS), which has been the main regional security actor since its intervention in Liberia in 1990. The African Union took the further step of issuing an ultimatum to the new government threatening to use “all measures” against the coup-makers if they did not back down after 15 days.

These immediate and threatening responses were due in part to fear. Since 2020, there has been a wave of military coups across the Sahel, including in Chad, Guinea, Sudan, Burkina Faso and Mali, and these have overturned an earlier trend toward democratization and presumed stability. Along with fear, however, there has been a sense of disappointment and loss. Niger had been a democratic standout until the coup, receiving thereby a great deal of foreign aid: more than half a billion US dollars from the EU alone between 2021 and 2024. The international system has been badly shaken by the chronic instability in South Sudan since its creation in 2011 as a very expensive experiment in internationally backed state formation. The trend since then had been to devolve international power to the African Union and regional bodies such as ECOWAS, while also allowing a greater role to Western powers, especially France, in providing lift capacity and firepower for fighting the numerous local insurgencies, many of which are Islamist. During the same period after 2011, Niger held three democratic elections and enjoyed a peaceful transfer of power in 2021 from Mahamadou Issoufou, who came up against a term limit, to Mohamed Bazoum. Niger could be and was seen as a rare example of success—right up to 26 July.

Then it became a nightmare. Burkina Faso, Guinea, Mali, Mauritania, and Algeria all issued statements saying they would oppose any military attempt by ECOWAS to unseat the new government of General Abdourahamane Tiani, the head of Bazoum’s presidential guard who feared he might be next in a military cleanup campaign initiated by Bazoum and backed by the US and France. The Wagner Group’s Yevgheny Prigozhin, who has been active in the region as both a mercenary leader and an investor (see SIGnal, “How Putin Goes,” 5 July 2023), endorsed the coup and offered his help in securing it. But the deeper problem was that Africans in the region did not all respond to the coup as a setback. As of this writing, ECOWAS did not seem to be following through on its threat of decisive action if the coup makers did not stand down; the deadline Sunday came and went. Many in Africa expressed their solidarity with the coup makers in rejecting outside interference, especially by France.

This should not have been quite such a surprise. When Emmanuel Macron took office in 2017, he gave a celebrated speech in Ouagadougou aimed at burying neocolonialism and entering a new era of partnership. The security part of that partnership did not go well, however, and Macron made a four-day tour of central Africa earlier this year, announcing a shift towards a greater appreciation and respect for local authority. Meant as an assurance that the condescension of earlier decades would be discarded, it was evidently seen by some as a sign of irresolution and withdrawal. Military forces in the Sahel seem to be moving toward a view that France is their primary adversary, adamantly opposing any foreign intervention in their internal affairs. What is most striking in the Nigerien case is that ECOWAS and the AU, whose own security capacities have been strengthening for a decade as a result of French and international support, are now being seen as “foreign,” or at least as inimical to the independence of African states, despite their being African themselves.

Russia, meanwhile, has been gaining influence. By appearing to treat African states as equals and giving their leaders a grandiose reception at the Russia-Africa Summit, Russia has appealed to African leaders weary of their low status in the global arena. Russia’s actions—including the cancellation of a substantial African debt of USD 23 billion and the exploration of mutually beneficial partnerships—align with the aspirations of African states, as have somewhat similar Chinese initiatives. The refusal of many African states to condemn the Russian invasion of Ukraine is to some degree a reward for Russia’s Africa policy.

The overarching concern among the people of Niger is that the foreign military presence and bases, in cooperation with Bazoum’s elected government, have not effectively addressed the insurgent threats in the region. Consequently, there exists a growing belief that the Nigerien military, with support from Russia, might be better equipped to combat the insurgency and handle security challenges within the country.

ECOWAS and the African Union need to adopt a more proactive approach to curbing military power seizures, promoting instead the principles of democracy, good governance, and respect for constitutional order. Doing so might restore some confidence in the efficacy of these regional bodies and foster African stability.

However, a pattern of institutional weakness at the regional and continental levels, accompanied by the rejection of elected governments by Africans themselves in individual states, could also lead major players such as France, the US, the EU, and even the UN to back away from existing commitments and focus more narrowly on particular interests. In the case of the EU, this would mean taking an even harder line against African migrants, thousands of whom die every year as they attempt to reach Europe. France is likely to become less internationalist and more inward-looking, an ongoing trend alongside attempts by Macron to reconcile the traditional French pursuit of la gloire with the demands of internationalism. At the same time, the US and other powers are likely to become less reticent about fighting Russia and China on African soil for access to strategic minerals.

The result will be an increasing divide between African economies able to grow their own productive capacity and those that, like many today in the Sahel, will choose the appearance of independence and the likely reality of chronic under-development as authoritarian states such as Russia and China are allowed to set the prices. An entirely understandable revolt against foreign dominance could then introduce an era that will feature a version of neocolonialism different from its predecessor, but not nearly different enough.

“Gradually, then Suddenly”: Why Change Has Become So Quick

“Gradually, then Suddenly”:

Why Change Has Become So Quick

by Dee Smith, CEO

[part one of two]

We are suddenly confronted—on all sides, it seems—with abrupt and wrenching change, with transformations that few if any of us expected to see or can easily understand.

Why is this occurring? Or perhaps more to the point, why is it so surprising to so many of us? These are two distinct but nevertheless related questions.

In the late 20th century, new mathematical models and enhanced computational power fueled a real revolution in our understanding of complex systems. Much of this revolution remains poorly understood—if it is understood at all by the general public.

Why is it important? Because discoveries about complex systems revealed that they all exhibit a shared set of attributes. They have hidden links and feedback loops. They engender enormous unintended and unexpected consequences. They are inherently unstable and fragile under certain conditions. Furthermore, they are liable to abrupt change including “tipping points,” cascading phenomena, and amplification of events.

The rigorous mathematical study of what is known as non-linear dynamics has revealed key characteristics that such complex systems display. They are not complicated to explain, although some of them seem counterintuitive, or even contradictory.

One of the most intriguing is homeostasis, a dynamic process that is characteristic of complex systems that maintain stability, despite disturbances, as long as conditions stay within a certain range. And yet outside that range, even small changes can have dramatic consequences. Inputs of the “right” kind, at the “right” time, into a system that has been stable can cause massive changes in the system’s state.

In some cases, systems can generate dramatic change themselves when they approach a critical point of phase transition. More generally, however, systems remain vulnerable to massive changes in state caused by external agents. Think of the introduction of a small amount of cyanide or polonium-210 into a living human body. It will change its state from living to dead very quickly in most cases.

The key point of all this is that change often happens abruptly, not gradually. And there are many reasons why abrupt change happens. The more complex a system is, the more vectors—the more inputs—of change will impact all the elements within the system. So change can increase exponentially.

The nature of abrupt change has been demonstrated and modeled mathematically. A Danish physicist named Per Bak studied it through the seemingly unlikely medium of sand piles. As it turns out, if you drop grains of sand on a sand pile, one by one, the pile becomes larger and more unstable. But grains of sand do not fall off in sequence, one by one, as each additional grain is added. Instead, they build up until, at a moment that cannot be predicted with any precision, a large part of the sand pile suddenly collapses in a kind of tiny avalanche. It is a bit like how Ernest Hemingway answered the question of how he went bankrupt: “Gradually. Then suddenly.”

This may seem mundane, but ask yourself why you are so surprised by sudden change and you will see that it is not. Think of putting a glass of ice outside on one of the hot days we are now experiencing almost everywhere. Once it warms to 0°C (32°F), it quickly changes its phase state from solid to liquid—in other words, it melts. It doesn’t stay part water and part ice for long on a hot day. And no single molecule is ever half-frozen and half-melted. It changes abruptly from frozen to liquid.

Many unimportant as well as very important changes in our own lives happen suddenly. You don’t have a car wreck over a period of several weeks, or a heart attack over a period of months. Why then are we so surprised when we encounter sudden change?

There are various ideas about this—including the suggestion that it may be due to the human brain’s inbuilt need to conserve energy. After all, it takes less thinking to deal with continuity than with change. There is also an evolutionary argument. Homo sapiens and our progenitors adapted over millions of years to a world in which change was usually very slow and sudden change simply resulted in death. This is all speculation, but whatever the reason, it is a very old question, closely related to one known to philosophers as the “problem of induction”—simply put, that things stay the same until they don’t.

It is a real problem, however, and it skews our perception time and time again. In the run-up to the Russian invasion of Ukraine, for example, many highly informed experts were certain that Russia would not invade. Their rationale was primarily that there had been no major war in Europe for 70 years. This is the problem with induction—believing that the past is a reliable guide to the future—and it leads to what in the intelligence world is called “failure of imagination.”

Putin himself was apparently subject to a “failure of imagination” in making his decision to invade Ukraine. The various tepid responses of the West and of the United States in particular to his actions during the previous 2 decades—in Georgia, in Syria, and in Ukraine itself in 2014 —and the disastrous American withdrawal from Afghanistan, impressed the idea on Putin that the West would do little if he simply took Ukraine by force.

So, if we can’t use the past as a reliable guide to the future, what can we use? This is a good question.

If we step back, however, we should now be able to suggest at least provisional responses to the two questions that I asked in the opening paragraphs.

Why does it seem change is so much more sudden and wrenching today? Because it is! We have unquestionably created the most complex human society with the most multifarious and most interlocking systems that have ever existed. And its complexity is increasing daily—even hourly. Dynamic complex systems in which complexity is increasing are especially prone to rapid transformation and unpredictability. So it should not seem hard to understand that this is resulting in more accelerated change—of larger scope, across more domains, at greater speed, and with more unpredictability— than we have ever seen before. Simply because of the nature of complex systems, we have passed into a state where change is accelerating and becoming more non-linear, with more unforeseen—and sometimes unforeseeable—effects and outcomes. And again because of the nature of the system and because of where we are at this point in history—a point to which I will return in a later post—change is becoming more radical. It represents departures further and further away from what we have known in the very recent past and what we have assumed will exist in the near future.

So why are we so surprised all the time? We are simply not mentally suited—we are not evolved—to deal with the current pace and scope of change. We have created a world transforming—technologically, socially, and environmentally—more rapidly than we can accept as individuals, as societies, and in fact as a planetary biological system.

More complexity equals more change equals more unpredictability equals more and greater risk. This is the world we have engineered, like it or not. We have made our bed.

[part one of two]

NATO Finds Its War (I&W)

NATO FINDS ITS WAR

Did NATO miss an opportunity at its recent summit in Vilnius? Some critics have said as much, pointing to divisions within the alliance about the measures that it should adopt in offering assistance to Ukraine. But NATO is aiming at something much larger: the transformation of an old Cold War alliance into an institution fit for the new Cold War. It may in fact have achieved it at Vilnius.

Ukraine is the key that opened the door. Until Russia invaded Crimea in 2014, NATO had been organizing itself around the two challenges of terrorism and cybersecurity, finally adopting a Comprehensive Cyber Defense Policy in 2021. Since then, and at a quickening pace after the Biden administration found its feet and Russia invaded non-Crimean Ukraine on 24 February 2022, NATO has been focusing on democratic principles and the rule of law in order to shape a strategic approach. The emphasis on these values at Vilnius underscores their role in guiding NATO’s strategic evolution within the paradigm of the New Cold War.

What is often missed is that an emphasis on values – just the sort of approach that is often dismissed as mere piety – marks the transformation of NATO from a defensive alliance into an ideological alliance. Although attempts by the Biden administration to promote ideological initiatives such as the Summits for Democracy have gained little traction, NATO is different. It has been steadily expanding a conventional concept of security to encompass the global commons, including oceans, space, technology, and cyberspace. Departing from a conventional summit declaration, the Vilnius outcome document suggests a strategic roadmap, delineating NATO’s envisioned trajectory in a global order now characterized by constant transformation.

It makes no obvious sense that the North Atlantic Treaty Organization should have any responsibility for the global commons. However, the reality is that conflict between the United States on one side and Russia and China on the other leaves the global commons up for grabs. Due to technological shifts and innovations, the means for conflict and the platforms for conflict are in effect global, specifically the Internet, cyberspace, and space itself, where military command and control by major powers is dependent not only on satellites in fixed positions above national territory but also on a system of satellites in constant orbit around the planet. The global commons has become a zone of conflict because certain aspects of conflict have become globalized. An organization that includes the specifically geographical definition “North Atlantic” in its name and its mission is now embracing a more global role.

While post-summit commentary centered on NATO’s relationship with Ukraine, perhaps the most crucial immediate outcome lies in the adoption of new Regional Defense Plans. Devised for the protection of NATO’s northern, central, and southern flanks, they signify a new chapter in its strategy. Prepared by SACEUR General Cavoli and his team, and totaling over four thousand pages, the regional plans offer intricate and precise delineations of the alliance's intended actions in the event of an assault on any of its member states. This marks the first time since the Cold War that NATO has formulated such comprehensive and detailed plans, rendering the deterrence and defense capabilities of the alliance more credible than ever before. The impetus behind the completion of these regional defense plans has been the Russian aggression against Ukraine.

Looking to the next summit, which will be held at Washington in 2024, we anticipate the full emergence of Global NATO on the 75th anniversary of founding of the alliance. The North Atlantic Council has been assigned the task of producing a comprehensive threat assessment. The results will accelerate deliberations about the future of Ukraine, provide clarity on NATO’s relationship with China, and demonstrate the ways in which the alliance is preparing to confront the globalization of major-power national security. The Washington summit may well grapple with the same unresolved questions that linger after the Vilnius Summit: Does the Alliance’s door remain open? When will Ukraine find a place among its members? On the largest and most important questions, however, NATO will already have found its answers.

Food’s Carbon Footprint (I&W)

Food’s Carbon Footprint

Twenty years or so ago, premium pre-packaged pineapple from Ghana began appearing on the shelves of Waitrose supermarkets in London. Advertised on the label as helping to fund smallholder community projects in Ghana, the pineapple’s appeal lay in its being unusually sweet and juicy. This was apparently due in large part to the local climate in Ghana being drier than that in many other pineapple-producing areas and thus concentrating sweetness in the fruit. The pineapple was hand-picked, trimmed, and packaged in Ghana, helping to keep more of the value chain in-country and support the villages where the pineapple was grown. It was then refrigerated and flown to London, where it was finally displayed on the shelves of Waitrose. It was a “win-win” equation: the consumer got especially delicious pineapple, and the producing communities got a fair deal.

At the time, the “carbon footprint” of the pineapple would have been only an afterthought, and only for a few people. Today, the question should be front and center.

The ongoing revision of global supply chains could have some positive effects in terms of carbon reduction. Long, globalized supply chains are being deconstructed and revised, in part because long supply chains mean high energy costs for transport. This accelerated during the pandemic, although it has larger causes, including global geopolitical splintering and concerns for national security. Reshoring, near-shoring, and supply-chain simplification to emphasize robustness over efficiency are the focus today. But when carbon is part of this, it is mostly as an afterthought.

The dichotomy between economic development and climate issues is becoming more widely recognized.  As Martin Wolf observed recently in the Financial Times:

The question of development assistance links with the challenge of climate. As everyone in developing countries knows, the reason the climate problem is now urgent is the historic emissions of high-income countries. The latter were able to use the atmosphere as a sink, while today’s developing countries cannot. So, today we tell them they must embark on a very different development path from our own. Needless to say, this is quite infuriating. Nevertheless, emissions must now be sharply reduced. This requires a global effort, including in many emerging and developing countries. Have we made progress on this task, in reality rather than rhetorically? The answer is “no.” Emissions have not fallen at all.

Wolf goes on to say that emissions must decline rapidly “while emerging and developing countries still deliver the prosperity that their populations demand,” and he reminds us that this will require a huge flow of resources towards them. “Countries with above average emissions per head [should] compensate those with below average ones,” and “high-income democracies are failing to offer adequate help in this, just as they did over Covid.”

This is factually accurate and morally valid. But is it realistic?

Even within democracies, the better-off seldom want, en masse, to help the worse-off, unless and until it becomes a matter of specific self-interest or even self-preservation and government policy leaves them no choice. By now, only the foolish or willfully ignorant would dismiss the possibility that high-income countries may themselves in the future need to survive with fewer resources—possibly with far fewer—across all socio-economic levels. So there may overall be less to spread around. Whatever lifestyle improvements and development that populations expect or demand in rich and in not-so-rich countries, it may simply not be possible to fulfill this. Many well-informed and intelligent individuals seem to have a strange blind spot about even admitting this as a possibility. It may be too emotionally painful to come to terms with a future that looks so much bleaker than the present or the recent past. Yet the abundance that globalization made possible, whether in delicious pineapple and other foods or in affordable apparel and electronics, cannot easily be squared with either decarbonization or reshoring.

Moreover, the extant systems that have been developed for global or even national redistribution of material assets—which is what Wolf is talking about—are far too inefficient and far too prone to corruption on both the transferring and receiving sides of the equation. Astonishing inefficiency occurs every day, even when redistribution is not being attempted: in the US we waste 30 to 40 percent of our food, for example, while 800 million people go to bed hungry around the world every night. Those on the deficit end of this imbalance are aware of the problem, and of course it is the source of enormous anger. As climate change makes agriculture less predictable, with dramatic effects for those least able to withstand food shortages, that anger will get worse.

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You Choose, You Lose? (I&W)

You Choose, You Lose?

The idea that the world’s states need to choose between the U.S. and China has been an article of faith in the U.S. intelligence community for some time. It broke the surface this week in a Foreign Affairs piece by Richard Fontaine, CEO of the influential think tank the Center for New American Security (CNAS), entitled “The Myth of Neutrality: Countries Will Have to Choose between America and China.” While Fontaine’s article is, as is usually the case, more modulated than the headline, he nonetheless concludes that the “time for choosing has arrived,” focusing in particular on “the effort to separate and safeguard technological supply chains.” SIG questions whether this is really the case.

The first problem with this argument is that technological supply chains are in private hands. The ability of any state, even China, to control its private-sector tech supply chains is uneven at best. This is true not just in present terms — the extent and nature of supply chains are not easy to measure, and measurement and enforcement can use government resources that might be better applied elsewhere — but also in prospective terms: supply-chain inputs and their providers change constantly. Moreover, Chinese and U.S. tech companies alike have multiple subsidiaries, JVs, equity investments, strategic partnerships, and so on outside their home markets, and those entities in turn have their own relationships. SIG’s experience in investigating Chinese and U.S. corporate ownership and part-ownership structures like these across the globe strongly suggests that arranging tech supply chains to conform with the political map will be difficult indeed.

The second problem with the choice argument is that it misses the non-equivalency of the U.S. and China in terms of tech sectors. At least since the expulsion of Google more than a decade ago, China has built its tech sector on the basis of a protected domestic market. As companies like Huawei, Alibaba, Didi Chuxing, and Tencent established themselves and grew, they enjoyed many advantages in having a gigantic captive market. However, that growth model had a dependency built into it, and when the Communist Party decided that Chinese tech companies were gaining too much social power it was easily able to clip their wings. The Party did not blink at liquidating tens of billions in equity value. Chinese tech companies are being obliged to subordinate themselves to state policy priorities, a process that shows no signs of easing. While the Party also works hard to build Chinese self-reliance in terms of supply chains and much else, supply-chain inputs really are the least of it, because the state has so much leverage in the C-suite already. The problem of Chinese tech companies is not guarding the home country’s supply chains but getting into other countries’ supply chains — and China’s autarkic policies, because they amount to a kind of nationalization, only make that problem worse.

The situation in the U.S. is nearly the opposite. The U.S. is an open market. It sources supply-chain inputs, capital, and talent from all over the planet. The most onerous government tech regulations prevent some (not many) U.S. companies from selling into the China market, but in this the U.S. has a willing assistant in Chinese state policy. Corporate espionage and IP theft aside, the Chinese state does not want U.S. companies supplying Chinese markets, except in those instances where Chinese companies still can’t match non-Chinese producers.

There really isn’t much of a choice to be made. China is a non-market economy with a security obsession and it sources supply-chain inputs for those things it can’t locate domestically. The U.S. is a market economy that sources supply-chain inputs from wherever they currently are cheapest. Yes, there are constraints for U.S. companies on sourcing from China, but that leaves all of the rest of the world for U.S. companies to work with.

That points to a third major problem with the choice argument as regards tech supply chains. Companies in the rest of the world can also make things and sell them into their domestic markets and into the 193 national markets that are not the U.S. or China. To the degree that the U.S. or China try to force a choice, the most attractive choice will usually be “both” while reserving the option of “neither.” If these choices are rendered impossible, most countries will choose the U.S., not because of its values but because its open economy has greater possibilities for them. From the supply point of view, as Fontaine notes, China competes well on price — ZTE will build a 5G network for less than Nokia would charge — but as non-Chinese, non-U.S. suppliers increasingly come online, how long can a country with rising wages and government debt, a shrinking workforce, and a non-convertible currency compete on price?

The security question is a separate one: It will not be (and never has been) easy to be an ally of both the U.S. and China, or to be neutral. But in terms of tech supply chains, the choice between the U.S. and China, in most sectors and for most countries, is a false one.

How Putin Goes (I&W)

How Putin Goes

The speed with which, in handling Yevgeny Prigozhin’s Wagner Group insurrection, Vladimir Putin went from bluster to bargaining led many analysts to declare that his weakness had been exposed and his demise would arrive soon. But Putin's departure from power is not forthcoming in the near future. The convergence of the interests that fortify Putin's existing system is robust and compelling. Putin is currently consolidating his position in preparation for elections in 2024.

In March, a year after his invasion of Ukraine, Putin's popularity remained very high, with an approval rating surpassing 80%, as indicated by a survey conducted by Levada, an independent Russian research organization. In some ways, recent developments fortified Putin's position: disloyal individuals have been exposed and purged. Sources closely associated with the general staff and the security services confirmed that General Sergey Surovikin was interrogated, while three undisclosed U.S. officials reported that Surovikin possessed prior knowledge of Prigozhin's plot to incite rebellion against Russia's military leadership.

Undeniably, Russia’s internal security crisis has eroded Putin’s stature on the global stage. But this erosion is more likely to push him to further provocative actions than to lead him to withdraw from the scene. The confluence of this crisis with the annual NATO summit (11 July) in Vilnius raises the prospect of potential assertive responses from Putin.

At home, Putin is very practiced at adjusting his authoritarianism to circumstances. He has learned from observing his Syrian ally, Bashar Al Assad, and the way in which his neighbor Recep Tayyip Erdogan defended his power in 2016. Rather than destabilizing the prevailing authoritarian regime, the Wagner coup is poised to reinforce and perpetuate authoritarianism through the adoption of novel strategies and practices.

Prigozhin, however, is not going to go away quietly. His security-oriented mindset is firmly grounded in profit-seeking. It is inconceivable that someone of Prigozhin's disposition could accept that the Russian Ministry of Defense would assimilate his Wagner troops by formalizing their involvement through contractual agreements, transforming them into an official component of the Russian military. His army is his business, one he is most likely to keep vital in Africa. Enterprises such as Lobaye Invest in the Central African Republic and M-Invest, along with its subsidiary Meroe Gold in Sudan, have emerged as key players involved in resource exploitation, controlling significant mining concessions. Several have recently been granted long-term extensions, further solidifying their hold on valuable resources. Wagner has rights to the Ndassima mine in the Central African Republic through a comprehensive 25-year contract with potential for extension. Prigozhin is resolute in his reluctance to relinquish any aspect of this expansive enterprise.

Of course, Putin and Prigozhin are both mortal as well as rich in enemies. But violent deaths aside, they will find ways to survive in the brutal world they know so well.

The A.I. Scare (I&W)

The A.I. Scare

With the release of ChatGPT in November 2022, the regulation of artificial intelligence suddenly entered the realm of popular politics and media commentary. By May 2023, AI experts were circulating a letter that referred to “mitigating the risk of extinction from AI.” In the same month, the EU Parliament was refining what it called “the first ever rules for Artificial Intelligence.” This wasn’t really true—China got there first—but it did reflect the high level of political energy surrounding the topic. By late June, US President Biden was in San Francisco warning tech leaders about AI’s dangers. The American Enterprise Institute, in line with news-cycle tradition, raised the alarm about excessive regulation.

SIG’s view is that there is both more and less here than meets the eye: “more” in the sense that state regulation of AI is indeed coming on fast; “less” because its effects are not likely to be very dramatic, at least not in the United States.

The Regulatory Wave

China, which early on saw AI as both a strategic technology and a threat to state control of speech and opinion, led the way on AI regulation in 2017 (the “New Generation Artificial Intelligence Plan”) and hoped that its standards would gain international adoption. The powerful Standardization Administration of China (SAC) issued 53 “Guidelines for the Construction of the National New Generation Artificial Intelligence Standard System” in 2020, meeting the deadline set by the 2017 AI Plan. As typically happens in China in moments of political enthusiasm, different bureaucracies began to compete for the new turf and the Communist Party needed to pick some winners and assert its authority. In March 2023, at the Two Congresses, the Party reshuffled bureaucratic authorities and centralized the domestic assertion of AI power, very much in step with the “rectification” of Chinese big-tech power that began in 2021. The extent of Party concern about AI regulation can be measured by the fact that China actually agreed with the United States on some non-binding standards for military AI use in February 2023.

The US, also typically, has been much slower in developing regulations, although it was quick to develop desiderata that don’t seem to have had much real force: Donald Trump’s 2019 Executive Order and a November 2020 Memorandum, followed by Biden’s Blueprint for an AI Bill of Rights in October 2022. The National Institute for Standards and Technology (NIST) took 2 years to consult stakeholders before issuing the “AI Risk Management Framework” in January 2023. The EU was on a similar schedule.

In general, China’s regulatory framework seeks to control information and remind Chinese tech companies that they operate at the pleasure of the Party. The EU aims at identifying and eliminating potential AI harms without constraining innovation. China and the EU both shape much of their efforts with the goal of minimizing dependency on US companies. The US aims at maximizing American innovation and minimizing harms to individual rights.

The 3 efforts reflect very different political cultures, suggesting that they will not be synthesized into broader international standards. In all 3 cases, a principal motivation has been to develop standards that will help each player improve its competitive position against one or both of the other players. It’s hard to see how competition will turn into cooperation any time soon.

So tech regulation is coming, more and more. Unlike at earlier moments of tech revolution, however, there is no free infrastructural (the open Internet) or commercial (unrestrained use of apps) or political (no data sovereignty, no privacy) global platform that AI can build on before it is regulated away. The AI platform is being pre-regulated.

Meanwhile, Back at the Startup

Actual tech regulation, as distinct from the setting out of ideas about things that tech should and shouldn’t do, has traditionally been led by industry. AI will not be much different.

So far, AI innovation has tended to come from smaller companies connected to the open-source community. Broadly, this has been the pattern for tech innovation for decades. It’s possible that AI innovation, too, will follow the pattern that led much of humanity to use the same search engine and a handful of social-media apps: a small company gains a technical advantage, is well run, has the capital to scale its platform without having to generate profits, eats its competitors, and wins big. But the conversation among AI industry leaders today is about whether or not AI innovation will grow based on these same “network effects” rooted in tech, capital, scale, and quantity of data.

The answer might very well be “no.” 

Why? Mainly because AI development teams increasingly turn toward “synthetic data,” that is, curated data sets that are edited to increase the chances of the AI system itself arriving at a desired result—not a specific result, of course, but a result within set parameters, a usable result. This means that the advantage of having huge controllable datasets—which was thought to give China and US big tech significant advantages just a few years ago—is not necessarily that important. It also means that AI development is not a prisoner to the need for scale that so shaped the development of search and social media.

Under these circumstances, AI regulation will be harder to do in any detail because innovators will be small and quick and the use cases for their products hard to predict.

The exception to this small-size advantage is computing power, known in the jargon as “compute”. Large companies with deep pockets have the advantage in compute. That said, compute is itself a product, as Amazon Web Services discovered and proved. And size can be a burden: the biggest companies tend to innovate in ways that take advantage of their size (e.g. lots of compute power) but can also lead them to innovate in ways that don’t matter to the actual market. The history of big-tech failures—Google Wave, Facebook Beacon—is suggestive.

What is Intelligence - Part #1: Looking for Trouble (@SIG)

WHAT IS INTELLIGENCE?

Part 1: Looking for Trouble

By Dee Smith
Chief Executive Officer and Founder

As head of a private intelligence agency—Strategic Insight Group (or SIG)—I am often asked what intelligence is and how it works. How is it different from other kinds of research? So here is a description that I hope will be helpful.

First of all, intelligence is very different from espionage. Traditionally, espionage is the practice of using spies to procure information. A modern variant is of course “cyber espionage”: a kind of cyberattack where the goal is to enter a computer system in an unauthorized and undetected way to access valuable intellectual property (IP) or sensitive or secret information. Espionage is often conducted by governments against other governments, as well as against opposing parties within their own countries. All governments conduct some form of it. It is also used in commercial settings—often called “industrial espionage”—but this is considered unethical and is illegal in most jurisdictions. Government intelligence against other governments is usually not considered illegal in the country in which it originates, or its legality is disregarded. This is because different rules—or a lack of rules—apply to sovereign states. There is a level of anarchy in inter-state relations, as there is no real overarching global legal authority, and what international law there is is weak and is often disregarded and unenforced.

Intelligence is not espionage, but it is also not the same as the general kind of research as undertaken by many people. Often, research on a topic gathers relatively easily obtained information and categorizes, synthesizes, and draws conclusions from it.

In contrast, intelligence is a very specific kind of research with a focus on revealing hidden information—to find things that others do not expect you to know or do not want you to know. The goal is to enable you to more completely understand the nature of a situation and to characterize the forces influencing it. Furthermore, intelligence often strives to provide continuing awareness of how something is developing, and early warning of emerging threats and opportunities.

The goal of any good intelligence operation is to produce “actionable” intelligence: something that a client who uses the intelligence) can act on. Intelligence works best when the question being asked by the client is very specific: “Are there negative indicators that should warn me against investing with this group?” or “Will an opponent in a lawsuit fight to the end or settle?”

Finding things that others do not want you to know might seem ethically questionable, but consider, for example, that many of our clients at SIG are large investors who manage money for ordinary people who have entrusted their retirement savings to pension plans or other investment funds. Imagine the following situation: a fund manager is proposing to make an investment in an entity, but that entity is itself acting unethically by hiding or misrepresenting issues. A good intelligence process could detect this, allowing the fund manager to make a better decision.  

When certain rules and procedures are followed, private intelligence can be conducted entirely legally, as SIG does on a daily basis.
 The intelligence that SIG conducts is essentially threat identification, risk mitigation, and fraud detection: we are “looking for trouble” . . . so we can keep clients—and the people whose money is entrusted to them—out of it.

How does intelligence work? It works by collecting a large array of data—many small pieces, from many different sources, not all of which are decisive or even terribly important. But when you collect the right pieces, and put them together using appropriate tools and techniques, the process can reveal hidden information about actors and their intentions—good or bad—and about their weaknesses and strengths. The whole is greater than the sum of its parts.

The Importance of Patterns

Sometimes a single piece of information can make all the difference. Far more often, however, it is the pattern of evidence that reveals the “lay of the land,” so to speak. You never know, until you begin collecting and analyzing it, what piece of data, from what source, will tell the tale . . .

Consider a subject who suddenly begins to receive speeding tickets or to borrow increasing sums of money. This may be a window into their personal life. Has something changed? If they head an investment fund, is it something so distracting that it might take their eyes off the proverbial ball? Or consider an individual who is found to have 3 bankruptcies, is a defendant in multiple lawsuits, and has tax liens every year for multiple years. What does this pattern across indicators tell you about their operating style?

There are two key elements: 1) multiple sources, because NO one source is dependable, no matter how legitimate it seems and 2) zero-based analysis, in which assumptions that everyone “knows” to be true (even if they are not) are discarded in favor of collecting data, analyzing it, and looking for patterns and anomalies that can reveal the nature of individuals, companies, and events. Then, the intelligence process creates hypotheses that might explain what has been observed, testing them to confirm or contradict them.
Intelligence that produces insight is iterative by nature. A conceptual device known as the “Intelligence Cycle” illustrates the process in a general way. It may circle around several times within a project, as new information is found and analyzed or tested.

Results of the Intelligence Process

Intelligence does not seek to predict the future, but to provide a better understanding of the present. From that, it can allow a user to take action on the basis of early indicators—before irreparable damage has occurred. It can also provide a basis for projecting forward more likely or less likely scenarios. By pinpointing key elements, it can also allow focused systems of monitoring (known as “Indications and Warnings” or I&W in intelligence jargon) to be established as a way of providing continuous “situational awareness.”

In the end, intelligence is only as good as the processes and protocols used in its collection and preparation. But properly conducted, it can produce astonishingly accurate insights to detect problems at an early stage and then to avoid or mitigate them.

Next in the series: The Difference Between Open Source Intelligence and Human Intelligence, and their Uses

Saudi-Iranian Rapprochement (I&W)

Saudi-Iranian Rapprochement

The rapprochement between Saudi Arabia and Iran, engineered by China in March, received a mostly favorable reception, with analysts suggesting that the process of normalization could alleviate regional tensions and pave the way for a tangible reduction of hostilities between Riyadh and Teheran. Some possibilities that have been aired include a cessation of Iran's interventions in Bahrain, Saudi capital infusions into Iran, and the promotion of nuclear non-proliferation.

But Saudi-Iranian relations are governed solely by self-interest and driven by the intricacies of geopolitics in the region and the emergence of a multipolar global paradigm. Both Saudi Arabia and Iran still aspire to be regional powerhouses and principal actors in this evolving multipolar order. China’s role in bringing them together is itself principally geopolitical. It is intended to improve China’s position in its long struggle with the United States. Whatever peace effects it might have are all to the good, but they were not the point. Neither Iran nor Saudi is especially weary of conflict. The rapprochement is part of a complex power struggle, not an embrace of peace.

It is up to Saudi and Iran to demonstrate that there is any substance to the agreement.  A crucial aspect that has yet to be adequately addressed is the establishment of some foundation of trust between the two nations. Considering their enduring rivalry and a historical backdrop riddled with mutual mistrust, Saudi Arabia and Iran both need to demonstrate some dedication to resolving their differences and participating in productive discourse together. Such efforts have not yet materialized, and until they do, the prevailing geopolitical landscape in the Middle East will persist unchanged, despite the purported reconciliation.

While there may be a convergence of interests in defying the United States, Saudi Arabia and Iran have very different objectives in the region. Crown Prince Mohammed bin Salman (MBS) harbors a grand vision of reshaping not only the face of Saudi Arabia within the Middle East but also its standing on the global stage. MBS's decrees are  unquestionable in the kingdom;  Saudi foreign policy is inextricable from his ambitions. MBS has shown no intention of relinquishing power or engaging in conflict de-escalation. Foremost on his agenda is elevating Saudi Arabia to the status of a preeminent power in the Middle East, employing any means necessary to achieve this objective.

The pursuit of hosting the World Cup in 2030 stands as a prominent testament to Saudi Arabia's endeavor to foster international engagement. This initiative, alongside notable undertakings such as the Neom project and the establishment of a desert-based ski resort, exemplifies Saudi Arabia's transformative policy trajectory. But the global battles over Saudi Arabia’s alternative golf league show that much of the world is unwilling to do much more than humor Saudi episodes of over-spending.

Iran’s attachment to the deal is costless. Its gradual movement toward Russia and China is propelled by many factors but peace is not one of them. Iran has chosen this paper peace as a way to position itself better in its struggle with its enemies.

‘’The new era’’ hailed by diplomats of both states is as thin as a straw, for it is sustained by temporary interests and untested alliances in a changing geopolitical landscape that cannot be predicted by anyone, and certainly cannot be controlled by two relatively minor players.

Elections and Earthquakes (I&W)

Elections and Earthquakes

The first round of the Turkish presidential election on 14 May was a disappointment for almost everyone. There was no winner. The opposition was convinced that years of economic mismanagement, along with a devastating earthquake exacerbated by the notorious corruption of the Turkish construction industry, would drive Recep Tayyip Erdoğan from office. His supporters believed that the great man would crush his enemies once again. But as neither side secured more than 50% of the vote, a second ballot needed to be held. When it was, Erdoğan was clearly the winner.

In North America and most of Europe, the result has generally been described as unwelcome and perhaps even disastrous. But is it?

There is little doubt that Erdoğan’s success was due to policies that became ruthless and vindictive following protests against his plans to build a mosque at Istanbul’s Gezi Park in 2013 and a coup attempt against him in 2016. The only two politicians who might have led a credible challenge to his authority both faced criminal prosecution and imprisonment. The press and television stations had been placed in the hands of AKP and its supporters by an obliging judiciary and voices opposed to Erdoğan were rarely heard during the campaign. The result was an election that has been seen as “free but not fair”, although it was not really either. While some degree of irregularity appears undeniable – Turkish nationalist candidates received an astonishing number of votes in Kurdish areas of the country, for example – no one seems to doubt that Erdoğan really won the election. He is therefore in a stronger position than he was before. His reign and his policies will endure for another five years, at least if his health remains robust. 

His undoubted appeal lies in an ability to display a patriarchal authority as well as an unwavering devotion to traditional values that half the country finds inspiring and reassuring. The other half, of course, disagrees. Nevertheless, after more than two decades of AKP government, Erdoğan continues to represent hope for the new middle classes in Turkey that a more affluent way of life will continue even though levels of personal debt have become almost insupportable. Whatever the risks, millions of Turks thought them less alarming than those posed by a rival candidate who had never held a position of greater responsibility than leader of the opposition and who never appeared to be tough enough for the job.

This may be worth remembering, especially in Europe. In the hope of winning the second ballot if he could attract support from the far right, Kemal Kılıçdaroğlu promised to expel “more than 10 million” refugees from Turkish territory. Would he have made a serious attempt to do it? Who really knows, but the consequences would have been appalling. Even the risk that he might try would have been profoundly alarming in most of Europe, especially given a war in Ukraine and rising tension in the Balkans. European politicians have years of experience in negotiating with Erdoğan when refugees are used as political weapons, and a known quantity is undoubtedly preferable at a time of rising uncertainty.

Erdoğan also wants something. His position requires the appearance of power as well as the reality of it. Sophisticated American weaponry is fundamental to both, especially as Russian equipment has been seen to be no more effective in Ukraine than Russian tactics. Erdoğan has been allowed by Washington to purchase much of what he wants from the United States, but not yet everything that he wants, including the most advanced versions of the F16. At the same time, he has the ability to grant favors that are of great importance to American strategists, including an agreement that Sweden will have the unanimous support it needs to enter NATO just as Finland has done. There is clearly an opportunity for both sides in the conversation.

Erdoğan’s attitude to NATO is undoubtedly ambivalent. Although a man of considerable intelligence and a politician of extraordinary ability, he has little formal education and no real knowledge of English or other foreign languages. He is therefore suspicious of a world that he sees as alien, even if his attitude tends to be pragmatic and transactional. His ambitions also extend beyond Europe and into Africa and Asia.

While Turkey was certainly involved in the rivalries of the Cold War, it played little more than a supporting role. The alternative at the time, the Non-Aligned Movement or NAM, was in large part a reaction to the bellicosity of the Great Powers, but a new unwillingness to choose sides, often known as NAM 2.0, reflects growing unease or alarm at the implications of a globalized economy dominated by the United States and its rivalry with China and Russia. In countries such as India and Turkey, it is not surprising that a vision of a new international order has also been accompanied by enthusiastic or aggressive forms of ethnic and religious nationalism.

So what will Erdoğan choose? He would naturally prefer Turkish prominence within the enduring structures of earlier decades as well as a leading role in a new NAM 2.0. Can he have both? His country has extended its reach throughout the world by relying on the soft power of its media as well as the harder forms of power displayed in its successful aerial drones. Turkish military technology is highly attractive to foreign investors as well as foreign customers, and it is only one in a series of lucrative possibilities that include property development in Istanbul or along the Mediterranean coast and the growing markets offered by Turkish consumers. For the rest of the world, therefore, Turkey remains tantalizing. In that sense, Erdoğan’s victory has changed little. The claims that it represents a defeat for either American or European interests and that Kılıçdaroğlu would have been a more effective or at least a more amenable president seem excitable as well as condescending.