Geopolitical Alpha

Chapter 3The Wizards of Oz

“The most valuable commodity I know of is information.”

— Gordon Gekko, Wall Street

hen it comes to politics and geopolitics, most investors take the Gordon Gekko view to heart. To gain an edge, the consensus is that having insight from the ground is critical. Or, even better, to “know somebody.” Because politics, from this viewpoint, is unpredictable, the only path to clarity is through intelligence-gathering. Billions are exchanged each year for fireside chats with wise old men (almost always men, almost always old – but rarely as wise as advertised) who spin a good yarn from their experiences or extensive Rolodex.

You have met these storytellers. You know them by the speed with which they name-drop from your very first encounter. Like peacocks spreading their plumage to attract a female, they try to lure the frameworkless victim with a verbal display of their networking prowess.¹ My rule of thumb is that if a political consultant drops three names before drawing his next breath, I daydream about basketball for the rest of the conversation.

While this chapter lays out the limitations to the intelligence model, I do not think that political analysis is truly possible without it. A top-down, macro approach to geopolitics is clearly my wheelhouse. But without actual understanding of issues at hand, the investor cannot ascertain what constraints are real and actionable.

I personally consume plenty of on-the-ground research from political consultants. ...