Kingdom of Lies – Kate Fazzini

4-11-19

Dear Partners in thought,

I would like to talk to you about “Kingdom of Lies” from Kate Fazzini, formerly a cybersecurity consultant and now the chief reporter on cybersecurity matters for CNBC and a lecturer in Applied Intelligence at Georgetown University. Her book is about being “behind the scenes” of the hackers and counter-hackers in the world today and getting a glimpse, as a hidden guest, of what goes on with these characters on a daily basis.  

As you know, cybersecurity is a subject close to my heart having been a seed investor in a UK cybersecurity start-up focused on preventing cyber attacks by making corporates (with a focus on the weaker SMEs that form the supply chain of large groups that are at risk of contagion) and government departments throughout the West, stronger and more resilient to cyber attacks by applying the leading UK Cyber Essentials standards, Britain being arguably the leading cybersecurity country in the West today *.  Cybersecurity is never boring and new developments keep happening on a daily basis, the latest being the rise of “false flag” operations where a hacking group hacks another hacking group so their attacks could be passed for theirs, which is a new refinement in cyber warfare. It took two years for the UK’s National Cyber Security Centre and the U.S.’s National Security Agency, the two leading national cyber security agencies, to identify that Oilrig, a hacker group deemed to be linked to Iran was in effect hacked by The Turla Group, which has been linked to Russian intelligence, that exploited Oilrig’s tools to launch cyber attacks in 20 countries with a focus on the Middle East. This story underlines the challenges of establishing clear attribution for cyber attacks, now more than ever, all the more as hackers downplay their affiliations with states, preferring their images as “hacktivists” or “patriotic hackers” like many in Russia (linked to electoral disruptions in the UK, the U.S. or France in recent years) or like with the de facto Bashar al-Assad sponsored Syrian Electronic Army.  

KF’s book as she puts it is one of “unnerving adventures in the world of cybercrime”. It is quite different from the usual fare as it shows black and white hats in action, so-called ethical hackers, cyber-criminals passing for penetration agents who just hacked so you could be stronger afterwards (for a fee and freeing your files of course), government-sponsored hackers – the whole gamut. Quite a young one too… We go deeply into the cybersecurity apparatus of a top US bank (renamed Now Bank…) where politics is also key and cyber specialists are quickly replaced by big ex-government names to run these outfits (with budget battles like in any corporate organisations)…We run into ex-CIA and law enforcement officers reborn as cyber warriors for financial institutions. “Startup centres” in Romania (a Transylvanian “Hackerville”), Russian government experts crossing back and forth between the white (read government-sponsored work) and black worlds (where they simply made money but were never harassed by the local authorities). Chinese waiters (happening to be ex-PLA military) at Shanghai Western-liked bars enhancing their revenues by stealing data from Western companies and naive customers using plugs they should not, first for government and then to monetise it… Various ways of making money from social engineering, stealing files, threatening to release embarrassing emails from business leaders, emptying ATMs…The author makes the case that many cyber criminals and good guys are not all IT or computer specialists, saying that one can be an “expert” (or say proficient) in six weeks and what counts is personality and drive. We read about Renée, this young Romanian teenager who became famous for her persuasion skills, making sure targets were not only paying fully to get their stolen information freed but were also happy about it and the experience. 

Kingdom of Lies is quite an entertaining book, even if lacking a bit of structure and is often compared to Michael Lewis’s work in the financial sphere like with “Liar’s Poker” and other pieces such as the one on the sub-debt crisis: “The Big Short”. In other words, non-fiction looking like fiction…(sadly!). It is definitely a good read for those who want to educate themselves on cyber warfare but are not necessarily willing to go deeply into the tech side of the subject matter. 
Warmest regards,


Serge     


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Occupation and resistance in Crete 1941-1945 – Georgios Papachristos

2-9-19

Dear Partners in thought,

Like the great Edward Luce, our top FT man in the US, you may be or had been holidaying in Crete (or in Greece) this summer and I thought I would tell about “Occupation and Resistance in Crete 1941-1945” by Georgios (George) Papachristos. George has been passionate about the history, tradition, culture, landscape and people of Crete given his family roots. George is an accomplished individual with three Masters degrees in history and political sciences, international relations and management (also the first Greek Sloan Fellow at the Stanford Graduate School of Business, home of the tech entrepreneurs) and he also holds a PhD in international political economy. As he is also a leading young Greek entrepreneur with a global remit, George is what we used to call in my days  a “Renaissance man”. 

George has researched in his book the events that took place as of when German paratroopers landed in 1941 (something the “red berets” keep studying) and the resistance movement and guerrilla warfare that ensued. His book is a must read, especially when vacationing in Crete but also for some of us who read about the exploits of the dashing Patrick (Paddy) Leigh-Fermor, his famous abduction of General Kreipe (indeed the military commander of Crete), and his later years in his “salon” in Southern Peloponnesian  Kardamyli. Some of you may have read the book that made Sir Anthony Beevor famous in 1991 when he published his account of Crete during WW2, which George obviously refers to. In this book we discover the various groups, sometimes not on good natural terms who all joined forces to ultimately participate in the defeat of the Nazi war machine. We discover that the Cretans share some clear features with other islanders like my Corsicans if only through the acute sense of honour or the liking for revenge that they call vendetta in Ajaccio. We go through all the major events that took place chronologically and involved sabotage and reprisals in many of the locations where we now enjoy a very relaxing time. First and foremost George’s book shows us a lesson in resilience against all odds and sheer brutality and the proof that good men and women can win in the end. Nearly all Cretans resisted, working relentlessly with Britain. This is a very enjoyable and educational book that I hope you will be reading in the shade in this cradle of civilisation.   

So you know, George is also someone I have known as a seed investor in a start-up, Toorbee, that his brother Nikos and him set up a short few years ago. Toorbee is focused on outbound Chinese tourism in Europe, wanting to become the leading B2B global distribution system in its segment, and while the core team is based in Athens, works in ten different European countries today. Talking about resilience, George used his limited seed capital to build a team of 16 people (including now three in Shanghai) while building a solid network of partners in China and Europe. He now has two venture capital investors and is ready to secure a leading position in his travel and fintech segment. http://www.toorbee.com  It is aways great to see and feel success particularly in our old Europe which has been the theatre of so much unsettling developments, starting with Brexit and the rise of populism (look at poor Matteo Salvini and how he is good at “governing”). I was in Athens this past week with George and Nikos thinking on how we could develop Toorbee further. I had this feeling that we were all the same, men of good will, thriving to achieve something together. I felt we were Europeans. I felt we could achieve little on our own while we could win together, making me think of Europe and this old EU dream that goes beyond the essential bloc it needs being and reflects who we are and that we should keep building…like the Cretans of the early forties, relentlessly and against all odds.            

Warmest regards,

Serge      

The New Girl – Daniel Silva

24-8-19

Dear Partners in thought, 

You will remember that I wrote a Book Note last summer about the works of Daniel Silva, the great spy and thrill novelist whose main character is Gabriel Allon, now head of “The Office” (or Mossad for the outsiders). DS struck again precisely, as he does every year, on July 15 (one day I will ask him why that very date) with a new novel. After “The Other Woman” who was an old flame of disreputable MI6 Kim Philby, we now have “The New Girl” which makes for an interesting evolution in titles. As I promised I will not reveal too much so you fully enjoy the book – especially a spy novel from the new and more muscular John le Carré – and will simply set the stage for you.  

“The New Girl” is about MBS – sorry not Mohammed bin Salman – but Khalid bin Mohammed bin Abdulaziz Al Saud or KBM, who is the new early thirties ruler of the Kingdom of Saudi Arabia. He is a reformer, gives women the right to drive cars and attend sports events, jails his family members at the Riyadh Ritz Carlton before extracting from them USD 100bn and making them understand who rules and even gets implicated in killing Omar Nawwaf, a Saudi journalist, critical of the regime and of KBM (on this latter, tragic aspect DS has a pre-book note about the 54 journalists, including Jamal Khashoggi, killed in 2018). While his “Way Forward” had received much support in the West, Nawwaf’s killing, in which he seems to have been implicated even if he did not give direct orders, makes Western leaders and populations cringe. In spite of his drive for reform, KBM may after all be an old style autocrat who simply found a smart way to sell sell himself better in changing his country and its oil-dependant economy. This story set-up looks of course more than vaguely familiar. I was actually surprised that DS would stick to a storyline that was so close to reality, even using the well known acronym approach. However this is also why DS stands apart from the spy novelist crowd today as the line between fiction and reality is constantly and artfully blurred. 

“The New Girl” is a twelve year old who studies in a top international school in Geneva, who lives in a castle in nearby France, is surrounded by bodyguards and whom nobody knows who she really is. She is of course KBM’s only child. And she will be kidnapped by an unknown party whose only demand to KBM is that he abdicates if he wants to see his daughter alive. KBM surprisingly turns to his art adviser, Sarah Bancroft (ex-CIA, see my Book Note of last summer – DS’s novels always bring back the same characters) who is tasked (even though she had cut ties post Nawwaf’s horrific killing) to approach Gabriel Allon on behalf of KBM. The two men will meet in Riyhad, which for the head of The Office is a premiere and Allon will agree to help KBM recover his daughter. He does it not not out of love for the House of Saud but in the knowledge that KBM in spite of his serious shortcomings is a better and more stable player for the region than a more radical Whhahabi ruler, also as tensions with Iran are at an all time high with Yemen and other hot spots where the two countries fight against each other. The two men will go to Paris (DS has considerably warmed to the French in recent years – I recall an exchange some ten years ago when I wrote to him and Jamie, his wife, that he was taking too harsh an approach on France) to meet with the couter-intelligence folks at DGSI. They then go to London to meet with Graham Seymour still running MI6 who gives them some useful intelligence on some individuals who have been spotted in Geneva the day of the abduction. In a return match of sort, it is a disguised KBM’s turn to go to Israel by way of the embassy in London. Little by little they get closer to the group of abductors still not knowing who they are but ending up identifying a close relative, more radical, of KBM who is quickly and rashly despatched by the Saudi ruler with Allon being present. They get very close to freeing Reema, his daughter, and all congregate to an agreed rendez vous point. We are at half of the book. Things will evolve in a unexpected DS way which I will let you enjoy even if the ride will be very tough indeed. 

Warmest regards,

Serge                            

Talking to my daughter: A brief history of capitalism – Yanis Varoufakis

15-8-19

Dear Partners in thought,

Before I start on this new Book Note, I wanted to let you know that my Book Notes may be shorter in the future, not because I suddenly became lazy but as I found out that you did not have all the time in the world to spend on my musings and I also did not want to tell you too much – which I admittedly did – in discussing those books so you would want to read them. I already feel a wave of warm support and appreciation reaching me in Prague from so many parts of the world… 

I wanted to tell you today about a book that is aimed at explaining the economy to the young (and in his mind, of course, not so young), written by Yanis Varoufakis (I feel eyes rolling), the  colourful (not to say firebrand) former economics minister in the early Tsipras government in Greece when the country was making the headlines as to whether it would repay its public international debt and would not eventually leave the EU. While things are much calmer in the cradle of Western civilisation with Tsipras now seen as a reformer and even defender of the EU (see the FT Special in May 2019), this feeling being strengthened by a former McKinseyite as new PM, YV having left the government some time ago, has been much on the circuit for speeches and conferences while sharing his experience in print. While many see him as an opportunist who may sail closely if unwittingly to the bad populist winds, there is no denying his brio, intellect and attractive persona. He also knows how to sell his message and himself, marketing the V brand very well as he goes on the speaking yours or even talk about Greece on various TV channels. Amusingly his book was shown to me by a very serious private equity veteran who seemed to like YV’s mix of iconoclastic flavour and Bernie Sanders approach, showing that a differentiated style matters as much as the rest for getting one’s messages across.     

His book is short and simple but very smart and entertaining. It is indeed a conversation (or a one sided, multiple address via letters) with Xenia, his daughter where he tries to explain to her the major tenets of economics in ways that would “resonate” with her. YV first wrote it in Greek with the English translation coming up later. His daughter, representing the young target audience (and let’s be clear all of us) lives in Australia so he could have gone “English” as he started the first time around, also as he masters the language like few of us foreigners can. Admirably he wrote it in eight days on the island of Aegina between meals and a bit of sailing – what is it not to like? Especially in these summery times…Clearly it is a funny and radical way to explain the economy to one’s daughter (the word “capitalism” in the sub-heading makes you wonder about another bearded thinker who would probably agree with YV today but also missed the point in his days about where the revolution would start). However taken as a piece of clever entertainment, it is really a good read while it makes you think about a few facts we always have taken for granted.    

YV addresses the main issue of “Why so much inequality?” that seems to have bothered him for ages. We learn why Europeans and their geography and agricultural surpluses (cultivating land being the key genesis fact for later success) conquered the rest of the world that was often more rich and full of “plentiful” cultures that did not need to bother about conquests or defending themselves. On the way, we learn the origin of writing (I say “we” though I should say “am” as many of you doubtless know already the need to check those amounts of grain in the Mesopotamian granaries). We learn why the British conquered Australian aborigines and not the other way around, which if an odd example to discuss inequality, is nonetheless a great dinner table topic. His main message is that Europeans did not prevail as they were smarter but as they had been given less natural assets and had to work harder that in turn started a cycle that led to the cycle of conquests that we know. Bureaucracy, armies and clergies, all established for the preservation of a certain order of things were by-products of agricultural surpluses that created Western kingdoms and nations. We then go on to understanding better the difference between goods and commodities and why debt and profits are the key elements that makes our world go around. The nemesis banking sector and its bankers are of course well covered while “haunted machines” are addressed in what is becoming a rising robotisation trend. He discusses economic instability as a chronic risk and why our economic system benefits some while impoverishing others, be they individuals or nations. All in all, these chapters or indeed letters to his daughter, cover the key pieces of the economic puzzle and address what are for YV the major issues linked to inequality in today’s world and why market-driven policies are not solving the more pressing issues facing our world. His main objective is to ensure that Xenia (and us) think about those points, be equipped better about what he sees as the failures and obfuscations of the current system and thrive for a more democratic alternative and outcome in the way the economy and indeed capitalism work.    

 I would probably not want YV to run my national economy while I would be happy to go on holiday with him – as he is very entertaining and has a knack for explaining economics in a fun manner even if his overall focus is of course highly radical. Conversely I would not like to go on holiday with many people I would trust blindly for running my national economy but whom by definition would be boring to spend time with. He is definitely more radical than progressive economists who nonetheless are playing the “game”, like Nobel laureates Joseph Stiglitz or Paul Krugman, but probably more fun to read in this very “Talking to my Daughter” instance. This is why I recommend that you read YV’s book (maybe for some if not many not to say all as a great piece of fiction) while enjoying some relaxing time somewhere not too hot…(now if you wanted to have a slightly more classical though also entertaining way to think about economics, I also recommend you to take Paul Krugman’s Master Class on the subject http://www.masterclass.com . So you know, I myself took wonderful Aaron Sorkin’s on screenwriting and the art of the dialogue. A gift of one of my daughters “talking to me” to tie this back to YV). 

Warmest regards,

Serge                

The Shadow War – Jim Sciutto

7-8-19

Dear Partners in thought,

I would like to talk to you about “The Shadow War” from Jim Sciutto, the CNN anchor and Chief National Security Correspondent some of you may know. JS goes “inside Russia’s and China’s secret operations to defeat America ” as the sub-heading says somewhat strikingly, though in essence his book deals with the new range of aggression short of actual war which today are the most modern aspect of warfare essentially carried out by two powers which either would wish to come back to the pack of leading nations (Russia) or would wish to assert itself as the new world leader, displacing America from its century-old historical role (China).             

“The Shadow War” deals with hybrid warfare which encapsulates forms of attacking an adversary while remaining just below the threshold of conventional war also referred to as the “gray zone” by military experts, using a range of hard- and soft-power tactics from cyberattacks on critical infrastructure, to deploying threats to space assets, to information (of disinformation) operations designed to spark domestic divisions, often in the context of democratic elections, to territorial acquisitions just short of a formal invasion. JS started to focus on those forms of soft-warfare when dealing with the poisoning of former FSB and Russian dissident Litvinenko in London in 2006 when working for ABC News, feeling that it marked a new era of aggressive risk-taking by a resurgent Russia that initiated a new form of war, which was continued even more strikingly with the Skrypal poisoning “raid” in Salisbury in 2018, both being officially denied by Russia. 

To JS, Russia and China, two different powers, use hybrid warfare which was new to the unprepared US and Western allies until the late 2000s as they sought another path to “victory”, realising they would be unlikely to win a shooting war to advance their strategic goals. The two “adversaries” also showed other countries the way, such as Iran and North Korea “starting down the same road”. Russia which admittedly was the most aggressive in all its shadow war ways, clearly stated in February 2013 (one year before Crimea and eastern Ukraine) in what became the Gerasimov doctrine (after the name of the chief of staff of the Russian Federation military) that “wars are no longer declared, and having begun, proceed according to an unfamiliar template” involving both military and non-military methods. To Gerasimov, “the role of non-military means of achieving political and strategic goals has exceeded the power…of weapons in their effectiveness.” Like Russia with the annexation of Crimea, China was able to secure sovereign territory in disputed South China Sea areas, without firing a shot and incurring reprisals – even if both nations according to JS, based on U.S. officials’ accounts, including China, are also willing to rely upon traditional spying in the U.S. and the West and kill adversaries, like dissidents or opponents “at the drop of a hat”. In one of the most friendly version of hybrid warfare, both countries have been proficient at conducting efficient news operations via RT (formerly Russia Today, which was perhaps too obvious a name) or the newly rebranded-state run China Global Television Network that use Western reporters and anchors, following a very CNN style of delivery.                  

In Opening Salvo, JS takes us to Estonia and the first major cyber attack against a sovereign country, this time by Russia even if the culprit always remained unofficial and no claim was never made. Following the decision to move a Soviet war memorial in April 2007, protests erupted in the street combined with waves of cyberattacks ultimately paralysing all of Estonia as the government decided to take the country off the international web. Estonia had become the first victim of a state-sponsored cyber-attach on another nation in the form of a coordinated, focused and global “distributed denial of service” or DDoS attack. This attack was also an attack on NATO and the EU given Estonia’s membership of both, with Estonians fearing that was the prelude to a full-scale invasion. Estonia compared “2007”, which went on for weeks, to 9-11 given the asymmetric means employed though came short of requesting NATO assistance under Article 5 of the Treaty while pointing the finger at Russia which was easily identified as behind the attack. “2007” promoted Estonia to rethink its cyber vulnerabilities to the point that it is one of the most cyber attack-ready countries today, making Russian attacks unsuccessful even if the offense always has an edge over the defence in cyber warfare. Estonia suffered little from the 2017 “WannaCry” (attributed to North Korea) and the global attack on infrastructure in 2018 (attributed to Russia), mainly as Estonia developed a top level of cyber “hygiene” at the level of each of its citizens that is the first step to counter cyber attacks. Estonia also established data embassies, like in Luxembourg and other undisclosed places, where giant digital copies of data and communication related to government, voters or health and financial records were safely stored. JS saw two key lessons in that opening salvo: 1. A relatively blunt and low cost cyber weapon, like a DDoS, can paralyse an entire nation. 2. Russia demonstrated as of 2007 it was willing to launch cyber weapons against Western nations on a scale and degree not done before. JS felt that the U.S. and the West have largely missed the lessons of “2007” and thus what was to come (with hindsight) in the ensuing  decade, still thinking that Russia wanted what the West wanted, that is a mostly friendly relationship governed by a Western international rules-based order. 

In Stealing Secrets, JS takes us into ways by which China stole secrets to advance and support its economic growth. JS focuses on Stephen Su or Su Bin who while being involved in business activities in the US as a manufacturer of aircraft cable harness, had developed a ring of spying and stealing intellectual property from defence contractors, notably Boeing. Interestingly these spying activities which were encouraged if not led by Beijing, were also entrepreneurial with rings of thieves stealing secrets to then sell them to China. The U.S. Office of Intellectual Property estimates that up to USD 600 bn is lost up by the U.S. mainly to China. JS sees two lessons: 1. China, which wants to surpass economically the U.S.,  has been aggressively stealing government and private sector secrets and intellectual property for years in what it sees a fair game and not a crime, making it the most expensive theft in modern history. 2. The U.S. never managed to change Chinese behaviour in spite of repeated efforts and warnings by all administrations to stop its theft drive. Personal presidential warnings, indictments of members of the Chinese military or trade tariffs never stopped China’s drive while the West kept assuming that China wanted what the West wanted and that participating in international treaties and associations like the WTO would make China more Western, not unlike the approach to Russia.  

In Little Green Men, JS refers to the invasion of Crimea without firing a shot and the arming and supporting, very directly, via “little green men” the insurgents in Eastern Ukraine in the so-called Republic of the Donbass. JS sees two lessons: 1. Russia had the intent and the ability to redraw the borders of Europe by force (going further than invading Georgia in the Caucasus in 2008) and it could do so on NATO’s doorstep on the border of four EU and NATO members states. 2. The West missed or ignored warnings to exert military influence over Ukraine by Putin and other senior Russian officials in the years and months before and kept thinking that Russia could behave in Western manners as the tanks kept rolling westwards and Malaysian MH17 was shot down by a Russian-made missile in April 2015.         

In Unsinkable Aircraft Carriers, JS refers to the gravity-defying artificial islands built and then quasi-weaponised by China to cement ownership claims of part of the South China Sea which was contested by half a dozen nations. JS feels that China’s means of claiming sovereignty, which is a major land grab also backed by force though without firing a shot, challenges the rules-based international order set up and led by the U.S. since 1945. This land grab was also  a way to challenge America’s role as the leading military power and arbiter in the region. This development set a bad example for things to potentially come in relation to the Senkaku islands claimed by Japan and the Scarborough Shoal claimed by the Philippines, knowing that the U.S. is bound by treaty to assist military both nations in the event of an aggression by a third party, which everybody knows can only be China. Today China’s man-made islands in the South China Sea are “facts on the sea” and here to stay, a fact admitted by the most hawkish American foreign policy-makers.  

In War in Space, JS deals with the other, expanding field of battle which is space where many of the world challenges are being settled in this 50th anniversary of the Apollo 11 mission. Both Russia, since Sputnik, and China are major space actors while India is starting to join the club. China ad Russia can paralyse the U.S. and western powers from space, disabling militaries, bringing civilian populations to standstill by shutting down infrastructure commanded from satellites while rendering the public and private sector in-operational. America which took a superior advantage in space technology became vulnerable to attack as both China and Russia took advance of this advance and reliability. In recent years Russia and China have translated their well-honed cyber-offensive tactics capabilities into the space arena with the U.S. only reacting now this new development. Counter measures have been developed by the public and private sectors by spreading GPS and critical communications among more satellites to reduce the damage linked to the loss of one or a few of them. The question facing the U.S. today is whether to focus on deterrence or joins a new arms race.           

In Hacking an Election, JS obviously takes us to the U.S. 2016 presidential elections and makes us wonder what the impact of the hacks really was knowing Trump’s wafer thin 22,000 vote lead in key states that delivered him all their delegates and thus the presidency all the while lacking three million votes nationally (this putting aside the viability of the American electoral college process that is a sacrosanct, non-debatable issue even for the Democrats in the U.S.). It is not unlikely that Russian meddling, with or without the help of the Trump campaign that remains a debatable issue, had an impact on the election outcome – this being reinforced with the equivocal response to the matter from the Trump Administration and their Republican backers which not only showed a fractured American response to a critical issue but also potentially emboldened Russia to keep at this new tactics. The Russian meddling into the run-up of the 2018 mid-term elections showed that sheer U.S. sanctions did not deter Russia even if President Trump recently allowed the Pentagon and Cyber Command to use offensive cyber operations to respond to foreign cyberattacks. It is not clear for U.S. cyber experts that America today has achieved enough offensive and defensive capabilities at a time when Russia would have been joined by China, Iran and North Korea in attempts or experimentations undermining the confidence of the American public in the the electoral process. The U.S. is not alone dealing with election meddling as the 2017 French presidential elections showed when Emmanuel Macron’s campaign was attacked by Russian trolls, this being reinforced by Russian support of the extreme right parties across the EU leading to the uncovering of dubious funding of leaders or parties such as in the cases of scandals involving Austria’s FPO or Italy’s Northern League.          

In Submarine Warfare, JS deals with the last soft-war issue which is the control of the oceans which is is often done down from “below” and subjects submariners to very dangerous challenges below the usual public radar or in this case, surface. Both Russia and China have meaningfully upgraded their submarine capabilities and increased their incursions into U.S. and Western territorial waters, at times close to the shore. The Pacific and Atlantic oceans, together with the Mediterranean not to mention Artic and Antarctic seas are the theatre of a new “Great Game” between the three powers with the U.S. playing defence and catching up fast to maintaining its earlier, disappearing advantage.     

Finally JS gives us his views on how America (and one would think the West, though Europe is not mentioned) could win the “shadow war”: 

1. Know the Enemy (understand who they are and how they operate “now”) – He could have said “thy” but we will forgive JS.

2. Set Red Lines (so the adversary knows it is crossing them at a real cost, meaning enforcement)

3. Raise the Costs (do not make it easy to wage soft-power aggression)

4. Bolster Defence (what was good in the past is no longer doing the job, this repeatedly) by i) protecting the home front, ii) easing rather than inflaming internal divisions and iii) enhancing resilience. 

5.Develop an offensive capability (si vis pacem para bellum or for themillennials: “if you want peace, prepare for war”, an admittedly old adage from the Roman times I like to use) through i) the development of information ops similar to what Russia and China perform, ii) be ready to undertake attacks on critical infrastructure and iii) be ready to organise deployments as “hard deterrence” which I would call “reality checks” (e.g. by making it clear to China that the U.S. Navy would have the necessary experience and means to destroy the man-made islands in the South China Sea or deploying U.S. Marines in the Baltics to calm down Moscow and make them “think twice” about the costs of their “soft” strategies) or iv) start deploying weapons in space so not only Russia and China weaponise and gradually control it.  

6. Warn of the consequences: Communicate clearly about the consequences of action, however soft-power they may be – and take advantage of the adversary’s inherent weaknesses like Russia’s vast attack surface and uncontrollably huge borders that it could never defend properly. Explaining the costs of Shadow War in no unclear terms. 

7. New treaties for Cyber and Space: Russia and China can fight a conflict in both cyber and space, all the more as there are no rules in the absence of any treaties in two key new conflict theatres. 

8. Maintain and Strengthen Alliances: America cannot win alone if only as it cannot act everywhere at the same time so it needs to strengthen and not weaken its key alliances both in Europe and in Asia (precisely unlike what the Trump administration in a MAGA drive has done).  

9. Leadership: All plans and their execution are only as good as the leadership at the top. Leadership is also about explaining consistently to its own people what is going on and why, not undercutting the assessment of its intelligence agencies and other departments – as in the case with Russia and the Trump Administration. It also goes with knowing “what liberal democracy is all about” (and rising above daily politics) as Desperate Measures would wholeheartedly agree with. 

One could wonder if Russia and China are different adversaries for the U.S. and the West. Isn’t there a difference between the poisoning of dissidents, soft invasions of countries, cyber disruption and disinformation in relation to elections as performed by Russia from the stealing of corporate and government secrets as performed by China (perhaps not including the unsinkable islands in the South China seas). One form, the Russian one, is more war-like in its means and objectives while the other, the Chinese one, is “usually and generally” more commercially-focused in nature with the main goal of growing its GDP, which is not to say it should be allowed but is less in the realm of strategic military-like warfare, however soft-power like. In some ways, the commercially-focused Chinese theft drive is perhaps more manageable through improving the cyber defences of targets than the Russian forms of aggressions that are wide-ranging but can also take more the form of quasi- (if not actual) military strikes albeit in official peace time. We also need China more than we may need Russia, the latter which we just want to contain and keep peaceful in its new form to take the old George Kennan adage, while we wish to build a new world and trade with an integrated China, always thriving, even if perhaps naively, to make us closer (them to us) and dealing as peacefully as possible with downturn situations like Hong-Kong today.   

“The Shadow War” is very enjoyable for all and educational for some  as it covers a recent period of history since the mid-2000s where America has gradually lost of its sole world leadership, perhaps as it got lost in reshaping the Middle East, triggering other geopolitical crises, but also as both Russia and China reasserted themselves either as they were growing economically and naturally wanted to assert themselves (China) or as they wanted to restore the dignity they felt they had lost during the 1990s transition (when we were perhaps not sensitive enough) while wanting to be back at the leaders’ table (through military might as its economy is too thin) and strengthening power at home (Russia). The only drawback of the book, however would be JS’s quasi-newsroom delivery style which is more akin to that of the excellent anchor he undoubtedly is that to the writer he had to be for “The Shadow War”. However for sure a great summer read to embark upon and a useful, clarified “architecture” of all the geopolitical soft-power events involving the three powers and their “allies” we have lived through since the mid-2000s.    

Warmest regards,

Serge       

Sea Stories: My Life in Special Operations – Admiral William H. McRaven

29-6-19

Dear Partners in thought, 

I thought I would speak to you about a man and a book though in that case the man is the book and he is more important than his stories through who he is and represents in terms of values. I would like to speak to you about “Sea Stories – My Life in Special Operations” by Admiral William H. McRaven who tells us about his life and 37 years with the U.S. Navy SEALs (literally Sea, Air Land but actually the elite U.S. Navy special forces widely recognised as the elite of the elite American special forces) from trainee to Commanding Officer of all SEAL Forces, responsible for well-known special ops including the famed raid of Abbottabad against Osama bin Laden in 1991 In Pakistan.  

Mac as he was called in his Navy SEAL training days by his tough and hard-nosed Vietnam Vet instructors was the 2014 Commencement Speaker at University of Texas who delivered in his whites the famed 20 minute “Make your bed” speech (“If you want to change the world, start by making up your bed…” and ten similar pieces of advice) that made internet history, re-stressing the importance of taking charge of one’s personal life and always going forward. Mac is the kind man we growing up in Europe in the sixties and seventies would see on screen, trying to emulate, hoping we could be one day what we were seeing. This book is about human stories in an unusual context, first due to the SEAL environment and second as taking place in a war context where decisions mean life or death of fellow warriors and civilians. More than a simple author or even a SEAL, Mac through his book and his UT speech became a much needed role model for our different times (Do watch and listen to his UT 2014 Commencement speech on YouTube).   

As a child, Mac was a confirmed world traveler as his dad, a senior Air Force officer was stationed in France at NATOs’ SHAPE Fontainebleau headquarters (that was before Le Grand Charles decided to send them to Brussels in 1966). We see him at five  sneaking into the club of these fighters pilots, all bigger than life, prolific smokers, hard drinkers and with the biggest of hearts, surprised they were still alive and not at all used to peace time, however fragile. Mac had a great way to describe these men which the first chapter of the book clearly and accurately describes as “The Greatest Generation”. He has a few lines to describe his father and his friends that sums it all for us: “Like all the men and women of their generation, they were the children of World War 1, lived through the Depression, and the men all fought in World War 2 and Korea. They were survivors. They didn’t complain. They didn’t blame others for their misfortune. They worked hard and expected the same from their children. They treasured their friendship. They fought for their marriages. They wore their patriotism on their sleeve, and while they weren’t naive about America’s faults, they knew that no other country in the world valued their service and sacrifice as much as the United States did. They flew their flags proudly and without apology”. Mac felt that what made them different as a generation was also the way they took all the hardships they went through, which were so big when compared to what most of us went through with our lives since WW2, and “turn them into laughter-filled, self-deprecating, unforgettable, sometimes unbelievable stories of life”. The part I really feel should resonate in our Western “cry-baby times and areas” is the one about not blaming others or the system for one’s misfortunes and taking charge of one’s life and destiny.   

Mac takes us through a few chapters to his teenage years in Texas until we go into main territory with SEAL training, culminating with “Hell Week” that will decide who graduates or more likely not. SEAL is also about team-bonding, teams of men who bond together and will succeed better as such going through very challenging programs that will test their human limits. During Hell Week, instructors drive trainees to surrender and ring that bell three times, being odious and sub-human, though really wanting to toughen up these aspiring SEALs and creating a class sprit. Obviously Mac will not ring the bell and will be a graduate of Class 95. Mac will learn the value of the team at SEAL training. 

We are then in 1981 and go to the Philippines where Mac as a young Lieutenant heads up a jungle training op to rescue and release the local Marine commanding officer having been kidnapped by local Islamic terrorists (already!). The operation gets delayed, SEALs are noticed early and the bad guys win. Three times Mac will tell the actual Marine commanding officer who played a part in the exercise that they could pack and go home but he wants to keep going, also as the main rationale for the exercise is to smoothen the relationship between Marines and SEALS in the area. As the two planes in charge of taking them back on a three hour flight as part of the exercise are late, the Colonel will finally agree to call it a day so Mac and him will not board their plane when it finally arrives. One hour later, that plane will crash in the water, due to the exhaustion of its pilot, killing all but 28 on board. Mac will always remember that event, realising that fate also plays a role in life.  

In 1986 when SEALs are tasked for an under-water mission against Tripoli that would involve a submarine ride from Puerto Rico and the use of micro-subs, Mac trains hard with his buddies in the Puerto Rico waters. One day they get stuck and are not doing well, especially his partner with little body fat which looks good on the beach but does not help in cold watery temperature, even in Puerto Rico. After a few hours as the situation worsens for them, Mac can only think about telling a joke to his partner. He tells him about the gorilla that enters a bar and asks a gin and tonic to the bartender, who then asks his boss: What should I do? To which he is told: Just charge him (a very high rate then of) nine dollars as “gorillas an’t very smart” and “he won’t know the difference” which he does, worrying about the gorilla’s reaction. However the gorilla pays, drinks it straight and asks for another drink which he gets for the same rate, the waiter telling him: “Well you know, we don’t get too many gorillas in here…”. Before the gorilla punch line could be told by Mac, a rescue team arrives, took them off the water and takes them back to base, where Mac, still dripping, is being told that the Admiral in charge would like to see him hic et nunc. Upon seeing the Admiral and his SEAL commanding officer, the former tells Mac, in front of about 200 specialists who followed the operation that day, to give them a debrief. However before Mac could start, the Admiral says: “What’s the punch line?”. There had been a microphone in the sonar buoy and all their conversation, “all of it”, had been relayed to the whole team back at base…So Mac gave the gorilla’s punchline: “Well you know, for nine dollars a drink, I am not surprised”, the whole hangar erupting in laughter. In the end, the sub mission against Tripoli was cancelled as some of us remember (I was starting my first job in New York then and I do), a massive air raid took place, Operation El Dorado, taking out the main Tripoli airfield, a military barracks nearby and a headquarters in Benghazi. Mac will remember that event as one when good humour and camaraderie helped navigating the stress of warfare, creating a link throughout the ages with those warriors of that Great Generation and how they coped with they did and kept doing then.

In 1989, President George H.W. Bush, a Great Generation man if any himself, a man whose values represented America so well, tasked the SEALs to identify a plane that had gone down in a very hard to get part of British Columbia, making it an unusual request in an unusual geographiy for the SEALs. The plane, lost 27 years before, had attained legend status to the point that even the locals did not know whether it existed or if it did could ever be identified so deep it was lost in the local wilderness. President Bush went to the SEALs due to the high-altitude diving that this mission would entail given the topography involved. That was a mission that nobody wanted, very peace-time, even if skills required were very much SEAL-like, which in the end Mac had to lead. He found the plane against all odds, provided necessary closure to the families of those pilots and passengers and got gratefully remembered both on Pennsylvania Avenue and within the U.S. Navy top hierarchy.  

We then go straight into Desert Storm and operations leading to the first defeat of Saddam Hussein and liberation of Kuwait under the international US-led coalition following U.N. resolutions 661 and 665. It looks like yesterday, even for those of us who saw the rapid unfolding of the events after work among investment banking colleagues in Paris cafés. Mac is still at sea though mostly ensuring that Saddam’s oil tankers do not play a military role in the confrontation. We follow Mac and his fellow Amphibious Squadron Five a.k.a. PHIBRONFIVE taking part in such operations. Interestingly his senior colleagues from the Air Force or from the Marine Expeditionary Unit/Special Operation Capable (MEU/SOC – as an aside the U.S. military is a trove of great acronyms) were all Vietnam Vets, war-tested individuals for whom Mac had tremendous respect as military leaders and men. We go through the boarding by a SEAL team commanded by Mac of Iraqi oil tanker Amuriyah, whose captain tries to stop, screaming at the American “pirates” while ensuring his face sufficiently shows he has resisted if only for internal purposes. The SEALs were told that some Iraqi oil tankers might shelter some of Saddam’s prized properties and possibly conceal weapons of mass destruction. In the end it will be clearer that this type of operation was to stop the tankers from preventing a Saddam-made ecological disaster by sinking oil-filled tankers in the Arabian Gulf. Many of these ships would eventually be air bombed before they could take on any oil. One of the interesting features of the story is to see how these Navy personnel, marines, Air Force and SEALs were coordinating such operations in a very disciplined script where each actor had to be ready 15 minutes before his turn short of being considered late. Desert Storm was the first time that Mac deployed his unusual skills in a war situation, fifteen years after basic SEAL training. 

As Mac tells us “war challenges your manhood. It sets you apart from the timid souls and backbenchers. It builds unbreakable bonds between your fellow warriors. It gives you life meaning”. When Mac, a very stable character, tells us that “Peace was meant for some people, but probably not for me” one could be forgiven for worrying as if that statement were an existential call, even a thirst for more war. However what Mac means is that for peace to be preserved, war needs to be prepared and for this we need professionals like Mac – si vis pacem para bellum. War should also not be an objective but a last resort. War should be prepared so we do not have to wage it in the full knowledge that we would lead it to win if needed. War is not to be trifled with, like launching strikes to cancel them in the same evening. War should be the prerogative of those who are not only elected but capable of assessing the pros and cons of military options and are surrounded by experts who can “lead” the leaders in that dangerous field. The U.S.-Iran confrontation we know, that pits the leading world democracy against a very challenging theocracy with the former having broken its word on a key treaty and the latter that is a very destabilising factor in its own region, shows that war needs being handled by level-headed leaders and experienced teams so last resort is really last resort and credibility is maintained at all times.  

Looking at what it means to command, Mac goes into issues that seem hard to handle like “giving second chances”. Some people will make the most of them and the giver of the second chance will be proud, and some will squander them and the world will say “I told you so”. Giving second chances can be risky. Mac reflects on the need to be a tough disciplinarian and the equal need to be compassionate at times so true leadership gradually emerges. Mac was fired early on in his career which could have stopped him in its very tracks, nobody being surprised. However while learning from his mistakes, he never quit, working hard on redeeming himself and proving doubters that he could lead a SEAL team (that the man who led all SEALs tells such a story tells you why he ended up leading them all). He gives a great story of a young SEAL Lieutenant he had to bench due to a DUI (driving under influence) which for an officer was a death knell though to whom he said to keep going and show his true worth. That Lieutenant was eventually promoted to Lieutenant Commander, would eventually serve in Iraq, earning the Bronze Star of valour and saving several lives of his fellow SEALs. Mac took a risk in not pushing him out and it paid off, strengthening the young Lieutenant’s desire for redemption and belonging.   

In 2001 when jumping from an airplane, frogman Mac, who by then commanded all West Coast SEALs, could have seen his career ended, first with his life. One of his fellow jumpers opened up his chute right into him in high altitude and knocked him out in the sky “with the force of a heavyweight boxer”. He recovered in time to land safely but quickly felt with high pain that the physical damage in the air had been massive, of the serious surgical kind. Mac was so wounded that it was not obvious that he could go on a a SEAL. He ended up in a wheelchair after leaving the military hospital, having struggled with “Sundowners” Syndrome, wildly hallucinating and fighting with nurses and doctors while losing his sanity while there. He also received support from visiting SEALs, also badly wounded, who lifted him up. When he visited Admiral Olson, the commander of Naval Warfare Command, a very tough SEAL, ex-“Black Hawk Down” Mogadishu veteran and his boss to talk about the future, that subject was very much up in the air, with no parachute. Olson had arranged for Mac’s next assignment in the Pentagon, so Mac could also recover better, but there was the issue of the medical board to let him go on. Mac played it straight to Olson asking him to forego the medical board (he knew would bench him) if he could do his passation of powers “on crutches” to which Olson agreed, taking a personal risk. Mac knew he put Olson in a tough spot as rules had to be followed, people to be notified and forms to be filled out, though he was betting on that unusual bond between fellow warriors. It worked. As Mac tells us, he had to visit many wounded soldiers throughout the Iraq and Afghan campaigns, all of them wanting to be kept in special ops. They didn’t need that second leg. They could see fine out of just one eye. They shot better with a prosthetic hand. Bu as a commander he had a job to do. They were rules to be followed. People to be notified. Forms to be filled out. Regulations to be to followed. But as Mac pointed out, showing what true leadership is in a way that the Greatest Generation would have enjoyed, “somehow my damn staff kept losing the paperwork…One of those days I need to check into that…”  

We then go on through several of the key periods of Mac, whose next step will finally be not at the Pentagon but with the White House as Director of Strategy and Military Affairs in the Office of Combatting Terrorism. We are in October 2001 and America is under its deepest shock since Pearl Harbor. On 9-11 four planes are highjacked, two of which down Manhattan’s Twin Towers, ending nearly 3,000 lives (including many first responders – we owe a big tribute just now to Jon Stewart and his great work to ensure funds are finally delivered to those heroes and most likely their survivors), one crashes into the Pentagon and one, likely en route to the White House, thanks to the indomitable courage of its passengers crashes into the forests of Pennsylvania killing all on board including its heroes. We see how a warrior adjust to bureaucracy and ends up advising the President by presenting retaliation options. We then go on to Iraq with Operation Iraqi Freedom and beyond when Mac will be one of the leaders in the hunt for Saddam Hussein under the overall command of General Abizaid. In 2008 we are more into occupation mode and dealing with the huge number of martyr-wrapped bombers being sent to the local open air food markets by various fanatics such as the dark Abu Ghadiya, of whom Mac will lead the elimination in nearby Syria via Black Hawk and SEAL intervention. We then go on the high seas and the SEAL-led operation to rescue the famed Captain Philips who will be later played by Tom Hanks on the screen. We then go to the Obama period and the use of drone or small “helos” to dispatch “bad guys” in a most efficient manner such as with the Somali Saleh Ali Saleh Nahban which involved a very soul searching decision from President Obama given the traumatic 1993 Black Hawk Down episode in Somali after Mac made a presentation to him, Joint-Chiefs of Staff Mullen, SecDef Gates and SecState Clinton. And of course there will be that famous raid in April 2011 in Abottabad where the mastermind of 9-11 who thought he was safe in “complicated” Pakistan, near army barracks, will fall at the hands of SEALs (if you have not see it, do watch Dark Zero Thirty with the talented Jessica Chastain). I will keep these sections under full wraps as if classified for you to enjoy. All of us remember the picture in the White House War Room (the one when Secretary Clinton puts her hand on her face, which will unfairly portray fear as she was always one of the toughest unwavering “go get them” supporters of Mac and the likes when they presented options to the deciders for going after leading terrorists).  Being a fair man, Mac will have a word on the fact they did not find any weapons of mass destruction, the driver for Operation Iraqi Freedom beyond the need for retribution in addition to “finishing the job of 1990” but likely as he did not write policy will stop from providing personal views, especially in terms of the devils that were unleashed and we still deal with, if only in Syria.                          

The beauty of this feel-good book, which is an easy and enjoyable read that I would recommend for the summer, is not so much about its stories as it is about Mac. However well beyond Mac it is about duty, honour, style and camaraderie under fire. It is about those things that few of us will ever have to face in a war situation (hopefully) but can apply in our daily lives dealing with our families, our friends, our colleagues and society in general. It is about being oneself and putting values first, certainly before money, for those of us working in business, finance or tech. And more importantly, it is about never, never ringing the bell.    

Hooyah! (the SEAL rallying cry, not to confuse with the Marine Corps’s Oorah!) – and warmest regards,

Serge

“Destined for War: Can America and China Escape Thucydides’s Trap” – Graham Allison

21-6-19

Dear Partners in thought,

You may want to read this Book Note on a laptop as it is rather long. 
I found a great book – clearly one of the “must read” now – that was published in 2017 but needs being revisited in light of the last two years. I would like to speak to you about “Destined for War – Can America and China Escape Thucydides’s Trap?” by Graham Allison, the Douglas Dillon Professor of Government, founding Dean of the Harvard Kennedy School in the 1980s and an adviser to Presidents Reagan, Clinton and Obama. Having taught at Harvard for 50 years, GA never sought the limelight like some of his peers though could easily have done so, so much his work is enlightening. 

GA’s book is about Thucydides’s trap (from the author of “The Peloponnesian war” relating the fight pitting current leader Sparta against inexorably ascendant power Athens in 500 BC) creating a case file of 16 such rivalries at Harvard Kennedy to study the rise of an emerging power, like China today in the context of world leadership, creating fear and anxiety among established powers and a current world leader, like the U.S., which could (in the worst case scenario) lead to war which today would be cataclysmic. 

This book got rave reviews from the New York Times, London Times and Financial Times as Best Book of the Year then. Leading foreign policy advisers, politicians, scholars and businessmen from across the American aisle (thought not from the current administration) such as Henry Kissinger (SecState), Joe Biden (Vice President), David Petraeus (SecDef), Niall Ferguson (“Civilisation”), Walter Isaacson (Aspen Institute), Fareed Zakaria (CNN’s GPS), David Rubinstein (Carlyle), Ash Carter (U.S. Senator), William Cohen (SecDef), James Stavridis (CIA), Lloyd Blankfein (Goldman Sachs), Paul Kennedy (“The Rise and Fall of Nations”), Sam Nunn (SecDef) and Stephen Schwarzman (Blackstone) could not find enough words of praise for the quality and foresight of GA’s book.

GA’s book is structured as follows:

1. The rise of China.

2. The lessons from history (Athens vs. Sparta; the last 500 years; Britain vs. Germany). 

3. A gathering storm (Imagine China were just like us; What XI’s China wants; Clash of civilisations; From here to war).

4. War is not inevitable (Twelve clues for peace; Where do we go from here). The appendix provides an illuminating coverage of the 16 rivalries of the last 500 years, 12 of which resulted in war. A must read. 

Where is China coming from, so fast

China was not born yesterday. China was the clear Asian leader of much of the second millennial and, before deciding to stop sending her ships in far out waters, also the equivalent of the European powers of the 1500s albeit for a short half a century period. Its sudden inward-focus move led her gradually to an isolated and second citizen role in world history culminating with European powers relatively easily “invading” China or at least its big cities of the late 19th century, sowing the seeds for a gradual 100 year backlash which high point was the creation of the PRC in 1949 and pride recovered. Today the rise of China is nothing but going back to its former position though in a clear world leadership status as taking the words of Lee Kwan Yew, the father of Singapore and best analyst of China, it is today “the biggest player in the history of the world”. In 2014, China reported the leading world GDP at USD 17.6 trillion bypassing America’s 17.4 trillion and causing much uproar across America. The FT expects China’s GDP to be 20% greater than America’s in 2019, prompting many in Washington to look for other yardsticks than simple GDP, where incidentally America remains number one. Measured by purchasing power parity, which is a better yardstick (as confirmed to GA by economist and central banker Stanley Fisher) China has surpassed America and accounts for 18% of world GDP up from 2% in 1980. However many GDP rankings still show America first, which at best is a rear guard battle knowing the growth rate of China. Today China is the largest producer of ships, steel, aluminium, furniture, clothing, textile, cell phones, pharmaceuticals and computers and serves since the Great Recession as the leading engine of global economic growth, accounting for 40% of it since the crisis. Today China creates another Greece every 16 weeks and another Israel every 25 weeks. Former Australian PM Kevin Rudd, an astute China old hand, described the country’s explosion as “the English Industrial Revolution and the global information revolution combusting simultaneously and compressed into not 300 years, but 30”. China managed to increase the living standards of its population to unprecedented levels in history, lifting more than 500 million people out of extreme poverty between 1980 and 2004. China today is now richer than Europe in terms of accumulated private wealth and should bypass America around 2020. In 2015 China overtook America in the number of billionaires, potentially creating issues for Karl Marx if he saw how many Chinese “Communists” are wearing Prada today. Louis Vuitton, Chanel and Gucci see the Chinese, who bought half of all the world’s luxury goods in 2015, as their primary customers and Christie’s and Sotheby’s highest price auctions are now held in Shanghai and Beijing. In 2015 Tsinghua University passed MIT as top place for engineering studies in the famed U.S. and News and World Report university ranking. 

Things were not always built on China’s road to preeminence on brains and hard labour. While it is clear that hacking and intellectual property theft were rampant as China grew its economy, Chinese companies are now relying “far more” (perhaps not enough) on their own research having reached a stage where they can do so (amusingly one of GA’s Chinese colleague admitted that while Western companies had R&D departments, Chinese counterparts had R&D-T, the T standing for Theft). James Comey when at the FBI famously said in 2014 that “there were two types of big corporations in America: those who have ben hacked by the Chinese, or those who don’t know yet they have been hacked by the Chinese”. Getting to economic preeminence was a key strategic choice for China that all tools could assist. The rise of China presents a new world leader that does not just base its leadership on military might. Contradicting Secretary Clinton on her view of the obsolescence of the concept of the balance of power, Lee Kwan Yew offered the view that the new balance of power was a combination of economic and military, with the economic outweighing the military (the One Belt One Road initiative being a good case in point). This new balance of power construct is also known today as geo-economics, which uses economic instruments, from trade and investment policy, to auctions, cyberattacks and foreign aid to advance national strategic interests. To illustrate where China is today, a former Obama envoy to North Korea pointed out that all states in Asia-Pac today ask not “what does Washington think?” but “what does Being think?”. Today China embodies more than any other country in world history the Golden Rule: “He who has the gold, rules”.     

Who is XI? 

I wanted to touch upon Xi as a leader and a man as it is worth the detour. Xi was not born yesterday and his personal history as a leader of China is key. He was born a princeling of the revolution, his father being a trusted colleague and civil war brethren of Mao, Vice Premier Xi Zhongxun. Xi was destined to grow up as part of the Chinese elite but a paranoid Mao arrested his father in 1962 in a recurrent purge when Xi was nine years old. Red guards kept forcing him to denounce his own father for months. When his school closed, Xi had to defend himself in street fights and stealing books from shuttered libraries to educate himself. Sent in a reeducation camp in the country side, he lived in a cave, shoveling dung. His older half-sister, XI Heping, depressed by this non-life, hanged herself from a shower rail. Xi then decided the only way to survive was to become “redder than red” and started his “reborn” ascent. He was rejected nine times before joining the Communist Party of 89 million members he leads today. He finally managed to get into the prestigious Tsinghua University and joined the Central Military Commission, eventually returning to the countryside to be a provincial administrator. In 1997 he just made it to the Central Committee being 151st for the 150 slots available though Premier Jian Zemin made an exception to expand the allotment. As Party chief of the Zhejiang province in 2002, Xi oversaw spectacular economic growth in the region and was able to support key entrepreneurs like Jack Ma, the Alibaba founder. He avoided any display of wealth that could be expected from his status. When corruption scandals were burying Shanghai in 2007, Hu Jintao named him to deal with the matter, making him, while unknown until then, the most capable individual to be a next leader of the party. He became not only member of the standing committee of the party but as heir apparent to President Hu. Then by his second year as President, Xi started being referred to as the “Chairman of Everything” with no successor or deputy. Leading a visible anticorruption campaign he purged dozens of rivals for the party leadership, took a dozen titles for himself, including commander in chief of the military (a title even Mao never had) before becoming China’s “Core Leader” reflecting his leadership centrality. As we know he now has no term limit.                   

While Xi is definitely a very driven, even ruthless individual and politician, he is also a survivor who has seen tyranny “up close and personal”, something that is not known well enough and may be a positive factor in the way he would handle a spiralling bad relationship with America. He knows the cost of pain, is driven and eminently adaptable (you will note that while negotiating back following trade war sparkles early on in the Trump presidency, he became the leading voice for globalisation – as a de facto Communist leader even if we coud discuss Chinese Communism – at Davos in January 2017, a position that may have been self-serving but made sense for all parties to keep the game moving). Not forgetting that China and indeed Xi condoned recent moves that threatened the autonomy of Hong Kong with the proposed extradition law, showing the worse aspect of the differentiated cultural feature of China however modern it has become, the personal history of Xi  should let us hope that he should value costs and benefits and would follow a rational governance path in its dealings with America and the rest of the world. It would be great to say the same of his American counterpart.    

What does XI want primarily for China?     

Xi’s ambitious strategic plan for China is based on four key points:

1. Revitalising the Party, cleansing it of (endemic) corruption, restoring its sense of mission, and reestablishing its authority in the eyes of the Chinese people

2. Reviving Chinese nationalism and patriotism to instill pride in being Chinese (Make China Great Again?)  

3. Engineering a third economic revolution, entailing painful economic reforms to sustain China’s historically unsustainable rates of growth

4. Reorganising and rebuilding Cina’s military so that it can “fight and win”      

The reasons for the gathering storm

As the late Samuel Huntington, another Harvard professor, wrote in 1993 with his well-known “Clash of Civilisation” the China-America rivalry and rising leadership clash is based on clear cultural differences exemplified by the table set up by GA below: 

 AmericaChina
   
Self-perception“Number one”“Centre of universe”
Core ValueFreedomOrder
View of GovernmentNecessary evilNecessary good
Form of governmentDemocratic republicResponsive authoritarianism
ExamplarMissionaryInimitable
Foreigners InclusiveExclusive 
Time horizonNowEternity
ChangeInventionRestoration and evolution
Foreign policyInternational orderHarmonious hierarchy 

How could a China-America (effectively WW3) war erupt today? 

I think the current U.S. administration does its best to slowly but surely, perhaps unwittingly as not realising the extent of their damage, drive the U.S.-China rivalry to an eventual state of war in the near to medium term. The trade war that benefits no party and hurts America even if grounded in real grievances is a very aggressive way to tackle issues. When GA wrote his book, the trend was already set and the road to confrontation open by Washington. However for a war to erupt there needs to be a trigger point which GA covers though some examples of how things could deteriorate quickly.    

The key trigger points today offered by GA, all linked with a potential and mutually lethal gradual economic and trade dis-intermediation between China and America are: i) an “accidental” collision in the South China Seas; ii) A Taiwanese independence move (always a favourite at election time on the island); iii) a war provoked by a third navy triggering treaty commitments; and iv) a North Korean collapse. These are the main cases in addition to the famed dispute on a few deserted but maritime natural resource-rich islands which mainly involved Japan (involving a traditional degree of historical resentment from Beijing) with America playing one-sided referee of sorts though trying to ensure that cold minds prevail.         

Why history should still make us hope for the best? 

Against this Thucydides trap backdrop, GA drawing upon his Harvard Kennedy Thucydides case file still believes that war is not inevitable and gives us 12 clues for peace:

Clue 1: Higher authorities can help resolve rivalries without war. GA is using the # 1 case of his Thucydides case file to make the point: Spain vs. Portugal (Late fifteen century). As Portugal became the first European country to set itself free from Muslim rule early in the second millenary, it became the equivalent of a Western leader. This position was challenged when Spain was born following the merger of two kingdoms and as Spain wanted to be recognised as regional leader (and de facto world leaders). Both monarchs decided to ask for the Pope to take a view on who should lead (quite a bold move as the Pope of the day was Spanish and owed his position largely to Sain). In the end the Pope stated that the world wold be shared and separated in two zones of influence which suited both parties after some haggling (and explains why Brazilians speak Portuguese). Of course for this too happen you needed two willing parties, both Catholic and sharing similar cultural values. I am not sure Xi would go for Pope François today.        

Clue 2: States can be embedded in larger economic, political, and security institutions that constrain historically “normal” behaviors. GA is using the # 16 case of his Thucydides case file to make the point: Germany vs. Britain and France (1990s-present). Germany (including predecessor Prussia and Bavaria) went to war three times (or fomented it), twice with devastating global impact in a short time of world history. Margaret Thatcher and François Mitterrand lobbied hard against German reunification in the early 1990s as “it would give Germany in peace what Hitler had wanted in war”. In the end, there was a pragmatic, institutionally-driven agreement to “Europeanise Germany” rather than “Germanising Europe”, all parties being part of this much attacked today but crucial European Union (then European Community). Germany, the poster child of an economic and political giant though a military dwarf became integrated with its neighbours though the EU institutions and (largely) protected by America and NATO. The Deutsche Mark eventually became the Euro and the European central bank was based in Frankfurt. Consequently one may ask were the EU collapse due to economic stress and the rise of populism, and the U.S. withdrawing NATO’s security blanket, whether a country with such martial traditions could not resort to its old ways. International institutions do restrain “normal” historical behaviour and are a great win of the post-WW2 era. And one would hope in such a bad case scenario that years of prosperity and war-less dominance would have changed Germany’s original DNA as I believe it did.    

Clue 3: Wily statesmen make a virtue of necessity – and distinguish needs and wants. GA is using the # 11 case of his Thucydides file to make the point: United States vs. Britain (early 20th century). As America was surpassing Britain in all areas under the leadership of Teddy Roosevelt and its goals were becoming evident from the disputes in Venezuela, to the contest with Canada over Alaska, Britain could have gone to war. However Britain knew the cost to be horrendous and the likelihood of victory small, all at a time when the Irish Question was gradually becoming front page news at home. So Britain chose to accommodate American demands without sacrificing its vital interests. It also stressed the common values shared by both countries while minimising the areas of division thus paving the way for more cooperation and benefits (for London) in the future. Britain chose accommodation, distinguishing needs and wants, at a time when, as Imperial Britain, it was ruling the waves. In doing so Britain stressed its diplomatic approach to international affairs, showing why it achieved leadership status in the first place and also why a cataclysm like WW1 – not yet in the cards then even if war noises could be heard in Europe – could only end its era.      

Clue 4: Timing is crucial. GA keeps using the # 11 case file. Windows of opportunities open and close rapidly without warning, forcing leaders to be able to act quickly (if they want or care). In 1861, Lord Salisbury could have sided Britain with the Confederacy during the American civil war (Britain and France leaning more closely to the South which was perceived a lesser competitive threat going forward). It would have been the right strategic move to protect British economic and other interests against a growing U.S. hegemon. Two Americas would have made the defence of British interests much easier in relation to Venezuela, Alaska and elsewhere. Lord Salisbury missed his chance and could not find a similar opening. Opportunities missed are opportunities foregone especially in matters of preventive interventions such as siding with the South. GA stresses rightly that when the cost of intervention is lowest (in relative terms – now or later) and the effectiveness of action highest, the need to act is ambiguous and uncertain. Democratic governments who need agreements form various parties before “acting” on such a preventive mode see the cost of effective intervention to have risen which unless the case is crystal clear becomes a strong deterrent to action. As an aside (and realising the crucial topic of slavery), I never understood why Britain or France never sided with the South for obvious strategic reasons at the time though the world could have been very different and I might be a proud citizen of the German Empire by now (in admittedly a least-dark scenario, with all due respect for my German friends).  

Clue 5: Cultural commonalities can help prevent conflicts. GA keeps using the # 11 case file. While influential Britons and their leaders knew they were no longer number one, they also knew that the English values, through language and culture, would keep prevailing albeit with American world leadership. The term “English-speaking people” became very fashionable in the London clubs, all the more as these “people” would continue ruling the world. During WW2, Harold McMillan famously said: “These Americans represent the new Roman Empire and we Britons, like the Greeks of old, must teach them how to make it go”. While diplomatic pragmatism (and ingenuity like with McMillan) was always a British trait that served this great nation well, it is clear that cultural commonalities help prevent conflicts. But what about the China-America rivalry here?         

Clue 6: There is nothing new under the sun – except nuclear weapons. GA is using the # 15 case of his Thucydides case file to make the point: Soviet Union vs. Unites States (1940s-1980s). Even though we live in the nuclear age, lessons of the past do matter, perhaps even more than before. We live in an unprecedented time of globalisation, economic integration and worldwide communication while facing climate change and (less now) Islamic extremism. There is always a propensity to think that our times are different. Norman Angell’s “The Great Illusion” remains known for having convinced British leaders that war was no longer a viable opportunity given the economic interdependence of the pre-WW1 period which indeed was the first era of globalisation. In his words of delusion, war was “futile”, as the “war-like do not inherit the earth”. Albert Einstein observed after Hiroshima and Nagasaki that nuclear weapons “have changed everything except our way of thinking”. What has changed is the clear understanding that a nuclear strike today against a nuclear power, given the nuclear weaponry advancement, would likely mean extinguishing all life on both sides of the rivalry if not on earth itself. Nuclear weaponry has made leaders thinking and taking a pause. However can all world leaders think? Especially today? And by the way, Norman Angell might have been right as war in the early 1900s was no longer a viable option, while it ended killing millions of people, destroying three empires and finally, decisively ending British leadership. GA argues that leaders of those days, like Chancellor Bethmann Hollweg and his famous “Ah, if we only knew” would not have gone for it if they had thought about it more. But then my humble guess is that they would not have believed in anything than a quick and pleasant war back then – as they did and so the early troops.       

Clue 7: MAD (mutually assured destruction strategy) does not make all-out war madness. GA keeps drawing on the # 15 case file. The MAD doctrine simply means that the decision by one state to kill another is simultaneously a choice to commit national suicide. The U.S. and the USSR eventually learned to live with each other while they could have gone for Armageddon. GA stresses that America needs to find ways to live with today’s Russia even if it is not the USSR and while it deserves ample criticism on the way it conducts its own affairs. Today, as GA stresses, China has developed a nuclear arsenal so robust that it creates a 21st version of MAD with America. Ronald Reagan in his ever-wise Gipper ways once said; “A nuclear war cannot be won and must therefore never be fought” which sums it all. However I would add that peaceful relations among “non-friends” make it key for deterrence to be credible. On a personal note, I believe that this initial definition of the MAD doctrine is not reassuring as states that are at the end of their economic ropes in an age of geo-economics may decide (the likelihood being still low) for a first strike rather than living in perceived infamy all the more if power is concentrated, leadership is “sick” and there is no checks and balance. Like in Putin’s Russia one day? However it is also a fact that we cannot roll back what they did at Los Alamos and live in a nuclear-free world even if limitation treaties are key if only as powers exchange on those vital matters.  

Clue 8: Hot war between nuclear powers is this no longer a justifiable option. The MAD lessons of the Cold War are relevant for today’s key rivalry. The nuclear age in a way has rendered hot war (between nuclear powers) impossible given the “Siamese twins” features of the key protagonists. Compromise has to be the word of the day (though I would add that for this you need level-headed leadership which is not frequent in the Washington leadership that conducts foreign policy almost to please its core voter base, itself not equipped to understand the intricacies of today’s world, even with a nice red MAGA cap on). There is a possibility that historical memory is vanishing in Washington and that nobody in charge was there to make things happen during the Cold War or even remember it as if it were a far away, very distinct matter from dealing with China today, itself requiring new methods as what is new is a change and is thus arguably best. It is also true that some of the Chinese generals quoting Mao’s claim, that “300 million lives lost would still make China survive”, does not help. One of the practical suggestions from GA would be to foster the candid conversations between U.S. and Chinese political leaders, as well as discussions and war games among their military so they could internalise better the cost of a nuclear Armageddon and that war is simply no longer an option.           

Clue 9: Leaders of nuclear powers must nonetheless be prepared to risk a war they cannot win. GA keeps using the # 15 case file. GA takes my point about deterrence here. Even if nuclear war is not winnable, key states need to be ready to use it and be credible about it, otherwise it has no purpose and the keys to the palace should be sent by express courrier right away. The “more responsible power” may choose yielding rather than the escalation of war but then why having nuclear weapons in the first place and being a key actor in International affairs? GA mentions the less-deadly but dynamic economic and cyber-competition between Washington and Beijing and argues that America is right in confronting China in terms of currency manipulation (Romney’s great tirade in 2012), subsidising domestic producers, protecting their own markets or stealing intellectual property. The U.S. thus is right in showing it is ready to risk economic warfare with China (perhaps I would add not in the way that Trump does it and without traditional allies). On the same basis, America needs to keep nuclear warfare in its toolkit in order to deter real and potential adversaries such as China.           

Clue 10: Thick economic interdependence raises the cost and thus lowers the likelihood. Looking back at the Europe of the early 20th century, the British and German economies were so inter-woven that they functioned nearly as one, no pain could be inflicted to one without the other suffering (interesting when thinking about the American-Chinese economic relationship today). There were however increasingly pamphlets and books in London such as “Made in Germany!” which was a vigorous attach against the rising industrial state across the Rhine. The U.S. today is the largest market for Chinese exports and China is America’s largest creditor, giving us a new MAD which GA called MAED, the E being obvious. If war erupted, putting aside which kind of hot war, the end of the Chinese-American mutual dependancy would create social and economic havoc for both sides. It is not only a matter of investment and trade flows in 2019, it is a matter of integration with everything sold in the U.S. being made with Chinese components, even Boeing aircraft. As GA puts it artfully, China made a “cosmic bet on an open market place to which it can sell its products and on daily arrivals of tankers delivering oil to power its factories, cars and planes”. This cosmic bet is also political in nature as extraordinary economic growth is also the “mandate of heaven” that keeps the Communist Party (that could change its name) in power. China is thus clearly vulnerable to trade disruption, perhaps more than the U.S., even if I think it can withstand longer upheaval than America given its history. In addition two-third of China’s oil imports travel oceans controlled by the U.S. Navy which compounds the problem of interruption for Beijing. In the end one would hope that a reality check takes place in what type of threats and measures are made, notably by the current U.S. administration and how far they can go. Nothing is for sure sadly.           

Clue 11: Alliances can be a fatal attraction.  History shows that leading nations when perceiving been threatened seek allies, this with dangerous consequences as shown with the “doomsday machine” that led to WW1. As China was reasserting itself in the Asia-Pac region, many countries like Japan, South Korea, Vietnam and even India sought closer ties to America at a time when Obama was strategically pushing for his “pivot”, focusing on Asia, to the sorrow of many of us in Europe (that oddly, if may add, may have precipitated Russia’s adventures in Crimea and eastern Ukraine). The pre-WW1 doomsday machine of the two big alliances was designed to protect peace but led automatically, in a sleepwalking way, after a regrettable but relatively inconsequential assassination focused on local Balkan grievances, to the the biggest war in the history of mankind at the time. Given that China’s presence throughout Asia is felt more than ever, demands for ever closer military alliances with America from Asian states will surge. America should remember the pre-WW1 doomsday machine and read the fine print of those treaties, however worthwhile they may be for strategic reasons.   

Clue 12: Domestic performance is decisive. What nations do inside their borders matters as much as what they do outside. At the end of the day, what matters is a tryptic that GA sees as: i) economic performance creating the substructure of national power;  ii) competence in governance allowing for mobilisation of resources for national purposes; and iii) national élan or spirit, sustaining both. The best example of how the tryptic works is to review the U.S.-Soviet rivalry and note that had the Soviets been able to sustain twice the rate of growth of America’s to become the leading economic power and Communist ideology being capable of overcoming nationalism in building the “new socialist man”, Moscow would have consisted a position of WW2 victor across Europe and probably Asia. History decided otherwise. Thinking about China, the Hong-Kong extradition law is definitely not what should have been tried in terms of corporate governance and possibly the respect of engagement. It is likely that China will find an honourable way to back down, which the international community should give them, as the price is not worth the gain, something GA would agree with.     

These 12 clues are definitely worthwhile though those that applied to specific situations in history may not be a perfect fit for the China-American rivalry of today. While both protagonists have achieved world power status, their cultural commonalities besides those shared by leading powers of their days is tenuous, making clue 5 a bit academic. One key feature however, stressed by these clues (clue 10), is the benefit of interdependence through economic and trade relations which lowers markedly the path to war. This is why the trade war initiatives taken by Washington since 2017, which are not without any rationale on some issues, is both detrimental to peace but also self-wounding to America in the short term (Americans pay for the tariffs) and the longer term (making a hot war more likely as the fabrique of international commerce is gradually destroyed). As for the “wily statesmen” of clue 3, would Donald Trump qualify? Probably not. So the key question is “can we rely on Xi to manage Trump and avoid a gradual descent to war resulting from a destruction of what the two countries built together over the last 20-30 years?”

How to tackle the problem? 

On the basis of his dozen clues GA offers us some directions for “where we go from here” which is useful and fuels the debate. 

1. Begin with structural realities. GA finds that too often and especially today in Washington little analysis is being done before formulating policy as if, I could add, what mattered was either to please or being loyal. GA seems to find that the problem with Washington today is that the question of “What to do” is not asked and no preparatory work done (a 101 subject I might add) to help understanding where we are. Instead a culture of “don’t just stand there. Do something” prevails. American leaders like any other should not take seriously the recommendations of policy advisers who have not first demonstrated a deep understanding of the challenge at hand. If I may add, the Trump administration behaves as its leader to the tunes of instant TV reality and cannot reasonably change its course at this point. In order to achieve GA’s sound and simple objective the 2020 elections should return sanity and rationale to the White House. Thinking about Pennsylvania Avenue, I just saw that Newt Gingrich released a new book titled “Trump against China” which, given its author is likely to be entertaining but with the objective of pleasing the Trump crowd – and its leader. Having said that I will take a look even if GA is by far my cup of sensible tea.      

Nixon before he died reflected on his opening of China in 1972 (that clearly was done to counter the Soviets and widen the divide with Moscow) thinking they had created a Frankenstein. In spite of all his shortcomings he felt like Napoleon writing and likely bored in 1817 on the St. Helena Island that “We should let it sleep as when China will wake up, the world will shaken”. History gave reason to the disgraced president on so many yardsticks, well beyond what he could have ever imagined. By 2040, based on actual growth rates (the latter being the defining race differentiator), China’s GDP will be three times America’s. 

As GA states, borrowing from Kissinger, the key challenge in statecraft is not to get lost on secondary issues but to recognise “a change in the international environment so likely to undermine national security that it must be resisted no matter what form the threat takes or how ostensibly legitimate it appears”. Key questions Washington should reflect upon are as follows: Is China bigger and more powerful than the US such a challenge? (knowing that is broadly the case) Is “military primacy” (America’s key power ingredient for decades) essential for ensuring America’s vital national interests? Can the U.S. thrive in a world where China writes the rules? Tough but useful questions. However there is a need for listening abilities and pragmatism that may not be there yet.                   

GA’s other and non-breathtaking recommendations are to “Apply history” (GA and Niall Ferguson suggested setting up a White House History Advisory Council on the same model as its Economic Advisers Council, so as to learn from history in the right way); ii) recognise that America’s post-cold war China strategy is fundamentally a contradiction and iii) review all the strategic options – even the ugly ones. Then Accommodate. Undermine. Negotiate a long peace. Redefine the relationship with China.  

By way of conclusion, GA points to a few more things, also bringing back memories of his studying and teaching at Harvard (his adviser in 1962 was a gifted foreign-born academic, with a penchant for applying 19th century diplomacy to the Cold War context, people thought would go far: Dr. Henry Kissinger): 

1.Clarify vital interests

2. Understand what China is trying to do

3. Do strategy 

4. Make domestic challenges central 

I think that to fully complete the exercise it would also be useful to wear the shoes of Xi and China and not just America’s. Such key questions we should ask are: i) Would China want non-nuclear war (nuclear war being not feasible even if prepared for) even if forced, taking the stance that it would not be a first striker? and ii) would it ever finally bow to (undue) pressure from an American bully whatever warranted grievances in order to preserve the global trade environment?    

This book is about America and China and their rivalry. As a European I can only regret that there is little mention of where we are, Europeans, in this debate, is made. I still believe in the old Western Alliance and all the institutions (UN, World Bank, IMF, GATT, EC/EU, etc.) that made our world what it is today even if some voters prefer to forget the “taken for granted” and like cheap elixirs, some of them that would also unshackle them and restore by sheer miracle past historical grandeur. I think we have to work with America, as allies, in their dealings with China (assuming America still wants and values allies). Hopefully a different America – the one we knew and built our world. By the same token I feel it important to work on bridging gaps between the two cultures of the West and China. As such and as I told you I became a seed investor in a start-up founded by Greek entrepreneurs who set up a Hong-Kong company focused on outbound middle class Chinese tourism in Europe. I also felt that the more the Chinese travel the more a mutually harmonious relationship can be developed (which if I may be facetious is not an easy task when you see those hordes of tourists everywhere across Europe!)        

Quite aside from the focus on the China-America rivalry, this book is wonderful by the number of issues it deals with looking at that Thucydides Trap case file not the least those found in the realm of “what would have happened if”. As a French-born European, I cannot escape thinking of what would have happened in 1936 if Britain and France had sent a mere division of troops to enforce the Versailles treaty that Hitler had violated by remilitarising the Rhineland. German troops would have likely retreated. The German generals who were aghast at Hitler’s reckless move, may have used that French-British move to topple him. WW2 may not have happened (then). Interestingly, Churchill, who is much decried lately (not due to Boris Johnson’s following) by his opposition to D Day was very much in favour of that move in 1936. Such a move that may have terminated an abject tyran may not have registered among the great moves in history simply as nobody would have fathomed then the alternative that sadly became the history we know. Even if Europe and the world due to that cataclysmic clash largely grew stronger, more interdependent, collaborative and enjoying 75 years of peace and prosperity (with all the obvious set downs along the way) of a rules-based world order.            

I realise I have written much about this book and may have given too much away. However it is a very rich book. I have not dealt with Sparta-Athens, the 500 years, Britain vs. Germany, much of what China is today and why which GA goes through at great length. And he developed all the points I told you much further. I recommend you to go to Amazon (unusual move for a lover of bookstores but that book may possibly no longer be at your local Waterstones or Barnes & Nobles) and order this book as it deals with one of the key issues facing the future of our world. I would like to thank my friend and follower Christina for pointing me to this great book. This Book Note is dedicated to my friends George and Nikos, great entrepreneurs believing, like me, that global business engenders peace and are part of those who work on making the West and China “harmoniously” cooperate for a better future.    

Warmest regards,

Serge