Shemozzle – Irish style

Mike Tyson is apparently coming out of retirement. America may need him. Last week on the Sino-Indian border Line of Agreed Control (North Sikkim to be precise) there was a mass brawl between Indian and Chinese troops. Helicopters (China) and fighter jets (India) were scrambled to add heft to the situation, which left several injured. The incident recalled the word ‘Shemozzle’ a Yiddish word that denotes chaos, uproar and confusion. In Ireland, sports commentators have used it to describe fights between opposing hurling or Gaelic football teams.

I fear that ‘Shemozzle’ now enters the lexicon of geopolitics, not least because tensions between nations are rising. One relationship to watch is that between China and Australia, where trade, political and diplomatic relations are worsening. I advise my Chinese friends to be wary – every time Australia play Ireland in ‘Compromise Rules’ football, there is a large scale ‘Shemozzle’.

The notion of a ‘Shemozzle’ is not a bad one to describe the world – tensions are rising as governments try to advance beyond lockdowns, and scarce resources such as vaccines will be fought over. In addition, the tension between markets and the reality of the economic damage from the coronavirus is growing.

In my April 4th note ( I laid out three broad scenarios – an optimistic one called ‘Easter’ which outlined how much of the crisis could be over by the end of April, a more sober one called ‘Summer’ which flagged late summer as the point at which we should have largely mastered the effects of the virus, and then a tail, very nasty scenario called ‘Winter’ where the effects of the virus drag on and the economic damage is severe.

As it stands, it seems that equity markets have priced in the optimistic ‘Easter’ scenario while it looks more likely that economies and societies will get ‘Summer’. The tension between high equity markets and the real world betrays a range of factors – the oversized role of the Federal Reserve and wealth inequality for instance.

I am focused on the performance of small cap indices and bank stocks (as opposed to tech stocks) as the lead indicator of where the economy and markets will go, given the risk of a credit crunch. In general, the performance of banks has been very weak, with some like Wells Fargo in the US hitting March lows and others in Europe (e.g. Société Générale) hitting their lowest levels since 1991.

At the other end of the market the outperformance of technology stocks also reflects a lack of forward thinking that in the US as in other countries, corporate taxes will have to rise in order to offset the generous stimulus programs put in place by the government. The five large tech companies (FAANG’s) who make up 22% of the market capitalization of the S&P 500 index are vulnerable here, given their earnings. This is perhaps the so-called ‘black swan’ that investors have not priced in.

To stick with the idea of ‘black swans’, a phrase that is now in the popular lexicon as meaning a high impact event as opposed to a highly improbable one a la Karl Popper’s conception of the term, the two recurring ‘swan’ questions I keep hearing are ‘will Europe breakup?’ and ‘will the US and China go to war’. That people continue to think about these questions shows that in effect they are not focusing on events (black swans) but processes.

In particular, the evolution and deterioration of the relationship between the US and China is a process that bears watching. In a week where the Economist front cover declared ‘Goodbye Globalization’ an opinion poll from the Pew Research Centre showed that close to 65% of Americans have a negative view of China. This compares with only 30% some ten years ago and the darkening in Americans’ views of China tightly tracks the demise of globalization.

With rhetoric picking up, and supply chain restrictions on Huawei now more severe, there are three elements of this relationship to watch in the short run. One is the friction between China and American allies in Asia (Australia) amidst talk in China that it needs to prepare itself for military conflict. Another is the shift in supply chains, the most interesting development here is Taiwan Semiconductors’ decision to invest USD 12 bn building a plant in the USA. Also, China may respond in kind to the Huawei announcement on Monday.

Then finally, is the politics – lambasting China, however illogically (the President has stated that cutting ties with China would save USD 550 bn) creates political capital for Donald Trump, and as such we should expect no let up in anti-China rhetoric until November. The question is what damage this does to trade and diplomacy, and whether it leads to a real ‘Shemozzle’.

Have a great week ahead,



Technology meets politics

About twelve years ago, I accompanied an American friend to a Democratic Party fundraising event in London. The main speaker at the event was Michelle Obama, and once she had delivered her eloquent and rousing address, I was tempted to think that the Democrats had opted for the wrong Obama.

Michele Obama might yet have her chance to run for president. There are rumours that in the wake of the technological fiasco of the Democratic primary in Iowa, and the failure of a clear Democratic leadership candidate to emerge, the Democrats may opt to choose someone with the brand recognition of Michelle Obama.

This is yet a wild-card scenario, though it does underline the meshing of politics and celebrity, and in the case of Iowa, the complications that technology is introducing to politics.

In common with many companies, a political party’s ability to use social media is now one of the defining metrics of its success (in much the same way that radio impacted politics in the 1920’s and tv did so from the 1960’s onwards).

The Arab Spring was the first event to demonstrate the power of social media in political activism. Donald Trump’s campaign team used social media to great effect in 2016, as did Dominic Cumming’s Brexit referendum campaign, from which he excluded MP’s and instead loaded up on data scientists.

Having written on the Chinese Communist Party last week (‘Humanity and Adversity’), one social media news story to keep an eye on is the reaction across China to the death of Li Wenliang, the doctor who courageously warned of the virus in late December. Sympathy for him and anger at attempts to suppress his warnings may be the making of an unexpected but powerful backlash against the CCP.  

More broadly, as social media has permeated mainstream politics, its effects have become much less unambiguously positive. In some respects they have amplified extreme views. For instance, in the European Parliament, the two groups at the respective left- and right-wing extremes have close to 12 percent of seats but over 40 percent of Twitter followers. In this way, social media is excellent for mobilizing voters, though perhaps less so in representing them.

Social media is having a more profound impact on policy making. It raises the tempo of politics such that political decisions end up being made too quickly and sometimes on Twitter.

Another issue at the intersection of politics and technology is simply ‘truth’ or fake news. I won’t rehash the debate on the verifiability of the claims of more populist politicians, but will remark that bad ideas seem to travel faster and further than good ideas (this is the fault of humans and not robots).

There is however another, positive side to the impingement of social media on democracy that I want to highlight, partly because I had not suspected it existed (through my own ignorance) and because I have lately stumbled upon it.

One of the topics in ‘The Levelling’ is the idea of a modern ‘Agreement of the People’, a template that would express what people wanted from politics in concrete terms. I had hoped, and still do, to harness social media to produce a ‘mass’ version of this. In my efforts to do this I have come across a range of projects that I can recommend readers dig into, if only to give them faith that social media can play a constructive role in politics.

The most significant project I have come across is the NYU Governance Lab (Govlab) where they pursue approaches such as ‘crowdlaw’ that captures the power of crowd thinking to improve the quality of lawmaking, or the use of social media in improving trust in public institutions, or the use of data and social media to enable city managers solve urban problems (something that will become a science of its own with the advent of 5G telecoms technology).

Another port of call is the Oxford Internet Institute, where there is a great deal of work for instance on the role of online petitioning for social and political causes, and also on the design of direct democracy apps for use in German cities. I will let readers delve into the web sites of these and other (MIT is another) institutions, as there are two further political/social media trends worth watching.

The first is the extent to which politicians either try to coopt large social media and data intensive companies, or to heavily restrict their reach, at least as politics is concerned. The move in some countries to treat social media content as if it were equivalent to newspaper content (this would make social media companies liable for the views expressed on their platforms), is part of this trend, and there will surely be more debate on the need to break up large social media/internet driven companies – at least in the West.

The other intriguing possibility is the entry of technology to politics as a political issue or cause. To date there are very few parties who have a prominent, well thought out policy on social media in the sense of how it impacts our lives.

I expect this to change and can imagine that in the future we might see political party that is driven by the role of technology in our lives, it could be called the ‘Governance Party’ – it wants to use block- chain in health-care and social welfare systems, it preaches that technology should not be feared and should be actively used by government, it believes in codes of conduct in public life, society, and business and that these can be overseen through technology,  citizenry is closely tied to electronic-based identity systems so that nearly all forms of behavior—consumption, voting, contribution to pension plans, to name a few—can be monitored and optimized.  

To many this will sound alarming, but such ideas are being embraced in countries like Estonia, Romania and China. It makes Iowa look rather tame though.

Have a great week ahead,