We have been very complacent over the past several decades with regards to world wars. When the Berlin wall came down and the end of the Cold War was announced in the west, we turned our focus to finding ways to improve our quality of life and progressing as nations through the post-World War II Liberal National Order. Yet, perhaps not enough attention has been paid to the fact that for certain nations, the war was not really over. What we thought was good for everyone was not perceived by those that felt like they lost it all, and the west was to blame. War has in fact continued on, but in a very different and extremely clever form. The strategic advantage to those that remained in battle was that they were playing the “long” game. They took their time, and operated in a covert fashion, so only now are we in the west waking up to this fact. The key questions today are what are we going to do about it and is it too late?
Take for example the Chinese. They have had a 100 year plan since 1949 to be world dominant by 2049 (which marks the 100th anniversary of the People’s Republic of China). For most of the last 70 years it seemed like such a farfetched plan so far into the future, from the most backward nation in the world, that nobody really paid much attention. For decades they played the poor cousin needing help from the west to become a more open democratic nation (China is now one of the largest borrowers from the World Bank). They key word here is “played”. China never had any intention to become a full open democracy giving their people the same freedoms and rights that we enjoy in the west. Recent news would certainly confirm that. In fact their intention was always the other way around. To trick the west into making them stronger so that one day they could overtake the west, and the U.S. in particular, in economic importance. They are now the second most important economy in the world so one could argue they may be reaching their 100 year goal well ahead of time. It is essential with China to not listen to what they say but to rather watch carefully what they do.
Michael Pillsbury in “The 100 Year Marathon” does an amazing job of explaining this journey and is a must read for anybody that questions whether there is any veracity to their long term goals and what they have achieved to date. Sadly, their success is thanks to our help as they were given western technology without having to provide much, if anything, in return. Today they are in a position to be able to take this to the next level which is to use this technology to not only control the lives of their own, which they already do, but possibly some day, ours too.
Huawei, the Chinese multinational telecommunications company and consumer electronics manufacturer, exists today only because they benefited from technology provided by Cisco, Nortel, and other North American and European companies, without having to invest on the research and development required to acquire it. The Chinese have never been forced to respect Intellectual Property or Patent Protection. They blatantly would take other’s technology and adapt it to their needs and today, they aim to be the most important supplier to the West of 5G infrastructure for broadband networks. If that does not seem terrifying, it should be. The fact that any nation in the west would consider using their technology, or that of any other Chinese company given they are all essentially controlled by the Communist Party, is naïve and the equivalent of going to battle and providing the other side with your weapons while you fight unarmed.
According to numerous reports, the Chinese have infiltrated a lot of American Companies with the aim of stealing their technology. It is not clear what level of defense we have against this, if any. President Trump is wrong to want to impose tariffs on the whole world without the correct facts or rational reasoning. But when it comes to China this is probably the only weapon still available. Chinese industries, thanks to massive global investment and government subsidies, are today’s lowest cost producers in many industries. However this also makes the success of their economy highly dependent on trade with the developed world. The fact that some of the largest U.S. technology companies are now concerned that China could be spying on us using power cords and plugs has not seemed to get the attention that this merits.
Cyber security is a huge risk to everyone today given our lives are so intimately tied to the internet, not only for consumers using the internet for banking, shopping and social purposes, but for all the infrastructure that today runs on digital platforms. War no longer needs to be fought with men nor even drones. All you need is to push a few buttons and you can infect systems with viruses, which can bring down electrical power grids, for example, which would create unfathomable damage.
China is on the 100 year plan to become the world’s largest economy and only then will they feel they can push the west to follow in their playbook. In the meantime, as they are using technology to steal information from the west they are also creating weapons through cyber security that one can only hope our national defense systems in Europe and North America are aware of, and can retaliate if necessary.
Then there is Russia. It is well known that its fearless ex-KGB leader, Putin, has never been happy with the break-up of the USSR. This action, in his view, has allegedly inflicted endless humility to his nation and he aims to restore it to its natural glory. He too has been playing the “long” game although his weapon of choice, rather than to build his own economy at the expense of others, has been threefold: 1) create dissention among citizens in the western world so they are so busy fighting with each other that they are distracted from seeing the real enemy in plain sight; 2) manipulating leaders in the west to carry out his playbook and 3) become a multi-billionaire by hiding assets with his oligarchs (so he does not need to care about Russia being wealthy, as long as he is wealthy).
It is absolutely astounding how effective Putin has been at all of the above. Influencing (compromising?) the U.S. President has probably been his biggest win in history. Putin can sit back and enjoy his multi-billion dollar life (at the expense of his own citizens) while the world’s most important leader, Trump, follows his playbook to the very last detail: isolating America and other western forces by fighting with U.S. traditional allies and doing everything he can to shut NATO down (the one thing holding Putin in check from invading neighbouring countries); distracting his own country by spreading lies and creating hate amongst the races and political groups that up until recently have managed to co-exist quite peacefully in the land of the “strong and free”. Republicans and Democrats are so busy hating each other that they are ignoring the enemy in plain sight. The average American does not seem to see Russia meddling in their elections, nor a President that is friendly with Putin, as a major problem judging by the polls that the majority of Republicans still favour this President.
The fact that Trump has private conversations with Putin and is following a very anti-American playbook while claiming to make “America Great Again” should be of huge concern to both Republicans and Democrats alike. Yet it is only a concern in terms of partisan politics because the Russians have also been masters at playing the American people in the press and on social media to the point where they now think their greatest enemies are their own neighbours, if these belong to the opposing party. While Democrats and Republicans fight it out, and get conned into thinking their enemy is coming from the southern border, they totally miss who the real enemy is, sitting comfortably in a totally different continent, and with a strong presence on their smartphones and computers and ultimately in their own living rooms and maybe in their heads. Targeted advertising campaigns, fake social media accounts, and fake news all have had a devastating effect not only on election results but also on how people from within their own countries view each other.
The most interesting part of American politics is how transparent it has all been to those of us looking at it from the outside. Trump was able to build a “billionaries” brand based on lies and deception and a lot of debt. (Ironically, had he just invested his inheritance in the stock market he would be a billionaire today and would have saved himself a lot of trouble with the law). American’s obsession with celebrities, and possibly more than a little help from the Russians, got this reality TV star to the finish line, despite a horrific track record in business that included settlements for: money laundering charges, racial discrimination, a fraudulent university, bankruptcies, and all this on top of accusations (and self admittance) of groping of women, and endless racist remarks pitted at getting different groups to fight with each other.
There appears to be even evidence of downright criminal activity, as he is an unindicted (yet) co-conspirator in Michael Cohen’s case in the southern district of New York, yet his base of voters has never wavered in their adulation. He is an expert and master deflector but, it is clear to any objective viewer that even if he did not conspire with the Russians to get elected, he is more than likely to be compromised by Russia (nothing in the Steele dossier has been disproven to date). He alone is the sole master of fake news (this started back in the 80s with the fake news of his level of wealth which was greatly exaggerated); and he has even managed to enlist the cooperation of a major news network to assist in this endeavor. He is an unparalleled con artist. His Republican counterparts in congress are certainly very aware of all of this. Yet they put party over country and refuse to deal with it as their first priority is to get reelected, rather than educate the base and save the country from such ethical and moral corruption. History will not treat them well.
Moving to Europe, there is of course Brexit, the movement to have Britain exit the European Union. It now turns out that Aaron Banks, one of the most important founders of the Pro-Brexit independent party and founder of the organization pushing the UK to leave the EU, also has deep Russian business connections just as Trump does. He also tried to hide them.
It is hard to see how this gets resolved for Britain, even with a postponement until the middle of May. Only now are the people who voted in the referendum understanding what it means to actually leave the Union, but it is not clear whether they will be allowed to vote again on this issue. If the Russians wanted to sew disruption in the UK and on the continent, they did a fantastic job.
Luckily the French wised up to social manipulation created by the Russians and managed to vote in a leader who, for all his faults, is there to truly put France first and make his country great again. But in Spain it is widely known that the Russians have successfully infiltrated social media to sow discord amongst those that are from Catalonia and those that are not. All are Spaniards and their main concern should be Spain and the Spanish economy, but like the Democrats and the Republicans in the U.S., they have been led to believe their enemy is within their own borders rather than to the east of them.
We do not know where this all ends. But as investors we are taught to do research and investigate. Knowledge is power for anything you do in life. You can never have too much information and even when you do, it is a dynamic world, things change and you can make mistakes. The part that produces the worst performance is when you refuse to admit your mistakes and to move on.
All sides of a story must be explored before reaching a conclusion but to date, all the information would point to a lot of manipulation of western democracy by dividing us from within. The threats are real to our way of life. The only way to win this type of new war is to play their own game and never allow them to divide us. In the U.S., Republicans and Democrats must stand together and realize what the true threat is. They must remember they are first and foremost Americans and that they are currently being played. In Britain, in Spain and in all other infected countries in the west, likewise the divided groups should reflect at what is better for their nation as a whole, their economy, and their people, and act accordingly. The intellectual property of our companies must be protected at all costs. Our infrastructure must also be protected from those that aim to harm us. If they do not allow us into their infrastructure, why should we allow them into ours? If they stole our technology why should we help them succeed? It is the role of government to first and foremost protect their citizens. Right now they are not doing a good job. It is time to change that narrative, make these leaders accountable and elect only those that truly have their nation’s best interest at heart. It is time for change and to take back our countries in the west because ultimately it is defending democracy and all our freedoms. It is never too late to become better informed about who the real enemy is, and to act accordingly.
The Summerhill Team