Category Archives: geopolitical risks

25/2/18: Syria: a Web of VUCA

In his column this week, Tyler Cowen, of Bloomberg View, sums up the VUCA nature of the ongoing conflict in Syria. In fact, his article is more fundamental than that. He paints a coherent picture of how Syria conflict serves as a fertile ground for growth of Black Swan-type tail risks (risks of large scale impact events with low or zero historical predictability).

In simple terms, in Syria, the U.S. and Russia (and their auxiliary proxies) combine three key VUCA factors:

  • Ambiguity: represented by the inability to distinguish and delineate clearly the adversarial actors involved in each individual incident: Russian proxies are met with American proxies, amidst a veritable soup of various other actors;
  • Uncertainty: represented by lack of clear, stated in advance, and transparently enforced objectives by major actors, most commonly the U.S., but also Russia and Iran;
  • Complexity: captured by a complex web of interests, internal-to-Syria and global objectives, etc. 
As Cowen correctly warns, incidents like the alleged Russian proxies-led attack on the U.S. and Kurdish compound can create a potential for a large scale risk materialization or blow-out. Or, put into more academic language,  VUCA environment is self-sustaining: ambiguity, uncertainty and complexity interact to produce a cyclical reinforcement of Volatility (risk). The vicious cycle repeats, amplifying the extent to which VUCA impact (size of the potential forthcoming systemic shock), likelihood (probability of a systemic forthcoming shock), proximity (timing of the systemic shock) and velocity (speed with which the forthcoming shock arrives) rise.

Read Cowen's article in full here: and read these excellent descriptors of how complexity of Syrian conflict is evolving: and here:

20/7/17: U.S. Institutions: the Less Liberal, the More Trusted

In my recent working paper (see I presented some evidence of a glacial demographically-aligned shift in the Western (and U.S.) public views of liberal democratic values. Now, another small brick of evidence to add to the roster:
The latest public opinion poll in the U.S. suggests that out of four 'net positively-viewed' institutions of the society, American's prefer coercive and non-democratic (in terms of internal governance - hierarchical and command-based) institutions most: the U.S. Military and the FBI. as well as the U.S. Federal Reserve. Note: the four are U.S. military, the FBI and the Supreme Court and the Fed are all institutions that are not open to influence from external debates and are driven by command-enforcement systems of decision making and/or implementation. Whilst they serve democratic system of the U.S. institutions, they are  subject to severely restricted extent of liberal checks and balances.

Beyond this, considering net-disfavoured institutions, executive powers (less liberty-based) of the White House are less intensively disliked compared to more liberty-based Congress.

27/6/17: Millennials’ Support for Liberal Democracy is Failing

New paper is now available at SSRN: "Millennials’ Support for Liberal Democracy is Failing. An Investor Perspective" (June 27, 2017):

Recent evidence shows a worrying trend of declining popular support for the traditional liberal democracy across a range of Western societies. This decline is more pronounced for the younger cohorts of voters. The prevalent theories in political science link this phenomena to a rise in volatility of political and electoral outcomes either induced by the challenges from outside (e.g. Russia and China) or as the result of the aftermath of the recent crises. These views miss a major point: the key drivers for the younger generations’ skepticism toward the liberal democratic values are domestic intergenerational political and socio-economic imbalances that engender the environment of deep (Knightian-like) uncertainty. This distinction – between volatility/risk framework and the deep uncertainty is non-trivial for two reasons: (1) policy and institutional responses to volatility/risk are inconsistent with those necessary to address rising deep uncertainty and may even exacerbate the negative fallout from the ongoing pressures on liberal democratic institutions; and (2) investors cannot rely on traditional risk management approaches to mitigate the effects of deep uncertainty. The risk/volatility framework view of the current political trends can result in amplification of the potential systemic shocks to the markets and to investors through both of these factors simultaneously. Despite touching on a much broader set of issues, this note concludes with a focus on investment strategy that can mitigate the rise of deep political uncertainty for investors.

11/7/16: Russian Strategy Change? Perhaps… and Lets Hope So

A rather interesting analysis from The Moscow Times on the emerging directional change in Russian geopolitical strategy:

As someone who consistently stressed the need for both, Russia and the West, to (1) actively seek cooperative resolution to the ongoing process of confrontational politics, and (2) pursue consistent policy of de-escalating relations, with a specific focus on potential sources of risks (e.g. accidental encounters in the international air space or waters), recent change in rhetoric from Moscow is certainly welcome. In time, I suspect, we will see more comprehensive strategy emerging from Kremlin statements, but for now, even less-than-comprehensive statements are a good sign.

As a note of caution, I do not agree with the entire set of the author conclusions. Just highlighting the important nature of change. The degree of risks severity here is highlighted by a range of surveys and public opinion views, here is a snapshot of investors' key concerns:

In this environment, last thing anyone needs is more geopolitical risks.