Transcript generated by Descript
Hello, listeners. Welcome to another episode of cognitive dissidence. As usual, I’m your host. I’m Jacob Shapiro. I’m a partner and the director of geopolitical analysis, cognitive investments. Rob and I are back at it for a weekly chat. I’m coming to you live from the double tree Hilton in Pleasant Prairie, Wisconsin, and we do a little micro geopolitics.
the beginning of the episode to talk about it. If you want to talk about anything we talked about on this episode or anything else that’s on your mind, like Bitcoin going to the moon or what books you should read or my latest thoughts about diet and exercise, it really anything else you can write to me at Jacob at cognitive dot investments.
You can also find out more about the services that we offer at CI and whether those would be a fit for you or whether you want me to come to your event, as you can tell, I’m all over the place right now. So other than that, take good care of. People you love and I will see you out there.
Alright, if you’re watching the video of this, you can tell I’m on the road again and I’m back in Wisconsin for the second time in two weeks. Where are you, Rob?
I’m in Paris today, but this morning I was actually at the US Embassy, which I guess is technically. American soil,
right? I guess technically.
I feel like I’m always getting the short end of the straw. I’m like in random places in Wisconsin, and you’re like, I’m just chillin in Paris. Like, when do I get to chill in Paris? When do I get to that point in my life, huh?
trust me, you didn’t want to spend time at the U. S. Embassy. That’s not a, it’s not a walk in the park.
We’ll just say that.
what’s worse? Spending time at the U. S. Embassy in Paris or spending time at a DMV in any United States city or town? It’s pretty
much the same experience except the architecture outside is much nicer.
Okay. last week we did a little talking about Eau Claire, Wisconsin, which you might have thought it was a one off.
That this microgeopolitics theme couldn’t possibly be applied to other towns. You were incorrect because I am now in Pleasant Prairie, Wisconsin. Pleasant Prairie is not really known at all. it’s honest. It doesn’t even have a downtown. They’re talking about putting in a downtown. it was originally, or at least it has, it has some interesting factoids about it.
It is one of the sites with the earliest recorded, Native American activity. So this area seemed to be a gathering place or a meeting place for a lot of Native American tribes that were in the region. At least one reason for that is that the lake used to be. Here it is now no more towards Kenosha, but apparently the boundaries of the lake used to come up here So Native Americans used to congregate here The other sort of claim to fame is that there’s a big prairie and I hope I’m not mispronouncing it called the Chiwaukee prairie And it’s the last Unbroken stretch of prairie of its kind in Wisconsin, and it’s home to 400 plant species and 26 rare plants.
And, it’s described as the last bit of Wisconsin landscape. that is basically what it was like when the settlers, the English settlers and the German immigrants and all those eventually or originally got here. which is pretty interesting. And I also, I did a little deep dive on the word prairie, which is an interesting word, and I won’t bore you.
bore you all with it. But Teddy Roosevelt in his how the West was one has this very brief little thing about prairies that I just thought I would read. He says, we have taken into our language the word prairie because when our back woodsman first reached the land and saw the great natural meadows of long grass sites unknown to the gloomy forests wherein they had always dwelt, they knew not what to call them and borrowed the term already in use among the French inhabitants.
Number one, that’s cool. Number two, we used to have U. S. Presidents who could write prose like that. Imagine that. but anyway, Pleasant Prairie is basically a small town. And it goes away for a couple different reasons. Now it’s right between, halfway between Milwaukee and Chicago. So you can imagine everybody’s either going to flock to Milwaukee or Chicago as the area urbanizes, but the sort of immediate cause was there was a massive explosion at the Laughlin ran powder company plant, which made dynamite powder and things like that.
Millions of pounds of dynamite exploded on March 9th, 1911 and basically leveled the entire town. Not just the factory, but everything. The shockwave was felt more than 500 miles away. DuPont Company was the one that owned it. And it’s great to read the newspaper articles about them trying to sue DuPont and the back and forth and everything else.
Anyway, at that point, Pleasant Prairie basically, becomes the backyard of Kenosha. And Kenosha is also an interesting town, city, in its own right. I, called a friend of mine and told her I was going to be around Kenosha today, and I asked what I should do, and her first response was, you should probably get out, because apparently Kenosha has a bad reputation.
but Kenosha has also been a center of recent political events in the United States. You might remember the Jacob Blake shooting, and Kyle Rittenhouse, and all of that social unrest. That happened in Kenosha, Wisconsin. Last week, we talked about Eau Claire. There’s a very similar story for Chrysler shutting down what was then the nation’s oldest auto factory, in the late 1980s is all those jobs flocked to China and other places in the world.
So there’s that. And then Rob, I know that you have a resident that you want to talk about that’s in Kenosha, but you know who the most famous son of Kenosha is the most famous person to have come from this part of the world. No, you don’t. I didn’t know this either. It is Orson Wells. Was born in Kenosha, Wisconsin.
and this was just an excuse for me to rewatch Citizen Kane last night in my lonely hotel room. And to go down an Orson Welles rabbit hole, who is also a fascinating person in and of himself. And he apparently also had pretty divided feelings about the place. so like I have a couple different quotes from him at one point, he called himself almost belligerently Midwestern and always a confirmed badger.
He also said that having returned to Kenosha, he found it vital and charming, but then he’d also said other times, I’m not ashamed of being from Wisconsin, just of being from Kenosha. It’s a terrible place. Ouch. and he also called Kenosha in another interview. Let me get this right. A nasty little mid.
Middle Western city in a 1937 magazine profile. And if you don’t know who Orson Welles is, he is worth the YouTube rabbit hole. He’s worth watching. Citizen Kane, a fascinating dude in of his own right. I’m sure you have stories you want to tell about Orson Welles, too. So that’s my little micro geopolitics of Kenosha.
But I sent you that I wanted to do this silly little thing. And you also have some things to say about Kenosha. So let’s talk about it for a second before we get into the Middle East and what’s going on in the world.
I only bring this up because a recurring theme on the podcast has been American manufacturing and sort of Chinese outsourcing and what is the future look like for the American economy?
And how does that structure change? And I think this is interesting because probably if you were a stock investor, the most famous is, inhabitant of Kenosha is Snap on Tools and Snap on, I think, is, worth talking about a little bit, at least because they really exemplify what that future looks like, or I should say what it had looked like because they are an American manufacturing company.
They make pretty simple stuff and they make it all in the U. S. Wrenches, hammers, all that kind of hand tools is, all made here. And they’re very profitable. Extremely profitable. So how, do they do it? How have they survived? And if you really look at it, it’s, a fascinating story because they have survived and thrived.
In part by, and this is going to be somewhat negative on snap on just as a preview, but in part by embracing to less savory aspects of the American economic model. The 1st is debt and the 2nd is franchising. So if you’re not too familiar with snap on how it actually works, I’m sure you’ve seen the trucks, right?
The Snap on tool vans. they’re all over the place. the reason why you see them all over the place is because Snap on works with franchisees. the guys who drive those vans are not Snap on employees. They’re quote unquote independent contractors. the reason why they’re so aggressive in driving all over and why you see them all over the place wherever you go is because they have the whip at their back.
Because it’s a churn them and burn them kind of strategy. If you don’t hit your sales targets, then it’s set up in such a way where you’re going to fail. So they get a lot of, young male, guys. A lot of them are out of military, out of tech school, they want to own their own business.
They like. tools and building stuff and fixing stuff, and they go into this area and, a lot of them just get churned right out after taking on a lot of debt. So that’s one aspect of how Snap on’s been so successful and why Snap on is so profitable because they can sell. When Snap on makes a sale, they’re selling it not to a mechanic most of the time.
They’re selling it to a franchisee who they basically have under their thumb. So that’s one less savory aspects of the Snap on model. The other one is, as I mentioned, debt. So Snap on was one of the first American companies going all the way back to the 1920s that would buy, that would lend you money to buy their product directly.
And that continues today. Snap on has a huge credit arm of their business. And if you really look at how their business works, Snap on tools, I think you’ve said recently, if we want to accept that America is going to make things, we have to accept that it’s going to be much more expensive. Snap on tools are about five times as expensive as the equivalent.
And we’re talking about wrenches, like these are not high tech, high value add things. These are very simple tools. And the reason why they can do that is because the whole sale. The whole process of buying anything from Snap on is about getting you, Mr. Mechanic, Mr. Consumer, into debt. And the wholesale is not, Hey, here’s a wrench, Jacob.
It’s 178. It’s, Hey, Jacob, I’m going to give you this wrench. Just, no, just take it. Take it. you’ve worked hard. You deserve it. Just pay me 8 a week for the next eight years. And that’s basically how it works. And with that customer base, that is, a pretty compelling argument because they’re not thinking about the total amount of debt they’re taking on.
They’re thinking about, hey, it’s eight bucks a week for eight years for this wrench. So if you really look at the situation around Snap on, you have this successful American manufacturing story. And I think they’ve done a lot of events, with politicians and stuff, highlighting that fact, but if you peel underneath, the underlying structure of that is much less healthy and much less something to be proud of, then.
People might think so. That’s my snap
on story. Yeah. and it, makes sense because when all of those auto plants shut down, you also, you just have a bunch of people who don’t have jobs anymore. And at one point, Kenosha itself, it became a mass exporter of workers. So more than half of the people employed in Kenosha County were actually traveling to Chicago for work.
Half of the fourth largest city in Wisconsin going to another City for work. And that’s in the late 1980s and early 1990s. But I think if you’re trying to find the silver lining here, it’s that the snap on model I think is being eclipsed and that this area, whether it’s Kenosha or actually more specifically Pleasant Prairie, when you drive in or when you’re around, there’s actually a lot going on here.
Now, the first thing you notice as you’re driving down the highway, it’s just massive brand new. Warehouses, whether it’s Amazon or Uline, just absolutely brilliant, brand new. The lights are on 24 7. I can see them out from my hotel window. these bigs, they’ve become hubs of transportation and things like that, but for both Pleasant Prairie and Wisconsin, it’s not just so snap on is not the only game in town.
I did a very brief search of other companies that have been building manufacturing capacity or, or, locating their operations here. One is Haribo. The candy maker, they have a huge factory for creating their stuff. When you come in, Siemens, is opening a new utility scale inverter factory in this part of the country.
So they’re thinking about solar and whether they can translate some of their manufacturing prowess and expertise into solar, which. Maybe 10, 15 years ago seemed like a pipe dream because China cornered the market now that China has cornered the market and there’s going to be a lot of incentive for made in America, maybe that’s interesting.
One of the more interesting to me, and something that Vice President Kamala Harris was really touting a year or two ago was that Nokia, has agreed to build a factory in Pleasant Prairie itself, not just in Kenosha to build. some of the parts that go into Nokia switches and all those other things in Pleasant Prairie, Wisconsin, and they’re getting lots of buy America waivers and things like that.
And I’ve worked closely with the American government to check all the boxes for those things. So it’s not these places like Kenosha, which became famous because they were part of the circulatory system of the American automobile manufacturing companies. Industry like that’s not coming back.
And if you go do some basic research, you can find people bemoaning, oh, the loss of the towns and the jobs. And we’re no longer manufacturing at a mass scale. It’s all snap on tools or Nokia this or blah, blah, blah. but there is a small renaissance happening in this part of the country and it’s small scale manufacturing.
But for instance, even though Kenosha has been in the news for all the wrong reasons. And aside from what my friend jokingly said about getting out as quick as I can. You don’t feel that when you’re driving around and when you’re driving in, you don’t feel that in Pleasant Prairie. Pleasant Prairie feels new and it feels like things are going on.
Also has the largest rec center in the United States. Don’t know if you knew that right on Lake Andrea up there. So all sorts of interesting, factoids. And also it goes back to our conversation last week about there being in the DNA of towns and places like that, An ability to adapt and this is where Orson Welles actually becomes relevant because I didn’t know this.
Obviously, I had to research it. Orson Welles, his father, who he had a complicated relationship. We don’t have to go into it, worked for like a bike manufacturer in this part of the country. Like he made tools for bikes and things like that. And that Chrysler plant that was closed down to so much controversy in the late 1980s was originally a bicycle manufacturing plant.
So they go from bicycles to automobiles and now it’s a motorcycle. they’re trying to turn the Chrysler plant into the Kenosha innovation neighborhood, trying to make it a little lab for research and semiconductors and tech and all the buzzwords that you’re thinking about, which, maybe pie in the sky.
It’s also not what most towns and cities are doing. Most towns and cities are talking about that. They’re not having city council meetings and, proposing bonds and allocating resources to actually building those. things. so I don’t, I think snap on might have some competition if they continue to do things that way in this part of the country is what I’m trying to say.
I think there’s selection bias here too, because you end up in these pretty dynamic places in the Midwest. But I think by definition, the kinds of places that are going to have companies that are Going to bring Jacob Shapiro in to talk about geopolitics are going to be the success stories, not the, opposite, right?
I guess that’s true. I also tend to try and give every chance, give every place that I go to a chance. Like I try to fall in love with every single place I go. But it’s not, the same, like I’ll be doing a lot more traveling, as the course of this year goes on. And it’ll be interesting to see at the end of the year, was I unabashedly positive about every single place I went, in which case it’s either selection bias, or I’m a little too gullible.
Or if I do get to places where I’m like, this place sucks, it’s an absolute shithole. And I can’t think of one right now. But that’s also just because I’ve been traveling. so much and all over the place. Ironically, that my least favorite trip so far of this year was not to Minot, North Dakota in January and is not to Pleasant Prairie, Wisconsin.
Now it was Miami because there is something about Miami that just makes my skin crawl, but. This is not my therapy session. So maybe we should get into the geopolitics. Rob, we alluded to it last week, and, it’s actually the subject of what I’m talking about today. Later with a client, they asked specifically for me to talk about the Israeli Palestinian conflict.
Only the second time in my entire career where someone has asked me to talk just about the geopolitics of the Israeli Palestinian conflict, which is interesting in of its own right. But why don’t we just start? Let’s I mean, we might not even get through it with 45 minutes, but let’s talk a little bit about the Middle East.
There’s a lot going on even just this week. So there were rumors of a ceasefire agreement between Israel and Hamas. Joe Biden even volunteered that he was optimistic by maybe next Monday there would be a ceasefire. Hamas came out and said, and not so fast, Joe and Israel came out and said, we’re still going to invade Rafa.
Don’t you worry? Maybe we’ll delay a little bit, but we might still invade. So I don’t know. The signals are not so clear yet. I will say so. Ramadan starts around or on March 10th. And a lot of pressure is being built up both by the media, but also by Qatar, who’s running some of these negotiations and Israel and Hamas to get something done before Ramadan.
And I think that’s a little bit artificial. Maybe it’s a negotiating tactic. I don’t think the whole region is going to explode just because of Ramadan on March 10th, but you can feel that there’s this pressure to, okay, there’s an opportunity here for compromise. Let’s get a deal done or at least some kind of ceasefire in place before March 10th.
So that’s what’s going on in the conflict itself over in the Red Sea with our. Our Houthi friends in Yemen. They started the week by going after submarine cables. Which is the stuff of black swan nightmares. Now they damaged a few. It’s going to take probably six to eight weeks to repair them, but because of the redundancy of the cables and things like that, it has not caused that many problems.
It really hasn’t caused any problems globally, but it is really the first instance I can think of a state actor or a state, proxy for a state actors or the Houthis being a proxy of Iran going after submarine cables. To create leverage and things like that. That’s a really interesting bit.
At the same time, the Houthis came out and said, if there was a ceasefire, maybe they would pull back, maybe they would stop bombing things in general. The takeaway to there is just, they’re still bombing shit. The United States, the much vaunted United States Navy with nine aircraft carriers and all these bombs and everything else can’t stop the Houthis from bombing submarine cables continues to be an astounding fact.
Iran. Enriched a little bit less uranium at 60 percent than it did recently. And the IEA, the IAEA says not to get too excited about this, that it’s just the normal oscillation of nuclear production, but maybe a little tiny signal of something changing in Iran. Maybe not. Maybe it’s just they’re getting better at creating even higher percentage uranium and they’re going to have nuclear weapons soon.
And we’re going to be talking about nuclear proliferation in the Middle East. and then the sort of last but not least, we talked, we have been talking now for each about Egypt for weeks and what a basket case Egypt has become, it’s the United Arab Emirates turn apparently to bail them out. They came out, unveiled a 35 billion dollar, Scheme.
I don’t know what you want to call a combination of investments and credits and grants and everything else, to stave off disaster for Egypt, which probably means yet another currency devaluation is coming once they devalue the currency. I think it’s for the fourth time in some ridiculous period, 12 or 18 months or something like that.
They get access to IMF funds, maybe more dollars come in. but Egypt looks too big to fail. and they’re yeah. Rich sunni gulf allies seem not willing to let them go at least completely down the toilet bowl quite yet So that’s just and I haven’t even mentioned turkey. It’s actually a fairly quiet week for turkey So we’ll leave them to the side so that we don’t completely overwhelm the listeners But pick it whatever part of that you want to go into first rob.
Let’s start with. israel, palestine if you don’t mind so just quick question, and maybe this is I know, Joe Biden was perceived to have, had not great results from the Michigan primaries and that there was a protest vote within democratic circles against, the administration’s, stance towards the conflict.
Do you, does that have any impact on what they’re doing? Does it spur them to try to get this resolved sooner than otherwise? Or should we just ignore this when we think about these issues?
That’s a good question. It might, in my opinion, because this is more U. S. domestic politics, and I’m not quite as I wouldn’t call myself an expert on this, although I know enough to be dangerous, in my opinion, if there was a Republican alternative.
That was willing to be tougher on Israel. And that has happened before. That might sound strange, but George, George Bush. The first, was actually maybe the toughest U. S. President on Israel since Dwight Eisenhower. So there is some history of the Republicans being tough on Israel or giving Israel the tough love.
If you had. A Republican candidate who is offering that kind of tough love to Israel, then yes, you might actually think that there was a serious chance that a demographic of voters that usually went Democrat or that went with Biden last time would switch. The problem for those voters is Trump would be worse.
Trump wanted to move the embassy to Jerusalem. Trump would just give the Israelis carte blanche. He doesn’t care about any of these other things. And he wants, Israel to do whatever it wants. so I think the biggest impact that it could have is that people will stay home and I am not sure that does enough.
for the by the administration to let that tail wag the dog. Now, I’m sure they’re aware of it, and I’m sure that there’s lots of, and if you look at the broader national polls nationally, approval ratings for how Biden has handled Israel are fairly low. But again, There’s not a whole lot of differentiation there between Biden and Trump.
So if Trump starts going out there and talking about how he’s going to be tough on the Israelis and everything else, maybe we can have a conversation in that direction. But if that is the issue that is moving you at the ballot box, you’re either not going to go to the ballot box or you’re going to hold your nose and say, okay, at least Biden has been putting pressure on Israel to, stop a little bit or at least to moderate their attacks.
Not nearly enough from that perspective if you hold that view. but the alternative is not better here.
And given where the status of things is now in, in Israel, Gaza, how is this impacting everything else? So you were asked to give a speech about this today, focused on this topic. Why does this client care? And why should we care beyond just the, the human level story of what’s happening on the ground?
What are the broader implications, if any? Or, is it just, hey, this is a sad story, and that’s,
it. I have never understood the level of interest and coverage that this particular conflict gets. I will say, if you look at a map There’s a reason that what is today Israel, what was before Palestine, and then before that was, various kingdoms and things like that.
It has changed hands many times over history. So one of my favorite chart, or maps in the deck that I’m showing later today is I show just six or seven of the empires that have overrun this part of the world. And if you look at a map, it makes sense. Because if you’re a European power and you’re trying to project power into Asia, so whether you’re the Romans or Alexander the Great or whoever else, you need the land bridge through the Middle East into Asia and Palestine slash Israel is the first place where you land.
You have to have control of that territory if you’re going to expand, additionally. If you’re the Egyptian pharaohs, by the way, and you’re trying to expand beyond the Nile into the Levant, where’s the first place you get? Palestine slash Israel. You need that territory if you’re gonna move up and try and make a play for the Euphrates, the Tigris, those other places.
The same is true if you are an eastern power that is looking west. So whether it’s the Babylonians, whether it’s the Islamic caliphates, whether it’s Persian empires, getting to Israel slash Palestine was what gave you access to the Mediterranean. And then you can start thinking about the Bosporus and North Africa and other things like that.
So it is a really critical strategic spot. there’s also there are so many religious overtones and connotations to Israel, and it is also so directly connected to World War II, which is the historical moment that still dominates everyone’s consciousness that I think people care about it from that point of view.
And when I give talks about the Israeli Palestinian conflict, or when I talk about it, I spend most of my time just trying to explain the literally centuries of history that got us to this point because there’s so many different conflicting narrative. So just in pulling out those threads, like I usually say to my audiences, I’m not gonna tell you what to think.
I don’t think anybody has the moral high ground here. And if they do, I’m not qualified to figure it out. What I can tell you is what both sides think and what the history is. And you can make up Your own mind, but then once I do that part, I zoom back out and say, okay, and let’s look at the broader Middle East right now.
Let’s look, for example, the fact that the Houthis are bombing infrastructure in the Red Sea and that 90 percent of container shipping is not going through the Suez Canal because of the Israeli Palestinian conflict. Let’s look at the fact that the Middle East used to have, and especially the Gulf, used to have a really tight relationship with the United States because the United States had to import oil from that part of the world.
Decades of U. S. foreign policy and grand strategy are about securing those oil resources. That’s not true anymore. The U. S. doesn’t have to import anything from the Gulf if it doesn’t want to. The countries that are the biggest importers of this Middle East oil are China and Japan and South Korea and India.
And so you have this weird Aberration. what’s the word? This weird anachronism of U. S. Policy in the region where U. S. Interests are not here anymore, even though they were since 1973 from 1973 until 2014 15. This is the most important part of the world for U. S. Foreign policy. Full stop. It’s not anymore.
And it’s not even that it’s less important. It’s not important in the grand scheme of things. The Pacific. What’s going on? All that is much more important. And I think people have not quite caught up to that fact. And the region has not quite caught up to that fact, still looking to the United States to pressure Israel to do things or to have defense treaties with them.
While meanwhile, their top customers are India or China who are running around with money and investments and trying desperately not to get tangled up in all of the political melodrama, but just making sure they have access to their oil and to their LNG and things like that. Those are some of my best guesses, but I confess, as somebody who thinks about the world often, the Israeli Palestinian conflict, it’s a compelling story, it’s a depressing story.
There are lots of compelling, depressing stories out there, and when you look just in terms of the numbers of people that are affected, like there are other conflicts happening that affect more people, and yet this conflict still captures the imagination for most people in a way that a lot of other conflicts don’t,
And how do the Europeans fit into all this? Because we always talk about the United States in relation to the Middle East and, that historic area of interest. But when you look at a ship that goes through the Suez Canal, for instance, it’s not going to the U. S. It’s going to Antwerp or it’s going to Rotterdam, or Genoa.
Don’t forget Genoa or Genoa and the submarine cables that are being, attacked, aren’t going to the US East Coast necessarily. They’re going into Southern Europe and the energy flows out of North Africa into, the other parts of the world. They’re not going. to the U. S. They’re going to Italy and into Spain.
And you’re talking about, hydrogen pipelines going from North Africa into southern Europe and beyond. Where are the Europeans in all this? And how do you see, if at all, that their role becomes bigger and more active as the U. S. Sort of withdraws?
first of all, this is a little tongue in cheek, but only a little.
If you want to blame someone for the Israeli Palestinian conflict, and for a lot of the things going on in the Middle East, blame the Europeans, because it is their fault. The Israeli Palestinian conflict itself, we can blame that directly on the British. And it goes back to World War I, in the context of World War I, they promised, and this is where T.
E. Lawrence and Lawrence of Arabia comes up. They promised the same land to two different groups. They promised this land to the Arab groups if they will rise up against the Ottoman Empire, part of the central powers in World War I. And then they also promised the land to the Jews for a national homeland.
Ultimately, what is the Israeli Palestinian conflict? Two different groups that are fighting over the same land and don’t want to share it. And that situation is created, number one, by the British promising the land to both sides. And then number two, by Nazi Germany and by the destruction of European Jewry, which is the thing that actually makes Jews want to leave Europe.
if you look at the migration numbers from Europe to Palestine. Now it would eventually become Israel. They’re still relatively low even into the 1930s and by relatively low I mean in the tens of thousands, this is maybe 5 percent 10 percent Jewish population in some of these areas It is only the combination of you’ve given the I the Jews the idea of a national homeland and then you’ve killed Six million of them and then they’re running to the only place where they can feel safe And then suddenly they meet a population that is already there in land that they thought was promised to them And which they didn’t own because it was owned by the ottomans and the jews started borrowing from them.
So the europeans A lot of blame can be laid at their feet for this situation and even as recently, we had Helen Thompson on and she was talking about the Sinai campaign in 1956. As recently as, the late 1950s, the Europeans hadn’t given up the idea that they were still the shot callers here.
The 1956 Sinai campaign is France and Britain teaming up with Israel to take over the Suez Canal from Nasser’s government in Egypt at the time. Can you imagine? That happening today, but that’s what happened in the late 1950s because these European powers were pushing Israel that way I think it’s also important here to note That the U.
S. Israel special relationship. it doesn’t start really until 1967 or I would really dated in 1973. And that’s in the context of the cold war. All of these secular Arab dictators start batting their eyelashes at the Soviet Union and the United States doesn’t like that. And so the United States doubles down on its relationships with Turkey, with Israel, with Iran, until that blows up in the United States is faced because yeah.
They back the shot, and that’s a whole nother podcast that we would have to do. And the reason I’m telling you that is because in the 1950s and early 1960s, the only reason Israel exists and survives the war of independence and everything else is because the Europeans are the ones that are supporting them.
Israel’s nuclear tech does not come from the United States. It comes from France. France was trying to support Israel in the Middle East for its own in general. So that’s some of the historical background today. Europe is pretty weak. and it doesn’t even have, enough weapons and resources to send to Ukraine and its fight against Russia, let alone pretending like it’s still the heyday of your European power in this part of the world.
And a great example of this that was proven out was Libya. The Europeans were the ones who were chomping at the bit to get rid of Muammar Gaddafi in the context of the Arab Spring and It was the United States that had to come in and clean up the mess because it became very clear that the Europeans did not have the requisite military capabilities or the will to actually finish the job in Libya.
And Libya is still in a state of civil war because the Europeans started it. And then the United States came in and half assed cleaning it up. But now the sides are just fighting each other and everything’s terrible. All of which is to say, when you hear Emmanuel Macron droning on about how we need European defense forces, we need European military capability.
We need to be able to protect European sovereignty. You’re exactly right, Emmanuel. Europe needs military forces because the United States is not going to protect Europe’s interests in the Middle East. It’s interminably and the Asian powers that I mentioned, they have some interest in making sure that the sea lanes are open, but they’ve also just proven they can go around Africa.
They care about getting the oil and the LNG and those resources for themselves at more preferential terms. so Europe is really, they’re on the outside looking in here. They don’t have a whole lot that they can say. They don’t have. Political influence because they are the cause of the problem. They don’t have military influence because they don’t have military forces that are on the ground in this part of the world.
yeah, it’s an area where Europe has extremely exposed and absent. The United States is willingness to help out. Can’t really do much, which is one of the many, reasons that if you’re a European leader, you are terrified of another trump administration because biden still thinks about the Middle East like a 1990s U.
S. Democrat. You can see that in everything that he’s doing and saying and pushing for. So he still is in the anachronism of, oh, the Middle East still important. I’m going to commit U. S. Yeah. Blood and treasure to making sure that all these things continue to go in this direction. I am not sure that Trump would do that.
In fact, I’m pretty sure Trump would try and say, Hey, it’s the Israelis and the Saudis problem. Let’s give them everything they need. Nuclear weapons, this, that, and the other thing. We can’t send Toby Keith there anymore. R. I. P. Toby Keith passed away recently. Really sad. But we’ll send some other U. S.
country artists over there and they can play songs from Mohammed bin Salman and everything will be great. and then we’re going to focus on China. And also on trade wars with Europe itself. not a really great position to be in if you’re Europe. And if you’re looking for someone to really blame in this conflict, blame the Europeans.
It’s their fault.
So here’s a provocative question by design. If we’re heading into a truly multipolar world, as you’ve argued very persuasively, and the incentive of right thinking people is that world should be as durable and safe as possible, which means in part that Europe needs to step up and be a player and secure some of these areas where the U.
S. is not going to play that role anymore. Should we be perversely rooting for a Donald Trump victory and the potential catalyst that could be, for Strictly, you know through the prism of what Europe is going to do or how they’re going to react to things
That’s a tough. That’s a tough question and it’s hard to abstract from all of the domestic political issues too, but if you are someone who is hoping that an external shock will lead the Europeans to changing the way that they do things.
yes, you can answer your question in the affirmative. The, problem is that we’ve already seen this movie, like the COVID 19 pandemic. Oh, it, the Europeans decided to borrow together joint debt. That was a big Rubicon cross, but. still a lot of squabbling. Hungary and Poland, they still haven’t allocated a lot of the money.
then Russia invades Ukraine. the Europeans are still pussyfooting around about what should we do and what should we provide and is Ukraine going to be part of the EU and is there going to be a negotiation, etc. the point being, I think we’ve seen the external shock hypothesis and it hasn’t moved the Europeans to doing anything.
If the Europeans are actually going to come around, I think it has to come from them internally. So I don’t think Like Trump might pour some more wood on the fire. He might make it more. He might make the argument better for someone like Macron. but unless it comes from a place of sort of positive, this is what the EU is going to be.
This is why the EU is going to do this. This is why these national leaders are going to do this. I don’t think Trump is going to be the one that moves them in that direction. I think the counterfactual is. If Europe does not find that resolve within itself, maybe the European Union will still exist in a sort of delicious, ironic twist of history.
Europe will go from being the colonizer to, in some sense, the colonized and different European states will be on different sides of this multipolar world. Some will align with China and some might align even with Russia and some will align with the United States and some will try and do their own thing.
And it will be a hodgepodge checkerboard the way that Europe was. Before sort of the 1700s, which is a scary thought. You probably know from your own knowledge of history and your readings of Oliver Cromwell and everything else, how violent and terrible place Europe was in the 1500s and the 1600s when they were all squabbling with each other.
And before they figured these things out, not to mention World Wars One and World War Two brought to us by the Europeans. So I, yeah. I hear you, but I don’t, think that if, what you’re rooting for is the Europeans to find themselves, we’ve seen the external shock scenario and it didn’t work.
Something else is going to have to happen for the Europeans to turn around. I
think it’s really interesting question to think about. have you ever read the pity of war by Niall Ferguson?
Not, I have not read that Ferguson book, but I’ve read plenty of Ferguson. he
has a pretty provocative thesis in it where he basically says, It’s that World War II could have been avoided because ultimately, once Germany united and once Germany, achieved the power that it did, it was destined to be the dominant player in a European customs union, as he describes it.
And that ultimately everything between, basically 1900 and 1950 was the, bad way of getting. to that end destination. And if you could have, done that in an EU type structure, that you would have eventually gotten the same thing. And I think that’s really interesting because if that is the case, and Germany was always destined to play that role and destined to do so in a way where, there’s a balance.
within Europe itself, but a weak balance. Like what happens when Europe has to be something different? and I guess, I’m, rambling, but like the notion that Europe can just be this level playing field and just be an entity that stands above everything and just maintains these rules that everyone has to follow, which is the German conception of Europe as this arbiter rather than an actor.
That’s where we are today. Is it possible to turn Europe into an actor? And, can you do so in a way that is not falling back on nationalisms and, can trans, transcend them? or is that just not, is that just not possible, And just one, one final thought, I was thinking about this recently because if you really look at the history of France, it’s interesting, France is a very centralized nation, and it’s a very, interventionist nation.
There’s actually a great book called, The Euro and the Battle of Ideas. which was written about a decade ago, I think, and it goes into detail about the different conceptions of what Europe and the EU should be and, between. The French side and the German side and philosophically how they see things differently.
And, what I’m getting at is if you look at the history of France, France itself is a patchwork of nations where basically a centralized authority came in and squashed them and said, you’re one nation now. And we’re going to act in unison, and we’re going to have these things that define us that are common.
But, at the same time, we’re going to make a big deal about celebrating, oh, you’re the Brit you’re the, from Brittany, and you’re from, Provence, and you’re from the West, and here’s all the wonderful things that make you unique in this patchwork quilt of different languages, but it’s fake.
And I wonder, is that the history or is that the future of Europe that you need to see where you have some sort of very muscular power of some kind in the center that comes in and says okay like for our own security we need to implement these changes and we need to exert power in a very centralized way but we’ll still Oh, the Germans.
Oh, look at how unique you are. And that’s great. Oh, and the Czechs and the Italians, but ultimately they’re under the thumb of something in the center, if that makes sense.
Yeah, France is really interesting. And yes, they celebrate some of those subnational identities. I dare say they wouldn’t.
Celebrate the Algerians or anything else. And there was also a big controversy in the early 1800s about the role of the Jews in France, if you can imagine that. And the key takeaway was basically to the Jews, nothing is a nation, but everything is individuals. The idea being you can celebrate and do whatever you want in private.
But when you are in the public space, you are French. And there’s really no, it’s like we can talk about the celebration of the subnational stuff, but I don’t know, my, my impression of that is that it’s not something to be celebrated in person. Also, just a random aside, I was reading, in The Economist this week, there was an article about Germany’s industrial complex, which everybody says is shrinking and melting away.
And it was talking about how the roar And this dovetails with what we started the podcast with. It sounds a little bit like, Wisconsin in the sense that actually there’s a lot of interesting, small manufacturing things happening. And a lot of the expertise there is starting to turn around. There are Northern parts of the roar that are still based on coal.
and that part of the, roar, which is the German industrial heartland is not doing well, but the Southern parts, tech acceleration and all these kinds of weird investment. Schemes and companies that are building really complicated things. Now they’re dependent on global supply chains, some interesting signs that German quote unquote industrialization continues to be, it’s going to be here in the short term.
We’ve talked about this and published research about this, but I wouldn’t bet against the Germans if you’re on a five, 10 year time horizon. Look, the answer to your question about the EU is of course it’s possible, but it’s going to be tremendously difficult and it’s going to be tremendously difficult because the two countries.
that can do that are Germany and France. Number one, they don’t see eye to eye on a lot of things. Number two, to your point, the Germans are, in some ways passive and afraid of their own history. They’re, not willing to assert things that way because the historical memory of what Germany did in the past weighs really heavy on them, which then leads France to be the instigator.
And that’s all well and good. But the problem with that is if you look at the polls, France is arguably the most Euro skeptic country in the entire block. and Macron is, just about termed out like we’re already starting to hear about Le Pen or the far right or about Euro skepticism rising in France and I take it more seriously than I do in some of the other countries because just look at the latest Eurobarometer data.
I don’t remember it off the top of my head, but it was something like 50 50 of people who approve of the EU who are who don’t approve of the EU and France has always had this sort of independent streak in and of itself. So I think what you’re talking about. Is possible and France and there are actors in both France and Germany that are certainly pushing for it, but for it to happen, France and Germany have to be on the same page on.
They have to be willing to upset the apple cart and make some European nations mad or even kick them out or create some kind of mess. structure within the EU itself that allows them to say, okay, like we’re not going to have countries like Hungary that are going to be able to gum up the works and things like that.
And it’s just it’s going to be very difficult. the metaphor I think to use is how long did it take the U. S. Colonies as they were breaking away from the British empire to form their own constitution in their own state. It took Years, if not decades, and even in the early goings, like it was not, it didn’t go particularly well.
It eventually had a civil war because of some of the things that were left undone, at the beginning. So this is not a process that usually happens quickly. And the problem, the biggest problem for Europe is they’re running out of time because the world is changing around them and they don’t arguably have 15 years to figure this out.
They just need to start making moves now. I think if they’re going to stay forward. As relevant as they are in terms of their current power and influence in the world. And that’s a tough slog. It’s why this year is so critical because you do have French and German officials who are talking about the treaty changes that have to happen to make this work.
There is some swell on both sides to try and get something done, but it always seems to end with squabbles over things that probably aren’t that important in the long run and then nothing gets done. And then you look at who’s getting elected or what elections are coming down the line and you get that much more depressed about the situation.
So I can go either way. it’s possible, to be very hard.
I guess the only counterfactual to the colonies comparison is they weren’t surrounded by. Potential threats, right? So ideally, you would have some sort of, we, talked about the, threat, catalyzing change thesis and how that has not really played out.
But if it plays out, like you described earlier, where Europe is fragmented, different countries are aligning with different outside powers, North Africa is, chaotic, there’s, real impacts on people’s day to day livelihoods that you would think might spur someone to step up and, put the niceties aside and try to force their way into a position of
leadership.
There was external threat in the colonies. There were Native American tribes and there were the British and there were the French running around and the Spanish were there too. Santa Ana, Almost made it to New Orleans when he was marching before the whole thing blew up in his face. the, real, struggle here is one of identity.
And this is the, most interesting question in some ways, the most important and the one that is least, which we have the least amount of hard science, if you will, to rely on. And it goes down to things like. Is a Taiwanese national identity going to rise or is Taiwan just going to be complacent?
Is a European identity going to displace, allegiances to nationalisms that really don’t work anymore if you want some of these European countries to maintain their current space? there are absolutely Europe, citizens of European states in Europe who feel more European than anything else, who have bought into the ideals of the European Union.
The problem is they’re the minority. And the question really is, can you get enough Europeans to think that way, to put European first and then to put their national identity second. And that’s a really hard thing for all of these different countries to do. you mentioned France, like France did this to all the little groups that are within France today.
If France wants to see this glittering future, they’re going to have to give up the idea that it’s going to be France that is leading it. And they’re just going to be one of the, one of the squashed, they’re going to be one of the ancillary groups that get celebrated. We’re really, we’re all European. I think one of the problems with Macron is he wants to have his croissant and eat it too.
Ha He wants to have, oh, France is a leader and I’m a Gaullist and we’re doing all these great things. And by the way, Europe is the super strong superpower. All right. put your money where your mouth is put Europe first. no, nobody is actually putting, maybe that’s a little strong, but I find it.
I find that most of these leaders are not putting Europe first. And that makes sense. These are democracies. If you put Europe first, you’re not going to win, win democratic elections.
Yeah. I wonder how much of that is, is built into the current views of the right in the sense of like people talk about the far right and nationalism per se, right?
But I think in many ways, at least in the French context, which is the only one that I know particularly well, that view is not necessarily yay, rah, France. It’s, we don’t want people in our country who have fundamentally different values from what we’re used to. You don’t see them complaining about the Polish plumbers.
They’re complaining about people from Africa and from the Middle East and because values are meaningfully different. So maybe, I’m trying to be, turn this on its head a little bit. Maybe, the rise of the far right in some weird way helps solidify a European identity because it’s identifying a distinct other against which you’re defining your own group.
And maybe that group isn’t Frenchmen or Germans, with the German right. Maybe it’s, hey, these people are, very different. And yeah, those guys are, they eat sausages and they speak a different language, but at least we can get them.
Yeah, a shiver goes down my spine when we start talking about how the Europeans are going to identify the other within their own society.
again, a movie that I’ve already seen and don’t care to see again. And by the way, I think you’re right about France from that point of view. I was in Britain in What studying at Oxford and was the 2014 15 13. I can’t remember now what year it was somewhere around then and they absolutely were complaining about the Polish plumbers.
They wanted nothing to do with the Polish plumbers. So maybe the Brits are just, I don’t know. I’ll stop there. we only have a few more minutes. Let’s talk about Egypt for a second because I think Egypt is interesting. I know you looked a little bit of what the U. A. E. promised them. and in some sense, Cairo is still It’s still the weather vane. It’s where the Arab Spring started. It’s where sort of the Arab nationalist movement started with Nasser. We alluded to that in the 1950s. what are you seeing out of Egypt after looking at it a bit closer?
The thing that catches my eye is, you see the headline about the UAE is Basically giving them 35 billion.
That’s not chump change. you see this on the newswire and you’re like, Oh yeah, sure. Billions, like it goes over your head. According to the numbers, the UAE’s total GDP is 410 or so billion dollars. So we’re talking about eight and a half percent of the UAE’s GDP and they’re providing it to Egypt.
From what I can see largely in exchange for the development rights of a large piece of of, land, very desirable land on the Mediterranean coast that they’re going to turn into basically an investment hub and a destination. development much like they’ve done with the, Palm cities and sort of those flagship projects in the UAE.
I find this very interesting. And I actually was talking to chat GBT before we got on and asking, can you think of any historical parallels chat GBT, where you have a very small, very rich country, basically trying to. Build influence through this kind of huge investment. And there were no examples really.
The only examples that could come up with were Singapore and Norway who have obviously enormous sovereign wealth funds, but they’re not doing this. They’re not using those sovereign wealth funds in this very direct and targeted manner. And I, think the jury is still out on how successful this sort of thing will be, but it’s something new.
and it’s, it’s worth really focusing on more than, Oh, they’re getting a bailout from the IMF. They’re getting a bailout from here. This is real money. And this is a big, deal. I think,
this is great because I’m going to feel I’m going to feel smarter than chat GPT here because there are absolutely answers to that question.
And the first thing that comes to my mind is the Phoenicians. Based entire Lebanon or present day Lebanon who have all these outposts and city states all along the Mediterranean from what the 9th to 6th century or something like this my old history of the region is coming to fore.
I think you could also very well make the case that this is what the British Empire did On a certain level, it’s not like the British Empire went and conquered all of these different places by force. They just had better technology. So they could send, an abysmally small number of people and set up a trading company in a place like India.
And, their model went forward and they took it over. The interesting thing I think that you’re talking about is, I think that in the context of a more multipolar world, there is a place for city states, which is what the UAE Ultimately is and with the gulf, a lot of what these gulf countries absolutely are and you can have these little networks of city states that are all around and maybe you can create a satellite city state that has more in common with what yours does.
And you can be the merchants of a particular region and things like that. So I think
that’s a little bit not to interrupt, but that’s a little bit different because this is a, I don’t want to use the word white elephant button. Okay. But these guys are building a fucking seaside resort, like this is not, the Venetian empire with, it’s one street that’s devoted solely to Venetian merchants and you can’t tax them and they get all these privileges.
Like those guys were installing nodes in a merchant network that were demonstrated to be profitable from the very second. You put them up and the Phoenicians I think were similar because they were traders, right? this is, we’re gonna come in, it would be like, I don’t know, it would be like if in the 1980s when Japan was riding high, if instead of buying Carnegie Hall, they went and they spent 40 billion dollars to build Disney World in Florida.
like that’s. it’s just, it’s, it’s much more speculative. It’s much more different. And maybe that’s just the world we live in now where you build these things and you can just build a Dubai wherever you want and people will come and, but this is a, it’s a, fundamentally unique thing in, in the, sense of what kind of investment it is.
I guess that’s what I’m
saying. I wouldn’t shortchange what the Phoenicians were doing in that way. Like they didn’t have any of the tech that we have and they decide they’re going to merchants over to what is today Tunisia and set up a little colony there and it eventually becomes Carthage, which again is the same sort of thing.
Like you have a power that is in the Levant or deep in the heart of the Middle East that then wants to establish some kind of outpost on the Mediterranean. I guess it depends where this is. if it’s a boondoggle, In the Egyptian desert, okay, like now I’m, but like the UAE has proven that they can do this and that if you put this sort of resort town on an important coast or on an important trading route or something like that, things will go well.
And if you can figure out how to get water and how to get resources, Egypt, there’s a reason that Egypt has been many times throughout history, such a powerful force, its own mismanagement and a lot of other things have driven it. into the ground, but it makes sense to me if the UAE can prove that this model works in the Gulf.
maybe you get out of the Gulf, which is really geopolitically charged and get over to the Mediterranean, which is also politically charged, but it’s nothing like the Gulf and with Iran and Saudi Arabia and everybody else, holding, holding that over your head. So to me, the metaphor works, but I’m also just now trying to get into a fight with chat GPT to prove my, human virtues.
it’s worth watching no matter what, because it’s certainly an interesting development. And I, wonder just. Extrapolating in a broader way, are we seeing the beginning of states becoming weak and other states coming in and essentially, I don’t want to use the word colonizing, but, your British Empire comparison was, somewhat apt.
are we going to see Mark Zuckerberg come in and, he already owns half of Hawaii, right? So I don’t know, maybe that’s too sci fi and maybe that’s extrapolating way too far, but that’s why I’m, this piques my interest beyond the normal.
I think we’re seeing it, like what China’s doing in Pakistan, this little project that you’re talking about here, like there are definite examples of this, the difference between.
Now and then, and this is, I’ve been struggling with what to call this, my working term now is imperialism 2. 0, but, the thing that made imperialism work in the 1800s and 1900s was European technology was so far advanced from the places that they were colonizing. that it wasn’t just political weakness and division.
It was they had, it was guns versus arrows. It was, ships and artillery versus a little raft or something like that. that’s not going to be true for China and Pakistan as China has learned. It’s not going to be true for the UAE in Egypt. Like they don’t have some kind of technological advantage that makes them so much more powerful than the Egyptians.
What they have is some money. And like eventually like the Egyptians are going to come in and probably like it’ll be corrupt and army officers will get kickbacks and they’ll be the ones that live there and it won’t actually do anything like the U. A. E. In some ways is just writing a blank check to a nation with serious structural problems.
And if you don’t fix the structural problems or if you aren’t so omnipotent compared to them on a power perspective that you can just force them to do what you want. probably the investment is not going to go so well. So maybe one of these countries will figure out how to use a I or, some biotech application or energy solution or something like that gives them that kind of political leverage.
But if I’m thinking about the U A E right now, or even the Gulf, like they’ve invested in Egypt before they’ve invested in Pakistan themselves before, it always goes nowhere because Egypt is a country of 125 million plus people run by a military dictatorship that siphons off the money so that the military officers could continue to have a good life.
as long as that’s Egypt, I don’t care how, nice your city is on the Mediterranean. It’s probably not going to do very well.
Yeah. Oh, I took his breath. I’m spicy today. You can feel it. It’s because I’m revving up for this, speaking engagement. But it does worry me. the Gulf is spending, I didn’t realize that the UAE was putting so much money. Into this thing. eight plus percent of GDP is absolutely huge.
Like I don’t, what return exactly do they think they’re going to get? I don’t know that, that, It seems like a dangerous rabbit hole to go, down. And for what? is, Egypt going to come to the UAE’s aid if something happens with Iran? Is, are we going to go back to the Egyptian dreams of the 1960s and have some kind of unified Arab state where all these Arab states are now working in conjunction with each other?
I don’t know. that, that starts to get interesting. And if the Sunni Arabs want to resist. It’s Turkish power and Iranian power and the Asian powers that I talked about that are interested, like they are going to have to pull resources. So I don’t know, I’m spit balling, but it seems like a doubtful investment from my point of view.
No, I agree.
I think that’s why the comparisons to Singapore and Norway are so interesting because Those are two unequivocal success stories and, not like Norway is going to be swinging around its political, powers in the, in Scandinavia or something, but, both have taken the route of broadly diversified, investments.
That are essentially just buying the market and have done very well. whereas here you’re starting to see, and maybe this is a misread of the situation, but it’s hard not to see one upmanship being part of this. Not only between the UAE and Saudi, but also with Qatar. And everything that they’re doing.
to what extent is this sort of prince’s doing, prince things as opposed to a well thought out strategy?
You know,
what it reminds me of, it reminds me of when Scotland before it was part of the, before they united the kingdoms or whatever, they wanted a colony of their own.
So this wasn’t a diversified investment, but they pool a lot of Scotland’s national resources to build a colony. Near what is today the Panama Canal in the Darien Gap, which is not a great place to put a colony. So all of this treasure, it was some like ridiculous percentage of Scottish GDP at the time goes towards building this colony in Darien.
and it just blows up in their face. They lose it all. They all die from disease, everything else. And it’s actually one of the reasons that Scotland. Has to join with England because they are so broke after this failed venture, that the economic prospect of merging with England is the sort of elites of Scotland decide that is worth the trade off.
So it reminds me of that. it’s not quite as bad as trying to build a colony in the middle of a. jungle where you don’t have medicines and things like that. Like you can at least see the argument. Oh, okay. Egyptian Mediterranean beach town. We can desalinize the wall. Like I can see the direction we’re going in.
But, man, the UAE, the Scotland of the, 2020s. I don’t know. That’s a good metaphor.
It’s probably the first time anyone’s made that comparison.
that’s what we do on the podcast, Rob. We bring people different ideas. All right. I gotta go get ready. anything else you want to tell the listeners before we get out of here?
No, we’ll see
you next week. We’ll see you next week from Minneapolis. Get ready for my deep dive into Minneapolis, Minnesota. Talk to you soon.
Thank you so much for listening to the Cognitive Dissidence podcast brought to you by Cognitive Investments. If you are interested in learning more about cognitive investments, you can check us out online at cognitive dot investments. That’s cognitive dot investments. you can also write to me directly if you want at Jacob at cognitive dot investments.
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