Summer Essay 7 -- Options

So this is how I am spending the last week of summer vacation: daily reviews of essays from the current edition of Foreign Affairs as the United States barrels towards the most consequential election in decades, with US global leadership very much on the line.  Looking forward to the conversations this may spark.

Corporate leaders seeking to make sense of the geopolitical landscape often offload the data aggregation (reading) and analytical processes to subject matter experts skilled in the theory and practice of statecraft.  This can be a mistake, particularly when the experts in question have at best a loose understanding of the company’s underlying business.  Many experts may also bring to their approach a range of implicit biases and assumptions that influence their analysis.

Others avoid the issue completely.  They treat geopolitical risk as a random exogenous variable that can be neither measured nor managed.  Adopting an ostrich strategy is very much a mistake.  Patterns exist in public policy. But because the risks are expressed verbally, most corporate leaders face challenges in identifying quantitative measures of public policy risk which are free to underlying bias.  My company’s patented process provides the foundation to illuminate those trends, providing immediately actionable intelligence to support strategic decisions based on concrete, objective data. 

The data is not a panacea or a shortcut to analytical thinking. Data users must have a frame of reference and a familiarity with the policy landscape in order to work efficiently with the data.  This is where Foreign Affairs comes in.  Welcome to Summer Essay 7: Richard Haas’ timely essay in the current edition of Foreign Affairs.

The essay runs through the various tools available to the United States when its allies take actions that Washington does not support.  The list focuses on traditional military and diplomatic arsenal components plus economic sanctions; it does not address trade policy which remains a powerful tool to reward friends and impose costs on foes. 

Most casual observers believe that foreign policy options are binary, toggling between diplomacy/negotiation and sanctions. Haas methodically runs through the full range of policy options, with plenty of historical examples.  It is a sobering, but not surprising, read. He  highlights how each of the traditional policy options available to the United States has failed to deliver the desired outcome defined as a change in policy or behavior. 

Haas attributes the suboptimal performance to the fact that the tools “all leave the initiative with the friend or ally.”  He then advocates for the United States to “take independent action.”  He is not wrong. But the question of non-compliance with U.S. policy preferences is more nuanced.  Significant research over the years argues for alignment of interests and outcomes. For example, economic sanctions by themselves cannot address military or territorial problems.

The overall impression left from the essay is that the United States increasingly has great difficulty in cajoling friends to shift gears and align their policies to U.S. interests. Taking independent action -- as recommended by Haas -- may well be the only rational tool left when sanctions fail to achieve course correction. But it is also a recipe for increased geopolitical volatility and increased headline risk.

• This is particularly the case in 2025, when nearly every G7 nation will have in place new leadership that will be eager to make their mark on the world while signaling to voters that campaign promises are being kept.
• The scope of policy divergences will also expand beyond foreign policy. Climate and energy policy, trade policy, cybersecurity policy, and digital currency policy are all on deck to display divergences during 2025 that will require diplomatic engagement even as differences deliver headline risks and related market reaction functions.

Corporate leaders and strategic analysts will need to make sense of the policy volatility in order to understand which policy shifts will impact profitability and operational realities.  Experts will spend a great deal of time mainly in “hunter-gatherer” mode (finding facts) rather than in higher-value analytical and strategic tasks.  Corporate leaders and financial strategists can deploy advanced technology to enhance their access to, and use of, actionable intelligence as they strive to deploy smarter mechanisms to detect and assess policy divergences as they emerge, before they become headlines.

At BCMstrategy, Inc. we believe the foundation for that analysis is to look at the data.  Experts with access to the data can generate more robust analysis and leaders can make better decisions using a solid foundation that takes into account the dynamics within the policy process itself in a manner that is separate from the news cycle.  Underlying technology programmed by subject matter experts helps ensure that the resulting data remains attuned to the realities and special features of the policy landscape.

Intensifying conflict requires firms to up their game and adopt advanced technologies as we all brace for the impending policy volatility after the election.   

Barbara C. Matthews is a globally recognized public policy and quantitative finance leader.  Her track record of successful innovation and leadership spans five continents in both the private and public sectors, including service as the first US Treasury Attache to the EU with the Senate-confirmed diplomatic rank of Minister-Counselor.  She has consistently been the first executive to forge new paths that add lasting value with durable, high-performing teams.  She is currently the Founder and CEO of BCMstrategy, Inc., a company that delivers ML/AI training data and predictive analytics that provide ground-breaking transparency and metrics about government policy globally.  The company uses award-winning, patented technology to measure public policy risks and anticipate related reaction functions. Ms. Matthews is the author of the patent.