How can you make sense of a state's move concerning your business? In the “intelligence analysis 101” toolkit of most practitioners are three models to help understand why countries behave the way they do. These models were popularized by Graham Allison in his justly famous book Essence of Decision: Explaining the Cuban Missile Crisis. Business and finance strategists will also profit from a careful review of Allison’s text.
While useful, Essence and its ilk suffer from a problem, and unfortunately the problem serves to reinforce a bias to which businesspeople are already particularly prone when trying either to understand or to forecast state behavior. In our book on intelligence failure and strategic surprise we call that danger the “cult of objectivity and reason.”
The Models To Understand Country Behavior
The three models, or analytic tracks, that Allison introduces are the so-called Rational Actor Model, the Organizational Behavior Model, and the Governmental Politics model.
The Rational Actor Model approaches the state as a unitary actor with perfect information; it tries to understand a country’s actions like those of a chess player whose leaders are united, and following Kasparov’s counsel to “see the whole board” and “think several moves deep.” The Organizational Behavior Model peels the onion of state behaviors a bit, and looks at the formal constituent parts of a state such as departments and ministries. It assumes that these formal parts do their best to execute a logical plan, but they remain in some ways prisoners of their routines; it assumes that in their pursuit of state goals these entities “satisfice” within the confines of their Standard Operating Procedures. One might remember this by thinking of the limited moves available to each member of a football team: even if the team is after the same basic goal, different parts cannot always fill any role perfectly even if logic might dictate that they do.
The third model, Governmental Politics Model introduces a very different view of the world: instead of looking at the state as a single entity, it considers the individual motives and desires of various players inside a state, some of whom may be seeking mere personal gain or bureaucratic advantage; far from assuming unified intentions, this third model accounts for greed, self-interest, back-stabbing and deception: the chess board is long gone, and the game is now poker.
Human Reason And Its Limits
All three analytic tracks can be useful for understanding what is going on when, say, China stops exporting rare earth elements or when Russia seizes Crimea. But they also all come embedded with a risk: the risk of assigning too great a role to human reason. Imagine a major conflict between China and the United States. Nothing that either country might gain from such a conflict would outweigh the damage done both individually and to the world as a whole. Yet, if history teaches us one thing, it is that on regular occasions we can expect what Barbara Tuchman, writing about the events that led to the first world war, called the March of Folly. Just because a conflict between our two nations would be irrational (and would likely doom the Chinese Communist Party) does not mean that it will not occur. Miscalculation, spirals of escalation, and plain old blunders can happen not only between the US and China but also among China and US treaty allies in the region (The US is pledged to the collective defense of Japan, Australia, New Zealand, the Philippines, and South Korea.) As Christopher Coker points out in his excellent exploration of this topic, The Improbable War, "Whether the Americans have any more reason to trust Chinese management of North Korea than Europeans in 1913 could trust Germany's management of Austria-Hungary, or Russia's management of Serbia, is very much open to question.". Business people, with their instinctive focus on profit and loss, may miss not only the motive force of nationalism, passion, historical grievances, or for lack of a better word, Honor.
In other words, our obsession with finding reason-based explanations for a state’s actions may lead us to torture the evidence until it appears, as somehow explicable to a purely reason-governed man, a homo economicus. Business people in particular must apply models like Allison’s judiciously, and remind themselves that reality is often “thicker” than Economics (even Behavioral Economics) can capture. International politics are not microeconomics, and history is littered with countless examples of irrational or unreasonable "rolls of the iron dice"…
So next time you consider a "state's" motives in a business context, don't forget to consider the human motivations behind the actors involved. And in doing so, make sure you understand the culture, identity and values of these actors.
