JULY 2019

Takeaways from the Aspen Ideas Festival: Next New World Order and Economic Progress, Part III

Category: Portfolio Management

By Doug Cohen, Managing Director, Portfolio Management

The following are my key observations from the speakers of the remaining sessions that I attended on the broad themes of the Next New World Order and Economic Progress. Please also see from this topic Part I can be read here and Part II can be read here.

Takeaways from sessions I attended on the theme of American Renewal can be read here.

Are We Headed for War with Iran?

William J. BurnsPresident of the Carnegie Endowment for International Peace, retiring from the US Foreign Service in 2014 after a 33-year diplomatic career and holding its highest rank: career ambassador

1) The session ultimately focused as much on broader elements of the Trump foreign policy approach as it did on Iran. Burns, whose recently published The Back Channel: A Memoir American Diplomacy is critical of President Trump’s approach, was suitably diplomatic in his comments but left no doubt that he disapproves of the President’s largely unilateral approach and most specific policies. In regard to Iran, Burns recapped the years of secret talks that paved the way for the ultimate nuclear deal that he believes is/was the best way to avert the “imminent” (two months) risk of the Iranians obtaining nuclear capability. He acknowledged that the original deal was imperfect, but thought it provided a foundation that could be strengthened over time with increased engagement. Moreover, the US was in a better position to enforce the deal with the rest of the world on board. He believes Trump was keen to void something he viewed as part of President Obama’s legacy, while also being sensitive to input from Saudi Arabia and Israel. Burns was only surprised it took as long as it did for Trump to disavow the deal. He also indicated he did not believe personal sanctions against Iran’s leaders would assist in diplomacy efforts.

2) Burns was relieved that Trump did not engage in a military strike against Iran in the weeks before the conference, noting the potential for an Iranian reaction and the political support the Iranians might receive from Russia and/or China. His view is that the Iranian regime’s first and primary goal is survival and that they are deeply suspicious of the world around them and are not afraid to lash out. Burns also noted that some elements of a “madman strategy” from the US can work, but only if they are indeed part of a strategy and not improvised. He views Iran as a formidable country, but not a military superpower or an economic one—in essence, he believes they can be contained. More broadly, Burns felt that another four years of Trump would put the US at great risk of losing (even more) stature in the world, with the Chinese best positioned to capitalize on the void and that the West was “too lazy over the last 30 years in assuming China’s economic revolution would lead it join the world order”. Like others at the Festival, he bemoaned the US decision to withdraw from the TPP process.

3) Burns believes that the youth-dominated Iranian population will ultimately lead to more economic freedom. He also noted that the US/Saudi Arabia relationship is an important one but that it is often too much of a one-way street. He believes the US should push back aggressively on some Saudi policies, including the current conflict in Yemen. More broadly, he believes the US would be far better served with a less unilateral approach to diplomacy. The Iraq War demonstrated how difficult war can be and he expects Iran would be a far more capable opponent. Burns closed by bemoaning the dramatic reduction in State Department talent dating back to after 9/11 when resources were diverted to other areas but noting that the decline in foreign service professionals has accelerated rapidly during the past two years.

--A key question that was not addressed: “What evidence was there before Trump withdrew from the nuclear deal that Iran was reducing its ‘bad behavior’ around the globe and would not simply abide by the agreement, pocket the ~$150 billion in payments, benefit from reduced sanctions and still be on a path to a nuclear weapon within 10-15 years?”

Change Happens

Cass SunsteinThe Robert Walmsley University Professor at Harvard Law School and former faculty member at University of Chicago Law School. He also served on President Obama’s Review Group on Intelligence and Communications Technologies

1) This was an interesting, somewhat unorthodox session focused on the seemingly serendipitous ways that major changes such as say the #MeToo movement or the Arab Spring happen—and how sometimes they are not as serendipitous as they may seem. There were three key underlying elements. The first is that we all have different preferences in our head from what we tell people, a kind of “pluralistic ignorance” (e.g., a famous quarterback who privately acknowledged his fear of game-day pressure). Second, we all have different thresholds for action (e.g., when Sunstein and a friend saw a young boy in the Middle East being beaten by his father, Sunstein only took action after his friend made the initial move to confront the father). Finally, our thoughts are often dependent on what other people seem to think (e.g., it’s a lot easier to be the 1000th person in a community to become a vegan than the first).

2) The three elements summarized above have meaningful practical implications. For example, the Chinese government censors will typically allow expressions of dissent in an on-line chatroom or the like. However, they will typically not allow like-minded people to arrange a meeting to share views. Very few people have the courage to act on their own, others have different thresholds for how many people they need to see act before they join in. This has high relevance when assessing historical events such as the willingness of many Germans to commit the atrocities of the Holocaust. In general, like-minded people are very good at strengthening each other’s views, as evidenced by the hardening of views by those who tend to watch say MSNBC or Fox News—the reason China discourages like-mined people from coming together.

3) Astute politicians identify ways to capitalize on psychological tendencies. For example, then Senator Obama knew that he needed to do extremely well the Iowa Caucuses to convince people everywhere that he was a viable candidate. President Trump frequently highlights elements linked to his popularity such as the crowd sizes he draws to remind potential voters that they are far from alone in supporting him.

--A key question that was not addressed: “What actions can be taken to help reduce the increased polarization in society that seems to be taking root in society as folks remain insulated in their ‘echo chamber’ of choice?”

My Life is Awesome, so Why Can’t I Enjoy It?

Laurie SantosHead of Yale’s Silliman College, Laurie is an expert on human cognition and the cognitive biases that impede better choices, she teaches Yale’s most popular course, Psychology and the Good Life. She was recently voted one of Popular Science magazine’s Brilliant 10 young minds and a Leading Campus Celebrity by Time magazine.

1) There are many sessions at the Festival that veer away from “outward-oriented” mainstays such as geopolitics, social change and innovation. This was one of the more well-attended and talked about of the inward-oriented discussions. Santos highlighted several shortcomings that our minds all share—and how we can help to overcome them. One “glitch” in our minds is “perceptual adaptation”—the extent to which our minds become accustomed to certain realities that we don’t even realize. There is also “hedonic adaptation”—exemplified by videos of over the top excitement of students finding out they have been admitted to Yale, but then surely not sustaining that level of enthusiasm once they’ve settled into their day-to-day campus routines.

2) Among the tips offered to overcome these mental challenges are investing in experiences over material items. Research has shown that the memories associated with say an unusual vacation destination dwarf that generated over time by say a fancy new car that quickly loses its ability to please us. Taking the time to savor pleasant moments contributes significantly to happiness. A daily gratitude list of 3-5 things has also been found to significantly boost mental well-being.

3) Our thoughts are often influenced by what we think others are thinking. For example, college students routinely believe their peers are far happier than the peers themselves report to be the case. We are also overly likely to reward relative favorability—for example, people generally are far happier to earn $50k in a given job when their peers earn $25K than they are to earn $100k when their peers earn $250k. For those who have grown accustomed to flying first class, flying one time in coach makes one appreciate the benefits they had come to take for granted. The practice of premeditation malorum—essentially imagining the loss of the things most important to you ala Jimmy Stewart in It’s a Wonderful Life—can be a very effective mental technique.

--A key question that was not addressed: “How many people have been able to consistently use these techniques to boost their mental happiness—and assuming that most do not, how can we best encourage them to do so?”

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