How Business Leaders Can Navigate the Unknown — and Thrive

Former Amazon exec Julie Benezet discusses her new book on the benefits that can come from being uncomfortable.

Julie Benezet joined Amazon in 1998, when the company was just another ambitious startup in the nascent business of internet retail. She was hired to find sites for Amazon’s distribution centers as the operation grew. There were a lot of unknowns at the time, but the risks taken back then clearly paid off. Benezet left Amazon in 2002 after building the company’s first global real estate function. She was an executive committee member of the Samuel Zell and Robert Lurie Real Estate Center at Wharton and also taught the Challenges of Leadership program at Harvard’s Graduate School of Design, Executive Education.

Today, she’s a consultant who teaches the value of taking risks, which is the focus of her new book, The Journey of Not Knowing: How 21st Century Leaders Can Chart a Course Where There Is None. Benezet recently spoke on the Knowledge@Wharton show on SiriusXM about the benefits that can come from being uncomfortable. (Listen to the podcast at the top of the page.)

An edited transcript of the conversation follows.

Knowledge@Wharton: How did your experience at Amazon shape the content of this book?

Julie Benezet: I was in a company that was in a new industry. There was no such thing as e-commerce when I got there. The organization was new. There was no such thing as a business plan, and we had a large plate of work to achieve. In order to achieve that end in that environment, we had to make up a lot of things.

I like to invent. I’ve always enjoyed the entrepreneurial spirit. Before, an entrepreneurial mindset was nice to have — it’s fun to go try to make something better that hasn’t been tried before. When I got to Amazon, it was a requirement because there was nothing that you could look back on and say, “OK, that worked well. We’ll do more of that.”

Instead, you had to look forward and ask, what does this new e-commerce customer want? What is it that they’re going to expect in terms of speed of delivery? [And] the way that things are handled in the back end, in the customer-service end. How do the programmers have to work together to create a new platform that will continue to address their evolving demands? You were always on your toes, trying to anticipate what these new customers wanted, and then making it work with no precedents.
What became our way of work at Amazon evolved into the 21st century, where everybody works that way. That created for me the Journey of Not Knowing, which is simply about the importance of going toward rather than away from the scariness of change to achieve something better.

Knowledge@Wharton: That’s an issue that a lot of executives have — they want to have the security of the known, and they do have the fear of the unknown.

Benezet: Absolutely. They get petrified when you say, “You don’t know if this new customer is going to like what you have to say, but how else are you going to find out unless you go and talk to this person?” I saw this at Amazon, and I see it writ large in today’s executives. People who have come in to present to us all the whiz-bang things they could do for our business without asking us what it is we were up to.

Part of the unknown is asking, being prepared not to know what they’re going to say, and being OK with the discomfort of that. A lot of executives feel like their job is to be super-confident, in-charge and in control. I believe that they’re going to miss what is actually going on because, at the end of the day, we live in a world of constant change. We are totally out of control. I mean, look at the madness of Washington. We’re out of control! But that’s an opportunity to learn.

Knowledge@Wharton: How has digital affected our ability to deal with the unknown in both our professional and personal lives?

Benezet: The digital world has created a life where everything’s hyper-connected and fast. It has sped things up so much that people have stopped thinking, and there’s a lot of reactive behavior going on, a lot of acting out, rushing to judgment. People take actions without the benefit of verifying facts. The digital world has accelerated this bias towards action, even when the action doesn’t make sense given what’s really going on.

Knowledge@Wharton: Early in the book, you write about these first couple of experiences of building fulfillment centers. You had to develop one in Germany, which was a unique dynamic in trying to understand the customer there, compared with the American customer. Can you tell us about that?

Benezet: In Germany, we weren’t exactly welcome. We had acquired an online book organization there. The owner was pleased to have the large check and the honor of having Amazon coming to buy it. But they weren’t pleased with us coming in and saying, “No, this isn’t right. We need to move your distribution facility to another part of the country where we have more space and we’re more centrally located. We can’t tell you where, but we can tell you why. We just don’t see you achieving that in the small space you have here.”
There was a lot of pushback of, “You don’t understand us, you don’t understand how we work. You don’t understand that if you move more than 30 miles away, you’re going to have to create a social plan which will fund people’s livelihood for the next 10 years. You just don’t understand.”

I don’t understand the German language, so it was a little inconvenient, but we worked around that. What we had to do, and in warp time, was to learn from them what the German setup was. We couldn’t have things like a nice database that told us where in the country everything was because there was no integrated database of real estate.

Amazon at the time was hardly creditworthy. We were beloved by Wall Street because our stock soared because people saw this great future, but the lenders weren’t so convinced. They said, “You have no credit. You’re not profitable. In fact, you stubbornly say you don’t want to make profits for the next few years” — which was not a very strong base to go in from.

When you arrive at the doors of landlords who have never met you, who say, “Yeah, we hear about in the United States, you got this thing going. But we don’t know about it here. We have requirements.” It took a lot of painting a picture of, “Here is the acceleration of the internet, which is growing at 2,300% a year. Here is the acceleration of people buying off catalogs. You put these things together, you have a business model that is only going to grow; it’s going to grow quickly. That’s why we have to get this super-sized facility to house all of this.” They finally believed it, and we were able to get a distribution center. But there was a lot of insanity along the way when people, just because of the scariness and the speed of it, pushed back.
I spent a lot of my time feeling like a social worker, asking, “What’s getting in your way? What’s stopping you?” Because the Journey of Not Knowing is not just knowing what idea is going to work, it’s also not knowing how people are experiencing things inside. How are they with the new? How are they in taking experiments? How do they feel about failure? One of the things that was very freeing in working with Amazon, which executives these days can learn from, is that failure was OK. We failed all the time. The important thing is what you learn from it. What do we need to change to push this forward?

Some things were abandoned entirely. For example, zShop was brought out in the late ‘90s as a competitor to eBay because we wanted an online auction kind of format. It failed miserably because we just didn’t know how to do it right. But what it led to was the format we have today at Amazon. It led to the Amazon Marketplace, which is an integrated model of being able to buy something from the vendor, buying something that is used, or buying something that is from a third party. And you can buy it all from the same place, on the same page.

Believe it or not, that made a big difference. About 50% of the retail activity on Amazon now occurs in the Marketplace format, but it started with a failure. Back in ’98, ’99, when we were trying to get this distribution center in Germany, we were awash in failures. But it led to something that was successful, and we got the distribution center.

Knowledge@Wharton: You have four key principles that you call the Core Four. What are they?

Benezet: The whole point of the Journey of Not Knowing is to learn to travel through the discomfort of trying out new ideas to make life better. Your job as an executive, or anybody in life, is to make something better. In order to do that and deal with the discomfort of going to this unknown place, you have to do four things.

The first is, discover your dreams. Choose something that you want to improve. It can be anything. Maybe you want a different communication culture in your company because people aren’t honest enough with each other. They resist giving each other feedback. What you want to build is a culture where you give honest feedback in a constructive way.

It’s a disruption because people are so conflict-avoidant, but it’s an important change. It can be choosing a new market to go into. It could be a different way of staffing teams, in which the teams themselves choose their members, rather than the managers choosing. The idea is, you choose something that you want to make better. That is your dream.

It’s often something that you’ve been avoiding because it bugs you so much and it’s going to be hard. But once you have that dream, then you have to go learn about the people who will benefit from it. If you are looking at project teams, and they are the ones who would benefit from changing to a regime where they choose their own members, you spend time with those teams. Ask, “What goes on for you? Where do things trip up? What happens when you have a member who’s not functioning at a high level?” That crystalizes what your dream is and allows you to hone it, so when you go to test it, you have better facts to deal with.

The second principle of the Core Four is to get comfortable with the scariness of risk. We spend a lot of time trying to de-stress ourselves, trying to be mindful and so on. All of these are good things. But when you’re in the business of trying new things and the new behaviors that go with that, you’re going to be in a place where you’re going to be nervous. It’s important to accept that as part of the deal.

However you experience it physically, however you experience it mentally is to not fight it, but to embrace it and say, “This is the cost of trying to improve things, and that’s good.” It doesn’t mean you sit and shake and do nothing, but you allow it to travel with you. In effect, allow it to say, “This is assigned to me. I have to pay more attention to what’s going around me, to learn from the others, to ask questions, to hear what they’re saying, to course-correct as we go along.” And be OK with the fact that they, too, are going to be nervous.
The third thing is to watch out for self-sabotaging behaviors. I call these ‘hooks.’ These are defensive behaviors that are very common in business and life. We all know them. I’ve identified 10 of them. They are ways of calming yourself, of giving yourself some way of feeling you have a modicum of control over things. The problem is, while they may help settle you down in the moment, they will take you off the course to the bigger idea.

The importance of watching out for these self-sabotaging behaviors is to learn to recognize them and to switch strategies. These are things like micromanagement, perfectionism, conflict avoidance, disengagement. They are things that are very common. It doesn’t mean that you have a psychological problem. It means that you’re a normal person trying to find your way through scariness and trying to calm yourself.

But when you catch yourself, for example, readjusting the fonts on a proposal, or yelling at your team to make sure they got the PowerPoint slides just so, instead of thinking, “Is this proposal really a winning proposal for this client we’re going to approach,” catch yourself. “Oh, I’m micromanaging. What’s going on here?” Then you go into a strategy of literally stopping yourself, stopping the speeding train of [reactions], and [ask], “What do we need to do here? Have we spent enough time with the proposal?”

I taught strategy for years, and it’s remarkable what a high percentage of the time a strategy fails because people didn’t know the stakeholders. They didn’t spend enough time either internally through the organization, or externally. They didn’t get what was the real problem. They just said, “I’ve got to get this done. Just please put a Band-Aid on it, let’s go.”

At the time, it’s all done in a spirit of making change, but it’s not enough. You have to go to that uncomfortable place of saying, “Maybe I’m wrong. Maybe I don’t get what they’re upset about.” And go to the humbling place of learning what it is that people care about. But that’s the point. When you go from reactivity to activity, you’re going out in a learning mindset to take in what you’ve got to know and what you didn’t know before to make the idea work.

The final principle of the Core Four is to find drivers to help fuel your travel through the discomfort of the new idea that comes with the unknown. The driver can be anything that gives you purpose. It can be a really serviceable driver like, “I just hate that guy so much that I would rather die than he wins this proposal. It would kill me to see a smug expression on his face if he wins and I don’t.”

“I am going to go work with a super-scary analytics department in our company who makes me feel like a moron, but they would definitely help me put together a winning proposal because I don’t want to see that guy’s smug expression.” It doesn’t have to be something that speaks well of you, it just has to work for you. You will find a different messaging for your team, for sure. But for you, find something to help navigate the discomfort.

Core drivers are about who you are as a person. What is it that makes you, you? What do you care about? A very powerful film is Invictus about Nelson Mandela. Mandela did not want to be a victim. He was in prison for 27 years. He studied his jailors and learned who they were as people. When he came out of prison, he wanted all of the people in South Africa to be equal.

“You’re going to be in a place where you’re going to be nervous. It’s important to accept that as part of the deal.”

But in order to do that, he had to go through all sorts of scary experiments. The whole thing about the World Rugby Championship was a huge bet because black Africans didn’t even play rugby. And here he was, trying to get them to pull together. But the idea is that his core driver was he so did not want to be a victim. It allowed him to try out a lot of new and scary things.

I have had countless women tell me that they had mothers who thought that they would fail, and they would tell them that. These women would come into my office and tell me these stories, and then tell me they had spent their life disproving their mothers. That was a driver for them.

I have worked with many men, too. I remember in particular an executive group where five out of six of members were men, and very successful ones. We were sitting around in a meeting one day, and it turned out that every one of them had a distancing father. It really empowered them to say, “I am going to prove to that guy that I can do it.”

Knowledge@Wharton: How much do you think leadership is truly going into the unknown?

Benezet: All of it. You have businesses that are changing quickly, customers that are changing, the businesses that have failed to recognize the customer change. Just think of what social media has done. It has really elevated the power of the individual to have an opinion.

I worked with a restaurant company where they said they just dread it when people take out their phones at the table, start photographing the meal, and then typing something. They can put out there that they had a crummy meal, and it will really hurt business.

As leaders, we have to keep ahead of where the customer’s going and acknowledge that they have an opinion and, like it or not, it counts. So, that absorbs people all the time. At the same time, it’s exhilarating because it makes you want to try new things. For example, restaurants that went to a format of having the kitchen open to the dining room was in response to the people in the dining room being curious about cooking. It’s been a very successful model.

sábado, abril 06, 2019




The new scramble for Africa

This time, the winners could be Africans themselves

THE FIRST great surge of foreign interest in Africa, dubbed the “scramble”, was when 19th-century European colonists carved up the continent and seized Africans’ land. The second was during the cold war, when East and West vied for the allegiance of newly independent African states; the Soviet Union backed Marxist tyrants while America propped up despots who claimed to believe in capitalism. A third surge, now under way, is more benign. Outsiders have noticed that the continent is important and becoming more so, not least because of its growing share of the global population (by 2025 the UN predicts that there will be more Africans than Chinese people). Governments and businesses from all around the world are rushing to strengthen diplomatic, strategic and commercial ties. This creates vast opportunities. If Africa handles the new scramble wisely, the main winners will be Africans themselves.

The extent of foreign engagement is unprecedented. Start with diplomacy. From 2010 to 2016 more than 320 embassies were opened in Africa, probably the biggest embassy-building boom anywhere, ever. Turkey alone opened 26. Last year India announced it would open 18. Military ties are deepening, too. America and France are lending muscle and technology to the struggle against jihadism in the Sahel. China is now the biggest arms seller to sub-Saharan Africa and has defence-technology ties with 45 countries. Russia has signed 19 military deals with African states since 2014. Oil-rich Arab states are building bases on the Horn of Africa and hiring African mercenaries.

Commercial ties are being upended. As recently as 2006 Africa’s three biggest trading partners were America, China and France, in that order. By 2018 it was China first, India second and America third (France was seventh). Over the same period Africa’s trade has more than trebled with Turkey and Indonesia, and more than quadrupled with Russia. Trade with the European Union has grown by a more modest 41%. The biggest sources of foreign direct investment are still firms from America, Britain and France, but Chinese ones, including state-backed outfits, are catching up, and investors from India and Singapore are eager to join the fray.

The stereotype of foreigners in Africa is of neocolonial exploiters, interested only in the continent’s natural resources, not its people, and ready to bribe local bigwigs in shady deals that do nothing for ordinary Africans. The stereotype is sometimes true. Far too many oil and mineral ventures are dirty. Corrupt African leaders, of whom there is still an abundance, can always find foreign enablers to launder the loot. And contracts with firms from countries that care little for transparency, such as China and Russia, are often murky. Three Russian journalists were murdered last year while investigating a Kremlin-linked mercenary outfit that reportedly protects the president of the war-torn Central African Republic and enables diamond-mining there. Understandably, many saw a whiff of old-fashioned imperialism.

However, engagement with the outside world has mostly been positive for Africans. Foreigners build ports, sell insurance and bring mobile-phone technology. Chinese factories hum in Ethiopia and Rwanda. Turkish Airlines flies to more than 50 African cities. Greater openness to trade and investment is one reason why GDP per head south of the Sahara is two-fifths higher than it was in 2000. (Sounder macroeconomic policies and fewer wars also helped.) Africans can benefit when foreigners buy everything from textiles to holidays and digital services.

Even so, Africans can do more to increase their share of the benefits. First, voters and activists can insist on transparency. It is heartening that South Africa is investigating the allegedly crooked deals struck under the previous president, Jacob Zuma, but alarming that even worse behaviour in the Democratic Republic of Congo has gone unprobed, and that the terms of Chinese loans to some dangerously indebted African governments are secret. To be sure that a public deal is good for ordinary folk as well as big men, voters have to know what is in it. Journalists, such as the Kenyans who exposed scandals over a Chinese railway project, have a big role to play.

Second, Africa’s leaders need to think more strategically. Africa may be nearly as populous as China, but it comprises 54 countries, not one. African governments could strike better deals if they showed more unity. No one expects a heterogeneous continent that includes both anarchic battle zones and prosperous democracies to be as integrated as Europe. But it can surely do better than letting China negotiate with each country individually, behind closed doors. The power imbalance between, say, China and Uganda is huge. It could be reduced somewhat with a free-trade area or if African regional blocs clubbed together. After all, the benefits of infrastructure projects spill across borders.

Third, African leaders do not have to choose sides, as they did during the cold war. They can do business with Western democracies and also with China and Russia—and anyone else with something to offer. Because they have more choice now than ever before, Africans should be able to drive harder bargains. And outsiders should not see this as a zero-sum contest (as the Trump administration, when it pays attention to Africa, apparently does). If China builds a bridge in Ghana, an American car can drive over it. If a British firm invests in a mobile-data network in Kenya, a Kenyan entrepreneur can use it to set up a cross-border startup.

Last, Africans should take what some of their new friends tell them with a pinch of salt. China argues that democracy is a Western idea; development requires a firm hand. This message no doubt appeals to African strongmen, but it is bunk. A study by Takaaki Masaki of the World Bank and Nicolas van de Walle of Cornell University found that African countries grow faster if they are more democratic. The good news is that, as education improves and Africans move rapidly to the cities, they are growing more critical of their rulers, and less frightened to say so. In 1997, 70% of African ruling parties won more than 60% of the vote, partly by getting rural chiefs to cow villagers into backing them. By 2015 only 50% did. As politics grows more competitive, voters’ clout will grow. And they will be able to insist on a form of globalisation that works for Africans and foreigners alike.

To Defeat Maduro’s Regime, Treat It Like a Crime Syndicate

Traditional mafia-busting tactics could help solve the crisis in Venezuela

BY Raúl Gallegos

Federico Parra/AFP/Getty

Venezuela is almost a failed state where millions of people face nationwide power outages, food shortages, hyperinflation, and where crime and looting have become a means of survival. The most powerful criminal organization in this apocalyptic reality is the regime of Nicolás Maduro and the syndicate of criminal families that make up his government.

Venezuela’s chavista government was once a legitimate political actor but it has devolved into a type of cartel of criminal cells that protect each other and run the nation through corruption and fear. There is the Maduro inner circle that includes first lady Cilia Flores, whose nephews tried to export tons of cocaine to the United States and who were tried and sentenced by a U.S. court as a result. There is Diosdado Cabello, the head of the National Constitutional Assembly, and Minister of Industries Tareck El-Aissami, both sanctioned by the U.S. government for engaging in drug trafficking along with a number of top military and National Guard allies.

The bureaucracy, the armed forces and the security forces enrich themselves with kickbacks from government contracts, illegal mining revenue, foreign currency trading, extortion, kidnapping, and the smuggling of price-controlled gasoline and food with impunity, on top of generous, oil-financed salaries and benefits. They spy on each other and they empower the most criminal among them, those compromised by corruption or human rights violations, a common approach of criminal groups. And of course they jail, kill and raid the homes of those Venezuelans who oppose them. The main goal of this crime syndicate is to cling to power because leading normal lives in the legitimate world once again is no longer an option. To defeat this regime the international community must move beyond the diplomacy and sanctions used to deal with traditional political actors, and instead adopt techniques the police use to fight the mob.

The first step is to acknowledge that the regime not only partners with drug cartels but also with guerrilla groups deemed terrorist organizations. Dissident members of the Revolutionary Armed Forces of Colombia (FARC) group – those who did not participate in the peace accord or have since dropped out – hide in Venezuela. The National Liberation Army – responsible for bombings of oil infrastructure and civilian targets in Colombia – guards the illegal gold mining operations in Venezuela which help prop up Maduro and his collaborators. Venezuela’s regime is not a terrorist state but it harbors and works with groups that have been designated as such.

A following step would be to use intelligence and surveillance to understand the criminal enterprises of chavismo and to identify its weaknesses. Police forces usually map out the command chain of crime syndicates and seek to pinpoint who is an enemy of whom, so they can work to deepen rifts within the criminal organization. This is the same approach chavismo has used for two decades to divide and weaken the opposition.

Infiltrating chavismo to help identify its big illegal dealings and the practices of its leaders is the type of thing narcotics agents do to successfully dismantle cartels. This is not without risk because chavismo’s counterintelligence apparatus, advised by Cuban officials, constantly monitors dissenters inside and outside the regime. But it is not impossible. The Drug Enforcement Administration already successfully infiltrated the cocaine smuggling plans of Maduro’s nephews, which served to put them away.

But when infiltration is too risky, paying informants to confess and to turn on the top capo is another tried and true police strategy. There are a number of chavistas who would be willing to give information on the regime’s inner workings in exchange for being allowed to keep their ill-gotten gains, or for assurances they won’t be prosecuted in the future.

Cutting off the money flow of both legal and illegal cash that helps the regime survive is paramount. For Venezuela that will mean continuing to tighten sanctions as well as finding ways to track and seize shipments of illegally mined gold. Of course wresting control of Citgo from the regime has hurt Maduro, and having bond holders to go after government assets would further undermine the regime’s financial strength.

Taking advantage of the mercenary nature of chavismo can help, by eventually offering rewards for the surrender and delivery of Maduro and his top lieutenants. In fact, the U.S. government has in the past indicted a sitting head of state, Manuel Noriega, in 1988 for drug running, money laundering and racketeering - charges that would easily stick to Maduro and scores of his allies. The U.S. government eventually offered a $1 million bounty for Noriega.

Treating Maduro like a criminal is not easy in a world of liberal democracies still inclined to see his regime as a legitimate expression of Venezuelan voters. The world must understand that chavismo now uses progressive rhetoric as a veneer of legitimacy to disguise its increasing criminal nature. International laws protect heads of state and government officers from being arrested, but then most of the international community does not recognize Maduro as a legitimate president anyway. The willingness to arrest Maduro would limit his ability to travel. Coming to terms with the criminal nature of the regime and treating it as such can make its survival more difficult in the long run. This approach to defeating Maduro would still take time, but it would be preferable to using force or invading Venezuela, an option that would not be a quick fix, considering the various armed actors active in that country that could likely make any form of intervention a prolonged and bloody endeavor.

Dealing with Maduro will require more creativity and persistence, which means that diplomatic efforts as well as sanctions by themselves are unlikely to do the trick, just as they have failed to bring change to other dictatorships like North Korea, Iran or Cuba. The U.S. and the Venezuelan opposition will succeed in Venezuela when they are perceived by chavismo to be just as dangerous and intractable as the Maduro regime has become.


Gallegos is a political risk consultant and the author of Crude Nation: How Oil Riches Ruined Venezuela

sábado, abril 06, 2019



“The Diamond Age”

By Doug Casey, founder, Casey Research

Science fiction has always offered both a more accurate and more timely look at the future than any think tank. For one thing, a good book is the product of a genius, not a committee of suits trying to reach a consensus. And a format of fiction allows one to speculate in ways that a “serious person” can’t do in nonfiction.

Every educated person should have read the classics by Jules Verne, Robert Heinlein, Isaac Asimov, and Arthur C. Clarke, among others. Add Neal Stephenson to that list. I’ve been a fan of Stephenson’s novel The Diamond Age since it was published in 1995. I strongly recommend you read the book.

There are many themes in The Diamond Age, which refers to a near-term future (I’ll guess around 2050) when nanotechnology has transformed much of life. Although not nearly as radically as I believe will actually be the case. (See my essays on the future here and here.)

But one theme in the book is quite a breakthrough, and spot-on. It posits the creation of “phyles” as the major form of social and political organization. The word comes from the same root as phylum, from the Greek, meaning “tribe” or “clan.” But I think it’s also a pun on the word “filial,” with its connotations of family.

The book posits, I believe correctly, that in the near future most nation states will have broken down. Many will have ceased to exist. It’s quite logical, because they’re a dysfunctional way for people to organize. And it’s happening right before our eyes. None of the countries in the Middle East, Africa, or Central Asia have any coherence. They’re just the result of some ruler’s military prowess, or some politicians drawing lines on a distant map. Nation states themselves have really only been around since the 17th century. Before that, people weren’t loyal to a country; they were loyal to a chief, a king, or an emperor.

Loyalty to a country can make some sense, on at least a primitive atavistic level, as long as the inhabitants of the “country” share a common language, religion, ethnicity, and customs. But it makes no sense when they have little in common. So it’s natural, and salubrious, for the various religious, ethnic, racial, cultural, or economic groups within a country that’s become too big, too “diverse,” and too “inclusive,” to want to get out. Everyone recognizes – even if they don’t say it – that a national government is just a vehicle for theft, benefiting the group that controls it.

As the world becomes more educated, the average man becomes more acutely aware of that fact. And as jet travel and the internet become universal, people start to realize they might have almost nothing in common with their so-called “countrymen.” And a lot more in common with people who may be on the other side of the globe, many of whom will feel the same way about their own countrymen.

I can tell you that I have much more in common with friends in the Congo or China than I do with my fellow Americans living down the road from me in a trailer park. I have nothing in common with them. These people not only aren’t my friends, they’re liabilities. And may turn into active enemies under the right circumstances. I’d rather associate with people with whom I share common values and interests, not just the same government ID.

In any event, almost all the world’s nation states are terminally burdened with debt, taxes, regulations and increasingly, strife between groups fighting for either a teat on the milk cow or political power. The nation state is a dinosaur; it no longer makes sense in a world with today’s technology and demographics.

This explains what we’ve seen in the last generation: the breakup of states. The USSR into 15 components. Yugoslavia into six. Czechoslovakia into two. Sudan into two. This is just the opening round. Most European countries have secessionist movements. Russia should eventually break up into a dozen new states. China into at least a half-dozen. Brazil into at least two. Bolivia into at least two, etc., etc.

Military Violence and Terror

In fact, the primary reason that’s given for the very existence of the nation state is to defend its inhabitants. But, with the changing nature of warfare, that’s one of the things it’s least able to do. Can it defend against a nuclear attack? No. At best it can just threaten to counterattack.

In fact, a country with a big military stationed all over the world, not only can’t defend its citizens, but actually draws in attacks by making enemies among the natives in far off places. In the past, it didn’t matter – the natives were immobile and powerless. Today they can go anywhere and access a wide variety of weapons.

In fact, governments are so united against “terrorism” because it’s not just a very effective tactic against the nation state – it really can only be used against the nation state. Governments couldn’t care less about the few hundreds of people that might be killed in a terror attack. They care because it threatens their existence.

In today’s world, nation states are no longer the big risk to other nation states. Rather, it’s groups like ISIS and al Qaeda that are a much bigger threat. They can’t be destroyed by dropping a nuke on their cities; they don’t have cities. They can be everywhere and anywhere. But they can easily attack the cities of their enemy. And those are just well-known Islamic threats. There will likely be many others of many varieties, on templates as different as the Red Army Faction, Aum Shinrikyo, or FARC.

The safest way to avoid attack in the age of cheap and easily available atomic, biological, and chemical weapons is to be dispersed. At least not to be part of a geographic nation state. From a military point of view a nation is about as viable as cavalry before WW1 or battleships during WW2.


Not being part of a nation state ameliorates a lot of problems for a person, but it’s not a total solution. What The Diamond Age posits, and I think is going to happen, is that people will form phyles, joining in an alliance according to what’s most important to them. Or the way they “self-identify,” to use a currently fashionable term. Jews famously stick together relative to the goyim. That’s one reason at least part of Israel (likely excluding the Hasidim and Palestinians) will survive as a nation.

One reason Mormons are so successful is that they favor each other, like the Jews. Muslims (although rarely economically successful, for other cultural reasons) definitely do the same. Birds of a feather (all the outraged hysteria about racism notwithstanding) do, in fact, tend to flock together.

So here’s my prediction of what’s going to happen over the next couple of generations. Many nation states will simply collapse or disappear. Incidentally, I don’t think the U.S. will be a survivor. The country used to share a common culture, albeit with quaint regional variations. That’s no longer the case. The election of Trump has crystalized long-simmering, and growing antagonisms. It’s not that Americans just have a political difference of opinion. It now boils down to mutual cultural hatred, and on a visceral level. It’s only been exacerbated by the push for “multiculturalism,” always a stupid and destructive concept, from the usual suspects.

Take California, the Left Coast, for instance. Even now some of them are talking about divorcing themselves from hated Flyover Country. But even California makes no sense as a political entity. What does the Mexican population have in common with Silicon Valley? Nothing. What do the hippies in Humboldt County have in common with the Los Angelenos? Nothing. What do farmers in the Central Valley have in common with anybody else in the state? Nothing.

Incidentally, we can break down Canada and Mexico the same way. Much smaller entities within these (and all other) countries would be much more viable. But still anachronistic. And suboptimal.

So what will happen? Everywhere people will reorganize for mutual support, defense, insurance, companionship, and everything else. But it won’t have much to do with politics as we now know it.

They’ll form phyles.

An outrageous concept, I know. Now you see why radical ideas are best presented in the form of novels.

China’s Amazing Collapsing Exports

The timing of the new year holiday had a big impact on China’s February trade data. The broader picture still isn’t very encouraging.

By Nathaniel Taplin

The trade conflict with the U.S. is now really starting to bite.
The trade conflict with the U.S. is now really starting to bite. Photo: mark ralston/Agence France-Presse/Getty Images

This time of year, the Chinese economy resembles a poorly kept barnyard. Dogs, pigs and even dragons run roughshod over the data.

China’s apparently frightening drop in exports in February—down 20.7% on the year—is a classic example. Western countries follow the Gregorian calendar, but China’s most important holiday follows the lunar calendar. In turn, the shifting weeklong Lunar New Year holiday makes year-over-year comparisons of economic data in January, February and sometimes even March tricky.

In 2018, the Year of the Dog, the holiday fell on Feb. 16, the second-latest Lunar New Year in the past decade. That meant more of the distortion in early-year trade data was pushed into March: February exports in 2018 rose 44.5% from a year earlier, but March exports fell 2.7%.

This year, the holiday came on Feb. 5, meaning most of the impact was in January and February. That huge base effect from last February largely explains the stomach-wrenching drop this year.

None of this is to say Chinese exports are doing well, it’s just the magnitude of the drop that is off. The combined January and February data give a more-accurate picture. Exports in the first two months of 2019 were 4.6% lower than a year earlier, similar to December’s pace of 4.4%.

Weakening growth in Europe is one factor: January-February exports in yuan terms were up 7.5% on the year, significantly slower than double-digit growth rates in mid-2018. But the trade conflict with the U.S. is now really starting to bite. January-February exports to the U.S. fell 9.9% in yuan terms. Exports to Southeast Asia, however, rose 7%—implying some rearrangement of supply chains to avoid U.S. tariffs, suggests ANZ. Chinese stocks opened down sharply lower following dreary news overnight from Europe, and dropped further after the trade data released midmorning.

The overall picture is of China starting to feel real heat from U.S. trade pressure—but not in utter collapse as the headline figure implies. Still, things will likely get worse before they get better: China’s manufacturing purchasing managers index still shows new export orders trending down.

In 2018, Chinese exports proved resilient. The real dog days, unfortunately, are still ahead.