What Investors Can Learn from War

Unveiling the Power of Narratives in Geopolitical Conflicts and Investments

When it comes to conflicts, the instinctive reaction of many is to hope for a peaceful resolution based on dialogue and compromise.
However, it is not always the case that the interests of a population align with those of its ruling class.

It is common practice in politics, and beyond, for leaders not to proclaim what they truly think, but rather to say what is pleasing and generates consensus.
Thus, ruling groups may not be genuinely interested in peace, as maintaining a state of tension can stabilize or strengthen their position.

A conflict, whether real or threatened, tends to unite the population, discourage dissent, and consolidate the power of the elites.
On the contrary, peace encourages the desire to improve one’s condition, which could pose a threat to those in power.

How is this tension created and maintained? Through narratives.

Narratives are powerful tools used to shape public opinion.
Elites manipulate reality perception by constructing a “unified enemy,” attributing all misfortunes to an adversary.
Generalizations like “all Israelis are Zionists” or “all Arabs are terrorists” are examples of such manipulation.

Without enemies, the ruling class, especially if of poor quality, would risk losing their position.
Thus, maintaining high tension serves to conceal the weakness of their positions, allowing them to govern for extended periods while pursuing their interests.

Implications for Investors

Investors need to be aware that, just like in geopolitical conflicts, there are conflicting interests in the investment world.
The main conflict is not between banks but between a bank and its client.

A total war between banks might benefit clients but would reduce overall system profits.
Therefore, a certain level of tension is preferable, avoiding a cutthroat competition.

Understanding the narrative that conceals the conflict of interest between a bank and a client is crucial.
It portrays a non-existent alliance between the bank and the investor, despite the actual conflicting relationship.

For instance, claiming to offer 1000 different mutual funds implies impartiality and an alliance between the advisor and the client.
However, if the client knew about differentiated kickbacks among funds and the bank’s ability to steer the consultant towards a specific fund based on remuneration, the perception would change.

By grasping these dynamics, individuals can identify areas for better managing their wealth.
Recognizing and delineating conflicts of interest is key to neutralizing narratives and making informed investment decisions.