Grey-zones
There is no such thing as war or peace — both coexist, always. — Sean McFate, The New Rules of War
If the United States is black and China is white, Europe is a grey-zone.
What is the grey-zone?
The grey-zone is where adversaries deal, trade, negotiate, steal, spy, apply pressure, and exert power. It’s a space that both provides cover and creates buffer. Operating in the the grey-zone is a critical piece of the next two decades of statecraft, diplomacy, war, and technology.
The European grey-zone is changing. Today it looks like this:
- economic coercion in Lithuania (China-Lithuania)
- human smuggling through Belarus (Russia-EU)
- ethnic divisions in Kosovo (China-NATO)
- visa-free travel from Hungary (US-Russia)
- sanctions evasion in Armenia (Russia-US)
- election interference in Moldova (Russia-EU)
- banned film in Russia (Russia-US)
- info warfare in Sweden (Russia-NATO)
The future of the grey-zone looks different. It’s hard to predict how much it will change, but one thing is definitely true: technology is at the center.
Said differently, if diplomacy is black and war is white, technology is the grey-zone of the next two decades. Future grey-zone tactics in Europe will look like this:
- synthetic entertainment to deploy misinformation
- re-direction of climate migrants
- targeted mild health issues
- design of new technical standards
- hair-trigger covenants on infrastructure lending
- (programming) language politics
- sovereign space launch capacity
- AI-blamed unemployment
- water scarcity and control
- patent alliances
Technology is front and center, and that means that scientists, technologists, investors, regulators, and even customers are part of it.
(As an aside, this is unique because governments’ control wanes, which they don’t like. In response, we see things like a renewed industrial policies, protections on capital flows, and new legislation.)
What role do investors play in the grey-zone?
They’ll fall into one of four categories:
- The Crowd: The vast majority will be unwitting participants, unaware when grey-zone competition intersects with their investments. Business as usual.
- The Readers: Some will study each side’s incentives, constraints, and levers, and make informed bets on technology. Make the right bets.
- The Analysts: Astute observers will anticipate external maneuvers such as regulation, legislation, press campaigns, and financial control, and invest accordingly. Make the right bets at the right time.
- The Movers: Some investors will actively influence regulation, legislation, press, and financial rules. They will ramp up lobbying efforts, influence public opinion, bring in the best talent, and seed narratives to promote the investment themes they believe in. Make the right bets at the right time, and help create the house rules.
I think somewhere between Analyst and Mover is the right place to be.
In the grey-zone, being a Mover seems great at first, but it’s a high-risk strategy. First, the opportunity cost of being wrong is high. Tons of wasted effort, and possibly even against your own self-interests if you’ve read the situation incorrectly. Second, there’s an information gap: do The Movers really have better information on a particular regulation or pending law than anyone else? Possibly, but not always. In fact, this is more of a circle than a line: the gap between Mover and Crowd is really just one good influence operation.
I think the most successful investors in the grey-zone will be those that are default Analysts, occasionally spiking as a Mover.
Winning in the grey-zone
Smart players use these grey-zones to pressure, distract, tax, exhaust, to create bargaining chips, to force adversaries to a negotiating table, to shift cultures and public opinion, to cause doubt or over-confidence, or dangle tempting wins that are in fact pyrrhic victories.
Winning the grey-zone doesn’t mean winning each discrete contest, but instead using them to gain an advantage in the larger competition. Only after many years can you see that the grey-zone moved inch by inch towards the ideology of the winner.
Ultimately, I believe grey-zones are useful. Grey-zones are slack in a system, and for systems in tension, slack is a good thing.
