You Don’t Make A Deal Until…
- Posted by Leigh Drogen
- on December 15th, 2010
You don’t make a deal until it’s in your interest to do so. Most people naturally understand this concept when it comes to business. We don’t go around cutting deals with each other for the heck of it, to make friends, or just doing deals to do deals. No, we make deals when it’s in our interest, when the status quo is less attractive, when fighting with a competitor is less advantageous.
Why then do people have such a hard time understanding that the same holds true for relationships between individuals, and states. That was a rhetorical question, the answer is pretty obvious. People naturally believe we all have some type of greater good spirit in us, that we all want peace, cooperation, and for each other to succeed.
I’m sorry to burst your bubble, but it just ain’t the case. People, states, and businesses do what’s in their best interest. But remember, as I make my case here, what’s in their best interest sometimes means cooperating with an adversary, not destroying a competitor, or acting in the spirit of the greater good.
You might be surprised to learn that a large portion of my study of war theory and international relations was geared towards conflict resolution. We rarely fight wars for the sake of simply killing each other, we just don’t, we fight wars for honor and treasure. Wars fought for blood are expensive, and often don’t produce a positive return in the honor category. It’s hard to convince your people that their sons will die in order to simply kill someone else’s. As most actors are rational, a simple calculation usually prevents this from taking place.
But states do fight wars, and they do choose animosity over peace because in certain instances it’s in their best interest, be it in the pursuit of honor or tresure. At the end of the day though, we understand that peace is in the best interest of us all. Although peace is not necessarily the natural inclination of a specific party, understanding how and under what circumstances two parties choose to go that route is extremely important. Only through understanding why we choose to make peace, can we attempt to move one or both parties in that direction, through any number of means.
I spent a lot of time leaning why states in different situations choose the paths they do. What situations are normally present when two parties choose peace over war, or a defacto state of war, and when two parties are more likely to choose a more animus path.
The topic at hand here is a hard one to talk about, once again, because people’s minds are usually made up before you can even make your point. Beyond that, people don’t normally like to read the words on the page, their minds often mold your words to support or refute their own beliefs. It’s mostly for this reason that I don’t like writing about this topic, although it is one of my favorites and one that I have extensively studied.
Tom Friedman wrote an Op-Ed the other day titled “Reality Check“. He makes the case that the United States is taking exactly the wrong path when it comes to producing the correct environment needed for both the Israelis and Palestinians to make the calculation that coming to the negotiating table is in both their interests. Tom is right to some extent, but I think he misses the bigger point here. So before you move on through my piece, go read through his. This is an important aspect of what is taking place and I wouldn’t be brining up this topic if Tom’s piece wasn’t an important read.
First of all, I feel bad for Tom, he seems generally frustrated. We’re all frustrated Tom, no one, and I mean no one likes the situation these two parties find themselves in. Even those on both sides which would like to see the other wiped off the face of the earth for good don’t like it. This is the reality of a defacto state of war. The status quo is not fun, it’s not peace, but it’s not let’s end this thing for good all out war. Of course the latter doesn’t really exist in the region now does it, no war will ever bring about a lasting peace, it’s just not possible given all of the elements at play. So like the rest of us Tom is frustrated and looking for someone to blame.
Enter the United States. Tom, like many out there, believe that the United States is not only responsible, but has the hard and soft power to make a peace deal in the region a reality. This couldn’t be further from the truth. The United States, due to it’s own relationships in the region does not, nor has it ever had the power to bring these two sides to the table. Yes Tom, our dependence on Saudi Arabian oil is a part of that, so is our relationship with Egypt, or Jordan. Going beyond political pressure from other sovereign states, we lack the credibility when it comes to the extremely heavy stick that would be needed in order to coerce both sides to the table. The United States has never and will never be prepared to show significant military force within the region save for the possible extinction of either side, and even then, Nixon refused to send a carrier strike group to the Mediterranean to help Israel during the Yom Kippur War in 1973 when they were on the brink of being overrun. You can’t force two sides to make peace, unless they both make the decision that not listening to you would be worse.
So let’s go back to why two parties choose to come to the table and make peace. In essence, it’s due to their belief that they have more to gain through peace than through continued conflict. It’s a rather rational exercise. Tom writes, “I understand the problem: Israeli and Palestinian leaders cannot end the conflict between each other without having a civil war within their respective communities.” Yes Tom, that is a problem, but it’s not THE problem. You need to go deeper, why are there such large factions within each party that believe peace is not the right course of action? And I’m not talking small minorities here, in certain cases those who would choose war over peace are a tiny fringe voice, that’s not the case here. Neither side can come to the table and talk peace with any honesty when such a large portion of their constituency does not believe it is in their best interest to do so.
And there in lies the central question. Why are there such large groups within each side that believe they stand to gain more from the status quo than they would from making a real deal? That wasn’t a rhetorical question. This is where the real work is done by the diplomats and political scientists. How do we work to change the equation so that peace is in the best interest of both sides? We are failing miserably at this, we choose to bang the two sides heads together in hopes that at some point they will magically kiss. Sorry, this isn’t a fairy tale.
Tom tries to make the case as well, to both sides, that their current course of action is against their best interests. Maybe it is, maybe it’s not. What’s more important though is what they believe, not what we believe. You don’t think the Israelis know that they have a demographic issue on their hands, please. You don’t think that the Palestinians know they are never going to get a real state without putting down the guns, please. The governing bodies (or lack there of) on both sides have come to the conclusion that peace is not optimal to the current situation.
Let’s take this in another direction. It’s possible that one side has come to the conclusion that peace is optimal to the status quo. They may come to that conclusion from a position of strength, or a position of weakness. This is also known as surrender, at some point one side may capitulate and choose to accept the outcome determined by the other party in return for the cessation of hostilities. Again, not likely in this scenario, especially when you are dealing with one side waging a guerrilla war.
When you think about two sides in a conflict always remember that peace isn’t the first or natural outcome of the situation. Peace is just one outcome and it must be won, either through concession or the mutual belief that every other option isn’t as beneficial.
The Israelis and Palestinians aren’t ready for peace. We can keep dancing around singing this song that both sides should come to the table and talk, but honestly, where is that getting us? Large shifts within both parties need to take place in order for a real deal to take place. When each side believes there is less to be won by fighting than by talking, they will talk. And I do believe there will be a day when this happens. Until then Tom, stop banging your head against the wall.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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