Actions have consequences, and those consequences, or reactions, change the world, often in surprising and unexpected ways. Whether we act on the spur of the moment or after long consideration, pondering the likely outcomes of one decision or the other, once the deed is done it is out of our hands. Power and force do not always win the day; adaptability and agility often gains the upper hand in what otherwise seems to be a hopeless situation.


This seems to be the case with the war in Ukraine. An invasion that was supposed to have all falling before it, with Kyiv capitulating to Russian superiority – or welcoming the de-Nazifying liberators – did not work out quite as planned. I will not dwell too much on a conflict that has led to so much death and suffering, but instead point to another conflict, that of the weaponising of energy. There was panic as the conflict started as mainland Europe, long reliant on Russian gas suddenly faced a shortfall in LNG, and one it could not replace immediately. Russia continued to restrict the flow until it  gradually turned off the taps, in some cases – if the Scandinavian security forces are to be believed – violently by blowing them up. Europe had a big problem.


But if this was intended to bring Europe to the negotiating table, or at least make them more accepting of Russia’s actions, it backfired. Europe – surprisingly, especially one imagines for Mr Putin – united, and decided to find different solutions to the problem, and different sources for its energy. The crisis has passed, and the price of energy, and of LNG in particular, is now lower, not only lower than it was at the time of the invasion of Ukraine but as low as it has been for over eighteen months.


According to Pierre Andurand, a star trader in the natural gas markets, Putin’s big mistake was cutting gas exports to Europe last year, as although he succeeded in driving prices higher temporarily he had underestimated Europe’s ability to adapt. As he told the Financial Times “I think it was a massive miscalculation over who had the leverage…Russia has lost its biggest customer forever.”


You can trace the origins of his mistake. He felt that Europe – in the imagined death throes of western decadence – would be divided by the conflict, and individual states would fragment into small puddles of self-interest which could be dealt with one by one. The arrogant, nationalist echo chamber around Mr Putin saw the end of western dominance in many places without thinking that this was confirmatory bias feeding their own prejudices. Countries obsessed with individual rights, wokeism, stolen elections, feminism, led by women or effeminate statesmen would fold as real manly action, from real men, with real guns and real power, would take their place in history, and right the wrongs of the past. Instead these same weak countries united in the face of aggression, and – expensively it has to be said – found alternative solutions. Underestimating your opponent, or worse assuming that they will act in line with your prejudices is as bad a mistake as you can make, politically, commercially, militarily and diplomatically.


John Boyd, a US air force colonel with combat experience in the Korean war knew this. Of the many things he is famous for is both his talent in aerial dogfights and the OODA loop (a good guide for competitive broking tactics if you ever have the time). But it is not just his writings on military strategy that are inspiring but his other ideas as well. One short – and dense – paper that he wrote called Destruction and Creation discusses how to be truly innovative and adaptable. He argues – I think, it is dense – that only by destroying, or perhaps deconstruction is the better word, can we break things down into smaller parts and create new things, and new ways of doing things. By splitting things into smaller parts we have a bunch of as yet unrelated concepts. From that we can create new general concepts.


Of course the markets do this all the time. In the search for profit we cannot rely on how things are done – and have always been done – to be sure of a return. In fact once the rough edges of a new way of doing things have been knocked off and smoothed away, the very efficiency of the concept loses its profit making ability because other people take up the innovation and change it and use it different ways. Nothing stays the same. As Boyd says elsewhere, once a plan is put into action it becomes obsolete, simply by others becoming aware of it.


But the search for profit is very single minded. In institutions, organisations, companies, schools, wherever human beings gather together to do stuff, politics comes into play, and by this I mean in the way that Aristoteles describes man as a political animal. It is part of who we are; we cannot survive as a member of the species without living socially, without relying on other people. This means that other considerations – ambition, affection, greed, generosity and a whole lot of other things – affect decision making and action. Boyd’s thoughts on the power of group think and progress in institutions (and in fact how he lived his life) are recorded too.


“Tiger, one day you will come to a fork in the road and you’re going to have to make a decision about which direction you want to go.” He raised his hand and pointed. “If you go that way you can be somebody. You will have to make compromises and you will have to turn your back on your friends. But you will be a member of the club and you will get promoted and you will get good assignments.” Then Boyd raised his other hand and pointed in another direction. “Or you can go that way and you can do something – something for your country and for your Air Force and for yourself. If you decide you want to do something, you may not get promoted and you may not get the good assignments and you certainly will not be a favourite of your superiors. But you won’t have to compromise yourself. You will be true to your friends and to yourself. And your work might make a difference. To be somebody or to do something. In life there is often a roll call. That’s when you will have to make a decision. To be or to do? Which way will you go?


This leads to two conclusions: change comes from being in the world i.e. things that change you, but also comes from our own actions to think and do things that change not only the world around us, but to ourselves as well, knowing that sometimes this change may be uncomfortable and bring unwelcome effects.


Russia’s invasion of Ukraine was certainly action – on a massive scale – and immediately shook many markets out of the complacency of their assumptions. Disaster loomed. But the invasion didn’t go to plan, mainly because the reaction expected – from Europe in particular, but also from other countries – didn’t occur. The very weaknesses that were perceived in western democracies – too much thinking, discussion, infighting – proved to be their strengths as they adapted swiftly to a new situation. Russia assumed a different state of being, and therefore their subsequent actions would be different too. By being threatened they didn’t fold, but found different ways of doing things, ways that have made them stronger, more agile, and less dependent on, well, abusive relationships. It has been uncomfortable, and the worst is by no means over as resilience will lead to other actions by Russia.


There is a lesson here for businesses and dare I say it for us brokers as well. Power and aggression, much admired but also destructive in its way, is not the only way of doing things.  An attempt to control – or worse, coerce – markets will never entirely succeed, because markets are by their nature based on lots of different opinions and decisions, and need this difference so the market can function properly. Be being continually threatened by power and aggression may lead to less powerful competitors coming up with different ways to find success, and continue to be in business.


There is a difference between accepting how things are and going with the flow and doing things that change the flow itself. Both are important. Our actions will always lead to consequences, and subsequent reactions, and this is the way life goes on. Being and doing are both important, but having the wisdom to know the difference is paramount.


Best regards,
Simon Ward