Odd Lots - How a Geopolitical Analyst Predicts the Outcome of War

Episode Date: July 10, 2025

For investors, geopolitical risks are always lurking as a factor that could upend trades for obvious reasons. When war breaks out, it's crucial to have some kind of understanding of what it will mean for various markets (such as oil or grain) and how long the conflict can persist. But is there any way to analyze these things scientifically? Many people are paid by investors to try to do exactly this. On this episode, we speak with Andrew Bishop, the global head of policy research at Signum Global, about what he does, and how he attempts to forecast the future. We use the recent conflict between Israel and Iran (as well as other sources of global tension) to get a better understanding of how he goes about forecasting, how investors use his research, and what he sees going forward. Read more:Israel Is Now Peerless in the Middle East and MarketsIsrael Emerges Stronger From Iran War, But Risks Blowback Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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Bloomberg Audio Studios, podcasts, radio. Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Allaway. And I'm Joe Wisenthal. Joe, do you ever experience a sudden surge

in geopolitical analysis emails in your inbox? Yes, I do. You know, it's funny. most years, people are like, oh, what do you, you know, at the beginning of the year, end of the year, things are going good. And it's like, what do you concern about? It's like, I'm concerned about geopolitical tension. It's just one of these cliches. That's a classic. That's what I always say when I have no. It's like, well, things seem fine, but I am concerned. But then some years, clearly geopolitical tension, war, etc., is very real. We recently saw the bombing in both directions between Israel and Iran. That seems to be paused for now. but sometimes geopolitical attention becomes outright geopolitical hostility. Yeah, that was definitely one of those weeks when we both got a lot of emails. Yes.

I have a confession to make, which is I read all of those geopolitical analyses, but I always kind of wonder what I'm supposed to do with that information. Yeah. You know, if I were a major professional investor, if I'm reading a note about what is the base case for like Iran versus Israel, I am not entirely sure how that influences my own decision making. Well, I would say I would take it even a step backwards and say like, you know, when we talk to Wall Street analysts, say a Fed forecaster, I have a sort of, I think, intuitive understanding of how they, they're like, oh, there's going to be three cuts in the next year. And then I generally have a sort of intuitive understanding of how they might arrive at that.

Okay. We look at statements from the Fed about what they're looking for in terms of, of achieving disinflation. We look at the trajectory of the U.S. economy, and then we say, okay, we combine the Fed statement, their sensitivity, et cetera, the reaction function. That's the term I'm looking for with the data, and then we arrive at a forecast. When it comes to something like a war, I do not really have an intuitive understanding of how the geostrategic or geopolitical analysts whose notes flood our inboxes from time to time, always during bad periods, how do they arrive at conclusions, therefore X, we think the war is going to end this way. I do not know how that

can be done systematically. And yet people try. And actually, some of them put numbers, probabilities on specific outcomes. So I think if I was a geopolitical analyst, I would just put 30% chance on everything. That seems reasonable. Yeah. So it used to be that if you were unsure but wanted to sound smart, you say 6040. But these days, you say 7030 is the new 6040. That's right. That's right. I don't want to be cynical about it. I am curious about how one could derive a number from things that seem wildly uncertain and rare because there are not a lot of event studies. And every war is distinct. And therefore, the idea of trying to accurately assess the outcome of some conflict strikes me is very difficult.

Yeah. Well, I am very pleased to say that we do, in fact, have the perfect guess to talk about geopolitical analysis and how it actually is calculated, I guess, or pre-referralized. We are going to speak with Andrew Bishop. He is a senior partner and Global Head of Policy Research at Signum Global Advisors. So, Andrew, welcome to the show. Hi, thanks for having me. Why don't we just start with what is Signum? So Sigmum is a political and geopolitical risk advisory firm that was founded in 2018 by a gentleman named Charles Myers,

who was the vice chairman of Evercore ISI before founding Sigmund. And Charles had a career in banking with a focus on emerging markets, but was all always sort of one foot in U.S. politics as a fundraiser, as an advisor to candidates, et cetera. And he founded Sigmundum essentially to try to meld his instincts about how markets work with his knowledge about U.S. politics. And from there, he hired me to help build out the sort of global analysis beyond the U.S. So I think I started first becoming aware of your commentary recently because Ozan Tarmann, who we've had on the podcast over at Deutsche Bank, he started forwarding some of your notes over. And so then I started reading the stuff and it was like very interesting

and compelling. But why don't you tell us, okay, you explained what Sigmundam is. What's your background? How do you develop an expertise in these areas? So I joined Sigmund from Eurasia Group, which is sort of the, you know, the founding house of political risk. I was there for four years. I first joined Eurasia because I'd met Ian Bremmer through a previous job at the World Economic Forum, so the Davis organization. And I joined as sort of right-hand man to their chairman, Cliff Kupchin, who really taught me a lot in that firm, in that role. I ended up as deputy head of research.

And several of the things that I learned from Cliff were, for example, not getting overly excited by every new headline, right? So I think especially when you're at the beginning of your career. Good advice for everyone. Yes. I mean, to me, the best example of that is the zero-hedge type headline about how the first gas contract was denominated or settled in the euro instead of dollar, you know, or just the bricks more generally.

I started working when I was 22. I'm 39 now. The bricks have had a glorious future for, you know, almost 20 years. So that was one of the things. The other thing that I learned from Cliff was good analysis, like basically the key is to have a rigorous and analytical process. And even if you get the call wrong, it's better to have good analysis and a call wrong rather than the other way around, right?

Because otherwise you could just be throwing darts and you'd be getting a you know, 50% right half the time, right? Which, by the way, gets to this question of what you mentioned on the probabilities, it's actually harder than just throwing darts or flipping a coin because most situations have far more than two scenarios, right? So it really is a very, very difficult thing to do to predict all geopolitical outcomes, which I'm sure we'll get to. But just to close off on, you know, sort of background, I joined Eurasia from the World

Economic Forum. And the job I had there was really fun because essentially, you know, the, the organization is best known for Davos, but the team I was in, which was their global risk team, basically send their team members throughout most frontier and emerging markets to meet with government officials, get a sense of where their head was at in terms of their country's sort of economic future, future economic policies, et cetera, then meet with the opposition and the business community and think tank community and essentially write up scenarios about the future of that country at a sort of 10 to 20 year outlook, not trying to get it

right, not trying to predict it, but trying to essentially force the country to think twice about its business model. As you can imagine, a lot of these were resource-dependent countries, and that led to some pretty interesting situations. Like one of the projects we worked on, for example, was about the future of Ukraine, and that was in 2013, 2014. So the project was literally interrupted by the Maidan Revolution. Half the people on the board of the project and half the people we interviewed were either fleeing or put in prison. And I remember we were doing a panel to actually introduce parts of the findings in Davos. And the prime minister of Ukraine, his plane was, he was basically disinvited on the day that the panel was taking place.

So this plane was circling over Zurich, not being allowed to land, not being allowed into the room. You know, similarly, we had back then, he was an MP, Petro Poroshenko, who later became the leader of the country, smuggled in a grenade from the Maidan revolutions into the conference hall and sort of held it up to show how, the brutality of the regime was working. So it was a really great way to get firsthand exposure to frontier markets. Yeah, that is definitely firsthand exposure. I'm not sure how I would feel being in a conference room or like a big hall with a grenade. I'm hoping it wasn't live, but who knows? Okay, Andrew, one thing I wanted to ask, and I alluded to it in the intro, is when I get your research notes, if I am a typical client of Sygnum, what exactly am I doing with that information?

Why do I want to get this analysis? So first thing is about 60, 65 percent of our clients are financial investors, right, that Joe mentioned or alluded to. About 35 percent or so are corporates. And they obviously use this in very different ways, which I'll get into. But I think the first topic that you all sort of touched on is this idea, you know, there's a lot of studies that show that geopolitical risk just don't affect markets, right? Like, who really cares, frankly? Oil is pretty much flat from pre-Israel-Iran war. Vicks barely picked up, you know, S&Ps at all-time highs, et cetera.

Obviously, I have a, you know, a bias or I'm rooting for my home team here, but I think that that's a little bit short-sighted for a few reasons. One is most of these studies typically look at S&P in the long-term. And our clients, obviously, are not trading the S&P in the long term, right? They're trading in the short term, and you've got some pretty violent, sharp moves up and down for a lot of these assets. And they're also trading, obviously, more niche assets. So I'm thinking of the travel and tourism industry, or I'm thinking of the oil and gas industry, Israeli Shekel, you know, things that are far more niche.

And if you look at it at that level, you've got some major, major volatility that can be both beneficial or negative depending on how good you are at playing it, which is really what our clients are specialists in. We're not strategists. We don't give investment advice based on the geopolitical research we put out. The other thing is there's this big, you know, talking point. And it was true again last month. There were two weeks ago whenever the Israel-Iran war. ended, there's sort of this like oil collapses, right? And that's a counterintuitive outcome. A lot of our clients were actually expecting that. And so what they were trying to figure out was

when is this going to end, or not end, but when is it going to culminate, right? When is going to be the peak fear level? And that's probably going to be when Iran retaliates for whatever the U.S. does. So again, the fact that it actually drops on the news is not necessarily surprising to most of the folks we speak to. But Tracy, you want me to get into a little bit, how the clients use us? Yes, that would be great. Yeah, I mean, so there's a few ways. The first, and I would say least often and least sort of savvy or useful way, is for the predictions themselves, right? So what I'm saying is basically most clients don't use us for the actual outcome prediction. It's better if we get it right. But if they were only going to use us for

that, they could probably go to prediction markets, right? I think their prediction markets are a little bit overestimated these days, which we can get into, but they're not bad, right? Interesting. Yeah. So that's not the main reason. The main reason that the way that a client put it to me, and this was years ago, and it's stuck, is like they're an F1 driver and we're helping them on the sort of, you know, the training tracks, right?

Like on the training loops before the actual race to literally memorize every single turn and know when they can accelerate, when they've got to cut a corner, et cetera. so that when the events start unfolding, they're already prepared to, you know, hit the brakes or accelerate, depending on what's happening. The difference here, of course, is that the track is not fixed. But the point is, you know, in a situation like Israel, Iran, you've got multiple calls, right? Or multiple, call basically just means prediction. You've got multiple situations. So you've got, is Israel going to strike? Then you've got the question, okay, so we know they're striking. It's all over Twitter, et cetera. Is this a shot across the bow or is this the big one? Is the U.S. actually going to

get involved after 12 hours? Is Iran going to retaliate forcefully or in a, you know, symbolic way? Is this war going to last three days or is it going to last three weeks? Is the U.S. going to get involved at that point, you know, and so on and so forth? And so they're not, like most clients don't expect us to get every single one of those calls right. I mean, that would be insane. What they want is for us to lay out arguments that are not necessarily just convincing, but that help them do the mental gymnastics around all the possible outcomes. And then, of course, it's better. if you get it right. Wait, I have a very short, quick question. Do you see anyone in your clients who are actually in the prediction markets looking for opportunity there yet? Because some of these

are getting to be big size, or do you see this as a future growth area for you, people looking for mispriced contracts on the prediction markets? So you mean clients that would actually be putting on trades? Yeah. You say there's 40% of X happening. The prediction market is 60%, maybe there's an opportunity. Anyone doing that yet? So short answer is that I'm aware of no. Okay. And the main reason is still liquidity despite the fact that it's getting bigger, as you say. What's really interesting, of course, is that that would disintermediate the market's reaction function. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real,

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I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today wherever you get your podcasts. So I'm looking back at a note. This is just a random one that I'm found in my inbox, but there were several that I read in July. In June. By the way, I should say we were recording this on July 1st

and given that the world is an uncertain place by the time this episode comes, and I don't know the exact date. Who knows what's going to happen by the time you're listening to this? But I'm reading a June 16th note, and you gave these odds, 20% preemptive Iranian capitulation, 45% Israeli mission accomplished, followed by Iranian capitulation, 25% chance US intervention, and 10% Iranian nuclear breakout surprise. What do you go, give us through your thinking in the middle of June, how you arrived at some of these numbers. And then, given where we are today on July 1st, how did you do?

or what surprised you or what didn't surprise you and talk about sort of where you were then and where you are today? So the first thing is Tracy was asking about how do we describe probabilities? I could give you a fancy answer about Monte Carlo simulations, et cetera, but the reality is neither we nor as far as I'm where anyone in the sort of market actually models this stuff. And the few that do use predictive analytics rather than historical data. And the reason is there just aren't that many case studies to go off of, right? So let's just get that out of the way.

So the way we use probabilities, and I'll absolutely answer your question about that specific case study in a second. Sure. But there are three main ways that I think the probabilities can be useful. The first is if you're drawing out scenario trees and you're assigning probably, you know, before you publish, right, you're assigning probabilities to various sub events before getting to the total cumulative outcome. Basically, if the math doesn't add up, that can highlight a problem in your logic.

It's not a math problem. Who cares if the math doesn't add up from a mathematical standpoint. But if you end up with above 100 or below 100 or whatever, that means that you're probably overstating one aspect of the dynamic or understating another. That's one. A second that can be quite interesting and problem, you know, not problematic, but useful for the user, is clustering, right? So we had a recent scenario or a recent situation with an election, I think it was in Uruguay,

where the base case was perhaps market constructive. but if you aggregated all the non-based case scenarios, you actually had a more likely outcome of a market negative bottom line, right? So those are a few of the ways. Now, the way that I would approach a situation like the Israel or Iran one is basically break it down into an equation. So if you're trying to answer the question, is the U.S. going to intervene in the war and bomb for it out, right? Yeah. To me, the odds of that would be you start with 100 and then you take out whatever,

the odds are that Iran is going to capitulate at the diplomatic table. So, you know, we can talk about how you can come up with that view. But the idea is, are the Iranians going to take the diplomatic off ramp that Trump is giving them on that Friday in Geneva, right? So those odds might be low, but they're not zero. So you get to, say, 20%. Now, that leaves you with 80%. Of that, the question becomes, is Israel going to basically finish the job on its own, right? i.e. can the Israelis destroy Fordow on their own, either through bombing without the most advanced bunker busters or through a ground operation like they conducted in Syria the previous November, which is something that I and a few others had on their radar. And if they can't, then presumably the president will intervene, right? Now, you were asking about scoring myself. That's a perfect example. Those odds get you below 50% of U.S. intervention. You on top of that have to add the fact

that the president might want to intervene even if he doesn't have to, right? Because you might see political opportunity and being associated with a victory. And that's the part that in this instance, for example, I'd underestimate it. Now, where it gets really interesting, and I'll stop here, what gets really interesting is even if your take is that the president is actually not dying to get involved and that he doesn't really see this as a big opportunity and you therefore only ascribe it, you know, whatever, 30% odds, you're still going to end up above 50% overall. So that can tell you that because there are so many ways of getting to an outcome, you can get tips over 50 without it being your modal scenario.

And same with odds of regime change. You can get regime change through a palace coup. You can get regime change through Israeli bomb. You can get regime change through a revolution. Our base case was that there would be no regime change in Iran. And I think that's what played out so far. But the point is you've got to compound all those odds because they're independent variables. Okay.

You have the probabilities. I get that the way you just laid it out. was very clear. But how do you actually come up with, I guess, the range of scenarios? Because that's what seems practically unlimited nowadays. And also, you mentioned Trump just then. In Trump world, I kind of feel like anything is possible, right? Like, there are a lot more tail risks out there that now seem, you know, plausible in various ways. How do you take into account the unpredictability of anything can happen, and then how do you actually confine yourself to this is a set of realistic scenarios that I'm going to talk about?

So first thing I'd say is to me, that's one of the reasons why prediction markets aren't that useful yet, and especially to clients. They can actually be ironically more useful, I think, to the analyst than to the recipient or user of the final product. And what I mean by that is the prediction markets will tell you where the tariff level is going to end up on July 31st, right? But what if the cutoff that's relevant is not July 31st? What if it's, you know, a completely different date because Trump is visiting, like, let's say that it's a ceasefire in Gaza and the cutoff date is Trump's visit to Saudi Arabia or whatever.

So the point is the rigidity of the prediction markets, and it's a tradeoff, right? Because the reason they do in that way is so that they can be easily falsifiable and you can compare predictions, et cetera. But that rigidity, I think, narrows the value. So then to your question on how do you even frame the frame the issue. That's a major problem for Trump tariff situations indeed. So if you take July 8, for example, you can't really, and we've, you know, we've struggled with this. Everyone does. It's hard to make a call on whether he is going to escalate or postpone his deadline because there are 60 countries involved. So first of all, you theoretically would have to make 60 individual calls, right, or predictions. Second thing is,

what if he says, you know, we're escalating in the tariffs, but they're kicking in on July 15th? Is that a punt or is that him actually having increased the tariffs and so on and so forth? So, I mean, the short answer, Tracy, is there is no perfect way of doing it. And that's actually been one of the issues with Trump is that framing the initial question is almost as hard as predicting his behavior. Trade, ironically, is one of those situations, though, that we've had a pretty good track record with. So I'm happy to talk a little bit about how we've tried to, like, get into Trump. Trump's brain, if you want? Please.

Yeah. So there are a few things. So the first is you can observe patterns, right? So Robert Armstrong had sort of this huge success with the taco label. That was amazing marketing. But I have to say we were a little jealous because I think you wrote that in early May. And in early April, we put out a table with basically every one of the Trump threats. I think there were like 23 or so.

It doesn't matter if you don't market it. It's all about that acronym. Anyway, keep going. I was waiting for the invite. So I think Trump had backed down in 21 out of 23 threats or something like that, right? So the first thing is you can identify patterns. And in fact, actually, truth be told, we ran that same study at the very end of his first term as well. And the takeaway was very, very similar.

The question, I think, was he going to be tougher his second time around, right? But the point is you can identify patterns. So Taco is one of them. Where it gets complicated, though, is, you know, it's almost like the economist or Time Magazine cover phenomenon. by the time the taco thing came out, whether it was from us or from Armstrong, it was already fading. It was already getting arguably less true. Because if you look at the pattern of Trump's behavior, on Jan 20, he had made a bunch of threats against Mexico, Canada, China, et cetera. He completely

let them go, right? Nothing happened. He didn't even mention them on Jan 20. Then he postponed them to February 1. He went one step further. He actually signed the executive orders. But nothing happened. Then March 1 comes around, or March 4 rather, and he actually implements the tariffs, but he walks them back after a day. Then April 2 comes around and he walks it back after a week on rest of the world and a whole month on China. So the point is there are patterns, but you've got to constantly be reassessing them because the rule that worked yesterday may no longer work today, right? A second question is, or principle, let's say, is we've been very, we've tried to be very nimble and not have a grand theory, right? So this gets a little bit

to the whole like Phil Tedlock, Fox versus Hedgehog, like not be too attached to grand ideas, but look at each prediction individually. One of the things that's really driven me crazy is this narrative that Trump's trade approach is all about China, right? That is totally accurate over the course of four years. It is totally useless in the short term, because if I told you that Trump's trade policy was going to be all about China, which in hindsight is correct, right? China's got a 45% tariff. Everyone else has a 10% tariff. But if I told you that on January 19 and you were, you know, running a hedge fund, you would have been very, very that the first three months of the Trump administration were all obsessed with Mexico and Canada.

Basically, this whole China lens would have been useless up until April. So that's a second thing, is trying not to take an overarching view, but look at it individually, and try to figure out what's he after in this specific case. So, you know, the best example is if you think he's after tariff revenue, then he's by definition not going to back down. You can't get revenue if you're back down, right? And the same country can be affected by completely different motivations or, you know, confrontation. So Mexico in the first three months was affected by fentanyl and immigration concerns,

which were pretty clearly, I mean, it's always easier to say in hindsight, but pretty clearly transactional. Like Trump just wanted to be able to say that he had done something about those issues. The way that Trump is going to approach Mexico in Q4 this year to try to get them to do USMCA revisions and open up their energy market and change their rules of origin on auto sector issues, that's going to be much, much tougher, right? So same country, totally different approach. another is there's this big like talking point you know don't take trump literally but take him seriously we hate that one around here okay so yeah so first of all we know not to take him seriously because of taco or you know signam pre taco but i actually think taking him literally has been reasonably helpful

him and some of his advisors those who repeat his views so people like bess and ludnik they actually don't repeat his views they kind of freelance but if you take caroline levitt one thing that really sort of struck us was I think it was before the February 1 deadline rather than the March 1, but I could be confusing them. She said in that press conference the day before on the Friday, she said there is absolutely nothing that Canada and Mexico can do to prevent the president from signing the executive order tomorrow. Signing the executive order.

They never said they were going to actually implement the tariffs, right? And I know that sounds like a little cute. Yeah, but there is something to that effect. And if you listen to Trump, I think it's quite interesting. If you also look at how his advisors, how he lets them talk, like speak, you know, what kind of leash they're on, they are allowed to say anything, including the craziest stuff, as long as they don't reduce his optionality. Right. So he benefits from them going nuts as long as he doesn't get cornered by their comments.

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And something I'm interested, so looking at the cumulative odds, 20% preemptive Iranian capitulation, 45% Israeli mission accomplished. When you're coming up with those odds, like how much do you really have to know about the size and scale and quality of the respective weapon systems of Israel and Iran? Because ultimately to some degree prior to the U.S. intervention, the question was the degree to which one side's missiles or their missile defense was stronger than the others. So how do you learn about that and how important is it to actually have really high quality? information about each side's arsenals. So that actually gets a little bit back to what is Cignam and who we are. Because I'd say there are different types of shops in our industry, right? There are shops that are based on Intel, right?

So it's like what we're hearing in Congress or I play golf with, you know, Scott Besson or whatever. That's not us. We do access events and a bunch of, you know, really cool stuff. We took clients to Ukraine to meet with the Ukrainian government and get a sense of what post-war reconstruction type policy might do. be, we do that stuff, but it's not part of our research, right? And that's because Intel, in addition to, you know, potentially, if you've got MNPI,

etc., that gets legally dubious, in addition to that problem, it doesn't make for good predictions, right? Because Scott Besson himself didn't know on April 8 whether Trump was going to back down the next day. He knew he was working on him, but he didn't know. Assad was not sure whether he was going to be toppled or not, right? So there's that. And then there are shops that are very focused on country expertise.

So it's like, you know, I lived in Venezuela for 15 years, so here's my take on whether Juan Guido's coup is going to succeed or not. And don't get me wrong, like we've got regional experts. We have a Mexico office with a Mexican guy leading it, years and years of experience in Lanham, et cetera. So it's not that we don't do that. But the point is where we think our value at is on the process. And we've basically adopted like a few principles. One is the Phil Tetlock principle that I mentioned earlier, which is it's not really about who you are. It's how you proceed.

Right? So it's precisely what is your model, like what is your process? And that's where another guy comes into focus, which is Brisbane de Mesquita that a lot of people will know about political scientists, very focused on essentially the logic of political survival, right? Like leaders will always put their own advantage ahead of anything. And that's why, you know, you've got situations where like Netanyahu's never going to agree to a hostage deal because it would risk his coalition. And why would he risk his coalition or, you know, why would he risk his coalition or, you know, why would he risk? losing power just to satisfy Trump. That's where it gets interesting, though, is none of these rules is failproof, right? Because using that logic, one of the pushbacks I got on our ceasefire calls in the past was, why would Hamas ever give up the leverage of hostages, right? And that sounds like a conversation under. The truth is they've given up hostages twice now, right? You've got to stay, like, pretty nimble and humble.

There is no, like, perfect answer, but that sort of process approach can be helpful. Now, to get back to your initial question about, like, how much knowledge you need, you do need technical knowledge, but you don't need to have it in-house. So we don't ever outsource any of our analysis. Like, no one external has ever come up with a prediction for us or written any of our notes. But what we do is we break down a big issue into sub-questions, and then we go out and try to find the answer. And some of that will be an open source. Some of that will be trying to speak with an expert on XYZ missile range. So yeah, the answer is you do need it, but you can break it down and not make it part of your core business model and instead just sort of have it as a research process.

You mentioned being humble just then, and I'm wondering, so, you know, in the Iran situation, you published probabilities and your base case and all of that. And I think events didn't pan out quite the way you expected. What happens when you're just wrong about a particular prediction? So, you know, you've laid out your analysis. Maybe you had a really great way of reasoning around scenarios and things like that. But nevertheless, something happened that you did not expect. What do you do? So there's a couple answers to that.

Well, there's several. The first couple are deflection. The third is the real answer. So one is in any of these situations, you've got lots of different predictions, right? So, for example, we didn't expect that Trump would actually go in and bomb fort out because we expected the Israelis to do it their own. But we were on the right side of the regime change call. We were on the right side of the Hormuz call. We were on the right side of Israel staying away from trying to knock out Iranian oil production, which looked hairy during that first weekend and so on and so forth.

So that's one. The second is you basically have to try to figure out why you got it wrong, right? And from there, you can typically learn something for the next time. So in this instance, for example, I was far too focused on the Israelis capabilities and whether or not the Israelis were going to be able to do this on their own and not focused enough on Trump's appetite to get involved for political reasons. Where it gets really ironic is part of the reason I was of the view that the Israelis would be able to go out and knock out for it on their own is because for the previous 12 months, I've been telling clients the Israelis have the capability to strike Iran on their own and they are going to do it. And it's going to be a bolt from the

blue. I didn't expect it to be exactly when they did it because the nuclear talks were still ongoing. But the point is back then, the big pushback I would get constantly was the Israelis don't have the planes to reach Iran. They don't have the refueling capability, you know, and so on and so forth. And so that gets back to this thing that there is no like one rule that you can like, you know, to sort of one rule to rule them all, right? There is no such thing. You've got to constantly be reassessing. You know, when we talk to economists and market practitioners, You know, one of the terms that comes up a lot is regime change. And I have in this case, I got to be careful. I don't mean literally like the question of whether the Iranian regime changes.

But this idea of like regime change in markets like, does the relationship between bonds and stocks change over time? Or is the Fed an inflation fighting mode or deflation fighting mode? Whatever. Like these are certain relationships change. And I'm curious like there are many people who perceive and perhaps the medium term future that maybe the U.S. Israel relationship, is going to change, that maybe there are parts of growing a louder contingence within the Republican party, and both parties, really, but within the Republican Party that do not want to deploy U.S. military assets or resources in the same way, the same level of support to Israel in the past. And who knows how that is going to transpire? But I'm curious, like, how you think, like,

okay, there's some relationship the two countries might have, but all relationships could change. And if that relationship does change, then it changes the short-term expectation on any given war. And so I'm curious in your process or internally, you think about this idea of relationship regime change. And could at some point down the future, and we don't know when, could some of these alliances or partnerships or, you know, friend relationships change? And then that force a calculation change when an acute event happens. That's a great question. But I would say that there is a pretty big difference. I think, I mean, I'm not in the markets, but I think there's a big difference with financial markets, which is the regime changes happen, but they happen much more slowly.

And so you have a lot more time to bake them in, right? So, you know, you started the podcast by sort of talking about how they're these, like, talking points that come up over and over, right? The world, like geopolitical risk is going to be big in 2025, right? A big one of those is multipolar world, right? Yeah. Or just your world. Like this idea that it's like the breakdown of global order and so on and so forth. So those only happen every 20 or 30 years.

Or that the U.S. may not want to be the hegemon at some point, that it may not have the same appetite to be a global police. And so, for example, you know, the Tucker Carlson wing of the Republican Party very loud against this idea like, why should the U.S. have such a global military footprint, things like that. At some point, that could be a dominant strain of thought. And if it becomes one, we might not necessarily know when the flipping point is. Totally agreed. but going back to how it's a slow process, I think Trump was a really interesting, and literally what happened over the past month

was a very, very good test case for that, right? And the fact that Trump himself, who is known to be not just isolationist, but also pacifist, you know, one can chuckle, but like he does have a pacifist instinct, I think, and pretty stingy in terms of use of American power and use of American money and resources, et cetera. The fact that even he intervened,

I think tells us something about how slow that process is going to be. Sure. Okay. We mentioned cliches a couple of times, and I think this is probably a cliche too. But, you know, cliches can be true. Maybe that's why they become cliches. But when it comes to geopolitical risk analysis, do things feel more difficult to you nowadays versus when you perhaps started in the industry?

Does the world seem more complex? and I guess given the Trump administration and some of the unpredictability that we discussed earlier, do things seem more volatile, more uncertain, and just harder to sort of get a handle on? Yes, I think that is absolutely fair, and it really does sort of echo back to Joe's question in the sense that you take something like the relationship between Russia and China, pre-Ukraine war or pre-2020 version of the Ukraine war. For 15 years before that, there had been an established talking point amongst pretty much all, political analysts, which was it's an alliance, it's an axis of convenience, right? They get along, they work together, but they don't really trust each other. They don't really love each other.

And so you knew that when push comes to shove, when they had to like put their interests above the other, et cetera, you knew which way it was going to go. That was very unclear for the first, like, year. And frankly, some could argue it's still unclear post-Russia invasion, right? Or Ukraine invasion. Are they now in it forever and sort of Russia, basically China is grooming Russia to help it when it goes after Taiwan, or is it still very much an access of convenience where the Chinese might cut off drone inputs to the Russians for the right price if there's American export control lifting or something like that, right? And to your question, Tracy, the fact that so much stuff is changing so fast means that you have even less historical

background or historical data, which, as we said earlier, you're already starting with very, very small data sets, right? And so the temptation there is to kind of just make it up as you go. And that's where things get dicey. Do you think that's possible, like, that China has a price for which it would hold back on Russian access to drone materials and such? So my answer to that would be in a way that one is actually not that hard because even if there were a price, we are so far from being willing to pay that price that it's never going to see the light of day. What's a surprise thing that you think is not on anyone's, radar right now geopolitically that you think we should be focusing more on. This is my way of

soliciting ideas for future episodes, by the way. Yeah, yeah. No, so I actually, I love that question because, but I hope this is not going to be disappointing, but I, it is. I always say, like, the whole Black Swan thing is irrelevant. Like, Black Swans almost never happen. The stuff that blows up in our face is stuff that is visible pretty far ahead, like, not necessarily far ahead of time, but that is pretty obvious, and the difficulty is for the analysts predicting the details, right, like in what month is Putin going to invade or whatever, or what part of Ukraine is he going to invade. And the other difficulty for clients, of course, is how to trade that, right, given that you can

get radically different outcomes. But the events themselves, I mean, there were four or five months of Russian buildup in front of Ukraine. And in, you know, December, January, people were still debating whether it's going to happen or not. And another example is COVID. People talked about COVID as a black swan. I mean, if you read any of those, you know, World Economic Forum Global Risk Reports for the past like 15 years,

pandemics were always top 10, like, or even top five. People knew that pandemics were a major potential business risk. So again, it's more like the details rather than something's going to just pop up in our face. In the next, I don't know, five years, do you expect China to invade Taiwan? Yes. I mean, the word invade is the one that bugs me. Okay. which is not going to surprise you because I think that it's more likely to be a blockade,

for example, than an actual amphibus invasion. So that view, for example, is pretty, I think, banal, right? The problem is, again, from the perception of how do you manage it, one of the things that I think is totally underappreciated is everyone knows that a blockade is at risk, right? But the part that's totally underappreciated is that the Chinese could roll it out literally overnight. So I think what is underappreciated is we're not going to get any buildup. We're going to wake up one morning and it's going to be done. So that's one problem.

A second problem is a bloodless blockade that lasts, you know, three months or six months, that is essentially a continuous anaconda squeeze on Taiwan and the Taiwanese economy could actually be far worse from a purely market perspective. Forget about, you know, normative aspects, far worse than a one-month war regardless of the outcome, right? because it's the length of the disruption for business operations that could be most problematic. So again, it's how you look at it, I think, that they can make a difference. Back in college, I wrote an essay slash dissertation on the chances of China, you know, invading Taiwan or going after Taiwan.

And I think I had my base case was they were going to do something before the 2008 Olympics. So, yeah. So you empathize with the difficulty of timing? I totally do. Andrew, that was fantastic. Thank you so much for coming on all thoughts. Thanks, Andrew. That was great. Thank you.

Joe, there was a lot to pick out of that conversation. I think one of the things that struck me, okay, first of all, you know, he was talking about black swans. And this is something that, to Lebb himself, pointed out at our recent live event, which is we shouldn't really be worried about black swans because they are by their very nature unknowable. We should be worried about the gray swans like a pandemic. I think that makes a lot of sense. Secondly, the emphasis on motivation was really interesting to me because this is something that I have wondered about the tariffs. If Trump needs to have a bunch of tariff deals to have his trade war seem to be a success, then what does that mean on the revenue side? Because he has also talked about how tariff revenue is going to offset a bunch of tax cuts and things like that.

So I do think it's important and I still haven't figured out that one particularly. And then the other thing is he was talking about Trump's advisors. And this is something I hadn't realized, but he's right. The one thing they can't do is limit the president's optionality. Yeah. It seems like they can throw out pretty much any scenario, any response, any possibility that they want, but they can't do anything that would box him or pigeonhole into one position. That was interesting.

Yeah. You know, by the way, just going back to Andrew's note that we kept referencing on June 16th, he had underestimated the odds that the U.S. would intervene as he did. However, to his credit, here were his final takeaways. U.S. intervention is certainly possible, but still not base case. Okay, it did happen. However, he says, likewise, regime change is plausible, but still unlikely. So he was right on that. And then he said, the overwhelming majority of scenarios end in a negotiated Iran capitulation with no meaningful damage done to global oil supply or golf assets. I think that's a pretty good conclusion that at the end of the day, because if you figure people care about the markets and oil supply, more or less a useful conclusion to have been able to make on June 16th. I have to say the speed with which Andrew answered, yes, there is going to be something in Taiwan. It's worrying. I was like, I was hoping that he would hum and haw a little bit about that. And then this idea that's just going to happen to so quickly,

overnight. We're not going to get any signs of it. And then the world is going to change dramatically the next morning in ways that we don't really know. Well, on the other hand, there are people like me who have been saying with great confidence that this is going to happen for a while and it doesn't. So maybe that's some hope for you, Joe. I mean, for me, I mean, for lots of people certainly hope there is not. Anyway, the other thing I was going to. I just didn't like how comfortably he was at. Yeah. In five years, yes, he didn't have seemed to have any doubt. The other thing I was thinking, we probably should have asked this, but the timeframes for things? Because you mentioned regime change in Iran. Like, okay, well,

it hasn't happened, but it's also been two weeks since we had this big, big event that happened. And I don't think it's necessarily off the table. So I'd be curious to figure out how he thinks about like the time frame of possibilities as well. But oh well, we already spoke for about 45 minutes. So we should probably leave it there. Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Allaway. And I'm Jill Wisenthall. You can follow me at the stalwart. Follow our guest, Andrew Bishop. He's at Andrew underscore D underscore Bishop. Follow our producers, Carmen Rodriguez at Carmen Armand. Dashel Bennett at Dashpot and Kail Brooks. For more Odd Lots content, go to Bloomberg.com slash Oddlots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 in our Discord. Discord. g slash oddlots.

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