The Newsletter You Didn't Subscribe To - Penguins

Your daily dose of nonsense - Monday, 10 August 2020

If you liked this, consider subscribing and forwarding. If you didn’t like it, consider forwarding it to someone you don’t like.

Penguins

Source: Hiroya Minakuchi/Minden Pictures via Hakai Magazine

Source: Jessica Stafford on Culture Trip

Source: https://www.besttime2travel.com/st-kilda

When do you decide to cooperate?

Let’s say that you run a lemonade stand selling bog standard lemonade. Your neighbour, seeing your business success, later also decides to run a lemonade stand, also selling bog standard lemonade. So you are the more established incumbent, and you now have a new competitor.

Let’s also assume that your neighbourhood is big and friendly enough that it’s not a zero-sum game, i.e. just because someone bought from your store today doesn’t mean that they won’t buy from your neighbour’s store later in the day. And given that you are just lemonade stands, there are no de facto competition or antitrust issues.

Let’s also assume that both your stands are not in a place with overzealous governance, unlike this 5-year old girl who was fined £150 for not having a business permit for her lemonade stand.

One day, both of you discuss cooperating with each other. Maybe it’s printing flyers (marketing), or sharing recipes (intellectual property), or could be anything else. Do you decide to cooperate with your neighbour?

Let’s say that you know exactly how much both of you would make with and without cooperating. Here’s scenario 1:

In this case, both of you would have an equal percentage gain, but you gain more in absolute terms. This is extremely favourable, and you would likely choose to cooperate.

In Scenario 2 below, the outcome is less favourable for you than in Scenario 1, but you are still better off cooperating than not. You would also be likely to cooperate:

But what if we cut it a little bit closer? Let’s say in Scenario 3, you would still be better off cooperating, but by cooperating you are pulling your neighbour up to your level.

This might be hard for some of us to decide now.

All sorts of questions might go through your head now. What if from this point on, it is a zero-sum game? How long would we cooperate for before either one of us backstabs the other?

Now let’s reframe the question printed on the heading of this section - “If you are a country, when do you decide to start or stop cooperating with other countries?”

This is hell a lot trickier to decide. You don’t have perfect foresight (you don’t get neat tables like those shown in the scenarios above); you have pre-existing relationships, agreements, treaties and history to consider; and not all costs and benefits can be summed up into a price tag (e.g. cultural influence, defence, etc.).

If you are a lemonade stand owner(or any other business), any disputes could potentially be ironed out with the authorities or the legal system. But when you are a country, when you have disputes, you have to iron them out bilaterally or via the World Trade Organisation. But there is no third party to enforce things for you. You could probably impose economic sanctions. But ultimately, countries can resort to the classic “I have a bigger stick than you” strategy as a means of persuasion.

US decides to pull troops out of out Germany

Once upon a time, the world was split into two major spheres of influence (technically, there was the neutral “third world” too, but let’s ignore that). The US was on one end, and the Soviet Union on the other polar end. The Soviet Union had 15 republics (hence the full name of the Union of Soviet Socialist Republics) and the Warsaw Pact. 

That’s a huge bloc. There is always a fear in the US and its allies that this was large enough a security threat and there was always a risk that they would invade, and win.

So the US and its allies decided to cooperate militarily and formed this club called NATO. NATO members believe that if everyone contributed 2% of their national Gross Domestic Product to military spending, they collectively might have a stick big enough to deter Soviet/Russian aggression.

Sounds like a good deal, innit? But what if someone reneges on the agreement? What if you perceived and felt like other members are freeloading off your hard work?

In 2014, the US spent about 3.7% of its GDP on the military. Germany, on the other hand, spent about 1.3%, which is below the 2% agreed spending number. Here’s the full chart of NATO member’s spending below:

Source: NATO press release

As a consequence, the US has decided that Germany wasn’t pulling enough of its own weight, and therefore, shouldn’t enjoy the benefits of the collective defense, and will pull out 12,000 US troops stationed in Germany. 

On the other hand, Poland, which spends near the required target, will get an additional 1,000 troops.

Now, is the US pulling troops out of Germany a wise move? One can argue that even if Germany hasn’t spent enough on its military, NATO as a whole would still benefit more collectively than having each country having no military allies.

But then again there are poor communities in the US who might argue (and more importantly, vote) that the money spent on other countries could be put to better use back home. Below is a chart of 2019 poverty rates in OECD countries - the US has the 4th highest total poverty rate:

Source: OECD poverty data

If you were in the US’s shoes, what would you decide to do? Tough choice, innit?

The US, TikTok and the tech landscape

So undoubtedly you might have already heard about the predicament that is TikTok, which goes something like this:

• TikTok is owned by a Chinese company;

• Some people in the US fear that it can be used to spy on them;

• TikTok is almost banned in the US;

• Microsoft, a US business, is going to make it American;

• The US government gives Microsoft until 15 September to make that happen.

Oh, and it’s not just TikTok that the US government has a problem with anymore - WeChat is now also gonna get banned too.

On the 5th of August, the US Department of State set out guidelines to effectively remove the Chinese government out of its technology landscape, including:

• “... ensure untrusted People’s Republic of China (PRC) carriers are not connected with U.S. telecommunications networks”;

• “To remove untrusted applications from U.S. mobile app stores”;

• “To prevent untrusted PRC smartphone manufacturers from pre-installing –or otherwise making available for download – trusted apps on their apps store”;

• “To prevent U.S. citizens’ most sensitive personal information and our businesses’ most valuable intellectual property, including COVID-19 vaccine research, from being stored and processed on cloud-based systems accessible to our foreign adversaries through companies such as Alibaba, Baidu, and Tencent.”; and

• “To ensure the undersea cables connecting our country to the global internet are not subverted for intelligence gathering by the PRC at hyper scale.”

Some might say that this is justified purely on security grounds. Some might say that this goes against free market principles. I think that there might be another angle to this - some might consider it fair to block these Chinese apps given that many US services are blocked in China. Trump has once offered to consider to lift the ban on Huawei if it helped with trade negotiations. Could this be the same thing? Here’s a whole list of sites that are blocked in China; and here are the top 5 blocked sites by impact rank:

Source: Wikipedia

So in this case, is it a net good or a net bad thing to cooperate / not cooperate on technology? I don’t know. Is this a Trump-specific issue? Maybe not - some say that if Elizabeth Warren was to become president, she would be tougher on China. There are even reports of Chinese hackers hacking Joe Biden’s campaign team, as if Biden might be worse than Trump from a China perspective.

Don’t you just love geopolitics. There are no permanent enemies, and there are no permanent friends, just permanent interests.

Edit 1: updated link to 3rd penguin photo.