Invest Like the Best with Patrick O'Shaughnessy
· Darren Farber
[00:00:00] S1: Winning is politically defined. The Strait of Hormuz was open before this contingency at the end of the day, and so if all we get is the Strait of Hormuz back open — strategically, was the juice worth the squeeze, for lack of a better term? I would argue that you've degraded an enormous amount of Iranian military capability, which is what the department's internal FRAGO, their order, was to do, and so you have degraded that. But the Strait of Hormuz as an economic choke point has to open back up in order for commerce to work. We're sitting here today, the strait's functionally closed. The economy's still ripping here in the United States markets. You have high inflation, but the conventional wisdom is that America can withstand less pain than the counterparty. There's this hybridization that happened in certain parts of the Shia Muslim world through the works of Shariati, which is a hybridization of Marxism and martyrdom together — absolute control of an environment. And to say if you martyr yourself, you're winning, you're ascending. It's such a satanical philosophy because it promotes internal destruction and sacrifice to the limit as evidence that you're winning. We were talking right before we sat down — Gaza has been leveled by any stretch of the imagination. There are still elements of Hamas operating, but have they won? In their mind, in that Shariati form of Red Shi'ism, they're winning. You can bring people to the precipice of their own destruction, and in that ideology, that form of religious ideology, they're winning. You're going to have to bring an enormous quantum of hurt. And the challenge with democracies is how much of our moral rectitude will we compromise in order to achieve the political goal if we don't feel the existential threat sitting here today in New York. That is tough. There's the Taylor view of flexible power, of this proportional response to threats, and then there's the Eisenhower school of massive retaliation. I love Kotkin because he talks about how if you don't know history, everything is unprecedented. The Japanese had a martyrdom culture that they memorialized into their force structure through kamikaze. They would chain people up in trees in Okinawa. Why did we drop two bombs on them? We dropped the first bomb — enormous mass destruction.
· Darren Farber, Patrick O'Shaughnessy
They refused to surrender, and they were prepared to fight to the death. We dropped the second bomb, and it was only Emperor Hirohito that broke the tie. If he didn't break that tie, if he said continue — they would've sacrificed themselves. It's extremely hard with a martyrdom culture to have regime change, and then the question is, what are you going to defect to? You need an alternative power structure there to defect to. You can defect from, which is you leave, but to defect to, to get regime change — even if 85 or 90 percent want the regime to change, you need an alternative force structure to do it. The IRGC controls half of the economy, and they have all the guns. They have all of these elements of power. They're very hard to replace. Can you co-opt them successfully between all the assets that they own in Western Europe? They own an enormous quantum of assets in Western Europe. [00:00:00] S0: What kind of assets?
· Darren Farber
[00:00:00] S1: Homes in London, villas, billions of dollars that they've exfiltrated from the country. Abbas Milani has documented this in voluminous detail. He's a wonderful scholar on the topic. But think of the average Iranian — the limit at the ATM is seven dollars. That's how much you can pull out. You had the second-largest bank fail about two months before this recent contingency. Milani calls it a mafia-style regime, and it's true. The quantum of corruption is absolutely enormous. Dictators are enormously strong and enormously weak at the same time. This is actually a good frame for our entire conversation, which is to say we have to be able to hold two competing ideas in the same vessel, and both can be true. A dictatorship can be enormously weak because they're illegitimate. They haven't been tested. They only have to be stronger than their strongest opposition, and opposition is outlawed, and so they're weak. At the same time, they're strong because they control the apparatus of the state. This is the cauldron that you have and the people that you're fighting. There is a growing body of evidence that suggests that Ayatollah Khamenei martyred himself. He allowed himself to be above ground and to be targeted to die to solve a whole series of problems. He killed potentially 30,000 or 40,000 of his own people. He was sick, and succession was unclear, maybe there would be some infighting. Martyrdom in the Shariati school of Red Shi'ism is this beautiful solution. He was sick and ill, and so there's a growing body of evidence that suggests he wanted to be killed. These are the adversaries here. Winning at the limit in the way we think of it, in almost a documentary for World War II — is really hard, but we experienced that in World War II as well. The bombing of Dresden — there was this horror that we would firebomb a city and kill 30,000 people under the premise that they have to know that they lost. This is what happens when you deal with fanaticism. It makes you question the kernel of your moral fiber as a democracy, and you have to go really far. The analog with Israel and Hamas in Gaza is a perfect example. Israel has annihilated Gaza. It has been leveled. You can't say that Hamas, from a technological standpoint, has any kind of military capability compared to the Israelis. It's like comparing a toaster oven to the sun.
· Darren Farber, Patrick O'Shaughnessy
In order to win it, look how far they've had to go. I don't know if Netanyahu has the support in the Knesset for the purposes of doing this last leg in the ground war, but it's what's necessary for his condition of winning. You have to have a design on a concept of positive propaganda. Propaganda has a bad connotation to it, but it's just… [00:00:00] S0: Marketing.
· Darren Farber
[00:00:00] S1: It's marketing. It's your political worldview. Israel has just not spent the calories on it. So the question is, should they? I believe the answer is yes. In a finite pie, how much of the pie should they spend on it? It's not immaterial. Their adversaries are spending enormously on it because it's working. The martyrdom culture, because it's hybridized with religion to create a higher form of fanaticism, allows you to run for so long. The design to co-opt American universities can be traced to a single hotel room in Philadelphia by the FBI, listening with laser microphones. Where, after the Oslo Accords, the Palestinian Authority with Arafat is brought in, and Hamas is considered left out in the cold. They go to Hamas. They say, "Guess what? You're not in this deal." This is a political organization with no home. They laid out in this single conversation that the FBI has transcripts of, their plan to co-opt universities and co-opt university teaching and institutions, for the express purposes of changing Western opinion over the course of 20 years. Bezos has attributed the quote that if you have a seven-year plan, you win, because most people give up. These guys had a 20-year plan, and it totally worked. To make it seem like it was this natural formation out of the ether, through moral will, is to dumb down the sophistication of what these people in the Muslim Brotherhood and Hamas set out to do. They set out to do this. They were so committed to it, and they saw it through. We're talking about people advocating for a society that brutalizes their own people and denies their rights. You have a series of people advocating for them that would be denied those same rights there. It was done with intent. It was by design. This administration is moving the goalposts in the popular vernacular of what winning means. My view is if you have the strait open and you have a degraded Iranian military capability that can't reconstitute itself very quickly through oil profits, then that will be a win. If it can quickly reconstitute its export network of terror and the strait is closed, then strategically it will be a failure.
· Patrick O'Shaughnessy, Darren Farber
[00:00:00] S0: What do you think will happen in the strait? How would you describe the state of things today and the options that the rest of the world has, or we have, going forward? What do you think will happen? [00:00:00] S1: In practical terms, the rest of the world — we're there, and then we have the Iranians, and there are foreign-flagged and commercial vessels there. But no one else is there in practical terms. It's just us, and the rest of the world is really, to a large extent watching, save for the Gulf Arab states. The amazing thing is the Gulf Arab states have a much stronger will to fight. UAE has left OPEC. That's kind of big. They said they will participate in projecting force with their own forces. That's pretty big too. They are very concerned that we will lose our will to fight by virtue of whatever economic pain in the interim basis it generates. But the concept of overcoming the blockade is going to need more magazine depth, more forces in the region. We're going to need an amphibious force on the shore for sure. That is a major escalation, and that's where Taylor's theory and Eisenhower's theory begin to merge. [00:00:00] S0: Can you describe those two? It's such an interesting history.