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Trading Lessons

Greece Have A Little Faith In Blotto

Politics / Eurozone Debt Crisis Feb 05, 2015 - 10:17 AM GMT

By: Raul_I_Meijer

Politics

What, Greece again? Sorry!! But I see a lot of things flash by that make me want to say something. Today it’s the alleged 180 that Syriza made on debt reduction, before that it was their alleged kow-towing to Brussels on Russia sanctions, and tomorrow it’ll be something else again. It’s all media formatted bite-size and pre-chewed chunks, but the Greece-Troika stand-off is anything but.


I have a ton and a half of respect for David Stockman, who earlier this week wrote‘Greek Finance Minister Yanis Varoufakis has the weight of history on his shoulders’, but I’m sorry, I can’t agree with that, Dave. Yanis, who I only know through the occasional recent email exchange, if he has any weight on his shoulders, it’s that of the Greek people. And it’s the weight of their future, not their history.

Stockman also hints that Greece should leave the euro, and perhaps that is true, I would certainly tend to agree, but that doesn’t mean, even if Syriza agrees too, that today is the day they should go public with it. A Grexit may even be their endgame, but focusing on it now could well backfire. After all, a Grexit could come in many different shapes.

I have confidence that Varoufakis and his people have thought this through, and thoroughly, and that they have a – longer term – strategy that not many people will be able to comprehend. A quality all good strategies have. And the other side has no such strategy: they have never entertained the idea that they could lose, so why strategize? Goliath never figured he needed one either.

There are many good willing and smart people who tend to see Syriza as the executioner of what they themselves have long felt needs to be done, and there’s nothing wrong with that. But that doesn’t make it real. Syriza’s first priority is to drag their own, Greek, people, out of their misery. And that is easier said – and written – than done.

So heaping more pressure on them beyond their first goal of alleviating the poverty of the Greek people is perhaps not very wise, not if you want them to succeed. I already said a while ago that this is not Syriza vs Europe, it’s Syriza against Wall Street. That’s a big fight. And who else is actually fighting it, other than in words? Not many. Don’t underestimate the extent to which Syriza’s success – for their own people – also depends on support from outside Greece.

So my take is tone it down a tad on your opinions – after 10 days – of what Yanis and Alexis should or should not do. See, I don’t see Yanis Varoufakis as someone who would come unprepared. I think for one thing the fact that he doesn’t come all dressed up to the nines for meetings with Osborne et al says he did prepare. You can just feel the likes of Osborne go: how come HE doesn’t have to wear the stiff stuff?

Varoufakis shows that he’s not a politician, but an academic. Which is good. Because EU politicians have all sold out their people, and the Greek people in particular, and they can’t be trusted to come up with the solution, any solution. They’ll just continue to ignore the problem, and eventually the bodies in the street, as long as they can. Re: Eurogroup chair Dijsselbloem and his ‘much progress has been made’. They have no ideas, they just have religion. And very little conscience.

And I think the Syriza crew has been preparing for this day for a long time. For most people it may look like they were born yesterday, but they were not. Still, after a little over a week, everyone has an opinion based on what has been achieved. Whereas, when you think about it, it should be clear that this thing was always going to take a long time.

And for long-term battles, strategy is pivotal. I see Syriza sowing confusion through seemingly contradictory statements (debt reduction vs no debt reduction, Russia sanctions vs none), I see good cop bad cop (in those same statements), and most of all I see game theory, Prisoners Dilemma and Colonel Blotto. These things are valid. And they’re not surprising given Varoufakis’ game theory background.

And Yanis is of course right when he says that they made no U-turn on the debt, there are simply more ways than one to get what you want. In politics, when push comes to shove, it all comes down to semantics: ‘Can I sell this to my voters’?

The ‘other side’ went into this convinced they would be able to dictate all the terms all the way. They’re less certain now, though still bustling with brute force hubris, so confusing them is a great tactic. Temporary till they figure it out, but good every time you do it again. Never let ‘em know where you are or what you think. Texas hold ‘em on the big stage.

This is especially important because the battle will be long, with many protracted skirmishes. And Syriza knows that. One of the first things they said when elected is that they wouldn’t talk to the Troika inspectors. Instead, they want to talk to EU, the CB and the IMF separately. Today they suggested bringing in the OECD as well.

Varoufakis and Tsipras are on separate tours of Europe, talking to leaders and finance ministers in Italy, France, Britain, soon Berlin, and probably other nations. And Varoufakis visited Draghi in Frankfurt today. Justin Fox:

In Colonel Blotto, adversaries allocate troops across multiple fronts. Whoever has the most troops on a particular front wins that battle, and whoever wins the most battles wins the war. If each side goes to war with the same number of troops, Colonel Blotto is a frustrating game that no one can reliably win. If one side has more resources than the other, though, things get interesting. It turns out the weaker side has a clear interest in increasing the number of fronts.

To illustrate, consider a Colonel Blotto game where one side has 50 soldiers and the other 33. If there is only one front, the outcome is certain – 50 is more than 33. If fighting expands to three fronts, the stronger side can still achieve certain victory by allocating 17 soldiers to the first front, 17 to the second and 16 to the third. The weaker side can win one front, but then wouldn’t have enough troops left to win either of the other two.

Spread things out over five fronts, though, and this certainty vanishes. If the stronger side simply puts 10 soldiers on each front, the weaker one can win by allocating 11 troops to three fronts and none to the other two. Every other possible allocation by the stronger side can be beaten as well. Most of the time it won’t be – it’s still better to have 50 soldiers than 33 – but for the weaker side a hopeless effort has been transformed into one that can succeed.

I’d say, have a little faith. There’s not much else you can do for now anyway, since you’re not in their shoes. From where I’m sitting, Syriza ain’t doing half bad. They got more media attention over the past week and change than the Kardashians (well, not in Texas or West Virginia), which is necessarily a crucial element of their campaign. They need the European people’s good will, The Germans, Italians, everyone. They already have the US president’s.

Go Blotto!

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)© 2015 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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