From Carthage to Taiwan: Lessons on Brinkmanship
A Comparative Analysis for Big-Umbrella Thinking
By Vaughn Woods, CFP, MBA
Across vast stretches of time and continents, human beings -you and I and each living person who is born, lives and dies- is involved with the decisions national leaders make in timeless and recurring struggles over the clash between rising and established powers.
The stakes are high. After all, the pathology of conquer or be conquered is an economic threat. The winners spread their values, their language, their religion to the planet, while the losers are fraught with devastating economic instability leading to hardship. Moreover, the pressure to assimilate with the leading hegemony is sad and intense, even while the losing powers can only sit it out as their citizens live a life of diminished cultural heritage.
I write this analysis to you as a unique gift to my clients and newsletter readers since most everything I have ever written deals with small umbrella thinking, that is, themes on short-term economic thinking. Consider yourself fortunate to live in a world in which the economic system is based upon a set of laws and practices which constitute the agreed upon and audited order of the day. A similar but unaudited market can lead to China’s un-investable status now.
The vast quantity of short-term data, graphs and charts I review each day is what gets me up in the morning. It’s always new. The data implications are full of far bigger ideas, biases and signals for profit or loss than an inexperienced money manager can handle emotionally. The information is part of a larger historic solution set for hegemony and world dominance. The challenge of China as a rising power. Our proxy wars. Military strategy. Pandemic outbreaks. The efficiency and innovation of pharmaceutical companies and semiconductor manufacturers. Each represents an action and reaction function, to threats versus scalable profits. These threats are not new. The face-off between ancient Carthage and Rome is remarkably similar even with modern nuclear deterrence and our digital age of speed and efficiencies. To whit, let me introduce you to the third century BC.
We do not find China facing off against the U.S. in the straights of Taiwan. Instead, we find Rome in a face-off with Carthage over the Sicilian Straights.
Time: the 3rd century B.C. Place: Sicily and the Straits of Sicily. Where: in a Mediterranean world about to witness the clash of civilizations. Who: a young and audacious Rome against its adversary, the mighty Carthaginian Empire. In the end: three wars were fought by land and sea over 118 years for the ultimate prize, nothing less than dominance over the known world.
Fast-forward millennia, and a similar drama now unfolds. Today’s rising giant is China, fueled by booming industry and technological ambition. The reigning titan is a watchful United States. Both powers find themselves fighting over more than regional influence and shipping lanes. They are fighting over ideological and economic schemes, world currencies, digital administrative order, religious controls and social dominance. In other words, whether the CCP will remake the western world, to its advantage. Both sides are building up military forces to win if force is viewed as the only and last strategy forward.
At the heart of this tension lies Taiwan, a self-governing island that produces 60% of the world’s computer chips including over 90% of the most advanced ones. This makes Taiwan nearly irreplaceable and highly vulnerable. As one of the world’s most valuable companies, Taiwan Semiconductor sits upon a precarious technological future being a potential battlefield poised to ignite a conflict with consequences not just for the Asian-Pacific, but the entire world.
What will the Chinese Communist Party do about Taiwan? Fearing it could be cut off from the most advanced chips, China is spending billions to steal Taiwan’s crown. Or it could take the island, as it has repeatedly threatened to do. The problem now for China’s military is that high-end semiconductor chip production relies upon a web of economic ties and electronic components. These are components that could be cut from international supply chains unresponsive to the CCP.
In his final address to the nation as U.S. President in 1961, President Eisenhower warned that the growth of the U.S. military and its military industrial establishment could endanger democratic ideals, and lead to profit-driven motives, which could overshadow other national interests. In other words, the profit trail of a nation funding a massive defense industry could distort our national policy priorities.
Sixty plus years later, defense spending now accounts for nearly half of U.S. discretionary spending. Typically, it’s only about one-third of the annual federal budget. The U.S. is the number one spender on the military in the world. China is second but holds the world’s biggest army and the world’s biggest navy (that is by sheer number of ships). This build is a definite threat to Taiwan.
Should China attempt to assert control over Taiwan, a modern-day conflict involving advanced weaponry and global supply-chain disruptions could have far more devastating and destabilizing effects than the standoff and later wars between Rome and Carthage. Will history repeat its bloody course, pushing the United States and China into a catastrophic confrontation reminiscent of Rome and Carthage? Or can both sides navigate the simmering tensions, avoiding a clash that neither may truly win?
Lesson from the Punic Wars -A Modern Echo
Here’s how current US actions bear some resemblance to Roman tactics, both past and potential.
Debt-Fueled Growth: Deficit spending can spark economic expansionary interests. Rome’s heavy borrowing (particularly during the second Punic War), to finance campaigns against Carthage put a massive strain on Rome’s finances. Both the United States and China have taken on deficit spending to advance their interests setting up the long road pressuring taxpayers.
Technological Restrictions: Denying China advanced AI chips, mirrors the concept of denying a rival strategic resources. Carthage controlled important trade routes, forcing Rome to develop alternative strategies at a time when Rome was already worried about Carthaginian expansion. Proxy skirmishes for Rome and Carthage escalated, ultimately evolving into full-scale war.
Economic Resilience: Outperforming China during China’s real estate recession is like Rome’s determination to withstand Hannibal’s onslaught. Today’s stock market advances signify resilience and support the view that the U.S. is invincible. Just what an established power needs to teach an aspiring hegemonic power who is still in charge.
Calculated Diplomacy: Communicating with China while upholding Taiwan’s autonomy could be compared to Rome engaging in treaties with Carthage it had no intention of ultimately honoring. This buys time and potentially allows for additional strategic positioning.
Champion of Ideals: Supporting democracy in Taiwan mirrors Rome’s presentation as a defender of republics against an expansionist, autocratic Carthage. This bolstered regional support for Rome.
Naval Presence: Displaying military force in the South China Sea is akin to Rome asserting dominance in the Mediterranean – demonstrating power and a refusal to back down from vital waters.
Market Manipulation: Asserting the untrustworthy and unaudited status of Chinese stocks as an uninventable zone is like Rome’s strategy to undermine Carthage as a greedy and untrustworthy nation, thereby destabilizing their economic prowess.
Industrial Policy: Encouraging manufacturing outside of China parallels Rome’s development of alternative supply chains and production centers outside of Carthage’s sphere of influence.
Targeted Sanctions: Both President Trump and President Biden have continued to apply sanctions against Chinese exports. In like manner, Rome negotiated treaties with regions and cities against Carthage prohibiting or limiting trade with Rome’s enemies. Sanctions aren’t always about money but about control. This is how Rome weakened the Carthage economy, by reducing access to key resources.
Advanced Warfare and Proxies: Emphasizing military superiority through direct and indirect confrontations is reminiscent of Rome’s eventual decisive campaigns, showcasing might that Carthage could not match. Nevertheless, proxy wars in history tend to lead to full-scale wars.
Additional Thoughts and Lessons
One cannot go away from the comparisons here without recognizing the size of the prize, that is, world domination! When Rome finally defeated Carthage it controlled trade routes, currencies, influence, culture, economic systems, and hegemony for the next six hundred years! With world dominance at stake, the prize is sufficient to require both sides to do whatever it takes to win. For this reason, expect long-lived strategic pressure and conflict.
Never Buy the Idea of a Short-lived War
The naval superiority of Carthage and their quick dispatch of previous foes lead Carthage to view the conflict with Rome as a quick one-and-done campaign of success. Rome also viewed their victories against Carthage as evidence of a short-lived conflict. Both fought each other for the next one hundred plus years.
Against All Chaos and Wars Companies Want to Grow
The Dow Jones Industrial Average enjoyed long-term growth over the cold-war period. The cold war between the United States and the Soviet Union lasted some 46 years. In 1945 at the beginning of the cold war, the Dow Jones Industrial Average stood at around 160-175. In 1991 it ended the year above 3,100. Note to self. Stay informed but remember America’s standing in the world and nuclear deterrence changes everything. Diversification is the best strategy today as it was during the Punic Wars. Wealthy citizens of Rome and Carthage stored wealth regionally as well as locally.
AI Versus Elephant Insights
Just as Hannibal’s war elephants instilled both awe and fear across his opposition, AI disrupts conventional thinking. Unexpected uses emerge, creating winners and losers amidst sudden shifts. Rome had to rapidly adapt tactics to counter elephants, just as today’s businesses might completely change in response to AI. Those who stay rigid could lose ground swiftly.
Elephants weren’t simply a battlefield novelty; they opened new logistical possibilities for Hannibal’s movement. Likewise, AI might allow solving previously considered ‘unsolvable’ problems by brute force computing power.
Elephants were a discrete tech tool to which Rome could (if barely) devise countermeasures. AI fundamentally impacts every part of human activity. Its full influence isn’t as neatly contained.
Comfort is the Enemy
The use of elephants in the Punic Wars and AI are not equivalent, but both reveal that comfort is the enemy. Entrenched leaders clinging to ‘how things were done’ falter during times of sweeping change. In fact, unpredictability reigns through the ages. Remaining flexible and diversified is key for most all strategists. Expect unforeseen uses to emerge. Those strategists in war or in investment management which are quickly able to capitalize on the tool of agility are best able to draw on corrective actions.
Final Analysis and Summary
Today’s geopolitical arena is far more complex than the ancient world, making direct comparisons imperfect. Nevertheless, we can draw several important lessons from Rome’s ultimate victory over Carthage. It was hard-won. It was costly. It remained unpredictable for a very long time. It pressured the citizenry of both empires to pay for it. To the winner it was worth it. No one speaks Punic today. It is a lost language with no power to influence.
It leads us to appreciate scalable corporate strategies that deconstruct their operation over the planet to keep Chinese copycats at bay. The importance of a disassembled international set of alliances to separate design, manufacturing, supply-chain deliveries, and retail alliances is a part of that war to stay ahead of Chinese domination interests.
The fact that the President Trump implemented tariffs against China and President Bident upheld and maintained these tariffs is telling. The world is not moving away from global economic expansion. It is reorienting the supply chain much the way Rome used agreements with its neighbors to weaken Carthage. The stakes of selecting, implementing, and changing strategy as needed are high.
Just as the ancient powers of Carthage and Rome struggled to predict the future amidst the swirling currents of the Mediterranean, so too, do modern investors grapple with uncertainty in the global marketplace. Both historical actors and contemporary investors operate with incomplete information, limited time frames, and the ever-present influence of emotions. In both contexts, understanding broad thematic trends becomes crucial for navigating complex situations. For the Carthaginians and Romans, deciphering trade winds, political alliances, and military capabilities formed the backdrop for strategic decisions. In the modern world, investors analyze economic cycles, geopolitical shifts, and technological advancements to inform their investment choices.
However, even the most insightful analysis can only go so far. In both the ancient world and the modern financial landscape, seeking guidance from experienced professionals can be invaluable. For the Romans, trusted advisors like senators and military commanders navigated the intricacies of diplomacy and warfare. Today, experienced portfolio managers have a deep understanding of financial markets and investment strategies. Good ones possess the knowledge to navigate complex financial instruments, economic cycles, analyze market trends and develop tailored investment plans that align with your specific goals and risk tolerance.
If I sound like I am touting my expertise and knowledge allow me the privilege. I’ve been at this a long time. I am as excited as ever to get out of bed and meet the challenges of the day. If you know someone who, like yourself, could benefit from what we do daily, do not hesitate to have them contact our office here in La Jolla. 1-858-454-6900.
All the best to you as ever,
Vaughn L. Woods, CFP, MBA
Vaughn Woods Financial Group, Inc.
2226 Avenida De La Playa
La Jolla, CA 92037
858-454-6900
Investors should be aware that there are risks inherent in all investments such as fluctuations in investment principal. Past performance is not a guarantee of future results. Asset allocation cannot assure a profit nor protect against loss. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Views expressed in this newsletter are those of Vaughn Woods and Vaughn Woods Financial Group and may not reflect the views of Bolton Global Capital or Bolton Global Asset Management. The information provided is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. VW1/VWA0297.
Sciencepress.com
Bbc.com
The Fall of Carthage: The Punic Wars 265-146 BC” by Adrian Goldsworthy
Hannibal’s War: A Military History of the Second Punic War” by J.F Lazenby
Livy’s “History of Rome”
Polybius’ “Histories” (also available translations by Evelyn S. Shuckburgh