Why America Cannot Afford to Lose Another War | Marvin Barth

0:00Demetri Kofinas:What's up, everybody? My name is Demetri Kofinas, and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs, and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guest in this episode of Hidden Forces is Marvin Barth, founder of Thematic Markets, an institutional research platform providing macro and geopolitical analysis to professional investors. He previously served as head of foreign exchange and emerging market macro research at Barclays and as chief economist for international affairs at the US Treasury Department during the second Bush administration.

0:41Demetri Kofinas:Marvin and I spend the first hour of our conversation today discussing the ongoing US and Israeli military campaign against Iran, where it stands, how the evolution of the conflict has aligned with Marvin's initial expectations, and the analytical framework he uses to assess U.S. strategic objectives and the incentives that inform the decision-making of its key agents, most notably the President of the United States. We draw historical analogies to previous Middle Eastern conflicts, assess the risks to further disruptions in maritime security and global trade, and assess the evolving incentive structures of the key players involved, including the U.S., Israel, the Gulf states, Saudi Arabia, and China.

1:21Demetri Kofinas:We also explore the broader geopolitical implications of the conflict, including the fracturing of the post-war liberal order, the precarious situation in which Europe finds itself, the possibility of a far-reaching strategic realignment that could reshape America's alliances, its role as the world's dominant maritime power, and as the preeminent economic and military power in the international system. The second hour begins with a psychological portrait of Donald Trump, his reliance on inductive reasoning, his strategic use of misdirection, his narcissism, and what Marvin describes as a genuine ambition to secure his place among the greatest presidents in American history.

2:00Demetri Kofinas:We discuss how the skills that made Trump successful in the private sector and during his multiple candidacies may fall short of what is needed to weather international crises and lead America through this fourth turning, and how his latest antics and his decision to initiate what has thus far been a very unpopular war, is now eating into his political base of support, and risks turning him into a lame duck president before he is less than halfway through his second term. If you want access to all of this conversation, go to hiddenforces.io slash subscribe and join our premium feed, which you can listen to on your mobile device using your favorite podcast app, just like you're listening to this episode right now.

2:41Demetri Kofinas:If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q &A calls with guests, discounted access to third-party research and analysis, and in-person events like our intimate dinners and weekend retreats, you can also do that on our subscriber page. And if you still have questions, feel free to send an email to info at hiddenforces.io. And I or someone from our team will get right back to you. Lastly, because this conversation deals with investing. Nothing we say on this podcast can or should be viewed as financial advice. All opinions expressed by me and my guest are solely our own opinions and should not be relied upon as the basis for financial decisions.

3:25Demetri Kofinas:And with that, please enjoy yet another thoughtful and timely conversation with my guest, Marvin Barth.

3:36Demetri Kofinas:Marvin Barth, welcome back to Hidden Forces. Thank you, Dimitri. It's a pleasure to be back again. You were on the show, was it even a year ago? Around that. I can't remember exactly. Was it after the London dinner or before the... Were you at the London dinner last year or the year before that? I believe it was after the London dinner. So it must have been within the last year, probably eight, nine months ago, because the London dinner was the first time that we met. When were you on Grant's podcast last? It published a few weeks ago. When did you guys record that? Oh, I think that was... Goodness, it must have been right after I published that piece, Alia Iacta Est, which you can actually say what Caesar said in Greek because I can't pronounce it, but that would have been around March 20th or so.

4:23Demetri Kofinas:Yeah, I was going to guess something around there. It seems like it's been almost a month. So I wanted to give people that context in case they want to go back and listen to your previous appearance on the podcast where we will have spoken a bit more about your background than we're going to talk about today. and I also recommend the episode with Grant, which was an excellent episode, as you know, because I also retweeted it on Twitter and said as much. And I think you're also a reader of John Conrad's works. I think some of his stuff has informed some of your own analysis or parallels. I listened to your interview with him.

4:52Great interview. You did a really fantastic job. That was really useful for me.

4:57Demetri Kofinas:Yeah. I can't say that I find his view especially convincing, but we can talk about that. But one of the things I really love that really stuck out for me in that interview that you did with Grant was your comments about Trump wants to be a great president. He wants to be not just a great president, he wants to be on the Mount Rushmore of presidents. Not only on Mount Rushmore, but he wants to be a gilded head on Mount Rushmore. And you don't get to be a gilded head on Mount Rushmore by losing a war. And I thought that was very, very powerful. So I think we'll have a chance to revisit those comments and dig deeper into them when we discuss your methodology.

5:34Demetri Kofinas:But let's just start with, we're recording this on Tuesday, April 14th. Now, I've been doing a lot of these one hour long conversations. I imagine this one will be longer. We have more time that are just meant to bring people up to date, keep me up to date on the state of the war and how it's going. This is going to be about the war, but as I said, I'm sure we're going to go a bit longer here. There will be a second hour. But let's just start with the war. I mean, What is your interpretation of how it's going right now? We are in week, I don't know, six, seven, something like that since Operation Epic Fury began back on February 28th.

6:09Demetri Kofinas:We're still in the midst of a ceasefire, though I don't even know if it's really a ceasefire. We're calling it a ceasefire. Is it really? So I'm curious to get your interpretation of how the war is going and then how your assessment today measures up with what your assessment was a few weeks into the war. Yeah. So let's start in reverse order where I started, which is that as well as I think I've done in predicting Trump. And this is one of the things that Grant and I talked about that I think I've done probably a better job than most people out there in terms of forecasting what Trump's policies would be and how they would play out and looking through a lot of the noise.

6:54and yet still I was caught off guard by this war and I think it's for the classic reason that most people thought about or at least I think most people who were somewhat more open-minded to Trump and by that I don't mean necessarily a supporter but just not in the oh everything he does is stupid and the guy's insane or whatever you know the people out there who have a very clear, strong negative view, and they're not able to see any rationality to anything that he does.

7:25Demetri Kofinas:What is broadly called derisively Trump derangement syndrome. Yeah, Trump derangement syndrome. And I mean, that's why I didn't use that term, because it is somewhat derisive, but I mean, it is a real thing, right? And if you exclude those people, I think most of us thought, hey, the guy campaigned pretty strongly, and this was a key tenet of the MAGA coalition, no foreign wars. Now, I would amend that. I would say if you actually look at the broad swathe of things that he said, it was no more stupid strategic wars, but he never said that. He said no more foreign wars. Vance basically explained for him later when he said the reason that this is different than previous wars is because previously we had stupid presidents, now we have smart presidents, which also sounded somewhat condescending, to be honest with you, as a citizen, to hear the vice president explain it that way.

8:21Demetri Kofinas:But yeah. And by the way, if I may just comment on that specific comment, this is one of the things that really annoys me when I hear people talk about this president or that president is stupid. And that includes the current president talking about his predecessors or the vice president. interview. Look, this is the single most competitive position in the world. Maybe, maybe General Secretary of the Chinese Communist Party is more competitive, right? You don't get there unless you are a uniquely talented and smart individual. Just accept that. Every single person who becomes president of the United States, whether you like their politics or not, this is actually somebody who has some sort of talent.

9:05Now, I'm sure we'll get into what is Donald Trump's particular talent, but to that point, you know, his predecessors weren't stupid. You know, I was in the Bush administration and a lot of people then derided George Bush as being really stupid. And the fact was George Bush had a problem with malapropisms, right? He was constantly saying the wrong word at the wrong time. And the other thing to know about him - And making upwards that didn't exist. Well, yes. But he had a good sense of humor about that. So one of my best friends was in the White House Department of Strategery, and that was its official name given by the president.

9:51Demetri Kofinas:There was also, I don't know if you remember the SNL skit in 2000 where Daryl Hammond was playing Al Gore and Will Ferrell who played George Bush many times on SNL was playing Bush during one of their debates during that election. And whoever was playing Jim Lear, the moderator asked Bush to sum up his campaign in a single word and he used the word strategery. Yeah. And I think that's where the name of the department came from. And it was named ex post after that, that George Bush to his credit, had a great sense of humor, was willing to poke fun of himself and named his internal political strategy department that Karl Rove headed, the strategery department.

10:35So look, the point is, these guys are all very smart. That doesn't mean that they have the right policies, right? And I do think, I mean, you have been one of the most eloquent spokespeople out there on the great strategic mistake that was the Iraq war. And I think even George W. Bush recognized that. One of the things I find really interesting is you talk to a lot of his voters, and they'll say, I liked Bush term one, but Bush term two was terrible. I'm like, no, you got it exactly backwards. Term one is when he made all his mistakes. Term two is when he actually became a president and knuckled down and tried to fix them.

11:20But that was the pattern, right? We had Iraq, frankly, twice because whatever we left things undone, whether you want to see that in 1990 or not. We had this pattern of Libya, Syria, Afghanistan, over and over where we would get ourselves involved in a way that wasn't necessarily strategic to the United States, but bled a lot of blood and treasure. And that's what a lot of people were extremely angry about. And if you listen to the totality of what Trump said on the campaign trail. You don't have to listen to J.D. Vance's ex-post or, frankly, the most eloquent spokesperson in his administration on explaining what's really going on, Marco Rubio.

12:09You can go back and listen to him. Across various speeches, he would talk about these specific issues that, hey, I'm not against going to war. I'm against going to things that, why would we do this? How is this in America's interest? And so I was surprised to say that, but it did make me think, okay, this war is going to be different. So from the very get-go, I was like, the model here is probably going to be Afghanistan, which you've interviewed my friend Dave Kilcullen before. And Dave and I were talking about this right after the war broke out and exactly about this point that Afghanistan was probably the model.

12:52And the reason for that is that as much as we now look back as Afghanistan is this terrible failure, it was actually a massive success until we changed the mission to nation building. That was the original come in with an air campaign, use special forces to help organize on the ground insurgents who already disliked the regime and overthrow it. And they did that very successfully. But then we decided to stick around and turn it into this nation state that we wanted, that educated people. And those are all noble goals, but it wasn't core to American interest, right? And so my suspicion was when they decided this, they were going to go for this model.

13:40And then I started thinking through that and it made me think more and more, look, if this is really in a grand strategic point about one, taking out a committed US enemy, right? So a lot of people like to say, we started this war, the Americans started this war. I don't think that's true. I think Iran started this war 47 years ago. They've been at war with the US for 47 years, the US just hadn't acknowledged it. It is a fact. You can go look up the numbers on this. There is no nation state. I understand some terrorist organizations have done worse, namely Al-Qaeda, but there is no nation state that has killed more Americans in the last 47 years.

14:29And these are documented deaths we can directly attribute to the state of Iran than Iran. More Americans maimed by Iran. And this has been going on for 47 straight years. I think ex post, one of the things we can see from just the fusillade of missiles and drones is that they were very clearly taking the North Korean attack to develop a conventional cocoon that prevented anyone from being able to disrupt their ability to develop a nuclear weapon. And they were on their path to have a nuclear weapon and have ballistic missiles that could reach the US. And given that they are a millennialist entity that does believe that the US is the great Satan and Israel is the little Satan, I don't think you could discount the idea that the US would actually be threatened by them someday.

15:35So given the circumstances that developed and there's a whole, we go into exactly how this is there, but there was an amazing opportunity to finally decapitate this entity. Just the coincidence of a lot of different things. And so I think they saw that. They decided to go do that. But my firm conviction has always been they're not going to be their donation bill. They would love to have an Iranian revolution that takes over and turns into a friendly American state in this dream state if they got lucky enough for that to happen. But their stop loss, if you want to put it in financial terms or investor terms, is they are perfectly happy to walk away and leave it a smoking wreck that is a civil war as long as the Islamic Republic doesn't exist anymore.

16:23And that's been my view all along. All right.

16:27Demetri Kofinas:So let's dig into some of what you said, and then we'll have a chance also to talk about or to model the incentives of the US government. So first of all, I do think it's an odd comparison for me to compare Iran in 2026 to Afghanistan in 2001, primarily because Afghanistan Afghanistan was a failed state at that time. It didn't have the institutions or the national cohesiveness of Iran. So it wouldn't immediately seem obvious to me why that would be the appropriate model to think about how the US would go about approaching a war with Iran. Why is it that you, and it sounds like also David felt this way.

17:07Demetri Kofinas:So what is it that you feel like made that an appropriate analogy? Well, I think it's the method of attack, not necessarily the state. Bombardment coupled with allying yourself with other domestic factions, the Kurds were floated as one early on in the war, but there are others. Yes. The Kurds, the Balokis, the Azeris, they have multiple independent insurgent movements there. The state has firm control over its territories, or at least has before this war. We'll see if that's still the case. I think that's to your original question, where are we today? That's a really interesting one. But Afghanistan was already in the process of civil war.

17:47Demetri Kofinas:It'd been dealing with civil war for what, two decades before the US war with Afghanistan? Exactly. In this case with Iran, if we were to do that, we would plunge them into civil war. And that doesn't seem to be in the US's interests. Certainly it could be in the interest of Israel as a better option than the status quo prior to February 28th, but why would civil war in Iran be in US interests? So look, as I mentioned, I think their ideal circumstance is that the Persians who had shown a strong disaffection for the government before the war began, there were other reasons why this was a particularly unique time to attack, but that was a big one, right?

18:27There is clearly a significant dissatisfaction with the majority Persian population as well. So I think their ultimate, if you were to say, what would have been the best outcome they could possibly hope for is that they remove the apparatus of the state and the Persians rise up and a friendly government that likes Israel and likes the US, i.e. like Iran before the Islamic Republic, rose up. That's their best case.

18:59Demetri Kofinas:Yeah, but we didn't really have any basis to hope for that, did we? I mean, this seems like the Ahmed Shalabi equivalent of trying to pin our hopes on the son of the Shah. I mean, it really, I didn't see it any differently. What would I be missing? Oh, okay. I would say that's very different. You're absolutely right to chastise the Bush administration, the Washington establishment for following Shalabi in that case, right? Because there was no evidence that he had any real following in the country. There is evidence of widespread dissatisfaction with the Islamic Republic in this case, and that people don't want that.

19:37Demetri Kofinas:I mean, I would say that that was also the case for Saddam, though, right? I mean, besides the non-Kurdish Sunni minority that supported him, that was filled primarily with Ba 'athists and loyalists and decreed, I would say that he was more unpopular than the Islamic Republic or the IRGC or the Ayatollah in Iran. Fair point. And by the way, the various groups kind of split the way that they had geopolitical leanings for. So obviously, to your point, the Sunni Arabs were not happy to have the Americans come in and take away their monopoly of power, even if they weren't in the inner circle of Saddam, the Kurds were very happy.

20:22They've been staunch US allies throughout. And of course, I think somewhat predictably, the majority Shia South, of course, aligned with Iran. I agree with you that it would be foolish to think that this was the outcome that you should do. And that, I think, is a crucial difference here. The Bush administration made the mistake of thinking this would happen. Now, by the way, I should speak up for one person in the administration who's typically really maligned and ultimately I think is in a large part responsible for the disaster in Iraq. But in retrospect, he probably had the right idea and that's Donald Rumsfeld.

21:08So, one of the problems you had in Iraq that was commented on frequently was that the US did not have enough troops there to nation build. But that was precisely because Donald Rumsfeld thought that was an idiotic idea.

21:27Demetri Kofinas:Well, he was committed to reducing the size of the military and have a small, light, rapid footprint. And he tried to fight the war with, what was it? 140 ,000 troops? I can't remember the number exactly, but it was much less than obviously the military advised. And even in that case, of course, the argument would be that the military always wants to have more of everything, more troops, more equipment. But look, in this case, I would say this is one where you can very clearly pin the blame on George Bush. What happened there is Rumsfeld was a very strong personality. And Rumsfeld made very clear, No, I can go in and cut off the head of the snake with this amount of troops.

22:07And then you had Brennan over at the - CPA. Over at State Department. Yes, who said, no, no, no, no. I can do this nation building thing with the troops that he says. And George Bush is ultimately the person in charge. He didn't reconcile that difference. But both of those two people knew this was not true. and yet they went ahead with a plan that was too few troops for the nation building. So they shouldn't have tried nation building or otherwise. Anyway, the point is there were a lot of mistakes that they made because they assumed this would happen. This is what I think is the crucial difference here is that I said that's sort of your best case scenario.

22:50But then you go down and you can say, okay, well, we could have something like a Venezuela situation where you know, maybe we have less committed millennialists, but, you know, part of the IRGC who are making money from their corruption networks and things like that, and happy to work with the US to stop all this. You got a whole spectrum of different things. And down at the bottom is exactly this one that, well, what if we just leave a failed state behind? And I'm not sure how that's not. Obviously, that is not the optimum outcome. But if you think about that as your downside, that's not a bad downside.

23:33You've just denied China its major proxy in Western Asia. you have defanged a regime that was threatening all its neighbors and your plan to consolidate those neighbors into a more peaceable commercial region. I mean, I think the whole Gaza Peace Board is clearly a model for the broader region that, hey, we're just going to make everybody do business together and that'll keep the peace. And maybe that won't work, but that seems to be their plan. If that's the case, then yeah, it's not great to have a civil war across the Gulf, but at least you don't have someone trying to get in everybody else's business.

24:17And you also ultimately end up controlling the flow of resources out of the Gulf in a way that gives you leverage over the Chinese potentially in terms of a Taiwan contingency or them using their critical mineral monopolies against you. And so I don't think that's a terrible downside.

24:42Demetri Kofinas:Well, let me challenge you there because it seems to me that civil war in Iran would be antithetical to maintaining commercial traffic through the strait. Because if you can't secure Iranian territory, you certainly can't prevent militant factions from flying drones into oil tankers, which at the very least would drive up insurance premiums, if not make the strait effectively or practically unnavigable. And then we're left with whether or not that represents a relative win for the United States in its larger geostrategic competition with China. And on that point, I'm also unconvinced that Iran was especially important to China to begin with.

25:20Demetri Kofinas:I mean, I'm certainly not an expert on China or its Middle East policy, but I've always gotten the sense from my conversations with sinologists and political scientists on this show who study China that the People's Republic and the Communist Party is very wary about not just foreign entanglements, but foreign alliances or over-reliance even on any one particular country. And I've gotten the sense that they see meddling in the Middle East as largely a no-go zone. So I don't know to what degree they were really invested in Iran to begin with, other than seeing it as yet another important source of diversification for oil and oil and natural gas derivatives.