Intelligence Tools for the Finance Professional

© 2015 Milo Jones Intelligence Tools for the Finance Professional

Intelligence Tools for the Finance Professional

Prof. Milo Jones Finance Department


Who am I?


Course Overview

I. Session One

Why is this course important to you?

What we can actually achieve ?

What do I expect of you?

Where does this material come from?

II. Session Two What is the TRUE “macro” context for any financial or investment analysis you

will do over the next few years?

III. Session Three How can you organize a basic search for information?

What is important to know about strategic surprises ?

IV. Session Four How can you analyze who the actors are and what their motives might be during

foreign events with a market impact?

CASE: Chinese REEs case & Three Track Analysis

V. Session Five How can you apply Allison’s frameworks to an M&A situation

CASE: The battle for Endesa: Worth E.On’s Energy?

VI. Session Six How can you refine your view of people?

How can you refine your view of institutions?

VII - VIII

Sessions Seven & Eight

How might you put the tools of this course together to understand an ongoing and highly complex investment situation?

What is the IA3 Framework and how might you employ it?

CASES: The Hermitage Fund & Hermitage’s Russian Quandary


A few other preliminary notes…

» What we achieve in eight sessions:

Exposure - unconscious ignorance versus conscious ignorance

Give you basic theories to help you notice things

Give you basic tools to both organize information better…

Build better mental habits (i.e. give you something besides a “hammer”)

AND TO ASK BETTER QUESTIONS OF YOURSELF, COLLEAGUES & EXPERTS

Point you towards where to dig out more information


Why did I create the course? Examples and Warnings



A few weeks ago


» To a man with a hammer…

Examples…


Examples…


Some Warnings

» NOTE WELL: Many of the frameworks and ideas in an intelligence course will prompt you to ask great questions, but…

» Under no circumstances is it design to encourage, condone, enable or glamorize criminal activity, including insider trading or any other unethical practices.

» Governments can and should do things that business and finance can’t and shouldn’t!

X


What do Intelligence Agencies do?


» Intelligence Agencies do “Big Picture” analysis of the state of the world.

What do Intelligence agencies actually do?


» Intelligence Agencies also collect “actionable intelligence” and issue specific warnings.



» Intelligence Agencies (sometimes) organize “covert action”.

» (In my view, this is not a great mix with their main function).




Tasking

Collection

Analysis

Production

Dissemination

The “Intelligence Cycle”



Tasking

Collection

Analysis

Production

Dissemination


Where

people

focus…


What forms does Intelligence come in?

» HUMINT = Human Intelligence



» HUMINT = Human Intelligence



» SIGINT = Signals Intelligence









» GEOINT = Geospatial Intelligence









» OSINT = Open Source Intelligence

» FINSINT = Financial Intelligence



Tasking

Collection

Analysis

Production

Dissemination


Where you

should seek an

edge: original

questions and

inventive

hypotheses!



Tasking

Collection

Analysis

Production

Dissemination

The “Intelligence Cycle” Where the other

magic happens

(and ~75% of

CIA people work)


An Example: China and REEs












Please tell your firm’s Investment Strategy Committee…

» 1) Why is there an apparent stoppage in Chinese REE exports?

» 2) Who or what is responsible for the apparent stoppage?

» 3) How might you explain their actions?


Please tell your firm’s Investment Strategy Committee…

» 1) Why is there an apparent stoppage in Chinese REE exports?

» 2) Who or what is responsible for the apparent stoppage?

» 3) How might you explain their actions?

» A Reminder:

» SEPT. 22, 2010 “Amid Tension, China Blocks Vital Exports to Japan”

» OCT. 19, 2010 “China Said to Widen Its Embargo of Minerals”

» OCT. 28, 2010 “China Is Said to Resume Shipping Rare Earth Minerals”

» NOV. 10, 2010 “China Still Bans Rare Earth to Japan”


Peeling the Onion…

» To answer these questions, we use what I call Three Track Analysis:

» 1) Construct a Timeline and Chronology of the issue (not just the “news stories”)


Peeling the Onion…(Timeline/Chronology example)


Peeling the Onion…(Timeline/Chronology example)


Peeling the Onion…

» To answer these questions, we use what I call Three Track Analysis:

» 1) Construct a Timeline and Chronology of the issue (not just the “news stories”)

» 2) Then examine events in three ways, or “Tracks”:

The Rational Actor Track

The Organizational Process Track

The Bureaucratic and Personal Politics Track


Track I


Track One: the Rational Actor Track

The Unit of Analysis is a single, optimizing, truthful actor – it is a “unitary rational actor” that makes "decisions.“


Track One: the Rational Actor Track


Track II


Track Two: the Organizational Process Track

» Unit of Analysis: the Unitary actor’s formal parts (Ministries, Departments, Agencies, etc.) Assume that these sub-units act according to pre-determined procedures to produce an "output."



» Unit of Analysis: This track is sometimes useful for otherwise mysterious events that don’t make a “unit” look rational.



» Unit of Analysis: the Unitary actor’s formal parts (Ministries, Departments, Agencies, etc.) Assume that these sub-units act according to pre-determined procedures to produce an "output."




Track III


Track Three: The Bureaucratic and Personal Politics Track

TRACK THREE - Unit of Analysis is key individuals or groups - This model ignores the "unitary“ actor idea, standard playbooks, and even formal organizational charts! It focuses on the different perceptions, personalities and preferences of self-interested individuals and (formal or informal) groups. It also screens for deception…



?













If you want to “Do it Yourself”…


Questions?

You can contact me on Linkedin or

Or via http://www.geopoliticalalpha.com/

http://www.geopoliticalalpha.com/

http://www.geopoliticalalpha.com/

Economy & Finance

Intelligence Tools for the Finance Professional