Book Review: Geopolitical Alpha

Q1 2026 has been insane.

First Venezuela. Then the US-Israel strikes on Iran. Never before in my life have I been following this many geopolitical events simultaneously. Nothing impacts markets more than what's happening in the Strait of Hormuz right now.

This felt like the perfect time to read Geopolitical Alpha by Marko Papic.

The Framework

The book argues investors should focus on material constraints, not stated preferences. Politicians say many things. What matters is what they can actually do.

The philosophical foundation surprised me - it's built on Karl Marx. Not someone I expected to encounter in a book about investing. But Papic grounds his entire framework in materialist dialectic: material conditions determine behavior, not ideology or preferences.

He repeats this throughout: Preferences are optional and subject to constraints. Constraints are neither optional nor subject to preferences.

Papic ranks constraints in order of importance: politics, economy, market, geopolitics, legal, time. Start at the top. Work down.

The beauty of this is it's falsifiable. You're not guessing what leaders want. You're mapping what they can actually do given their constraints. If your constraint analysis says X should happen and Y happens instead, you were wrong about the constraints.

The Implementation Gap

The book covers a lot of historical events I don't know well enough to judge whether his analysis holds up. He moves quickly through cases in Latin America, Eastern Europe, Asia. Some of his constraint assessments might be retrofitting - explaining outcomes after the fact rather than predicting them beforehand.

I'd need to revisit this later with more background to separate genuine predictive power from hindsight bias.

But the bigger issue: I agree completely with Papic's idea that material constraints are what matter. The foundation is right. But I can't shake the feeling that commodity traders already have a better implementation of this concept.

If you trade natural gas in Europe, you're constantly thinking about material constraints. Storage capacity. Pipeline flows. LNG terminal throughput. Weather patterns. You don't need a philosophical framework - you live it every day. Physical infrastructure constraints aren't theoretical. They're the difference between profit and loss.

Commodity traders don't call it materialist dialectic. They just know that stated energy policy preferences mean nothing if the pipeline capacity isn't there. They know that political speeches about energy independence are subordinate to actual storage levels and winter demand.

Maybe the book's real contribution is packaging this intuition into a systematic framework that equity and macro investors can use. People who aren't used to thinking in terms of physical constraints. But for anyone who's traded physical commodities, this feels like dressing up operational reality in academic language.

The framework is sound. The implementation still needs work.

The Iran Problem

I'm struggling to apply this framework to the current US-Iran war.

When I go through Papic's constraint hierarchy, the analysis says this war can't continue much longer.

• Political constraints: Midterm elections coming up. Trump's base doesn't want prolonged foreign wars. A sustained conflict with rising gas prices is politically toxic.

• Economic constraints: Oil at $100 is hitting growth. European gas at nearly double baseline is crushing industry. Inflation expectations are rising again.

• Market constraints: Credit markets are starting to break. UK gilts are in stress territory. The Fed can't ease with oil this high but can't tighten with equities down 5%.

• Geopolitical constraints: No other major powers want this war to escalate. China needs stable energy prices. Europe needs cheap gas. E ven Israel's stated objective was surgical strikes, not prolonged conflict.

All of these constraints point toward de-escalation. A face-saving diplomatic exit. Some kind of ceasefire arrangement.

But three weeks in, it's still going. Oil is up 47%. European gas up 85%. The strikes continue.

Either I'm applying the framework wrong, or there's something the constraints aren't capturing.

Maybe I'm underweighting the time constraint. Papic emphasizes that policy changes take time to manifest. The political and economic constraints are building, but they haven't reached critical mass yet. The breaking point might be weeks away, not days.

Or maybe the constraint hierarchy doesn't capture path dependency once you're in a crisis. Starting a war and ending a war have different constraint profiles. Once you're committed, new constraints appear - credibility, domestic politics around "winning," alliance commitments.

I don't know which yet. But I'm watching the scenario analysis closely to see which constraints bind first.

Conclusion

I like this book because it removes the feeling that geopolitics is some form of insider trading. You don't need special access to predict geopolitical outcomes. You just need to map the constraints systematically.

That's valuable. It stops you from thinking you need to know what's happening in classified briefings or private diplomatic channels. The constraints are observable. Public. Measurable.

The message is right. Material constraints determine outcomes, not preferences or ideology.

But I'm still looking for a better way to apply it. The framework gives you direction - where the system wants to go. What it doesn't give you is timing, path, or magnitude.

Constraints tell you oil prices can't stay at $100 indefinitely with elections coming up. They don't tell you whether the resolution comes at $95 or $110, in two weeks or two months, through diplomacy or escalation followed by collapse.

That's what makes markets interesting. And frustrating.