The political unrest in the Middle East brings up some geeky thoughts about the techniques of strategic analysis. This is not from the “Hey, you should dig megatrends!” book of the future, but direct from the canon of heavy geopolitics and game theory. E.H. Carr‘s realism versus Walt and Mearsheimer’s Neorealism versus Alexander Wendt‘s theory of constructivism. It happens to be about the current geopolitical situation, but the techniques referenced come to bear on all forms of competitive analysis. (In other words, business readers, don’t click out to espn.com just because this stuff is government-y, please. It involves you.)

One of the biggest implications of the past few weeks of major unrest in the Arab/Middle Eastern world is that the units of analysis are being scrambled. Remember: foreign policy experts use the nation-state as the key unit of analysis. Cold War realpolitik, for example, hinged entirely on big ol’ nation states as the way we analyzed the world. There were two big units, the United States and the U.S.S.R., both of who were distinct actors with stable central decision makers and defined borders. They units went out and affected other units, namely countries, to try to “win” geopolitics without killing people and breaking their stuff. When one of these units went and tried to influence a third, say, Vietnam, then the other came out to also influence it. Very clean, in terms of analysis, even if the reality was a complete misunderstood mess.

September 11th screwed things up by suggesting that non-state actors would no longer play bit parts, but could influence the whole geopolitical game. To wit, the 9/11 attacks allowed/motivated the United States to take over two nation-states, Afghanistan and Iraq. But notice – the analysis here was still about nation-states, their legitimate governments, and force-based realpolitik. The United States has attempted to use the newly-minted nation states to provide a counterbalance to its strategic competitors in the region, notably Iran (and probably Pakistan, if we are honest.) Not much has changed.

The revolution in the Middle East is different. Changing Mubarak, a long-time ally of the United States and a moderate actor on Israel’s western flank, for a popular revolution is a complete scramble for the strategic analyst. For example, Western nations give “Egypt” military aid in the billions. Well, actually, it’s not Egypt – it really has been Mubarak’s regime. They aren’t handing out AEGIS cruisers (or whatever) to random Arab taxi drivers in Cairo, they are handing power off to a group that they assume will act in a way similar to all the other regimes out there. It enables things to be nice and neat, or at least to keep some form of balance.

The huge weakness of this analysis is that it assumes complacency on the part of the huge percentage of the population that isn’t part of the government elite or the military. A nation-state is truly the result of a social contract, and when the millions of people who form that contract decide it’s no longer for them – it’s not the same thing anymore. It can’t be used as a unit of analysis in the same way. Let’s say the people of Egypt follow through on their popular revolt and elect a parliament of all taxi drivers. Can a foreign policy analyst in Paris seriously expect the same type of future behavior that it got from foreign-educated elites who understood what was expected of Cold War nation states?

Nope, it’s a whole new world.

Why is this useful for business? It’s no different than what the record companies went through when the MP3 came out and destroyed the value chain. Competitive analysis might never look the same. Why, customers were now fulfilling the roles of marketing AND distribution through the Internet. How could you possibly assume the same dynamic once the units were different?

When people say, “This is a game changer” this should be the level of dynamic shift to which they are referring.