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Hedgeye CEO Keith McCullough is back with a new edition of “Hedgeye’s Book Club.” In this installment, he discusses risk management through the lens of history in renowned Harvard history professor Graham Allison’s book, Destined for War. According to McCullough, while the book is more about history than economics, it provides a stark view into why China matters in terms of geopolitical risk.

Click below to watch.

“He contextualizes why China matters. He gives you where the tilt of Chinese economic power will be by 2024 versus where it is now. And the year 2024 isn’t that far away,” McCullough says. “As we accelerate in rate-of-change terms as far as Chinese GDP growth and global, economic, and geopolitical power, what does the world potentially look like versus what [American] intentions might be.”

In the book, Allison explores 16 geopolitical rivalries in the last 500 years and the events that led to 12 of those rivals eventually heading to war with each other. Using what he calls “Thucydides Trap,” referencing the ancient Greek historian who documented the rise of Athens to challenge the ruling Sparta, Allison posits that a rising power will instill fear in a ruling power and cause conflict. But will that conflict always lead to war?

“This book is a scenario analysis. It’s not a certainty,” McCullough adds. “It’s saying, ‘This has happened before. History is not always the same, but there are rhymes to history.’”

Want more? Click the links below to watch other installments of “Hedgeye’s Book Club”:

  • Watch McCullough’s review of Benoit Mandelbrot’s book The Misbehavior of Markets, which he calls “the Bible of financial markets.”
  • In our review of Daniel Kahneman’s seminal book, Thinking Fast and Slow, McCullough calls it “the most important book I’ve read on behavioral finance.”
  • And in what McCullough describes as “one of the better economics books I’ve ever read,” he reviews the autobiography of Nobel laureate Herbert Simon, Models of My Life.