ANDREW BRADLEY: Russian war in Ukraine has changed rules of investment

The first rule: know the rules of the game. If you don’t, you should probably not play. If you play without knowing the rules, it will most probably be a mess. If there is a winner, it is most likely to be the person who knows the rules.

This applies whether you are playing sport or in any other endeavour in life. If you go on to the playing field with your friends and some of them are kicking the ball around while others are picking it up and running with it, it can only be chaos. People will get hurt, and almost everyone will get frustrated. It certainly will not be enjoyable.

As I have watched the horrendous war Russia is waging on Ukraine unfold, I keep wondering: what are the rules of the game? Russia certainly seems to be waging war using different rules to those of Ukraine. This war is not even something the Ukrainians wanted to get involved in. They are now more than involved and committed to the cause, with potentially deadly and catastrophic consequences for themselves. As they grapple with their new environment, they seem to be struggling to come to terms with their rules of engagement, which is making their task even more difficult.

There are also some significant consequences for the rest of the world — even though these pale into insignificance when compared with the suffering of the Ukrainian people. How does the world respond? In most instances, as the world responds to assist Ukraine, it is also hurting itself and its own citizens.

We need to start thinking about what this means for all of us. Is this war a temporary horrendous event we will look back on with shock? Will life get back to what we knew? Or is this an inflection point? Are things changing for the foreseeable future? Will the world not go back to what it was before?

Watershed moment

All of these questions frame the world of business and investing. Just like every other endeavour, business and investing have their own rules. How entrepreneurs and investors go about their work are all based on these. The question we have to answer is: have those rules now irreversibly changed? If not, we all hope for a speedy end to the war with as few casualties to life and property and possible.

Sadly, I believe this is a watershed moment. It is rather like when the football was picked up and the game of rugby was born. In this instance, I am not sure the old game survives. Those rules will no longer exist. Business and investing will now have new rules. If you want to play by the old rules, the probability of success will be at best remote. This war has brought about a new set of global rules in all the major dimensions.

There has been remarkable economic growth over the past 70 years. With that has come widespread prosperity, substantial improvements in the standard of living and quality of life, and a dramatic reduction in poverty worldwide. My hypothesis is that this has been based on stable global economic policies, globalisation and a sense of world peace — despite some terrible conflicts and wars. Strange as it may seem, Nato has played a major role in facilitating this global growth. It has allowed member countries, which make up most of the global economic powerhouses, to spend minimal amounts of money on their military and defence by standing together.

The funds each of these countries have saved in military spend has been redirected into infrastructure and other economic growth engines. The war in Ukraine has now made countries fearful and concerned about their safety. Under these circumstances they spend much more money on defence. Some European countries have already committed to double their military spend. With these funds now sidelined for economic purposes, growth will start slowing down quickly.

This is just one point that brings with it a fundamental change to the rules of the game. Other major changes are geopolitical alliances, trading policies and partners, embargoes and sanctions. We need to think clearly about whether we still want to play the game. If so, what the game is and whether we are equipped to play it. What changes do we need to make to ensure we can survive and even thrive on this new playground?

• Bradley is CEO of Fiscal Private Client Services.