(A reflection on contracts).
Last week I watched another round of European hysteria over American rethoric and actions.
This time it was because the Americans had the nerve to admit that NATO isn’t their number one priority. That defending Ukraine is even further down the line, unless they get a direct benefit. And they also said that the key party in Europe’s defense should be, well… Europe itself.
THEY’RE GOING TO DROP THE MOST IMPORTANT AGREEMENT OF THE 20TH CENTURY.
Only in Europe people treat agreements and notary scts like they are sacred. Let’s not forget we once said the same about the European Union, that it was “the greatest invention of the 20th century”.
A contract is great, sure. The EU and NATO are among the best agreements ever made. Words matter. But practice always matters more. Everyday benefits. Relying on a piece of paper is a risky business, especially when that piece of paper turned 75 last year. There are plenty of things more important.
AIRPLANES. TV’S. PENICILIN. NUCLEAR ENERGY. COMPUTERS & SEMICONDUCTORS. ROCKETSHIPS & MOON LANDERS. THE INTERNET.
Europe is wrong.
In life and in business, my experience is that contracts are the least important part of a long relationship.
For example, it’s ridiculous to expect a marriage to survive just because you signed a piece of paper and said some nice words a decade ago. Anyone who’s ever worn a wedding band knows that marriage has to be worked on every single day. With attention, mutual investment, and above all a big side of intimacy and humor.
The same goes for startups. Yes, founders and investors do sign an agreement, but all those pages and signatures and lawyer discussions get quickly filed and stored somewhere. It’s the daily grind, the commitmen and the wins that generate the trust to move the company forward. Cracking a good joke helps too.
I think the same happens woth Countries. NATO and Europe are great things, but they must be lived and defended by those who profess such paper love for them.
FOR BETTER FOR WORSE, FOR RICHER FOR POORER, IN SICKNESS AND IN HEALTH, TILL DEATH DO US PART.
We have ample evidence that contracts aren’t super strong. At the very least they are wesker than practice.
This text isn’t the right place to detail the varied treacheries, betrayals, back stabbings and general egotistic actions people do on their personal lives that go against the spirit and of their written marital agreements.
On the professional front, I have seen shareholders agreements be nullified or written over. A few times it was because people just ignored the contracts altogether. Most of the time it was because the power balance changed, either because management wasnt doing too well, or because they were doing extremely well, and so the stronger party asserted themselves. They wanted more, and the existing contract is just a blocker to be overcome.
It isn’t always the case, but expect that a strong party will do somethijg woth leverage.
I AM ALTERING THE DEAL, PRAY I DON’T ALTER IT ANY FURTHER.
Contracts establish legal details, but that’s not reality, no one lives permanently surrounded by judges and regulations only and isolated from everything else. No CEO that I know passes their time asking themselves “what is in my contract”? We’re social beings, trying to make daily improvements. With a few exceptions, contracts govern just extreme events like the dissolution of a company or what happens when a CEO leaves. At the event horizon of a catastrophe, the gravity of the End becomes unavoidable and laws breakdown and everything becomes spaghetti. If there is a major positive explosion, that too makes a contract a detail into what the future may bring.
I conclude that if I am in a contractual relationship that I like, that I should be taking any and every action that posivitely feeds it. Whether it is my business or my family, any meal, trip and revenue are infinitely more important than the piece of paper that exists between us. And if things go south, I know that a contract will only help contain the damage at best. On the contrary, being dead weight is a terrible way to be in that relationship.
WE’RE ALL IN THE SAME BOAT.
If my theory is right, the U.S. will start paying a lot more attention to NATO when Europe actually steps up. When the Russian Army doesn’t dare cross borders. When Russian spies stop killing people in Europe soil. When Russia’s Navy stops playing submarine hide-and-seek in our waters, be they the Portuguese, Spanish, French, or British.
America will treat us as equals when Russia respects our borders.
WHEN WE RESPECT OUR OWN BORDERS.
Now what?
The present time is a very particular case. While European countries have neglected the practical geopolitics and power balances and chose instead to overly pontificate on agreements, our partners have chosen an equally pointless and sanctimonious path.
Today, the U.S. is a flashpoint of rethoric and bulshit. The entire woke culture and the MAGA act were both built there, on top of 100-character memes. Words are essy.
The differemce is that when the time comes, the U.S. has real tools. They are the most advanced economy in the world, which is a magnet for talent and more innovation, and they have the mightiest military.
We need more of that. I think the time has come for Europe to reform. It’s a bit late, but we can do it. We’re a big continent, rich and populous. We have beautiful historic cities and stunning nature like my Portugal’s coastline. We have millions of creative people, and many brilliant inventors, and we actually get along pretty well among ourselves. (Even the rowdy Spanish and French, who love to fight, prefer brotherly infighting to picking fights with other EU countries).
We have to turn Europe into what it could be and drop the filibustering. We can’t play the surprised, hurt spouse that is beijg abandoned. This has been a long time coming.
It is especially important to do it fix Europe the right way. There’s a new crop of folk trying to chime in, and they say what we really need is more contracts. “Ah! What we’re missing is a new way to register businesses (EU Inc.). A federalized Europe. A European Constitution. More presidents, more commissions, more projects, compasses, programs, and directives. A joint Military. All that, plus a shiny new agreement to distribute hundreds of billions in AI funding.”
AND THAT’S FINE.
It is all good. But it won’t help much.
All these ideas assume that signing an agreement will solve things. But contracts are usually the wrong first step. If there’s a problem, we should fix it now, not wait for an agreement.
If Germany wants simpler business rules, they can start by scrapping their ridiculous notary requirements. If France wants to help Ukraine, it can send more money and troops directly, themselves, now. Walk the talk, alone if needed. Be frontal and bold about what you believe in, and do it.
If Portugal wants to be more competitive, fix our insane maze of bureaucracy that kills small businesses. No need to even touch taxes (which, yes, are high and not competitive in a global talent-driven economy). Just cutting through the red tape would do wonders.
In short: fix problems first, iterate, and only later scale those solutions across Europe. The culture of results always beats trying to come up with the “best idea” at the top and forcing it down people’s throats.
The solutions being thrown around revolve around new agreements, and in my view they are actually a bit worse than a distraction by overconfidence in contracts. The way I see it, there isn’t even a democratic mandate for Europe to keep signing away national responsibilities. The quiet federalization we’re seeing is, frankly, embarrassing. Especially for those of us (like me) who actually believe in a more united Europe.
It is tricky.
Our first reaction to our current situation was to do what Europe does best, documents. We called in the former European Central Bank (ECB) governor Mario Draghi and tasked him to write a report. He concluded we need more competitiveness and and boom, now we will have a new way to register companies (EU Inc regime), plus a whole bunch of new things. The Americans are telling us to increase military spending or they’ll pull support? Guess we’d better start thinking about an Army. But no one voted for a European Army. No one voted for a new way to register businesses, no matter how good it is. These things weren’t even clear election issues in any country.
No one is stepping up and taking responsibility. Everything is outsourced. Blame and Solutions.
“It’s Putin’s fault”. “Trump’s fault”. “COVID’s fault”. This isn’t good.
ANOTHER PIECE OF PAPER.
Time to recap.
At the moment, Europe is in panic mode because of external events around us. We’re scrambling to shore up our strengths.
But what goes on inside Europe is more important. I suspect that a lot of Europeans don’t feel respected in Europe. We live comfortable lives, but we have little agency. Ordinary people and businesses don’t matter much to those in power. This feels like so many people in their failed marriages and companies. The original contract of a liberal democracy is breaking down because we don’t see the investment into our problems.
Future European leaders better learn that it’s no use whining about the Americans, who are fighting their own internal battle over values, led by an egomaniac.
Contracts and agreements are part of life, but they don’t make things happen. So f*** contracts.
We must believe in ourselves and make things happen. We must fulfill the relationships between citizens and each EU government first, then live up to the neighbors next door, the EU countries and other European states. And thwn we can join our US partners in strength.