Saturday, August 31, 2013

Educational Warfare: A New Way of Thinking About War

Wars are expensive.

For example, most estimates of the cost of the Afghanistan and Iraq wars to the US put the cost above $3 trillion. (See for example, ) And if you include borrowing on deficits used to finance military activity, the site estimates another $7 trillion over the period 2001-2013 when the cumulative costs 50 years out are included.

The truly hidden cost is what would $10 trillion do to improve the US economy (currently a $14 trillion in size)? One might suspect that $10 trillion invested in more positive activities might stimulate economic performance more than warfare.

So, when we consider how to influence other countries not to have civil wars or to go to war, the public debate tends to focus on issues of morality, theology, values and the saving of lives. While most people would agree that saving lives is a desirable goal, the reality is that wars are rarely stopped by such considerations. Would that they were.

So, here's a wild and crazy thought. What if we attempted to influence those about to go to war with clear communication of the economic impact of not going to war? Controlling the dialogue is important in winning debates. And how you frame the debate is in a sense educational warfare. It won't work every time. Fanatics are not rationale, but it would be an inexpensive way of influencing debate and influencing the shape of coalitions against war.

The idea is not a new idea. I recall reading a science fiction novel, whose name I forget a decade or so ago about introducing a computer game into the then Soviet Union so people could evaluate the virtues of different economic systems, thereby, laying the groundwork for liberal democracy. Isaac Asimov in The Foundation Trilogy plotted the use of embargoes and the desire of householders for household appliances unavailable from the Foundation embargo of the planet. The result: quick resolution.

Clearly, some wars are driven by the desire of a small controlling class to reap the benefits of power and rentier economics. Their trade-offs clearly look different than those of the rest of the population. But if democracy is about transforming diverse groups into a coalition to resist tyrants or oligopolies, then a common benefit should have benefit.

Say, for example, that several years ago, a model of the Syrian economy structured as a game allowed players to evaluate the consequences of war. Perhaps the chance of war might have been less today. The controlling group might even understand the potential benefit of devolution of power.

The dialogue might look different, less emotional, more rational. Perhaps this idea might not have worked in the past when computer usage was less and mobile devices less powerful, but in today's world, where fixed and mobile computing, gaming and simulations deserve attention as powerful ways of influencing the understanding of large swathes of the population.

Educational warfare. It's probably not perfect, but it's certainly a tool that we under-use or don't use at all.

Wednesday, August 21, 2013

Game Theory and NSA Practices

"Who shall watch the watchers themselves?" or "Quis custodiet ipsos custodes?" is an old question and certainly one raised by recent revelations about NSA practices.

But what the NSA situation reveals is the importance of a strategic perspective and the importance of governance models in making sure that the right strategy is being executed, resources are well allocated, and managers are held accountable by independent third parties.

The simplistic demagogic views falls into two categories:

1. Slippery slope: if a well meaning government has no constraints on monitoring, it lays the foundation for tyranny if or when the unethical are in charge.

2. National defense: we need to pursue terrorism to the maximum extent possible.

A more nuanced assessment might suggest that a different framing of the problem is required, The issues are really much more subtle,

Presumably, the ability to track terrorist and terrorist projects is desirable because practically everybody would prefer not to be blown up or injured by terrorist activity. But not all activities of monitoring lead to successful prevention of terrorism events or tracking down of terrorists after a terrorism event. There is, therefore, an important question of both effectiveness and cost effectiveness. Presumably we should all desire to prevent terrorism if it is effective, cost effective and does not risk tyranny. And we should avoid ineffective monitoring that raises risk of abuse.

However, data around effectiveness, cost effectiveness and potential for or actual abuse is not currently disclosed. In a business this would be equivalent to providing carte blanche to a department and not holding them accountable. I hypothesize there that it is possible to disclose performance and compliance information without jeopardizing the overall effectiveness. I would also suggest that assessment of the potential for abuse and tyranny is not possible without disclosure.

From a game theory perspective, politicians play in a game that is annoyingly short sighted.

If a politician is in power and a terrorism event occurs, the argument can be made by an opposition that the politician did not spend enough or pay enough attention. The criticism may or may not be true. The absence of disclosure ensures that any debate will be sterile.

If no terrorism event occurs while a politician is in office, then he/she will argue whatever program is in place must be good. Again, there is no way of assessing the value of the spending and the activities or the potential for abuse.

If a politician spends too much on programs for countering terrorism, there is little penalty for overspending.

If a politician cuts spending on anti-terrorism and no events occur, then the politician is still at risk of political attack for a visible decision to cut and no clarity on what may previously have been overspending.

The net result is that there are strong incentives for politicians, suppliers and government staff to continue to demand increased spending. Increased spending will typically lead to more monitoring activity. Presumably, more monitoring activity increases the potential for abuse.

And strangely, even those politicians who are anti-government, seem content to fund defense and security spending without significant disclosure, risk assessment or effectiveness measures.

In a :"Show me. I am from Missouri." universe, performance and operating data needs to be revealed. Without performance reporting we can have no assurance that money is being well spent or that practices are consistent with guidelines and governance processes that highlight and protect against abuse.

And as with any portfolio decision, investment in NSA activities needs to be compared with other approaches to preventing terrorism and its root causes. Bureaucratic budget holders are, like any budget holder, always reluctant to propose reductions of their own budget. If we knew for example, that the cost of preventing a terrorism event was $5B and we also knew that we could reduce the likelihood of equivalent terrorism in a country by investing in that country the same amount, it would frame the budget and performance decisions differently.

The American constitution is built upon the concept of separation of powers and authority. The same is true in corporations where auditors are supposed to be independent of the company. NSA monitoring of terrorist activity looks very different if there are no auditors or guardians of the guards.

Any claim that disclosure of activities would jeopardize the effectiveness of collection activities is too easy. It's highly unlikely that bad guys have not being going to the movies or reading newspapers, so I think we can safely bet that they know they are being monitored. And as in wars, there is a difference between immediate and eventual disclosure. Aggregated data can provide metrics on monitoring without disclosing significant secrets.

I am sure of one thing in this debate. Knee jerk assessments may not be the most effective way of assessing this complex task.

Tuesday, August 20, 2013

Jeff Bezos And The Washington Post

The conventional wisdom about the impact of digitization upon content businesses is that the music business is the model. Digitization makes illegal copying easier; revenues from digital advertising is lower than traditional advertising. Newspapers have had difficulty replacing both subscription revenue and advertising in a world where customers have become accustomed to getting their new for free.

But there is another interpretation. In digital businesses, the impact of scale is dramatic. After you have covered your fixed costs, the incremental profitability of an additional customer is high, verging upon 100%.

The reason scale is important is that traditionally newspaper brands, particularly in the US, have tended to be regional. But there is no intrinsic reason why newspaper should not be national in a world unconstrained by the need to deliver physical papers. We already have examples of national newspaper brands, the Wall Street Journal, the New York Times, and USA Today are the three leading examples of newspapers with national audiences. These newspaper superbrands, to which we can anticipate that the Washington Post will be added, represent a reordering of an industry. Old assumptions about scale and business models go out the window in a world of national newspaper brands vs. local newspapers.

As evidence of this, consider the following. The NY Times divested itself of the Boston Globe. Boston can be serviced with NY Times content plus some regionalization.The NY Times, the Wall Street Journal and the Washington Post all now have firewalls. Only Gannett's USA today lacks a firewall, perhaps because it has a different demographic and a head start as a national paper. The Economist, admittedly a weekly newspapers represents another example of the value of a national or international brand as does the Financial Times of London.

Most commentators about the acquisition have tended to focus upon the opportunities for synergy with Amazon and Kindle devices. There may well be opportunities but these opportunities will require a national newspaper with a wide range of content as a device for attracting the attention of Amazon buyers. It's a scale game. You can't create great content without high quality, diverse and local editorial content.

You can think of a consumer's attention as being equivalent to the shelf space in a supermarket. Owning one of the major national newspaper brands will likely prove a cost effective way of reaching customers and giving them more reasons to make Amazon a central part of their life.

The predictions from this conclusion are straightforward - a change in the scope of competition and dramatic competitive pressures on smaller newspapers. If you run a smaller newspaper, it's time to rethink your strategy and operating model.