Thursday, May 23, 2013
What if required reforms are taboo?
The most recent newsletter from Michael Pettis focuses on two competing perspectives on the optimal level of investment for a country. The first perspective holds that there is a global optimal level that advanced economies have developed and that all countries below that level of investment can profitably expand their investment. The second perspective contends that the optimal level of investment for a country depends upon its institutions (what Pettis calls "social capital"), which affect how much investment a country can profitably absorb. Pettis acknowledges that there is not decisive evidence to resolve the debate but he leans towards the latter camp. If one buys this perspective, then in order to continue growth China will have to make painful reforms to its institutions to increase its ability to productively use infrastructure. The necessary reforms include, among other changes, improved rule of law and a reduced influence of crony networks.
If this perspective is correct, then it is ominous that there are reports that Chinese officials have asked professors to avoid seven sensitive topics, including "elite cronyism, and an independent judiciary." If the government is so sensitive about these topics, then how realistic is the expectation that it will tackle them head-on in reforms needed to continue to the healthy growth of China? What happens if the interests of the Communist Party collide with the reforms necessary to enable continued robust growth?
If this perspective is correct, then it is ominous that there are reports that Chinese officials have asked professors to avoid seven sensitive topics, including "elite cronyism, and an independent judiciary." If the government is so sensitive about these topics, then how realistic is the expectation that it will tackle them head-on in reforms needed to continue to the healthy growth of China? What happens if the interests of the Communist Party collide with the reforms necessary to enable continued robust growth?
Friday, April 19, 2013
Stop Lumping Iran in with China
A perfectly serviceable Bloomberg article about the DF-21D makes a misstep in its final sentence:
Regarding ASCMs, The 2013 IISS Military Balance lists Iran has having C-701, C-704, C-802A with ranges of 20 km, 35 km and 180 km, respectively. So, again, even if we grant the Iranians the ability to target and launch these systems at maximum range, a CSG could still stand-off outside their range and still be able to generate sorties over the Iranian mainland.
Iran is not in China's league. Every time an article mention them in the same breath as China, they get a little free prestige boost. Cut it out.
Analysts including Mark Gunzinger, a senior fellow with the Center for Strategic and Budgetary Assessments, and some naval officers worry that the new carriers, while formidable warships, may not be able to get close enough for their planes to attack enemies, such as China and Iran, that are armed with precision- guided anti-ship cruise and ballistic missiles.Regarding precision ballistic missiles, Iran's attempts to turn the Fateh-110 into an ASBM seem to my eyes to be an Iranian PSYOP to ride on the Chinese coattails. Setting aside the difference in guidance between it and the DF-21D, there is the big issue of range. The Fateh-110 has a 300 km range while the DF-21D has a range in excess of 1,500 km. In other words, even if the Fateh-110 was a real system that could credibly threaten a CSG (and, to repeat, I question that conclusion), then the carrier could safely stand off outside of its range and still generate sorties.
Regarding ASCMs, The 2013 IISS Military Balance lists Iran has having C-701, C-704, C-802A with ranges of 20 km, 35 km and 180 km, respectively. So, again, even if we grant the Iranians the ability to target and launch these systems at maximum range, a CSG could still stand-off outside their range and still be able to generate sorties over the Iranian mainland.
Iran is not in China's league. Every time an article mention them in the same breath as China, they get a little free prestige boost. Cut it out.
Monday, February 25, 2013
PRC, D.C. and the Myth of Scheming
Ezra Klein has a strong blog post regarding a fallacy he sees embedded in the Chinese hacking every organization under the sun in the District. The Chinese are looking for the "Master Key," he argues, because in China even the products of nominally independent think tanks are really secretly the work of government officials.
Klein argues that it is folly to attempt to find such connections between the power brokers and think tank products:
[As an aside, one of my pet peeves is the invocation of go by a threat inflator or other proponent of the argument that the strategically brilliant Chinese are playing an indescribably long game. I'm no dan, but I am more than a beginner (I played around 15 kyu when I had time to devote to the practice) and that is more than enough knowledge to dismiss nearly every analogy using go as incoherent or laughably simplistic as to be useless. The two exceptions that I can think of are David Lai's Learning from the Stones [pdf] and of course Scott Boorman's The Protracted Game.]
Klein argues that it is folly to attempt to find such connections between the power brokers and think tank products:
This is the most pervasive of of all Washington legends: that politicians in Washington are ceaselessly, ruthlessly, effectively scheming. That everything that happens fits into somebody’s plan. It doesn’t. Maybe it started out with a scheme, but soon enough everyone is, at best, reacting, and at worst, failing to react, and always, always they’re doing it with less information than they need.It is akin to the fallacy behind conspiracy theories - complex or unusual events don't necessarily require complex or unusual explanations. Pardon the crassness, but people are flawed, they bumble and shit happens. Klein argues that it is actually a hidden strength of the DC method:
That’s been a key lesson I’ve learned working as a reporter and political observer in Washington: No one can carry out complicated plans. All parties and groups are fractious and bumbling. But everyone always thinks everyone else is efficiently and ruthlessly implementing long-term schemes.
They’re missing our real strength, the real reason Washington fails day-to-day but has worked over years: It’s because we don’t stick too rigidly to plans or rely on some grand design. That way, when it all falls apart, as it always does and always will, we’re okay.All of this reminded me of Luttwak's recently released The Rise of China vs. the Logic of Strategy. Luttwak argues that the purported strategic wisdom of Chinese history actually impedes China's ability to successfully carry out policy in the international sphere. During the waring states period, massive intrigue and Game-of-Thrones-esque maneuvering was possible because of a common language, in addition to ethnic and cultural homogeneity. International politics, on the other hand, is marked by disparate languages, ethnic groups and cultural heritages. In this hodge-podge, deep stratagems aren't feasible because people have a hard enough time understanding one another when they aren't attempting to dissemble. In short, the fear of inscrutable Chinese strategists playing a brilliant long con on the world is simply not plausible because it would require a degree of cosmopolitan understanding of other nations and societies that no nation has successfully achieved.
[As an aside, one of my pet peeves is the invocation of go by a threat inflator or other proponent of the argument that the strategically brilliant Chinese are playing an indescribably long game. I'm no dan, but I am more than a beginner (I played around 15 kyu when I had time to devote to the practice) and that is more than enough knowledge to dismiss nearly every analogy using go as incoherent or laughably simplistic as to be useless. The two exceptions that I can think of are David Lai's Learning from the Stones [pdf] and of course Scott Boorman's The Protracted Game.]
Wednesday, January 16, 2013
Patriots inside Texans OODA loop
The Boston Herald sports page offered an excellent case study in using tempo as a strategic advantage. You should read the whole thing. It describes how the Patriots use a quick, no-huddle offense to operate inside of their opponent's OODA loop. [For those not familiar with this powerful concept, Chet Richards ought to be your first stop.] It is uncanny how perfectly it illustrates the power of the OODA loop.
This article does a masterful job describing the master class that the Patriots have been putting on how to exploit the OODA loop. If you appreciate Boyd's work, then you should root for the Patriots if only for the beauty of watching tempo being used to such great effect.
[As a postscript, one might ask "why don't other teams just do the same thing the Pats?" The reason why they haven't yet is because it is very hard. It helps to have a QB who has mastered the idea but it is useless without a team trained to do this. One couldn't just grab a bunch of conscripts and say "we're going to do maneuver warfare - go!" Shared orientation is built through shared experience, exercise and learning to create trust. One cannot simply will that into being, nor can one create it quickly.]
The Patriots run their no-huddle offense like no other team. They don’t necessarily start a quarter or a particular series with it. Tom Brady just steps on the gas when the time’s right.
While it may seem like he flips in-and-out of the hurry-up on a whim, there’s a method to the madness.
...Tempo and pace are the trademarks. The Pats have regular speed, faster speed and warp speed. Their purpose is to daze, confuse and exhaust opponents. Usually, it works like a charm.Classic signs of operating within an opponent's OODA loop. Changes occur faster than the opponent can process, causing them to fall behind. By the time they take action, it is too late; they are chasing ghosts.
So will the aging Ravens defense, on the field a ton the past two weeks, keep up with the “gimmick” offense, as linebacker Brendon Ayanbadejo tweeted in respect to the Patriots? Will they stay with the “borderline illegal” offense, as Jets linebacker Calvin Pace referred to the no-huddle in an ESPNNewYork.com story before the two teams met Thanksgiving night? Will the Ravens be so gassed they won’t be able to get back to the line, much less make a play on the regular snaps, as opposed to the quick snaps?If your opponent doesn't think what you're doing is fair, then that is a good sign for you. In war, you never want to be fair. In sports, you want as much advantage as you can squeeze from operating within the rules.
Even the younger Texans weren’t very good at handling the Pats’ up-tempo attack. During Sunday’s divisional round victory, by the third quarter Brady was playing them like puppets. On back-to-back plays, they weren’t set when the ball was snapped, caught when Brady rushed the team to the line. The first resulted in a 23-yard gain by Stevan Ridley to set up a first-and-goal from the 5. The ball was barely placed down when Brady once again hurried the team to the line for another quick snap and throw to Brandon Lloyd, who walked into the end zone before the Texans knew what hit them.
“You don’t know when you’re getting it. That makes it even harder,” ESPN analyst and former NFL quarterback Tim Hasselbeck said of the Pats’ hurry-up during a phone interview Monday. “When is that curveball coming? When is that changeup coming? When are we going to get it? Then you’ll get it when you have a personnel grouping out there that the Patriots want to attack.”Note that this isn't speed for speed's sake, nor is it about going fast all the time. If you aren't making better decisions than your opponent, operating fast will just cause you to make lots of bad choices. Furthermore, if you always operate at the same speed, then that provides a fixed target to which your opponent can adapt. Operating inside of an opponent's OODA loop is about modifying tempo to your advantage; using speed as a weapon to disorient your enemy. Or, in the words of an NFL commentator:
The NFL Network’s Solomon Wilcots, a sideline reporter for CBS on Saturday’s Ravens-Broncos telecast, believes the Pats use the no-huddle at strategic points, and it wears on teams mentally as well as physically.Mental dislocation. It is stressful. It makes it difficult to process information, making you more prone to errors. That's why you want to do it to your opponents.
“They do it in situations where they just made a big play. Now they want to run down there while you’re still trying to figure out what happened on that play, and guys are pointing fingers. Then they get up to the line and snap the ball,” Wilcots said. “Theirs is kind of situational. They speed it up at a moment of crisis or a moment of conflict or a moment of question, so it’s not just to tire another team. It’s to gain an advantage in terms of another team being discombobulated or whatever, maybe not quite organized.Note that tempo can be used to reinforce success.
“It’s like when a boxer hits you with a jab and you’re stunned. Then you come with a flurry,” Wilcots went on. “Well, they come with a flurry of plays. They’re controlling the game where psychologically, you can’t gather yourself. It can really cause more mental stress than physical stress.”
...Yet, Jaworski still doesn’t know when it’s coming.
“I have not found any trigger to when they decide to go to it,” he said. “They could be in the middle of a drive, and all of a sudden, there they go.”Again, patterns can be exploited by adaptive adversaries. If they can't predict what you will do, then that helps you operate inside their OODA loop to fold them back on themselves.
Jaworski then pointed to the win against Denver, when the Pats kept lead sack man Von Miller on the sideline a lot of the time because the Broncos weren’t able to substitute him back in while the Pats were in hurry-up mode. That’s another plus.Using tempo to shape adversary forces. When you find the enemy in a vulnerable position, use tempo to keep him in the vulnerable position.
Hasselbeck also made two interesting points. It’s hard for scout teams to emulate the kind of pace the Pats bring, and that creates a preparation problem. Second, like Jaworski, he can’t help but be impressed at how well Brady runs the operation, so quickly and seamlessly.Again, if adversary's can't train to it, then it is easier for the Pats to create novelty during the game to confuse and stress their adversary's decision-making.
“They have to do it in a manner that doesn’t alert (the other team) they’re going to do it and snap the ball right away,” Hasselbeck said. “To get that communicated to everybody, so that everybody operates with that same sense of urgency to get that snap off, it’s a fire drill, and then (to) not have mistakes off of it, that’s the other impressive end of it.A reminder that in order to fully exploit the strategic advantages of tempo, one's own forces need to be unified. They must operate with a sense of purpose and be able to rapidly adapt. Shared orientation and high motivation within your side helps you break your opponent's orientation and sap his will. If you can't get a good play off quickly, then you won't reap any strategic advantage from pushing the tempo. You'll just be making mistakes more quickly.
This article does a masterful job describing the master class that the Patriots have been putting on how to exploit the OODA loop. If you appreciate Boyd's work, then you should root for the Patriots if only for the beauty of watching tempo being used to such great effect.
[As a postscript, one might ask "why don't other teams just do the same thing the Pats?" The reason why they haven't yet is because it is very hard. It helps to have a QB who has mastered the idea but it is useless without a team trained to do this. One couldn't just grab a bunch of conscripts and say "we're going to do maneuver warfare - go!" Shared orientation is built through shared experience, exercise and learning to create trust. One cannot simply will that into being, nor can one create it quickly.]
Monday, December 03, 2012
The Inflation of Everything
Back in the spring, the Economist had a great article about non-monetary inflation in everything from clothing sizes to loyalty programs.
I travel a fair amount and bitter about the erosion of service, particularly among airlines. Traveling without status is awful; traveling with modest status is merely acceptable (I find it roughly equivalent to the experience of traveling without status roughly a decade ago).
The value of frequent-flyer miles is also being eroded by inflation: it is increasingly hard to book “free” flights; they cost more miles, and redemption fees have increased. This was inevitable: airlines have been issuing so many miles (for spending on the ground as well as in the air) that the total stock is worth more than all the dollar notes and coins in circulation. Central bankers would shudder at such reckless inflationary policies—were they not themselves earning triple miles up in first class.Exhibit A of this trend is an email I just got from Hilton Honors, announcing that they will be increasing the requirements for Gold and Diamond status in 2013. An insidious incentive at work here is that one can buy gold status by using one of the Hilton sponsored credit cards with an annual fee - and in order to make that a more valuable perk, Hilton can make it harder for others to earn equivalent status. United hasn't yet resorted to such draconian tactics to boost the status perks of its credit card, but I wouldn't put it past them.
I travel a fair amount and bitter about the erosion of service, particularly among airlines. Traveling without status is awful; traveling with modest status is merely acceptable (I find it roughly equivalent to the experience of traveling without status roughly a decade ago).
Friday, November 30, 2012
Systemic Change and Chinese Growth
Just came across a fascinating article by Michael Pettis. He argues that most of the economic forecasts being done for China assume that its existing growth model will continue. Thus, while inputs to the model do create different predicted levels of output (like the 7.5-8.5% predicted growth rates cited in the Goldman Sachs study), they cannot accommodate a fundamental change in the development model. The issue, Pettis argues, comes down to China's need to rebalance:
Because [the rebalancing process] is path dependent, and usually subject to important political constraints, it is hard to predict exactly when the old growth model will be replaced by a new growth model (for example I did not believe that China’s rebalancing would begin until 2013, after the new leadership took power, but it may actually have begun in 2012). It is also hard to predict short-term consequences, although it is, perhaps paradoxically, much easier to predict the medium and long-term implications.
Why? Because it is almost axiomatic that unsustainable imbalances must reverse themselves one way or another, and the only interesting question is how. The reversal of major imbalances is almost always very difficult, but the process itself can occur either in a quick and “catastrophic” way, via a kind of sudden financing stop that may lead to a financial crisis and negative growth, or in a slow, more controlled grinding away of the imbalances. There are few other ways in which the rebalancing can occur once the imbalances have gone far enough.Readers with experience with complexity science and systems analysis - hell, anyone with experience in modeling - will recognize the issue at work here. If there is a fundamental change in the governing dynamics of a system, then the model used to describe that system will very likely need to change. If the existing model was built based upon observed correlations, then it definitely will have to change. As Pettis puts it:
With a change in the growth model comes a radical change in the relationship between underlying variables and their impacts on growth. It makes no sense to use the earlier data series, adjusting them according to new conditions, and to project new data series, because when a country is forced into reversing the imbalances, by definition all the correlations between relative inputs and outputs must fall apart, and the more extreme the imbalances that need to be reversed, the more untrustworthy the previous relationships.Stimulating material. Gotta add Pettis to my must-read list.
Tuesday, November 13, 2012
To fix the flaws of China's meritocracy, the meritocracy must fundamentally change
Daniel Bell and Eric Li offer a full-throated defense of China's model of government. Bell and Li spend most of the article extolling the enlightenment of the Chinese meritocracy. They even go so far as to criticize democracy for sharing the franchise too narrowly because "non-voters such as future generations and people living outside the country are also affected" by the choices of a government. This seems like an awfully confused line of criticism; are Bell and Li really arguing that China's government better cares for the interests of non-Chinese citizens than Western countries? They even mention climate change, which is peculiar given that it was China - not Western democracies - who blocked a stronger climate change deal in 2009. China's neighbors in Southeast Asia certainly don't seem to think that the Chinese government takes proper account of how its policies affect them, at least when it comes to maritime issues.
What really interests me, however, is Bell and Li wrap up their article:
It is not a foregone conclusion that it will. As I've pointed out before, the very problems that Bell and Li recognize must be address (corruption, lack of transparency, abuses of power, ...) make it difficult for leaders created by this system to change those aspects of it. Perhaps noble, honorable and gifted technocrats will rise the challenge by shunning personal wealth in order to scale-back the role of SOEs that could enrich them and their families. Perhaps. But human nature is more fundamental than China's culture and history. I'd be inclined to bet on human nature.
What really interests me, however, is Bell and Li wrap up their article:
In practice, Chinese-style meritocracy is flawed. Most obviously, there is widespread corruption in the political system. Term and age limits help to “guard the guardians”, but more is needed to curb abuses of power, such as a more open and credible media, more transparency and an effective legal system, higher salaries for officials, and more independent anti-corruption agencies.In other words, after all the bragging, Bell and Li reach the same conclusion as the Economist - albeit with a much different tone. Bell and Li's bottom line is that:
The Chinese regime has developed the right formula for choosing political rulers that is consistent with China’s culture and history and suitable to modern circumstances. It should be improved on the basis of this formula, not western-style democracy.The problem is that truly improving the Chinese regime (and addressing the abuses of power, the lack of an open media, the lack of transparency, the lack of an effective legal system and the rampant corruption) will require it to change. Bell and Li don't seem to appreciate that if the PRC really did achieve the wishlist of improvements that it needs, then it would look a great deal more like the Western democracies that they claim are worse at governance. In short, they don't seem to recognize the natural result of these improvements:
What will create more meritocratic government in China is continued economic development; more education for more people; open competition; moving towards a free press; an independent judicial system; and, in time, a representative political system.We have a major case study in progress right now. Commentators like Bell and Li argue that China's model is more effective than the existing Western model. It is a widespread consensus among economists that China's growth model needs to be fundamentally re-adjusted. Among these adjustments are a need for more market-oriented reforms and scaled back power for state-owned enterprises. Investment-led growth must give way to more balanced growth (which requires an increase in the share of consumption). The World Bank even co-authored a major report with China's Development Research Center on the changes needed [pdf]. The case study is this: will China actually implement reform? The writing is on the wall and the need seems clear. Will China be able to make and implement the difficult policies that it needs for sustained growth?
It is not a foregone conclusion that it will. As I've pointed out before, the very problems that Bell and Li recognize must be address (corruption, lack of transparency, abuses of power, ...) make it difficult for leaders created by this system to change those aspects of it. Perhaps noble, honorable and gifted technocrats will rise the challenge by shunning personal wealth in order to scale-back the role of SOEs that could enrich them and their families. Perhaps. But human nature is more fundamental than China's culture and history. I'd be inclined to bet on human nature.
