The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future

by Bruce Bueno De Mesquita

  There it is: “Men are likely to forget in the heat of action where their best interests lie and let their emotions carry them away.” How beautifully put. He’s just explained that Joel Cairo will try to be careful not to kill Spade, but then, Cairo can get emotional, so there is also a chance that if Spade doesn’t talk he’ll end up dead. In this brief exchange we see three lovely principles of game theory at work: the question of credible commitment; the use of playing probabilistically to alter how others look at the situation; and the pretense of irrationality (the heat of the moment) for strategic advantage. What could be truer to life’s fears and calculations? How many of us would dare to stay silent given Sam Spade’s gamble: keep the bird and maybe die, or give up the falcon and (maybe) live?

  With a bit of luck, it will become apparent that game theory is not limited to parlor tricks, movie scripts, and brainteasers. It is a powerful tool for reshaping the world. In the remaining chapters, we will use these foundations to see just what kind of problems rational choice theory can tackle, and how math, science, and technology now allow us to predict and engineer particular outcomes that we might otherwise assume would only be determined by a random mix of good or bad fortune and a heavy dose of human whim.

  4

  BOMBS AWAY

  WE NOW UNDERSTAND the basic principles of game theory. That’s all well and good, but how do we use these principles to solve the big problems of our time? Well, let’s not mess around—let’s take a look at North Korean disarmament.

  Being born in North Korea pretty much ensures having a miserable life. The average North Korean has to work an entire year to earn what an average American, Irish, or Norwegian worker makes in around four days. Money isn’t everything, but it is a pretty good first-cut approximation of quality of life.

  Of course, being born in North Korea is not always bad news for everyone. Kim Jong Il, that country’s “Dear Leader,” seems to do very well indeed. He is estimated to be worth around $4 billion. That’s about one-third of North Korea’s annual gross domestic product. (Poor Bill Gates, his wealth is only about 0.4 percent of the U.S. gross domestic product.)

  Kim’s wealth, womanizing, heavy drinking, and gourmand tastes incline many to think of him as an inconsequential, even frivolous, lightweight dictator. He is frequently described as irrational, erratic, and dangerous. Most assuredly he is the last of those, but irrational and lightweight—I think not. Sure, he came by his position the old-fashioned way—he inherited it (on the death of his father, the “Great Leader,” Kim Il Sung). Still, that was a long time ago. No fool stays in power for years on end when there are so many generals, sons, and wives waiting in the wings to launch a coup.

  Kim Jong Il is a savvy, skillful, vicious demagogue. If he is erratic it is because it serves his interests. While we might be inclined to laugh at this seemingly odd little New Age dictator, he cleverly maneuvers within the limitations of the miserable cards he’s been dealt to make himself a menace on the world stage. All the while that he engages in fomenting terror at home and abroad, he continues to rule a country that he and his father made dirt poor.

  When Kim came to power in 1994, North Korea had virtually nothing to sell in the world. Its stature was about as low as it could get. So miserable has he made life in North Korea that many of its hapless citizens have been reduced to eating tree bark. Maybe as many as 10 percent of these poor souls, while taught to revere Kim Jong Il as a god, have died from starvation in the last decade. Yet today, North Korea is on everyone’s radar screen. Why? Because while there is hardly an economy to speak of, there is the business of missile and weapons development that Kim has carved out to remarkable success. His people may starve, but he has put the money he takes from them to work, turning North Korea into a nuclear menace. His potential to launch nuclear-tipped missiles surely provides food for thought for the world even if he puts no food on the average North Korean’s dinner table. Sure, Kim’s government is reviled in almost every corner of the globe, but just about everyone takes notice. They didn’t a couple of decades ago.

  Today, the governments of the United States, China, Russia, Japan, and the Republic of Korea try to work out how to bring Kim Jong Il’s rogue state into the mainstream of international affairs. For years he was threatened, he was coaxed, he was urged to be better, but he also was rewarded by Bill Clinton, at Jimmy Carter’s behest, in the hope that North Korea’s behavior would improve. The rewards Kim’s regime got—in the form of foreign aid, technology transfers, and food relief—came with little or no genuine commitment on Kim’s part, just empty promises. More recently, the six-nation talks seem to have made progress. The task of diminishing his threat appears to be moving forward, although in fits and starts. Finding a path to resolving his nuclear threat can be, and perhaps has been, advanced by accurate predictions and engineering aimed at getting Kim to put his bombs away.

  In early 2004 the Department of Defense hired me as a consultant to investigate alternative scenarios for trying to get North Korea to behave better on the nuclear front. I can only sketch the solutions I came up with here, but even so, we can see how to think about such issues. I will focus attention on the scenario that held out the greatest promise for solving the problem. This scenario looks at trade-offs between U.S. political and economic concessions in exchange for North Korean concessions on the nuclear front. Before delving into details, however, let me be perfectly clear that I am taking and seek no credit for whatever progress may have been made. Policy consultants almost never know whether they are being listened to. They almost never know what other sources of advice are being heard or what those sources are saying. All I can do is report what my analysis showed and relate it to what eventually happened.

  What kind of information is needed to make reliable predictions and tactical or even strategic recommendations? First, of course, it is essential to define the questions for which we want answers. A question like “How can we get Kim Jong Il to behave better?” is too vague. We need to define the objective more precisely, and we need to know the range of choices that Kim and his government can undertake. In this case, the choices included the possibility that Kim and his regime would refuse to negotiate about nuclear weapons at all; would negotiate but then cheat on any agreement as soon as doing so became advantageous (Kim’s preferred approach); would slowly reduce the extent of North Korea’s nuclear program in exchange for different levels of U.S. economic and security concessions; would eliminate the program conditionally (with various gradations of conditions having been specified); or would eliminate the nuclear program unconditionally (the most preferred outcome from the perspective of the American president and his foreign policy team).

  Next we want to know what background conditions should be imposed on the question. For example, we might ask which of the above policies Kim Jong Il could be induced to adopt if the United States publicly targeted nuclear-tipped missiles at North Korea, or if the United States guaranteed North Korea’s security within its borders, or a host of other possibilities. Each condition defines a scenario so that we can compare what is likely to happen if the United States (or some other government) takes this or that action. This way, we start to answer “what if” questions. Once the issue, the options, and the scenarios are defined, then only a very few facts and a bit of logic are needed to identify solutions.

  First, the facts. In my experience, all that is necessary to make a reliable prediction is to:

  Identify every individual or group with a meaningful interest in trying to influence the outcome. Don’t just pay attention to the final decision makers.

  Estimate as accurately as possible with available information what policy each of the players identified in point 1 is advocating when they talk in private to each other—that is, what do they say they want.

  Approximate how big an issue this is for each of the players—that is, how salient is it to them. Are they so concerned that they would drop whatever they’re doing to address this problem when it c
omes up, or are they likely to want to postpone discussions while they deal with more pressing matters?

  Relative to all of the other players, how influential can each player be in persuading others to change their position on the issue?

  That’s all you need to know. That’s all? you might ask. What about history? What about culture? What about personality traits? What about almost everything else that most people think is important to know? Knowing all of those things would be great, and I will say more about them in a moment, but none of that information is crucial to making correct forecasts or to engineering policy change. Sure, it helps. It is generally better to know more than less. Still, anyone who does not put together information on the four factors I listed above is unlikely to assess a situation correctly.

  What’s interesting about the four pieces of information that I contend are crucial is that while they’re not the kind of stuff that can be easily looked up in a book, it is possible to tease such information out of articles in The Economist, US News & World Report, Time, Newsweek, The Financial Times, The New York Times, The Wall Street Journal, and from Internet stories and other news outlets. Understanding the availability of such information, and having the confidence to employ it, is a big part of predicting and engineering outcomes. Admittedly, it is a lot of work going through so many news sources, and for problems with a short fuse, that approach can take too long. Luckily, there is a more efficient way to get the information—ask the experts. It’s that simple.

  Experts have invested years in learning a place’s culture, language, and history. They follow the intimate political details that go on in the area they study. If anyone knows who will try to shape decisions, how influential those people can be, where they stand, and how much they care about an issue, it is the experts. Come to think of it, isn’t knowing this information what it means to be an expert?

  About now you might wonder, if the experts know the information needed to make predictions, what do we need a predictioneer for? Here is where specialization of skills is really important. It’s important to remember that experts alone do not do nearly as well at anticipating developments as do experts combined with a good model of how people think. A declassified CIA study reports that my forecasting model has hit the bull’s-eye about twice as often as the government’s experts who provided me with data.1 I certainly don’t know more than they do about the countries or problems they study. In fact, I often know no more than what they tell me. But they’re not experts on how people make choices, because that, after all, is not the focus of their knowledge.

  With all of the information we collect in order to predict and shape outcomes, computer modeling is necessary both to organize the data and to run simulations of negotiations or exchanges. Think of these simulations as a game of chess in many dimensions, in which the computer calculates everyone’s expected actions, taking anticipated responses by everyone else into account. The computer has a tremendous advantage over experts, analysts, or the smartest decision makers when it comes to playing such a complicated game. Computers don’t get tired; they don’t get bored; they don’t need coffee breaks or much sleep; and they have fabulous memories. They are content to crunch as much information as we shovel into them.

  Consider the computer’s advantage. Suppose we were examining the North Korean nuclear problem in 2004, as I was, and suppose we simplified it (which I didn’t) to consider just five players: George W. Bush, Kim Jong Il, Russia’s Vladimir Putin, China’s Hu Jintao, and South Korea’s Roh Moo Hyun (ignoring Japan for the moment). How many conversations among the parties to the talks might each of those five decision makers want to know about?

  George Bush certainly would want to keep track of what he said to each of the other four and what each of them said to him. They would all want to keep tabs as well on any proposals they made and any they heard from others. That’s twenty exchanges of views right there. Certainly that is not all that any of them would want to know. Bush would be interested to know, or at least try to figure out, what Kim Jong Il might be saying to Putin, to Hu Jintao, and to Roh, and each of them would want to know about the conversations they were not directly involved in too. That’s another sixty possible discussions. And Bush might even want to know what, for example, Putin thought Kim was saying to Hu Jintao and to Roh Moo Hyun, not to mention what he thought Roh said to Hu and to Kim, and so on.

  All in all, taking all the layers of information being traded back and forth among just these five decision makers, there are 120 possible exchanges or imagined exchanges (that is, 5 factorial, or 5×4×3×2= 120) to know about. Keeping track of those 120 possible offers and counteroffers that might be on the table is essential in sorting out what is best to do at any moment in a negotiation. Those 120 possible exchanges of points of view and beliefs about such exchanges are what can happen in a single round of bargaining with just five stakeholders. It might be surprising to know that a smart person can keep that amount of information pretty straight in his or her head. Keeping the information straight, however, becomes an acute problem as the number of interested parties rises.

  Just adding Japan’s prime minister—the talks are, after all, six-party talks, not five-party talks—to the mix inflates the number of important bits of information six times from 120 to 720. Moving up just to ten players, the number of useful pieces of information rises astonishingly to over 3.6 million! No one—not Newton, not Einstein, not von Neumann—can keep that much information straight in his head; but of course the tireless computer can.

  Alas, the computer’s great memory and excellent work habits come at a price. There is a vital gap between how experts or newspaper articles express facts and how computers ingest and digest them. Like the rest of us, experts communicate in sentences. Models talk in numbers. So part of my job is to turn sentences into numbers so that the computer can crunch away. Numbers have big advantages over words—and not just for computers. Most importantly, numbers are clear; words are vague. It’s essential to turn information into numerical values, and in fact it’s not especially hard to do.

  To get a sense of how readily experts know the information needed to make reliable predictions, and to see how easily the information can be turned into numbers, try an experiment. Interview someone you think of as really knowing about your friends and family, including perhaps yourself. Pick an issue that is important to your family or friends. It doesn’t have to be about world affairs; it could be about where to have dinner, or what movie to see, or whatever else leads to disagreements. The easiest sort of issue to do as a first try is what I call a beauty contest. Say you and some friends are trying to choose between two movies. Anyone who really truly wants to see The Sound of Music (or fill in whatever first-run movie might grab your fancy) gets a value of 100, and anyone really committed to seeing A Clockwork Orange (another great old film) gets a 0. Then you should be able to rate how strongly each friend leans toward one movie or the other. Any who are truly indifferent get a 50; anyone leaning slightly toward A Clockwork Orange might be close to 50, say at 40 or 45, and so on. You or the “expert” you are interviewing need to calibrate their strength of feeling as accurately as possible. This way, movie preferences are turned into one value for each chooser—that is, each family member and/or friend involved in shaping the decision. The process is exactly the same, although the choices may be more complex, whether deciding what movie to see or addressing North Korea’s nuclear choices. Sure, the stakes differ, but once the essential facts are extracted, the process of turning stated objectives into a predicted outcome is the same.

  Now estimate how eager each friend or family member—each player—is to weigh in on the decision. If you think a family member will drop what he or she is doing to discuss the movie to see, rate that person’s “salience” (variable 3 on my list) close to 100 (no one is ever really at 100). The less focused you think someone is on the movie choice, the lower the salience score. If a family member is the sort who would say, “Look, I’ll go to w
hatever movie you choose, but really I don’t have time to get involved in picking which one,” that’s somewhere around a 10. On the other hand, if you think a friend will say, “I’m busy right now but call me back in ten minutes,” that’s pretty high salience. “Call me back in an hour” is lower, and “Call me back next week” is much lower. With a bit of effort, it shouldn’t be that hard to calibrate how important the movie decision is to each person compared to the other decisions they have to make (not compared to each other, mind you, but compared to other things they need to do or deal with).

  Finally, figure out who you think has the most influence among your friends or family members if you assume that everyone thinks the choice is equally important. Give the person credited as being most persuasive a score of 100 and rate everybody else relative to that. So if Harry is 100 and Jane is 60 and John is 40 in potential clout, and Jane and John want to see The Sound of Music and Harry wants to see A Clockwork Orange, then that means that John and Jane together just offset Harry’s ability to persuade if they all care equally intensely about choosing a movie. If Jane were 60 and John were 70, then, all else being equal, they could persuade Harry to moderate his view and give more consideration to the movie Jane and John prefer. Of course, if someone else supported Harry’s choice, that might create a strong enough coalition to defeat John and Jane. The dynamics get complicated, but the basic idea should be straightforward.

  It’s important to note that most of us make these assessments of interests in any situation. We just do such calculations naturally with relative judgments of where people stand on a given issue. What I’ve sketched above is simply a formalization of that natural process—which becomes all the more needed the more complicated the problems in question become.