Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Wednesday, July 26, 2006

The Economics of Terror

Last night, I heard the Israeli PM argue that "proportionality" shouldn't be based on the extent of damage (let's rephrase that - costs incurred), but on the extent of the "threat".

This is not just a morally troubling argument (because it's easy to slippery slope your way from there to arguing that "threats" exist everywhere there's a brown person :). In fact, it's a deeply flawed argument from a strategic pov; and examining why reveals the gaping heart at the antistrategy of the War on Turra.

Let's think about this a little critically for a second. Let's say you are a terrorist (no, NSA, I'm not a terrorist). Your benefits are basically how much damage you cause/people you kill/etc. Your costs are very different: they are basically search costs - most terrorists don't have problems getting money, they have problems getting bombs, guns, and other assorted tools of the trade.

Now, let's think about the limit case of this argument - which is actually only 10-20 years away: imagine a world where anyone can destroy a city with something they download from the net, and build themselves. It's a world that we're becoming increasingly familiar with thinking about.

From a strategic pov, this world is happening because the costs of being a terrorist are dropping by orders of magnitude, while benefits are simultaneously exploding: yesterday, you might order a few grenades, and kill a few hundred people.

But in our limit case, what you download/build/etc will kill thousands or tens of thousands - without the need for the enormously costly coordination that went into something like 9/11.

Now, consider these new economics in light of the new "proportionality" argument - that one should respond in line with "size of the threat", preemptively if possible. In our limit case, the expected cost to us of each potential terrorist attack is huge - and these potential attacks and attackers are everywhere (because the costs the terrorists incur are very low).

Can we "fight" such an enemy with our strategy? Our strategy calls for us to respond to the expected size of the threat - preemptively. This means uhhh...bombing everyone, everywhere, all the time. Clearly, this strategy is going to be very, very costly for us - but not so costly for the other side. Already, this is a bad outcome.

But let's think a little further ahead. What does it mean to respond to the "size" of a threat if a terrorist is a guy with a suitcase, who might blow up a city? Well, it can only really mean something like levelling the city the terrorist is from. Which means lots and lost and lots of innocent people die always and everywhere under this strategy.

And that means, of course, in the next round of the game, you will have even more terrorists - more guys who want to kill you. And you will have to keep blowing more and more cities; which will create more terrorist, and so on into oblivion.

The point is that such a strategy leads (literally) to chaos and disequilibrium - an endless spiral of more and more destruction. It is the worst outcome for everyone. All of which makes this set of actions not just absurd morally, but vacuous strategically as well.

And that's perhaps the simplest reason the War on Turra isn't just an inane concept - but is, in fact, a strategic error of the highest level. Fighting terror with, well, terror - unsurprisingly, just creates more terror.

Let me draw an analogy that may make this easier to understand. It's just like the RIAA vs the file-sharers. The RIAA is (still) using a centralized strategy to "fight" a decentralized enemy. Clearly, suing grandmothers - even if it notches up the expected cost of filesharing a few bucks - is never going to be an effective tool to fight a universe of file-sharers; there are simply too many of them, and a lot of them will pretty much always find it worthwhile to share files.

NB - if you want to comment, please try and stick to strategy over pure politics, this is not really about Israel/Hezbollah/Lebanon, but rather about the flawed approach to the War on Turra in general.

If I wanted to get political, I would note that Bush + cronies profit enormously/personally from terrorism.

-- umair // 12:21 PM // 10 comments


Umair - recommend to you this old post from Kos ( pointing out that not only is the disproportionate response strategy morally troubling and absurd when you apply the necessary reductio ad absurdum, but actually what the terrorists are hoping for.
// Anonymous Anonymous // 3:16 PM

Hey Seamus,

That's the really sad part - you're exactly right, it's exactly what they want, because, when countries are ripped apart, guess who benefits from the power vacuum? Just look at Iraq: terrorists win.

This is very well known in the 3rd world, I'm shocked at how it doesn't get more attention in the 1st.

Thx for the comment.
// Blogger umair // 3:29 PM

What? This is the perfect strategy! Remember, Eurasia is our enemy, and Eastasia is our ally.

Conspiracy theories aside, fighting terror is a very good strategy for the perpetuation of the ruling power. This way, you don't even need to rewrite the newspapers - you just call a country "rogue" when you need a new enemy.

Pretend you're the Bush administration and answer Kos' questions 1 and 2. Do you see what I see?
// Anonymous Anonymous // 4:02 AM

umair ,
first the case you described is very different from the case currentlly between israel and hezbolah.
by demilitarizing southern lebanon the threat currently posed by hezbolah on israel would be removed , and this could be achieved by some army (either lebanon's or other nation ) occupying southern lebanon.

regarding the terror scenario you have drawn(the suitace guy) ,on the surface this strategy doesn't seem very good ,but maybe as a part of an holistic long term strategy that takes into consideration other things that affect the situation.

in any case , because of the easiness of killing many people , it would be much harder to keep the piece in the future .
// Anonymous Anonymous // 1:30 PM

simply the best post i have read from you.
// Blogger marks ramblings // 2:17 PM

Hey Tiago,

Unfortunately, you're very right - this is how dictatorships almost always happen.


The post isn't about Israel vs Hezbollah, it's about thinking strategically.

But your comment is absurd, because it assumes it's own conclusion (conveniently). How many nations have succeeded in "demilitarizing" geographies riddled with cells of guerrillas?

Think about that: *zero*.

Why? The reason is, as I point out, the (increasingly attractive) economics of terror.


I'm glad you enjoyed it :)

Thx for the comments guys.
// Blogger umair // 8:47 PM

umair ,
i don't think judging sucsess on war on guerilass can be measured on a binary scale ,because of the easiness of generating terror .

but use of force , and intelligence , can reduce the number of acts of terror. one example i'm aware of is the israeli army's fight again the intifada , which with force (not so large force like in lebanon - alot more constrained force)sucseeded to reduce acts of terror inside of israel comming from gaza and the west bank by a large percentage , for a period of few years.
// Anonymous Anonymous // 10:32 PM


You're bent on making this discussion Israel, though it's not. But let me use your example to illustrate why.

Can "force" can reduce violence? Of course. But we're talking economics, not truisms and cliches.

More to the point: the limit case I outline in the post is one where the world's resources are devoted entirely - misallocated - to stopping terrorism. In such a world, war is endless, and little is left over for anything but "national security".

This is an impossible game to play from an economic point of view.

To wit, in your Israel example, you deliberately ignore the huge costs paid by millions of Palestinians - a destroyed economy, no infrastructure, hours spent at checkpoints just to see family/friends.

Now, others are willing to bear these costs for both Israel and the Palestinians. But we can't play the game of shifting costs on a global scale.

Put another way, the logical conclusion of your argument is a world where *everyone* must accept this kind of "force" as the price of "safety".

It's not just that most people in the world wouldn't accept it (though they wouldn't); rather, it's that the economics of this social contract are fundamentally unsustainable.

Your argument is prima facie absurd - I suggest you reread the post and comments and try and understand what we're talking about.

Thx for the comment.
// Blogger umair // 11:34 PM

Umair. Hope you're reading John Robb at

He's basically been running the whole war on terror through the lenses you'd call "microchunking" and "edge competiencies".

He calls it "open source" and the "bazaar of violence", but is getting at the same thing :

- violence is cheaper and easier to produce because of new technologies and network organizations

- people like Bin Laden are not controlling terror through a hierarchocal command organization, but inspiring a kind of "peer production" of terror through the creation of "plausible premises" eg. "we can attack America and hurt it", and retrospective embrace of those who copy them.
// Blogger Composing // 4:37 PM

Umair - this is the best post of yours I've ever read. I commend and admire you for your courage to stand up and say something like this.

To get specific in regards to Anon #1's comments regarding Israel, anyone who tells any of you that the aggression in Lebanon is justified is a complete and utter racist, as they do not count the lives of brown people (Lebanese & Palestinians) the way they do white people.
// Anonymous Anonymous // 2:42 AM
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