Predicting the future

Everyone wants to know the future. The problem is that we do not know how. In the past, kings and queens relied on gods and goddesses. Present day leaders make a beeline for seers and astrologers. It is only recently that science has been harnessed to replace both the gods and the astrologers.

Bruce Bueno de Mesquita, a professor of political science at New York University, has shown how to mobilize game theory to predict the future. His success and accuracy over the past two decades has led many observers to dub him the "New Nostradamus." The previous Nostradamus was a 16^th Century Frenchman who used astrology and visions gotten from meditations and then wrote the resulting predictions of the future down in a series of obscurely worded quatrains that have been the subject of controversy and discussion for centuries. Bruce Bueno de Mesquita, on the other hand, uses a mathematical formula based on games theory to predict future political developments. And according to the CIA, for whom he consults, he has been right 90% of the time.

He started on this journey by accurately predicting the rise and fall of Charan Singh as prime minister of India in 1979 using his nascent software based on games theory. Games theory comes in two primary flavors: cooperative game theory, invented by John von Neuman and Morgenstern in 1947 which deals with players who engage each other, trying to anticipate moves and countermoves, but only in setting where they will do exactly as what they say will do. Hence cooperative game theory has as its essence an optimistic view of human nature. But along came John Nash in the early 1950’s who invented a different kind of game theory- the non cooperative game theory- where players make promises that they have no intention of keeping unless it is to their benefit. This view is of people as cold, ruthless and self interested is at the heart of the Nash game theory thinking.

Among Bruce Bueno de Mesquita's successful predictions have been: he forecasted the second Intifada and the death of the Mideast peace process, two years before it happened; defied Russia specialists by predicting who would succeed Brezhnev, his model identified Andropov, who nobody at the time even considered a possibility; predicted that Daniel Ortega and the Sandanistas would be voted out of office in Nicaragua, two years before it happened; foretold four months before Tiananmen Square, that China's hardliners would crack down harshly on dissidents. And of course there is the CIA endorsement of his accuracy.

To predict how leaders will behave in a conflict, Bueno de Mesquita starts with a specific prediction he wants to make, then interviews four or five experts who know the situation well. He identifies the stakeholders who will exert pressure on the outcome (typically 20 or 30 players) and gets the experts to assign values to the stakeholders in four categories: What outcome do the players want? How hard will they work to get it? How much clout can they exert on others? How firm is their resolve? Each value is expressed as a number on its own arbitrary scale, like 0 to 200. (Sometimes Bueno de Mesquita skips the experts, simply reads newspaper and journal articles and generates his own list of players and numbers.) His predictions are thus based on self-interest and needs to look at all of the influencers on the key decision maker. If you merely sort the players according to how badly they want a particular result and how much support they have among others, you will end up with a reasonably good prediction. But the other variables enable the computer model to perform much more complicated assessments. In essence, it looks for possible groupings of players who would be willing to shift their positions toward one another if they thought that doing so would be to their advantage. The model begins by working out the average position of all the players — the “middle ground” that exerts a gravitational forces on the whole negotiation. Then it compares each player with every other player, estimating whether one will be able to persuade or coerce the others to move toward its position, based on the power, resolve and positioning of everyone else. After estimating how much or how little each player might budge, the software recalculates the middle ground, which shifts as the players move. A “round” is over; the software repeats the process, round after round. The game ends when players no longer move very much from round to round — this indicates they have compromised as much as they ever will. At that point, assuming no player with veto power had refused to compromise, the final average middle-ground position of all the players is the result — the official prediction of how the issue will resolve itself.

But the most interesting claim of his book is that it is possible for us to anticipate actions, to predict the future, and, by looking for ways to change incentives , to engineer the future across a stunning range of considerations that involve human decision making.

He presents examples of how a long term commitment of $ 1.5 billion per year to Pakistan would ensure its support for a meaningful fight against the Taliban but that it would never fully eliminate the Taliban since doing that would eliminate any need for further aid. In another example, he similarly shows the correct long term strategy for dealing with North Korea.

His analysis starts from the premise that what Kim Jong Il cares most about is his political survival. As Bueno de Mesquita sees it, the principal reason for his nuclear program is to deter the United States from taking him out, by raising the costs of doing so. “The solution, then, lies in a mechanism that guarantees us that he not use these weapons and guarantees him that we not interfere with his political survival,” he says. Perhaps not coincidentally, the recent agreement that the United States reached with the government of Pyongyang closely resembles the one that Bueno de Mesquita’s model suggested: Kim agrees to dismantle his existing nuclear weapons but not his existing nuclear capability. “He puts it in mothballs with IAEA (International Atomic Energy Agency) inspectors on site 24 hours a day, 365 days a year. And in exchange, we provide him with $1.2 billion a year, which we label ‘foreign aid,’ of course.” The “foreign-aid” figure published in the newspapers was $400 million, which concerns Bueno de Mesquita. “I read that and I said, I hope that’s not the deal because it’s not enough money. He needs $1.2 billion, approximately, to sustain the loyalty of his cronies in the military and so forth. It’s unpleasant, this is a nasty man, but we’re stuck with it. The nice part of the deal is that it’s self-enforcing. Each side has a reason to credibly commit to their part of the deal.”

He also used such a model to predict the outcome of the Iran’s stand off on nuclear power. According to his model, the Iranian government will tone down its nuclear ambitions to the point where it will develop weapons-grade nuclear material only for research purposes. Real power rests not with the mullahs or even with the Supreme Leader, but with what he calls the “moneyed interests” of Iranian society: “the banker, the oil people, the bazaris”. In a talk at TED, he lays out the rationale of his prediction that Iran will not move towards a nuclear bomb.

He even ventures into the minefield of how to resolve the Israeli-Palestinian conflict. “In my view, it is a mistake to look for strategies that build mutual trust because it ain’t going to happen. Neither side has any reason to trust the other, for good reason,” he says. Bueno de Mesquita’s answer to this dilemma is a formula that guarantees mutual incentives to cooperate. “In a peaceful world, what do the Palestinians anticipate will be their main source of economic viability? Tourism. This is what their own documents say. And, of course, the Israelis make a lot of money from tourism, and that revenue is very easy to track. As a starting point requiring no trust, no mutual cooperation, I would suggest that all tourist revenue be [divided by] a fixed formula based on the current population of the region, which is roughly 40 percent Palestinian, 60 percent Israeli. The money would go automatically to each side. Now, when there is violence, tourists don’t come. So the tourist revenue is automatically responsive to the level of violence on either side for both sides. It’s completely self-enforcing, it requires no cooperation except the initial agreement by the Israelis that they are going to turn this part of the revenue over, on a fixed formula based on population, to some international agency, and that’s that.”

It really would be interesting to see what he predicts for the health care debate in the US congress or on the Afghanistan strategy?