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Missile Defense

Russian military leaders have expressed concern about US plans for a national missile defense system. Will defense technology be limited by possibilities for a strategic imbalance? Is this just SDI all over again?

rshowalter - 05:30pm Mar 23, 2001 EST (#1394 of 8073)
Robert Showalter showalte@macc.wisc.edu

I'll imagine that you're the great leader that the quality of your thought and "staff work" indicates -- suppose I take a shot, in the next hour, trying to speak of Russia as a "statistical ensemble of businesses -- with expected rates of return that make them unattractive -- and discuss how you might radically increase the attractiveness of your country from a business point of view.

I'll speak of "expected rates of return" -- as in compound rates of interest -- and talk about the key thing -- which is the total RISK DISCOUNT -- make Russia more reliable, and you will RADICALLY shift its marketability upwards.

rshowalter - 05:36pm Mar 23, 2001 EST (#1395 of 8073)
Robert Showalter showalte@macc.wisc.edu

Perhaps this model is simple enough for you to use -and evaluate, punching numbers on a hand held calculator. Sometimes the biggest effects are easiest to see in a simple case, where relations stand out starkly.

Suppose you think of an investment,

where at time 0, you put in a cost, C

and after a time of t expressed in years (which could be a fraction)

you get a Payoff, P , if you win

and the PROBABILITY OF WINNING is a value a, between no chance ( a = 0 ) and certainty ( a = 1 ) so that 0<= a <= 1

It is worth noting, and especially worth noting for Putin, how the value of a matters.

rshowalter - 05:38pm Mar 23, 2001 EST (#1396 of 8073)
Robert Showalter showalte@macc.wisc.edu

Reliability is valuable (and unreliablility is very expensive ) from a gambler's (or investor's) point of view !

rshowalter - 05:41pm Mar 23, 2001 EST (#1397 of 8073)
Robert Showalter showalte@macc.wisc.edu

the expected rate of return, r , for this lump model is

r = [ln( aP/c)]/t

In words, the effective compounded rate of return (compound interest) is

the natural logarithm of the risk discounted payoff to cost ratio divided by the time between putting out the C, and getting the payoff P

rshowalter - 05:43pm Mar 23, 2001 EST (#1398 of 8073)
Robert Showalter showalte@macc.wisc.edu

Note:

it isn't the "best case" payoff to cost ratio, P/C

it is the risk discounted payoff to cost ratio (aP)/C

that the investor, if he's a rational gambler, looks at.

rshowalter - 05:51pm Mar 23, 2001 EST (#1399 of 8073)
Robert Showalter showalte@macc.wisc.edu

So you want the probability of payoff, a to be JUST AS CLOSE TO 1 AS YOU CAN GET IT.

In fact, most business people, when they see a values much less than 1, don't keep on calculating values of investments.

They turn away, and look for another game.

That's happened to Russia. People have turned away, and looked for other "games" -- other economies to invest in -- because the overall socio-technical reliability of business in Russia is just too low.

Putin is doing many of the right things to fix this. But perhaps he should be doing some things with more focus. Because Russians know how to get VERY HIGH P/C ratios, when things to well -- they have the potential to enrich themselves and others -- if their work was more reliable, they'd be "good bets." But right now, many too many times, they've been too unreliable, a values have been too low, and now the whole country is regarded as a "bad bet."

From where Putin sits - the question "what happens to a , in the ordinary cases of business?" ought to be the key question he asks, every time, about economic policy. You can get a up without sacrificing humanity, or Russian cultural values.

But you have to get it up, or Russia will be weak, when she should be strong.

rshowalter - 05:53pm Mar 23, 2001 EST (#1400 of 8073)
Robert Showalter showalte@macc.wisc.edu

Better ability to interface with other cultures is part of getting a up.

Fewer lies and evasions among yourselves is a way of getting a up.

And some standard management skills are important - you may not like Friedman, but all the things he said about financial controls are true.

rshowalter - 05:56pm Mar 23, 2001 EST (#1401 of 8073)
Robert Showalter showalte@macc.wisc.edu

Americans would rather work with a really unattractive sonofabitch, who could do his job

rather than a much more attractive human being, who couldn't.

You don't have to sacrifice your culture - many of us LIKE the idea of an authentically different Russia. But you have to , in an American phrase, "pull up your socks."

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