Ep68 “Is It Better to Overestimate or Underestimate Your Enemies?” with H.R. McMaster

Key Concepts

Geopolitical Tensions: The shift from a unipolar world dominated by the US to a multipolar world with rising powers.
Intelligence Overestimation: The tendency of intelligence agencies to overestimate the capabilities of adversaries.
"All Else Equal" Mistake: Ignoring the incentives of intelligence producers, leading to a bias towards overestimation.
Type I and Type II Errors: Statistical concepts relating to overestimation (Type I) and underestimation (Type II) and their respective costs.
Proxy Wars: Conflicts where opposing sides use third parties to fight on their behalf.
Information Warfare/Cognitive Warfare: The use of misinformation and disinformation to influence perceptions and decision-making.
Demographic Shifts: The impact of declining populations on economic power and global dynamics.
Authoritarian Governance: The characteristics and global promotion of authoritarian models.

Summary

This episode of the "All Else Equal" podcast, hosted by Jules van Binsbergen (Lauder Institute, University of Pennsylvania) and Jonathan Berk (Stanford Graduate School of Business), features H.R. McMaster (Hoover Institution, former National Security Advisor) discussing the complexities of geopolitical tensions, intelligence analysis, and strategic decision-making in a multipolar world.

The "All Else Equal" Mistake in Intelligence Analysis

The discussion begins by highlighting the persistent tendency for intelligence agencies, particularly in the US, to overestimate their adversaries. Jonathan Berk cites historical examples such as the Cuban Missile Crisis (overestimating Soviet ICBM capabilities) and the Iraq War (overestimating WMDs). Jules van Binsbergen proposes that this "All Else Equal mistake" stems from the incentives of intelligence producers: underestimating an enemy and being unprepared leads to job loss, while overestimating and being overly prepared, even if the threat is less severe, carries no such penalty. This asymmetry encourages a bias towards overestimation.

H.R. McMaster agrees that intentional overestimation is unlikely, attributing it instead to a lack of focus on the qualitative dimension of combat effectiveness and a poor understanding of one's own capabilities in comparison to the adversary's. He emphasizes that commanders are ultimately responsible for placing intelligence estimates within an operational context.

The Costs of Overestimation and Underestimation

While the immediate costs of overestimation, such as the Iraq War, are evident, the conversation explores the potential for significant long-term costs. Jules van Binsbergen questions whether the penalties for underestimation are so much worse than overestimation that they drive the observed bias. H.R. McMaster counters that overestimating can also be detrimental, leading to missed opportunities to seize the initiative against a weaker enemy. He uses the example of Iran, where the regime's perceived strength through its use of proxies masked its underlying weakness, leading to a failure to impose costs for attacks on US forces.

Conversely, examples of underestimation are also presented, including the US underestimating the difficulty of annexing Canada twice and, more significantly, the North Vietnamese and the Taliban. McMaster notes that the intelligence community's portrayal of the Taliban as a natural movement, rather than a Pakistan-backed terrorist organization, contributed to this underestimation.

Proxy Wars and the Ukraine Conflict

The discussion shifts to the prevalence of proxy wars. Jonathan Berk posits that the US and European support for Ukraine, while not direct intervention, could be seen as a form of proxy warfare, as they are supporting Ukraine's fight against Russia without directly declaring war. H.R. McMaster clarifies that he does not consider the US and European support for Ukraine a proxy war because Ukraine is defending its sovereignty against Russian aggression. He argues that China, however, may be fighting a proxy war against the West by underwriting Russia's efforts, providing equipment and financial support. He points to China's "partnership with no limits" announcement as a declaration of a new era where they aim to lead.

McMaster further elaborates on the concept of proxy warfare, tracing its historical roots and distinguishing it from direct support for a nation defending itself. He emphasizes that the objective in Ukraine is Ukraine's sovereignty, not a US or European objective to weaken Russia or depose Putin.

The China Threat: Overestimation and Underestimation

Regarding the long-term threat posed by China, H.R. McMaster suggests a nuanced view: the US both overestimates and underestimates China.

Underestimation: Occurs in areas where the US has not made sufficient investments to counter China's military advancements, such as offensive cyber capabilities, electromagnetic warfare, counter-satellite systems, and drone swarms. The US also underestimates the danger of giving a hostile authoritarian regime coercive power over its economy through control of critical supply chains.
Overestimation: Is seen in China's economic prowess. While China controls critical supply chains, it faces significant internal weaknesses: a debt crisis, a real estate crisis, insufficient consumer demand, a demographic "time bomb" (projected population decline), high youth unemployment, and the chilling effect of crackdowns on its tech sector.

Demographic Shifts and India's Strategic Importance

The conversation highlights the dramatic demographic shifts occurring globally. Jules van Binsbergen points out China's projected population decline from 1.4 billion to 620 million by the end of the century, with a drastic reduction in young people. In contrast, India, which has surpassed China in population, is expected to maintain its population at 1.4 billion.

H.R. McMaster emphasizes the strategic importance of India, stating that its success is crucial for the world, while its failure would be a catastrophe. He acknowledges India's promise due to its younger population and democratic status but also notes its challenges with energy, food, and water security, as well as internal political issues related to Hindutva. He advocates for major economies like Japan and the US to prioritize helping India address these interconnected problems through free-market incentives, particularly in energy security, which can also address environmental concerns.

Intelligence Failures and Decision-Making

Returning to the Saddam Hussein and nuclear weapons intelligence failure, Jules van Binsbergen probes why this mistake was made and how decision-makers should react to intelligence with known asymmetries. H.R. McMaster references an essay on "The Fate of Facts in the Lives of Men," suggesting that intelligence analysis can mirror policy preferences. He points to two dynamics at play:

Policy Preference: The post-9/11 context and the "1% rule" (acting on even a small chance of a hostile regime acquiring WMDs) created a preference for preventive war.
Imperfect Data: The intelligence community operated with incomplete information and significant "noise." Saddam Hussein himself had an incentive to make others believe he possessed WMDs to deter an attack, ironically convincing the US to attack.

McMaster stresses the importance of constant dialogue and challenging the intelligence community. He advocates for asking follow-up questions and clearly articulating the desired answers to ensure thorough diligence across intelligence disciplines. He shares a personal anecdote of questioning an intelligence assessment on Afghanistan that he felt was "delusional" and outsourced to the Taliban.

Information Warfare and Cognitive Warfare

Jonathan Berk introduces the concept of information wars accompanying physical conflicts, noting the strategic release of information and propaganda. H.R. McMaster connects this to the historical Soviet technique of maskirovka (deception) and cites examples like Pearl Harbor and the Molotov-Ribbentrop Pact. He emphasizes the need to understand new techniques of misinformation and disinformation, apply analytical tools to identify influence campaigns, and develop cognitive warfare strategies.

McMaster highlights education as the primary inoculation against these tactics. He also mentions technical methods for identifying message evolution and the role of bots and trolls. He expresses concern about platforms like TikTok, not just for data collection but for their potential to shift perceptions. He commends companies working on forensic analysis of social media and notes the efforts of countries like Finland and Estonia in countering hybrid warfare.

McMaster advises thinking like the enemy and understanding how they attempt to manipulate. He uses Vladimir Putin as an example of a leader skilled at manipulating world leaders, including former German Chancellor Angela Merkel and US presidents, by playing to their egos, offering flattery, expressing sympathy for grievances, and portraying alternatives as weak. He stresses the role of National Security Advisors in warning presidents about such manipulative tactics.

Arrogance and Misunderstanding of China

The conversation touches upon the arrogance in assuming China would democratize as it became wealthier. McMaster criticizes the belief that the Chinese Communist Party would change, given its history of immense human rights abuses. He argues that the US entered a post-ideological era, believing in the inevitable triumph of free societies, and underestimated the Leninist nature of the CCP and its ambition to displace the US and rewrite international rules. Jonathan Berk concurs, highlighting China's 2,000-year history of centralized authoritarian control, making the idea of a sudden change naive. McMaster adds that China is actively promoting its authoritarian governance model globally.

Conclusion

The episode concludes with a reflection on the critical need for a nuanced understanding of geopolitical dynamics, the inherent biases in intelligence gathering, and the evolving nature of conflict, which increasingly involves information and cognitive warfare. The hosts and guest underscore the importance of critical thinking, challenging assumptions, and recognizing the strategic incentives of all actors involved to navigate the complexities of the current global landscape. The discussion also highlights the long-term implications of demographic trends and the strategic imperative of engaging with rising powers like India.