Tuesday, September 27, 2016

And so it begins...

The much awaited riposte has begun.

PM Modi has refused to attend the SAARC meeting in Islamabad.

PM Modi has suspended the Permanent Indus Commission indefinitely.

The Indian media and diplomatic initiative after Uri had sought to paint Islamabad as terrorist state and given its long history of hosting terrorist groups and harboring irredentist positions - the label stuck to Pakistan.

PM Modi was careful not to abrogate the Indus Water Treaty but to simply suspend the Permanent Commission which adjudicates issues that come up during the implementation of the treaty.  By linking the restoration of the Permanent Commission's talks to the "end of terror" - the Indian PM has drawn a line in the sand.

This is a major shift in the India Pakistan discourse.

This is a very direct articulation of an existential threat to Pakistan.

Pakistan is a lower riparian state and despite all pretenses - it cannot alter the status quo in Kashmir. Should India choose to go its own way on water issues, the entire agro-economy of Pakistan would collapse under the weight of speculative panic in its grain markets.

We have now entered a new phase of India Pakistan relations.

This puts us into a space that I call "Beyond Cohen". Steve Cohen's basic hypothesis was that India would respond militarily to a Pakistan attributed terrorist attack and that would set the situation railing towards an escalatory peak.

By de-activating the Permanent Commission - the situation has escalated without a military act by India.

This is important - the move indicates PM Modi's willingness to  engage in a test of wills. He has indicated to everyone he is not backing down from a fight - but he also has numerous non-military options at his disposal which Pakistan has no counter for. For all the forces it possess the Pakistan Army cannot bring water to the people of Pakistan.

It  remains to be seen how Pakistan responds, but it would appear that PM Modi's move has signaled that his patience with the Pakistan Army and its behavior is at an end.



Friday, September 23, 2016

Predatory pricing as part of a national security strategy


This kind of thing usually comes up in the context of Chinese national business practices, and most opponents of international trade bring this up when coming up with arguments to support their views.

The basic idea here is that a nation deliberately facilitates its companies as they pursue predatory pricing strategies to gain dominance on international trade patterns. For example, a nation subsidizes its companies and that subsidy allows them to drop prices on internationally traded products. The companies then basically dump their products on to the market and drive all other international competitors out of business. Once the dominance has been achieved, the nation raises taxes or withdraws incentives to these companies and in turn they price gouge their captive markets.

A lot of people accuse the Chinese of doing this kind of thing. And given how many people accuse the Chinese of doing this,  I feel that there is certainly some fire under all the smoke. I also agree that this is the kind of strategy that would appeal to Chinese national security planners.

There is however a problem. If you look carefully at all the control that has to be maintained to get this kind of scheme to work, you realize that such a strategy has significant administrative costs. And this administrative costs have to be born for several decades before price gouging can provide a real return. That is a period over which the Chinese (or any other nation  seeking such a policy goal) basically holds on to a very insecure debt burden which grows quite significantly. The biggest risks in such a strategy are that in the period that it takes to really action such a policy - no competitive technology appears that is better tuned to customer expectations of product quality.

Now people (like myself) who work on novel technologies will tell you it is very difficult for new technology to compete with lower cost mass produced stuff, but this is only really true when there is no clear value addition from the new product side. If your new product can actually offer users an improved UX or better appeal to customer defined norms, you can be competitive against a dumping strategy. This can obviously augmented by brand awareness and loyalty etc...

There is also a psychological factor at play in this sort of thing. If the target market can show even one example of a successful market disruption, then it will sow doubts in the minds of the policy planners in the nation attempting a dump-and-gouge strategy. I think some of this is happening in China, I see a lot of Chinese firms trying to do innovation - or at least their own version of it. These firms inevitably discover that innovation is painful and expensive and it further chews through their weak profit margins. They basically do not have a very deep resource pool from which to attempt true innovation and what it ends up doing is that it prolongs the time for which their government has to shoulder their bad debt.

Many people argue that closing the door to the target market is the only way to secure themselves from dump-and-gouge attacks. This kind of thing basically advocates against international trade which is the corner stone of our global prosperity.

I disagree with that way of doing things  - I think a better way is to engineer disruptions of the dump cycle through targeted innovation.  That should have a salutary effect on the dump-and-gouge strategy without affecting the overall framework of international trade.


Thursday, September 22, 2016

Iran announces "surge" in Syria

Recent reports indicates that Iran has massively increased its footprint in Syria. This has significant implications for the stability of the Assad regime and for the prospects of "Sunni gas".

As most of you are aware ISIL's ability to make war has been severely restricted. Between Russian airstrikes on their oil infrastructure and US airstrikes on their remaining military battalions, the fall of ISIL control in many areas including the Al-Raqqah is imminent.

This is as good a time as any to get in on the action. That is what is largely driving Iranian enthusiasm. Chicago rules say you should always kick a man when he is down.

The troop surge planned by the Iranians will not support the Assad regime as much as it will constrain it to do Iran's bidding. We have seen this kind of thing in Lebanon with Hezbollah. Hezbollah leaders openly speak about Iran pursuing its own interests even if they come at Hezbollah's expense.

From the Iranian perspective - Assad is an accident of history - perhaps a useful one but not an essential one. I feel the deployment of more IRGC assets and Iranian irregulars on the ground in Syria speaks to Iran's estimate that the Assad regime will not sustain beyond a point here. The Iranian's recognize that the Assad regime is exhausted and like ISIL it will not sustain a real beating for much longer.

I sense that the objective for Iran here is not so much to facilitate the proposed "Shia Gas" routes, but rather to frustrate "Sunni Gas" initiatives backed by KSA and Qatar. The Russians want this too (as does anyone who dislikes the current low oil prices). This becomes a natural zone of convergence for many groups and the Iranians are capitalizing on that.

It is difficult to say how long this surge will last. From current trends in Iranian media channels, there is broad public support for checking ISIL but it is not clear the average Iranian backs getting into a pipeline war with KSA+Qatar.

The imminent fall of ISIS offers Iran a massive opportunity to gather support from its people and put more feet on the ground in Syria.

America for its part is ambivalent to the root of the Syrian conflict. If Saudi+Qatar  succeed in getting "Sunni Gas" through to Europe, then the US could benefit from resulting reduction in ONG prices. If the "Sunni Gas" initiative fails, the price of ONG would rise (as KSA would not be able to sustain its production at low prices)  but then US based fracking firms would go back into business and the US would make money from exports.

This kind of ambivalence is what allows certain presidential candidates to get away with making utterly nonsensical comments about US intervention in Syria. In a sense it is completely irrelevant what they say - because no one is actually going to do anything  significant.

Tuesday, September 20, 2016

Storm clouds and lightning

When storm clouds gather lightning strikes with little or no warning.

Monday, September 19, 2016

Some comments on the Uri Attack

The loss of life in any incident is terrible. Unlike the bureaucrats of old who felt that the armed staff are basically paid to die - I actually believe everyone has a right to live.

Unfortunately as you might expect - there is actually a response scale that typically comes into play when an incident occurs. This has evolved over the last several decades and it is deeply rooted in thinking of the Armed Forces. (Seriously - do you know of anything that doesn't have a schedule in GoI? - even the number of pieces of toilet paper you use are stipulated in some  rules of conduct.)

The first level on the incident is one where uniformed personnel are attacked during the course of their duties. Usually this definition is limited to when they are actually on patrol, but after the first RR garrisons were established, it has largely been revised to include the act of being in the base itself. The response is usually local and limited to uniformed or recognized adversaries only. Naturally the response is proportional to the casualty and challenging a flag officer produces an extremely serious reaction.

The second level incident is one where personnel out of uniform are attacked either off-base or off-patrol. This kind of behavior is seen as hostile and completely unwarranted. Most movements in India's north east even in their heyday never crossed this line and only attacked people in uniform. The response is much stronger than the previous level. I don't want to go into the specifics because let's face it - most of you don't care.

The third level incident is one where the relatives of personnel are targeted either on or off a secure base. This kind of thing has happened very rarely in history and it is seen as an unforgivable terrorist act. The response is usually very severe. Again no specifics - but you can look at history books as  much as I can.

Obviously Sri. Modi can do whatever he wants. It is all dictated by political expediency anyway.  One meeting of the brain trust and all this could become irrelevant.

At the present time, people are talking about cross border strikes, but it is difficult to do it without the help of the Pakistan Army. It should be possible to secure such help but there is inevitably a cost associated with that kind of thing and I wonder if Sri Modi is up for it. One would have to pay the Pakistani Army to arrange safe passage for the Indian strike team as it did for the Seal team that took out Osama Bin Laden. Only a long range recon patrol could produce a strike of extraordinary precision with little to collateral damage.

It may be possible to do this without Pakistan Army cooperation, but the risks and likely costs of such an option will be higher. I think it will be an extremely high risk mission with over 90% chance that the away team will be lost. Units like the SG can carry such risky long range recon patrols with ease but traditionally that has been held in reserve for reasons that should be exceedingly obvious. Naturally I am never in favor of expending SG lives unless there is no alternative at all and I would be against this option on account of those principles alone.

Another option that was doing the rounds was reinstating the artillery barrages that were used as punitive measures in the Neelam Valley. Unfortunately I think this measure is less effective now, firstly the Pakistani posture in the sector has hardened considerably and the only ones who are punished by these barrages are innocent Kashmiri women and children who can't escape the Indian artillery shells. The Pakistan Army terrorist groups or their sponsors are left largely untouched by such acts.  This was not the case a decade ago but now I fear things have changed.

The other big discussion is air strikes. If the element of surprise could be achieved it would be quite effective, but I stress there would be significant collateral damage. The Israelis have done this kind of thing time and time again, but their model for this is far more tolerant of collateral damage. Essentially the Israelis state that their responses need to match the per-capita casualty rate imposed by their adversaries. As Israel's population is quite small, the per-capita casualty rate is very high. So from the Israeli perspective an imprecise option like an airstrike produces acceptable levels of collateral damage. This argument does not apply in the Indian context.

If I was a JS in the PMO, now would be the time that I would try to attend that conference in Kanyakumari or perhaps I would try to go the my fifth-cousin-thrice-removed's son's wedding in Rangoon!

Saturday, September 17, 2016

Schlafly is gone - but Steinem lives.

To those of you who are unfamiliar Phyllis Schlafly and Gloria Steinem represent two of the most strident female voices in the US political spectrum. Their ideas and public postures shaped the views of several generations of men and women in the US and I believe these two intellectual giants hold the key to an electoral landslide in the coming US election.

The two could not have been more different. Throughout their lives they fought each other and it was a vicious and pitched war of words and thoughts. Ordinary people (like me) watched these ideological conflicts and wondered what to make of it. (Full disclosure - I am much closer to Steinem's positions on gender issues but I do not see Phyllis' ideas are being "anti-feminist").

I for one see Phyllis as a crypto-feminist. I know that word has been largely defined to mean women who reject overt association with feminist ideas but I am using it differently. In my view Phyllis infiltrated the male dominated conservative hierarchy in the same way that an S-Directorate illegal infiltrates the US nuclear command and control chain.

Now you would think that kind of infiltration is easy to spot. Surely you can tell when a KGB illegal is getting too close to the football? - I mean the man loves reading old Russian novels,likes Pirogis and struggles with the letter "V" - right? ... No wrong!

That is where I think the talent and genius of Phyllis Schlafly lies - she embedded herself at the core of the dark heart of male egocentrism by going along with and exceeding anything the men could come up with on their own.

If a conservative lawmaker said something stupid, Phyllis Schlafly would come up with something ten times stupider and prejudiced. Every time she did that the obvious stupidity of the statement would be so apparent that even the conservative lawmaker would have to reconsider his own idiotic idea.

As she repeatedly played this card she pushed herself into a position of advantage and she gained power over those of near-Taliban intelligence levels (such as your average male social conservative political figure).

There was no way as a conservative you could avoid dealing with Phyllis. If you tried to say something, when you were done - she would say something that would make your idea look even stupider than it was and in doing so you were reduced to the child that goes up to his mom and says "I would like to climb up the tree in the backyard" and the mother replies "Yes dear and while you are up there can you also take the chainsaw and some matches?". You would never know if she was being sarcastic or she really wanted you to do that, so you would back off the idea of climbing the tree.

I think that sort of approach is brilliant. Toxic - but brilliant.

Gloria Steinem ofcourse felt differently. She was much more of the plain spoken and WYSWYG person. To her mind - you didn't have to use all this cryptic stuff. If you thought something you spoke your mind and if the men didn't like - who cares what they think anyway.

While Gloria and Phyllis neutered the over inflated male egos in their own ways - they educated American women about different ways of coping with their subaltern and repressed status in society.

American women from the Boomer generation were especially affected. They oscillated between the two viewpoints on a daily basis. Every woman wanted some balance of independence and family responsibility and playing the arguments from Phyllis and Gloria against each other to get the required leverage to do what they wanted became a game that women of that generation played on a minute by minute basis.

Now let us journey to the present. Currently 12% of the US population are baby boomer women. About 80% of those self identify as white - so about 10% of the US women are white baby boomers. This segment of the population sees a reflection of themselves in Hillary Clinton and they see a shadow of their husband in Donald Trump.

If Phyllis and Gloria were to compete on an equal footing for their votes, this group would split down the middle. Phyllis supported Donald Trump and Gloria supported Hillary Clinton. By extension half the white boomer women would support Donald Trump because he would be the evil they know - and the other half would support Hillary Clinton because they would see a president who was just like them.

But Phyllis is gone and only Gloria remains.

A very painful Brexit process has begun

 "The campaign was fought ... and the public gave their verdict. There must be no attempts to remain inside the EU ... and no second referendum. ... Brexit means Brexit."

Theresa May - June 30th 2016

I think these words carry great significance as they lay out the pain and suffering that lies ahead. The Prime Minister is correct, if citizens do not recognize their civic responsibilities or do not exercise them with due diligence, then they must suffer the consequences. 

By appointing Boris and other Leave leaders into ministerial positions, Prime Minister May has executed a Machiavellian master stroke. She has put the people yelling the hardest about leave in the front line of the battle to deliver on it. If these people fail - they will be visibly accountable for the suffering that follows.

If we had fought WWI or WWII in the same fashion and pushed the loudmouths who wanted the war into the trenches and the tanks - then I suspect the war would have been over much faster. 

A great many opportunists had attempted to use the Leave campaign as a political spring board, they never expected it to succeed but to use the publicity to launch themselves into lucrative careers as pointless-talking-heads. Madame May's move to make them into ministers has now caused the entire Leave effort to backfire on its opportunistic creators - what they hope would be a stairway to financial heaven has become their political epitaph. 

For their part the EU states will make this process as prolonged and painful as possible. It is in their collective interest to bargain as hard as possible. And any economic hardship that results from this will end up being directly blamed on the very people who proposed the Leave idea and then failed to deliver on its well advertised promise. 

The tentative date for discussions on how to go about the whole Article 50 activation has been set for mid February. If the Leave campaigners wish to leave their cushy ministerial positions and seek out alternative employment elsewhere (I mean Nigel Farage clearly has found himself a place in the American political sideshow act sector) - then they have to do it before that date - because beyond that date, if they withdraw they will be seen as rats deserting a sinking ship. 

As long as Madam May keeps her iron will on the issue in full view of the public. None of these opportunists will survive contact with the reality of Brexit. 

Thursday, September 15, 2016

“Go to your headquarters and work this out so that we can have Aadhaar-registered devices.”

Good grief...

[link]

"Indians will still log into their smartphones using the manufacturer’s biometric authentication—typically a fingerprint or iris scan. But once they access Aadhaar using the government’s encryption, the likes of Apple and Google will lose the ability to track users online, forfeiting the ability to mine that data to sell ads or other products and services. (Indian law, by the way, bars the government from collecting or using customer data.)"

“According to the UIDAI CEO, the data will be encrypted by the UIDAI key at hardware level in phones that will make it impossible for anyone else to decrypt the information except for the Aadhaar server. The agency says it will ensure full privacy and security of biometric information.”

Man... Nandan this is simply breath-taking.

Demographics of the Trump voters

FWIW - I don't think anyone should be called deplorable - views are deplorable - people should be given every opportunity to change.

I bin Trump voters into the following categories (based on my own personal highly irregular and nonscientific sampling). The rough demographic percentages are knowable from the Pew center.

Older White Boomer Men - These people grew up in a culturally narrowed US in the 50s and 60s. They associate a lack/weakness of cultural identification as a critical component of nationalism. They are uncomfortable with a black man or a woman being president. These people never reconciled to the election of President Obama. These people do not subscribe to overt racism, it reminds them too much of the Nazi nonsense that their parents generation died fighting - but covert racial thoughts permeate the zeitgeist of this group. Most people in this group (including global superhero Clint Eastwood) don't recognize the dangers this kind of thinking poses. The primary concern these people have is that they are now completely dependent on government spending. In their old age, they have become just like the "unemployed lazy black person" they love to hate. Given how much debt the country has worked itself into - there will be no way for them to really collect any level of meaningful social security. The aging white boomer man is the ultimate Social Justice Warrior - they seek to receive social security and medicare into their last days - that is their definition of social justice and they are willing to fight for it. I don't know if Hillary can reach out to this group but if she did - it would be by making assurances on the continuation of entitlement spending.

Older White Boomer Women - This group has reached its social equilibrium with the challenges it came up against. These voters are pulled between the extreme views of Phyllis Schlafly  and Gloria Steinem. I see both the viewpoints as natural reactions to the manner in which the preceding generation (i.e. "Great Generation")  of women were treated by their male peers after the war. When they saw what happened to their mothers and grand-mothers - white boomer women split into two groups - one group went down the road of putting up a slavish pretense of compliance with male ego centrism (and in doing so expose its failures) and the other launched an open revolt against idiotic male ideas of society. A great fraction of Hillary Clinton's own actions (especially her obsessive secrecy) can be easily explained by her white female boomer pedigree. Like the caricature of Brie Van de Camp in Desperate Housewives - the white boomer woman is obsessed with the idea of visual perfection. These women are less concerned about decaying social security as (unlike their male counterparts) they actually know how to "make do with what they have". This IMHO represents Hillary's greatest political opportunity - if she can speak directly to this group - she will win by a landslide.

Early White Male GenXers - This category is driven purely by economic concerns. Their debt structure (partially inherited from their boomer forbears) is unsustainable. Caught in the vise-like jaws of globalization, and practically raped by Reagan era policies on trickle down economics - this group is financially challenged. They are not poor - but they are deeply in debt and their cash flows are insecure. They would like to see that be less so but given how much debt the US is carrying - there is no way to sop up their debt too as it is simply too large a number. This is a very vocal community - these are the bulk of the people who post on social media sites like Reddit. Most of these people know that there is little their community will really gain from Donald Trump economically. The only reason they support him is because they want to make a point - or a protest vote. People from this group also recognize that Donald Trump is a serial-liar because they spend all that time on the internet covering for him or supporting his lies. Tragically there is no way to reach out to this group. There is no package that Hillary could offer them to switch loyalties. No one can help them - not Hillary or Donald Trump.

Bold Font Readers - This is a group that imo defies clear social labeling. Their only common feature is that they usually don't read the fine print in anything. These people are supporting Donald Trump because they haven't bothered to look up the details about his business style. Once they realize how he typically operates they will be quite dissatisfied with him. Hillary could try to educate these people and that will switch their loyalties.

The New Carpetbaggers - This is a group of political opportunists that has decided to jump on the Donald Trump bandwagon as they think it is their route to fame and fortune. Again these people tend not to read the fine print, but they are so desperate (kind of like Taco Truck Guy or Ann Coulter or Sarah Palin) so they are using the Donald Trump platform to surf their way to personal financial success. In Hindi - I would call this group the - "Main Bhi Trump" (I am Trump too) category. Again there is nothing anyone can do about these people. They exist in every campaign.