The Dictator’s Handbook (Book Review)

Don’t believe me, just watch
Don’t believe me, just watch
Don’t believe me, just watch
Don’t believe me, just watch
Don’t believe me, just watch
Don’t believe me, just watch

— Mark Ronson, UpTown Funk!

Look, there is no way around it. You need to read The Dictator’s Handbook.

You need to read Caro, too. But this is more concise and to the point. By concise, I mean it does a really good job of explaining how the world works in few words.

The final thing you need to do is balance cynicism with optimism, like the authors Bruce Bueno de Mesquita and Alastair Smith.

Knowing how and why things are as they are is a first, crucial step toward learning how to make them better.

The Dictator’s Handbook (Introduction)

Many people dislike the truth because it destroys illusions about the world that make them feel comfortable. Of course, no one likes to talk about that, but it is the root of many of our problems. This book destroyed several of my illusions. See below.

These stories of the horrible things politicians or business executives do are appealing in their own perverse way because they free us to believe we would behave differently if given the opportunity.

The Dictator’s Handbook (Introduction)

Instead of viewing politicians as different types of people, what if we viewed them as rational people who simply want to stay in power by pleasing the people that keep them there?

We fully admit that our view of politics requires us to step outside of well-entrenched habits of mind, out of conventional labels and vague generalities, and into a more precise world of self-interested thinking. We seek a simpler and, we hope, more compelling way to think about government.

The Dictator’s Handbook (Introduction)

I had been conditioned to believe that politics is complex. I am now convinced of the opposite.

This requires acknowledging two things:

  1. States don’t have interests. People do. The United States doesn’t “do” anything. Donald Trump and Nancy Pelosi do.
  2. Leaders cannot rule alone. They need people. Kim Jong Un has power because his coalition (the military) allows him to have it. The same is true for Tim Cook at Apple, except his coalition is a board of directors and the main shareholders.

In any organization, whether it is a democracy, autocracy, or corporation, the authors put the people leaders need into the following groups:

  • Nominal selectorate (interchangeables): the pool of potential support for a leader
  • Real selectorate (influentials): those whose support is truly influential
  • Winning coalition (essentials): essential supporters without whom the leader would be finished

In the United States, the nominal selectorate is every person eligible to vote. The real selectorate is the electoral college. The winning coalition is the minimal number of voters who give the edge to one presidential candidate (or, at the legislative level in each state or district, to a member of the House or Senate) over another.

In other words, we have a relatively good system (even though the authors make a compelling case that it is time to get rid of the electoral college).

The same principles apply at the company you work for.

Who is your leader? Who are the essentials whose support she must have? What individuals, though not essential to your CEO’s power, are nonetheless influential in the governance of the company? And then, of course, who is there every day at the office — working hard (or not), just hoping for the breakthrough or the break that will catapult them into a bigger role?

The Dictator’s Handbook (p. 7)

The authors use these terms interchangeables, influentials, and essentials, because it is tempting to think of officials in a democracy as materially different types of people than dictators because dictators generally get to their position by force.

Stripped of their emotional connotations, and viewed through the dimensions above, we see that they are largely the same with two crucial differences: thankfully, people come into power less violently in a democracy and here in the United States, we have one of the biggest winning coalitions both in absolute numbers and as a proportion of the electorate (England has the biggest as a proportion).

In contrast, North Korea has a small winning coalition (likely in the hundreds of people). However, Kim Jong Un has made it work so far, by a combination of successfully appeasing them and convincing enough of them that they are replaceable if they threaten him.

So, defined only slightly differently, a dictatorship really just means a government based on a small number of essentials and a democracy means a government founded on a very large number of essentials.

Although no major media outlet would stress the similarity of the following three people, if we define rationality as making choices that leave you better off, Barack Obama, Donald Trump, and Kim Jong Un all act rationally.

They know who they need to please, and they please them.

The goal of politics

This is the essential lesson of politics: in the end, ruling is the objective, not ruling well.

The Dictator’s Handbook (p. 58)

I meant to take an informal poll to see what people’s reactions were to the quote above. As Richard Feynman says, if it disagrees with experiment it is wrong. This experiment has been run a lot, and it seems any exceptions only prove the rule. When Pope Benedict XVI resigned in 2013, it was the first time a pope resigned since 1415.

If ruling well was the goal, you would have to define what “well” means, then you would have to be held accountable to that standard, which ultimately means leaving a powerful position if you fail to meet it.

This is laughably rare, but improving.

The Rules

It is fashionable to talk about politics in terms of concepts like ideology or left-right continuums.

We do not challenge this view so much as offer a completely different way to think about it.

From the perspective of this book, so-called liberals and so-called conservatives appear simply to have carved out separate electoral niches that give them a good chance of winning office.

The Dictator’s Handbook (p. 135)

Rule 1: Keep your winning coalition as small as possible.

Rule 2: Keep your nominal selectorate as large as possible.

Rule 3: Control the revenue.

Rule 4: Pay your key supporters just enough to keep them loyal.

Rule 5: Don’t take money out of your supporters’ pockets to make the people’s lives better. 

This may be offensive to some and sounds like it is only about autocracies. The authors ask some rhetorical questions showing how they are equally relevant in democracies:

  • Why does Congress gerrymander districts? See Rule #1.
  • Why do some political parties favor immigration? See Rule #2.
  • Why are there so many battles over the tax code? See Rule #3.
  • Why do Democrats spend so much of that tax money on social programs? See Rule #4.
  • Why do Republicans wish the top tax rate were lower, and have so many problems with the idea of national health care? See Rule #5.

Yes, it is about money

There are three primary ways a government gets money: Taxation, resource extraction, and borrowing.

All things being equal a leader wants to tax as much as possible because Rule #3 is the most fun of the five rules. The leader can spend on public goods (for everyone), private rewards (for her main coalition), or put it in her Nevis bank account.

The limits of taxation are:

  1. the willingness of the people to work
  2. what the coalition is willing to bear
  3. the cost of collecting taxes 

Before reading this book, I naively thought that the US budget deficit would have a limit and we would eventually vote a responsible politician into office that “thought like a businessman” and would begin to run the country like a business (i.e. under-spend its revenue).

I was wrong. You have to support the coalition in the short run, even if the economic consequences are damaging later (when you are not in office). If George Bush did not convince Congress to spend money on The War on Terror, he would probably have been voted out. If Barack Obama did not convince Congress to spend money on the American Recovery and Reinvestment Act in the financial crisis in 2009, he would probably have been voted out.

Some people voted for Donald Trump in 2016 because they believed him when he promised to eliminate the national debt in eight years. His plan assumed the country would grow 6% annually (laughing as I type this). When Trump took office on Jan. 20 2017, the national debt was $20 trillion. Today (three years later), it is $26 trillion.

Here is the thing though: If Trump did not sign the CARES Act in response to the pandemic, he would almost certainly get voted out and his rival would do whatever he was unwilling to do.

Just as there is an inevitability to Tolstoy’s Napoleon invading Russia and politicians lying, there is an inevitability to spending because if he takes a financially reasonable position by refusing to incur debt, then he has less to spend on rewards for his essentials and influentials.

So not borrowing jeopardizes a leader’s hold on power. 

The Dictator’s Handbook (p. 93)

The only limit on government borrowing is the market demand.

Creditors can’t really repossess property from nations that fail to pay their debts. The authors give a few examples of them trying: France invaded Mexico in 1862 in order to get them to repay their loans and then Germany in 1923 to collect reparation payments due from World War I. Both attempts failed.

Based on experiences like these, they suggest that the only leverage lenders have over countries is to cut them off from future loans.

Although this pressure for unlimited borrowing was initially depressing to me because of the inevitable consequences, it makes perfect sense and will save hundreds of hours of energy over my lifetime.

The only way this could be changed is if the winning coalition decided to give up their benefits in order to pay down the government’s debt or as Warren Buffett suggested, passing a law that says anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election….neither of which has ever been done in history.

So we will enjoy the party whilst it lasts. #WheninRome

How it works

The best part about this book is that they list names. Most people talk about bad things people do in the abstract, without labeling them. The story of Bell, California. Samuel Doe of Liberia. Robert Mugabe in Zimbabwe. They even call out the ongoing corruption1 in FIFA and the International Olympic Committee (with solutions).

I have never had anyone walk me through step-by-step case studies of corruption and show me why a seemingly solvable problem like hunger persists.

White farmers in Zimbabwe suffer a similar fate. Robert Mugabe’s government seizes their land. The cover for these seizures is land redistribution to poor blacks who were dispossessed under colonial and white minority rule. The reality is much different. The land invariably ends up in the hands of cronies, none of whom are farmers. When the new owners invariably allow the land to fall into disuse, the farmers lose their investments, farm workers are evicted from their houses, and Zimbabwe, once a huge agricultural exporter, becomes hungrier. But on the other side of the ledger, Robert Mugabe is still in power.

The Dictator’s Handbook (p. 84)

This is another example that is easy to dismiss as entertainment because it does not hit close to home in a democracy.

So here is one that hits closer to home.

Let’s start with the decennial redistricting of Congress. The Supreme Court insists on the principle of one-person, one-vote and that is an excellent guideline. But it is a principle so easily distorted as to make congressional elections almost a farce except under extreme conditions. This is true for the simple reason that it is politicians in state legislatures who get to draw up congressional district boundaries. Shockingly enough, they design the boundaries to make it easier for their party to win.

Gerrymandering is especially pernicious because it translates into two conflicting consequences. The average American is greatly dissatisfied with the job that Congress does and the average American is happy with his or her member of congress. The latter is true because districts are constructed by politicians to give their preferred party a majority and so, by definition, the majority in any district is likely to be content. But this is a great perversion of governance. A small coalition of state legislators pick their voters instead of millions of voters picking their representatives. When politicians pick who votes for them it comes as no surprise that politicians are easily reelected and barely held accountable.

The Dictator’s Handbook (p. 287)

Solutions

The inherent problem with change is that improving life for one group generally means making at least one other person worse off….

Pursuing the perfect world for everyone is a waste of time and an excuse for not doing the hard work of making the world better for many.

The Dictator’s Handbook (p. 252)

As the authors make clear, it is unrealistic to aim for perfection in politics. Win-win scenarios generally need minimal persuasion — you usually just do it and no one makes a big deal about it. So, if someone refuses to take action until the perfect solution becomes available, they secretly want things to stay the way they are.

In most cases, a powerful mantra is: Can we make it a little bit better though?

The authors make a logical case that the focus should be on expanding the coalition and the essentials. You do this by enabling free press and free assembly, which leads to fair elections and opposition to the existing leader.

Expanding the size of the necessary winning coalition is the goal, and the essentials are the ones that can make things happen.

I agree with this, but the critical mechanisms are transparency and amplification. To oversimplify, every process is a series of steps. If you can illuminate the steps, especially obvious cases of corruption (transparency), then amplify the message to enough stakeholders then you can almost guarantee change.

A relentless focus on one thing by enough people will always lead to change.

It seems obvious and taken as granted now, but people must have the ability to organize to accomplish much. Access to technology, like Facebook and mobile video, continues to give people capabilities they have never had before to hold people accountable and effect change. China censors Facebook for this exact reason.

Recently, in the most developed countries, it seems we skipped the beneficial aspects of thoughtful coordination and went straight to fake news and leveraging it for propaganda. Instead of methodically eradicating one injustice at a time, it seems that we are allowing social media to preserve power structures by making everyone hate each other and conveniently settling into one of two camps.

Technology will continue to be a big time player as politics evolve.

The way to make the world a better place is not by changing people. It is by aligning incentives such that both good and bad people, defined however you want, have an incentive to do something beneficial for the largest number of people.

The authors give us specific examples of how to do this. Take financial aid: Often, the funds are wasted (from the perspective of the giver). The intended effect never happens and you can’t get the money back. Instead, implement a reward-in-escrow scheme where a government leader is only given aid money after the intended effect occurs.

The most sensible criterion for assessing aid’s effectiveness asks not how much money is spent or even how many wells are dug, schools built, or villages electrified, but rather how many people are helped.

The Dictator’s Handbook (p. 183)

These common sense solutions require a determination that is often missing.

Whether you are an aspiring dictator, philanthropist, or you simply want to live in a better democracy, this is your handbook.


1. Corruption & Math

The authors have perfected the art of uncomfortable truths.

As we all know, the victor writes history. Leaders should therefore never refrain from cheating if they can get away with it.

The Dictator’s Handbook (p. 65)

Remember, if you are in power you want a small winning coalition.

The authors show us how the principles extend to any organization by comparing the International Olympic Committee (IOC) and FIFA, the groups that pick the location of the Olympics and World Cup, respectively.

Both were involved in scandals. The IOC’s involved the location of the 2012 Winter Games (Salt Lake City) and FIFA’s big one was in 2015. The authors published this book in 2011 and laid out the structural issues that make the scandals unsurprising, predictable even.

Salt Lake City originally lost the 1998 bid to Japan’s Nagano and learned the algorithm: Pay each committee member $150,000 for their vote. In political circles, this is called “the cost of doing business.” Outside of those circles, it is sometimes called a bribe. There are 115 members in the IOC, so you only need 58 votes.

$150,000 per vote x 58 votes = $8,700,000

We can safely assume Salt Lake City made more than $8,700,000 hosting the games, so it was probably a great investment.

In 2010, FIFA announced that the 2022 World Cup would be in Qatar, beating out Australia, Japan, and the US. This was an unusual choice for a few reasons, the most obvious being: The World Cup is in the summer. It is so hot and humid in Qatar in the summer that the residents often leave. To address this, Qatar said it would build air-conditioned stadiums or the tournament could be moved to the winter, but doing so would interfere with European soccer leagues.

That sounds like a tough one to justify until you learn that 24 members of FIFA’s executive committee determine the location. The winner requires the support of only 13 members — if that.

Well, before the big scandal happened, there were mini scandals. One of the members, Amos Adamu, was suspended for allegedly trying to sell his vote for $800,000.

$800,000 per vote x 13 members = $10,400,000

It is important to note that the scandals occurred before the games in both Salt Lake City and Qatar, and neither location was reassigned.

This is brilliant writing because I am going to guess that the average person thinks of government money as Monopoly money. The sums are generally so big they are hard to grasp. But, when you do a little math and see how much each person gets, the world starts to make much more sense. Would I pick Qatar over Australia for $800,000? I don’t know, Qatar is hot, but it wasn’t literally on fire.

Money helps us rationalize behavior.

The authors provide a straightforward solution: expand the coalition. There are roughly 14,000 Olympic athletes. If they were all on the committee, you would need about 7,000 votes. If your Corruption & Bribe Budget was still $8,700,000, each member would only get $1,250. That wouldn’t even pay for their airfare and lift tickets.

If you wanted to pay them the same $150,000 that the Salt Lake City group got, your Corruption & Bribe Budget would need to be $1,050,000,000.

Although the authors are on the right path, even walking through this exercise shows how hard the problem is by raising additional questions. How do you pick a fair location? Would the expanded coalition be independent? Wouldn’t every city do a cost benefit analysis and set their Corruption & Bribe Budget accordingly?

The salient topic in the US today involves police accountability. The reader will have to decide whether the authors’ description below is fantasy, only possible in Russia and Hollywood.

Though private rewards can be provided directly out of the government’s treasury, the easiest way to compensate the police for their loyalty — including their willingness to oppress their fellow citizens — is to give them free rein to be corrupt.

Pay them so little that they can’t help but realize it is not only acceptable but necessary for them to be corrupt. 

Then they will be doubly beholden to the regime: first, they will be grateful for the wealth the regime lets them accumulate; second, they will understand that if they waver in loyalty, they are at risk of losing their privileges and being prosecuted. 

The Dictator’s Handbook (p. 140)