I wrote this article in Russian in late May 2014, three months after the annexation of Crimea. The aim was to understand why Russia's leadership and people repeatedly engage in actions that hinder the nation's progress.
Еight years later, Russia decided to cause itself harm once again. The invasion of Ukraine will have severe consequences, potentially endangering the Russian state itself. This move appears reckless and unprovoked, but there is a pattern to Russia's behavior.
Two years after the aggression, both the USA and the EU are unsure how to respond effectively. To address the Russian threat, the West must understand what drives Russian authorities and society. This motivated me to revisit and translate this text into English.
This updated version is not just a rehash of the original article; it has been refined and expanded upon. In 2014, my insights were based on personal observations as scholarly studies on this topic were scarce. Since then, more studies have emerged, supporting my initial views.
Also, my ongoing reflections on this issue have led to new insights, resulting in a longer and hopefully more enlightening article than the original one. I hope it’ll help you better understand what we’re dealing with.
* * *
In the spring of 2014, I wrote several articles where I tried to predict how the West would react to Russia's actions in Crimea and Eastern Ukraine. So far, the predictions have come true ― not because I have a crystal ball in which to see the future, but because the logic of Western leaders is transparent and predictable. Having sorted out the West for myself, I wanted to write an article analyzing possible moves of the Russian leadership. But here I failed ― I realized that I simply do not understand its logic.
I was not the only one who had problems understanding the logic of the Russian leadership. In recent months, I have probably not seen a single detailed forecast that has come true. Dozens of journalists, analysts, and even statesmen have been racking their brains trying to understand Russia's strategic plans. The question, to put it mildly, is not an idle one; the fate of the world literally depends on the answer. But there is still no answer. Or rather, there are many answers, but the forecasts based on them turn out to be wrong time after time. I have been puzzling over this riddle since March 2, 2014: the day when my recent prediction that Putin must understand the long-term consequences of the annexation of Crimea and would therefore not embark on such an adventure failed. The realization came, as it usually does, suddenly, when I had already despaired of finding an answer and was confessing my defeat to a friend. The clue lay, as in a Zen koan, not where I’d been looking for it.
But first, a little theory.
I. Time Discounting
The concept of delayed reward, also known as delayed gratification, has roots in both psychology and economics. In psychology, Sigmund Freud introduced the idea in his works on personality structure, highlighting the conflict between the instant fulfillment of desires driven by the Id (Pleasure Principle) and the rational waiting for rewards guided by the Ego (Reality Principle). This transition from immediate gratification to delayed reward begins around age 2
In economics, Adam Smith discussed a similar concept in the 18th century, emphasizing the need to delay impulses for future rewards in his works. John Ray later expanded on Smith's ideas, linking a nation's wealth to psychological traits like the propensity to accumulate wealth through self-control and virtue.
Modern economics has further developed the concept of delayed reward, particularly through the works of Frank Ramsey and Paul Samuelson in the 20th century. They introduced complex mathematical functions like time discounting to study how individuals subjectively value goods over time.
Research delves into how individuals discount delayed rewards differently based on timeframes and amounts. Studies show that people discount future rewards at varying rates, influenced by factors like opportunity costs and self-control. For instance, individuals may value a $10 bill differently based on when it will be available, with some willing to pay more now for a larger reward later.
For instance, if a $10 bill is available today, both Alice and Bob assign it a subjective value of $10. However, if the same bill is only accessible a year later, Alice values it at $5 today, indicating her willingness to pay $5 presently to receive $10 in a year. Conversely, Bob values the bill at $2.5 today if received in a year; hence, he would not pay more than $2.5 now for the promise of $10 in the future. Economists would describe this as Alice discounting at 50% per year and Bob at 75%. Consequently, to persuade Bob to forego $10 immediately, one would need to offer him at least four times that amount in a year, equating to a minimum of $40. In contrast, Alice would agree to relinquish the same amount for $20.
Economists typically assume that the general public discounts future rewards using an exponential formula, where the subjective value decreases consistently over time by a certain percentage, albeit varying among individuals.
However, individuals facing addiction struggles, such as alcoholics, drug addicts, and smokers attempting to quit, exhibit a different pattern of discounting. For them, the value of a reward diminishes rapidly in the immediate future, with little significance placed on rewards obtainable in a month or beyond. This behavior is known as hyperbolic discounting and is not limited to those battling addictions but also extends to individuals living day-to-day.
In reality, most people do not adhere strictly to either exponential or hyperbolic discounting. Instead, they tend to follow a quasi-hyperbolic pattern. Initially, the subjective value of rewards decreases sharply, followed by a more gradual decline over time. For instance, receiving $100 in a month may be perceived as $70 initially (a 30% decrease), with subsequent monthly decreases of 5%.
Despite the preference for immediate rewards over slightly larger delayed ones, individuals still allocate resources towards long-term goals like skill development, health maintenance, and retirement savings. This behavior is commonly observed in Western Europe, North America, and East Asia but contrasts with practices in regions like South Asia, South America, Africa, the Balkans, and Russia.
II. All the way down
Here are insights from various studies on patience levels across different countries:
The Global Preference Survey, based on data from the 2018 survey, assesses country-level patience by determining the average payoff individuals request for delaying immediate rewards. Russian patience levels align with those of regions like Africa, India, and Latin America, significantly lower than those observed in Europe, North America, and China.
Another study by Sude at al (2021)1 presents a patience map derived from multiple surveys, with countries depicted in colors ranging from red (low patience) to blue (high patience). Russia emerges as notably less patient even compared to the previous assessment.
Research by Wang at al. (2016)2 valuates the willingness of individuals in different countries to wait for rewards, positioning Russia as the 5th least patient nation.
Finally, there’s a comprehensive study by German economists involving 80,000 participants across 76 countries explores the impact of patience levels on GDP and other indicators of national success, such as public institution quality and long-term economic development. This study (Dohmen et al., 20163) was conducted in 2015, after the annexation of Crimea.
Here’s a chart from this study illustrating the relationship between patience levels (adjusted for external influences) and the protection of property rights in various countries.
The correlation between patience levels and the protection of property rights is notably strong, with Russia ranking as the 3rd least patient country. While Israel's top position may appear surprising, considering their historical endurance and resilience over centuries, it aligns with their ability to navigate challenges for millenia. In the raw data chart, Israel's position is slightly lower but remains high, while Russia's ranking remains relatively consistent.
Another chart from the same study introduces a different metric, Laddering Patience, which measures the proportion of respondents unwilling to wait for any reward. This metric differs from average reward demands by focusing on individuals who refuse to wait even when rewards are gradually increased. Russia performs slightly better in this metric but still falls significantly below the average.
The aforementioned research delves into various aspects of patience. Here’s a 2011 paper that specifically explores time discounting (Breuer et al., 2011)4.
The X-axis represents present bias, indicating the preference for immediate rewards over delayed ones. A position further to the left signifies a stronger inclination towards choosing today's reward over tomorrow's.
On the Y-axis is depicted long-term temporal discounting, reflecting the willingness to wait for extended periods. A higher position on this scale indicates a greater capacity for delayed gratification, such as waiting 10 years when faced with a one-year delay.
Russia is situated in the lower left corner of the graph, indicating a reluctance to wait and a tendency to opt for immediate rewards. When faced with waiting, Russians are inclined to endure only short delays before seeking their rewards.
Finally, that’s here’s a chart from Wang et al., (2011)5 comparing time discounting of the USA, Germany, Japan, China and Russia.
Researchers surveyed residents from 45 countries to determine the additional amount they would require to delay accepting a monetary gift by one year or ten years. Russia ranked one of the lowest in the survey, alongside Bosnia and Nigeria.
There’re more research with similar results, but I don’t want to bore you to death.
Russia is Hyperbolea, a country whose inhabitants discount time hyperbolically. In other words, they don’t value the future, don’t care about it, or, as Russians say, are spitting on it from a toll belfry (quite a fitting metaphor: if you take it literally, it demonstrates disdain for something that’s far away from you).
III. Hyperboleans
Time discounting in Russia doesn’t follow a purely hyperbolic pattern; it’s quasi-hyperbolic. Hyperbolically, the future’s value initially drops sharply and then levels off. Quasi-hyperbolically, as seen in Russia and Nigeria, it plunges immediately and continues hitting new lows.
Of course, this doesn’t apply universally to all Russians, but characterizes the statistical majority. Exceptions exist, but they don’t change the overall situation.
My own observations align with scientific findings. While my American and European acquaintances—engineers, economists, and even poets—started contributing to pension funds during their student years, I’ve yet to encounter a Russian student pondering their retirement financial securit decades ahead. Perhaps it’s because the future remains uncertain, and both investment funds and state guarantees can vanish over time.
Life in the West is full of surprises, with Western countries occasionally encountering unexpected events akin to the Black Swans described in Taleb's book. However, in Russia, Black Swans are not just occasional visitors; they seem to have taken up residence.
The question of whether Russians' tendency to overlook future planning is a response to the frequent unexpected events or if their lack of foresight contributes to these events is akin to the age-old debate of "what came first, the chicken or the egg." Both factors likely play a role in this dynamic. The constant disruptions caused by unforeseen events make long-term planning seem futile in Russia. The absence of forward thinking leads to misunderstandings and conflicts as individuals struggle to anticipate each other's actions. Over time, these conflicts accumulate until every few decades, Russia is engulfed in chaos, leaving destruction in its wake.
What does it all boil down to? Essentially, in Russia, stable economic development is a tough nut to crack. Without a solid political and economic foundation, and the ability for businesses to plan ahead strategically, sustained growth becomes a distant dream. The Russian economy may see bursts of rapid growth, but they are often followed by sharp downturns.
When it comes to technical innovation, Russia also faces hurdles. Innovations typically pay off after a few years, but many Russians are not keen on waiting that long. This impatience hampers the country's ability to foster groundbreaking innovations, with forward-thinking individuals often opting to leave early on.
In a nutshell, prospects for prosperity, security, and stability in Russia seem dim.
The concept of quasi-hyperbolic time discounting sheds light on Putin's actions in Crimea and Ukraine. The immediate gains of seizing territory outweighed concerns about potential consequences like sanctions or economic fallout. This shortsightedness is not unique to political leaders; it permeates various levels of Russian society, from the opposition's struggles with strategic planning to oligarchs prioritizing short-term gains over long-term stability.
The explanations above might make it seem like when Russians discount time hyperbolically, they don't think about the future at all. But that's not quite true. Hyperboleans do think about the future, just in their own way. They don't put much value on the future, so they don't really bother analyzing the long-term consequences of their actions. They kind of just keep going with the flow, seeing the future as an extension of the present.
To them, life is pretty straightforward - what's happening now is what they expect to keep happening tomorrow and down the line.
This mindset leads to Russians being quite prone to mood swings. They tend to see any small win as a big victory and any setback as a major disaster. For example, if a big store like IKEA opens in Moscow, they might start thinking Moscow is going to outshine New York as a financial hub. Or if there's a protest with 100,000 people (which is less than 1% of Moscow's population), they might believe Putin's regime is about to crumble. Annexing Crimea can make them confident that they can “take Kyiv in three days“, despite years passing and many things changing.
Their hyperbolic view not only messes with their future outlook but also distorts how they see the past.
Russians aren't big on looking ahead or back. They're not too keen on real history either, often preferring made-up stories instead. While history helps us predict what might happen next by looking back and connecting the dots, those who don't care much about the future don't see the point in history. They prefer to base their views on how they feel right now rather than what happened before.
This way of thinking was pretty evident in Putin's history lesson that left Tucker Carlson scratching his head. The idea of "always" is key ― if something seems true today, then it must have always been true. And if it’s been always true, it should be true today. This circular logic implies that Ukraine should belong to Russia because it has always been Russian. And since it has historically been Russian, it should remain so indefinitely. The actual historical facts are irrelevant, because time doesn’t exist, it’s only this moment that matters.
IV. Time Bandits
Mutual trust is another victim of hyperbolic discounting.
This impossibility to agree is a direct consequence of hyperbolic discounting.
You've probably heard of the prisoner's dilemma, but not everyone remembers what it's all about right away.
If you know what the prisoner's dilemma is, check out the table below.
In games like chess or cards, there's usually just one winner who gains at the expense of others - a zero-sum game. But life isn't always like that; sometimes everyone can win or lose together, which is called a non-zero-sum game. The prisoner's dilemma is a classic example of this.
Here’s how William Poundstone describes it in his book Prisoner’s Dilemma (from Wikipedia):
Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of speaking to or exchanging messages with the other. The police admit they don't have enough evidence to convict the pair on the principal charge. They plan to sentence both to a year in prison on a lesser charge. Simultaneously, the police offer each prisoner a Faustian bargain. If he testifies against his partner, he will go free while the partner will get three years in prison on the main charge. Oh, yes, there is a catch ... If both prisoners testify against each other, both will be sentenced to two years in jail. The prisoners are given a little time to think this over, but in no case may either learn what the other has decided until he has irrevocably made his decision. Each is informed that the other prisoner is being offered the very same deal. Each prisoner is concerned only with his own welfare—with minimizing his own prison sentence.
This leads to four different possible outcomes for prisoners A and B:
If A and B both remain silent, they will each serve one year in prison.
If A testifies against B but B remains silent, A will be set free while B serves three years in prison.
If A remains silent but B testifies against A, A will serve three years in prison and B will be set free.
If A and B testify against each other, they will each serve two year.
An interesting and unpleasant consequence of the prisoner's dilemma is that under such conditions even completely innocent people will testify against each other.
n real life, experienced folks like gangsters often keep quiet, which can make some people question if the prisoner's dilemma really applies. But it's not that simple.
The classic prisoner's dilemma assumes a one-time situation where both sides know it's their last go-around. In reality, it's more like a recurring thing where people expect to run into each other again and maybe seek payback. When there's a chance of meeting again and settling scores, working together starts to look pretty good. This can lead to win-win situations, like avoiding trouble and enjoying the benefits together.
For this to work, both sides need to care about what happens down the road, thinking about how things will play out in the months or years to come. If someone doesn't care about the future, they're less likely to want to talk things out or team up.
This whole deal also explains why having a good rep can be tough in places like Russia. When folks don't plan ahead or remember what went down before, it's hard to build trust over time. So, Russian big shots might end up spinning lies left and right without worrying about getting caught out or losing credibility in the long run. This cycle of deceit messes with trust and makes it hard to form solid partnerships.
While this might be a headache for Russia, it's actually a silver lining for others. It shows that Russia might struggle to make lasting alliances or military pacts because of their habit of being shady and unreliable.
V. Take When Given, Run When Beaten
Today, the most important consequence of Russian hyperbolic discounting for the West is the Russian aversion to risk.
How so? ― you may ask. Russians often find themselves in risky situations, seemingly disregarding their safety, as seen in numerous YouTube videos showcasing daring Russian feats.
Yes, but....
While Russians do engage in daring activities, it's not because they have a love for risk-taking.
What exactly is risk? Risk involves being willing to give up what you have now, even risking your life, for a potential gain in the future. It requires assessing the situation and roughly calculating one's chances of success.
Russians don't assess the risks; they simply don't consider the possibility of failure. It doesn't register with them. This isn't a conscious choice to take risks but rather a deep-rooted inability to foresee the consequences of their actions, which sometimes can make outsiders cringe.
Studies indicate that risk tolerance is closely linked to patience. Generally, those with higher patience levels are more willing to take risks. Why? Because there's usually a time gap between taking a risk and reaping the rewards. If you heavily discount future outcomes, you're less likely to take risks since the immediate consequences of risky behavior are often negative.
According to the extensive Global Preference Survey, Russians rank among the least risk-tolerant populations globally. This sheds light on why "Stability" was a prevalent political slogan in Russia for two decades before recent events.
That's great news for those concerned about World War III.
Russians aren’t crazy kamikaze nuclear terrorists. You can handle them by following three simple rules:
#1. Don't try to sweet-talk or scare Russia with long-term promises or threats. They don't get the whole "long-term" thing. Save your breath and skip calling Putin.
#2. Don't make deals like "Ukraine gives Crimea to Russia for security guarantees." Russia will take what you offer and conveniently forget its side of the bargain.
#3. Threaten Russia with immediate consequences for any aggressive moves or provocations. Make it crystal clear: I-M-M-E-D-I-A-T-E. If Putin talks about a nuclear strike if you cross his red lines, don't say you want to avoid World War III - that just gives him more confidence. Instead, tell him you'll hit back ten times harder, using all your nuclear power. To back up your words, send a couple of nuclear submarines into the Gulf of Finland. There's a popular Russian saying: Take When Given, Run When Beaten, and Putin lives by it. If he sees something he can take without consequences, like Crimea in 2014 or mistakenly thought Ukraine in 2022, he'll try to grab it. But if he knows he'll face immediate and severe consequences, he'll think twice. The West has been vague about swift punishment in the past, which is why we're dealing with this now. Putin only understands one thing: that every wrongdoing will be swiftly and severely punished, on the same day or the next morning at the latest. Promises of future punishment won't deter him because he only cares about the present. If too much time passes between the crime and the consequence, he won't connect the two. When Putin talks about playing a long game, he means he doesn't care about what happens in a year or a month - only about now. If you make it clear that every move he makes will be met with a stronger response, he'll retreat like a rat back into his hole. Putin, like most Russians, avoids risks. He won't take a chance even for a big reward if he knows it could harm him. For the past 25 years, Western leaders have made him believe there are no consequences for his actions. It's not too late to change that perception and show him that there are real risks involved.
Sunde at al., 2021: Patience and Comparative Development
Wang at al., 2016: How time preferences differ: Evidence from 53 countries
Dohmen et al., 2016: Patience and the Wealth of Nations
Breuer et al., 2011: Time Preferences, Culture, and Household Debt Maturity Choice
Wang et al., 2011: How Time Preferences Differ: Evidence from 45 Countries