Subject: Re: [Asrg] Short-term versus Long-term focus: A bit of economics

From: "John Fenley" <[email-masked]>
Date: Tue, 03 Jun 2003 03:13:06 -0600

From: "Bob Wyman" <[email-masked]>

>The issue here, as almost always, is a trade-off between
>tactical short-term and long-term benefits. It is very much like
>computing the present-value of some quantity of money. For instance,
>what has more value? $100 in your bank account today? Or, $1,000 in your
>bank account in 20 years? The answer, of course, depends on what you
>think the interest rate or cost-of-capital is. Similarly, when thinking
>about spam, you can ask which is more valuable: A system that rapidly
>limits spam to 50% of its current level or one that eliminates it
>completely in five years?

>In my previous note, which suggested an objective economic
>analysis as the basis for deciding between a short or long term focus, I
>should have noted that it appears that the "cost of spam" is increasing
>at a compound rate. Some suggest that this rate is equal to as much as
>50% per year.
>Given compound growth in the "cost of spam", the present-value
>of any future solution is drastically reduced as the time to implement
>and deploy that solution increases. Similarly, the future-value of any
>short-term reduction in the cost-of-spam is drastically increased as the
>time to implement the short-term reduction is reduced relative to the
>time-to-implement the long-term ideal solution.
>I suggest that an economic analysis of spam argues clearly and
>unambiguously for the greater value of even the smallest short-term
>reductions in spam rather than more perfect solutions that may be
>possible in the long-term.

Your argument is backwards. The economic corollary is to a large debt that 
we owe. If we make the minimum payments the total debt will go down slowly. 
Even if we pay off half of the debt, the interest will still be there 
compounding what remains. If we fail to make payments greater than the 
critical maintenance amount our debt will grow. The best option is to pay 
off the debt as soon as possible. Only then will we be free of the 
continuing burden.

My original point was that there is an opportunity cost associated with 
putting effort into a direction. To maximize results the most effort 
possible should be directed in the most advantageous direction. The entire 
world seems to be working on short term, self beneficial solutions, and they 
seem to be producing a constant supply of these types of solutions. I feel 
time spent on longer term solutions would be of greater benefit in the long 
run than just adding to the existing supply of short term solutions.

John Fenley

==============================
I think this is a better economic model:
==============================
Consider the following situation: I owe $1000, and am being charged 10% 
interest compounded annually. If I pay $100 per year, I am only paying 
interest. I could pay $100 per year for 30 years, and still owe that $1000. 
Over that 30 years, the total cost would be $3000 and I would still owe the 
original $1000. Therefore paying the $1000 up front saves $3000 over the 
thirty years. Short term solutions are like paying the interest. The spam 
problem could go on indefinitely, and the sooner a permanent solution is 
found, the less total energy will be lost to combating spam.

I feel this is a more accurate model of the costs of spam, and it argues for 
a permanent solution as quickly as possible. We are not getting the interest 
as you implied, we will have to "pay" it until a solution is found.

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