Most people feel losses more intensely than gains, argues Nobel Prize winner Daniel Kahneman; they would rather not lose than gain the same value.1 Of course, some people are far more tolerant of loss—such as professional risk-takers in the financial markets—but, within certain bounds, most seek to avoid certain losses and to hedge against uncertain ones. People even tend to prefer a sure thing that is of reasonably less expected value than a gamble that could have a little higher payoff.2 When people buy insurance, for example, they are paying a premium against uncertainty. Kahneman and Amos Tversky have referred to this phenomenon as loss aversion.3 This tendency, however, is not absolute. Kahneman argues the following:
In a mixed gamble, where both a gain and a loss are possible, loss aversion causes extremely risk-averse choices.
In bad choices, when comparing a sure loss to a more substantial loss that is merely probable, diminishing sensitivity causes risk-seeking.4
These are the central insights of prospect theory, for which Kahneman and Tversky won a Nobel Prize in economics. An individual’s reference point plays a critical role in decision-making.
People tend to be risk-averse when they are in a gain frame of reference. They do not want to forfeit their gains, and future increases tend to be less relevant to them than previous ones. They also tend to place a much higher value on what they have, merely because they have it (also known as the endowment effect).5 The perception of military gains made during the intervention, and the reluctance to forfeit them and other achievements, can amplify loss aversion.6 To demonstrate that their strategy is working, leaders can get trapped in the rhetoric of progress.
In a loss frame of reference, however, people tend to be risk-seeking. They prefer to take risks to avoid or to recover losses.7 Loss aversion, in part, accounts for why leaders could gamble for resurrection rather than accept losing, even if a lost gamble could be irrecoverable.8
In short, loss aversion, combined with confirmation bias, can create situations in which leaders believe a strategy is working even when there are compelling indications that it is not. Leaders may also recognize that an approach is not succeeding, but prefer to stick with it if they think the available alternatives could forfeit gains or undermine more critical interests.9 Finally, leaders may double-down or escalate a conflict in hopes of reversing a probable loss, even if the odds of succeeding are low and the likely costs are much higher.
Confirmation bias, progress in political and security milestones, and encouragement by Iraqi officials to maintain the transition-and-withdraw plan reinforced the status quo against Democratic Party calls to end the war. Loss aversion created the desire to preserve perceived gains and resist changes in strategy that could place them at risk—even as the cost of the current policy was high, and its prospects of success were low. Trapped between an approach that they believed might work and an alternative that assured a loss, the Bush administration dug in. The administration reframed its reference point from perceiving to be winning to acknowledging it was losing and found a new approach that promised to reverse a failing situation.
The removal of the Saddam Hussein regime and eventual replacement with an elected government was an achievement for the Bush administration. Iraq’s success in meeting benchmarks reinforced perceptions of progress. They described the risks of forfeiting these gains in stark terms in their 2005 National Strategy for Victory in Iraq. The war on terror was the “defining challenge of our generation,” like struggles against communism and fascism before. “The terrorists regard Iraq as the central front in their war against humanity,” the administration explained, “And we must recognize Iraq as the central front in our war on terror.” Failure in Iraq would create a new terrorist safe haven from which al Qaeda could launch more September 11-style attacks. “Ceding ground to terrorists in one of the world’s most strategic regions will threaten the world’s economy and America’s security, growth, and prosperity, for decades to come.” The current strategy “will help Iraqis overcome remaining challenges but defeating the multi-headed enemy in Iraq—and ensuring that it cannot threaten Iraq’s democratic gains once we leave—requires persistent effort across many fronts.”10
Reports from the Department of Defense echoed the gains. Each Department of Defense quarterly report to Congress from July 2005 (when the reporting requirement began) to August 2006 marshaled evidence in the political, economic, and security lines of effort to show the strategy was working. Despite alarming increases in violence, the growth of sectarian atrocities, and the Iraqi government’s transparent Sunni Arab marginalization, not a single report during that period raised questions about the strategy’s viability.11
In a fall 2005 article in Foreign Affairs, Andrew Krepinevich argued for a revised strategy he called the “oil spot” approach that focused on creating and expanding secure enclaves.12 These kinds of suggestions were opposed consistently by the military command and US embassy and gained no traction with the Bush administration.13 Senator Joseph Biden provided the only alternative to the Democratic Party’s demands to end the war on a specified timeline, calling for a soft partition of Iraq into Shi’a, Sunni Arab, and Kurdish enclaves and a troop withdrawal by 2008.14 The White House was not yet prepared to take such radical steps.
While projecting confidence, doubts reportedly crept into President Bush’s mind by mid-2006, but the lack of alternatives for success reinforced the need to stay the course.15 Bush wanted to protect gains in Iraq, which he believed would be forfeited under the Democrats’ “cut and run” concept and would be put at risk in Casey’s “conditions-based” transition-and-withdrawal plan. He did not seem to question the underlying logic of a strategy that was leading toward disaster.16 The nature of the problem eluded the Baker-Hamilton commission—the so-called Iraq Study Group—that was directed by the US Congress in 2006 to review the situation in Iraq and recommend a more productive way forward. The conclusions reached by the group largely confirmed the status quo—a gradual handover of security to the Iraqis and drawdown of American troops.17 During a June 2006 National Security Council discussion on Iraq at Camp David, Casey reportedly pressed the logic of his plan. “This strategy is shaped by a central tenet: Enduring, strategic success in Iraq will be achieved by Iraqis,” he argued. “Completion of political process [the recent formation of Maliki’s government] and recent operations [which included killing Zarqawi] have positioned us for a decisive action over the next year.”18
Retired general Jack Keane, the former vice chief of the army staff, began to challenge that logic. Championing ideas proposed by defense intellectual Frederick Kagan, intelligence official Derek Harvey, and others, Keane argued that the American effort in Iraq was failing and would lose under the current strategy.19 He and others noted that the Sunni Arab insurgency was directed both at coalition forces and the Iraqi government. Turning over security responsibility to Iraqi forces and withdrawing would play into the hands of those on both sides of the Sunni-Shi’a divide who were bent on civil war. Immediate withdrawal, as Democrats proposed, would have the same effect. Keane argued that a five-brigade troop surge using a classic counterinsurgency approach that emphasized working with and protecting the people on the ground in local communities could be successful. Outreach to and relationships with Sunni Arab leaders was critical, as was reducing the sectarian violence in mixed neighborhoods—particularly in Baghdad.20 This approach was not dissimilar to the one Krepinevich advocated in 2005, but Keane’s ability to show that the current plan would guarantee a loss and a new approach could result in a win at acceptable cost was critical. When questioned about whether surging five American Brigade Combat Teams risked breaking the army, Keane reportedly replied that such risk existed, but “the stress and strain that would come from having to live with a humiliating defeat would be quite staggering.”21
Having heard the assessments and recommendations from Casey, the Iraq Study Group, the Democrats, and Keane, National Security Advisor Stephen Hadley decided to assess the situation. Arriving in Baghdad on October 29, 2006, Hadley became convinced that Keane was right. His memo to President Bush questioned whether the United States and Maliki shared the same vision and if the latter could rise above sectarianism. He noted that the actions of the Iraqi government suggested an explicit campaign to consolidate Shi’a power at the expense of the Sunni Arabs.22
After the 2006 midterm elections, which were a significant setback for the Bush administration, the National Security Council began to review their options in Iraq. Bush fired Rumsfeld—a clear signal that he wanted an overhaul to the strategy—and replaced him with former CIA Director Robert Gates.23 Secretary of State Condoleezza Rice was reportedly skeptical that adding more troops would make any sustainable difference.24 General Casey pushed back on the surge idea vigorously, arguing that any tactical gains made by the surge could damage the progress made in Iraqi ownership of security and governance.25 In its December 2006 report to Congress, the Department of Defense finally accepted that the conditions were present for a civil war and that more effective reconciliation efforts by the Iraqi government were needed to arrest this trend.26 The subtle change in sentiment neatly aligned with the Hadley memo. Still, the December 2006 report did not discuss at what point such risks required a shift in strategy. Maliki was reticent, too, about a surge of American forces.27