Global Guerrillas

GG RADAR: Late January 2009

Some items of interest:

• Mainstream media is picking up GG logic on the primacy of the global marketplace: that all Russian conflicts since the turn of the Century are related to the energy business, from Estonia to the recent flare up on Georgia.  The Russian state, for all intents and purposes is now an energy company and all actions are slaved to the pursuit of a natural gas monopoly.    
• P.W. Singer, of the Brookings Inst., touts his new book "Wired for War" in a Harper's interview.    Of note:  he is tracking the trend towards DIY weapons and "open source" warfare.  I'm going to get this book and do a review when I get a chance.
• The Christian Science Monitor has taken notice of the early signs that militias are growing in the US (as anticipated by this blog) due to:  a spike in property crime as the economy collapses and insolvent state/local governments are the main drivers.  Of note:  neighborhood Twitter alerts called BOLOs (be-on-the-lookout). 
• The $25 Autopilot.  Looks like a price point breakthrough for a minimalist DIY drone, rocket assisted smart bomb, or DIY V-1 for the boys in Gaza.  
• Interesting wiki called "Empowerthyself" 

OPEN OODAs

Open source insurgencies (both global guerrillas bent on disorder and resilient communities focused on stability), the general description for movements where many small groups with different motivations cooperate to move the war forward, have a big advantage over traditional hierarchies (both conventional militaries and guerilla movements formed in the 20th Century).  They adapt well to highly ambiguous, complex, and rapidly changing environments. 

One way to look at this is through the lens of John Boyd's OODA loop.  It is arguably the best description of personal and organizational decision making that has been constructed to date.  Unfortunately,  the model breaks down in the modern environment's hyper-complexity, torrential feedback loops, and rampant network connectivity.  The reasons are clear:  

• It is a serial process.  The only way to speed up decision making is to make the loop go faster.  This serial process quickly reaches the hard limits of human communication and collaboration.  Also, the slowest part determines the speed for the entire system.
• It isn't flexible or creative enough.  The orientation process of any single organization is insufficient to accurately model the existing environment.   In short, a dog's brain that runs 1,000x faster is still a dog's brain.* 
• It's hermetically isolated.  Decision making improvements in modern organizations don't naturally propagate horizontally (by design).  The process used is opaque as possible and the results are often intentionally obscured to enable that organization to gain advantage.**

OPEN OODAs  

Open source insurgencies solve these problems by (I'll draw a revised OODA process for this when I find the time):

• Decision making processes run in parallel.  The larger the number of loops, the faster it goes.
• Multiple responses by a diverse group of participants (anybody can participate) generates a wide variety of hypothesis and decisions.  Many of which, work.  
• Sharing and rampant copying of the processes (i.e. the hypothesis and orientations) that work yields strong horizontal propagation.  It scales, potentially even to a global level.  

* It's even worse than described.  Most modern hierarchical organizations and their supporting professions actively avoid the employment of the most important types of minds necessary for decision making in complex environments:  pattern matchers and system thinkers that can routinely develop new synthetic models of complex processes.  In Boyd's lingo:  the sign outside almost all modern organizations, both corporations and government, is "no snowmobile's allowed."  Here's an example: the US government's and the economic profession's abysmal decision making effort in response to the emerging global financial and economic meltdown. 

**  This damages the speed of response and the scalability of response.  Why?   A lack of horizontal propagation prevents system wide synchronization of new modes of operation as well as the development of ecosystems.

PROTECTION RACKETS

Diving into military theory (again).

A core dynamic behind the emergence of the nation-state was it's ability to run a successful protection business (aka racket).  A system that has been growing since the treaties of Westphalia in the 1600s.  The protection business is relatively simple:

1. It is a monopoly.  It has exclusive ownership over the use of violence.  As a monopoly, it must crush all internal competitors.  
2. It defends its monopoly from outside interests -- as in warfare with nation-state and non-state competitors. 
3. It charges the customers (individuals and businesses) within its geographical areas of control for this service.  This isn't optional.  Customers presumably benefit from this protection.  

Historically Successful Protection Rackets

So what made the nation-state formula for protection so superior to its competitors during its ascent over the last 400 years?   It's simple.  It delivered value to its customers.  Let's dive into this with a paper by Charles Tilly (War Making and State Making as Organized Crime).  He cites the economic historian Frederic Lane's simple formula for success:

• The protection monopoly must generate tributes in excess of the costs necessary to maintain it's monopoly.  
• The protection monopoly must generate protection rents for its customers.  The amount the customers benefit gain from the protection of their interests less the amount they pay for it. 
• Both tributes and protection rents must be positive for long term success.  Further, the nation-state that minimized protection tributes in favor of maximizing protection rents grew the fastest (historically, that was partly accomplished through economies of scale).    

The Status of Modern Protection Rackets 

The protection formula broke down in the latter half of the 20th Century as the nation-state became more complex.  Key elements of this breakdown include:

• First, the advent of nuclear weapons made full scale war impossible (van Creveld).  
• Second, the emergence of a global marketplace with global property rights meant that the commercial interests of the nation-state's remaining customers became more powerful than nation-state's interests.  This restricted/limited warfare even more.
• The result has been a slow unraveling of the nation-state's ability to maintain it's monopoly over violence (and much more) within and outside its geographical borders.  This has created a gap in protection at the local level into which small violent groups are now quickly converging.  Finally, there is additional evidence that the economies of scale that drove the growth of earlier protection monopolies has broken down.

What this Means

It's likely that small groups that emerge to seize local control (as in, create a TAZ), will eventually converge on the successful protection model (delineated above).  In fact, we have already seen this shift with groups as diverse in origin as the Sendero Luminoso to the Taliban to the Zetas to MEND.  These groups will be successful in so far as they:

• Stay decentralized and cooperative (re: opposition to the state) to ensure protection efficiency.   There are few economies of scale in this environment given the leverage offered by globalization and the presence of legacy nation-states as barriers to growth. 
• Generate positive protection rents for their customers.  Deliver value.  Protection monopolies that expand into the core businesses of its customers will become vulnerable and inefficient.  Expand the business interests of customers by eliminating competition when possible and ensuring market access.  Charge competitive rates and not monopoly rents (sufficient tribute but not excessive).
• Diversify.  To maximize potential tributes while still delivering accelerating protection rents to customers, a protection racket should expand its customer list.  This means extending protection from drug smuggling to generic smuggling (across the entire range of potential goods) to generic commercial activity (standard corporate and small business interests).  Create a vibrant local commercial environment across the entire spectrum of potential activity.

NOTE:  I think this is a nice expansion of the theoretical groundwork laid down in Brave New War, with the goal of laying out the entirely new framework for how 21st Century warfare will work.  Of course, since I don't work for anybody exclusively, it is available to everybody.   Use as you see fit.

JOURNAL: The Inflating TAZ

NOTE: Here's some theoretical warfare stuff for those that are interested.

In open source warfare, an insurgency's strength grows through a proliferation of groups with a similar high level objective:  a weaker nation-state.  The question becomes:  how is this proliferation achieved?

This model is a likely candidate:

Simple process:

1. Create a TAZ (temporary autonomous zone).  Self-generate financing.  
2. Disrupt adjacent areas.  Optimally, by breaking economic/commercial systems.
3. Generate local failures in adjacent areas through repeated disruptions.  Reduce the legitimacy of the nation-state/government.
4. Local failures shift primary loyalties and the formation of new groups.  Seed these groups with offers of alliance and support.
5. New TAZ is created as new group forms.   

This model has been demonstrated in Iraq (less so in  Afghanistan).  It's likely going to be seen again, but more effectively, in Pakistan and Mexico. 

NOTE:  Situations that can be exploited by the nation-state include:  a) the core group becomes large enough to easily target (usually by acquiring the new territories as their own), b) social disruption, as opposed to economic disruption, creates inter-group competition/warfare (this was the opportunity the US used in Iraq).

JOURNAL: China in Recession

Nouriel Roubini points out that China's recently announced estimate of Q4 shows 0% growth.  Global guerrilla thinking re:  a disorderly unwinding of China is now in play.

In general, this evolving depression (let's not mince words here) may result in a substantial acceleration of the secular decline of the nation-state (a trend-line we have discussed here at length).  Non-state groups, that offer alternatives to nation-states (in everything from security to wealth creation) to their members (don't think in terms of default membership due to geographical residence as we do with nation-states), will begin to grow faster than ever.   This will open up gaps (temporary autonomous zones) within previously cohesive states which will serve as conduits for greater disorder.  

Of course,  the opposite is true too.   Resilient communities can be nodes of order/hope/success that radiate outward into the crumbling social/economic grid.  A self-organizing solution for a system at the edge of chaos.

BIGGER THAN A PRESIDENT 2

The other thing I don't think people understand about the current crisis (it's lost in the noise over where to spend the stimulus/TARP funds and philosophical debates over nationalism/Keynes, etc.), is the role of excess debt.

If you look at it from the perspective of debt, this is a crisis more about solvency than sentiment/liquidity.  Here's why.  The amount of debt that is currently held in public and private hands (corporate and consumers) is estimated to be 350% of GDP (there are multiple estimates in the same range. Here's a good chart of debt growth and an interesting discussion).  

Historically, it appears that sustainable debt levels are approximately 150% of GDP (there has been lots written that Greenspan's "Great Moderation" fundamentally changed that ratio, although I think those arguments are now deprecated).  So, the current situation looks like this: 

A good assumption is that $20 + trillion in excess US debt (200% of GDP), mostly in private hands, must be wrung out of the system before it stabilizes.   Consumers and corporations appear to agree.  Once the vulnerability posed by this excessive debt was exposed by explosions in the shadow banking system, both consumers and corporations began to radically reduce spending to pay off debt in an attempt return to solvency.  This is likely, given the magnitude of the debt involved, a fundamental change in behavior that spells the end of the consumer (and the arrival of something else) economy.

NOTE:  This pay-off period may take decades (much of it through write-offs, defaults, or inflation).  IN the meantime, declining asset values and economic depression will be the norm (as in, the new cars stacking up on these docks will end up as scrap/parts/auction sales).

NOTE2:  Stimulus won't accelerate payback of this debt since it only adds more debt.  Also, this is a behavior change borne out of balance sheet insolvency and not merely sentiment (which can be impacted by stimulus).

BIGGER THAN A PRESIDENT

I'm not sure most people grasp the sheer scale of the current crisis.  This may help.

First, there is the shadow banking system (see the estimate of its size below relative to other big things...).  NOTE, estimates can be even much larger than this.

In short, it's the massive pile of derivatives accumulated over the past decades.  It's also tightly coupled and extremely complex (worse, not understood).  It isn't regulated, nor is it liquid enough to price (which is why global banks are still able to "act" like they are solvent).  Granted, this is the notional value rather than market value, but in uncertain times market values and notional values can converge. 

The best way to view the shadow banking system is as a financial amplification system.  A byproduct of its operation is that it can take small financial events and convert them into financial nuclear weapons that explode with a spectacular display and devastating effect.  Worse, since the entire global economic system is deeply turbulent, we can expect to see more financial nuclear explosions than ever before as the shadow banking system amplifies an increasing number of small and unexpected events into disasters.

Next, there is the global economy.

Finally, there is the US economy.

You can see why global banks are now trading at prices that anticipate insolvency and government bailout ( See this chart from JP Morgan for more).  And why the UK looks like Iceland more each day.

NOTE: fixed the circles.

QUOTE: Mexican Militias

"Our mission is to terminate the life of a criminal every 24 hours ... The hour has come to stop this disorder in Juárez." 

From the press release of the Juarez Citizens Council's (CCJ), a "citizen's militia" formed to counter narco-guerrillas. They are even setting up an e-mail/text line for tips from citizens on who they should target.

RC JOURNAL: A Gutted City

Many people have a problem envisioning what extreme economic failure looks like in a Western country.  Enter Detroit.  Detroit serves as a warning for how global markets treat losers.  Selected quotes from a Denver Post article, "How low can homes go, try $0" :

The median price of a home sold in Detroit last month was $7,500, according to Realcomp, a Farmington Hills, Mich., multiple-listing service, down 50 percent from last year... 1,228 homes listed for under $10,000, 209 of which were under $1,000. 

Police stopped patrolling these neighborhoods years ago.

Some of these neighborhoods are so desolate, crime isn't much of a concern. I could take you to 30 square blocks of urban prairie.

They take the hinges, the knobs, the sinks, the faucets, the vanities, the toilets; some of them go for the tiles.  They even steal the brick off the sides of some of these houses.   Street dealers traffic in furnaces, water heaters and appliances.

JOURNAL: State Sponsored Open Source Warfare

Read the earlier briefs: Open Source Warfare: Cyberwar and The US DoD and Cyberwarfare 

The trend is:   

Nation-states, unable to officially conduct warfare in cyberspace and unable to win against an open source opponent via conventional means, will eventually embrace open source warfare themselves to achieve stalemate.   

Earlier examples of this include:  China/Russia's embrace of open source cyberwarfare (against the US, Estonia, Georgia, etc.).  The US military's embrace of open source militias (Anbar Awakening) to achieve a level of controlled chaos in Iraq. 

New example: Israel has begun to recruit an "army of civilian bloggers" to defend the state (Haaretz):   

The Immigrant Absorption Ministry announced on Sunday it was setting up an "army of bloggers," to be made up of Israelis who speak a second language, to represent Israel in "anti-Zionist blogs" in English, French, Spanish and German.

"During the war, we looked for a way to contribute to the effort," the ministry's director general, Erez Halfon, told Haaretz. "We turned to this enormous reservoir of more than a million people with a second mother tongue." Other languages in which bloggers are sought include Russian and Portuguese. 

Halfon said volunteers who send the Absorption Ministry their contact details by e-mail, at media@moia.gov.il, will be registered according to language, and then passed on to the Foreign Ministry's media department, whose personnel will direct the volunteers to Web sites deemed "problematic." 

Within 30 minutes of announcing the program, which was approved by the Foreign Ministry on Sunday, five volunteers were already in touch, Halfon said.