Global Guerrillas

ENERGY, MOORE'S LAW, AND SUBSTITUTION

I'm still hard at work on some great new projects that are absorbing most of my thinking.  I'll try to post when practicable.  

A big part of being a successful strategist is differentiating between long term trends and short term blips.  The long term trends are inexorable.  They define the future  environment's boundaries.  In contrast, the short term blips mislead and confuse.  It's also important to understand that long term trends should never be brought to their logically extreme conclusion, since the human system they influence is both thinking and adaptive.  That means that it will change to meet the challenge -- as in, get us out of any box we find ourselves in -- but often in unexpected ways.

One of the long term trends that now seems inexorable is that fossil fuels (stored solar) will be expensive from here on out (see my earlier attempt at this topic with "Crossing the Energy Chasm").  Demand will continuously outstrip our increasingly depleted and difficult to obtain sources of supply.  Prices will rise when demand increases, and when prices rise too much, demand will be destroyed (with demand destruction starting first at the low end, as we saw with sub-prime borrowers in the US).  In other words, every time we attempt to grow economically within the current model, we will bump into energy that is too expensive to support that growth.

However, there is some light at the end of the tunnel.  Since we live in an adaptive system (much less adaptive than it could be due to deep structural and conceptual problems) alternatives will be found.  The common assumption is that these alternatives will be in the form of direct substitutes, or new forms of inexpensive energy (presumably, fossil alternatives or solar power) that can power the existing model of the global economy.  That's likely a false assumption.  

Why?  The substitutes for energy that are available, aren't available in the quantity demanded nor at a price point necessary to serve as direct substitutes for existing sources at their historical (low) prices.  Most particularly, solar power (the only source with the theoretically achievable scale to serve as a true substitute for fossil fuels) won't be inexpensive enough to serve as a true substitute for decades.  

The reason for this is that the Moore's law equivalent for solar power appears to be a halving underlying costs every 10.5 years (not two, like we see in the computing industry).  Moore's law has been powering productivity improvements in other industries (like biotech) at rates approaching the underlying rate of semiconductor  improvement.  This due to the high levels of information processing in those industries (directly addressable by improvement in computational capacity) relative to the level of improvements needed to advance the materials used.  In contrast, manufacturing more efficient solar cells reverses that ratio:  less information manipulation in the design and much more in terms of fundamental improvements in capacity of the materials utilized (new breakthroughs).  Therefore, the rate of improvement in solar efficiency occurs much slower, even when it uses much of the same equipment used by the semi-conductor industry.

As a result, on the current doubling rate of improvement, we can't expect to reach grid equivalence at the current prices in any reasonable scenario (sooner than 20 years).  In contrast, grid equivalence at higher prices, say 10 times current prices (of electricity, which is already a premium energy source), may be achievable in the 2025 time frame.  Sure, we can accelerate the share of solar energy production  through the use of government subsidies and mandates (as we are currently doing), but that only shifts costs and doesn't scale (particularly given the red ink induced pallor of our finances).  

So, what does this mean?  We will likely adapt, but not in the way anticipated.  The most likely adaption will come in the form of a substrate shift.  A shift in the underlying model of the global economy to one that is much, much more energy efficient.  This shift isn't seen the small and peripheral gains in efficiency we see in the work of Amory Lovins' Rocky Mountain Institute.  

Instead, it's a global judo move that flips everything on its back.  A core change to our fundamental economic and social model that substitutes physically moving products globally to virtually moving information about products.  Where virtual presence is substituted for actual visitation and nothing is made that isn't bought.

It's a place where you telecommute to work if you sell goods and services globally.  Where all production is increasingly and inexorably local, from food to energy to consumer products.  It's a place were physical travel is a premium event, reserved only for those objects and occurrences that are the most valuable.  In short, localization into resilient communities (the only term I know to describe it) drives orders of magnitude improvement (10x to 100x) in the use of energy, time, space, matter, and information over the old model of globalization.  

However, like any shift in fundamental substrates, this a process of creative annihilation (as opposed to the much milder form of Schumpeter's creative destruction we see in free markets).  The benefits will only available to those that make the shift and the devil to the hindmost. 

NOTE:  It's interesting that under this scenario, the traditional categorizations of optimism and pessimism regarding our future become non-sensical.  

NOTE2:  Here's a great interactive graphic on US energy from NPR.

TRANSITION TOWNS AND PARTICIPATORY PROBLEM SOLVING

Rob Hopkins, the founder of the Transition Towns movement and I have been working on methodologies by which communities can become resilient for about the same amount of time (since 2004-05, building on the earlier work of others).  We have developed different approaches to the same goal and still need to find the time to share notes.  His approach, informed by peak oil and climate change, is focused on a radical reduction in energy usage.  In short, it's a plan to achieve community "energy descent," to provide a buffer against oil price spikes/shortages and reduce any contribution to climate catastrophe.  

However, as I pointed out in my earlier post on the movement, the real value of the Transition Towns approach isn't its emphasis on energy descent (which may neither be sufficient nor ultimately valuable for resilience), but rather its concisely crafted methodology for catalyzing community participation via a messy open source organizational process (which allows people to deviate from the "energy descent approach" if they desire to).  This is exactly the conclusion Jon Mooallem, who wrote a long article for the New York Times on the Transition Towns movement in the US, reached.  The conversation he had with Councilman John T. Reuter, of Sandpoint Idaho (a Transition Towns site) illuminates this:

What Reuter said he felt was wonderful about the Sandpoint Transition Initiative was how quickly it was rejuvenating people’s faith that the changes they craved were worth working for. “To say the group has only created a community garden so far really isn’t sufficient,” he told me. “It’s something really more substantive: they’re bringing people to the process.” It was easy to argue that at the initiative’s core, in place of any clearly defined philosophy or strategy, was only a puff of enthusiasm. But Reuter seemed to argue that enthusiasm is an actual asset, a resource our society is already suffering a scarcity of. “There’s just something happening here that’s reviving people’s civic sense of possibility,” he later said. “Politics is ‘the art of the possible,’ right? I think what the Transition Initiative is doing is expanding what’s possible in people’s minds. It is expanding people’s ability to dream bold. And that’s what we need to do: dream bold. Because people have been limited by their own imaginations.”

Reuter had a utopian vision, too: the one laid out in the U.S. Constitution. And the Sandpoint Transition Initiative seemed to be moving Sandpoint closer to that ideal in its own small way, even though it was working out of a totally different handbook. They were managing to make the functioning democracy in their town a little more productive. For a wide range of not-always-consistent reasons, people in Sandpoint decided that Transition could help them build the world they wanted. And now, only because enough people stepped forward and made that decision, Transition actually looked like a good tool for the job. They were picking it up by whatever handle they grasped. They were swinging it as earnestly as they could.

So, being the open source pragmatists that we are, let's borrow/steal from what seems to work (Rob's open source methodology for "unleashing" community participation) and build from there.

RESILIENT COMMUNITIES AND SCALE INVARIANCE

In the second installment of the excellent Terminator movie series, Arnold Schwarzenegger (playing a robust robotic Terminator able to absorb terrific damage) faced off against a superior new series of robot, the liquid metal T-1000.  In contrast to Arnold's character, this robot was resilient.  Specifically, if it was blown apart the parts were smart enough and mobile enough to reassemble themselves back into a fully functional T-1000.  What enabled the T-1000 to do this was a weak application of the concept called scale invariance.  Essentially, scale invariance means that across all scaling factors (large, medium, small, tiny, etc.), the properties that define the whole are conserved (intelligence, mobility, form, productivity, etc.).  

Scale invariance is a requirement for societal resilience.  It is also something anyone seriously thinking about the topic of resilience must be familiar with.  Here's why.  Our global system is composed of intermeshed and tightly coupled networks.  These interlinked networks enable our system to be efficient and relatively robust against random shocks.  However, large shocks can overwhelm this type of network design, causing it to either act erratically (turbulence) or break apart (into smaller clusters via cascades of failure).  We saw systemic turbulence in action via the recent brush with a global financial meltdown in September 2008 and we are seeing it currently with erratic swings in markets, trade, and other forms of economic activity.  Examples of network failures that result in disconnected clusters are seen with every black-out in the electricity network.  A pandemic would be a mix of the two, intentional clustering (quarantines) and high turbulence.

In either case, system recovery could be catalyzed and the damage largely mitigated, if our global system was scale invariant.   Basically, this means that if we had communities that could produce at the local level many of the essential products and services currently produced at the global level, handling disconnection or buffering turbulence would be of little consequence (also, it would be much easier for us to find ways of protecting or making redundant the products/services that ONLY could be produced at the global level).  Fortunately, particularly given the substantial uptick in dynamic instability at the global level, we are seeing movement towards scale invariant resilient communities.   These communities can and would be able to operate autonomously regardless of availability, pricing, or quality of external goods/services for extended periods of time.  Unfortunately, this movement may not spread quickly enough to provide any meaningful support to those communities that are utterly dependent on the smooth functioning of the global system.

RC JOURNAL: Schwundgeld

NOTE:  Here's some fun thinking about local currencies (a topic that may become increasingly relevant in the coming years).  Hope you find it of use.

Regional or local currencies, or scrip, are designed to catalyze and grow local economies.  Typically, they gain steam when a regional/local economic depression is exacerbated by national/global deflation (asset collapse and monetary hoarding) -- as we are experiencing today.  These currencies take a variety of forms, from "hour of work" equivalents, food/energy stockpile backed currencies, to depreciating currencies (called Schwundgeld in Germay, arguably the most popular).  

Schwundgeld is a form of currency that actively discourages hoarding/savings through aggressive rates of depreciation -- as in, notes issued at the start of January depreciate by 2% per month, meaning it is worth 98% of face value in February and 96% in March.  This rate of depreciation incentivizes immediate use, or demand, in depressed economies.  It also minimizes societal stratification due to financial accumulation, discourages hoarding, and minimizes non-productive behavior.  The arguments against Schwundgeld and regional currencies in general, as outlined in "Regional currencies in Germany - local competition for the Euro" by Gerhard Rosl and commissioned by the German Bundesbank, fall into the following categories:

• It depresses trade with global system, reducing total potential wealth generation.
• Users of the system are not indifferent to immediate vs. delayed demand.   While this does stimulate demand in the short term, it limits growth of the currency and its ultimate stimulative effect.
• Profits from the system are misused.  

In short, according to this analysis, depreciating currencies don't work as well as the theoretical models of national fiat currencies in stimulating economic growth.  Of course, the theoretical models in question don't reflect our current experience, since we are now in depression/deflationary economic environment with accelerating hoarding/income stratification.  In light of this development, the response to the critique is that potentially sub-optimal solutions are often better than no solution at all (as in Churchill's famous dictum: "democracy is the worst form of government, except for all those other forms that have been tried from time to time").  Specific responses:

• Local currencies ensure that minimal local needs can be met in the absence of a functioning or available global system.  In this respect, it minimizes or hedges against catastrophic downside risk and reduces uncertainty.  This is an aspect that the national system fails to address.  National systems are indifferent to local malfunction.
• While depreciating currencies don't enable rapid monetary growth and accelerating stimulation, they are very effective at dampening excesses (everything from stratification, hoarding, and non-productive behavior).  Currencies of this type aren't designed as a store of value over the long term.  Alternatives exist for that, and savings are accomplished either through conversion to national currencies, assets, or fungible commodities.  The system does what it is designed to do.
• Cui bono?  The most telling critique is the issue of, "how is the excesses generated by administering the system spent?"  This can be addressed by limiting administration costs to a fixed percentage of the system and allocating the remainder to public platforms -- everything from maintaining an electrical microgrid (in order to eliminate/lower transaction costs) to baseline production of food/energy/etc. 

How does this apply to warfare?

If you are working on COIN or stability operations and you aren't thinking about the potential uses of local currencies/scrip, you aren't even in the game.   Connecting devastated local economies to a chaotic and hyper competitive global economy does not auto-magically occur, it needs to be built/grown organically and insulated against rapid reversals.  Local currencies could play a significant or central role in mitigating and restarting economic activity following:

• Disconnection of local economies due to COIN operations (ink spots) post instability.
• Economic development in areas where national corruption/mismanagement make services highly uncertain.   
• Recovery from rapid economic collapse (when formerly developed areas, heavily dependent on the global economy, are economically devastated).    

RC JOURNAL: Late February 2009

Some items of interest:

•  Bloomberg.  A complete collapse in US consumer confidence in February.  Not only did the current confidence level drop to 25 from 37.4, the expectations index (6-month) dropped to 27.5 from 42.5.  This alone means that D2 is a likely 'a lock.'
• Very interesting exploration of organic security approaches.  A Darwinian Approach to a Dangerous World.  Book.  Article.  Web Site.  YouTube video of presentation on the topic.  
• Problem solving for diverse groups.  Open space technology.  Overview.  Harrison Owen.  Strategies for self-organizing groups.

Some of the core ideas from the video presentation "A Darwinian Approach to a Dangerous World" (click to enlarge):

Interestingly, almost none of these "natural rules of adaptation" applies to reform of existing systems (despite the mental gymnastics the authors attempt).  It does work within the context of resilient communities.  Think of it also in terms of intellectual backfill for Brave New War.

RC JOURNAL: Money Garden?

Burpee is selling a new frugal package called the Money Garden.  Sales pitch:  $10 in selected seeds can "potentially" yield $650 in produce.

"Victory gardens" are smart way to hedge against short term system failure and as a cost cutting measure.  However, a longer term solution for decentralized agriculture needs to be much, much more productive than traditional gardening.  Subscription plots/farming, low cost sensor networks (water, light, PH, etc.), high intensity plot plans, accelerated local composting systems, lawn garden entrepreneurs, tinkering networks, etc. will be needed to flesh out an innovative ecosystem that will drive the productivity curve.  Given these innovations, its possible to see a situation were 80-90% of food consumption is locally derived and sold at a small fraction of current costs and at a much higher level of quality/freshness.  Resilience needs to be productive/affordable to become dominant.

RC JOURNAL: Virtual World Demo

Virtual world's (using in massively multiplayer online games, MMOG) have the potential to be an amazingly effective and efficient method for conducting/organizing both education and business.  Using a just-in-time information system coupled with the immediate and repeated application of that information in simulated environments, learning takes place at a very rapid pace.  Easily accessible collaboration between participants adds to the learning process and enables the accomplishment of very complex tasks.  The accumulated knowledge gained by participants is absolutely staggering given the degree of automation involved.  

Here's a demo (video, MP4) I made , using "The World of Warcraft" (an extremely popular MMOG) which may help to bridge the generational and experiential gap necessary to understand the potential of virtual worlds in education and business (my son is a top player).  The video is very small, which makes it easy to download/stream (and inexpensive for me), but it is big enough so that you will get a feel for experience (hopefully).  Also, my ad hoc presentation style isn't being powered by much coffee yet (it gets MUCH better with additional cups).  

Let me know if this is useful or if there are any problems. 

GREED IS....

Here's another quick theory brief on moral conflict, game theory, evolutionary biology, and behavioral economics. I'm not looking for agreement with these theory briefs, reasoned opposition to the concepts is just as useful as acceptance -- both get you thinking in new ways.

"Greed is Good" Gordon Gecko.

If we look at the least thirty years through the lens of behavioral economics, one of the most striking changes has been the rise of greed as the ultimate descriptor of much our economic behavior, particularly at the highest rungs of the economic ladder (this shift has even been cited by many as one of the biggest achievements of the economics profession). However, as Yves of the blog Naked Capitalism points out, greed is different than ambition, greed is:

a selfish and excessive desire for more of something (as money) than is needed

If approach this from the perspective of game theory and evolutionary biology, the propagation of greed as a virtue among elites is a game changer. It is a survival strategy mightily benefits the early adopters and confers great success. We have clearly seen evidence of this in our experience (from multi-billion dollar fortunes to CEO pay w/o reference to performance to Hamptons estates..). However, once greed becomes a universal survival strategy, it destroys system value (as the formal rules of intrinsic/moral fair play are replaced by hideously expensive and slow enforcement/legal mechanisms). It can also result in the type of massive economic collapse we are seeing today.

Its spread also eventually forces a change in the survival strategies of those people upon which greedy people prey. To compensate, they adopt new strategies such that a new evolutionarily stable strategy (ESS) emerges.* In the 20th Century's Depression, the excesses of tycoons/wall street resulted in government intervention to level the playing field to the unionization of workers to full employment public policy to a commitment to public service among elites (from serving in the military to voluntary limitations on pay). In effect, both the strategies of the elites and the rest changed to create a new ESS. This created success, since under this new social compact all boats rose and increases in worker pay were tightly correlated with improvements in worker productivity (that ended in the late '70's with the abandonment of full employment monetary policy).

The ESS for this current situation may look somewhat different. Greed is firmly entrenched among elites on a global scale and unlikely to dissipate (for example, there isn't even a hint of the scandals/public excoriation of excess that occurred during the early years of the 20th Century's Depression). That means that a counter strategy to greed will emerge, as the people not driven solely by greed seek protection against its revealed excesses.

What will this strategy be? We can already see the emergence of it with the shift away from consumerism towards the economic independence of thrift, investment, resilience. Dependence on the larger global economy is being curtailed, firewalls between systemic instability and the local are being set up, and new sources of local and virtual income are replacing older forms. It's possible that we will find the competition between greed at the global level and cooperative resilience at the local will be an evolutionarily stable strategy that will persist for decades to come.

*NOTE: an ESS is a stable set of complimentary strategies that "crowd out" other potential strategies.

VIRAL RESILIENCE

Here's a quick theory brief that may be useful.

Historically, economic recessions that last longer than a year have durations/severities that can be plotted as power law distributions (Ormerod and Mounfield).* Given that we are already over a year into this recession, it implies that we are really into black swan territory (unknown and extreme outcomes) in regards to our global economy's current downturn and that no estimates of recovery times or ultimate severity based on historical data of past recessions apply anymore. This also means that the system has exceeded its ability to adapt using standard methods (that shouldn't be news to anyone).

It may be even more interesting than that. The apparent non-linearity and turbulence of the current situation suggests we may be at a phase transition (akin to the shift in the natural world from ice to water). Basic changes to the rules of the systems operation -- for example, a much higher ratio of non-linear vs. linear feedback, put in place to improve the system's performance -- may have altered the global system's underlying mode of operation. This means that the requirements of this new system may have obsolesced much of the current control system (collectively: governments, treaties, regulations, laws, models, behaviors, etc.), although which parts is not clear.

As a result, a new control regime may emerge. To get a glimpse of what is in store for us, we need to look at the sources of emerging order (newly configured dissipative and self-organizing systems/networks/orgs that are better adapted to the new non-linear dynamics of the global system).

The last time something that closely approximated this happened was during the last great 20th Century depression. In that situation the sources of emerging organizational order were reconfigured nation-states that took a more active role in economics (total war economies during peacetime). In this situation, we are seeing emerging order at the local level: small resilient networks/communities reconfigured to handle this level of systemic environmental non-linearity and survive/thrive (see the brief: Transition Towns). Further, it appears that these emerging communities and networks are well suited to drawing on a great behavioral shift occurring at the individual level, already evident in all economic statistics, that emphasis thrift/investment rather than consumption/gambling (the middle class consumer is becoming extinct).

So what does this mean? These new communities will eventually start to link up, either physically or virtually (see the diagram for the Transition Towns network), into network clusters. IF the number of links in the largest cluster reaches some critical proportion of the entire system's nodes (Kauffman has indicated that this proportion is 50% for simple networks), there will be a phase transition as entire system shifts to the new mode of operation. In other words, resilient communities might become the new configuration of the global economic system.

*NOTE: I would argue that basic changes to dynamics of the system, such as tight coupling via instantaneous media and supply chains as well the relative shrinkage of control mechanisms vs. the size/complexity of the system, likely shorten that time horizon dramatically as compared to historical experience. As in recessions in the current environment can be well less <<1 than a year till we enter black swan territory.

THE GREAT REBOOT

"...we don’t just need a bailout. We need a reboot." Thomas Friedman got it right in that it's : "Time to Reboot America". Unfortunately, the prescriptive solutions in the article are garbage.

America does need a reboot but it can't be achieved through top-down stimulus or reconstruction. It has to start at the bottom and grow organically.

NOTE: A reboot begins when simple core process is started which in turn starts another process and so on in series until the entire complex edifice of fully functional system is reconstructed.

So, what does this new, better core process look like? It starts at the community level with a wholesale reinvention that makes networked communities:

• Resilient to rapidly propagating global shocks (an inevitable outcome of a global system that is too large, fast, and complex to control).
  
• Highly productive in their ability to produce everything from food to products to energy (they produce wealth). Networked innovation.
  
• Extremely efficient and low cost. This stems from: shorter distances, less energy, less space, less time, less mass, and less information (as in, less management overhead required).

Fortunately, all the technological trends are leading us towards radical improvements in efficiency and productivity for doing real things at the micro level -- everything from high intensity small plot farming to personal fabrication to DIY synthetic biology to global tinkering networks to high efficiency local energy production. Even better, the ability to connect these communities via networks means that these new local powerhouses can work together synergistically. In short, the density of the improvements offered by this new model are akin to the quantitative and qualitative improvements (and the decades of opportunity space to improve capability exponentially) that we saw with the move from vacuum tubes to transistors in computational hardware.

So, how do we escape from our failing vacuum tube economy with its incredible inefficiencies and inevitable heat death? You start at the small. Find the model for the first design of the transistor-like local economy that can be copied throughout the entire global network. Once that model is found, you begin a process similar to the equivalent of the exponential improvements of Moore's law for the local and ride that curve to success.