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 [email protected], 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.

SPEAKING: Notre Dame in February

Martin van Creveld and I are the keynotes at the "Of Law and War" symposium (hosted by The Kroc Institute for International Peace Studies at Notre Dame) on February 12/13.   Martin and I are also sharing a panel together on "War in the 21st Century."  Should be fun.  

JOURNAL: Censoring Music

Here's a timeline of attempts to censor/ban the distribution of Narco-corridos (ballads to the narco-guerrilla lifestyle).  Good luck with You Tube.   Even YouTube music videos are part of an open source insurgency.  A niche industry in much larger highly segmented network (which has replaced the hierarchical cartels).

JOURNAL: Good Node, Bad Node

P2P (peer to peer) networks are everywhere.  From software networks (bitTorrent, etc.) to distributed sensor networks (which are being installed everywhere) to human networks (from decentralized terrorist/guerrilla groups to online communities).  One of the biggest threats to a P2P network is a bad node.   A bad node -- which occurs through either malicious insertion or malfunction -- can block/capture/falsify information flow in the network and thereby threaten its very existence.

Unlike a hierarchical network, there isn't (typically) a single trusted authority that can judge whether a participant in the network is acting badly.   Further, it's important to ensure that the process of determining or policing bad nodes doesn't force a wasteful expenditure of resources.   Ross Anderson et. al. (of MIT) has an interesting paper on solutions to this problem:

• Blackballing and Jury systems.  Voting systems that identify and "vote off" bad nodes are very costly in terms of resources.  Good nodes are forced to expend resources while bad nodes are not.  Universal polling is required, etc.   In the human sphere, this is the equivalent of getting a jury of peers to unanimously convict (that's morally tough).
• Buddy list systems.  A voting system that promotes good nodes (other than yourself) to a trusted level is much less costly.  A simple way to do that is to share buddy lists.  As in: here are the people I like to work with.  In order to be considered part of the core network, the bad node needs to work much harder.
• Suicide attacks.  One of the most efficient ways to eliminate bad nodes is to allow other nodes to suicide them.  In short, a good node recognizing bad behavior in another node can opt to disconnect themselves and the bad actor from the network.  IF node A (a good node) recognizes that node B is bad, node A can opt to inform the network that both A and B are not operable anymore (essentially a suicide bomb).   Given the limited range/scope/scale of attack, this is likely a very inefficient vector for attacks by bad nodes, so reversal of the process has limited downside.  

While I can see how suicide bombs can work as a mechanism in automated P2P networks, I'm a little perplexed on how it would work in human networks.  At a theoretical level it is certainly an elegant and efficient way to eliminate bad nodes in P2P networks, since it doesn't require the much effort to implement.  What do you think?

JOURNAL: Interdicting DIY Weapons

Israel is in an interesting position re: Gaza.  It needs to answer the question:  How do  you prevent the construction of DIY (do-it-yourself) weaponry made possible through the re-use of consumer electronics?  

The Israeli solution: block the importation of electronic goods, from microwaves to computers.  

As technology continues and individual superempowerment becomes easier, will we see similar efforts in uncontrolled zones of Mexico, Pakistan and other hollow states?  Will it be effective?  

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. 

INDUSTRIAL EDUCATION?

A critical part of the shift towards resilient communities will be a radical reduction in core economic costs for individuals/families/communities through improvements in productivity and STEMI compression (less space, time, energy, mass, and information required for any unit of activity/production).   The objective of this is cost reduction, over the longer term, will result in a radical improvement of the participants to produce wealth (thriving in a vicious and potentially stagnant or depression soaked global economy, and not simply surviving).    This process wont just apply to economic activity, but to core activities like education.  Let's dive into this.

Education, in its current form is an admixture of industrial and artisan processes.  While the quantities of product (graduates) produced and the facilities resemble industrial processes, the actual production is most closely akin to artisanship (with guilds, no less!).   Regardless, this process has become an albatross of cost and stagnating quality.  For example, costs for collegiate education have increased 4.39 times faster than inflation over the past three decades and has now eclipsed affordability for most households (median incomes have stagnated during this same period) with no appreciable improvement in the quality of graduates.  Worse, there is reason to believe that costs of higher education (direct costs and lost income) are now nearly equal (in net present value) to the additional lifetime income derived from having a degree.  Since nearly all of the value of an education has been extracted by the producer, to the detriment of the customer, this situation has all the earmarks of a bubble.  A bubble that will soon burst as median incomes are adjusted downwards to global norms over the next decade.*

Fortunately, with the implosion of this bubble, the opportunity to introduce improvements will emerge.  The most interesting of these improvements is the ability of collaborative online education to replace much, if not most of in person teaching.  For example:

• Lectures.  Videos of lecture series, plus associated materials, are available for many courses at some of the best Universities in the world (i.e. see MIT's open courseware).  Online videos are not only better than in-person lectures in many respects, they also allow you to get the best.  There is no need to recreate the lecture with tens of thousands of less qualified/exceptional teachers.
• Application.  As MIT is finding out, JIT (just-in-time information) in combination with simulated application of the concept to real scenarios is the best method for success.  The advent of computer simulated virtual worlds for in the computer gaming industry have proven this combination (JIT info and immediate application) can train kids to adults in complicated and complex tasks in a fraction of the time other methods require.  
• Collaboration.  The business world is already shifting on online collaboration as a replacement for most in-person work (the economic crisis will only accelerate it).  In my personal experience developing exceeding complex products, its possible to conduct the entire process from ideation to delivery online without any face to face contact (at great savings in time to direct expense).  Unfortunately, this ability/skill/mindset isn't central to the educational world, despite the fact that students are currently doing much of this already in their private lives with social software. 

When will the floodgates open?

The shift towards online education as the norm and in-person as the exception will arrive, however, the path is unclear.  It is currently blocked by guilds/unions, inertia, credentialism, and romantic notions.  Here's what could happen:

• Local governments cut costs.  Nearly or officially bankrupt local governments, out of desperation, opt to reduce costs through online education (the single biggest line item in most local budgets).  Drawing from online home schooling systems, the market for these systems explodes (growing at several thousand percent a year).  
• Entrepreneurial innovation.  As student populations at the collegiate level dwindle due to cost pressures, a major University (with a brand as good as MITs or Harvard), opts to offer full credentials to online student (at a tiny fraction of the cost of being in attendance).  Ten million students enroll in the first year to attend Harvard's virtual world.  
• Open source alternatives.  Unable to afford in-person education, the lack of a major brand in the marketplace, and a job market in free fall stunts the growth of online education.  As a result, a massive open source effort develops to develop virtual worlds and other online courseware that rivals the best Universities.  The government is forced, over the objections of established institutions, to confer credentials to graduates that pass standardized tests (in fact, comparisons quickly show that these graduates are the equal and/or better than traditionally educated competitors).   The business world embraces them.

End Note 

The result of these innovations creates a highly productive educational system that produces high quality graduates at a small fraction (an order of magnitude less) of the current costs.  Decentralization via online education also results in massive STEMI compression for a given unit of instruction and the educational platform created enables a level of flexibility and renewal needed to meet the challenges of a rapidly mutating global economy.  Resilient communities, as early adopters, will become the first beneficiaries of these benefits (which will allow them to accelerate beyond competitors) as subscription access to world-class online educational (virtual worlds, lectures, courseware) drop to less than $20 a month.  

"An Ivy League Education for less than $20 a month.  Why not?"  

*Interestingly, the rate of decline will likely even be harsher for the graduates of extortionately expensive elite universities with the implosion of Wall Street and broad corporate profitability.

NOTE:  Please feel free to shoot me studies/etc. that support or undermine this brief.  As always, agreement with my position isn't the objective of this brief.  However, I hope it does get you thinking in new ways.

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.

GG/RC RADAR: Early January 2009

Some items of interest:

• Policing via inkspot counter-insurgency methods in the favelas of Rio. It works, at a heavy social price, until a) the criminals opt to become more like guerrillas (overrun, IEDs, or more), b) it becomes too expensive to continue funding, or c) the police become as bad as the gangs they replace.
  
• An excellent movie from Brazil that I highly recommend re: favelas, urban counter-insurgency, modern warfare etc is Tropa de Elite -- Elite Squad. WARNING: It's hard edged and not Hollywood powder puff "action." Directed by Jose Padilha.
  
• Shlok Vaidya critiques the slow ideological approach of India's Naxalite insurgency (although they get some aspects right). GG theory suggests that the optimal approach to insurgency growth is to connect with other groups that oppose the state (and thereby grow the whole faster) economically, militarily, etc.
  
• As the economic depression deepens for Thailand, local currencies based on the Santi-suk model are spreading virally across northeastern part of country (that's why it's important to focus on models for resilient communities, get it right and it spreads quickly). Keys to expansion? 1) Legal cover from lawyers willing to donate time has kept the central bank off of their backs. 2) The adoption of the currency by a local rice mill, which is a focal point for the local economy. More from James Hookway writing for the Wall Street Journal. Here's more on local scrip/currencies.
  
• Piracy off the coast of Nigeria. Bourbon, a French oil services firm, announced that their ship, the Bourbon Leda, was seized with nine crewmembers. This is a follow up to an earlier successful (in that it likely yielded millions in payments) piracy attack on a Bourbon vessel in October 2008. Meanwhile, attacks on oil infrastructure continue.
  
• Timelapse video of a single botnet infection from Clarified networks. Note that white is infection activity as computers are taken over.
  
• Low cost "solar powered" Fridge -- just add water.
  
• Gaza. Israel is locked in a strategic vise that will get tighter and tighter. What is the vice? DIY missiles and a strategic barrage. DIY missiles are proving much cheaper and easier to deliver than using human beings as the terminal guidance systems for explosives (unfortunately, radical improvements in accuracy are in the offing making them comparable to human delivery). Israel can't ignore the missiles due to their impact on psychology and economic activity. Walls don't help either. It can't adopt Hama rules (razing enemy territory) without incurring isolation/economic collapse. It can't engage the enemy without high collateral damage which boosts recruitment and solidifies support for its enemies (Van Creveld's paradox or broadening the conflict to include missiles from Hezbollah).
  
• Somali pirates free Saudi supertanker = earn $3 million for their effort.
  
• More when I get a chance (and thanks to all that sent links or borrowed links from).

MEXICO'S BAZAAR OF VIOLENCE

The most likely existential security threat to the United States isn't likely to originate from southwest Asian terrorists or a conventional war with China. Instead, it will originate from Mexico's open source insurgency as:

• The Mexican state becomes hollow and unable to maintain any semblance of control over its territory. Fiscal bankruptcy, driven by declining oil revenues and a global economic depression, will eliminate any remaining legitimacy it has with the countryside (already tenuous due to extreme income stratification).
  
• The narco-insurgency in the northern provinces morphs into a national open source insurgency with thousands of small groups all willing to fight/corrupt/intimidate the government. Many, if not most, of these groups will be able to power themselves forward financially due to massive flows of money from black globalization. The result will be a diaspora north to the US to avoid the violence.
  
• Economic failure, a loss of legitimacy and economic deprivation in the US creates an environment for the rapid proliferation of domestic groups willing to fight the government in order to advance their economic interests. Catalyzed by connections to Mexico's functional and lucrative bazaar of violence (read "Iraq's Bazaar of Violence" for more on how this works), these groups carve out their own territory in the US. Experience shows that once these groups gain a foothold, they become nearly impossible to defeat (although they can be co-opted).
  

Sam Dillon, writing for the NYTs, provides us with a good waypoint check on this scenario. Here is a good example of how quickly the infection can spread:

Jerez, a town of 60,000 a few miles northwest of Felipe Angeles in Zacatecas, was until recently a calm place, largely untouched by organized crime, said Abel Márquez Haro, a grocery wholesaler. But recently, scores of men driving Chevrolet Suburbans and carrying automatic rifles established a menacing presence, threatening residents on the street and extorting businesspeople. The identities of the men remain a mystery, but many people in the town say they assume they are traffickers who have abandoned another Mexican state, perhaps to avoid an army crackdown.

The article goes on to explain how these groups are targeting family members of immigrant workers in the US via kidnapping/extortion. The result has been that workers that would have normally returned during an economic downturn, aren't returning due to safety concerns (and many are trying to bring the rest of their families north to safety).

NOTE: IF your are wondering how a global depression might impact national security, this is it (I suspect that the biggest hew and cry will be over how the fiscal crisis has led to the rapid defunding of hideously expensive conventional weapons systems, of no use to this threat). If you want spice, think about the implications of an economic collapse of Pakistan (needs to borrow), Russia (needs $70+ oil), and China (needs growth in US consumer spending).

JOURNAL: New Lows

In a quick follow up to the "Middle Class Consumers" journal entry. A change is afoot and it will be a good thing:

Bloomberg. Consumer confidence sank to the lowest level in at least 41 years this month as Americans grew more concerned about keeping their jobs and paying their mortgages, raising the risk they’ll spend less next year.

Bloomberg. The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year... Separate figures today showed business at European factories contracted in December by the most on record.

Time for some "Yankee" ingenuity re: resilient communities.

A couple thoughts:

• If similar data on manufacturing is showing up in Asia (and there are signs that it is, although the data is of poor quality), it will be a disaster there soon. In short, it's impossible to be a mercantilist if there isn't a large/affluent market to exploit. Back in 2006, I weighed in on the topic of China and economic failure (see the brief "When China Derails"). We still haven't seen much on China's potential collapse in military/intelligence analysis, although it is growing at the edges of the commercial analytical world. What does this mean? In a couple of years we are likely to see "blue ribbon" panels bemoaning a "failure of imagination" in regards to China, despite tens of billions being spent on gov't analysis/intelligence. Hilarious cycle.

• Here in the west, the crisis we are seeing might have started in the shadow banking sector with the collapse of subprime mortgages. However, the unexpected happened: it revealed the US/Euro middle class as insolvent and forced a shift in behavior (towards something new). That insolvency and shift in behavior will sink chances of economic recovery from gov't stimulus (you don't add debt in a debt driven crisis) and financial sector bailouts.
  

JOURNAL: Middle Class Consumers?

Here's a bit of thinking for the new year. It may be useful, or not.

It's hard to imagine a more derogatory and less descriptive label than "middle class consumers"* for the group of people that created most of the world's massive wealth, rich technologies, and societal complexity. Worse, it's the type of label that limits how we talk about ourselves, which is particularly grievous in that it obscures a process that is already in motion: we are becoming something new.

What are we becoming? Here's what I see:

• Frugal. Elimination of financial debt and dependency.
  
• Focused on investing. In home productivity (energy, food, etc.) rather than global markets.
  
• Thrifty with expenses. New sources of low cost food, energy, security, etc. that are financially sustainable.
  
• Entrepreneurial. Energy, food, and more sold/traded/bartered at the local level.
  
• More physical. Not backbreaking 19th Century labor, but the nominal investments required to enable the transition. Re-skilling to accomplish basic tasks.
  
• Virtual. Knowledge work without commutes, offices, etc. sold to global customers via online collaboration. New skills in social software. Free agency.
  
• Cooperative. New geographic and global virtual communities. To share ideas, designs, insight, encouragement, physical work, etc. To build community platforms.
  

That's the just the start of a process that is making us more resilient and will accelerate supermpowerment...

Is there a new way to describe what we are becoming?