Acronyms

I was recently speaking with a friend of mine who is still serving in the military. He mentioned some work he was doing on “securitisation” policies. A year ago I would have instinctively known that he was talking about the development of security-focused institutions, the primary role of NATO in Afghanistan at the moment, and an area to which the British Army believes it can bring significant global value at a low cost. However, when he said the word “securitisation” my first thought was to ask him what on earth the British Army was doing getting involved with the development of financial instruments…

That conversation inspired me to begin thinking about some of the other phrases and acronyms that have two very different meanings in the military and in the private sector. I came up with this list; there are no doubt some more (let me know). Concurrently and coincidentally, HBR IdeaCast published this podcast, which puts forward some good arguments as to why not all jargon is bad.

So if you’re in the Big Three then take care doing CA training, HFT, looking for a VC or some PE, working out the ROE, or using DF.

Acronym / Phrase Military Private sector
Alpha Typical callsign Gap between expected returns and actual returns
BB Back brief Bulge bracket
BD Bulldog Business Development
Beta Typical callsign Expected returns according to the CAPM
Big Three Paras, Marines, RAF Regt McKinsey, Bain, BCG
CA Combined Arms Chartered Accountant / Current Account
CDS Chief of the Defence Staff Credit Default Swap
CF Coalition Forces Cash Flow
COB Coalition Operating Base Close of Business
CP Close protection Consumer Products
CTC Commando Training Centre Cost-To-Company
DF Direct Fire Discount Factor
DSO Distinguished Service Order Day Sales Outstanding
EOD Explosives Ordnance Demolition End of day
FOB Forward Operating Base Freight on board
GS General Service Goldman Sachs
HF High-frequency (radio) Hedge Fund
HFT Hybrid Foundation Training High Frequency Trading
IOT In Order To Internet of Things
IR Infra Red Investor Relations
MC Military Cross Marginal Cost
OC Officer Commanding Opportunity Cost
OTC Officer Training Corps Over-The-Counter
PE Plastic Explosive Private Equity OR Price to Earnings OR Price Elasticity
PO Potential Officer Purchase Order
PPE Personal Protective Equipment Property, Plant & Equipment
RC Remote-Controlled (IED) Retail Company
RE Royal Engineers Retained Equity OR Real Estate
ROE Rules of Engagement Return on Equity
SF Special Forces Securitisation funding
VC Victoria Cross Venture Capital

If you’re new to the private sector and the interplay of the various elements – particularly in finance – and getting concerned with all these acronyms, this graphic helps (from Wall Streep Prep).

I feel the need… the need for sleep

Ideas trend; currently I am reading a lot about the need for sleep. Not only is it a topic that has been discussed for generations, but it is a topic which transcends sectors; it is the bleed-across between the military and private sectors that interests me, and subsequently how the failure to get enough sleep impacts on the decision-making process by leaders – the science is clear.

Getting enough sleep is a perennial problem for members of the military. The nature of conflict, with its Clauswitzian friction, means that maintaining a regular sleep rhythm is difficult.  In the current climate western nations have the advantages over their adversaries at night; as such the call to “Own the night” is often made by commanders, which demands that people operate outside their circadian rhythm. Not all theatres are the same; more mature operations with a focus on domestic capability development and which align to host nations’ normal daily activities (including sleep cycles), often have a more established pattern. However, one of my constant cries is the need to avoid the arrogance of presentism, and although such sleep-friendly campaigns are dominant in the current operational setting, they are an historical aberration. Sleep deprivation for service personnel is here to stay.

This is particularly challenging at certain levels of command, where tradition dictates that a commander should not go to sleep unless he is certain that his soldiers have been taken care of. The great Field Marshall Bill Slim, whose book Defeat Into Victory is one of my most gifted books (for military and civilian friends alike), was clear:

“I took one look at them and thought “My God, they’re worse than I supposed.” then I saw why. I walked round the corner of that clearing and I saw officers making themselves a bivouac. They were just as exhausted as their men, but that isn’t my point. Officers are there to lead. I tell you, therefore, as officers, that you will neither eat, nor drink, nor sleep, nor smoke, nor even sit down until you have personally seen that your men have done those things. If you will do this for them, they will follow you to the end of the world. And, if you do not, I will break you.”

There comes a level of command when this is simply not realistic; probably around company / battalion command (which broadly means commanding between 100 and 600 soldiers). Senior leaders are there to think, and this demands a clear, rested head; both Slim and his “colleague” Field Marshal Montgomery were known to castigate junior officers that woke them during the night without adequate cause. Military commanders now generally operate with specific “wake-up” criteria which provides guidance to subordinates on the kind of incident that would justify breaking critical sleeping time.  Modern day executives – including Mark Zuckerberg, Bill Gates, and Jeff Bezos – have a similar routine. The Harvard Business Review recognises this, noting that ‘senior executives get more sleep than everyone else’.

The reflection of this in the private sector was stark throughout 2018. Tesla CEO Elon Musk had a well-publicised spat with Arianna Huffington about his long working days, with some commentators believing that he needs to step back and get some rest; there have been claims that on a macro-scale the UK’s lack of sleep is contributing to its lack of productivity; McKinsey & Co devoted one of their Five-Fifty pieces to it; and books have been published about it.

I wouldn’t attempt to give advice on how to ensure that one is getting the right amount of good quality sleep; there is more than enough information in the links included here to get started, and I am certainly no expert. What is clear, however, is that the need for sleep transcends all the differences between life in the military and life as a civilian.

Case studies and Battlefield Studies

‘Those who cannot remember the past are doomed to repeat it.’ (George Santayana)

As I go on the journey from infantry officer to civilian via a full-time MBA I’m constantly seeking to identify areas of crossover between the military and the private sector.  Currently trending for me is the use of historical examples to learn from, and my interest in this has been piqued recently for several reasons.

Firstly, we are using more and more case studies in our classes. Pre-reading for a lot of modules inevitably includes some theory and one or two examples of where the theory has been applied in the real world; recent ones have included Apple’s accounting methodology, Toyota’s production systems, Southwest Airlines’ culture, and more. These are of course amongst the most well-known cases for business students, but we are in a fortunate position and able to leverage personal contacts of lecturers to enable access to more exclusive – and arguably exciting – cases; these have recently included, inter alia, having the team from BAML that worked on the Ferrari IPO talk to us, and the Morgan Stanley section that worked on the Fox / Disney/ Comcast deal – 3 days after the notorious auction actually happened. In the world of M&A this is as close to the coalface as most students will get while studying.

Secondly, there has been some criticism of Harvard Business School’s use of the case study recently in business education press, with some people believing that it is too male / US-centric, too lacking in current examples, and would benefit from more focus on learning and testing robust theory (although there are counterarguments to all of these). Like most things there is likely an Aristotlean Golden Mean, and the case study is one club in a golf bag that can be used to teach.

Finally – and this is where the military analogy emerges – I am a big proponent of making use of historical military examples to learn from.I am a particular fan of the use of Battlefield Studies (unfortunately officially abbreviated to BS), where a unit of any size will go to an actual battlefield, look at the ground, examine the history, and discuss the event –particularly with a view to drawing out lessons that can be applied in the modern context.  It can be a week-long activity or a day out; it can involve 50+ people or half-a-dozen. It normally involves an officer framing the discussion around current doctrine and theory,supported by a professional historian that knows the event inside-out.  One of my final tasks before leaving the Army was to run a week-long BS examining the Allied penetrations into Germany in late 1944, as well as take a glimpse at the famous German counter-attack that became known as the Battle of the Bulge. We framed the BS in the context of a western coalition fighting a peer / near-peer combined arms adversary in terrain that quickly varied from rolling countryside to thick woods to complex cities; the links with NATO’s current focus were obvious.

So what are the parallels?

  • The importance of Principles. Ralph Wado Emerson sums it up well: “As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods.” It is highly likely that whatever challenge one is facing, someone, somewhere, sometime, has seen something similar before.  We should take care not to compare apples with oranges, but principles are principles because they can be applied in some way in any environment. Their utility is particularly stark in the military; having a set of concepts that one can lean on when tired, hungry,scared, and cold is critical.
  • Beware the arrogance of presentism. Every generation believes that it is unique.It may have unique characteristics, but that does not mean that there is nothing to be gained from previous events. When people say that the “nature of conflict” has changed based on the past couple of decades of low-intensity counter-insurgency they are wrong; the current character is different, but the underlying principles of Clauswitzian fog, friction, fear et al. ring true throughout history. I detect that there might be similar principles within business; perhaps Porter’s 5 (or 6) Forces will turn out to be the answer…
  • Proximity bias. Like the aforementioned criticism of HBS, the British Army tends to look at BSs that involve elements of either of the world wars that were fought in Europe, because resource constraints – time, finance, logistical, corporate knowledge – make these far easier to organise. We must be mindful of not sticking to our lane, and look beyond the easy cases to broaden our knowledge and experience. I once did a course with an officer from the Nigerian Army who was taking a break from fighting Boko Harem; he had plenty of examples from which to draw lessons from.
  • More input leads to more output. Time spent preparing before the study inevitably pays dividend.  I have been on BSs as a passive passenger and an active organiser; the latter requires slightly more work but delivers far greater returns in terms of learning and enjoyment. I have quickly learnt that the same rings true in business case studies, and taking the time to fully read and absorb – and then conduct secondary/ tertiary analysis – is well worth the effort.
  • The voice of experience. I mentioned earlier the ability to attract speakers that have been involved in interesting, large-scale cases, and this is critical in genuinely bringing to life some of the activity that they have been involved in(subject to NDAs). Similarly, the experience of veterans of battles that we visit in BSs is invaluable – their primary source knowledge is invaluable, and they bring clarity, colour, and insight.

In sum, the case is a wonderful tool for study. The ability to take theory – whether it’s Blue Ocean theory or the Principles of Defence –and see it acted out in practice delivers far more learning than either method would individually. The power of combinations is a real thing, and the military / private parallels are clear.

NATO fear of Russian assault may be overblown; the West has a history of getting it wrong. But then again, so do the Russians. (Part 3)

This is the third and final part of piece looking at both sides of the Cold War’s failure to adequately assess the capability, willingness, and ultimately therefore the threat, of the other, and the role of bias in driving this failure. Part 1 looked at the US’ initial post-WW2 assessment of Russian force levels in Eastern Europe, whilst Part 2 studied the Cuban Missile Crisis. This part looks at the Soviet misinterpretation of NATO actions during Exercise AUTUMN FORGE (although the incident is more commonly referred to as Ex ABLE ARCHER).

Exercise AUTUMN FORGE – Assessing American Intent

1983 has been called the ‘year of maximum danger’, and ‘the most dangerous Soviet-American confrontation since the Cuban Missile Crisis.[1]  Due to SALT I and II, the ‘Open Skies’ policy, and détente, capabilities and dispositions were now well-known.[2]  Both sides had so much nuclear capability that there was little need to chase exact intelligence on it.  Khrushchev summed it up; ‘I once read something McNamara had said about the US having sufficient stocks of nuclear weapons to destroy the world four times over…  There’s no need to destroy the world four times; once is enough’.[3]  The Cold War had moved beyond assessing exact capability.

However, intent remained opaque.  Triggered by Exercise AUTUMN FORGE, large US manoeuvres in Europe, the Soviet leadership became increasingly nervous about NATO intentions, ultimately believing ‘all actions pointed in the direction [of an imminent nuclear attack].’[4]

Bias hindered obtaining accurate intelligence.  The Soviet Premier Yuri Andropov and his inner circle – succumbing to Groupthink bias[5] – had ‘convinced themselves’ that the US was planning on launching a surprise nuclear attack.[6]  This assessment itself was probably at least partly driven by Vivid bias as horrific images of nuclear war were produced in everything from academic texts to popular film.[7]  It also demonstrates the dangers of the Dunning-Kruger cognitive bias, as non-professionals believe their own assessments to be better than experts’.[8]  Displaying Confirmation bias[9], Andropov directed that Soviet intelligence collectors launch Operation RYaN to ‘gather evidence for what he was nearly certain was coming’[10] – the flaw in this reasoning is self-evident.  Despite disagreeing with Andropov’s assessment – the KGB believed that it was ‘more of a storm warning than a hurricane alert’[11] – they ‘dutifully supplied the Kremlin with whatever suspicious evidence they could find, feeding official paranoia.’[12]  The organisational and cultural refusal to speak truth to power had a clear impact.

However, one should examine the broader situation in order to understand Soviet concerns.  Reagan had a clear vision for US foreign policy; ‘to hasten the end of communism.’  The USSR was an ‘evil empire’, communism ‘a form of insanity… contrary to human nature.’[13]  There was resource behind these statements; the only federal department not to reduce its budget under Reagan was the Department of Defense (DoD) – in fact its budget doubled between 1981 and 1986.[14]  Not only was this setting the conditions for a renewed capability race, but it indicated to the Soviets a belligerent intent.  It is unsurprising that Andropov was nervous.

But Andropov’s analysis was again wrong.  Reagan’s narrative served a political purpose; demonising the other is a tried and tested way of building domestic popularity.[15]  Andropov recognised that ‘every election campaign… must be accompanied by anti-Soviet statements’[16], but he did not recognise that the increased DoD budget was not for directly engaging the USSR militarily, but rather ‘to divert priority Soviet resources to meeting future US capabilities beyond their grasp.’[17]  Reagan wanted to outspend the USSR so that ‘they can’t keep up’[18] – he was forcing them into Imperial Overstretch.[19]

This was clear in National Security Decision Directive 75 (NSDD 75).  US strategy for defeating the Soviet Union did not include any aspirations for kinetic engagement – rather it was based around three strands: resistance to Soviet imperialism; internal pressure on the Soviet Union to liberalise; and improved bilateral relations.[20]   Soviet failures to direct appropriately, collect sufficiently, and analyse accurately led to a significantly incorrect conclusion about US intent.

Conclusion

This essay contained three themes: the importance of all elements of the intelligence cycle; the importance of assessing both constituent components of threat – capability and intent; and the role of biases, primarily cognitive, organisational, and cultural, in influencing the obtaining of accurate intelligence.  As a framework within which to examine these themes it assessed that the importance of identifying the opponent’s threat was the main intelligence driver throughout the Cold War, and examined three case studies: US assessments of Soviet conventional capability following WW2; US assessments of Soviet threat during the Cuban Missile Crisis; and Soviet assessments of US intent during Exercise AUTUMN FORGE.  There were mixed successes on both sides, influenced largely by the presence of a wide range of biases.  Over the course of the Cold War capability identification became less important – and once nuclear armament levels reached a certain tipping point it was almost irrelevant – but the requirement to obtain accurate intelligence on the opponent’s intent remained.

Thus despite increasing clarity over capabilities, driven by advances in collection capabilities and increased openness, the impact of biases remained.  Even towards the culmination of the Cold War assessments of the other crucial part of threat assessments – the adversary’s intent – was persistently misjudged.

 

Complete essay available on request.

 

[1] Cimbala (2000); Adamsky (2013), p. 6; Johnson (1999), p. 264.

[2] SALT I (1972, SALT II (1979); Marquardt (2007).

[3] Quoted in Heikal (1978), p. 129 (no original source given).

[4] Soviet Deputy Chief of Staff of Strategic Rocket Forces, General Colonel Korobushin, quoted in Hines, et al. (1995), pp. 106-107.

[5] See DCDC (2011), p. A-1 (also called  the Bandwagon Effect).

[6] Cimbala (2014), p. 234.  Also see Harriman (1983), pp. 2-3.

[7] For an example of the former see Kahn (2007); the latter Kubrick (1964).

[8] Dunning, et al. (2003)).  The Soviet Union has a history of this; Stalin believed in 1942 that Germany intended to head for Moscow, ‘whereas all indications were that they were planning something in the south’ (Tissier (1996), p. 8); Khrushchev largely ‘preferred to conduct his own analysis’ (Garthoff (1998), p. 11).

[9] DCDC (2011), p. A-1; Defence Intelligence (2013), p. 5.

[10] Birch (2013).  For an example of these orders see Titov (1983).

[11] Fischer (Undated (circa 1996)), p. 62.

[12] Birch (2013).

[13] Skinner, et al. (2001), p. 21; Reagan (1983); Reagan, quoted in Skinner, et al. (2001), p. 12.

[14] Figures in Smith (1998), p. 132.

[15] See Wistrich (1999).

[16] Harriman (1983), p. 3.

[17] William Clark, interview with author, Schweizer (2002), p.132.

[18] Quoted in Schweizer (2002), p. 141.

[19] See Kennedy (1998).

[20] NSA (1983).

NATO fear of Russian assault may be overblown; the West has a history of getting it wrong. But then again, so do the Russians. (Part 2)

The first part of this essay focused on the US’ failure to establish a truly accurate picture of Soviet / Russian capability in the immediate period following the end of the Second World War; this second part looks at a time when the US failed to get an accurate picture of the Soviet threat (a function of capability and intent). The consequences were almost disastrous – but there were also positives that came from it.

The Cuban Missile Crisis – Assessing Soviet Threat

The Cuban Missile Crisis was ‘the epochal military confrontation of the cold war’[1]; identifying Soviet intent and capability was crucial.  Prior to the 13 days of the main crisis (16th-28th October 1962), The Office for National Estimates (ONE) issued a Special National Intelligence Estimate (SNIE) stating that the placement of medium / intermediate range ballistic missiles (M/IRBMs) in Cuba would be ‘incompatible with Soviet practice to date and with Soviet policy as we presently estimate it’[2] – a prediction that was, as it turned out, a ‘failure of the highest magnitude.’[3]   This estimate was exacerbated by Anchoring bias; following the crisis the Stennis Committee specifically criticised this ‘predisposition… to the philosophical conviction that it would be incompatible with Soviet policy.’[4]

However, the placing of missiles in Cuba was not something that the Soviets were likely to do.  The ONE’s conclusion was rational[5]; it is ‘difficult to say what would have been the correct estimate.’[6]  Predicting Black Swans such as Cuba – outliers with an extreme impact that in retrospect should have been predicted, but at the time were justifiably unexpected[7] – is difficult.

The period also demonstrates the HUMINT challenges faced by the CIA.  Cultural bias (arguably sheer racism) saw CIA agents ‘distrust[ing] émigrés, as well as their own agents of Cuban origin’ and dismissing Cuban President Osvaldo Dorticós’ public (i.e. Open Source (OSINT)) references to ‘weapons that we wish we did not need and that we do not want to use’ as ‘typical Cuban braggadocio.’[8]  This, again enhanced by Anchoring bias, saw swathes of evidence from Cuban intelligence sources that did not align with CIA expectations ignored.  This also provides an example of the counter-intelligence battle, as these biases were further exploited by classic Russian maskirovka activity.[9]

In the end fusion, coordination, and synthesis of all-source resources confirmed the presence of missiles; the importance of collaboration – a principle of US intelligence[10] – was made clear.  Two credible reports from refugees[11] ‘dovetailed’, triggering clear direction for Image Intelligence (IMINT) collection: ‘Search the area delineated for possible surface missile construction, with particular attention to SS-4 Shyster.’[12]  U-2 flights acquired photographs that were analysed and compared to documents provided by a Soviet HUMINT source, Col Oleg Penkovsky, before dissemination rapid dissemination to President Kennedy.[13]  No evidence of nuclear capability was ever identified, but it was recommended – influenced by Prudent Overestimation bias – that ‘one must assume that nuclear warheads could be available in Cuba.’[14]  In this case the bias was helpful; they were.

Conventional Soviet capabilities on the island were never accurately ascertained, hence it is fortunate that they were less crucial.  The US’ 1963 consolidated retrospective estimate was 22,000 Soviet troops in Cuba; the true figure was closer to 42,000.  CIA Task Force W in Cuba at the time had a more accurate ‘feel’ for 45,000-50,000, but without supporting evidence policy-makers ignored it.  In this instance instinct – ‘system one’ thinking, ‘thin-slicing’, fingerspitzengefühl – should have been given more weight.[15]  Regardless, the non-conventional capability assessment was complete.

However, the Soviet intent was still unknown.  A number of theories for the placement of missiles in Cuba were identified[16], but more importantly the CIA initially struggled to ascertain how Khrushchev would react to the US course of action.  Friction from organisational, cultural, and personal bias between President Kennedy and the Joint Chiefs (themselves biased by the Bay of Pigs and Munich respectively[17]), made accurate, objective intelligence vital.  To compound the challenge there was a paucity of information about the current Soviet intent – Kennedy confessed to being ‘mystified’ by Khrushchev and unable ‘understand to [his] viewpoint.’[18]  His brother was blunter; ‘we had been deceived by Khrushchev.’[19]

The subsequent SNIE was wrong; it considered it ‘unlikely’ that that the USSR was ‘installing these missiles primarily in order to use them in bargaining for US concessions elsewhere’[20], but it was the promise to remove US Jupiter missiles in Turkey that eventually persuaded the Soviets to remove their missiles.  Assessments of the Soviet reaction to a blockade were more accurate.  SNIE 11-19-62 predicted that the USSR would ‘concentrate on political exploitation, especially in the UN’, and would ‘not resort to major force in the area of Cuba or forceful retaliation elsewhere’; furthermore a blockade would not ‘bring down the Cuban regime.’[21]  These predictions all materialised.

There were significant intelligence failures during the Crisis – notably the failure to predict the presence of missiles – but also successes.  CIA Director John McCone demonstrated his ability as an analyst through the “honeymoon cables.”[22]  Fusion of all-source information, clear direction and collection eventually identified the missiles.  The US utilised shrewd intelligence dissemination in the UN.[23]  The analysts’ war game of the blockade was accurate.  And, arguably most importantly, the establishment of a hotline offered both sides the opportunity to clarify their intent in the future.

 

Part 3 will look at the events surrounding Ex ABLE ARCHER.

 

 

[1] Betts (1987), p. 109.

[2] ONE (1962), p. 93.

[3] Blight and Welch (1998), p. 4.

[4] Heuer (1999), pp. 116-119, 150-152; Tversky and Kahneman (1974), pp. 1128-1130; Schwenk (1986), pp. 300-302; Dobbs (2008), loc 2642; Preparadness Investigating Subcommittee (1963), p. 2.

[5] See Knorr (1964), pp. 460-462.

[6] Garthoff (1998), p. 21.

[7] Taleb (2010), loc 343.

[8] Quoted in Dobbs (2008), loc 1761.

[9] Amuchastegui (1998), pp. 101, 116; Fischer (1998), p. 161; Lehman (1962), p. 99; Bennett and Waltz (2007), pp. 103-105.

[10] US Army (2013), p. II-1.

[11] CIA (1962a) and CIA (1962b).

[12] Lehman (1962), p. 101.

[13] Weiner (2007), p. 197.

[14] Guided Missile and Astronautics Intelligence Committee, et al. (1962), p. 187.

[15] Garthoff (1998), pp. 28-29, fn 28; Gladwell (2005); Kahneman (2003).

[16] See CIA (1962c).

[17] See their discussions at DOD (1962).

[18] Quoted in Dobbs (2008), loc 200; and Weiner (2007), p. 199.  On ‘certainty effect’, a bias affecting the USSR, see Kahneman and Tversky (1979), p. 269.

[19] Kennedy and Schlesinger (2011), p. 27.

[20] CIA (1962d), p. 198. See Heuer (1999), pp. 152-156 on ‘expression of uncertainty’ bias.

[21] CIA (1962e), p. 216-217.

[22] Weiner (2007), p. 204.

[23] Witness the clash between Stevenson and Zorin, Educational Video Group (2009).

NATO fear of Russian assault may be overblown; the West has a history of getting it wrong.  But then again, so do the Russians. (Part 1)

There has been a lot written about Russian military threat over the past few years as they seek to re-establish themselves as a world power.  NATO has reconfigured itself (in parts – and much smaller) to look something slightly more aligned to the form it took when it established its original raison d’être.  But the West has a history of failing to see beyond the Russian maskirovka, and/or failing to deal with its own biases. This essay (in three parts) examines some of the ways that the West and the USSR got their threat assessments wrong during the Cold War. The “so what” is this: if we got it so wrong so many times before, why are we so arrogant to presume that we are getting it right now?

 

 ‘The Cold War was an intelligence war… Information was power.’[1]

 Introduction and Biases

There are three themes within this essay that will enable discussion of the US and USSR abilities to obtain accurate intelligence on each other during the Cold War.  Firstly, obtaining intelligence – ‘reasoned foresight for comparative advantage’[2] – is dependent on all elements of the intelligence cycle; Direction, Collection, Analysis, and Dissemination.[3]  Secondly, threat is a combination of intent and capability – being ‘willing and able’[4] – and both elements, in particular during the new bipolar nuclear world that followed World War Two, must be assessed.  Finally, obtaining intelligence is inherently subject to biases, broadly categorised as: cognitive – ‘mental errors caused by our simplified information processing strategies’; cultural – ‘widely held beliefs, practices, or cognitive styles that characterize one’s specific social environment’; or organisational – ‘constraints on cognitive flexibility… that have evolved within the specific organization in which the individual serves.’[5]

To examine these themes this essay will look at three periods of heightened tension during the Cold War: US attempts to ascertain Soviet conventional force capability in the period following WW2; US attempts to identify the Soviet threat during the Cuban Missile Crisis in 1962; and Soviet concerns over US intent during Exercise AUTUMN FORGE in 1983.  It will conclude that despite an improved awareness of capabilities through increased technology and transparency, uncertainty about intent persisted; therefore consolidated accurate assessments of the threat remained elusive.  For brevity, this essay will touch only lightly on the vast technological collection improvements that occurred during the Cold War[6], and assumes that the reader has sufficient understanding of biases to render full descriptions of each unnecessary; references are provided should clarity be sought.

Soviet forces in the early Cold War – Assessing Soviet Conventional Capability

In the period 1947-1953, prior to Soviet force reductions[7], US intelligence agencies were directed to ‘appraise and reappraise the… capabilities of the Soviet Union.’[8]  These assessments of Soviet force levels were, in part, accurate.  After small initial overestimations, by 1948 a total of 175 Soviet divisions were assessed to exist, a figure since confirmed.[9]  The CIA was clear of the implications: ‘The USSR has the military capability of overrunning Europe… in a short period of time.’[10]

However, US intelligence struggled to grasp the nuances underlining this figure; attention had been ‘principally on numbers of divisions… rather than on actual manning.’[11]  Manning levels of these divisions varied from over 70% down to 10% according to, inter alia, readiness levels, location, and role.  The CIA did not recognise this variance until 1955; its total manning figures were therefore some way off the truth.[12]

There are a number of bias-driven reasons for these failures to obtain accurate intelligence on conventional Soviet force levels.  Firstly, cultural bias led to flawed directionPolitical focus was on the number of divisions; quantity makes for a better sound bite than quality, and second-order analysis was considered too complicated to explain to the public.  Secondly, history and structure forced organisational bias; US intelligence, configured for identifying German force levels, had not cultivated a Soviet-facing Human Intelligence (HUMINT) network, and was overly bureaucratic.[13]  Thirdly, ‘Self-interested Overestimation bias’ was at play.  To justify an increased military budget, and to build Congressional support for NATO, analysts stated greater Soviet capability than was evidenced; arguably this overestimation was a driver for the major assessment of the period, National Security Council report 68.[14]  Finally, cognitive biases, particularly Availability and Vivid bias, had an influence.  The horror of WW2 was still fresh in analysts’ minds, leading to ‘a tendency to “round” military estimates with a slant toward depicting a greater threat.’[15]  This confluence of biases created a Biased Overestimation, when ‘estimates of the capabilities [of an] adversary are… systematically adjusted upwards’[16]; this was clear to Rear Admiral Stevens, Naval Attaché to the US Embassy in Moscow:

‘The sum total of our estimates is not consistent with what I have experienced in Russia, and I believe that it comes from piling incorrect assumptions and inferences one on another.’[17]

But overestimation of enemy capabilities is not just due to incompetence; in deciding force levels required to meet a potential aggressor ‘the only sound policy is to estimate our own requirements to meet the worst situation likely to occur… The price of underestimation may be… national extinction.’[18]  It was understandable that analysts would err on the side of caution – this is Prudent Overestimation bias[19] – even if secondary impacts of this inaccuracy (e.g. misallocation of national resources, escalation of the security ladder, a security dilemma) could be severe.[20]

It is clear in hindsight where and how US capability estimates were influenced by bias.  However, the mitigating circumstances are understandable.  This was the US’ first real attempt at obtaining intelligence on Soviet capability; it achieved mixed success.

 

Part 2 is coming shortly, and will examine the biases and miscalculations prevalent during the Cuban Missile Crisis. For a quick (gripping) review of the one of the most important events in the history of the world watch this.

 

[1] Dobbs (2008), loc. 3879.

[2] Dr James S Cox, in Tyrell and Quiggin (2014).

[3] US Army (2013), p. I-6.

[4] John Foster Dulles, quoted in Rosendorf (2005), p. 73 (no original source given).  See Garthoff (1978) for the common fallacy of focusing only on capability, not intent (pp. 24-25).

[5] Heuer (1999), p. 111; Thompson, et al. (1984), p. 2-9.

[6] Herman (1996), chapter 4 provides a good overview.

[7] See Evangelista (1997).

[8] Leffler (1984), pp. 348-349.

[9] See Evangelista (1982), p. 114.

[10] CIA (1948), p. 2

[11] Garthoff (1990), p. 96.  Also see Schwartz (1983), pp. 17-18; Evangelista (1982), pp. 111-112.

[12] See CIA (1955), p. 51, table 2; CIA (1957), p. 29; Gaddis and Nitze (1980), p. 179; Garthoff (1990), p. 99.

[13] See Valero (2000).

[14] Evangelista (1982), pp. 135-156; Renshon (2009), pp. 124-125; Nitze (1950); Donovan and Ferrell (1996), ch. 15.

[15] Heuer (1999), pp. 147-152; Garthoff (1990), p. 104.

[16] Renshon (2009), p. 126.

[17] Rear Admiral Stevens, quoted in Joyce (1951).

[18] Lincoln (1952), pp. 440, 450.  Also Stevens, quoted in Joyce (1951): ‘The seriousness of an under-estimate is obvious.’

[19] See Renshon (2009), pp. 122-123.

[20] Freedman (1986); Jervis (1978).  Also see Garthoff (1978), pp. 22-24.

A full bibliography will be published at the end of Part 3.

Lawrence Freedman gets it

Lawrence Freedman was a significant influence on me when I was doing my Masters degree – and we are clearly absolutely aligned on the limitations of assuming that there are easy lessons to be taken from the military to the corporate world.  What this blog is trying to do is to demonstrate that the lessons should go both ways, and that the military should strive to learn from the private sector.

“(T)he differences between business and war are profound, which is why business should treat military metaphors with care – especially if they are taken too seriously, turning every conflict into some pitiless, zero-sum fight to the finish.” (From ‘Dead Generals are not always the best business advisors‘).

How can leaders develop resilience in their followers or teams?

I recently had to do a short essay on developing resilience in followers or teams – it is not particularly in line with the core purpose of this blog, but might be some useful food for thought nonetheless…

 

How can leaders develop resilience in their followers or teams?

Leaders have responsibility for people under them, or the output of these people; a follower is one of these people; and a team is a collection of followers which may or may not have additional levels of leadership within it.  “Resilience” is a quality that enables something or someone to return to the shape that it previously had after enduring a stressor or failure. Leaders are faced with multiple challenges, one of which is often setting the conditions that enable followers to be resilient enough to recover from failure. Two symbiotic elements must be established to enable this recovery: the right culture, and the right processes. Responsibility for this lies with the leader.

“Culture” is difficult to define – it is intangible, and metrics that indicate progress are largely subjective – but it is nevertheless driven by the leader.  He or she[1] must establish a culture where people are comfortable trying and failing.  Indeed, in some industries he should encourage “failing fast”, and this demands openness, honesty, and trust amongst followers and leaders.

The right culture must underpin the right process of learning, where failures and subsequent root-cause analysis – asking questions such as “Why did the failure happen?” and “So what?” – can enable the implementation of procedures that prevent the failure happening again; Syed’s Blackbox Thinking provides a good model.  Importantly, this Lessons-Learned event should be broadcast widely, and the leader himself should be exposed to it.

Implemented well a leader can use this tool to take his team beyond resilience, ideally stretching them until they are closer to Taleb’s Antifragile.  Resilience is admirable, but only brings people back to where they were. Robustness merely prevents challenges having any effect.  Antifragility acknowledges that some failures are beyond the control of an organisation – Clausewitzian friction does not simply exist on the battlefield – and allows followers and teams to be better positioned after a failure.

However, whilst there must be some degree of tolerating (and even encouraging) failure, there must also be some degree of removing the relentlessly fragile; those people that are unable to recover.  Not only is the judgement of where this balance lies a key role of the leader, responsibility for implementation of it lies with the leader. This is a real challenge; encouraging the right culture and enabling the aforementioned root-cause analysis while avoiding negative blame is ferociously difficult and demands buy-in from across the followers.  If done right, and if sufficient attempts to learn lessons and improve the resilience (or, even better, the antifragility) of a follower, have not borne fruit, then that individual may be better suited elsewhere.

This requirement is underpinned by the dichotomous challenge that a leader faces and must recognise – there is not necessarily alignment between resilience in followers and resilience in teams.  Although the two are not mutually exclusive, a team may become collectively more resilient by losing some people.  Goldman Sachs and GE are both examples of organisations that trim their bottom 10%; it is not a concept without precedence. If it feels uncomfortable, it should do.  Good leaders understand that the right decisions are often the hardest. However, by retaining a firm understanding of what the end state for the organisation is – and it could be anything from shareholder revenue to a happy and comfortable workforce – a leader is able to understand where the balance lies. By developing the right culture and process, and retaining this strategic vision, a leader can take his team and followers to resilience… and beyond.

[1] Henceforth simply “he” for simplicity.

Disruption and Insurgencies – Part 2 – So What?

So what? Whilst Part 1 of this article was an interesting comparison exercise, what can the military learn from the business world where, in some cases, traditional structures and organisations have had success against disruptors, and the Old Wars have given way to the New Wars?

Western militaries are in a very difficult position in the 21st century.  Let us agree with Rupert Smith that war will now only be fought amongst the people, which is the epitome of the counter-insurgency. There have traditionally been two ways that success has been achieved against insurgents (I am deliberately avoiding the word “winning”…).  Firstly, entrust one man with absolute military and civilian power, ask no questions about his methods, and give him a set period of time to achieve his goals, coming home when the mission is complete.  The example I like for this is Malaya, but a number of imperial actions in the 18th-20th centuries from a number of countries would also work.  The second way is to invest vast amounts of resource – time, blood, international political capital, treasure etc – into a campaign, and acknowledge that you will ultimately have to come to some sort of deal with the insurgents.  Examples here are the British government with the IRA, and the Colombian government with the FARC.  As an addendum this method also demands accepting that there will continue to be insurgent-like rumblings long after the agreement has been reached.

The first method is unachievable in the modern age.  Ubiquitous media and increased moral concern mean that no western military that attempted this would retain domestic support.  The second method demands a long-term view that is completely at odds with the short-term political cycle (4 year elections, 24 hour news etc) that politicians are driven by.  Businesses may have similar pressure from shareholders, but they are still far better placed to take a long-term view; Toyota is rumoured to have a 100 year strategy, and in 1988 Warren Buffet stated that Berkshire Hathaway’s ‘favorite holding position is forever’.  The beauty of a long-term view is that, like an investment portfolio, there is more scope to take risk in the short-term as it will likely be balanced out in the long-term. The myopic and risk-averse nature of modern society – Luttwak’s ‘post-heroic society’ – has made it ferociously difficult for the military to take these kind of risks, especially in campaigns where the linkage to domestic security is not as convincing as it could be.

So what lessons can the military take from the way that traditional business has dealt with disruptors – good and bad?

  1. Prepare for the long-term. This is one of the British principles of counter-insurgency, and it requires more than lip-service; General Richards openly stated that the Afghanistan campaign could take 40 years.  The Troubles in NI lasted a similarly long time. Take a lesson from Toyota.
  2. Recognise and learn from your opposition, and understand that although their arguments and actions may be uncomfortable to your sensibilities, it is likely that they are popular somewhere, and with some people. As part of Marriott and Starwood’s merger in 2016 a renewed focus on the kind of customer-focused delivery that had driven AirBnB’s success was developed.  Blockbuster, on the other hand, buried their heads in the sand…
  3. Be prepared to deal with your opposition. Sit down with them, talk about what success looks like for them, conduct a thorough cost-benefit analysis of your options (leaving no options off the table), and come up with your plan. Market leaders understand what disruptors are doing, and are often happy to seek to acquire them in order to take their market share, get access to proprietary technology, or simply to put it all off-limits to their competition.
  4. Build on your strengths. Despite the success stories of disruptors and insurgents, these are inevitably in part enhanced by Survivorship Bias.  The thousands(+) of organisations that have fallen by the wayside are forgotten.  Established companies and large western militaries have established economies of scale, market share, logistic channels, experience etc – core capabilities – that present a significant challenge to any organisation trying to enter the market or battlespace.  London Business School recently published a good piece on this here.

In summary, the comparisons between industry disruptors and insurgents are numerous – if potentially uncomfortable.  However, it is short-sighted to not try and learn from the experience of others, whatever the sector. Some of the success gained by examples in these two articles may provide some ideas as to how to win have success with disruptive adversaries.

 

Strategy+Business presents some more ideas, with a focus on digital disruptors, here.

Disruption and Insurgencies – Part 1 – A Comparison

Discussion about the influence of disruptors is popular.  CNN’s 2017 list of 50 identifies 31 unicorns[1], a total of $44 billion in VC, and a market value of $239 billion.

But this post isn’t just about disruptors.  It is the parallels between disruptors and insurgencies that interests me – and the So What?  Although the Afghanistan campaign was launched under the auspices of Article 5, counter-insurgency has been the driving force for NATO’s raison d’etre since 9/11 (although rumblings from the near east in the short-medium term, and the potential of the Far East in the long term have provided some recent temperance).

I am not comparing Uber, AirBnB, Netflix etc with insurgents!  But their methodologies are similar.  Insurgencies are predicated on offering citizens of the space that they operate in alternate products – this could be in the form of shadow governance, moral leadership, and justice.  These alternate products would have no value if they weren’t needed – in the parts of Afghanistan that the government does not control many locals appreciate the ability of an organisation to come and settle disputes (a judiciary), deal with criminals (a police force), provide education (madrasses), and so on.

Disruptors do the same thing – although often they often do so in Blue Ocean space. Uber’s success was driven by frustration with cartel-esque pre-GPS practices of taxi-drivers; AirBnB’s by providing a personal experience that is so often absent from chain hotels (how many hotels have generic centralised websites which facelessly manage all their bookings?); Udacity’s by enabling the attainment of relatively cheap and recognised education qualifications to support increasing demands by employers for skills that are being offered with dubious quality with opaque pricing arrangements by universities.

I find real parallels in the way that disruptors and insurgents are funded.  Both have embraced alternate methodologies that sit outside of traditional means.  Both use cryptocurrencies –  disruptors are often spurred on by the innovative and ground-breaking nature of their founders to enhance their appeal to the type of customer that it wishes to attract; insurgents relish in the difficulty in tracing it. Both groups avoid cash.  Insurgents have a further method of money movement, making use of traditional hawalas that sit outside of government scrutiny.

External funding is similarly unconventional.  Many disruptors have developed from Kickstarter campaigns and venture capitalist investors; insurgents are often funded by the illicit drug trade.  Both types of organisations receive income from wealthy individuals.  Insurgents receive additional funding from supportive states; some disruptors from established companies.  In all cases these are far removed from the traditional methods of raising capital for a company.  But in the same way that insurgents often eventually come to the negotiating table and accept some traditional ways of doing business, many disruptors do eventually decide to float, or get acquired by established businesses.  By this time, however, the disruption has been caused.

Further similarities can be found in the leadership of both groups.  The leaders of both elements are often inspirational and held in high reverence by followers, whilst at the same time their behaviour can be morally questionable (see Uber…). Both types of group seek to increase their customer base, often through well-concentrated and planned public relations exercises. Disruptors want to increase their market share, whilst insurgents will attempt to gain everything from popular support to more territory.

In sum the parallels are clear, and in Part 2 I will look at what militaries can learn from how businesses have dealt with this challenge.

Summary of key comparisons between industry disruptors and insurgents.
Summary of key comparisons between industry disruptors and insurgents.

 

[1] A start-up company with a value of over $1 billion (Investopedia).