The Strategist

Loser alert - bankers armed and, err, dangerous

Alice Schroeder on Wall Street bankers taking up arms...

"The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank."

Snort. The only things these losers are likely to shoot are their own fat arses.

"Strike with chaos" - who's the best translator of Sun-tzu?

So, you haven't read Sun-tzu's The Art of War, but you'd like to. Trouble is, which translation?

I've got two translations of this ancient Chinese classic on warfare and strategy. One is by Thomas Cleary, published by Shambhala in 1988. The other is by John Minford, published by Penguin in 2003.

Cleary's translation is a dog. It is long-winded. It is dull. Avoid it.

Minford's translation is superb. It is crisp. It is poetic. Buy it - either the 2003 edition, or the Penguin Great Ideas version which is small, slim and easy to carry around. If you're a soldier, tuck it into a trouser leg pocket. If you're a suit, carry it inside your jacket.

Payoff? Next time you have to endure a business presentation or a brainstorming session, sit at the back of the room, ignore the powerpoint rangers and facilitators, pull out Minford's Sun-tzu and read him instead.

Here's how Cleary translates a passage in the first part of The Art of War: 

Draw them in with the prospect of gain,
Take them by confusion.

And this is how Minford renders the same passage:

Lure with bait
Strike with chaos.

"Strike with chaos". When I read this, I think of Caesar striking south from the Rubicon with the XIII Legion, driving Pompey to Greece, Pharsalus and destruction. Of the Mongols scything through Russia and Europe from 1238 to 1241. And of Jason Bourne, striking fear into the dark hearts of renegade CIA operatives in "The Bourne Ultimatum".

I won't labour the point. Minford's translation sings. It makes the study of war and strategy come alive. Cleary makes me yawn.

Was the Lockerbie bomber set free in a squalid oil deal?

A seedy angle on the release of the Lockerbie bomber is emerging. It sounds like the UK government agreed to set free Abdelbaset al-Megrahi as part of a deal allowing oil majors BP and Shell to tap Libyan oil reserves.

Here's what the Times has to say:

"The strong circumstantial evidence is that a lucrative agreement to allow BP to explore for oil off the Libyan coast was being held up by Mr Megrahi’s exemption from the prisoner transfer programme. The idea that the Westminster government had no view and no influence is not credible."

And the Guardian:

"...ministers and senior civil servants met Shell to discuss the company's oil interests in Libya on at least 11 occasions and perhaps as many as 26 times in less than four years....

The revelations, showing that the government invested large amounts of political capital in securing North African oil, lend weight to claims that commercial interest lay behind last week's decision to release the Lockerbie bomber...from jail in Scotland to receive a hero's welcome in Libya."

Big picture implications?

Once again a democratically elected government seems to have allowed itself to be used as a tool to further the business interests of a coterie of very rich people. The close links between the UK government and Big Oil cast real doubt on Whitehall's commitment to negotiating an effective global climate change treaty at Copenhagen in December. And as long as people like this "run the show", the UK government will never grapple seriously with big concerns like peak oil, resource depletion, and the need to make a transition to a low carbon economy.

The ideal recruits are "all terrain vehicles"

If I was a budding lawyer, I'd want to work for a law firm that has a graduate pitch like this:

"We encourage students of all disciplines to apply....A commitment to a career in law is essential, but a degree in law is not."

"We expect you to have a life outside work, both before and after you join us....Our clients are interesting entrepreneurial people who want advice from imaginative lawyers with a broad range of skills and experience. Enthusiasm, commercial flair and a sense of humour are essential qualities..." Holman Fenwick Willan, "Growing potential: graduate recruitment 2009".

In my experience, many companies and government departments look for recruits from a narrow set of disciplines - law, commerce, business studies, management. There's no understanding of the value that that a graduate with a good degree in history, classics and philosophy can bring to a job, in terms of ability to think, to imagine, and to empathize with people from different walks of life and cultures.

I've come across recruiters who are only interested in work experience and qualifications. They couldn't give a rat's arse about the things people do outside work. But the questions that you ask potential recruits about their lives - what books they read, what interests they have, where they come from, what they want to do with their lives - and the answers you get, will tell you a lot about their characters.

A psychologist I know describes good recruits as "all terrain vehicles". What I think he means is that good recruits are smart, inquisitive, personable and open-minded. They're people who adapt swiftly to new or changing situations, and who like grappling with problems and coming up with solutions.

I agree with him on this. But I also look for people who are quiet, composed and thoughtful, who have an intuitive sense of how to motivte others, who roll with the punches, and who thrive in situations of change and uncertainty.

Insurance for ships in Somali waters

Introductory note: I'm researching companies that are profitting from Somali piracy.

If you're a shipowner and your ships are sailing through the pirate-infested waters of the Horn of Africa, what sort of marine and specialist insurance cover will you be carrying?

• Hull insurance covers the ship, while cargo insurance covers the goods and commodities that the ship carries.

• War risk covers a ship for damage while sailing through a war zone (which Hull doesn't cover). There are two main types: war risk liability, which covers people and items inside the ship, and war risk hull, which covers the ship itself.

• Protection and indemnity ("P&I") insures the shipowner against third party liabilities and expenses that may come from owning or operating ships, e.g., collisions with other ships, claims from injured crew.

• Kidnap and ransom ("K&R") covers the cost of dealing with a pirate hijacking - it indemnifies the assured for ransoms, and pays for crisis response, hostage negotiations, ransom drops, legal advice and so on. Traditional cover meets the price of ransom but not the extra costs - a ransom will be around 25 - 30% of the total cost of dealing with a pirate attack.

Hiscox is a leading K&R insurer. It claims to write about two-thirds of global K&R policies. Hiscox retains private security corporation Control Risks to provide its K&R clients with crisis response services if their ships are hijacked by pirates.

London-based Control Risks was founded in 1975, initially as a subsidiary of an insurance broker. It's one of the world's biggest private security corporations, with maritime security but one of its business activities.

As well as crisis response, which can include negotiating with pirates and ransom drops, Control Risks assesses risk for shipowners and advises on voyage planning and counter-piracy measures. It can provide shipboard security teams and monitoring and operational support while vessels are sailing through pirate waters.

The profiteers: companies making money from Somali piracy

Who are the western companies that are profiting from Somali piracy? And how do they make their money?

I'm researching these questions for an article. So far I've identified an assortment of companies that are engaged in security activities relating to Somali piracy and hostage-taking in the Gulf of Aden and the Indian Ocean.

Generally speaking, these companies are involved in one or more of the following activities:

• Security for ships: private security companies, like Hart and Secopex, provide guards and non-lethal weapons on ships, training for crews in piracy countermeasures, and advice to shipowners on operational security and risk management.

• Crisis management: London-based law firms, like Holman Fenwick Willan, coordinate responses to hostage-taking on behalf of shipping clients. They engage specialist companies, such as Control Risks, to manage crises, conduct negotiations with pirates, and carry out ransom drops. Law firms also provide shipowners with legal advice, e.g., on the legality of paying ransoms. 

• Marine insurance: companies like Cooper Gay write kidnap and ransom ("K&R") policies for shippers. Hiscox also provides shippers with crisis management teams. In 2008, Swinglehurst Ltd teamed with Hart to provide shippers with war risk cover (including piracy risks) for vessels protected by Hart personnel transiting the Gulf of Aden.

• Intelligence, analysis and monitoring: companies such as Dryad Maritime Intelligence provide piracy threat assessments to shippers. The ICC International Maritime Bureau runs a 24-hour Piracy Reporting Centre in Kuala Lumpur.

As the maritime capital of the world, London is the hub for most of this activity. Collaboration between companies appears commonplace. Gulf of Aden security work seems to be dominated by British firms, but American companies, like Xe (formerly known as Blackwater) and Hollowpoint, are getting in on the action.

Piracy as a business opportunity

Fancy setting up as a pirate? In "Cutthroat capitalism", Scott Carney outlines the economics and business model of Somali piracy...

"Most of Somalia's modern-day pirates are fishermen who traded nets for guns. They've learned that ransom is more profitable than robbery, and rather than squandering their loot, they reinvest in equipment and training. Today, no ship is safe within several hundred miles of the Somali coast."

Somali piracy seems to involve a cosy and lucrative arrangement where most of the parties - pirates, their financiers, insurers and private security contractors - can make loads of money.

Meanwhile taxpayers are hit with the cost of maintaining maritime forces in the area. The threat of naval intervention is an important element in the ransom process, but are the shipping insurers and security contractors paying the taxpayers their dues or getting a free ride? I suspect the latter - it's the good old public cost, private profit equation.

Secondly, if piracy is so lucrative, how come people elsewhere aren't getting into it as well? Is Somali piracy the start of a global trend? Or is there a combination of factors - like high shipping volumes, narrow waterways, secure bases for illegal operations (Somalia), skilled manpower (expert seafarers and gunmen), and many ways to make money - that make piracy around the Horn of Africa a uniquely profitable situation?

Cool Somali pirate game to play

It's cool computer game time. Check out "Cutthroat Capitalism" at Wired...

"You are a pirate commander staked with $50,000 from local tribal leaders and other investors. Your job is to guide your pirate crew through raids in and around the Gulf of Aden, attack and capture a ship, and successfully negotiate a ransom."

Caught my eye - freelance hackers and puppet stooges

Some blog posts and articles that caught my eye this week...

• China plans to use its massive foreign exchange reserves to snap up overseas natural and energy resources.

• David Rondfeldt blogs about collaborative communities as a way of organizing for cyber security.

• Desertec is one step closer to generating electricity from sunlight falling on North African deserts.
  

• Dark Visitor notes a poll of China's netizens: asked which criminal job they'd prefer, most chose freelance hacker over human trafficker, assassin, drug dealer, gambler, gang leader, spy and robber.

• On the 56th anniversary of the great Fatherland Liberation War, a North Korean war hero recalls the defeat of the US imperialist aggressors and their puppet stooges.

Cyber saboteurs emerge from the shadows

OK, so I've been rather sceptical about North Korea's cyber warfare capabilities. It's a tad hard to square news of elite cyber saboteurs with this crappy DPRK government website. But maybe I was wrong.

Over the weekend, North Korean-linked hackers carried out distributed denial-of-service (DDOS) attacks against US and South Korean government and commercial websites.The websites targeted included those of the US Secret Service and the White House, the New York Stock Exchange, and South Korea's Defense Ministry and National Assembly.

Tim Stevens, who blogs at ubiwar, was quoted as saying that "this type of 'denial of service' attack was designed to disrupt rather than penetrate a system to obtain data". Opinion varies about the scale and sophistication of the attacks. The Guardian described it as "a paralysing barrage of electronic cyber attacks", but this article claimed that the attacks were relatively unsophisticated and small-scale, involving 50,000 to 65,000 computers.

Another thing I've been sceptical about is the effectiveness of DDOS attacks. What's the big deal if a couple of websites are down for a day or two, right? But according to the Technology Liberation Front...

"The only real cost of an attack such as this one is writing an effective bit of malware that can spread itself around, compromise tens of thousands of machines, and allow an attacker to call on this army of unwilling silicon conscripts whenever it wishes.  When viewed from the hundred-billion-dollar heights of nation-state budgets, this cost is essentially zero....

DDOS attacks are a cheap (hijacking is free), relatively hard to trace, and very effective way for a state or non-state actor to inflict meaningful economic losses on others."

Banks and companies carry out a lot of business via their websites. Increasingly, government departments are delivering core services through their web portals, like getting people to apply online for welfare benefits and grants. Even temporary disruptions can inflict big costs on businesses, departments and customers alike. This is a pretty good return on investment for hackers.

Cops for hire: the rise of private police

If you're looking for a solid long-term investment, buying shares in private security companies might be the way to go. As this ISN Security Watch article (h/t AE) suggests, private police forces are on the rise in the US:

"Policing some of the most dangerous US cities has quickly become the newest line of business for many of these [private security] companies which have already replaced police officers in cities from Portland to Baltimore....

Cities are turning to the private sector for a variety of reasons. Some local and state governments are under pressure from budget deficits and are often convinced that privatized industries are more cost-effective than state agencies and bureaucracies. Other cities have an already overstretched force that cannot respond to increases in crime, so private contractors are seen as a quick fix and an easy force multiplier."

While I wouldn't want to see them policing my community, I'm not going to get too precious about private security companies. In many places, not just the US, private police forces are here to stay and have their uses.

And if you live in places like Johannesburg or Lagos, where the local cops are corrupt, incompetent and never around when needed, then private security companies may be your only protection. If you can afford them, of course. And if they aren't already on the payroll of the local crime lord.

Rise of the eco-skyscraper

Who'd have thought that skyscrapers, that symbol of rampant capitalism, would go green? It's like someone ripping out the guts of a Hummer and dropping in a poncy electric motor.

Chicago's Sears Tower is getting a green makeover. It will be retrofitted with solar panels and wind turbines, upgraded wall and window insulation and water systems, advanced lighting, fuel cell boiler plants, and energy efficient elevators.

The owners claim that the retrofit will lead to "unparalleled energy savings and reduced CO2 emissions...reducing the base building electricity use by up to 80 percent".

Meanwhile in Guangzhou, the Pearl River Tower is being hyped as the most energy efficient superskyscraper ever. When finished in 2010, the tower will have wind turbines, sun shields, solar panels, smart lighting and water-cooled ceilings. It's designed to use half the energy of similar sized buildings.

Of the two strategies - retrofitting an existing skyscraper or building a new one - I'd argue that retrofitting is the way to go. If you've got an existing structure, it makes sense to kit it out with the latest green technology.

A new structure may use less energy and emit less CO2 than a retrofit (because it was designed that way at the start). But you have to factor in the vast amount of energy that is used and the CO2 that is emitted in the manufacture and transport of building materials and the construction. And the building will still use extra energy which has to be generated somehow, probably through burning coal.

So while it's cool to see green design and technology coming to the fore, it's a shame that this is being wasted on monstrosities like skyscrapers, rather than making 21st century cities green, liveable and energy efficient.

And yes, call me a cynic, but we have to be mindful of "eco-skyscrapers" as another form of greenwashing, designed to give corporate owners and tenants a veneer of environmental respectability. Like Okhta Tower in St Petersburg, the fancy new head office of Russian gas corporation Gazprom.

Change is constant, except for cars

I grew up in the 1970s. Aside from Stars Wars, the Stranglers and the threat of nuclear holocaust, I remember the '70s as a time when earth-shattering technological advances seemed just around the corner. Perhaps I read and watched too much sci-fi, but undersea cities, space colonies on Mars and contact with aliens by the year 2000 sounded very plausible.

While we're still earthbound, technological breakthroughs in communications, materials, fabrics, energy, medicine and so on have drastically changed our lives. But what I find weird is that cars haven't really changed in the last 40 years or so.

The other night I saw a TV ad for a new range of cars. These cars were said to be the "latest in automotive design". By "latest" they meant styling, comfort, entertainment - everything that is cosmetic about a car. It might also, if you're lucky, mean greater fuel efficiency. But the fundamental aspect of the car - its internal combustion engine - remains the same, decade after decade. We're told that electric and fuel-cell cars are just around the corner, but that line's well-worn. 

Why do cars stay the same? Is it because auto-designers are lazy? Or because there's a conspiracy on the part of auto-makers and oil corporations? Or because of gargantuan sunk costs (our economies, livelihoods and lifestyles are based around the car, and to retool would be phenomenally expensive)? Or simply because the internal combustion engine, for all the problems it causes, is an incredibly effective piece of kit and for that reason is enduring and hard to beat?

The last two reasons go a long way to explaining why, in the absence of a deep shock to oil supply, shifting transport to a low carbon pathway is going to be damned hard. For example, any practical alternative to the internal combustion engine has to match it on ease of use and effectiveness.

You'd also want to make sure that a new engine design didn't replicate the environmental problems of the old one (carbon dioxide emissions caused by burning fossil fuels). This is a big problem for electric cars. It's a cool idea to charge them from the grid, but it's not so cool if the extra electricity is generated by coal-burning power stations.

Car-free communities and climate criminals

Here's some things that caught my eye this week...

• A car-free community in Germany...

• Brand new suburban homes being demolished in the US...

• Global warming forces Carteret Islanders to abandon their homes...

It's ironic, and tragic, that the car-free Carteret Islanders have to flee their ancestral islands because of the greed of these climate criminals.

Sunday morning reflection - on "experts"

"Fossilized Wall Street", photo Johnzo Washington

They're at it again. Experts, brimming with confidence, no doubt wearing ties, telling us to place our lives and savings in their hands. In this case predictions that the worst of the global recession has passed and that a bull market in stocks is about to take off...

Anthony Bolton, a respected financial adviser and stock-picker in London, predicted: “All the things are in place for the bear market to have ended . . . If you wait for things to get better, you’ll miss the rally.”

David Schwartz, a prominent stock market historian, said that lessons from the past century of share price ups and downs pointed decisively to a new bull market. “History says fill your boots, sell your wife, dive in."

About a decade ago I was burned with an investment in tech stocks. One thing I took out of that was never trust the financial "experts", especially when they're confidently forecasting good times ahead. Either I make up my own mind, based on my own research and analysis, or I leave well alone. (And to be honest, I've got more interesting things to do than research stocks.) As a result, I'm not rich, and I'm not poor. And I've never had to anguish about losing my home and jeopardizing my family's security.

So, Andrew Bolton and David Schwartz, you could well be right. Or you could be spectacularly wrong. No matter - as far as I'm concerned you can take your advice and stick it in a place where the sun don't shine...

Big Oil gives a rat's arse about climate change

Avaaz via Global Dashboard

China - getting ahead of the game

In January 2007 I wrote that "China's unquenchable thirst for oil will lead to a clash of interests with the West....If western nations were smart, they would change the game by switching to new energy sources and technologies - the way of the future - rather than fight over a rapidly declining energy source."

In a fascinating twist, it's now China, rather than the west, that's trying to "change the game" with an aggressive move into clean transportation: the manufacturing and use of electric and hybrid vehicles (cars, buses, scooters).

As Jonathan Watts points out, this seems part of a deeper strategy:

"the science and technology minister, Wan Gang, said the country aimed to come out of the economic downturn greener and more advanced than it went in. 'Accompanying every financial crisis is a revolution in technology that serves as an engine for economic development. This time, new energy technology will probably be the new driving force.'"

China is already a big player in solar and wind power. If China matches growing technological prowess with its cheap production costs and a massive internal market, it could become a global power in the production and use of green technology.

This would this enable China to gain a crucial hold in key industries of the future. It would help clean up a heavily polluted environment. And it would lessen a dangerous strategic vulnerability: China's dependence on foreign oil which must be imported along sea lanes controlled by the US Navy and other competitors, like India and Japan.

Bring back the boring old bankers

Today on the radio I heard some London wanker banker opining about how people need to remember that "money makes the world go round".

"Fuck off" was my instant reaction, and then "Is it 1789 yet?" Then I read this Global Dashboard post on ideas to rein in rock star bankers:

"Cable basically suggested a two-tier banking system: some retail banks would be considered crucial to the payment system and the economy, and thus ‘too big to fail’. They would be managed like electricity utilities, with very strict regulation, and owned, he suggested, through some form of public-private partnership, or as mutuals.

Any other financial players would be treated like hedge funds, and ‘would have no claim on tax-payers’ money should they fail’."

I'm not exactly a whining old fart banging on about the 'good old days', but I do like the idea of bankers being boring old sods.

Signs of the times: exports plunge

Free Exchange on the collapse in world trade:

"Argentina's exports were down 35.8%. Canada's were off 34.6%. Chile's by 41.3%. China's were down 17.5%. Ecuador's fell by 47%. Germany's by 28.7%. France's by 30.7%. India's by 15.9%. South Korea's by 32.8%. Malaysia's by 35.3%, etc. I could go on....

For this year, the WTO is forecasting a 9% drop [in global trade] - a lot bigger than the 2% drop the World Bank was forecasting back in December."

Friday linkfest

• Not exactly happy hour, but here's John Robb's testimony to the US Congressional House Armed Services Committee: "Threats to US security in the early 21st century". Whenever I read John's work I feel the need to drink whisky, lots of whisky.

• Free Exchange flags Beijing's drive to become a global leader in the production of electric cars. Another nail in Detroit's coffin?

• Friday night music: one of my favourite classical pieces, the Preobrazhensky March. Good stirring stuff!

Some things I learnt at Kiwi Foo

I was at Kiwi Foo Camp 09 over the weekend, among a group of technologists, inventors, entrepreneurs, designers, media people, bloggers, advocates and many others. Here are some compelling ideas that I came across in seminars and discussions:

• Economy - with the global credit crunch and diminishing natural resources, people will be crying out for technology that helps them do things cheaper, faster and more efficiently.

• Community participation - Thinksmall, an online platform which aims to encourage New Zealanders to debate and develop solutions to issues that are vexing them. The platform is pitched at national issues, but could be used by communities as a tool for discussing and organizing on local concerns - anything from rates hikes and vandalism to local government spending on costly "legacy" projects (e.g., new stadiums).

• Microfinancing - P2P (peer to peer) lending systems, where investors can lend directly to people who want money (e.g., for a business start-up, to buy a house) and choose different types of risk to suit their lending approaches.

• Sustainable living in cities - I've written before about the "inner urban wasteland" - vacant lots, grassed road verges, backyards, old industrial sites, bare rooftops - and how we could productively use these spaces, e.g., for growing food and generating energy. At a session on sustainable living, one of the participants suggested growing fruit and nut trees on road verges, thereby providing food, shade and soaking up carbon dioxide.

• People with disabilities - encouraging government, business and communities to actively tap the skills and expertise of disabled people, rather than treating them as a drain on the public purse. This is one aspect of developing a resilient society and economy.

I'll be writing more about these interesting ideas - and others - over the next couple of weeks.

Thank heavens I flunked Econ 101...

I did economics at high school, enjoyed it, and got good marks in the subject. Different story at university. I was put off economics, mainly because I'm not much chop at mathematics. For a maths ignoramus there didn't seem to be a future in the subject beyond the first semester of Econ 101.

But if Anatole Kaletsky is right, this was probably a lucky break...

"One reason why such fruitful [non-mathematical] insights have been ignored is the convention adopted by academic economists some 30 years ago that all serious ideas must be expressed in equations, not words. By this weird standard, the intellectual giants of the subject — Adam Smith, Ricardo, Keynes, Hayek — would not now be recognised as serious economists at all."

Kaletsky argues that mainstream economics has been discredited by the events of the global financial crisis. (He's not the only one saying this, and people like Nicholas Nassim Taleb - author of The Black Swan - were making similar arguments well before the crisis.) His article outlines the ideas of unorthodox thinkers - like Benoît Mandelbrot and George Soros - and explains why their ideas should be heeded.

Executive Outcomes founder starts a blog

These days even ex-mercenaries are writing blogs.

In 1989, Eeben Barlow, a former South African special forces officer, founded Executive Outcomes, a mercenary company. Executive Outcomes operated mainly in Africa in the 1990s, fighting in Angola and Sierra Leone. Disbanded in 1998, the company gained a reputation as a highly effective private military force.

Now Barlow is working as a consultant and blogging* about military and security matters. Check out his blog, especially this post which suggests ways that companies can fight criminal gangs that are preying on their activities. (I assume that Barlow is talking about places like South Africa, where crime is rampant and the police are often ineffective and corrupt.)

He has good advice about how companies should handle contracts with security firms:

"Do they usually know anything about the company providing their security? Have they made the security company liable for any burglary, theft or other losses they may suffer while under their watch? Are security companies given a time-line in which to perform adequately and resolve the crime issues within a company?"

Barlow suggests that to combat organized crime, large companies should develop their own in-house intelligence collection and assessment capabilities, and the means to counter criminal activities.

* h/t Zenpundit

Clausewitz, "On War", Book 4: keep it simple stupid

This post is part of the Clausewitz roundtable, an exploration of the ideas of Prussian military thinker Carl von Clausewitz as set out in his classic work On War.

I've got no idea who coined the phrase "keep it simple stupid" (KISS). If anyone can enlighten me, go right ahead. Reading book 4 of On War, which deals with battle, it's clear that in this respect, as in others, Clausewitz was well ahead of his time. In chapter 3, Clausewitz emphasizes the need for simplicity in planning and execution:

"rather than try to outbid the enemy with complicated schemes, one should, on the contrary, try to outdo him in simplicity".

Clausewitz's reasoning is clear. In war, planning and executing a complex attack takes time (and, incidentally, increases the opportunities for friction). You run the risk that the enemy will act quicker than you, using a simpler attack to seize the advantage and wreck your grand designs...

"an active, courageous, and resolute adversary will not leave us time for long-range intricate schemes....this is proof enough of the superiority of the simple and direct over the complex."

Critics might argue that this is a recipe for disaster, that it led to World War One frontal attacks against entrenched machine guns and artillery. (Didn't British theorist Basil Liddell Hart slam Clausewitz in part on these grounds?) In fact, the bloodbaths on the western front bear out the wisdom of Clausewitz's remarks, as each offensive was meticulously orchestrated over many months, with intentions telegraphed well in advance to the defenders.

What I take from Clausewitz is that if you want to defeat a thinking opponent, you can't hang about - you have to act quickly and decisively even when the circumstances are less than ideal. Think simplicity, speed and shock.

This approach doesn't just apply to war. We can all think of sports teams that beat their more fancied rivals, because they played it smart, simple and "up the middle". Or businesses which made a killing because they got an inferior product to market faster than their competitors, who were still farting about with their fancy-pants design.

'Shaping the post-crisis world"

Over the last few days the world's top brains were at Davos for the annual World Economic Forum. This year the forum was modestly called "shaping the post-crisis world".

If you thought that the assembled politicians, business leaders, intellectuals and journalists might've come up with some bright ideas for saving us from economic calamity, then think again. Here's Jeff Jarvis' take on Davos:

"I’m talking with other people who are getting more depressed as the day goes on and here, I think, is why: We are surrounded by the leaders who fucked it up: bankers, marketeers, regulators, and the press. They were in charge. That’s what Davos is: the people in charge. So who’s to say that we’re going to find the answers in Davos? Well, the people in Davos will. But I think the evidence is strong that the answer is not here."

Having just read the final media release from Davos, I can see what Jarvis is getting at. The forum concluded that...

"[world] leaders must continue to develop a swift and coordinated policy response to the most serious global recession since the 1930s: global challenges demand global solutions."

Yep, it doesn't take a rocket scientist to work that out.

What can a dead Prussian teach us about leadership?

Adam Elkus has written about the thinking of Helmuth von Moltke the Elder, the German general and strategist of the 19th century. This comment about the leadership principle known as Auftragstaktik ("mission tactics") caught my eye:

The celebrated German system of "mission orders" was also something that Moltke pushed hard for. He correctly saw that talented subordinates, if properly trained and possessed of the right ethos, could achieve greater results if left to their own devices. Mission orders allowed them to carry out the objective in the manner they saw fit.

This stands in stark opposition to the extreme micromanagement that often prevails in the modern era, the worst example of which was President Johnson selecting bombing targets from the Oval Office during the Vietnam war.

There's a lesson in this for today's managers. "Here's where we have to get to," the best manager says to his staff. "Up to you how we get there". Trouble is, this kind of thinking is lost on many executives, who are control freaks, don't trust their staff, fear uncertainty, and see only risk not opportunity.

Adam's piece is another reminder that we can learn a lot about leadership, organization and strategy from classic military thinkers like Clausewitz, Sun-tzu and von Moltke.

Rave against the cloud

Goaded by Jason Scott's rave against cloud computing (via Nat Torkington at O'Reilly Radar) I've started archiving all posts from The Strategist. I began with the Afghanistan posts, and discovered that since 11.59am on 10 January 2007 (zero hour for this blog) I've written 42 posts comprising 10,483 words on the war.

Scott argues that if (a) you trust the cloud to look after what's valuable to you, like blog posts, photos, communications with friends, and (b) you don't pay for the service (i.e., have no contractual arrangement with the provider), then you're a fool.

Why? Because you have no control over how your information is stored. Because you have no comeback should things go wrong. And because a service you pay for is more likely to be provided by a reputable, sound and successful business than a service that's free. Of free web-based services Scott writes:

"Trust it like you would trust a guy pulling up in a van offering a sweet deal on electronics. Maybe you’ll make out, maybe you won’t. But he ain’t necessarily going to be there tomorrow."

There's another interesting idea in this. If a guy provides a web service that's free (like a blog hosting platform), would he be quicker to pull the plug on it, leaving your stuff to evaporate in the cloud, because he sees you as a freeloader, exploiting the sweat of his brow? Or because he thinks that as you don't pay for the service, you don't really value the stuff that you put into the cloud?

I should add, I have no problems on this score with Typepad, the blog platform for The Strategist. I pay money for the service (US $89.50 each year) and get good service and support. That said, as any strategist knows, it's always good to have a Plan B.

One of a kind in the global car yard

As the world recession deepens, global demand for new cars has plunged. For a stark illustration of this, take a look at these photos of unsold cars piling up at ports and storage areas.

Strange as it may seem, I like watching car ads on TV and trying to decode the hidden messages. The ads subtly suggest that having a new car will fulfill your deepest aspirations, such as freedom, excitement, sexual prowess, and status.

Another meme is uniqueness. Ads show owner and car alone on a open stretch of road, winding into remote hills, or arriving at a sweeping windswept beach as the sun sets over the glimmering sea. "You are one of a kind," the ads whisper seductively. "You stand out from the crowd. You are the elite".

TV car shows, like Jeremy Clarkson's Top Gear, do the same thing. Last night I watched an episode where the lads drove stylish convertibles around Scotland's Isle of Lewis - alone on open roads, rocky hillsides and desolate moors with the glimmering sea in the distance. There were no other cars around, no other people. Just the two lads, in their convertibles, the wind rustling their shampooed hair.

The photos of the unsold cars expose what a crock this meme is. Thousands upon thousands of 'unique' cars  - same colour, same make, same styling - lined up one after the other. So much for being one of a kind.

Europe's gas crisis is a timely reminder

What's the big lesson of the European gas crisis? That the Russians and the Ukrainians can't be trusted, right?

Not quite. The gas crisis is a timely reminder that our model of energy supply is inherently risky. Much of our gas and electricity is generated far from the point of demand, and transmitted over long distances along power cables and pipelines. These lines often cross national borders, rough terrain, and politically unstable regions.

The advantage of this model is that very large amounts of energy are generated. The disadvantage is that the pipelines and power lines are vulnerable to disruption, caused by political crises, commercial disputes, natural disasters, insurgent attacks, and equipment failures. Extortion is another risk: unscrupulous organizations - governments, monopolies, criminal gangs, insurgent forces - can control the flow of energy as it passes through their territories for political and financial gain.

The obvious solution is to "localize", as far as possible, energy supply, control demand for energy, and use it wisely. There are at least three ways of doing this:

• Utilize technologies that tap waste products in existing systems, e.g., using turbo expanders to harness released pressure in gas distribution networks, and generating biogas (methane) from sewerage and landfill.

• Use energy efficiency technologies, energy conservation measures, and building design to moderate demand for energy, and drastically improve our use, storage and saving of energy.
  

• Generate more electricity at or close to the point of demand, e.g., at wind, solar and geothermal plants near cities; solar panels and small turbines on roof-tops; and combined heat and power (CHP) engines.
  

Bugger all silver linings in sight

The Economist's Free Exchange blog has an alarming take on the latest US unemployment figures. The unemployment rate now stands at 7.2%. One in seven American workers are either out of work or forced to work part-time...

"The danger in such a rapid deterioration is in the feedback loops. Newly un- and underemployed workers will be forced to sharply cut back on spending, face default, or both. Previously solid mortgages may now enter default, placing pressure on recovering financial markets. And tipping points may loom — financial institutions may collapse, political support for protectionism (in America or elsewhere) may coalesce, and political stability abroad may crumble, adding to uncertainty."

As an aside, if you're interested in global economic news, Free Exchange is a good source of information and analysis. The posts are snappy and written in plain English.

Very cool, very clean

This is a very cool and clean energy idea - use small turbines inside natural gas distribution networks to tap released pressure and generate electricity. Called turbo expanders, each device can generate 1MW of electricity.

• Bonus: combined heat and power engines can be added, generating electricity and heat.

• Double bonus: releasing gas pressure causes a sudden drop in temperature. This could be harnessed to replace refrigeration units and air conditioning.

I'm with Eliot Spitzer when he calls for Obama's economic stimulus package to partly fund transformative energy initiatives (the same point can be made for the stimulus packages of other governments). A little investment in smart energy technologies, like turbo expanders, will go a long way to kick-starting a clean energy economy.

Grim times for the auto industry

I've caught up with some grim economic news for the global automotive industry. Here's a taste of it...

• In December, US auto sales plunged by 36%. Similar trends were seen in Europe and Asia during the second half of 2008.

• Toyota is suspending production at all 12 of its Japanese plants for eleven days in February and March. It's also laying-off large numbers of temporary staff.

• Third quarter orders for Volvo trucks in Europe fell from 41,970 in 2007 to 115 in 2008.

115!

The knock-on effects of these kinds of figures are huge. And damned scary if you think about it for a minute or two.

Around the world, so many people work for auto manufacturers or for the myriad businesses, large and small, that are connected with the manufacture, sale, running, servicing and accessorizing of vehicles. A sustained slump in auto-making means big job losses and many business failures.

It also means plunging demand for other goods and services, as people who are laid off or have their hours cut back stop spending on all but the bare essentials. Now is not a good time to own a restaurant or work in a record store.

Manufacturing trouble in China

Factory workers in Dongguan, China (photo: Marie Havens).

2008 really did seem like China's year. Beijing kept a lid on unrest in Tibet and Xinjiang, mounted an effective rescue effort after the Sichuan earthquake, and staged the highly successful Beijing Olympics. Cue a rash of media articles and blog posts about China's powerhouse economy and its relentless rise as a global power.

But in the last month or so, China's economic prospects have nose-dived. As the world recession bites, and consumer spending in western and Asian economies plummets, China's exports are falling and economic growth has slowed drastically. Furthermore, the Times reports that...

"China’s vast manufacturing sector, the driving force behind the country’s celebrated economic growth story, is on the brink of technical recession as order books run dry and once humming factories fall silent."

Conventional wisdom has it that the Chinese Communist Party (CCP) depends on economic growth, plenty of jobs and rising prosperity to keep the population quiet and contented. Let the economy contract and - boom! - popular unrest could topple the CCP.

Keep in mind, though, that the CCP has been in power since 1949, has weathered many crises, and has a pervasive political and security apparatus. I don't think that the CCP's grip is threatened, yet. But this year it will be interesting to watch how Beijing copes with a severe economic downturn, especially in relation to the downturn's impact on:

• China's large army of migrant workers, who moved from the country to cities to work in industry and have nothing to fall back on if they lose their jobs.

• Young and well-educated people, who expect to get high paying jobs and affluent lifestyles, and will be sorely disappointed to miss out.

"Global Trends 2025" - dog eat dog for control of resources

I continue reading the US National Intelligence Council's "Global Trends 2025: A World Transformed" report, and briefly comment on things that interest me.

Chapter 5 of "Global Trends 2025" discusses the "growing potential for conflict" - insurgencies, civil wars, interstate conflicts - particularly in the greater Middle East. It suggests that states could fight over scarce energy resources. As demand for energy heats up, states will try to lock in unfettered access to oil and minerals...

"this could lead to interstate conflicts if government leaders deem assured access to energy resources to be essential to maintaining domestic stability and the survival of their regime."

We'd be foolish to ignore the possibility of state vs state conflict. But as the report suggests, it's a worst case scenario. I'd suggest that what will happen, in parts of Africa (like Congo and Niger delta), central Asia and Latin America, is violence around oil fields and mines as a byproduct of competition for access by governments, foreign corporations and hybrid corporate-criminal organizations.

How could this play out? Here's some ideas:

• Foreign corporations use proxies ( local militias and paramilitary forces, criminal gangs, private military companies) to protect their interests and destabilize competitors.
  

• Regional power-brokers - warlords, corrupt officials, crime bosses and insurgents - fight for control of resources and trade.
  

• Locals living near oilfields and mines fight back as their lands, forests and rivers are confiscated and devastated.

A final thought. In this dog eat dog world, multi-national corporations will be out-gunned by local warlords and bandits unless they come equipped with their own heavies, or enter business arrangements with said warlords and bandits.

A deep "L" shaped recession

Want to refresh your memory about global financial and economic events this year? Check out this video clip by Larry Elliot, the Guardian's economics editor.

Elliot believes that while the global financial system has weathered the storm (thanks to governments throwing money at collapsing banks), a worldwide recession is about to hit.

"It looks as though the world economy is going to have its first synchronized downturn since the early 1980s...almost everywhere you look there are signs of trouble..."

The OECD says that the world is entering a protracted L-shaped recession, of a magnitude "not experienced since the early 1980s". What this means is that economic activity has a long way to fall (the vertical axis of the "L") with recovery likely to be long, slow and weak (the horizontal axis). The agency predicts between eight and ten million thrown out of work in OECD countries to 2010. This is the optimistic view. Others are predicting a downturn lasting for the better part of a decade.

What does this suggest for political and social stability? Rising civil unrest - perhaps targeting banks, and symbols of capitalist greed, like luxury car dealers and posh houses - plus large numbers of people depending for basic sustenance on government, charities, churches and families?

Or, more positively, a surge towards resilient communities, as people generate local solutions for unemployment, poverty, security, and food and water shortages? Smart people, thrown out of work or business through no fault of their own, could be the catalysts - something like John Robb's idea of resilient community entrepreneurs.

The three big deals of 2008 - number one

If you had to pick the top three events of 2008, what would you choose? Maybe I'm tempting fate - there are eight more days until the end of the year - but what the heck. Here's my first pick:

Global financial crisis and worldwide recession

Hard to beat, really. The crisis unfolded with stunning scale and speed. We've witnessed extraordinary developments: the meltdown of global markets, huge government bailouts of big financial institutions, the near death experiences of large American and European car makers, and the collapse of Iceland's economy. As yet, there's no end in sight, with indications that the world is entering a deep and prolonged recession.

What's also remarkable is how the financial crisis and the worldwide recession are slaughtering sacred cows left, right and centre. The free market knows best. Light-handed government. And my favourite - the inexorable rise of China.

The Chinese economy is in trouble - as recession in the west bites, and consumer spending plummets, China's exports are falling and economic growth has slowed drastically. Add to the mix a toxic natural environment, burgeoning populations of unemployed migrant workers, rising social unrest, and pervasive corruption - symbolic of the difficulty Beijing has in maintaining control - and you get the sense that China's rise may take a little longer than expected.

They say you want a revolution...

This is spot-on - George Monbiot's perspective on the White House's $17.4 billion bailout of GM and Chrysler:

"Just think what could be done with money like this if it were invested instead in a green energy revolution. Not only would it stimulate lasting manufacturing jobs, it could also fund the emergency measures required to prevent runaway climate change.

But on both sides of the Atlantic, governments plead poverty when they are asked to invest in the future, then lavish funding on the past. Never underestimate the lobbying power which lurks behind sunk costs."

Something for President-elect Obama to think about before he getting too carried away with promises to rebuild Detriot's automotive industry.

If the rebuild involves forcing GM, Chrysler and Ford to build fuel efficient electric and hybrid cars, that might be okay. But there are far better investment opportunities for US taxpayers' money, like revamping the national grid, rolling out renewable energy (e.g., solar and wind power), and building efficient mass transit and long distance rail.

A rip-off, pure and simple

The White House's $17.4 billion bailout of American automobile companies GM and Chrysler is a rip-off. Willem Buiter explains why it's a rip-off, and a really bad policy decision, to boot...

"There is no economic rationale for supporting proven global losers like GM and Chrysler, firms with a record of incorrigible underperformance going back decades. Better to put them into Chapter 11 (insolvency protection) or Chapter 7 (insolvency and liquidation) right away, with the government providing financing to facilitate an orderly restructuring or liquidation."

The bailout is just throwing good money after bad. Is it likely that corporations - which are noted for greed, hubris and producing big, gas guzzling cars that no-one wants to buy - will suddenly become models of efficiency? Is is likely that this deal will resurrect a moribund industry, rather than just delay the inevitable collapse?

Yeah right.

"Global Trends 2025" - no Age of Aquarius

 

I continue reading the US National Intelligence Council's "Global Trends 2025: A World Transformed" report, and briefly comment on some of the findings that interest me. (Photo: species_snob.)

Chapter 4 - 'Scarcity in the midst of plenty?' - describes possible trends in the supply and use of natural resources - energy, water, food, and land. It also covers, to a lesser extent, climate change, and the impact that rising temperatures and extreme weather events may have on water and food supply.

This chapter is a grab-bag of ideas. Here you find speculation about climate change winners and losers, the strategic implications of an Arctic free of summer ice, a second Green Revolution in sub-Saharan Africa, and a US presidential diary entry from the year 2020 describing the evacuation of Manhattan after a catastrophic hurricane.

That said, the chapter outlines some interesting ideas. One is that many countries will simultaneously grapple with chronic shortages of water, energy and food, exacerbated by the impacts of climate change (such as melting glaciers and storm damage). Some governments may be overwhelmed by the scale, complexity and interaction of these problems.

The report also suggests that by 2025 the world "will be in the midst of a fundamental energy transition" - a "post-petroleum age" no less:

• As oil production in many traditional oil producers falls, the world's oil reserves will be concentrated in the Middle East, amongst a handful of producers.

• The world will be deep into a shift from dirty fuels (crude oil, coal) to "cleaner" fuels (gas, renewables, nuclear, biofuels, hydrogen fuel cells).

Note the report's careful use of the term "cleaner" fuels. We'd all like to see the dawning of an Age of Aquarius of clean energy. But the unpleasant reality is that coal - which is cheap and plentiful - will remain in big demand, while production of unconventional oil (mined from oil sands) may increase.

This undercuts the report's assertion of a transition to cleaner fuels. Coal and unconventional oil are the dirtiest fuels about. The mining of coal and oil sands lays waste to the environment - oil sands, for example, are mined in vast open-pit operations, like in Alberta, Canada, and use enormous amounts of water and energy in the process.

"Global Trends 2025" - separate strands?

I continue to read the US National Intelligence Council's "Global Trends 2025: A World Transformed" report, and briefly comment on some of the findings that interest me.

Chapter 1 of the report deals with the world economy out to 2025. "In terms of size, speed, and directional flow," the report trumpets, "the global shift in relative wealth and power now underway - roughly from West to East - is without precedent in modern history".

The report ascribes this historic shift to two factors:

• windfall profits for Gulf states and Russia brought about by sustained increases in oil and commodity prices; and
• the shift of manufacturing and some service industries to Asia, with strong global demand for Asian products creating big economies of scale margins.

The report predicts that over the next several decades the "global middle class" will swell from 440 million to 1.2 billion (from 7.6% to 16.1% of the world's population). 

What the chapter doesn't cover is the impact that 1.2 billion people, living wasteful Western middle-class lifestyles, will have on the...

• environment, which already is severely degraded;
• natural resources - like water, oil, arable land - which already is severely depleted; and
• the level of carbon emissions in the atmosphere, which already is very high.

There is no question that this trend is not sustainable. The problem of severely degraded environments and depleted resources is especially acute in China and India - ostensibly two of the heavy hitters in 2025's globalized economy. And yet the chapter does not pause to consider whether these factors will put the brakes on economic growth and development in both countries.

It remains to be seen whether "Global Trends 2025" effectively integrates social, political, economic, environmental and demographic developments. If the report is to present a coherent picture of the world in 2025, then it must: everything is interwoven. But I suspect that the report will largely separate these strands.

Blogshots

I've recently discovered the joy of Google Reader. All the posts of my favourite blogs piped into the one easy-to-read page. Brilliant!

Here are three posts that I've enjoyed reading this week.

Maverecon: "Too many cooks in Obama's economics kitchen"

Willem Buiter unravels the "Byzantine complexity of the White House economic policy-making machine".

Still, the US intelligence community, with 17 (!) federal intelligence outfits, beats the economists hands down. Check out the IC's funky homepage - "The IC - Working to Protect Freedom".

Jeff Vail (at The Oil Drum): "A resilient suburbia? (3)

A further post from Jeff on whether suburbs have a future in a post-Peak Oil world:

"it isn't realistic at present to think that we'll be able to put enough solar panels on our roofs to charge the batteries on the twin electric-Escalades sitting in our garage for the daily commute to work. I increasingly believe that suburbia can be resilient and sustainable, but not as a mere "Star-Trek" version of the present."

Antilibrary: "Nazi kitsch"

AE puts in a plug for World War Two films that are "loud and unapologetically crude such as The Dirty Dozen or Where Eagles Dare than an overwrought piece of Oscar bait."

Hear hear! For the record, my three favourite WW2 films are 'Guns of Navarone', 'Sands of Iwo Jima', and 'Von Ryan's Express'. No Oscar bait here.

The inner wasteland

 

Hydroponic greenhouse in Iran (photo: eshare).

One of the great challenges of the 21st century is feeding the burgeoning populations of world cities. Global population keeps rising, as does the demand for food, but water supplies are drying up and arable land is being lost to rising seas, salinization, and advancing deserts. Where's the food going to come from?

Urban hydroponics may be part of the answer. Hydroponics is a way of growing plants using mineral nutrient solutions, without soil. This article (h/t: The Oil Drum) looks at the prospect of urban cultivators using hydroponics to grow food for city dwellers:

"In a New York City schools program run by Cornell University, students grow lettuce on a school roof and sell it for $1.50 a head to the Gristedes chain of supermarkets.

Cornell agriculturist Philson Warner, who designed the program's hydroponics system, said his students harvest hundreds of heads of lettuce a week from an area smaller than five standard parking spaces by using a special nutrient-rich solution instead of water.

The numbers have some researchers imagining a future when enough produce to feed entire cities is grown in multistory buildings sandwiched between office towers and other structures."

One of the things that I find striking about my own city and its suburbs is the large amount of inner wasteland. This can range from vacant lots and grassed or concreted backyards to old industrial sites and empty rooftops. The impact of economic recession will increase the area of this inner wasteland, with empty parking lots, building sites, offices and apartment floors.

It's not hard to imagine a time when we use these spaces productively: for growing food (with hydroponics or in the soil), generating electricity with solar panel arrays and micro-turbines, and collecting and storing rainwater.

Take no pirates prisoner

Responding to "Sea Dogs of War", Tom S said this about the seeming reluctance of western navies to confront Somali pirates:

"Listening to [National Radio] tonight, they said that Western navies were reluctant to engage the pirates due to the "unclear legal status" of doing so.

Now, call me crazy, but isn't engaging and destroying pirate vessels and killing pirates a key reason navies came into existence in the first place? I would have thought any navy worth its salt would simply engage any and all pirates on sight."

As Tom suggests, it was much simpler in the old days. The Royal Navy put paid to the pirate menace during the "Golden Age of Piracy" of the early 18th century by patrolling pirate-infested waters and attacking pirate strongholds. In 1718, the sloop Ranger trapped and slew the notorious pirate Blackbeard and his crew off North Carolina's Outer Banks. In 1722, off the West African coast, HMS Swallow attacked and destroyed the pirate ships of Bartholomew Roberts, the Golden Age's most successful pirate. Roberts was killed and the pirate survivors were hanged. These actions led to piracy's eradication in North Atlantic and West African waters.

These days navies are, to a certain extent, constrained by rules. In 2008 the UN Security Council authorized states to:

• enter Somalia's territorial waters and use "all necessary means" to repress piracy at sea;  
• use "all necessary means" to actively fight piracy on the high seas off the Somali coast.

But repression of piracy must be carried out in ways consistent with the 1982 UN Convention on the Law of the Sea. Article 100 of the Convention sets down that all states must cooperate to repress piracy on the high seas. But the Convention limits the use of force. It allows warships to seize pirate ships and arrest pirates on board (Articles 105 and 107). Unless attacked first, warships cannot open fire. Under Article 110, the warship has to "verify the ship's right to fly its flag"...

"it may send a boat under the command of an officer to the suspected ship. If suspicion remains after the documents have been checked, it may proceed to a further examination on board the ship..."

These legal restraints are a check on action. But they are not insurmountable, as recent actions show. On 11 November, British commandos from HMS Cumberland killed two pirates and captured their vessel. Last Tuesday an Indian warship, INS Tabar, destroyed a pirate 'mother ship'. In a statement the Indian navy said that...

"On repeated calls, the vessel's threatening response was that she would blow up the naval warship. INS Tabar retaliated in self defence and opened fire on the mother vessel. As a result of the firing by INS Tabar, fire broke out on the vessel and explosions were heard, possibly due to exploding ammunition that was stored on the vessel."

It's hard to imagine that the desperadoes would have been foolish enough to threaten the Indian warship. But there you have it - no pirates have come forward to contradict the Indian navy's version of events.

Signs of interesting times

Long Beach, California:

For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.

And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation's second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.

"This is one way to look at the economy," Art Wong, a spokesman for the port, said of the cars. "And it scares you to death."

Sea dogs of war

It was only a matter of time before private military companies like Blackwater seized the business opportunities on offer off the coast of Somalia (h/t Tom S)...

"...Blackwater is planning to cash in on the rising threat of piracy on the high seas by launching a flotilla of gunboats for hire by the shipping companies.

The firm, which gained international notoriety when its staff killed civilians in Iraq, has already equipped one vessel, called The McArthur, which will carry up to 40 armed guards and have a landing pad for an attack helicopter.

The McArthur, a former survey ship, arrives in the Gulf of Aden, the scene of the recent high-profile hijackings and shootouts with Somali pirates, at the end of the year. It is to be joined by three or four similar vessels over next year to form the company's private navy."

As long as governments are unwilling or unable to plug this particular hole in the global security system, PMCs will look for a piece of the action. Fundamentally there's little difference between mercenaries riding shotgun on supply convoys in Iraq or on ships sailing through the Gulf of Aden.  

Why worry about piracy?

Somali pirates are back in the news again after hijacking a Saudi oil supertanker, the Sirius Star. The ship was seized on the high seas, 450 nautical miles southeast of Mombassa, Kenya. John Robb observed that the "holes in the global security system are so big now, that you can drive a super-tanker through them".

Clearly, some pirate gangs have considerable reach. In one of two informative commentaries in The Times, Roger Middleton explains that the pirates

"have reinvested their takings – now averaging well over $1 million per captured ship – in faster boats, electronic devices such as satellite phones, and powerful weapons. As their equipment improves they have been able to push farther out into the ocean and threaten ever more important vessels."

And Frank Pope explains how ship owners view the risk associated with piracy, and why they're reluctant to station armed guards on vessels.

Pope seems in two minds about how to deal with Somali pirates. On the one hand he states that the "only way to stop piracy off Somali is to sort out what is happening on land". Given the recent history of Somalia, this is not plausible. His other idea, for governments to commit more naval resources to improve sea lane security, is better.

The issue though is whether the cost of Somali piracy justifies the cost of mounting a major naval operation. A commentator on Global Guerrillas observed that the "odds of piracy are vanishingly small - 22,000 vessels pass the Somali / Yemeni chokepoint each year. Around one in a thousand get pirated successfully. That's roughly the same odds as getting wrecked each year".

Pope suggests that shipowners aren't too fussed about Somali piracy, not only because of the long odds, but also because pirated vessels, crews and cargo can be quickly ransomed. If that's the case, and ships continue to transit the Gulf of Aden (rather than go the long way around the Cape of Good Hope), why should governments be too concerned?

The way to build wind farms

This is the way to build wind farms:

"Over a dozen of the UK's former coalmining sites are to be redeveloped as wind farms under a revolutionary energy scheme to turn old energy into new."

In countries like the UK and New Zealand, where wind power development is forging ahead, there's been intense debate about plans to turn iconic natural landscapes into giant wind farms. Developing smaller-scale wind farms on "brownfields" sites - old coal mines, industrial areas and the like - makes a heck of a lot more sense.

Why? Iconic landscapes are left wild and remote. Brownfields sites become economically useful again. And power is generated closer to the point of demand, thus cutting energy lost in long distance transmission.

Sunday reflection

In a global economic crisis it's hard to know where to put your money. What about single malt whisky? This article profiles a Dutch company which allows people to invest and trade in rare malts...

"Roughly 11 months after [its] launch...the World Whisky Index has seen an average return of 26.2 per cent, compared to a more than 40 per cent decline in the MSCI World stock index.

...The top gainer on the index is a 30-year old Bowmore Scotch whisky in a ceramic bottle, which has gained about 137 per cent in the past eleven months and is now worth about 450 euros."

Not something for me, I'm afraid. My idea of the good life involves drinking single malt whisky, not making money from it.

Now, where's that bottle of Glenmorangie?

Nurturing leaders: get fit, stay fit

In these video clips (part 1, part 2), Paul van Riper explains his view on what makes great leaders. Van Riper was a US Marine Corps lieutenant-general, highly decorated, an inspirational and intellectual leader who rose to high rank but remained his own master.

He puts forward a number of interesting ideas. One that resonated with me was his definition of character as involving physical, as well as mental, moral, and spiritual, fitness.

"And I advocate physical fitness. If you don't keep your body in shape it is going to have adverse impact on your overall quality of life."

When we train and coach leaders, in government, industry or business, we generally ignore the physical element. That's crazy. A manager who is healthy and fit will have a heck of a lot more energy, enthusiasm and resilience than the manager who is overweight and sickly.

The military gets it right in this respect. It prioritizes physical fitness and makes it a core part of a soldier's daily routine. But in government and business, keeping fit is something you do outside of work, squeezed in between work, daily travel, meals, chores, caring for the kids and so on. No wonder that so many people find it difficult to exercise and as a result are not in good shape.

If government, industry and business want to nuture good leaders, they must encourage managers to get fit and stay fit, and allow them time during the working week to do so.

Sunday reflection: on carnage and mayhem

Words like "carnage", "turmoil", "mayhem" and "meltdown" have gripped world headlines over the past week. As if we didn't have enough reminders that the world's financial system is in trouble, pundits have exhorted us to "wake up" to the scale of the crisis, to "get real" about the consequences, and to take the "carnage" seriously.

Well, sorry, but there's no sense in panicking about things that we, as individuals, have no control over. Going into your own personal meltdown is not going to change things for the better, so why bother? I've been impressed with the way that people I know have just got on with things.

Perhaps that's because most people that I know are pretty boring. I mean this in a good way. We kept things simple. We're not hotshot bankers, traders, and investors who lived by the notion that greed is good. We didn't get sucked in by the ad men and rack up huge debt to buy flash cars and wide-screen televisions. We didn't buy houses with 105% mortgages.

At this point you may be asking, "105% mortgages?" Paul Kennedy explains (h/t Jeff)...

"What 105-percent mortgages meant was that foolish banks had lent to foolish people (at very low interest rates) not only the entire capital for buying a house or apartment without the purchaser putting up funds, but an extra 5 percent to, say, improve the kitchen."

This morning I read about a London trader who said that half his "net worth" had been wiped out in hours. If half of what you are worth can vanish instantly, then perhaps you never had much of substance to begin with.