Recently a chorus of voices from various backgrounds have been pointing to the patterns found in nature as holding the keys to the future security and ultimately survival of an increasingly fragile globalized world.

The argument goes something like this: globalization has exponentially increased the complexity of modern civilization and eliminated many of its redundancies (inefficiencies?) based on the pursuit of specialization and comparative advantage.  While many praise, and duly so, the various benefits of globalization, few understand or acknowledge the fragile state it has created in its campaign for greater efficiency.

The stripping away of redundancies and growing interconnectedness of nations and markets now makes a “butterfly in Brazil” scenario more likely as the global system has become much more sensitive to change and less robust.  To secure ourselves from future doomsday scenarios we should model nature and trade back some of our efficiency for increased redundancy and robustness.

Nassim Nicholas Taleb has been hammering on this theme for years now, adding a new updated section to “The Black Swan” on Robustness and Fragility,

First, Mother Nature likes redundancies, three different types of redundancies.  The first, the simplest to understand, is defensive redundancy, the insurance type of redundancy that allows you to survive under adversity, thanks to the availability of spare parts.  Look at the human body.  We have two eyes, two lungs, two kidneys, even two brains (with the possible exception of corporate executives)—and each has more capacity than needed in ordinary circumstances.  So redundancy equals insurance, and the apparent inefficiencies are associated with the costs of maintaining these spare parts and the energy needed to keep them around in spite of their idleness.

The exact opposite of redundancy is naïve optimization.  I tell everyone to avoid attending (orthodox) economics classes and say that economics will fail us and blow us up (and, as we will see, we have proofs that it failed us; but, as I kept saying in the original text, we did not need them; all we needed was to look at the lack of scientific rigor—and of ethics).  The reason is the following: It is largely based on notions of naïve optimization, mathematized (poorly) by Paul Samuelson—and this mathematics contributed massively to the construction of an error-prone society.  An economist would find it inefficient to maintain two lungs and two kidneys: consider the costs involved in transporting these heavy items across the savannah.  Such optimization would, eventually, kill you, after the first accident, the first “outlier.”  Also, consider that if we gave Mother Nature to economists, it would dispense with individual kidneys: since we do not need them all the time, it would be more “efficient” if we sold ours and used a central kidney on a time-share basis.  You could also lend your eyes at night since you do not need them to dream.

In an e-mail discussion with Timothy Thompson he drilled down the objections of many in this growing crowd to a more specific risk,

…the whole globalized economy relies on just one critical element: cheap transportation. And cheap transportation means cheap transoceanic container shipping, which in turn relies on just one critical factor: cheap oil. The world economic system can be disrupted at any time by simply increasing the price of marine fuel.

So, an entire global economic system has become dependent on the price of just a single commodity, crude oil.

From a security standpoint, the anti-globalization crew also write that any terrorist or military threat that stops transoceanic container cargo also stops most of the world economy.  So just one big terrorist bomb arriving in just one shipping container in just one port can cripple the whole global economy.

In coming up with solutions, John Robb is making a good go of it with his study and writings on resilient communities, also modeled in Suarez’s “Freedom.” He believes one of the answers to the potential problem of long-distance production and shipping is the use of 3D fabrication technologies to manufacture tools and products locally.   In his own words, “Localize Production.  Virtualize everything else.”

Concerning food, we can already see a glimpse of this ethos  in the rise of urban farming and local farmer’s markets.  It’s very possible that this will spill over into manufacturing (See Etsy) as the technology becomes cheaper and more readily available.

So, what to do as an individual?  Well, globalization is not going anywhere for now.  Rather than fighting its advance or holing up in a cabin in Alaska, the best stance may be to skeptically embrace its benefits, rebuffing naive claims of global utopia, while doing more to safeguard ourselves against its weaknesses.  It’s a balance of course.

Here are some links to articles and videos discussing the themes of efficiency, redundancy, nature and security:

Nassim Nicholas Taleb on Robustness

http://www.isegoria.net/2010/06/natural-security/

http://www.foreignpolicy.com/articles/2003/09/01/adapt_or_die?page=full

http://www.physorg.com/news193586040.html

http://fora.tv/2008/08/08/Daniel_Suarez_Daemon_Bot-Mediated_Reality

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First, the books:

1) “Freedom” by Daniel Suarez

An awesome follow-up to Suarez’s first novel, “Daemon,” a high-tech thriller that turned the heads of national security experts, technologists and futurists alike.  The sequel focuses on the role of resilient communities in building a different future for those who detest the decreasing self-sufficiency (therefore freedom) of the common citizen and community.

Both “Daemon” and “Freedom” plus Robb’s “Brave New War” and Pollan’s “Omnivore’s Dilemma” provide a great blue print for those wanting to see the near-future of conflict for power and resources and operational space.  (h/t @TimothyThompson)

2) “The Collapse of Complex Societies” by Joseph Tainter

Two chapters into the book that ZenPundit says is the “academic to mainstream crossover book of 2010.”  More to come…

3) “The Irony of American History” by Reinhold Niebuhr

I’ve heard Andrew Bacevich sing the praises of Niebuhr for long enough now that I had to consume some of his writing for myself.  Thus far I have been blown away by his C.S. Lewis-like style and depth.

Writing during the postwar years, Niebuhr, the scholar, theologian and prophet honed in on “…the persistent sin of American Exceptionalism; the indecipherability of history; the false allure of simple solutions; and, finally, the imperative of appreciating the limits of power.”

4) “Cloud Atlas” by David Mitchell

Have heard about this book for a while, shortlisted for the 2004 Booker Prize and other awards, excited to read a contemporary novelist who has been compared to David Foster Wallace.

5) “For the Win” by Cory Doctrow

Lots of hype from TwitterNation, will crack open once I finish the above.

And posts and articles…

1) “The Sun in the Sky: The Relationship Between Pakistan’s ISI and Afghan Insurgents” by Matt Waldman

2) “Who is Ayn Rand?” by Charles Murray (h/t Isegoria)

3) “West Point Faculty Member Worries it is Failing to Prepare Tomorrow’s Officers” by Maj. Fernando Lujan, U.S. Army

4) The Cheap Vegetable Gardener (h/t Shloky)

5) “The Scientific Scandal of Antismoking” by J.R. Johnstone, PhD and P.D. Finch, Emeritus Professor of Mathematical Studies (h/t Isegoria)

6) David MacKay’s Without The Hot Air (h/t Carl Rigney)

Oh yeah…and about those $1 trillion of minerals underneath the mine-laden dirt of Afghanistan, I’ll put money on China getting way more contracts than the U.S.  Why?  They care more about business than changing governments.  The only question they’ll have for Karzai regarding his corrupt brother in the South is, “yuan or dollars?”

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On Afghanistan, waterboarding and COIN:

1) A fascinating paragraph from Robert Kaplan’s latest article on Afghanistan in The Atlantic (h/t Andrew Sullivan):

The very prospect of some success by July 2011 increases the likelihood that U.S. forces will be in Afghanistan in substantial numbers for years. In effect, the proficiency of the American military causes it to be overextended. British Major General Richard Barrons, a veteran of the Balkans and Iraq now serving in Afghanistan, told me he learned during the most depressing days in Baghdad that “the long view is the primary weapon against fate.” If you are willing to stay, you can turn any situation around for the good. But that is an imperial mind-set, with its assumption of a near-permanent presence, which today’s Washington cannot abide, even as its own strategy drives toward that outcome.

2)  On Waterboarding: here and here (caution: disturbing)

3) Getting Close to the Afghans:

Our distance from the population, and the enemy’s proximity, encourage the people to alert the insurgents when our troops approach. They encourage the people to keep quiet about IEDs, which are now powerful enough to kill passengers in our best armored vehicles. Force protection measures thus result in less protection for our troops.

The risk aversion among American commanders has many sources. Fear of casualties and doubts about our purpose in Afghanistan cause segments of American society to pillory units that sustain large casualties, and to ignore units that cling to large bases and accomplish little. Talk of troop withdrawal dates discourages leaders from taking short-term risks for long-term gain.

Part of the blame lies within the military, which has often promoted risk-avoiders ahead of risk-takers, and has undervalued other attributes of vital importance in counterinsurgency such as creativity, sociability and empathy. The extent to which American units collaborate with Afghan security forces and obtain assistance from the population depends primarily on these attributes, and it varies widely.

On millenials, the economy and the coming anarchy (light reading, I know, sorry Linda):

1) The Dropout Economy a.k.a. when Millenials get tired of paying for the broken system created by the baby boomers and decide to opt-out. (h/t Shlok Vaidya)

Look at the projections of fiscal doom emanating from the federal government, and consider the possibility that things could prove both worse and better. Worse because the jobless recovery we all expect could be severe enough to starve the New Deal social programs on which we base our life plans. Better because the millennial generation could prove to be more resilient and creative than its predecessors, abandoning old, familiar and broken institutions in favor of new, strange and flourishing ones.

Imagine a future in which millions of families live off the grid, powering their homes and vehicles with dirt-cheap portable fuel cells. As industrial agriculture sputters under the strain of the spiraling costs of water, gasoline and fertilizer, networks of farmers using sophisticated techniques that combine cutting-edge green technologies with ancient Mayan know-how build an alternative food-distribution system. Faced with the burden of financing the decades-long retirement of aging boomers, many of the young embrace a new underground economy, a largely untaxed archipelago of communes, co-ops, and kibbutzim that passively resist the power of the granny state while building their own little utopias.

2) Britain ‘four meals away from anarchy’ (h/t John Robb)

…at least there’s always music, check out this sweet visualization - Rock ‘N Roll Metro Map

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Economist Jeff Rubin discusses the future of oil (peak oil) in an entertaining way that doesn’t take a PhD to understand. If you are a regular reader of Schaefer’s Blog this is a must-watch, even if you just watch the first 10 minutes.  Basically, Rubin lays out a convincing argument why triple digit oil, translating to $6-$7 per gallon at the pump is all, but inevitable and will probably come sooner than we think.  HT to Paul Kedrosky for this find.

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In a recent Washington Independent article, Spencer Ackerman asked the all-important, but seldom asked question, “Why Should Defense Spending Be Sacrosanct?”

It’s not popular to ask this question, especially if you’re a congressman because in doing so you’re bound to be labeled as not supportive of the troops.  However, the present course of the DOD is completely unsustainable. And in our current economic state ($12 trillion in debt and counting) I, like Ackerman and others, find it odd that there has been no serious talk of freezing the gargantuan DoD budget. In 2008, the US military spent more than the next 46 highest spending countries in the world combined (see here).

The spending problems come from personnel costs on one side — full retirement benefits for members who serve 20 years of active duty (most retire in their 40′s and now live well into their 80′s and beyond, a.k.a. 40 years of retirement pay), rising healthcare costs, salaries, housing pay, etc.  Equipment costs on the other — planes, bullets, tanks, UAV’s and an aging fleet of …well, almost every weapon system you can think of.  Just to send one combat troop to Afghanistan costs the taxpayer $1 million a year.

Almost everyone close to the organization knows we’re plowing ahead like a drunk driver headed for the cliff, but no one seems up to the task of fixing it.  Worse yet, much of the leadership seems bent on simply increasing spending rather than fixing a broken system.

Defense Secretary Robert Gates is making a noble effort, but the military-industrial complex is a three-headed monster, devouring every plan formed against it through strategic lobbying, creative bookkeeping and a view of the world based more on fantasy than reality.

Ackerman cites an October assessment from the CSBA’s Todd Harrison who compares the DoD to GM, explaining (emphasis mine),

Another similarity between the two is that both organizations are in a period of disruptive change in the competitive environment. In GM’s case, its market share rapidly eroded as gas prices climbed higher, the economy slowed, and consumers turned to smaller, more fuel-efficient vehicles. GM found itself building a fleet of SUVs and trucks that consumers did not want and could not afford. Similarly, DoD now finds itself saddled with a number of weapon programs whose capabilities are ill-suited for the types of conflict the military currently faces and whose costs have risen beyond what the Department can afford. Many of the new weapons being funded today are optimized for middle-of-the- spectrum conflicts—that is, conventional, military-on-military conflicts such as Operation Desert Storm in 1991. But adversaries are well aware of the United States’ overwhelming advantage in the middle and are instead moving to either end of the spectrum: irregular warfare on one end and high-end, asymmetric warfare on the other. The challenge for DoD, as it was for GM, is that the competition is adapting faster than it can keep up.

The last sentence is key, “…the competition is adapting faster than it can keep up.” Much of it has to do with the huge, inflexible, bureaucratic organizational structure of the DoD as compared the nimble, decentralized, open-source structure embodied by al-Qaeda and affiliate organizations. One bans twitter, facebook and gmail while the other uses the internet train to organize its cells all over the world.

Changing the DOD’s organizational structure is one thing, putting a freeze on the defense budget is another and one that may be a bit more realistic. However, none of this is bound to change anytime soon if we insist on keeping our country in a state of perpetual war.

Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes … known instruments for bringing the many under the domination of the few.… No nation could preserve its freedom in the midst of continual warfare. – James Madison, Political Observations, 1795

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People often ask me what is wrong/right with the U.S. military today and what I would change. Many times this is linked to a question about our work in Iraq and Afghanistan. Rather than rambling, I often wish I could just plop them down and show them this TED talk by Thomas Barnett.

Barnett has advised leaders on national security for many years now and has some of the most refreshing and spot-on ideas of how the U.S. military needs to change if we’re going to be effective in the 21st century.

He argues that we are still set up to fight a cold-war era opponent and that our military is being asked to nation-build when it was never meant to be used that way. But, rather than just criticizing, he offers a very clear solution: a large civilian force made up of highly educated civil servants who can focus on the post-fighting phase of helping rebuild a country like Iraq or Afghanistan.

I won’t spoil it too much, just give it a watch if you have a second.

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I’m currently sitting on my couch listening to newscasters on television report the latest drop in the stock market with gloom face and menacing tone. Even those who don’t follow the market have not been able to escape the constant coverage of the current financial storm that has hit markets both at home and abroad.

Here are just a few of the headlines in the news recently:

“Wall St tumbles on economic anxiety”
“Recession to be ‘Worse than the 1990′s,’ experts warn”
“Markets latest lurch down raises new uncertainty”

In the midst of such volatility, misinformation and outright confusion, it has been hard to draw any logical conclusions. But, surveying the scene over the past month an age-old lesson in skilled investing has resurfaced:

When the market is going down in flames, seasoned investors see incredible buying opportunities where novices see only doom and gloom.

Warren Buffet, billionaire investor, recently wrote on Op-Ed piece in The New York Times where he said the following (emphasis mine):

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Everyone likes to say the key to investing is, “Buy Low, Sell High”, but how many people actually follow their own advice? Startlingly few, actually. Most people tend to follow the herd, buying stocks when the buzz of how well the market is doing finally reaches their ears and selling when they hear on the news that things are bad. Thus, they do the exact opposite, buying when stocks are inflated by market hype and selling when they have been beaten down.

So why is now such a great time to buy? Because what we essentially have is a HUGE STOCK SALE! Some great companies are selling for half, even 75% less than what they were a year ago. What this means is for every share you could have bought a year ago you can now buy 2 or even 3 for the exact same price.

Right now is an incredible time to buy.  This is the opportunity that seasoned investors recognize that others do not. And it’s why some people will get rich off the current situation while others will go broke.

There’s no doubt we’re in hard times, but part of skilled living is keeping your head in the midst of stressful and complicated situations. When others are scared and running for the hills there are some that come out swinging. Learn from those people and imitate them.

I leave you with some final words of wisdom from Buffett:

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

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