Dominant Logistics
Project FutureThink - Tapping the Technological Cycle
What if the Pentagon had a crystal ball? What if they could see conflicts coming before they escalated to a state of war? What if they could see changes in the nature of war before they occur? What if they could see the mistakes they were making, before they make them? And what if all this information were not just affordable, but provided on a constant basis from outsiders and this same information would be available to Congress as well, limiting the need for constant studies and investigations? This is the concept behind Project FutureThink.
As has appeared in the news recently, DARPA has been working on a project called FutureMAP to devise a means to predict future events before they happen. This program has effectively been killed, but an alternative that addresses the moral and ethical problems of FutureMAP is not only possible, it can easily be expanded to provide the DOD with a sort of crystal ball into the future of war and related matters. FutureThink is a cross between the futures market model of FutureMAP and hypothetical war gaming. Members of the project would be paid considerable money in order to fully dedicate themselves to the program, while the money used in the fictional market would be notional money, not real money. To encourage the members to excel in this endeavor, a bonus system is used where the member is paid bonuses for new ideas and concepts, as well as a bonus equal to one half of one percent of the value of their notional portfolio for each year in the program.
Understanding the Technological Cycle
Many people wrongly believe that advances in technology just magically come about - somebody dreams up an idea and it changes the world. Reality is far different from this rosy scenario. If we step back and look at the world of technology from a distance, we will see a definitive cycle that applies to nearly all technological advances. The cycle loosely resembles the following:
Dream Phase - Someone, an expert, a layperson, a janitor, or a genius wakes up one day with a vision that may ultimately change life as we know it. More often than not, it is a broad concept as opposed to a very specific end product. More often than not, the "dream" is a solution to a problem that the individual experiences in their life or is at least familiar with. For example, the computers we use today were originally conceived as a physical machine to more rapidly and accurately complete mathematical computations. The first actual computer was the abacus.
Investment Phase - Inevitably, dreamers talk. They share their ideas, publish them, they may even attempt to market and sell them as patents. These actions bring about a feedback that leads to further refinements in the dream as well as to practical applications of the dream. Sometimes this comes about over a very short period - other times it is spread out over years and even decades. Using our example of the computer, while the basic concept was present for hundreds of years, constant investment ultimately led to electrical, programmable computers in the mid 1900s and onward to the modern computers of today.
Development Phase - As people invest in a given concept or idea, this leads to the formation of developmental concepts where the dream is placed into a practical application. Oftentimes, the practical application will have no relationship whatsoever to the original dream. For example, the original computer was conceived as a mathematical device. Over time, applications from communications to data storage and manipulation were added to the original concept.
Application Phase - Once an idea has gone through its development phase, it is typically ready to take on a given application. Ironically, the act of applying the technological change inevitably causes a need or opportunity for further change. For example, the early electrical computers were very unreliable, huge in size, and consumed too much power. This led to further "dreams" to address these shortcomings. But addressing these shortcomings, in and of itself, opens up new opportunities for use of the technology. Every advance in technology, by definition, either creates a need for a further advance or the opportunity for a further advance. Continuing with our computer example, improvements in the early computers made them cost effective to use for the business practice of accounting, and in particular for data storage purposes. But the computer wasn't designed for this so additional dreams ensued to resolve the data storage problems which made the computer useable for media work, but this opened up new problems to solve as well.
As you can see, what we have is a cycle that can quite literally go on for as long as man is on this Earth. But this leads us back to our opening question - is it possible to see the applications coming prior to their arrival? Can we read and understand where the dreams will lead? Conventional wisdom is that we cannot but historical evidence suggests otherwise.
Consider the technological advance of the Internet. It is arguably the most pervasive technological advance in history and if the experts are to be believed, nobody saw it coming or had any idea what it would become. Or did they? If we look back at the original Star Trek series, we can actually see the "dream" that ultimately became almost exactly what the Internet is today. Rodenberry's concept was a central computer that managed just about every task conceivable, with each individual member of the crew having their own personal access to the system through their communications badge or terminal.
Whether intentional or not, Rodenberry's dream may well have spawned the early technologies that led to the modern Internet. In the Investment Phase, we have IBM creating the networking technologies to create the centralized computing options Rodenberry dreamed of. We also had DARPA taking this networking capability to a global scale. The individual terminals to access the system were created by those who first created the personal computer. None of these concepts amounted to anything in and of themselves but all served as investments in Rodenberry's dream.
Once these various investments were made, we witnessed companies like Compuserve and America Online and others create the foundations of what would ultimately be the modern Internet. They developed the centralized resources and technologies that would ultimately power the application. They developed interfaces and methodologies that further refined the original dream. This development ultimately reached a point in the early 1990s where practical applications could be developed and marketed.
By the mid 1990s, the modern Internet was finally born from the dream originally conceived by Rodenberry in the original Star Trek series. While many still claim that nobody saw it coming, the reality is many individuals, as well as organizations, DID see it coming and invested substantial resources to the concept. So what does this have to do with the military?
The entire concept and nature of war is driven by technological change. Whether it is the developments of gun powder and rocketry for weapons, the creation of the internal combustion engine for vehicles, or the development of radios for communications, the art of war is largely defined by the technology available to engage in war. Many complain of a constant tendency of the U.S. military to always be fighting the last war but this is as much a matter of failing to adapt to changing technology as it is a matter of failing to adapt to changing warfare concepts.
Even our geostrategy is largely dictated by technological advances. Satellite communications have greatly enhanced our warfighting abilities while also enhancing the abilities of terrorist groups to attack us assymetrically. Medical advances have brought both the end of disease as well as biological weapons. Industrial advances brought both chemicals to improve our lives and chemicals that enemies can use to kill is. Aviation has opened up the world for commerce and given us the ability to inflict unimaginable levels of devastation. Every advance in the human condition brings with it a fundamental change in the art of war.
The Impact of Market Effects
It is not a coincidence that the overwhelming majority of technological advances originate in nations with something resembling free market economic systems. To a great extent, the market in and of itself drives the advances. In a market economy, the entire population of a nation plays a critical role in the investment, development, and application phases of the technological cycle. When any given idea is put forth, literally the entire nation sets out on ways to make use of the idea. Many will invest money in companies working the idea in the hopes of cashing in on rising stocks. Others will buy the technology as soon as it hits the market to put it to use in a profitable way and provide valuable feedback on the concept. Others may hold off purchasing the product - in itself, a form of feedback as developers are shown the product isn't fully ready for everybody and pushing them to refine their work further. The existence of the market provides those dreaming and creating new ideas with a constant feedback to further their development efforts.
This poses a massive problem for the DOD and defense contractors - in the real world of defense industry and policy-making, there is no market as the process is entirely communistic in nature. In the world of the DOD, every phase of the technological cycle is carried out by the same small group of people who many times will never even be involved in putting the technology to use. There are no consumers to accept or reject a product - there are no investors to support or reject ideas. The entire process is dictated by those of rank in the Pentagon who haven't been to a battlefield in years, and in some cases ever.
The absence of a market by definition means the absence of effective and constant feedback. Whether it's a weapon system like the Sgt. York, a rifle like the M-16, an aircraft like the A-12, or even a political policy like the Patriot Act or the Total Information Awareness project, effective feedback isn't available until it is too late. Project FutureThink can end this cycle of perpetual failure by capitalizing on the predictive nature of markets and their feedback mechanisms to recognize, isolate, and enhance proposed technologies and policies.
Members of Project FutureThink
In total, there should be 5000 "investors" in FutureThink. Of these, 20% should be organizations (businesses, contractors, think tanks, etc.) while the remaining 80% would be individuals with relevant experience and knowledge. An invitation process should be used to select the members while the general public is open to apply to request an invitation. Any member leaving the project is free to choose their replacement in the project, as long as the chosen replacement has the relevant experience and knowledge.
Individual members would be paid $100,000 per year on a contract basis (no benefits). Groups functioning as members will be eligible for a total of $600,000 per group which should be sufficient to get larger organizations involved in the project. Bonuses will be universal in that all members, whether an individual or a group, will only get the same bonus amounts. More on bonuses later.
Each member will have an online trading account by which they can manage their notional futures portfolio. This allows for people from all across the country, and even outside the country, to take part in the project. To lighten the informational burden, the "market" will be divided into sectors and each member will be part of a given sector in which they will specialize. At the start of the program, each member would be given a notional account of $10million to be used for trading shares in ideas and concepts. When a member develops an idea or concept that will enter trading, the member receives a nominal cash bonus along with a quantity of shares in the idea. The shares can then be traded on the market.
FutureThink Market Sectors
The futures market used for this project will consist of five specialty sectors with a sixth applying to everyone in the project:
These are the primary sectors into which members will be assigned. The sixth sector applies to everyone in the program. This puts 1000 members in each sector with a total of 5000 members trading in Geopolitics and Strategy (the futures relating to the original FutureMAP program). As examples, someone like myself would be assigned to Logistics, someone like Carlton Meyer would go into Future Weapons and Systems, a Mike Sparks would go into Operations and Tactics, a Douglas MacGregor would go into Command and Organization, and someone like former Microsoft exec. Paul Allen would go into Technology. These are just examples as opposed to actual suggestions.
Initial Proposed Offerings
An idea board will be maintained with proposals from all of the different members as well as proposals from the DOD and other government groups wanting a given concept evaluated. These proposals will be relatively brief and generalized. Examples of IPOs (respective to the above sectors) might be:
These IPOs would be listed on their respective idea boards at which point members can review each and respond in one of three ways:
Any new IPO will be listed as undecided for each member until the member goes into the board and changes their standing on that IPO. An IPO needs acceptance from 20% of all eligible members before it becomes a tradable future. For the specified sectors, this means 200 members must sign-on to the idea while for geopolitical IPOs, 1000 members must sign on. Any IPO that is rejected by more than 50% of the pertinent members is removed from the board entirely.
Tradable Futures
Once an IPO has attained its 20% it becomes a tradable future. Each of the respective members that signed on to the idea are then awarded 5000 shares in that future. A trading board will be maintained for all futures where members can post offers to buy and sell and to consummate trades in that particular general concept. As the price of a given future rises, this indicates an overall support for that particular concept.
Because we are keeping the futures themselves generalized, this aspect of the market is a tool to recognize problems or challenges that are currently going on in the force. Actual solutions will be addressed by other means but this portion of the market can show the Pentagon and Congress where areas of concern lie and will be changing and updating on a continual basis. Once the IPO becomes a tradable share, the shares are then frozen for a one month period to allow for the formation of derivatives.
Future Derivatives
Future Derivatives are where the members have the opportunity to offer their ideas and concepts for resolving the problems that have been identified. For the first two weeks after an IPO reaches future status, all applicable members are eligible to submit proposals for derivatives. All proposals will be posted on the derivatives board and will be open to review by members. At the end of the first two weeks, submissions are frozen and the selection process begins. Members must choose one derivative that interests them or opt out of the derivatives for that future. At the end of the two weeks, the derivatives that received the most votes (top five for sectors, top ten for geopolitics) will be awarded for trading. The creators of the derivatives will be awarded 100,000 shares in the derivative, $100,000 to their notional trading account, and a cash bonus of $10,000. At this point, trading in both the future and its respective derivatives will open for the members.
The Trading Process
The trading of futures and derivatives will work in a fashion similar to how conventional trading markets work. Interested buyers will post an offer of how many shares they would like to purchase and at what price, interested sellers will post similar numbers accordingly. Centralized computers will manage the trading process. Consistent with the basic concept of supply and demand, an increase in price indicates an increase in interest and support for the concept or idea. Similarly, a fall in price is indicative of declines in support for the concept. With this design, it is also possible to have a situation where an overall concept may have strong support but the ideas to deal with that concept may have little or no support.
With any future or derivative in trading, members retain the option to opt-out of the shares. What this means is that the member can wholly reject the concepts involved. If more than 50% of eligible members reject the share, that particular share is liquidated (eliminated from trading). This means that derivatives may be killed and in the case of a future share, the future and all of its related derivatives may be killed outright based upon a majority opinion. It should also be noted that any member holding a controlling interest in a derivative can alter that derivative as desired, allowing the idea to evolve with time.
Share Value as Feedback and Predictor
What this system does is it serves as a feedback system for the DOD, not unlike how the stock market provides feedback to the overall economy. High share prices indicate the areas where changes need to be made and the direction in which these changes should be made. This also provides an indicator for the DOD on the direction in which things are likely to be going in the future. Similarly, the Congress can also use this as a tool to evaluate the DODs operations and budgets. The market will indicate where the priorities should be as far as spending and efforts.
Contractors and the DOD can also use the market as a tool to evaluate new ideas or concepts. It can float an idea on the futures board and if members buy into the idea and the values head up, they know there is support of their concept. If nobody buys into the idea at all, they know they need to head back to the drawing board or look in another direction. A key aspect of this system is that although it would be financed through the defense budget, the information it develops will be independent of the DOD itself. Unlike studies that can be rigged to support a certain idea, there is really no way for the Pentagon to manipulate the results that will occur in the FutureThink market.
The ability of individual members to field their own ideas into the process also brings in thinking from outside the Pentagon. Instead of the bureaucracy driving the development of military ideas, the project members can develop concepts and ideas in directions that can overcome the inertia inherent in all large bureaucracies. If the Pentagon chooses to ignore an idea while its value on the market is skyrocketing, then Congress can act with its various oversight capabilities.
The Congress can also use this system as an independent evaluator of existing programs. It may see a program, like the V-22 or Commanche programs, where problems are appearing and put ideas into the market to look at potential options or alternatives to the status quo. The feedback provided may result in the direction of a program being shifted, an alternative to the program being presented, or ending the program altogether.
A Sample Scenario for FutureThink
Let's look at how this system might work in actual practice with an example from my area of expertise - logistics. For this example, we'll say that I am a member of FutureThink and we'll walk through the entire process.
I'm not impressed with the DOD's current plans to deal with future transport aircraft requirements so I log into FutureThink and post an IPO of "Existing aircraft resources plans are insufficient to support future deployment and sustainment needs." At the start, I have $10,000,000 in my FutureThink account and no shares in my portfolio.
Over the course of the next week or so, various other members from the Logistics sector sign-on to support the IPO and by the end of the week, we have 200 acceptances. I'm awarded 5000 shares in this future and the future is locked for the derivative process.
I have a solution for the problem that I am going to post as a derivative - "We need to expand the C-17 fleet to 200 aircraft, purchase 200 747-cargo variants, and 100 Skycat 1000 airships in order to meet future needs." I would spell this out a little more to make my case but for this example, we'll be brief.
Others will post their own derivatives including "Halt C-17 production, purchase 747s instead", "Purchase 747s to replace the C-5 and expand C-17 fleet to 150", "Remanufacture the C-5 fleet and expand the C-17 fleet to 200 aircraft", "Halt C-17 production, modify C-130s for midair refueling, purchase 747s to replace the C-5" which are the preferred derivatives along with my own.
Each accepted derivative creator is awarded $10,000 cash, 100,000 shares in the derivative, and $100,000 to their FutureThink trading account. So I will now be holding 5000 shares in this particular future, 100,000 shares in my derivative, and I'll have $10,100,000 in my FutureThink account. To build support for this future and derivative while maintaining control of my idea, I'm going to place an offer on the board to sell 100 future shares at $10 per share and 1000 derivative shares at $20 per share.
The following day I accept offers resulting in my selling 1000 future shares and 15,000 derivative shares to various parties setting my account at $10,510,000 and I turn around and purchase $300,000 in other shares. This process then repeats itself over and over throughout the market with prices rising and falling based upon the members perceived values of the ideas. I also pay special attention to always retain 50,001 shares of my derivative to retain control of its future. I can further refine it and package it causing the value of the shares to rise and fall based upon the other members perceptions of the value of my changes.
Over time, the value of this particular future, "Existing aircraft resources plans are insufficient to support future deployment and sustainment needs." climbs to a level where it starts getting some attention on Capital Hill. Congress is now aware that the market has little confidence in the DODs plans to address this area and the market also views this as a problem of growing importance (if it isn't a growing problem, members wouldn't be buying these shares because the value wouldn't be rising - they'd spend their money elsewhere). The problem is that none of the derivatives appear to be really standing out from the others. At this point, Congress can throw ideas onto the IPO board to attempt to further isolate a solution to the problem - those ideas that are supported will be bought and have their values increase while others will never make it off the IPO board.
Contractors being members of FutureThink will be watching all of this and working on projects to attempt to capitalize on the issue. They may throw their own ideas up on the IPO board to gain feedback from the market on a product idea intended to address the problem. The DOD will engage in a similar practice as will actual members of the project. As this is going on, derivatives will be revised to incorporate some of these ideas in an effort to bolster share values. Members may even partner up to merge ideas into particular derivatives to share in the growth of a share's value.
Over time, a dominant share will emerge as the direction in which the process should go. Once the DOD or Congress adopts the idea or concept, the shares are liquidated at the market value of the time of the decision and the holders of the shares receive funds in their accounts for the value of their shares. Once the decision is made, but prior to public release, the market for that share is frozen until the final decision is released. As an example, we'll say that through various maneuvers my derivative was adopted while I still held 50,001 shares at a value of $120 per share. My account would be awarded $6,000,120 for the value of my idea and my derivative would be liquidated. The remaining derivatives will remain until their values drop to a sufficient level or the future is killed outright as the problem is deemed solved.
Now then, let's say that at the end of the fiscal year, my FutureThink account held a total value of $12,000,000 because some of my ideas went well and others didn't go so good. I had a big win but I lost on others. For my efforts, I would get an annual bonus of $60,000 for this particular year, payable when I leave the program. The better I perform and work towards effective solutions, the more money I will get in my pocket. The more derivatives I get accepted, the more money goes into my pocket. If my ideas aren't supported and I can't package and push them, then I won't make any of the potential bonuses. The more money I make, the more service the DOD and Congress are getting from me.
Summary of Project FutureThink
Project FutureThink is a way to establish a form of market to provide feedback to the DOD and Congress on the performance and ideas of the DOD. It can replace many of the useless studies and investigations that are constantly performed but never seem to solve any problems within the DOD. This is a constant feedback mechanism - unlike a study, this isn't going away as long as the problem remains in place. Also unlike a study, the market is free to evolve over time with changes in warfare and technology, instead of being merely a snapshot at a given time and place.
When one considers the enormous sums of money spent by the DOD and Congress every year on consultations and studies, it becomes obvious that Project FutureThink can be done cost effectively. While the total base salaries of the members works out to $1billion per year, many studies and analyses come close to this mark in and of themselves. The defunct FutureMAP program to develop a market for the geopolitical ideas alone was budgeted at $1billion per year and this was for far more traders so we can accurately estimate that this project shouldn't cost more than about $3billion per year in total costs.
Is less than 1% of the defense budget too much for a crystal ball?