Open source warfare dictates against long planning cycles and complex attacks except in extreme circumstances (the handbook of open source warfare is Brave New War).  Typically, this means that for attacks to be sufficiently disruptive at this level of planning, they need to target soft but systematically important nodes on critical networks.  However, there is an exception to this rule.  If the defensive response to attacks on hard, symbolic targets is excessively intense, the damage caused by even failed attacks can be as disruptive as attacks on critical infrastructure.  I made the case for this in the Dec. 2009 post: "Failure as a Strategy".  

It now appears that the US counter-terrorism community accepts this premise (see "Al Qaeda's new Tactic is to Seize Shortcuts" in the LATimes) and is acting on it.  Here are some choice quotes from the article:

• An examination of recent plots, including the bombing attempt on a Detroit-bound airliner on Christmas Day, has convinced U.S. counter-terrorism analysts that Al Qaeda is becoming more opportunistic, using fewer operatives and dramatically shrinking the amount of planning and preparation that goes into an attack.
• The lesson Al Qaeda probably took was that, " 'Jeez, the damn bomb didn't go off and the Americans are still going out of their minds,' " a senior U.S. counter-terrorism official said.
• U.S. intelligence agencies are struggling to stay abreast of the evolving threat. The National Counterterrorism Center expects to add as many as 50 analysts this year focused exclusively on tracking emerging threat data that previously might have been overlooked when the emphasis was on trying to detect and prevent a mass- casualty plot.

Some random items of interest:

• OIL.  The price of oil is still over $80 a barrel even after a recession in the US.  This means a couple of things.  First, performance of the US economy doesn't dictate the price of oil anymore (it's now global).  Even with this high price new oil production isn't coming online fast enough to replace rapid rates of depletion, which argues strongly that we have already reached peak oil production.  Finally, any disruption of the oil market at this price level (for example: a restart of MEND's campaign in Nigeria or an ill advised adventure in Iran) would put oil well over $100 a barrel and drive the global economy into another deep contraction.  This is a replay of 2004 but much worse given this starting point.
• As background for the item above see the 2004 posts on the Oil market:  "A Window of Vulnerability" and "$100 Oil?".   Oil demand is inelastic in the short term.  Combine this with peak oil and even small amounts of disruption and the price skyrockets.  A clue on what is in store:  the 2008 financial crisis was set in motion by a global economic recession caused by an oil shock.  
• Interesting new consumer index that uses real-time online retail info to show that the US consumer continues to retrench (which implies that a double dip start to show up next quarter ~ -1% GDP in Q2).
• Marketcetera.  An open source high frequency trading (HFT) system.  Nice.  Why should Goldman and hedge funds have all the fun disrupting markets?  Would be interesting to see what is possible when a HFT system like is combined with physical systems disruption.
• Disgruntled former employee used his loan company's remote controlled repo system to disable a hundred or so cars.  
• Police department being targeted by booby traps in CA. "...a natural gas pipe was shoved through a hole drilled into the roof of the gang enforcement unit's headquarters."

Cultural entrepreneurs need to use every possible advantage when building systems that can outcompete a powerful, corrupt and dominant status quo.  For me, one advantage includes using game tech/design as a means of radically improving economic interaction over networks (which can serve as a source of economic power and generate rapid rates of innovation for resilient communities).   Sure, the idea is hard, novel, and difficult to wrap your head around, but frankly, if you automatically reject entire vistas of options because of some vague personal bias (or worse: ideological blather), you are doomed to failure.

So, that being said:   Here's a big think presentation on game design that may be of interest (particularly the last part). The presenter is very quirky (which made it enjoyable to me).

"We're witnessing what amounts to no less than a mass exodus to virtual worlds and online game environments."  Edward Castronova 

(Ed's an economist that studies online games.  I met him at a Highland's conference a couple of years ago, smart guy).

Here's a video of Jane McGonigal at the 2010 TED (the conference for tech, entertainment, and Wall Street elites to rub elbows) conference.   In it she talks about the power of online games.  Worth watching.

Some useful stats from the presentation include:

• Active online gamers spend 10,000 hours of play by the time they are 21 (almost as much as the time spent in school).
• There are 500 million active online gamers worldwide (that will grow to 1.5 billion in the next 10 years).
• 3 billion hours a week are spent playing online games.

She also hits on some useful observations:  people game to this degree because it makes more sense than real life and that gaming is a form of personal super empowerment. 

However, at this point the presentation breaks down.  McGonigal then proceeds to think of ways gamers can be used to do things (which plays well with the users at TED).  While I give her props for thinking about ways to generate ideas on how to fix global problems, she entirely misses the big idea.

Here's the big idea.  For active online gamers real life is broken.  It doesn't make any sense.  Effort isn't connected to reward.  The path forward is confused, convoluted, and contradictory.  Worse, there's a growing sense that the entire game is being corrupted to ensure failure.  So, why play it?

They don't.  They retreat to online games.  Why?  Online games provide an environment that connects what you do (work, problem solving, effort, motivation level, merit) in the game to rewards (status, capabilities, etc.).   These games also make it simple to get better (learn, skill up, etc.) through an intuitive just-in-time training system.  The problem is that this is virtual fantasy.

So the really big idea isn't figuring out how to USE online gamers for real world purposes (as in the dirty word: crowdsourcing -- the act of other people to do work for you for FREE -- blech!).  Instead, it's about finding a way to use online games to make real life better for the gamers.  In short, turn games into economic darknets that work in parallel and better than the broken status quo systems.  As in: economic games that connect effort with reward.  Economic games with transparent rules that tangibly improve the lives of all of the players in the REAL WORLD.

This isn't tech utopian. It's reality.  The global electronic marketplace and the political system that currently dominates our lives is at root a game but with hidden rule sets.  As a result, it's a game that being run for the benefit of the game designers to the detriment of the players.  The reason we keep playing is that we don't have any choice.  Let's invent something better and compete with it.  Let's provide people with a choice.

Here's a little bombastic vision on what could be the most important social trend of this century.

____________________

What if the world as we know it today isn't the end of history?  The pen ultimate destination of human cultural evolution that eventually (likely sooner than later) collapses due to its own obesity.  What if it is merely a stepping stone to something new?  Something much better than the increasingly barren monoculture prone to increasingly frequent bouts of malfunction we live in today.

The idea that something new is possible is spreading.  Most favorably, it is giving rise to a new type: the cultural entrepreneur.  

For these people, the slow motion failure of the global system hasn't resulted in capitulation, depression, or isolation.  They don't have a blind faith that things will auto-magically get better.  In contrast, to these entrepreneurs, the failure of the global system is a call to arms.  An open invitation to build something new.  A better social and economic system and not merely another patch on a wheezing status quo.   

For entrepreneurs of this type, the goal isn't isolation or withdrawal into the wilds to build communes or stock cabins with ammo.  It also isn't about taking control of the current levers of power and of forcing compliance.  A clue: it's not about bankrupt ideologies or the politics of the 20th Century.  

Instead, this effort is about competition.  It is to build new social and economic systems that can compete with the current political and economic monopolies and if successful, force them to compete in order to stay relevant.   It's about building something new from the ground up, a start-up culture of independence and sanity, that attracts better participants and delivers more results than any other alternative.  

The start-ups these entrepreneurs are building work within the current system and against it, growing in power with each cycle of innovation.  They compete against each other to provide the best possible results, yet connect on a level that allows them to accelerate faster than if they were alone.  

Sure, as with all start-ups, most will fail.  Many will be horribly misguided.  But some won't fail.  Some will even work spectacularly well.  

May the best solution win.

NOTE:  This isn't an essay to convince you.  If you think the status quo is the best of all possible systems, this likely isn't for you.  However, if when the the current system eventually fails you or your kids, you might think differently.

My friend Reihan Salam has a new article in Time magazine called "The Dropout Economy."  It's in a section on the top ideas for the next decade.  He must be feeling the motion underway too.  The driving need to be a social/cultural/tribal entrepreneur that makes something new out of the broken old system.  Here's some salient ideas from the article:

Somewhere in the suburbs there is an unemployed 23-year-old who is plotting a cultural insurrection, one that will resonate with existing demographic, cultural and economic trends so powerfully that it will knock American society off its axis. 

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.

Rather than warehouse their children in factory schools invented to instill obedience in the future mill workers of America, bourgeois rebels will educate their kids in virtual schools tailored to different learning styles. Whereas only 1.5 million children were homeschooled in 2007, we can expect the number to explode in future years as distance education blows past the traditional variety in cost and quality. The cultural battle lines of our time, with red America pitted against blue, will be scrambled as Buddhist vegan militia members and evangelical anarchist squatters trade tips on how to build self-sufficient vertical farms from scrap-heap materials. To avoid the tax man, dozens if not hundreds of strongly encrypted digital currencies and barter schemes will crop up, leaving an underresourced IRS to play whack-a-mole with savvy libertarian "hacktivists."

Work and life will be remixed, as old-style jobs, with long commutes and long hours spent staring at blinking computer screens, vanish thanks to ever increasing productivity levels. New jobs that we can scarcely imagine will take their place, only they'll tend to be home-based, thus restoring life to bedroom suburbs that today are ghost towns from 9 to 5. Private homes will increasingly give way to cohousing communities, in which singles and nuclear families will build makeshift kinship networks in shared kitchens and common areas and on neighborhood-watch duty. Gated communities will grow larger and more elaborate, effectively seceding from their municipalities and pursuing their own visions of the good life. Whether this future sounds like a nightmare or a dream come true, it's coming.

This transformation will be not so much political as antipolitical. The decision to turn away from broken and brittle institutions, like conventional schools and conventional jobs, will represent a turn toward what military theorist John Robb calls "resilient communities," which aspire to self-sufficiency and independence. The left will return to its roots as the champion of mutual aid, cooperative living and what you might call "broadband socialism," in which local governments take on the task of building high-tech infrastructure owned by the entire community. Assuming today's libertarian revival endures, it's easy to imagine the right defending the prerogatives of state and local governments and also of private citizens — including the weird ones. This new individualism on the left and the right will begin in the spirit of cynicism and distrust that we see now, the sense that we as a society are incapable of solving pressing problems. It will evolve into a new confidence that citizens working in common can change their lives and in doing so can change the world around them.

Some random items of interest:

• The shadow banking system is still alive and growing.  According to a new paper (PDF) by the Levy Economics Institute of U Miss, the derivative exposure of Goldman Sachs was 33,823% of its assets in 2009 (as compared to 25,284% in 2008).  They are still leveraged to the hilt and the US government is the backstop.
• Nigeria. MEND's open source insurgency is ramping back up. It gave 30 minutes advance warning (to avoid casualties) of several car bombs placed in a Niger Delta's government compound.  The objective was to discredit claims by the government that the insurgency was defunct and to disrupt what was left of the failed amnesty program.  As MEND begins its campaign of disruption again, higher oil prices will follow.  Note to the big oil companies: negotiate directly with MEND to build prototypes of resilient communities that can spread rapidly across the Delta.  In my contacts alone, there's a line out the door of very smart people ready to build these communities in a way that provides very rapid and self-managed improvements in living standards.  My guess is that the first company that does this gets a pass on the next couple of years of disruption.  At a likely price of 
• Mexico's insurgency is now targeting the US government.  Not sure this attempt at expansion of the insurgency will attract a swarm.
• MI5:  "Britain is four meals away from anarchy."  A belief that systems disruption can cause a complete breakdown.
• New Scientist.  Nice (particularly the bit with Tainter) round-up of theories on social collapse.
• Film.  "Local Solutions for Global Disorder"  in French.  In short, the collapse of the middle class in the US is being replicated in Europe.  
• The industrial education system in the US continues to collapse.  Soon, in order to get any semblance of an education, you will need to home school online.
• More later.

Two new books on the 2008 financial debacle from very smart insiders have emerged that may be of interest.  The first is Econned by Yves Smith.  It's a very detailed analysis of the debacle that attempts to trace it back to economic religion ideology and outright looting.  The second is The Big Short by Michael Lewis.  This book attempts to show the mass delusion and stupidity of Wall Street, mostly due to perverse incentive structures, led to the subprime meltdown.  Both push the boundaries of what's possible to learn from an insiders perspective.  

The only way to learn more is to look at it from a wider perspective, at the level of systems theory.  To do this, we need to establish what the financial system looks like at a controls and systems level.  The best candidate for this is the bow-tie control system.  This kind of control system is very common -- it's used in everything from our body's metabolism to the Internet/Web.  Here's a short paper on bow-tie control systems from John Doyle of CalTech that you might find helpful.

A bow-tie control system is very simple.  It takes a wide variety of inputs and simplifies them into a small set of common components.  These simple components are then used to create a bewildering variety of outputs.  In the case of metabolism, the inputs are the vast variety of foods we can eat and the simplified components are simple sugars etc.  The outputs are cellular structures to proteins.  In the case of the Internet/Web, the inputs are sites built using a wide variety of technologies.  The simplified components are data packets and the output is the visualization and interactivity seen by the end user sitting at a personal computer (in tech we call bow-tie control systems by another name: platforms).   

This type of system is very robust to almost all forms of environmental change.  The inputs and outputs can change radically, to respond to changes in the environment.  The only glaring vulnerability of the this system are attacks made directly against the bow.  Why?  In order for this type of system to work, the bow's components need to remain simple and the simple controls (feedback loops) that regulate the number and availability of the components can't be impaired.  If the bow ever does become corrupted, systemic failure is inevitable.

In the case of the financial system, the simplified component of the bow-tie control system is money.  The regulatory system for these simplified components are markets (price discovery). Through this lens, what happened in the financial system is actually relatively simple.  The financial industry created a system called the shadow banking system (a notional value of $400 trillion ++), which is essentially a complex web of interconnected derivative contracts.  These contracts are, by and large, NOT regulated by market mechanisms (they "derive" their value from other things, including market prices).  Instead, they are customized and complex.  These derivatives created a set of interconnections that bypassed the financial system's simple bow to directly connect inputs to outputs. This had the following results.  

• Since individual banks issued and participated in these derivatives, they became central to the system's operation.  These banks are now, since they own a portion of the financial and economic system's bow: "too big to fail."  
• The system became brittle to changes in inputs.  The shadow banking system doesn't provide a way to price and "clear" these derivatives using a market mechanism.  Information typically discoverable by markets (fraud and bad assumptions) isn't accomplished.  As a result, very small changes in sub-prime mortgage default rates (an input) rocketed through this system and was one of the factors that led to a systemic collapse. 
• The banks that have a stake in the shadow banking system are parasitic.  Like cancer, they actively redirect financial resources away from useful pursuits (in the bow-tie) into a much larger shadow banking system over which they have exclusive control for their own benefit.  Worse, these connections are potentially fatal to the operation of the bow-tie system upon which we rely.  Efforts to defend this parasitism, from the subversion of control mechanisms (i.e. the rating agencies) and distortion of government operations (to prevent regulation that would limit or unwind these contracts) are inevitable.

So, what does this mean?  Since nothing has changed -- the banks are still too big to fail, the derivates that make these connections are still being offered, the operations of the shadow banking system are still opaque, and attempts to regulate this arena have been rebuffed -- the financial system will remain corrupted, brittle, and ridden with parasites that sap its strength.   Catastrophic failure is inevitable.

Here's a compilation of the standing orders series for open source warfare from last year. Probably need to add some more.

1. Break Networks
2. Grow Black Economies
3. Virtualize your organization
4. Repetition is more important than scale
5. Coopetition
6. Don't fork the insurgency
7. Minimalist rule sets work best
8. Self-replicate
9. Share everything that works
10. Release Early and Often
11. Co-opt, don't own, basic services