Παρασκευή 29 Ιουνίου 2012

Irregular Warfare, Village Stability Operations and the Venture Capital Green Beret



After eleven years of non-stop general and limited war in Afghanistan, Iraq, the Philippines and elsewhere, Village Stability Operations are returning us to our Irregular Warfare roots. However, it is not the IW of the Cold War but rather the IW of Globalization. And there are three overriding truths driving this IW: investors are more powerful than nation states; stateless actors are more effective than standing armies; and, stability means employment. These truths have driven Special Forces, post 9/11, to move far beyond mastery of only the Military in Diplomatic, Information, Military and Economic operations. And yet, though we are meeting with moderate success and ninety percent of the resource development is done, we fail to fully grasp how all these operations fit into a functional whole. This is due to the fact we have yet to add one critical component, the mind of the investor.

The highly skilled mind of the investor is trained to realize one thing only, Return on Investment. And in a world now driven almost solely by economics and finance we need look outwards to this community for a conceptual framework and body of practice which can be adopted and melded to our domain. Fortunately, there is already an almost direct analog for the DIME centric Green Beret, the Venture Capitalist. A skilled generalist, the VC melds unconventional, non-linear thinking with traditional finance and business models so as to realize a ROI from the empowerment of small businesses, from wealth and job creation. For the VC and Green Beret alike, ROI is not derived from doctrine or from top-down thinking and applications of decisions and resources, but from empowering the near limitless capacities of the entrepreneurial spirit resident within even the most illiterate and uneducated members of humanity.

For those who have not had the opportunity to work in both worlds, that of Special Forces and that of the Venture Capitalist, the similarities may not be obvious. Nor may it be obvious why the mind of the investor and in particular the mind of the VC is that critical missing piece of modern IW. To gain an understanding of why this is so, we must first know what Venture Capital does and how such is already an analog for the 21st Century IW Warrior.

Venture Capital

Many argue agriculture and infrastructure need be developed before a widespread business base can arise. Though a certain degree of initial development in agriculture and infrastructure is necessary, it is business alone which can afford to expand, improve and maintain infrastructure. Without the tax base and development demand derived from a thriving commercial sector, welfare and non-welfare governments alike can only provide for limited infrastructure. More importantly, it is only an expanding base of industrial and services companies which can create the necessary number of jobs.

The problem of course becomes one of creating an industrial and services base out of not much more than raw human potential, and in some of the most remote and underdeveloped parts of the world. A top-down “trickledown” approach is incapable of the task, meaning a bottom-up, local and individual driven process must be applied. This is what makes the Venture Capital industry the perfect model. This bottom-up style of economic entanglement, new industry and job creation, is exactly what VC specialize in.

The bottom-up approach is powered by the endlessly creative and entrepreneurial spirit of humanity, and provides access to a near limitless supply of ideas and future business leaders. Venture Capitalists harness this boundless capacity by applying sophisticated filters, derived from proven experience, to weed through the many in order to identify those few business plans and management teams possessing the right combinations to become investable assets.

The sole purpose of the Venture Capitalist, the relationships and access, highly trained tools and practices they employ, is establishing companies which are productive contributors to globalization. For the economy this means a tax base, for the community it means jobs, for the investor it means Return on Investment and for globalization it means stability and growth.

Historically, less than ten percent of companies reviewed receive VC investment. Fifty percent of these fail, and forty percent only break even. This leaves ten percent of companies funded to realize the critical Return on Investment for all. A comfort working with and ability to derive value for stakeholders and shareholders from these success-failure rates is the role of and what differentiates the Venture Capitalist and the Green Beret alike.

Return on Investment is derived in a Venture Capitalist’s investment portfolio, from failure, through Constructive Destruction. This is the process of supporting efficient companies and cannibalizing inefficient ones and redirecting assets to the more efficient companies within the portfolio or the portfolios of other investors. This requires a VC possess the ability to, identify and analyze the value of assets within the portfolio at any given point in time, and to rapidly devise and execute courses of action designed to realize and enhance the value of these assets.

To further understand the nature of Venture Capital and to see how the industry is an analog and model for 21st Century Irregular Warfare requires an understanding of the investment world as a whole. And though such is far beyond the scope of this paper, we can discuss the basic structure of the now global investor community and how they collectively drive the global economy.

The global investment community is a tiered structure with Angel & Seed Venture Capitalists at the base and the Stock & Securities Markets at the peak. Investments move up through the many layers of investors between the base and the peak, with each subsequent investor further refining and defining the asset and improving valuation. At the base are companies with unstable valuations which are not clearly defined and represent higher orders of potential Return on Investment but also much higher magnitudes of Risk & Uncertainty. At the top are assets with stable valuations and which are clearly defined and represent lower ROI and smaller degrees of Risk & Uncertainty.

Where all the many layers of investors above are focused on improving the valuation of existing companies, Angel & Seed investors are the only ones whose role it is to invest in new companies. It is the Angel & Seed investor who comes in when the Risks & Uncertainties are too high, when the ROI is too low and uncertain for even higher level Venture Capitalists to get involved. Without this highly specialized capability and its dedicated practitioners the global Capital Markets would be impossible.

The willingness to look for and the ability to see assets and Return on Investment where the system cannot or will not, the application of conventional and unconventional thinking and the willingness to cannibalize inefficient assets before they lose all value, is what is necessary, to create assets from almost nothing and to develop an economy. This is not made possible by executing a predetermined plan as to which assets and of which type to invest in. The power of A&S investors is their ability to filter and harness the incredibly creative and productive entrepreneurial spirit of the near endless numbers of those seeking to participate in globalization. And this domain is both unique and common to A&S investors and the Green Beret alike.

This does not mean to imply there is not some predetermination as to which companies and business models receive investment. In order to qualify management and the business plan, to model Risk and to identify the ROI potential, investors must possess a well-developed and proven base of knowledge, experience and relationships in the industry in which the potential investment is or intends to be engaged. These abilities, far more than the money, are the real advantage the A&S investor brings to their investments and which provides for entanglement with the greater economic and financial engines and thereby much higher certainty of success.

The real importance of the A&S investor is his highly trained unconventional mind, which, like the mind of the Green Beret, cannot be taught but only refined in those who already possess it. This mind demonstrates its uniqueness in two fundamental capabilities: i) a thorough and fluid understanding of the subset of globalization in which the investment exists and must compete and survive; and ii) an ability to appropriately identify and articulate a quantified (specific) financial value (price) to the asset at any given point in time.

Venture Capitalists know how to put people to work in sustainable businesses. And at its very basest level, non-welfare state job creation is the current and future endstate of Irregular Warfare. We can see the beginnings of this in the Village Stability Operations now being conducted by Special Forces in Afghanistan.

Village Stability Operations

Though globalization has greatly improved the standard of living and quality of life for billions, there remain billions who are only now, or who are only partially benefitting. And there are hundreds of millions not benefitting at all. It is in these places where we do VSO, places walled or partially walled off from globalization, where the enemies of the modern world survive, thrive and recruit.

The purpose of this article is not to define VSO, which is already the topic of a growing body of articles and academic works, rather the purpose is to identify the similarities between VSO and the Start-up world of VC. It is important to detail some of the key issues of VSO in the language of business in order to demonstrate a common framework.

Limited or Ineffective Governance (Leadership):

Absolutely essential to the success of any venture is management and leadership, particularly in early phases when everything is opaque and uncertain. It is also important to note the best managers and leaders are not always obvious and those who are most effective in early phases may not be as effective in later ones.

In the start-up world there are four traits absolutely essential for managers and leaders. The first is vision and the ability to clearly articulate and achieve active buy-in with this vision. Second is a comfort with not having all the answers, with listening and choosing the best Course of Action from amongst those put forward. Third is the ability to rapidly adjust to changes in the environment or to having made a poor COA selection, even if this means changing direction and cannibalizing assets. The fourth is a willingness to fail, to learn from failure and to employ the lessons learned from failure to enhance the next venture.

In the VSO world, where old grudges and hatreds often exist, it is also critical managers and leaders possess enlightened self-interest, the ability to see beyond and to put aside personal anger for shared reward. It is the same in the business and financial world where prolonged competition or aggressive contract negotiations often lead to angry, vengeful and conflicting interests which need be arbitrated.

One of the greatest strengths, if not the single greatest, of the Venture Capitalist is the ability to recognize talented managers and leaders. This constant search for talent often leads to career-long relationships and the same VC working with the same managers and leaders across multiple projects. Identification of local, provincial and national managers and leaders is critical to the long-term success and viability of VSO.

Divided Populace (Inefficiency):

It is the nature of systems, markets, industries, communities, to become inefficient over time, to require a new vision to energize and unify. A vision defines an industry and demonstrates a pathway whereby all constituents benefit from efficiencies. In the VC world it is rare a start-up is funded with the purpose of creating an industry, most receive funding for an innovative vision of how to organize and drive an existing market to improved market share, profits and asset valuations.

Though vision is critical, it is only half the requirement. Leadership, committed to creating consensus amongst enemies, competitors, customers, and suppliers, stakeholders and shareholders, is the other. Where the Vision demonstrates what the table will look like and what will be left on it, Leadership provides the trusted party who ensures all parties have a place at that table.

One of the most difficult tasks is to identify all the direct and indirect participants necessary to the vision’s success and to get them to come to the table. No company or community operates in a vacuum and a vision and leadership alone are not enough. It takes a community, an industry, the active involvement of many contributors and competing interests. And to succeed, requires a thorough understanding of the community, industry, what external forces interact and impact it and of the larger and far more complex web of relationships in which it resides.

Overcoming division requires an achievable and communicable vision driven by leadership out there actively engaged in commitment building. Commitment to a vision is difficult to obtain and sustain where the risks are high, where the asset and value are not obvious, and where Return on Investment is uncertain or delayed. The role of the investor is exactly this, to help define the asset, continually refine its value and assist in attaining commitment from external resources and participants. As management does what is necessary to improve asset valuation, the investor provides access to ever greater external resources which further validates the vision and leadership.

Venture Capitalists and Green Berets excel at identifying which visions are achievable and represent cohesion, at providing access to external resources and recognizing and empowering those leaders capable of realizing the required buy-in. If we are to succeed at Village Stability Operations we must overcome divisions and realize efficiency by empowering leaders as they engage stakeholders and potential stakeholders in sustainable asset development, valuation improvement and Return on Investment.

Lack of economic development (Wealth):

The modern economy is exceedingly complex and virtually indecipherable even to individuals born, raised and highly educated in Capitalism. Imagine how much more impossible it must seem to those in pre-industrialized economies. And yet, all humans are entrepreneurial by nature, even the poorest, least educated and illiterate.

The global investment community wants to invest in the entrepreneurial spirit where we now and in the future will conduct VSO. They are prevented from doing so by a lack of economic development, which does not mean assets are nonexistent. It means those few assets which do exist have not been codified or developed to the state where they are actively increasing in value. This increase in valuation is mandatory if a Return on Investment is to be realized. And without ROI the power of the global investment community cannot be brought to bear. 

It is for the very same reason these villages are unstable breeding grounds and safe havens for insurgents. Where the entrepreneurial spirit is neither understood nor supported, where new assets are not being created, individuals will look for other means to earn a living and generate personal Wealth. This represents itself as a willingness to take from others either through corruption, crime or replacement of the existing Wealth structure.

Perpetual asset creation and improvement is essential for sustainable stability and this requires an active, local entrepreneurial community supported by an active and well connected local investor community. The continual interaction between entrepreneurs and investors drives the creation of new assets, improvements in asset valuations and a broadening of the economic base. More importantly this interaction steadily improves the knowledgebase, capabilities and capacities, the sophistication, of entrepreneurs and investors.

The sole purpose of VSO is to establish the environment in which business assets are identified, valued and improved. Whether we recognize it or not, at the heart of all human endeavors is Wealth creation and every action and decision increases or reduces Wealth. In the world of globalization, it is the Angel & Seed Investors who are responsible for establishing the conditions for new Wealth creation. If VSO is to go on and ultimately be successful the mind and Wealth creation skills and practices of these investors must become an integral skillset of the Green Beret.

With VSO, the members of a SFODA collectively organize their Wealth enabling efforts along three integrated Lines of Operation. A VC trained and enabled ODA would greatly enhance and ensure success along these same Lines of Operation:

Governance: Conducted with the purpose to establish effective and meaningful leadership and management at the local level, which engages in dispute resolution, short and long-term planning and decision making, and which is integrated with the levels of governance above it.

Equally important to effective governance and civic leadership is active and effective local business and financial leadership. Working with, yet independent of, village elders and leaders the VC educated ODA would identify and educate and empower business and financial leaders. The ODA would concurrently work with both to educate as to how governance and business leadership work in a collaborative relationship to develop and improve the community. 

Security: Operations focused on establishing the rule of law and on creating a safe environment in which the community may conduct its business and go about its life. In most contexts today this means establishing a local security force integrated with provincial and national security forces and primarily emphasizes counterinsurgency.

The Rule of Law is costly and requires an active and consistent law enforcement presence, paid sufficiently so that its members are more likely to put themselves in harms-way and less likely to use position to extort the people they are sworn to protect. This requires a sufficient, yet not overly burdensome tax revenue base, to be derived from local commerce and investments. The VC enabled ODA would work with local investors, businesses and civic leaders and with district, provincial and Host Nation governments to establish viable investment and asset taxation models which emphasize covering the costs associated with the Rule of Law.

Development: Though currently focused mostly on infrastructure, livability and quality of life improvements, these operations are ultimately and increasingly about improving the economic viability and sustainability of the community. 

The VC enabled ODA would work with village elders to identify those within the community who should be provided with business and finance training. After filtering to identify those with aptitude and desire, the ODA would conduct business training, work to identify the business assets and capacity of the community and would begin the process of asset creation and improvement and integration with the greater business community of the Host Nation.

With some obvious difference, the Lines of Operation as conducted during VSO missions already follow the same pattern as the Venture Capitalist when making, shepherding and exiting investments:

Shape: Where due diligence, planning, preparation and relationship establishment is conducted. It is during this phase in which many of the kinetic, constructive destruction, activities are conducted in order to remove security impediments to asset creation.

Hold: Once an asset has been identified and its initial form created and invested in it is of critical importance to defend, hold, this asset while it is perfected and hardened. It is most often during this time where failure occurs, when poor relationship/alliance choices or insufficient due diligence and planning becomes obvious in application. It is absolutely essential during this phase that Trust is developed.

Build: Though the most involved, time and resource consuming of the four phases, the Build phase is actually the easiest. It is during this phase the asset is actually created through entanglement, locally, provincially and nationally. This is where all of the assets and access available to the SFODA for VSO support, and the individual Green Beret’s knowledge and experience, are brought to bear in execution of the business plan.

Expand/Transition: As is critical to any and all businesses, and as a natural extension of building the business, it is necessary to expand beyond the scope of the original plan into areas and business lines which further support the mission, goals and survivability of the company. And once the company has reached the degree of entanglement required to sustain itself, it becomes necessary to transition the business to professional, and in the case of VSO, local, provincial and national management which can better handle the day to day and future operations. 

The desired endstate of VSO and a Venture Capital investment are the same, to develop a stable asset out of next to nothing, which can sustain and improve its position in the marketplace and increase in value. The purpose is to create an entity which will continue to add value to both shareholders and stakeholders. In the case of Venture Capital this represents itself as companies, while in VSO it represents itself as local economies and the governance and Rule of Law which enables them.

Green Berets are becoming masters of modern IW through the lessons learned conducting VSO. We have demonstrated a solid understanding of governance and security but are only marginally making improvements in economic development. However, if VSO is to be successful the Regiment and each ODA must also master the VC skillset and become masters at creating Wealth and non-welfare state jobs.

Summary

The threats of today and tomorrow are not rogue nuclear nations or traditional nation states. The threats now come from failed nation states and those states which wall their people off from globalization. Because, wherever there is economic oppression or underdevelopment, wherever globalization is not being allowed to improve the standard of living of the common man, there is instability. And where there is instability the investor community, which is the driving force of the global economy, is hindered in their ability to improve standards of living.

In the world of globalization, powered by economics and finance, there already exists a highly seasoned Irregular Warfare expert. This expert is out there, in every corner of the world, focused on expanding and enhancing stability. These experts are Venture Capitalists and in particular Angel & Seed investors and they are applying unconventional minds and thinking and conventional assets to create Wealth out of nothing more than the raw entrepreneurial spirit at the heart of all seven billion of us.

The mission and purpose of the Green Beret and the Venture Capitalist is the same. Their common mission is to bring stability to the now global economic engine, to bring down the walls which prevent the free flow of ideas, people, Capital and Wealth. The purpose shared by both is the War on Oppression. And both are out there every day employing economics to Free the Oppressed.

In the short time I have been in the Regiment I have come across a number of potentially very successful Venture Capitalists, Wealth creators. They have without exception been rebels, unconventional thinkers uncomfortable with the doctrine based conformity that Special Forces is becoming. Every single one of them is an individual who thinks of nothing but the War on Oppression and how to win it. We must remember Special Forces was established by these very same nonconformists and it was this which once made us great. These voices must once more be heard

Δεν υπάρχουν σχόλια: