Irregular Warfare Podcast - War Entrepreneurs: Economic Drivers of Insurgency, Terrorism, and Crime

Episode Date: February 26, 2021

What drives illicit violence by substate groups such as terrorists, insurgents, and criminals—and how can states counter these threats? Our guests in this episode, Juan Zarate and Gary Shiffman, argue that social science provides tools to understand why illicit violence occurs. And by understanding why it occurs, states can develop targeted sanctions and military strategies that disassemble and disrupt violent nonstate groups. This approach has implications for how policymakers and practitioners can counter violent actors from the strategic to the tactical level. Intro music: "Unsilenced" by Ketsa Outro music: "Launch" by Ketsa CC BY-NC-ND 4.0

So how do you define victory in this, you know, this world of sub-state violence? It's about competing against another firm in a crowded marketplace. And so you want the firm to go out of business. So it's not about killing the leader. It's not about causing that firm to hire a new executive. It's about you want the entire firm to go out of business, right? So let's define victory in that sense. hire a new executive. It's about you want the entire firm to go out of business, right? So let's define victory in that sense. You know, we want the Taliban as a firm to fail. We want

ISIS as a firm to fail. The way that we have typically thought about these groups or analyzed them is not only wholly artificial, but sometimes blinds us to what is driving and what's animating their operations and their intent. Welcome to Episode 21 of the Irregular Warfare Podcast. Your hosts today are myself, Kyle Atwell, and my co-host, Shauna Sinnott. In today's episode, we discuss the economic drivers of illicit violence by sub-state groups such as terrorists, insurgents, and criminals. Our guests argue that social science, particularly economics, provides the tools to understand why illicit violence occurs. By focusing on individual incentive structures

rather than group identity labels, the U.S. can develop targeted sanctions and military strategies that disassemble and disrupt violent non-state actor groups. This approach has implications for how policymakers and practitioners can counter violent actors from the strategic to the tactical levels. Our guests provide several examples from the Treasury Department's counter-threat finance efforts during the post-9-11 era. Juan Cerate served as the Deputy National Security Advisor for Combating Terrorism during the George W. Bush administration

and as Assistant Secretary for Terrorist Financing and Financial Crimes in the Treasury Department. He authored the book Treasury's War, the Unleashing of a New Era of Financial Warfare, in which he discusses America's fight against the illicit financial networks of state and non-state actors. Dr. Gary Shiffman is a professor at Georgetown University, founder and CEO of the software company Giant Oak, and author of the book The Economics of Violence, How Behavior Science Can Transform Our View of Crime, Insurgency, and Terrorism. Dr. Schiffman has also served as the Chief of Staff for Customs and Border Protection, as a National Security Advisor at the U.S. Senate, and as a U.S. Navy Surface

Warfare Officer. You are listening to the Irregular Warfare Podcast, a joint production of the Princeton Empirical Studies of Conflict Project and the Modern War Institute at West Point, dedicated to bridging the gap between scholars and practitioners to support the community of irregular warfare professionals. Here is our conversation with Juan Zarate and Dr. Gary Shiffman. Juan Zarate, Dr. Gary Shiffman, welcome to the Irregular Warfare podcast, and thank you for joining us today. Thanks, Kyle. Thanks, Shauna.

Kyle and Shauna, thanks very much for the invitation to be here. I'm a loyal listener and a big fan, so it's great to be here with you. Thanks. So today we're going to talk about what drives illicit violence by non-state actors, such as insurgency, terrorism, and crime, and how to counter it. Gary and Juan, you have both written books on this topic. What was the motivation for each of you to address it? I wrote The Economics of Violence because I think we're approaching violence wrong. And when I say we, I mean us in the national security community writ large. We tend to have an approach in which we divide the world into insurgents and terrorists and criminals, and we have institutions to combat terrorism and institutions that combat insurgents and

institutions that combat criminals, and they're different institutions. And I think the segregation is misguided and it misleads us. And so I have a different view and that is we think about humans and human nature and what we understand about human behavior. And we start from there. And I think it provides a much simpler and more powerful way to understand violence as I see it in the world. Kyle, again, thank you to you and Shauna for having me and always an honor to be with the great Dr. Schiffman. I wrote Treasury's War in part to chronicle what had happened post 9-11, not just at the Treasury Department, but within the U.S. government to think more creatively about the use of our economic and financial leverage against

terrorist actors and other state actors that present a risk and a threat to American national security. At the core, what I really wanted to do was to explain the new domain of power and how I saw it evolving, how I saw it evolving from within the government, but also the future of the use of economic and financial influence as a core domain of power and influence in geopolitics and geoeconomics. And I think that has played out over time. So that was really at the core of why I wrote the book. And in many ways, it's a compliment to what Gary has laid out in his book, Economics of Violence.

So from both of your perspectives, why is it important to understand the drivers of illicit violence in the context of our current and future national security challenges? So if we were to scope the relevance or scale of this challenge, how would you characterize that? Yeah, in social science, right, and the purpose of this podcast is to bridge the gap between academia and policymakers and operators. There's this really cool revolution going on in causal inference, which is understanding not only being able to observe phenomena in the world and understanding the correlates, but also understanding the causes of the phenomena that we observe. And so, Shauna, it's kind of ridiculous to me that we wouldn't try to understand the causal implications of

violence. And we have a science to do that, and we have great tools to do that. And so, my book, Economics of Violence, is about bringing these tools of social science and behavioral science to the national security community, because to understand and to counter the violence that we don't want to see in the world, we have to understand the causes. And I think that's just critical for where we are today in 2021. I completely agree with that. And maybe to take more of a policymaker's sort of take on what Gary has just said, I think we try very hard to understand America's enemies, nation state,

sub-state actors, and the networks that bind them. And you have to understand their motivations and their intent, obviously. To Gary's point, there's often a stovepiping of how we think about their motivations, their ideologies, their operations. And as a result, we're not clear on how to impact them and how to affect them. And that translates into less effective policies, less effective tools, less effective coordination. The other aspect of this, which is important, is I think America's enemies recognize the multidisciplinary nature of power and influence. You know, the Russians, the Chinese, the North Koreans, the Iranians, Al-Qaeda, ISIS networks

don't bound themselves by neat categories and, you know, aren't limited by ideology in a fundamental way in terms of their operations or how they think about influencing or impacting American interests. So we have to recognize that, you recognize that when we're thinking about the enemy networks that we're trying to confront or counteract, they themselves are thinking about the landscape very differently. And that often puts us on our heels when we are not thinking creatively or across disciplines the way that Gary has described. Yeah, that's interesting. So a major theme from Gary's book is that binning different forms of illicit violence as separate things from a policy perspective is not very helpful for us. So I guess, Gary, could you kind of state the key puzzle you're trying to address in your book? And

then what was your, what was the key findings that you had, your key argument? Where I bring you in the book is away from this idea of identity labels, Kyle, as you just said, and into a discussion of firms, entrepreneurs, and markets. And if we just switch our language from terrorist, insurgent, and criminal, building on Juan's point, Pablo Escobar was a drug trafficker. He ran for office in politics, and he blew up a commercial airliner. Well, was he a criminal or an insurgent or a terrorist? He was all of the above, right? So the label doesn't work. He was an entrepreneur leading a firm in a competitive market. So if we just switch our language to firms, entrepreneurs and markets, we now have language that makes sense in the context of a Pablo Escobar, a Joseph

Kony and Osama bin Laden, whoever it is we're talking about, the language of markets works. And that's where I'm leading the reader in the book is to shifting from identity labels to market terms. And Kyle, what Gary has done matches what we were doing at Treasury and what has happened in the counter-licit finance space from the US government perspective for now a number of years. Treasury was ultimately, its strategy was to make it harder, costlier, and riskier for America's enemies to raise and move money around the world. That was the point of all the strategies, all the financial constriction campaigns, all the sanctions that people read about. That was the strategic driver. To do that, you had to understand the

nature of these organizations and their financial links. And one of the things I lay out in Treasury's war is the very deep recognition within the IC, within the military, in developing the doctrine of threat finance, within law enforcement, within Treasury, even the regulatory community, to think more comprehensively about what financial intelligence meant and what those insights provided in terms of how these groups operated, how they related to each other. And in doing that, you got to the very clear conclusion in many cases to what Gary has described, which is these are groups that are

very hard to categorize. Their financial relationships, their motivations are not only malleable, but also adaptable and change over time. And then we have tools as a result, especially in the financial and commercial domains to actually influence, if not the core elements of these networks or groups, but the outer rings and the facilitators that allow these groups to operate and to have global reach. Just building on that one, my observation is that there was a sea change in treasury Department's use of sanctions. And there was a time earlier in our careers when we would sanction countries, we would sanction Iran and North Korea and Cuba. And then what we did is we started to sanction individuals

and sanction firms. And that's the whole ballgame. As an economist, I'm interested in economic actors. And I do not consider Iran, North Korea, Russia, I don't consider them economic actors. I consider the president of Iran an economic actor. I consider the firms, the large firms, economic actors and the shareholders and owners of those firms as economic actors. And US policy under the leadership of Juan and many others shifted us from this broad aggregate policy to targeting individuals. And that made all the difference in the world. That's my observation, Juan. Did I see that correctly? I think that's right. And I think part of it was a focus on

state actors, but also facilitation networks and being very clear and deliberate that financial and economic relationships and nodes were now going to be part of the target landscape, targeted by sanctions, by regulatory measures. And it also led, and I think this was the real revolution in the post 9-11 period, to a perception as to where the action points were, where were the nodes of leverage in what we were doing. When people say, well, what's different in the sanctions post 9-11? It was really the approach of saying, look, it's the private sector that holds the keys to the kingdom. They're the guardians at the gate of the financial and commercial system. And so the things that we do to impact our enemy have to be informed by and driven by the private sector. And that means what we do has to inform the risk calculus, has to inform their decision

making. And frankly, that's why when people say, well, why did sanctions against Iran hurt more post 9-11 than the two decades plus of sanctions prior to 9-11? It was in part because we were focusing on different nodes. We were focusing on the banking sector, the insurance sector, the nodes that were connected to the Iranian leadership. And the reason this policy works, it's because there's a micro-foundation for the macro-policy. A micro-foundation means I can draw a causal link to individual humans and humans making decisions in conditions of scarcity, which is the science of human behavior. Another example or anecdote is Jake Shapiro and I did about a decade worth of DARPA funded research and development. And so

we're looking at a much more micro level than what Juan's talking about. So you're looking at, say, the Taliban in Afghanistan. If you treat the Taliban as if it is a unitary actor, you're going to get it wrong. The Taliban has a leader at the time, you know, Mullah Omar was the leader. And then there were people who throughout the country affiliated and associated with the Taliban and they were pro-Taliban, but they were also farmers. They were also merchants. They also were fathers and wives and brothers and sisters. They were just people. And if you take that approach that Juan just talked about at the macro level and take it just to a local village or a community, it's the

exact same ideas. Why does that work? Because it's human nature. It's human behavior. You're relying on the same fundamental ideas of scarcity and decision-making. And it works whether you're in a village in rural Afghanistan, or if you're at the Kremlin, it's the same fundamental ideas and levers at play. And Juan, when we're talking about how the government adjusted its approach here, knowing that you drove a lot of that, was there a specific event or circumstance that precipitated the shift? How did you come to the conclusion that there was a better way to address these threat actors? Sean, that's a great question. I think 9-11 was really the shocking moment to the system, that tragedy forced everybody to think differently about how we were using all elements of power to, in the case of Al-Qaeda, disrupt and dismantle their networks. That was the marching

order at the time across the government. Let's use all elements of national power to ensure this never happens again, to go after those that have attacked us and to make sure, more broadly speaking, that terrorism and terrorist actors don't have the ability to have this kind of strategic reach globally. And so what does that mean? That means you have to impact their ability to access finance, money, networks, and you have to constrict their reach. And you do that fundamentally by restricting their budgets, right? Forcing them to make strategic decisions, putting at risk their relationships that may have other interests other than the core ideological interests of that particular group. It was that moment, Sean, I think that really forced us to think differently about how we were attacking these kinds of networks, what was motivating them, what elements of the networks we could try to impact.

And then frankly, as I said before, the financial intelligence dimension of this was critical because the more that we dug into financial networks, trying to understand who was linked to whom, you begin to see very different kind of links than one would assume. A good example of this was in 2003, 2004, we started looking very carefully at North Korean illicit activity, an enemy state actor worried about their nuclear program. But guess what? Very much a mafia state, very much acting as criminal actors in the international environment. And if you look at it that way and you begin to look at their financial commercial relationships, they're not the hermit kingdom. In fact, they have lots

of relationships, lots of banks that are doing business with them, lots of front companies that they're leveraging. You begin to see these unorthodox relationships or things that destroy the orthodoxy of how you would think about these actors. And so I think it was really that, Shauna, that reshaped the way we thought about the environment. Yeah. Something that struck me in efforts to counter illicit actors is how fluid the lines between insurgent, terrorist, criminal, and even friend and enemy can be when we're working with partners on the battlefield. So in many cases, the partner militaries we work with themselves may be involved in illicit activities. A term I heard recently was the concept of war entrepreneurs, the idea that there's a group of

people on both sides of the conflict who just profit from having the conflict continue for whatever reason. I'm wondering if that's something that's come up in your research or experience. So I write a little bit about it in my book, but there's the Kahani Network was doing exactly that, Kyle. And during the war in Afghanistan, they had US government contracts to provide logistic support for us. And they were providing logistic support for Al-Qaeda and the Taliban. I mean, they were logistics for hire. And labeling is where we go wrong. We have to keep in mind that they're firms and entrepreneurs. Think about ideology as marketing. So I may or may not believe in a particular ideology. It kind of doesn't matter. What matters is like, if I claim to be a part of

a certain group, if I take on a certain label, I can get revenue, I can grow my business, I can operate, I can engage in walking around safely, and my property will be safe, and my kids will be safe, right? So you find people in a war zone, like in Afghanistan, like in Iraq, things that we've been doing for the last two decades now, will pick up these labels. They might not have any loyalty to Mullah Omar and the Taliban, but that's the convenient label to take on. So if we, again, look past these labels and think about what's driving the human behavior, that's where you're going to find the story. And the labels can be helpful, but they can also be misleading if you're not prepared to look beyond it. The question about these war entrepreneurs

kind of betrays that a little bit, Kyle. It's like, of course, people are going to make money in the middle of a war. Of course, they are. We're foolish to think that everybody on the ground is an ideologue. Of course, they're not. Everybody is dyed-in-the-wool Taliban or dyed-in-the-wool loyal to US and coalition soldiers. That's a foolish assumption. These are people who, they've got lives, they've got kids, they've got ambitions, they've got plans for the future. They're just optimizing given the conditions and the constraints that they have. And we need to build policies around that. So the examples that Juan is talking about, it's about understanding

that the portrayal of the North Korean regime that we read about in the Washington Post or New York Times is very different than the way it actually operates on a day-to-day basis. It's firms and entrepreneurs. It's people trying to make a buck. And those people can be government officials. Those people can be non-government officials. Those are labels we've got to look past and just see the shared humanity of everybody engaging in politics and violence around the world. And then you get this crystal clear picture of what's really going on. Yeah. Gary, really appreciate that. Just on the North Korean front, your analysis is exactly right in framing this through the lens of entrepreneurial spirits that enemy actors or criminal actors or illicit actors have. The North Koreans are incredibly entrepreneurial, you know, in ways that are dangerous, of course,

and you'd hope they would use their efforts for other good things as opposed to what they're doing. But if you view them as entrepreneurial, then it's very easy to understand why they've developed the kinds of cyber capabilities that they have and why they're taking advantage, for example, of the crypto environment. And according to the latest UN report, raising $2 billion based on crypto cyber heists and other activities online. Why? Because A, they have to. B, they've got an entrepreneurial spirit and design to survival. I just want to push back just like I did with Kyle a moment ago. I wouldn't say the North Koreans are entrepreneurial. I would just say people are entrepreneurial. There's absolutely

no difference between you and me and the North Koreans and the Afghanis. The reason I emphasize that, though, is because your point about the media portrayal of North Korea as being a hermit kingdom, being backward. There's no sort of common sense that they can actually be advanced precisely because they are entrepreneurial. So I completely agree with you. And I think the lack of imagination as to how thoughtful, creative, entrepreneurial the enemy can be often leaves us on our heels and reacting to the latest attack. Can we dig into an example from a sub-state actor? And there's a bunch of them in Gary's book.

What's an example of somebody we might think is evil? We might call them ideological. We might assume they just enjoy conducting violent acts, but really you can kind of explain that they had an entrepreneurial spirit and they were just operating within the environment in which they existed. I would say, I challenge you to pick somebody who's not. Everybody is. So in my book, I talk about Pablo Escobar. I talk about Joseph Kony and Osama bin Laden. Joseph Kony is very interesting, classic insurgent, runs the Lord's Resistance Army, recruits child soldiers, and incredibly successful. And it's weird to talk about evil people as successful, but he's incredibly successful in the sense that he's been in business for decades, and lots of people have tried to put him out of business, and yet he survives and continues to operate his firm. His firm is the Lord's Resistance Army. He has a

supernatural story where he claims as a young adult, he wandered off into the woods and had some out-of-body experience where he talked with God and he came back and God told him to do this. And then he runs a very brutal organization where he recruits people when they're very young, and there's a high price for defection and there's a lot of violence. That's an example of somebody given opportunities and constraints and goals and constraints. He operates a firm. He uses ethnicity. He uses religion to further his goals, but we don't know what he really believes. We don't know if the spirituality is an important part of who he is or the ethnicity, but we know it's incredibly important to the marketing of the firm, to recruiting and retention of his employees.

You could walk through that same story with Pablo Escobar and Osama bin Laden. And that's the point of the book is take that same approach to these three people who on the surface are very different and you identify the commonalities. And it's this idea of this shared humanity that we all have. And that's where we need to start. That's where as military officers, as Pentagon officials, as Treasury Department officials, start with the shared humanity. They're not other, they're us, and figure out why it is that they're behaving in certain ways, and they're using particular rhetoric. Yeah. And just to dig into that from both of your perspective, if we're trying to reconcile

how we understand violence from an economic perspective versus like a religious or ideologically motivated violence perspective, what is that nexus? Is it something that you see is more driven by the entrepreneurial aspect from a leadership perspective and the ideology is the cell? Or how do you see those things interacting when we're talking about identity and violence together? So economics is the science of individuals making decisions in conditions of scarcity. So economics is not about the money. Economics is about people just making the most with what they have. And so you would adopt ideologies, you would adopt rhetoric about

ethnicities, you would adopt rhetoric about past aggressions against you and your people, if that is in your best interest to do so. So Shauna, all of this is economic, because it helps you optimize towards your goals, given your constraints. Financial constraints are important. Institutional constraints. If we create an institution that is ideology-based, so Osama bin Laden and his ideological affiliation was an important part of the firm and the story and his ability to succeed. That was an economic decision. And you would use identity labels to help you with recruitment, to help you with retention. And that's exactly what Osama bin Laden did. That's exactly what Joseph Kony did. And that's exactly what Pablo Escobar did.

If I can just feed off of that, I don't want to downplay the role of ideology or identity, right? There are different motivations, different factors. There's also different elements of networks, right? So in thinking through when you're talking about the Kony network or the Al-Qaeda network or the North Korean illicit finance network, there are rings to those networks that enable that network to operate. And there may be different balances of motivations in each ring. And I think understanding that, understanding that we're talking about different kinds of relationships, the fact that these motivations or identities can change over time is really important. You look at the history of terrorist groups or insurgency groups, especially those that occupy territory or have access to

resources, you see that their identity and their activities change over time, taking advantage of entrepreneurship and the rest. That's interesting. So, you know, we initially started saying, hey, if you're going to sanction, you don't sanction the state, you sanction individuals. And now you're saying, well, hey, if you look at a specific organization, there's rings within that organization and each one may have their own incentive structure, essentially. And you need to develop a sanction strategy, whether it be, you know, actual economic sanctions, military activity for each of those individuals. So it seems like the burden is on policymakers to have a pretty robust ability to disassemble and assess organizations and then tailor specific sanction strategies for those organizations.

Absolutely. In the economics literature, we call it the center and the periphery, right? So the way you deal with the center could be very different than the way you deal with the periphery, right? The center is trying to recruit and retain a workforce. The periphery, you know, might be, you know, hanging on, you know, by a thread. And so the center is trying to do whatever they can to engender loyalty. So you can do things like cut off financing, sanctions. You can use kinetic force, right? You can go in and you can take out the leader of the organization through kinetic force, you can impact social norms, norms of behavior, what's allowed and what's what's not allowed. Treasury has done this through you through name and shame policies, which were incredibly effective. And understanding that the people

in the center likely have very different optimization functions than the people on the periphery is absolutely critical to policymakers, regardless if they're at the Pentagon or the Treasury Department, State Department, wherever they sit. Yeah. And Kyle, I think part of it also depends on what policymakers are trying to achieve with the financial or economic measures, right? In some ways, it may be to completely disable a network. Maybe it's to deter, or perhaps it's to change certain aspects of behavior. If you look at the evolution of sanctions programs over time, not only have they been more targeted at individuals and entities and networks, they've been more conduct-based around types of conduct and activity, which then allows the sanctions to apply across borders and across

networks. And they've also now applied more and more to different kinds of financial and commercial activity. So it's not just you have your bank account frozen if you happen to have a bank account here. It's a whole range of other measures to include restrictions on debt and equity, for example, in the Russia or the Venezuela sanctions program, or particular sectoral sanctions that are marked in different programs. And you have other tweaks to the tools and the influence that can be used depending on what you're trying to impact and who you're trying to impact. And so I think over time, people will realize, and it's a bit of a discipline, that this is a whole different domain of power and influence. And you've got to understand the dynamics of these networks more intensely. Yeah. And on that, Gary argues that we need to break down a lot of those

artificial distinctions between crime, insurgency, terrorism, and really look at what the individual decision-making means as a starting point for violence. So I'd actually go to Juan with this question. If we're looking at it like that, why is violence the vehicle for this? What motivates violence as the means for these sub-state actors across the board? Well, I really defer to Gary because he's done the research and written on this. But in the first instance, policymakers are focused on violence because that's where the manifestation of the danger and the risk applies, right? Whether it's a mortar attack into a base in Iraq or a terrorist attack on US soil, the manifestation of an enemy's interest in attacking us, especially asymmetrically is where we're focused and trying to understand then why violence

becomes the manifestation of those interests is critical, right? What's the intentionality? Part of that is understanding where we apply our resources because we can't fight all enemies everywhere at once. And we've got to be preventative in what we do. And so in that regard, you have to understand what's motivating the violence. Why is it animated in certain environments? Why is it contained in some instances? And why is it global? Some of that is driven by entrepreneurial decisions. You see that in the cartel context in Mexico. The competition for plazas or markets drives a lot of the violence. In some cases, it's ideologically driven. You look at what Al-Qaeda has done over time. So understanding the motivations behind violence is critical. And frankly, the pathways toward violence is even more important as we try to be more

preventative in our national security posture. I don't actually want to disagree, but I want to go back to this word about ideology, religion, ethnicity, these identity labels. And I want to pause on identity labels. Violence is always market driven, or let me say almost always market driven. And ideology is often a market driver. So I wouldn't say that there are market reasons for violence and there are ideological reasons for violence. I will say that I want to encourage people to think about ideology as a driver in a market. It is a way to obtain goals, avoid constraints, or act within constraints.

And the reason I say it's almost always market-driven, there are firms that fail in markets all the time. And those are firms that might engage in violence when it's not a smart thing to do, given the market. Those are the firms that go out of business. Think about any firm that takes actions that don't drive up revenues or drive down costs. They go out of business. That's the same for a violent firm. That's the same for an Al-Qaeda. That's the same for a Medellin cartel or a Sinaloa cartel.

Revenues must exceed costs. Violence is almost always a cost of doing business. It goes into your COGS line on your balance sheet. It's the cost of doing business. It goes into your COGS line on your balance sheet. It's the cost of good sold. So you engage in violence when it's an essential element of running your firm. If you don't do that, you won't be a firm for very long. So violence happens when an entrepreneur in a firm decides to engage in violence. And if they're a good business person, that violence is going to help the bottom line. So what are reasons for violence? So hold on to that center and periphery

idea. So if you're the entrepreneur, an entrepreneur, the definition of an entrepreneur is the person who makes resource allocation decisions. That's it. Make resource allocation decisions, you're an entrepreneur. If you choose to engage in violence from the center, you're doing it to send a message, to deter defection, to make sure other people don't do what the person you just killed did, to flex muscle for your peer adversaries. So there are lots of reasons why it would make sense to engage in the use of violence. Other ways in which we see violence might happen on the periphery. So Steve Levitt, the Freakonomics author,

University of Chicago economist with a co-author, Levitt and Venkatesh wrote a paper about violence and drug gangs in the streets of Chicago. And they talked about how gang on gang violence tends to hurt the business of both gangs. So why do they engage in violence? Because if you're a junior or mid-level person in the gang you're trying to get promoted and it's through the violence that there's going to be attrition and maybe an opportunity to get promoted and that's the only way to make money in a drug gang is to be the shot caller or get to the top so you can see violence happening from the periphery because people want a chance to get promoted in a drug gang in that example violence from the periphery, because people want a chance to get promoted in a drug gang, in that example, violence from the center. But I want to encourage everybody to think about violence as sane and

rational. The crazy violence doesn't tend to be a threat to US national security. That's one off from a firm that's not going to be around for very long. But it's the savvy adversary, whether a state actor or a non-state actor operating in Afghanistan or somewhere like that against us, they're going to engage in violence against us because it's in their best interest to do so. If violence is always market-driven and can be used for contract enforcement and other practical reasons like you suggest, how can you explain brutal and inhumane acts of violence that almost seem wanton, whether it be sexual violence en masse or recruiting child soldiers, essentially things that you and I would probably say, oh, we would never do that.

How do you explain that type of violence? Yeah, so there's an interesting body of research on child soldiers and why we see child soldiers. There is good research on why that makes sense. good research on why that makes sense. The short story of that, Kyle, is it's cheap labor and the defection constraint is low because what Kony does is he recruits, he steals children from far away and brings them to his camp and so they don't know how to get home. So he doesn't have to pay them much and they're not going to run away. So there's an economic justification for child soldiers. There's a lot of research in the last 10 years about the same thing. Instead of child soldiers, it's kidnapping women and using them as part of the incentive structure of an organization. But it's the same idea. In economic terms, there's literature that

explains why something abhorrent and awful like that actually happens in the world as we observe it. The hardest example that I like to use, Kyle, of how can this make sense is the suicide bomber. So this is somebody who is clearly going to die today. And how in the world can that make sense? And there's really interesting work by Larry Iannacone and Ellie Berman, two economists that talk about the market for martyrs and how there are two

types of rewards for martyrs. The first is the here and now, which is my family gets a check a month and my kids are promised to go to school and stuff like that. So there's a real earthly here and now reward for the martyr in the sense that I'm doing something for my family. And the second is there's this idea of the supernatural, right? There can be some supernatural benefit after I die. And you can put those into clearly economic terms where somebody could say, look, I get a here and now benefit, I get a supernatural benefit, and my community is going to praise me. So I'm going to do it. So the point, Kyle, is you give me an example and I can tell you either there's an economic motivation for it, even though it's abhorrent to you and me, or it's a one-off. It's not a firm that's going to operate over time.

Yeah. I like what Gary has said and I agree with most of it. The one area where I do want to push back a bit is the power of ideology and identity in all of this, in these groups. And you see this with Al-Qaeda. What's interesting, to Gary's point, was a massive debate within Al-Qaeda after 9-11, and especially afterS. went in and toppled the Taliban and began to decimate the al-Qaeda networks, big debate as to whether or not that was a wise move. Now, to Gary's point, bin Laden and Zohar al-Hiri and others made the decision to attack the U.S. directly, in part because they thought it was in their best interest, right, for ideological and maybe other material reasons. But there was a fierce debate as to

whether or not that was a wise decision given the impact and the consequences, which frankly, they had misread. And so to Gary's point, that's perhaps an issue of miscalculation. That's right. I totally agree with all of that. No, right. But what I was going to say is the potential danger here is to try to rationalize what are decisions that are being driven by ideology. So regardless of the costs, regardless of that calculus, Bin Laden and several of the others have argued that that was worthy of doing. Al-Qaeda has survived, obviously, in various forms, a much weaker form, but has survived. And regardless of the cost-benefit analysis, there is an ideological driver to the

idea of the far enemy and the US being that far enemy, even if it doesn't rationally make sense or make sense in terms of their near-term local interests, right? So there is an ideology that is impacting the way they view the world. It doesn't undermine what you're saying, Gary, but it does point to the fact that there are ideological factors that are weighing heavily in terms of how these actors operate. I don't know Osama bin Laden's heart. I mean, I don't. I never sat down. I never had a one-on-one with him where I said, tell me truly, truly, truly what you believe. There's a narrative of the far enemy and the near enemy, right? And we've all learned that narrative. I don't know that that narrative

drove Osama bin Laden's behavior. And I don't think any of us knows. I know there's a- I think we know a lot about that, Gary. I don't have to have sat with him. People did say that, by the way. But I think what he's written, best interest to say those things. There's a difference. Leaders of firms talk about how awesome their firms are. They talk about the motivating narrative, and that's exactly what bin Laden did. My question is different. Not did he say these things, but what did he believe in his heart of hearts? We don't know that. I don't know if ideology drove his behavior or not, and I don't think anybody does. I think ideology is correlated with his behavior, but I don't know that ideology caused his behavior. He could have been just a kid who wanted to grow up and be important, and this was his way to do it, and he

used ideology to get there. And if you can just give me like that might be true, then you have to take a step back and think about this idea of the narrative and causation and not just correlation. Yeah. And I don't disagree with that. I don't disagree with that, but I want to subscribe. And I think it's borne out by case after case that there are different elements of motivation, even if we can't look into the heart of- There are different elements. Yes. But there are core, yeah. And core motivating elements that drive what an organization may be doing. I don't want the listeners to walk away thinking that we are discounting the role of ideology or identity in motivating or organizing groups.

Here's what I do want the listeners to know, though. We don't know for a fact what motivates the leader. We know what they talk about. And that's what I want the listeners to walk away with is I want you to think critically about that. Yeah. My only counter to that would be you have to look at not just what they say, but what they do and what they built and what their organization is driven to do. And Osama bin Laden could have been driven by greed and not ideology and done exactly what he did. The interaction between ideology and economic decisions may be

more tightly wound than some of these other circumstances. But this debate is helpful because it demonstrates that we have to think of our approaches from all angles if we want to create the opportunity for true disruption of these networks. So that leads me to my next question. Given both of your research findings and your practical experience, what do you see as the most significant implications for policymakers and practitioners as they grapple with this concept of the economics of violence? The implications are, in my mind, threefold. One, to understand the enemy environment, to understand the national security environment, you have to understand the nature of these groups and their motivations. And Gary's research is spot on that the way that we have typically thought about these groups or analyze them is not only wholly artificial, but sometimes blinds us to what is driving and what's animating their operations and their intent. And so that's

one key thing. And so if I were sitting back at the NSC, it would be demanding of the IC, the law enforcement community, DOD, to make sure that we are looking clearly at the nature and the relationships and the motivations of these groups holistically. I think the second thing is understanding that, then formulating strategies and tools that the US and our allies have to then address the various elements of these networks in a way that recognizes exactly what Gary's laid out in his book, but also tries to counter the expanse of their violence or their reach or their impact. And then the final thing is, I think, being humble about what the limitations are, given the innate nature of violence and market competition, which Gary lays out. I think we've huge advantages in that regard, market advantages, financial advantages, commercial advantages. But there are limits to what we can do in all places at all times. There's a prioritization that has to happen in how we think about addressing the role of violence

globally. I agree with all of that. And I'll give you just kind of three bullets. So first is analyze like a business executive. So look at the group, as Juan just said, and think about what's the mission, who comprises the leadership, what's their service offering, who are their competitors, who are their financiers? What's their market traction look like? Are they growing? Are they shrinking? How do they recruit, retain? What's the time horizon of the leader?

What's the culture, right? These are all questions that if you're doing analysis of a business, you would ask these questions. I think you need to ask these of your adversary in a sub-state context. Second is define victory in market terms. So how do you define victory in this world of sub-state violence? I think it's about competing against another firm in a crowded marketplace. And so you want the firm to go out of business. So it's not about killing the leader of the firm. It's not about causing that firm to hire a new

executive. It's about you want the firm to hire a new executive. It's about you want the entire firm to go out of business, right? So let's define victory in that sense. We want the Taliban as a firm to fail. We want ISIS as a firm to fail. And then the third is, given that we've done the analysis of the enemy and we have defined victory, now we want to fight like an entrepreneur. And that means we think kind of about all of our instruments of power. We think about our kinetic power. Maybe killing the leader is the best way to cause the firm to fail.

Maybe killing the leader will cause others who are better and more talented to rise up into positions. Maybe economic sanctions, constraining the annual budget of the firm is the right way to go. Maybe name and shame is the right way to go. Maybe changing cultural norms and ideas, maybe backing competitive firms. It's fight like an entrepreneur. You're an entrepreneur and you want the adversarial firm to fail. In your book, you say one way to defeat a firm or in this context to defeat an insurgent group or terrorist group is a merger. And what I read that as is kind of a negotiated settlement.

So you can incorporate that insurgent group without absolutely categorically defeating them. And the kind of takeaway I had from that is that can be incredibly unsatisfying because there's no victory parade. There's no one won this war. What are the implications for that recommendation for domestic politics, for how we engage insurgencies and terrorist groups and illicit criminals? Yeah, it's a great question. So domestic politics is a constraint on our behavior, right? So Juan, as Assistant Secretary of the Treasury, might have a policy goal, but he's got to not only think about the adversary overseas, he's got to think about how to sell it domestically and with the oversight committees in Congress, right? So think about politics as a constraint on behavior for us as well as others.

If you think about firms, entrepreneurs, and markets, and kind of this shared humanity, we're just like they are, they're just like us. And they've got domestic politics and we have domestic politics. The bigger picture, Kyle, is that, you know, was victory ever really defined as signing a peace treaty on, you know, the deck of the battleship? We call that the end to the war, but the underlying conflicts, you know, don't go away after the signing of the peace treaty. So think about things like a merger as you're operating a rival firm and they're starting to annoy you. Well, you could try to crush them or you could buy them. You could go to them and do a buyout and say, hey, look, come in and join our firm and organization. This is what we see in the illicit world all of the time. There's no

reason to think that we can't do this in the illicit world as well. Yeah, I agree with Gary. I think the challenge here, just by way of a bit of a joke, we used to comment internally that if we could drop all the memos and reports that we had to produce for Congress and internally and on the heads of Al-Qaeda in Afghanistan. The burden of the weight we're just taking down. The weight of the report. So to Gary's point, there are all sorts of constraints, but important ones, obviously. I do think that there are limits to what we've done. There have been limits to our imagination, right? So if you look at, for example, somebody like Dawood Ibrahim, right, who runs the D company, who's connected with Lashkar-e-Taiva and was implicated in the Mumbai attacks, long time, he's an Indian, but long time foe of the Indian government allied with

Pakistani militants and even Al-Qaeda. He runs a company, right? He runs a multinational operation. We've tried to use sanctions to deal with him. We've tried other measures to constrain his reach. The Indians have tried to capture him, et cetera. But have we done enough to think about the competition he faces in the underworld that he runs? He started his operations pirating Bollywood films. I think we don't think creatively enough around what does competition mean, especially with actors that are actually in the marketplace. So what are the other tools that we can bring to bear, including the tools of law enforcement to work with other actors in the space that compete with folks like Dawood Ibrahim, who may not be ideologically aligned with Al Qaeda, but who also represent a risk to his business, right? So I don't think we've thought creatively enough. And Gary's research, I think, opens the aperture to some of these conversations that policymakers need to think about.

And then, of course, the challenge is translating knowledge to change institutional organization. The big muscle movements are difficult. The shock of 9-11 produced many institutional changes for the good, the creation of the National Counterterrorism Center. DHS obviously was created, the DNI structure to try to organize the IC in a more rational, directed way in other institutions. But it's hard. It's hard to break down silos. And in the US context, to Gary's earlier point about domestic constraints, we operate under the rule of law and we have to operate under particular authorities and authorities have bounds and authorities have particular individuals who are charged with executing those authorities.

And so it gets hard when you have fluid environments and enemies in the U.S. government context because we are operating in a more rigid construct. So this is a good place to stop for today, but Juan Zarate, Gary Shiffman, I want to say thank you for joining us today. This has been a great conversation on Irregular Warfare. Kyle, Shauna, thank you much for inviting us and thanks for your service.

Appreciate it all. Yes, Kyle, Shauna, thank you. Gary, honor to be with you. Thank you. Juan, it was great. Thank you for listening to Episode 21 of the Irregular Warfare Podcast. We release a new episode every two weeks. In our next episode, Daphne and I discuss current irregular warfare policy priorities in Congress with Senator Joni Ernst and former Assistant

Secretary of Defense for Special Operations and Low Intensity Conflict, Mr. Owen West. After that, Nick and Kyle discuss what makes a successful practitioner of irregular warfare with Major General John Brennan, Commander of the Army's 1st Special Forces Command, and Dr. John Arquilla, Distinguished Professor at the Naval Postgraduate School. Please be sure to subscribe to the Irregular Warfare podcast so you do not miss an episode. You can also follow and engage with us on Twitter, Facebook, or LinkedIn. One last note, what you hear on this episode are the views of the participants and do not represent those of West Point or any other agency of the U.S. government. Thank you again, and we will see you next time.