In 2010, author Michael Lewis wrote The Big Short: Inside the Doomsday Machine. It has since become a major motion picture.
The plot unfolds around the creation of the credit default swap market that “shorted” the collateralized debt obligation (CDO) bubble, precipitating the housing crisis and global financial collapse of 2007. The book describes a private financial and government regulatory system so blind to its own vulnerabilities that it trundles towards failure of epic proportions.
Lewis points to three key enablers of this collapse:
1) A system so large and convoluted that no one truly understands it
2) Individuals who act in self-interested stovepipes to protect their specific aspect of the system
3) Lack of adequate, appropriate oversight
The global financial collapse of 2007 resulted in trillions of dollars of lost savings, pensions, and home value. It affected the lives of millions and has fundamentally altered the way Americans interface with their economy.
There is another system in our nation that shares similar characteristics. The military acquisition system is the elephant present in every room in Washington, DC; its success or failure affects every dollar we spend and every man, woman, and child in America. If the housing bubble affected the lives and livelihoods of millions, we can only surmise the deleterious effects that the acquisitions bubble could have on global security.
We must fundamentally examine the acquisitions bubble and how we can avoid it, before it is too late.
Shorting the System
In The Big Short, Lewis tells the stories of the individuals who predicted the housing collapse and “shorted,” or bet against, the market. These were men and women who profited off the bad business practices of banks and hedge fund managers.
When considering the military acquisitions system, it is our current and potential adversaries who are betting against us. Those who “short” the system include both small-scale organizations who employ inexpensive, low-tech methods to sabotage our forces, and large nation-states who are engaged in a broader game of geopolitical Risk with the United States.
As mentioned earlier, those who leveraged the housing bubble operated with three key enablers at hand. These are the same characteristics that our adversaries will continue to use as they leverage our military acquisitions system against us:
1. A system so large and convoluted that no one truly understands it.
DoD has an entire college–“Defense Acquisition University”–that includes both physical and online classes on the subject of military acquisition, technology, and logistics. Its website estimates the total number of individuals it services each year in the acquisition system at more than 150,000, a figure that represents but a fraction of the whole.
Tens of thousands of men and women, both in uniform and out, work on the subject in the National Capital Region alone. These folks work in small cubicles with water coolers and locked doors. The DoD budget that they each have a small hand in preparing heads to Congress at more than 500 pages each year.
No one–especially not this author–could accurately describe each stakeholder or step of the military acquisitions, technology, and logistics process. Unfortunately, this means that no single person could point out its inefficiencies or effectively propose improvements.
2. Individuals who act in self-interested stovepipes to protect their specific aspect of the system
The men and women wearing the cloth of our nation, far from our shores, are our nation’s true heroes. They work hard in conditions and at tasks that would make the rest of the world blanche.
But decisions are not made on the front lines, in the cockpit, or on the bridge. They are made in office buildings with air conditioning and snappy internet connections. They are made by both military staffers and civilian bureaucrats.
Too often, these offices succumb to what you might call “9 to 5 syndrome.” Many are of the mind that the job they were hired for has definite conditions, and they will work no longer than is necessary to meet only the minimum requirements. Any further issues that arise outside of these hours or requirements are “not my problem.”
Likewise are those that see a problem–incorrect information being passed up the chain, an erroneous analysis, unjustified assumptions–and do nothing. Why? “It isn’t my job.” “I wouldn’t know who to talk to about that.” “I don’t want to make any waves.” People fear for their employment, their financial stability, and their perceived reputation in the workplace more than they fear incrementally adding to the entropy of the system.
These aren’t necessarily behaviors that you could discern from a workplace survey. It is much easier to hide behind the anonymity of the computer screen, ignore our real problems, and react with dismay when the wheels start to fall off the bus.
3. Lack of adequate, appropriate oversight
Beltway Insiders refer to the “Iron Triangle” as the relationship between Congress, the military, and industry. Through the lens of the acquisition bubble, however, let’s take a closer look at each corner of this shape:
-A Congress with an approval rating hovering near 10%, in an environment hostile to incumbents and financially costly to challengers
-A military with a joint staff that each of the services scoff at, with the term “joint” or the color “purple” disparaged, handling oversight of the acquisitions process
-Industry beholden to investors who are looking for profit and short-term gain
This is a reality that has existed for decades. A system that should be designed for mutualism, where the actions of one benefit the other, has instead manifested as parasitic, where each actor seems to be negatively impacted by the actions of the other.
Each of the stakeholders in the Iron Triangle is responsible for the oversight and proper regulation of the military acquisition system. But in an environment where Congressmen are more apt to pass a funding bill that includes jobs and money for their individual districts; where industry advances projects that further their bottom line the most; and where the DoD serves up an amalgamation of individual service plans rather than a comprehensive strategy, oversight and regulation are fundamentally broken.
Now, more than ever, we should remember the words of a former president: “Our problems are man-made; therefore, they can be solved by man.” We must get beyond all of this; we must eliminate our excuses. The health of our Republic and the continued success of our men and women in uniform depends on it.
No Easy Way
The slow devolution of our acquisition system is the result of an unchanging bureaucracy that is grinding to a halt in the Information Age. As the pace of the world quickens around us, our system is growing more and more inefficient. At times, it is both too easily taken advantage of and not easy enough to engage; it is both too deliberative and not deliberative enough. Yet we continue to lurch towards multi-billion dollar platforms and continued inefficient policies, unable to stop this carnival ride we are on.
Hindsight has a way of making things look more obvious than they appeared at the time. Perhaps the system is helped in some way by the notorious bean counters and turf protectors that seem to stove-pipe problems and sabotage solutions. Perhaps the American acquisition machine will continue to slog on, unabated. But as we come upon our fourth post-Cold War decade, it is alarming that our systems and processes are becoming increasingly Soviet.
One of the most obvious solutions is to foster strategic thought, understanding, and literacy in military and civilian agents of DoD at a much younger age. Mark strategic aptitude early and enable groups of these hard workers to actually influence policy and lead change within government. There are plenty of outstanding strategic leaders across DoD, but we can do much more to enable our strategic enterprise as a true meritocracy, rather than a “tenure-ocracy.”
There are already cohorts fulfilling these roles in their own personal capacities, such as the Defense Entrepreneurs Forum and similar service-based groups of junior officers, enlisted, and civilians. We should further these groups to include true coalitions of service, Congressional, and industry staffers and leaders who can come together to solve problems instead of going through the motions of decorum and paying lip service to real issues. But to date, both Congress and service leadership has reacted with scorn to these possibilities, seeming to validate problem #2 on our list above.
At the end of the day, no matter how many bits of data or inches of type-block this article takes up, there is no silver bullet solution to the military acquisitions bubble. There isn’t a 5-point plan or a CONOPS capable of the kind of course correction needed.
There is simply this:
If we got every stakeholder and decision-maker, from the lowest ranking uniformed service member to the highest ranking civilian and industry leaders, into one room at one time–with a Congress and President ready to vote and sign whatever came from such a meeting immediately into law–could we task them to build a system around answers to one question:
“What would you do differently if you knew you couldn’t be fired and you couldn’t fail?”
And how do we get them there? How do we press the “reset” button on doing the right things?
Time is of the essence: before the acquisitions bubble pops, and we are left with a tragic sequel to The Big Short.
