Liminality, Innovation and Conflict with David Kilcullen, PhD

Dr. David Kilcullen, a mastermind in the spheres of strategy and counterinsurgency, joins us to dissect the evolution of global military tactics. His expertise, drawn from his book "Dragons and Snakes: How the Rest Learned to Fight the West," provides us with a rare glimpse into the ingenious ways adversaries have risen to contest Western military hegemony. This episode promises to peel back the layers of military leadership, bureaucracy, and the urgent necessity for adaptability, offering strategic insights that transcend the battlefield and permeate the realms of business and innovation.

Within the corridors of power and on the front lines, leaders grapple with the complexities of modern warfare, where technological prowess often spells the difference between victory and defeat. Our exchange with Dr. Kilcullen takes a hard look at the multifaceted role of the Department of Defense and the economic undercurrents of defense spending. We'll investigate how the resilience of parasitic markets and the agility of innovation can provide a blueprint for not only military success but also corporate triumph, setting the stage for a discussion that merges the art of war with the science of business strategy.

Venture into the shadows with us as we uncover the covert operations that define the modern era of conflict, where countries like Russia and China manipulate the threshold of war and commerce. Dr. Kilcullen will guide us through liminal warfare and the stretching of traditional battlefields into commercial territory, revealing a world where the lines between corporate competition and strategic dominance are increasingly blurred. Through this lens, we'll understand the imperative of reimagining business models, product placement, and the unyielding pursuit of innovation, drawing from military strategic frameworks that prove just as effective in the boardroom as they do on the war-front.
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Transcript

Steve McCrone: 0:56

Welcome to the no Way Out podcast. I'm Stephen McCrone, your host and, of course, your all-know Brian Ponch-Revera. We have a guest today, dr David Kilcullen. He's an Australian author, strategist and counterinsurgency expert. He served in the Royal Australian Infantry Corps. Retiring as a lieutenant colonel, david has had several sorry served in counterinsurgency and peacekeeping operations in East Timor, boganville and throughout the Middle East.

Steve McCrone: 1:27

David was seconded to the United States Department of Defense in 2004, serving as chief strategist for the Office of Coordinator for Counterterrorism. He's a senior advisor to General Petraeus, commander of the multinational force in Iraq, and to Condoleezza Rice, the US Secretary of State. David is a professor at Arizona State University and the University of New South Wales in Canberra, australia, his consultant with his company Cordera Applications Group. He's an advisor and author. The book Dragons and Snakes how the Rest Learn to Fight the West is one of our favorites because it covers the topics of evolutionary science, complex adaptive systems theory and how they impact both state, military and business decision making. So, without further ado, I welcome David Kilcullen to the no Way Out podcast. Thanks for having me Steve.

David Kilcullen: 2:22

It's great to be here.

Steve McCrone: 2:27

Good. So just building on the dragons and the snakes For listeners who haven't read the book, it really applies the concepts of evolutionary science and military innovation to explore how state actors such as Russia, china, north Korea and Iran, and non-state actors Al Qaeda, islamic State, hezbollah have really learned to defeat or render irrelevant the Leviathan forces high tech, expensive precision warfare as developed by the US throughout the 1990s. We often say that that book is a prelude or a very good background reading if you really want to understand the events that are going on currently, particularly around Russia and China. So, david, the first question for you is have we tamed the dragons and have we banished the snakes?

David Kilcullen: 3:24

No and no. Basically I mean I think this is a Basically the argument in the book is that in 1991, we established an extraordinarily dominant way of warfare. People may remember the Highway of Death at the end of the Gulf War where basically everybody that might want to take on the US or its allies figured out okay, that's not the way to do it. And we basically showed everybody how not to oppose the US. People spent 20 years figuring out how to evade and adapt away from that model. So, if you like, we were a sort of very dominant incumbent who became lazy and slow to adapt and a bunch of challenges, were able to overcome the barriers to entry that we'd artificially created in the military space and are now competing with us.

David Kilcullen: 4:28

And just to use the term dragons comes from it's a quote from James Woolsey, who was President Clinton's CIA director, who during his confirmation hearing said this is in 1993, right after the end of the Cold War said we've slain a large dragon talking about the Soviet Union, but now we find ourselves in a jungle full of snakes and in many ways the dragon was easier to keep track of. So I built on that metaphor and basically what I mean by dragons is powerful state adversaries Russia, China, to a lesser extent, iran, north Korea, as you mentioned, and then snakes are non-state actors and basically what's happened is that the dragons are back. They've been watching us struggle, dealing with the snakes for the last 20 years of the war on terrorism and they've come back and learned how to fight like snakes and are operating in a way that used to be the way that non-state actors operate it. We can get into that in more detail, but at the same time, non-state actors now have access to levels of lethality and precision and military capability that you used to have to be a state to acquire. So we're dealing with both dragons and snakes at the same time and in many of the same places and, as I mean, we can get into this in as much detail as we can stomach, but it isn't working right.

David Kilcullen: 5:51

I mean, you look at what's going on in Ukraine, what's happening with China, what's happening in the Middle East with Iran, with the Houthis in the Red Sea, and what you see is a dominant paradigm or a dominant military model that is failing and, as a result, we see Western control and dominance over the international system declining at a pretty rapid rate, with implications for all aspects of life, but what I'm trying to do is put my finger on the specifically military aspect of that, which isn't to say the whole thing is a military problem. There's a lot of other things going on as well, but to the extent that we can understand the military drivers of decline, they have something to do with this phenomenon. So long answer to an extremely short question, but I'm sure we can delve into that in more detail.

Steve McCrone: 6:44

Yeah, so let's do that. You know, history is, I guess, dominated by military thinking. That's found its way into in a modern sort of industrial complex and through to organizational decision making. What can we learn, as business leaders, from your experience in insurgencies and counterinsurgency?

David Kilcullen: 7:07

That's a great question and you know, just to pick up on your first comment, it's quite weird, right, because periodically people in business will say we should go copy things from the Pentagon or the military. But actually a lot of Pentagon in military thinking derives originally from business. Anyway, the famous Elihu root reforms of the late 19th century in the US military explicitly took ideas from you know late 19th century business. You know how to run a railroad and apply them to how to run what was then the war department. And then in the 50s people went and said, well, that's, you know, the Pentagon's got it figured out, so let's copy that. And took all these ideas back into to the business world. So it is quite self-referential. Yeah, I mean, I sort of touched on this earlier, right, if you've got, let's.

David Kilcullen: 7:55

If we think about the warfare space as a business and it is, it's not only a business, but it is that also there is a particularly dominant, incumbent way not only of doing combat but of doing things like procurement and contracting and maintenance and innovation. That is slow, ponderous, large scale. It tends to lack agility and it is very good at dealing with predictable problems, but it pretty much sucks at adapting rapidly to problems that you didn't anticipate, and people will often find themselves, you know, running out onto a rugby pitch and then only then discovering that they're suited up for cricket, you know. So what I like to think about is how do we, how do we, disrupt that model by learning from what adversaries have learned as they've tried to disrupt it. So my team, the work we do, is a lot about identifying and then helping investors understand emerging and disruptive technologies. Right, and where they're coming from and what's driving growth. So things like low power, no power, communications, swarming drones, loitering munitions, sometimes called kamikaze drones, you know a bunch of other things like that. But even you know AI, cognitive warfare, all that stuff.

David Kilcullen: 9:27

There's reasons why all these things now are super important in the military space, and they're for the same reasons that incumbents are getting disrupted by small agile startups across a variety of businesses. Just to go back military for a second, the. You know I'm sure you've talked about this before on the podcast, but in the last six months, we've seen two actors that don't have a Navy, in the form of Ukraine and the Houthis in Yemen, defeat or significantly disrupt major Navy's the Russian Navy, the US Navy and the Royal Navy by using small, smart, stealthy many autonomous and semi-autonomous like missiles, drones, underwater vehicles and so on that are outpacing and out adapting conventional forces, and what's happening is that incumbents are getting saturated by large numbers of small challenges that would, all of which each individual challenge would be easy enough to deal with, but they're all happening at the same time and really really, really, really, really, really really come in the same place, and that's swamping people's ability to adapt.

Steve McCrone: 10:47

So it's easy to focus on the technology, and it's. I think. All of us have a history of enjoying military technology. How is the decision making process different in a small terrorist organization than in a large military organization?

David Kilcullen: 11:09

Well, it can be very different. What are people doing differently? People are different, but it can be different on a number of levels and it you know, one of the things I track in the book is the evolution of al Qaeda, Hezbollah and Islamic State decision making over the last 20 years. If you look at al Qaeda on the eve of 9-11, it is very much a 20th century hierarchical, structured organization with a head office, franchises, committees, subcommittees, bin Laden more like the chairman of the board, with a bunch of you know board subcommittees doing different things and then a variety of regional CEOs running their franchise or their area within that broader articulated structure. That whole thing gets smashed within six weeks after 9-11 and you get a disaggregated structure right, with decision making pushed down to a lower level. What was the head office of al Qaeda evolves to be more of a innovation hub, right, that's providing targeting guidance and techniques and ways to think about pursuing that you had, but the actual decisions on how to do that are pushed down to the franchise level.

David Kilcullen: 12:32

Then Islamic State emerges about 10 years after that and they have an entirely different approach.

David Kilcullen: 12:37

They act much more like a nation state on one level, but that gets smashed pretty quickly in the counter ISIS campaign in the Middle East and they then find themselves in a sort of bottom up atomized model where individuals and small groups self-organize and self motivate to act within a general framework of guidance that's put forward by Islamic State headquarters.

David Kilcullen: 13:04

So you see, this sort of rapid evolution after 9-11, driven by the way that we reacted to that attack, that causes as I argue in the book, it causes an improvement, in fact, in the performance of terrorist groups. So, as we tried repeatedly to knock out the leadership group, what we're actually doing is refreshing the organizational structure of the entity and making it adapt to more quickly. And I quote a guy in the book called sorry blanking it'll come back to me Guy at Oxford who focuses a lot on application of Darwinian evolution to military matters and points out that the weaker player in a military adaptation environment always has stronger pressure on them to adapt and has a greater degree of variation and selective retention, which makes their adaptation happen in a much more rapid manner. So, and that's true in business, it's true in industry, it's true in the manufacturing space with the emergence of advanced manufacturing techniques. So it's not purely a military phenomenon, but that's the subset of it that we're seeing.

Steve McCrone: 14:28

Yeah, I remember reading a passage where a group of analysts are watching a firefight, and I think your comment there was. You know they're killing the stupid ones. No one who saw this happen would ever repeat the same mistakes. All we're doing is teaching them how to fight us.

David Kilcullen: 14:44

That's exactly right. I mean, if you put enough pressure on an adversary to kill the stupid in the week, but not enough to destroy the organization overall, you're essentially culling the herd and applying the term is actually artificial selection in adaptation and which is making them better, and there's a number of classic examples that I talk about the evolution of Palestinian terrorism under Israeli targeted killing in the 2000s. I talk about the way that Pakistani Taliban significantly improved. I mean, they went from a bunch of hillbilly idiots in 2002 to a transnational terrorist group make launching attacks on New York City by 2012. They successfully carried out the single most deadly attack on the CIA and the entire war on terrorism by basically us weeding out an older, less motivated, less experienced group of leaders who were then replaced by a more radical, more battle hardened, more motivated group, and we basically built a better adversary by the way that we targeted them.

Brian "Ponch" Rivera: 15:58

I want to go back to the use of drones and think about this from a perspective of Gordon Gecko, an investor, a shareholder in Raytheon or General Dynamics. I'm very excited about the use of the standard missiles going up there and knocking out these drones. Why? Because my stock price goes up and as a shareholder, I'm pretty excited about it. So you talk about complexity quite a bit in your book and even today talk about self-organization, autonomous teams and things like that.

Brian "Ponch" Rivera: 16:28

From a military perspective, as a retired veteran, retired military officer, I know that there's an implied contract when you hit 12 years of service that you're going to stay in. You're just going to do the minimum amount of work that you need to do to get your pension. So systems driving behaviors there. I want to get your perspective on what you see missing from military leaders, government employees, when they start thinking about war in terms of complexity theory. I know you write about that quite a bit. You talk about that quite a bit, but can you talk to us about why it's so important and what's so challenging about helping military leaders understand why complex adaptive systems thinking is so important?

David Kilcullen: 17:08

Yeah, I would draw a distinction between combat commanders and institutional leaders within the Department of Defense. I would further draw a distinction between battlefield leaders and more senior leaders, because it's an obvious point. But fighting and winning wars is only one of the things that the Department of Defense exists to do, and perhaps not the most important as far as leaders in the Department consider it. It is a very large employer. It soaks up a significant chunk I think it's about 21% of total federal annual expenditure. It provides jobs and income to an enormous military industrial complex and it is a sort of social engineering tool for social and demographic policies that certain governments want to push. And that's not only true in the US. If you're the Secretary of Defense, winning wars is in there as one of the things you're supposed to do, but you only have to look at the fact that not a single person, civilian or military, offered to resign or was fired, or was even asked to resign after the massive military defeat in Afghanistan. That happened in 2021. That tells you that the behaviors of the organization are not fundamentally about whether we win or lose wars. Right, it's about other things. You can get fired for fraudulently filing documents on your travel or sexually harassing your military assistant, or using the wrong phrase in a media interview All of those things are saccable offences and arguably should be. I'm not saying that it's okay to fiddle in your travel budget or harass your subordinates, but what you won't get fired for is losing a war. That tells you where that sits in the pecking order for people in the organization. Remember, after the Russians invaded Ukraine, they made a really major mistake in their intelligence assessment and immediately fired about 350 people within the intelligence services of the Russian Federation. There was a lot of, I think, ill-judged shard and frauder about that in the Western media, and people laughing at the Russians and saying, hey, all you guys got fired. I was like yeah, well, that's 350 more people than we fired for losing a 20-year war in Afghanistan. It tells you where their priorities are. I think it's really important to. I forget who it was, but somebody said that the easiest way to understand the behavior of a bureaucracy is to assume that it's run by a secret cabal of its enemies. I think there's a certain element of that.

David Kilcullen: 19:59

The other issue, though, is that it's very difficult for big chunky organizations like the US military, or any military, to get out of their own way in order to react quickly to a changing environment. Let's say that a brand new technology appears on the battlefield tomorrow in Ukraine and we have to immediately spend money to adapt to that. We would have had to allocate that money through Congress three years ago. We would have had to identify the need to do that about five years ago. We probably would have had to categorize that form of technology as worthy of study about a decade ago, just to meet the timelines that are imposed by the way the government funding process works. There's variations on that in Europe and Australia and elsewhere, but it's basically the same model. There are various workarounds in train to figure out how to deal with that. The Defense Innovation Unit is one DARPA historically. The Defense Advanced Research Projects Agency has been another. In Europe there's a thing called Diana, the Defense Innovation Accelerator Network for the North Atlantic, which is a NATO defense accelerator. Australia's got a similar thing. These are all attempts to become more agile in identifying problems and responding to them.

David Kilcullen: 21:24

To address the standpoint I would be looking for what my team calls parasitic markets, so things that are markets that track another market. A good example would be how do I know what the counter drone market is going to look like in two years. Look at where drones are today. That gives me an understanding of where the responses to that are going to be in another year or two. I'm able to invest in counter drone technology today because I know where the drone market is going to be in a couple of years. There's other similar examples like that. Similarly you hinted at this for just to make it a bit more explicit, PONCH.

David Kilcullen: 22:07

You might regard it as a military disaster if an Aegis air warfare destroyer gets sunk because I don't know what the VLS system carries on one of those 96 missiles, maybe something like that. You can't. For those that aren't naval familiar, you have a vertical launch system that launches these SM standard missiles to knock down a drone. That's incoming. The debate right now is the fact that the missile costs about a million bucks and the drone costs a few hundred. That's a problem. Another problem is you can't reload the vertical launch system at sea, which means that once you fire those 96 missiles, you're done. If the adversary sends 100 drones at you, it doesn't matter how capable the last four are. They're getting through because you've run out of defense missiles. You have other tools. You've got Typhoon systems and close-in weapons stuff, Without getting into the military mechanics of it. The point is that you might think it's bad that we're firing million-dollar missiles at $100 drones. If you're a Raytheon shareholder, that might be good for your Northrop Grummond. That might be good for you.

Brian "Ponch" Rivera: 23:19

That's the Gordon Gekko moment.

David Kilcullen: 23:22

It might even be good for you to lose the occasional ship to prompt rebuilds. I don't tend to think about it that way, because I want America to succeed rather than these corporations per se. We have 11 aircraft carriers. The most recent one, uss Ford, took 13 years and about $13.2 billion to build. The Chinese military builds a missile that can knock out the Ford once every 10 days. Large numbers of small, cheap, relatively easy-to-manufacture systems ultimately will trump very small numbers of exquisitely designed, extremely expensive systems that we can't afford to lose a lot of From an investment standpoint. The volume argument is there as well. You could say well, I need to invest in large numbers of small ships rather than small numbers of big ships. You run the numbers that that investment strategy might actually make you more money than quietly clapping your hands when a US ship runs out of missiles. There's a way to bring that patriotic capital together with a sustainable investment strategy.

Brian "Ponch" Rivera: 24:58

You touched on so many items there from Diana. We had General Porcalub on the podcast DIU that's where I just left Defense Innovation Unit. One of the things about that is we identified through mapping techniques, kind of like you talked about in your book. We identified that it's more of a brokerage than it is an innovation unit, but that's just something we saw working with the organization. So you get this innovation theater happening inside the DOD, inside of all organizations actually, we have innovation rooms. We do this thing that we call innovation, but we only focus on technology. And to me and even in your book you write about this anytime you focus on just technology, you're going to lose not just a war but even competition as a business owner. So again, a lot to unpack on there. We're not going to spend a lot of time on it. I want to throw it back to Steve to see if he has any other thoughts on what you just brought up or if he wants to go in another direction.

Steve McCrone: 25:50

Steve, yeah, so there's been a lot of talk about people getting fired or killed and I guess, at an assistance level, that's a form of dissent. So it's a form of saying what we are currently doing does not work. At a personal level and I'm going to quote you, david, here the ability to tolerate and integrate different opinions and thus to self correct is one of the foremost strengths of our form of government, and I'm guessing that also applies or to put words in your mouth too organizational decision making. How is that changing in your view? Are we becoming more or less welcoming of dissent?

David Kilcullen: 26:31

Oh, I think we're becoming much less welcoming of dissent. We're seeing what amounts to a censorship industrial complex developing across the media space. We're also seeing people voting with their feet. I mean, I think the recruiting crisis in the military is in part a response to people not wanting to serve in the structures as they currently exist. Good soldiers, sailors and aircrew always leave when you lose a war because they don't want to fight for losers. And I think the you know Rommel said that the best form of welfare for troops is hard, realistic training. The same is true if you. The best way to solve your recruiting problem is win a few wars.

David Kilcullen: 27:18

And you know, if you look at the wars that we have lost versus one, the last war that was an unequivocal win was arguably 1945. Korea was a draw, vietnam was a loss 1991 and the Gulf was a partial victory but it was stopped before it could translate into a full win. And we've lost all the wars since 9-11. So you know there's a reason why. To broaden it out to the rest of society, people are, if you like, withdrawing their consent in some ways from the general narrative because there's a collapse of confidence happening in institutions, experts, elites of all kinds. That's true in the medical space, pharmaceuticals. It's true in government institutions around economic growth and innovation. It's true of the military. It's a very broad phenomenon. I won't try to address the whole thing, but the military subset of it, I think, is because people have been told for at least 20 years that they've got the best military that has ever existed in the history of the world and yet with their own eyes they can see that military losing war after war and at some point people go you idiots don't know what you're talking about and it undermines the credibility of the broader narrative.

David Kilcullen: 28:37

I think we need to get much better at tolerating and integrating dissent. I think democracy or, let's say, republican, you know, representative government, which exists across the West, is the best form for that. But to the extent that we start self-censoring and shutting down debate, we are rendering ourselves much less able to compete with players like the Chinese, the Russians, the Iranians, who have a long history of not tolerating dissent. But we're rapidly catching up to them in terms of our ability to censor people. I would also say in the military-specific environment and also in business, people that are customer-facing or in the battle space or out on the ground know much, much more than people that sit in a bubble in head office, and you've got to have an ability to feed unwelcome information back to key decision makers at the high level rapidly and rapidly respond to that. Otherwise you get overtaken by your competitors Feeding back favorable, friendly information. That's not a problem, right? You always get that.

David Kilcullen: 29:45

It's hostile opinions that you want to be able to integrate, because there's never any problem. You know people that support the head office making their opinion heard. It's how do you get the dash of cold water from the ship driver that's out in the Taiwan Strait and is seeing something that the institution doesn't want to acknowledge? How do you get that back up? Now I'll make a comment. There are subsets of the military community and the business community that are better at this than others. Right, and I would say aircrew, special forces, submariners. There are people out there that have a tradition of this, and part of that is because there's a culture of listening to junior people that are customer facing and not shutting them down. Us Marine Corps is another example of people who are very good at this, but then there are organizations that suck at it, and part of it, I think, is just refreshing the corporate culture that allows to allow ourselves to better understand what's really going on out in the environment.

Steve McCrone: 30:58

Yeah, that's a good comment. As an EOD team leader, oftentimes you had to work hard to get your subordinates comfortable with the idea that if they see you do or say something that they think is likely to end in disaster or is stupid or is wrong, they're not able to speak up. They're obliged to speak up. Yeah.

David Kilcullen: 31:22

I just make that point.

Steve McCrone: 31:24

We're all equal here. If the bomb goes off, we're all equal. Yeah, it's just nishtonia.

Steve McCrone: 31:30

It all shifts to the idea of. Can we shift tack a little bit to the idea of liminality? And for the listeners who are familiar with the CanEvan framework, liminality features there in the space between the complex domain and the complicated and in the space between the complex domain and the chaotic, and that's where you're not in one or the other, but rather you're making that sort of transitory change between the two and the system is fundamentally changing. Can you talk about liminality in respect to your work and how you apply that concept in your consultancy?

David Kilcullen: 32:18

Yeah, so liminality is a broad based concept, as you mentioned. It's very common concept in anthropological work, which is my academic background, but it just means a threshold or a transitional zone or a transitional territory or a transitional population between established. When things go plastic temporarily before they reset in a new form, that's a liminal moment. But it also means riding the threshold of detectability, and that's how I use it in my context. We've had the emergence of what military people call UTS ubiquitous technical surveillance, in the last 15 years, where it's basically impossible to be covert or clandestine right. Covert means the existence of an operation is detected but the identity of the sponsor is unknown. Clandestine means that the entire existence of the operation remains undetected at all. It used to be feasible in the special operations and intelligence world to be fully clandestine on a more or less permanent basis. That's not true anymore. What we're talking about now is more like delayed attribution, where the adversary will eventually figure out what's going on. It's just a question of how long. And there are different adaptations to respond to that new ubiquitous surveillance situation. One of them is one that the Russians have made a speciality in which is riding the edge between detectability and ambiguity, so conducting operations, where they're not trying to be covert, they're not trying to be clandestine, they're not clear enough that we can mount a response, and they play a political warfare and information warfare game in that space to delay and obfuscate and limit a response and that gives them a play space within which to maneuver. The Russian takeover of Crimea is a good example of that, where they had the so-called little green men. Nobody had any doubt really that that was Russian military, but the Russians were just denying it completely ball-faced manner on international media and elsewhere and saying no, no, nothing to see here. That's not our guys and we have no intention of ever annexing or taking over Crimea, let alone the rest of Ukraine. It's just a temporary humanitarian intervention. And that delayed and obfuscated the response from NATO for a few weeks, which was all they needed to consolidate control. And then suddenly, on the 18th of March 2014, they announced OK, we're having a referendum on annexing Crimea. Next day, they annexed Crimea Following day. It's part of Russia.

David Kilcullen: 35:08

So that's an example of what I describe in the book as liminal warfare, right riding the edge of detectability. There are other ways to deal with it. A classic Chinese model, which is sometimes called unrestricted warfare is to go outside of the boundaries of what we define as warfare, so that even if we can detect what's going on, we don't necessarily recognize it as a form of conflict. Think about what's happening with technical standards, with access to semiconductors, critical commodities like pharmaceutical precursors, those kinds of things. They all fit within a Chinese warfare strategy called unrestricted warfare, but Western countries typically regard those as just parts of normal commercial interaction. So you're moving outside the bounds of what is traditionally considered to be war fighting. So there are different ways to handle that approach.

David Kilcullen: 36:05

From a business standpoint, liminality is really important because it requires business leaders and investors to ask the question continuously what business are we in? What are we trying to do here? What is the problem that we're trying to solve and how do I characterize my firm? Is it a? To use an example, most people are familiar, I think, with the evolution of McDonald's in the 50s and 60s where at some point the founders of the company or the successor who took over the company realized I'm not in the hamburger business, I'm in the real estate business. And at that point the role of the company as a franchise holder massively expanded and transformed the value chain for McDonald's. You see similar aha moments with other companies that realized hang on, I've been framing this as an X problem but it's actually a Y problem.

David Kilcullen: 37:07

You mentioned the Kinevan framework and I hadn't actually read that work before I wrote the book, but I've read it since and I think it tracks very closely. There's a framing issue. We have a whole part of our company that does strategic design thinking, work with clients, helping them to think through those kinds of questions and the framing part of the problem. Framing is super important for that. Likewise, we partner very closely with a firm called Chaos One in Australia that does military innovation and a lot of their work is design sprints, where they work with clients in this case founders to get an idea through a framing process that helps people understand how does this fit with what potential markets and innovators are looking for?

David Kilcullen: 38:00

And I just want to find a practical observation. One thing I often find with new investors or new founders in the military innovation space is everybody wants to go to special operations where it's sexy and cool, and people want to say, hey, we're selling to the highest tier special forces organization in the world. Well, that might be sexy, there might be a marketing edge to that. But actually, if you run the numbers, it's a tiny market and you're actually in many ways better off having less of a premium product that sells to everybody.

David Kilcullen: 38:38

Think about you walk into a Whole Foods or a Krogers or a Safeway and you're looking at a variety of high-end products. Think about the little rubber conveyor belt that's on every checkout in every store, in every big box facility anywhere in the world. Go look up the guys that invented and manufactured those tiny little rubber conveyor belts. They're ubiquitous. You don't even notice them. They're high volume, low prestige. Those dudes made a shitload of money off of that. So I like to say to people think about how you can take a high-end, exquisite idea and make it mass appeal, mass volume, as part of that scale up. A lot of people focus on the startup process, but where a lot of our founders that we work with struggle is in the scaling up stage and that's where you're trying to make that transition from a small number of high-end clients to a larger volume, perhaps less premium approach. That same idea in business applies to military innovation as well.

Brian "Ponch" Rivera: 39:51

I want to touch on framing a little bit more and referencing what we did in the military to look at the environment. So we use Dymefill, we use Pimisi, we use these different frame I guess we'll call them frameworks to understand the external environment, the operating environment. We're not seeing a lot of that type of use in set of organizations right now. So I'm kind of curious what approach do you use when helping organizations understand what's going on in the external environment?

David Kilcullen: 40:19

So Alyssa is going to be familiar with what Pimisi and Dymefill are. So Pimisi is a model of the environment? Not necessarily, yeah, let's just really run. They're just checklist, right. So Pimisi is a model of the environment political, military, economic, social, infrastructure, informational right. Dymefill is a list of tools you have to affect the environment diplomatic, informational, military, economic. You know you run through them, People can look them up. The other acronym, while we're talking acronyms, is CARVA, which is a model that we use in special operations about identifying vulnerabilities right Criticality, accessibility, recruitability, vulnerability and we can map out where the vulnerable points are in an adversary system.

David Kilcullen: 41:05

There's two problems with those approaches, right, there's three actually. One is they don't take into account complexity and what we would call complex adaptive systems, which by definition are nonlinear, where you cannot predict in detail the response to any particular action, although you can model, within a fairly decent set of parameters, the bounds of a response of the system. So you've got a pretty good idea what's going to happen in general terms, but it's really difficult, somewhat argue, mathematically impossible to predict the specific response to a particular action. So you can't treat it as an engineering problem, right? You can't spend your time trying to understand the entire problem and then build a solution to your that matches your understanding of the problem and then execute. That's a sort of traditional engineering problem to engineering approach to what we call TAME problems problems that don't change when you start trying to fix them. There's a term people use wicked problems. It's often misused to mean difficult problems. It actually means problems that once you start trying to fix the problem it changes the nature of the problem. So by definition there is no way to apply a sort of engineering style solution to the problem. Real world problems often these are platonic ideals, right. Real world problems often exist as a combo or a mix of those kind of elements. There's often TAME or engineering type problems that exist within broader wicked problems and part of the framing issue is identifying what parts of this problem can I solve now with existing resources within the timeframe that's meaningful, that will stay solved, right, and moving them to one side and letting the engineering and development teams get a crack at that. But then the rest of it is framing like what kind of problem am I in? What are the options that I have open to it?

David Kilcullen: 43:11

There's another thing that we use in the military called the JMAP, the Giant Military Appreciation Process, or something that's called the Marine, the Military Decision Making Progress Process, MDMP. These are not good models for dealing with rapidly changing, complex environments because they assume that the start state, like the state of reality that exists when you start trying to solve the problem, will still broadly exist by the time you come up with a solution. And in a rapidly changing environment that doesn't really work. So we work a lot on framing and on mapping out the problem, set space and identifying the range of tools that may be applicable to solving that. And then we work on what we call action learning. There's a number of different terms for this, but a cycle of essentially innovate and then iterate right so you want to understand the nature of the environment, not completely, but just in enough detail to take your first action. Then you act, then you understand the impact that your actions had and you adapt from there. Right so you have a cycle of adaptation, iteratively, action by action, as you try to understand and affect the problem. And the other thing we do a lot of work with is data modeling, using timestamped data that allows us to understand what data that's coming back to us actually matters to the problem we're trying to solve. So again, I'll use a military example for that.

David Kilcullen: 44:42

We spent some time in southern Afghanistan in the early 2010s working with ISAF, the military, the NATO force in Afghanistan. At the time, they were tracking 165 metrics to identify whether districts were getting more stable or less stable. We went out into the most dangerous and the most stable districts and measured, over about a month period, timestamped data and identified that about 90% of the data they were tracking was no different between districts that were getting safer and districts were getting more dangerous, which meant that they ended up with 11 metrics that actually changed when the status of the district changed. So, out of 165 things they were tracking, only 11 made any change at all when districts changed status. So we were able to say so.

David Kilcullen: 45:36

Don't stop collecting it, but in terms of your analysis, you need to focus on this subset of factors, because that's the set of factors that is relevant to this particular problem set.

David Kilcullen: 45:47

Now, if they were looking at a different problem set, it would have potentially been a different subset of the data. That's why you don't stop collecting. You need to change your analytical framework. Same thing for a business. Think about a high volume, fast moving consumer goods business. You're getting vast amounts of data back, but not all of that data matters to the sorts of decisions you're trying to make. So all of that stuff which used to be very difficult to model, say, 10 years ago, now, with AI and machine learning and the ability for a machine to recognize patterns in the data that a human analyst might not be able to, we're able to actually do a better job, not at analyzing everything, but identifying the relevant subset of data that we need to analyze for particular problem sets, and that then allows you to, as I said, understand the problem in just enough detail to take your first set of actions. Take those actions, see how it changes the problem and then adapt to that.

Steve McCrone: 46:51

I'm very curious, david. There's a lot of military people who have gone on to become consultants. You're talking to two of them now and I think a pattern that I see a lot is they take their military experience, chop it into pieces, civilianize it. We've seen people basically copying the manuals into civilian language and then selling them as techniques. Very few seem to take their time and I like to think there's three exceptions to that rule. On this call To actually go and examine the theories, the science, and do some really deep learning into things like complex adaptive systems theory, evolutionary biology you're an anthropologist, so if someone was listening to this and thinking I really want to go and learn the theory or really learn how to really challenge some of these ideas that I'm seeing, what would you advise them to do?

David Kilcullen: 47:54

Well, I think if you're going to be investing in or starting a company in the defense space, you really need to understand the technologies that you're working with and also the organizational and bureaucratic systems that impact how people buy those technologies or how they grow. So I would be thinking about that. There's a certain amount of value in innovation theory, but what you really need to know is the really specific technical details of your field. Investors typically say we don't invest in technologies, we invest in teams, and what makes an investor choose a team of founders is usually a combination of a dynamic team that can adapt quickly, that can respond to changes in the environment rapidly, but that has deep, deep domain knowledge in the area of expertise that they want to develop. So when I talk to founders, that's what I'm really interested in how did you get into this? What's your background? And what you want to see is a combination of a certain personality type, a certain team composition, but a deep, thorough understanding of the science and the organizational science as well as the technology of how this stuff works.

David Kilcullen: 49:19

So I often look for people that have deep technical knowledge and but at least one other element of knowledge that they can bring to bear, because innovation often happens when you have two sometimes unrelated fields of knowledge that intersect and you can start to identify insights that people that are deeply steeped in just one of those wouldn't see.

David Kilcullen: 49:41

So I mean I look for guys that have, or guys and girls that have, deep domain expertise in some relevant military skillset, but also expertise in something else jazz, music, architecture, biological science, whatever it might be right that that then often gives you the ability to see outside the deep rut of your own technical expertise but also makes decisions that are useful. So the other thing that I'm often suspicious of is people that are newcomers to a particular environment who think they've stumbled on insights that people that have been working in those environments for decades have somehow failed to miss right. They often have sorry, they may have, but often they just don't know enough to know what they don't know. So that's again why you need a team that has diversity, not in the skin color sense, necessarily, but in the sense of diversity of thought and diversity of experience and opinion about an operating environment, so that you can have, you can avoid, that group thing.

Steve McCrone: 51:00

Yeah, I talked to a lot of recent experts in AI. Yeah, good example, I grew up until recently were experts in blockchain. Yeah, yeah.

Brian "Ponch" Rivera: 51:10

That's a really good point.

Steve McCrone: 51:12

But again it's probably a good way.

David Kilcullen: 51:14

But again, coming from blockchain to AI, that's actually potentially a way of generating lots of interesting insights, but the only way you're going to generate that is if you don't go in saying, oh, I'm already an expert, right? You know? It's one of these things that I think people use the term Dunning-Kruger effect. It's worth looking at the actual Dunning-Kruger paper that that's based on, and it's only about expertise and a specific skill set, and one of the points that they make is that people that are genuine experts in a given area often have less confidence in their own abilities than people that are just starting out. Right, there's also a gendered element to that, too.

David Kilcullen: 51:51

Women tend to have less confidence in their own expertise than young men do, so you want to have an element of that as well, where people are not going to assume that whatever the latest idea they came up with is a brilliant one, but they're also not going to be too different to put forward that idea because they're worried that someone's going to shoot them down. So that's why you need a culture of innovation that involves letting the environment prove you wrong repeatedly and rapidly, rather than shooting people down in a discussion. Right, and that's the art, right? You don't want to have people self-centering and not bringing good ideas because they're worried they're going to get shot down, but you want to have an innovation system where you rapidly test those ideas against reality and recognize that 99.9% of them are not going to work right. I mean, if 80% of the things that you're trying in a military innovation space are not failing, you're probably not innovative enough.

Steve McCrone: 52:50

Okay, just to wrap up, I've got one final question. What are you working on at the moment? You've always got some interesting things to say, always interesting things to read. What's?

David Kilcullen: 53:02

next, I'm working on a number of things, as I always am. I've got a book coming out in a little while looking at how conflict has adapted since I wrote Dragons and Snakes. That's co-authored with a friend of mine, greg Mills, and it looks at Russia, ukraine, taiwan, china, but also a lot of African conflicts which often don't get analyzed in detail in the West. I'm also, weirdly enough, applying a bunch of ideas from resistance warfare and irregular warfare theory to what is going on in Western countries right now, and that's something I'm looking at intellectually. But in the business space, we're launching a new defense technology innovation hub that's going to basically work with founders to identify technologies and organizations and conceptual approaches, because we see innovation as including at least those three elements right A different way of a different organization, a different set of concepts and different technologies. When you get all those together, that's when you tend to get better innovation. So what we're doing is looking at a set of technologies, a group of founders and a set of environments and trying to basically identify where we think the environment's going in the next three to five years so that we can get ahead of the curve.

David Kilcullen: 54:31

Interestingly, you guys may have experienced this as well, but a lot of investors that we talked to have been unwilling to even engage with the defense, aerospace and innovation tech environment Over the past few years, are suddenly interested, and I think that has a lot to do with what's going on in Ukraine. But we're very much like, welcome, you know, glad that you're here. Let us help you navigate this pretty complex environment that you may not be familiar with right, because it's very different to a lot of other spaces that people might want to invest in. So that's what's happening right now at Cordillera, but personally I'm always looking at new things. I'm reading a lot of scientific literature and trying to think about how that fits into the space that we are focused on right now with innovation.

Brian "Ponch" Rivera: 55:25

Anything in particular that you're reading on the science side.

David Kilcullen: 55:28

So, yeah, so I'm doing a lot of work right now, thinking about a book that I wrote about 10 years ago called Out of the Mountains, which is a focus on urban environments, and, of course, urban conflict has been central to that the last 10 years. Right, so I predicted it and I was right in the content of what I predicted, but I was wrong in my prediction of how quickly I thought it would come about. Things that I was talking about happening within three to five years already happened within a year or two of me writing that book. So part of it is understanding the pace and thinking about rapidity of adaptation and evolution and working on a lot of computational adaptation material right now on that.

David Kilcullen: 56:15

The other thing that we're doing is revisiting some of the judgments we made about the urban space that have not played out, one of them being the actually significant reversal of demographic trends that seemed like they were going to result in certain changes to the global population, but we're seeing them shift. The four runners to that were already a little bit evident in the data a decade ago, but it's pretty clear now. So thinking about what that means, what deindustrialization, de-urbanization or even depopulation might mean for some of the trends that we identify. And then the other thing we're thinking about is the impact of the pandemic on big cities in particular and how that has shifted the way that things happen in large urban spaces. So yeah, that's another big part of what we're doing. So computational urban studies, computational biology, a lot of work on rapidity, pace and scale of adaptation, and yeah, that's kind of the base research we're doing. We're applying a lot of that to knowledge of fragility and anti-fragility in urban spaces.

Steve McCrone: 57:27

Good. Well, that might be a nice place to leave it. David, thank you very, very much for your time. It was a very interesting discussion that covered a lot of ground, and I'm sure any one of those topics is probably worthy of a deeper dive. So I appreciate you're a busy man and we've really enjoyed the talk. Thank you very much.

David Kilcullen: 57:48

I'm David Shave and thanks, ponce, for the great to connect you with you guys.