Michael D. Moberly March 7, 2014 ‘A blog where attention span really matters’.
I am fairly confident if one were to ask, whatever may constitute the average person on the street today, the source of the greatest transfer of wealth in U.S. history is?, I suspect few would cite economic espionage. But that is precisely what the NSA Director and Commander of U.S. Cyber Command, General Alexander said during a speech at the American Enterprise Institute in 2012.
There have been numerous terms and phrases used by government officials to describe the adverse impact of economic espionage. One early remark, attributed to former FBI Director Sessions in a speech to Cleveland’s Economic Club in the early 1990’s was to equate U.S.’s ‘economic security with its national security’. Not long after that, of course, the Economic Espionage Act was passed into law.
Having engaged many different facets of economic espionage off and on since the late 1980’s, I find no compelling evidence that would prompt me to think these rather extraordinary estimates have no basis in fact.
A large part of the problem however, in my judgment, lies with assuming economic espionage can be eradicated, something which I know of no relevant practitioner who believes that will occur. Economic espionage is far too complex, multi-faceted, and literally embedded in business and nationalistic (business) cultures, or, in some instances, religious doctrine to be absolutely eradicated. An exacerbating factor to all of this is that economic espionage, either in terms of economic losses or tradecraft, becomes unnecessarily blurred, when we automatically assume cyber-attacks are synonymous with economic espionage.
Obviously, there is some truth to equating cyber-attacks with economic espionage, but doing so infers a certain simplicity or ‘quick fix’ to resolving the problem, that is put more resources into IT security. To that I say, it’s absolutely imperative that business decision makers recognize economic espionage is extraordinarily asymmetric in its methodology. This makes, in my view, the prudence of business decision makers taking time to reflect on the adverse affects of economic espionage away from a project-by-project or quarter-by-quarter perspective to a strategic resilience and sustainability perspective would help immensely. When this occurs, sufficient resources will be present, along with measurable expectations for companies to at least slow down and otherwise mitigate the persistent and increasingly sophisticated and predatorial challenges presented by the global network of players regularly engaged in economic espionage.
Key starting points insofar as making indelible inroads with companies to genuinely recognize the persistent risks and threats posed to their proprietary data, information, and intellectual and structural capital begin with…
- recognizing the targets of economic espionage today are actually any intangible asset possessed and/or produced by a company.
- unraveling the reality that countless countries are actively engaged in different forms of economic espionage that reflect what they believe they (their county, industrial base) needs to acquire in order to achieve economic growth, competitive advantages, and become respected players in the global economy.
- unraveling the perspective that economic espionage is so pervasive that most every country is engaged in at some level, so what can one company do standing alone to mitigate it?
- demystifying the notion that only Fortune 1000 companies are the primary, if not only targets of economic espionage.
- bringing clarity to the various means, methods, and sources used by economic and competitive advantage adversaries to successfully engage in economic espionage.
- drawing more attention to the small and medium sized companies, start-ups, and university spin off’s, etc., which possess and develop advanced technologies, are also being targeted, thus size really doesn’t matter!
- demystifying the perspective only defense and national security products and/or information are being targeted, thus if one leads a company that manufactures dog food has no reason to be concerned with economic espionage.
- revisiting the often self-deprecating expressions of many company’s management teams that their company possesses nothing of value to economic – competitive advantage adversaries globally, so why devote resources to safeguarding what no one would want.
And yes, there are reasons why those having access to national media either inadvertently or purposefully leave the above out of their equation.
I would be hard pressed to find any colleague who would question that particular sectors of U.S. industry have been consistent and lucrative targets of economic espionage, and I’m equally confident most would agree, and there is evidence to support, the primary culprits to be China and Russia.
But, this may prompt some to gloss over the intricate, complex, and stealthily woven webs that certain lesser state sponsored entities have engaged to illicitly acquire and convert other’s proprietary intellectual and structural capital into lucrative and strategic competitive advantages.
One company, BlackOps Partners, which does counterintelligence and protection of trade secrets and competitive advantage for Fortune 500 companies, estimates, which I believe emphasis should be on estimates, that $500 billion in raw innovation is stolen from U.S. companies each year. Raw innovation of course includes such (intangible) assets as trade secrets, R&D, and intellectual and structural capital, etc., that produce, for companies, their economic and market space competitive advantage and otherwise serve as sources and drivers of a company’s value, revenue, profitability, and sustainability.
BlackOps’ CEO endeavors to draw this analogy, i.e., when the stolen innovation that is intended to underlie – drive a company’s revenue, profits, and employment for the next 10 years, the U.S. is losing the equivalent of $5 trillion out of its economy in each of those years to economic espionage. BlackOps couches this estimate in the context of income taxes, i.e., during all of 2013, they state, the U.S. will have taken in $1.5 trillion in income taxes, and $2.7 trillion in all taxes. Thus, their point is, if the original figures are correct, a five trillion dollar loss to economic espionage is significant.
But, due to the asymmetric nature of economic espionage, it is indeed challenging to arrive at objective and well grounded numbers as to the actual (real) costs – losses attributed specifically to economic espionage. Herein, in my view, lies another reason why business decision makers may be less receptive than they should, with respect to more actively and aggressively engaging economic espionage on behalf of their company, i.e., the loss numbers (a.) vary largely, (b.) appear subjectively drawn, and (c.) may be rooted in an agenda.
Too, in numerous, but really unknown number of instances, decision makers of victimized companies conclude, or are advised, often mistakenly I believe, it is not in their interest to ‘go public’ largely out of concern for how investors and other stakeholders may respond by interpreting the calamity as a ‘reputation risk’. Thus, it’s not difficult to believe why companies may want to avoid finding themselves in a position in which they must not only announce a significant breach has occurred, but naming the country – state sponsored source of the breach which they want to continue doing business.
A special thanks to Joshua Phillips of Epoch Times (October 22, 2013), ‘The Staggering Cost of Economic Espionage Against the U.S.’ for inspiring this post.