Calculating Costs of Economic Espionage Is a Reputation Risk Gamble…

There are numerous terms and phrases, ala descriptors…routinely used throughout the private sector, university researchers, ‘think tanks’, government officials, and found in an array of survey/study findings, that artfully convey and draw interest to the adverse (economic, competitive advantage) impacts of economic espionage, i.e., theft – misappropriation of U.S. proprietary intangible assets and intellectual properties.

I am respectfully confident, however…if one were to ask whomever constitutes the average person on the street today, to describe the primary cause of what’s been described as ‘the greatest transfer of wealth in U.S. history’, I suspect few would cite economic espionage!

The confidence of my assertion is based on my 25+ years of interest, and go to ground investigative study – research of this phenomenon, beginning in the early 1990’s.

This is closely comparable to what General Keith Alexander said…in a speech to the American Enterprise Institute on July 9, 2012, who, at the time, was serving as Director, National Security Agency (NSA), while also overseeing  the U.S. Cyber Command.

An earlier reference to this perspective was published by…the National Defense University in its 2011 report titled Economic Security: Neglected Dimension of National Security? edited by Sheila R. Ronis.  An even earlier perspective of this was conveyed in a speech by then FBI Director William S. Sessions in a speech to the Cleveland Economic Club in which he ‘equated U.S. national security to U.S. economic security’. 

Too be sure, there are numerous illustrations…of the adverse outcomes of economic espionage upon U.S. companies.  Having myself engaged many different facets of and players in economic espionage, primarily as an academia based investigative researcher, I find no compelling evidence that would prompt me to think either of these statements – estimates are embellishments of reality.

One of many challenges, however, in my judgment…insofar as economic espionage is concerned, lies with those who argue – assume economic espionage can be wholly prevented or eradicated.

Economic espionage is far too complex, multi-faceted, and literally embedded in…business and nationalistic (business) cultures as an acceptable norm, or, in some instances, subject to interpretation of religious doctrine.

An exacerbating factor to economic espionage, in terms of estimating economic losses and/or tradecraft…occurs when the subject becomes unnecessarily blurred, it is presumed that cyber-attacks are synonymous with economic espionage.

Equating cyber-attacks with economic espionage does have some relevance…but doing so, through my lens anyway, infers simplicity, i.e., there may be a ‘quick fix’ to its eradication, e.g., put more resources into IT-computer systems security, and all is good.

To that I say, the first imperative lies with business leadership recognizing economic espionage is extraordinarily asymmetric…in its methodology and tradecraft. This makes, in my view, the prudence of business leadership 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.  This would help immensely.

When (if) this occurs, sufficient resources will appear…along with measurable expectations for companies to measurably mitigate the persistent, increasingly sophisticated, and predatorial challenges presented by the global network of legacy free players who regularly engage in seeking, accessing, and acquiring others relevant intangible assets, i.e., intellectual, structural, and relationship capital.

Key starting points insofar as making indelible inroads with companies and their leadership…is to genuinely recognize the persistent (24/7/365) risks posed to their proprietary intangible assets and intellectual properties. It begins with…

  • recognizing the…targets of economic espionage today are actually any intangible asset possessed and/or produced by a company that provides a competitive advantage and adversaries find relevant to their R&D.
  • accepting 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 pervasive and persistent, and that a large percentage of countries, i.e., allies and adversaries are engaged in it at some level.
  • demystifying the…notion that only Fortune 1000 companies are the primary, if not only targets of economic espionage.
  • bringing operational clarity to the…various means, methods, and sources used by economic and competitive advantage adversaries to successfully, effectively, and clandestinely engage in economic espionage.
  • drawing more attention to the…small and medium sized companies, ala SME’s start-ups, and university-based research startups, etc., which develop and hold possess highly advanced intangibles and technologies, which are also being targeted, i.e., size really doesn’t matter!
  • demystifying the…perspective that only national security and defense products, systems, and classified information are being targeted, thus those who preside over companies that only manufacture  – sell dog food have no reason to be concerned with economic espionage.
  • revisiting the often self-deprecating expressions…of company – business leadership who presume their company possesses nothing of value to economic – competitive advantage value which adversaries would rationally desire, so why devote resources to safeguarding what no one would rationally want.

And yes, there are reasons why those having access to national media either inadvertently or purposefully leave the above out of their research – reporting 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, there is ample evidence of who the various culprits are, and they are not only China and Russia.

To assume differently, we know, influence some, to gloss over the intricacies, complexities, and stealthily woven webs…that certain lesser state sponsored entities have applied to illicitly acquire and convert other’s proprietary intellectual and structural capital into lucrative and strategic competitive advantages.

One company, BlackOps Partners…which employs counterintelligence and safeguarding business trade secrets and competitive advantages for Fortune 500 companies, estimates (emphasis on estimates) that $500 billion in raw innovation is stolen from U.S. companies each year.

So-called, raw innovation include…such (intangible) assets as trade secrets, R&D (inputs, outputs, failures, and relevant intellectual and structural capital, etc., that produce, for companies economic and market space competitive advantage and otherwise serve as sources and drivers of a company’s value, revenue, and sustainability.

BlackOps’ CEO endeavors to draw this analogy…i.e., when acquired ‘raw intelligence’ ala innovation intended to underlie – drive a company’s value, revenue, competitive advantages, 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 guesstimate 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.

It is indeed challenging to arrive at…objective (quantitative, qualitative) calculations as to the costs – losses specifically attributable to acts of economic espionage as defined by the EEA.

Herein, in my view, lies another reason why…unduly large percentages of business leadership, are less receptive than they should be, with respect to undertaking more aggressive actions to thwart – mitigate economic espionage. For example, the loss figures (a.) vary substantially, (b.) appear subjectively developed, and (c.) not infrequently, rooted in a transparent agenda.

Too, in numerous, but an unknown number of instances…decision makers of victimized companies (economic espionage) are advised, often mistakenly, it is not in their company’s interest to ‘go public’.

Such positions are born largely out of concern for how…investors, stakeholders, and consumers may respond, i.e., they may interpret the calamity as a ‘reputation risk’.

It’s not difficult to understand then…why some companies sense it prudent to avoid finding themselves in a position in which they are obliged to not only announce a significant (economic espionage) breach has occurred, but naming the country – state sponsored source of the act; they want to continue transacting 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.

Michael D. Moberly [email protected] St. Louis  March 7, 2014 ‘Business Intangible Asset Blog’ since May 2006, 650+ posts, ‘where intangible assets, business, and effective solutions converge’.

Please explore other relevant blog posts, video, books, and position papers at

Divi Real Estate Agent | Luxury Properties


1234 Divi St. #1000, San Francisco, CA 94220

Phone Number

(255) 352-6258

Business Hours

24/ 7 / 365

Sign up to get latest news & Listings:

Do you need some help?

Vivamus eleifend mattis eu faucibus at felis eget. Tincidunt at ut etiam turpis consectetur euismod. Ullamcorper aenean sem sceleris que sed vel facilisi netus ut. Pharetra vitae sed ut sed sit pharetra sed. Sit sollicitudin potenti laoreet auctor non nunc. Quam viverra commodo vel adipiscing tortor ultricies.
Copyright © 2024 | Privacy Policy
Divi – Real Estate Agent