An LA Times article [1] today discusses the ongoing DoD debate over how to balance America’s national security investment portfolio.

MG Gen. Charles Dunlap argues that “We need the bulk of the Army prepared to go toe-to-toe with the heaviest combat formations our adversaries can field [empasis added]” while others such as Gen. James Mattis argue that the U.S. must not lose its newfound expertise in counterinsurgency warfare.

The article closes with this point:

Although largely behind the scenes, the debate within the department has been unusually frank, according to senior Pentagon officials. Unlike his predecessor, Donald H. Rumsfeld, Gates is almost universally seen as willing to give all comers a fair shake in strategic discussions.

In this spirit, I think the dividing line comes down to how much of our portfolio we devote to each concern. Anyone who paints this as an either-or choice is trying to skew the debate. Due to the institutional inertia against including any sustained COIN/MOOTW/LIC/SysAdmin capability in the force, the false either-or dichotomy will usually be used to argue for more big war forces.

In this debate, people often speak of “hedging” against the conventional war threat. If this is to be more than a rhetorical tool, then we need strategic risk managers who can find clever ways to invest in capabilities with negatively correlated payoffs. This assumes, of course, a rational investment process whereby these ideas can be instantiated. A friend of mine works for a hedge fund and she basically spends her days figuring out clever ways to chain bets. When she thinks she’s come up with something, she makes her case to her manager. Then she gets a go/no-go decision. In public sector budgeting, however, that go/no-go decision process involves a multitude of other actors and a far longer timeline. There are good reasons for this and bad ones; for the moment I just want to point out that it is different.

If we’re really going to hedge, then we need to be ready to counter arguments that we’ve invested in programs which “haven’t delivered value.” Hedging doesn’t increase profits, it reduces risk. If maximizing benefit in a single point scenario is your goal, then hedging won’t help you. Hedging only helps reduce your overall risk. So if we’re really going to be hedging, then we’re all agreeing to look at our total portfolio and work to look past our local biases.

So, to conclude, the next step in the debate is to tease out the risk trade-offs between MG Dunlap’s proposal of keeping the bulk of the Army tailored for a near-peer competitor (say a 75-25 split), a 50-50 split of the force, and a 25-75 Leviathan-SysAdmin split.

[1] Los Angeles Times, July 21, 2008 , Pg. 1, “A Pentagon Battle Over ‘The Next War;’ Some resist Gates’ focus on guerrilla, not large-scale, fighting,” By Julian E. Barnes and Peter Spiegel.