posted 25-Mar-04
This article from JUNE 1997 EWR has been posted on SUBSCRIBER ACCESS.
We are making it available to Public Access.
You Know More Than Clinton
Reprinted from June 1997 EWR
Congress and the president rely on the CIA and other intelligence agencies to keep them informed.
I got a kick out of the CIA's February 5th report to Congress about world crisis areas and potential wars. It was as if the briefing had been lifted from last year's issues of EWR. India, Pakistan, Kosovo, Libya, Iran, North Korea -- all were old news to readers of EWR, but they were hot revelations in Congress that day.
Either the CIA knows a lot they hide from Congress, which is an interesting thought, or they really do not know enough of the history of these countries to understand what to expect.
They are forever a day late and a dollar short. It has become conventional wisdom that no one foresaw the breakup of the Soviet Empire or the Iraq-Kuwait war. But if you've read my 1985 WASHINGTON TIMES article about the effects of guerrilla warfare on the USSR, and my 1989 speech about the Mideast, you know these events were foreseen by me as well as by other people in the financial industry.
How did we do it?
How could private individuals with limited resources see what the CIA and other intelligence agencies missed despite their billions of dollars and thousands of experts sifting mountains of information?
It's not that we are so smart, it's that the intelligence agencies are so dumb. After all, these are agencies of government, why would they work any better than the post office or the welfare system?
But this runs deeper than the normal inefficiency of government. They have two fundamental problems. The story of Aldrich Ames illustrates the first.
The son of a CIA employee, Ames went to work for the CIA in 1967. He was eventually made a CIA case officer. His job was to recruit foreign turncoats as spies for the US. But he was no good at it, and was removed from the job and shuffled around the agency.
As the years passed, Ames became more unhappy and developed personal problems. He began drinking heavily and his marriage went on the rocks. Once he got so drunk he left a briefcase full of top secret documents on the New York subway.
In 1983, he was promoted to one of the most sensitive jobs in the CIA, a chief of counterintelligence in the Soviet division. There he continued to drink and went deeply into debt -- two red flags that always spell a big security risk. He was also caught using a top secret CIA safe house for extramarital affairs. This got him a divorce but, as in the past, he was not fired. In fact, he kept his highly sensitive job.
In 1985, seriously in need of money, Ames walked out the front door of Langley with a briefcase full of files on CIA spies in Russia. He sold these to the Russian government.
The results were horrific. Ten of the spies were executed, others were imprisoned, and virtually the entire CIA network inside Russia was destroyed.
By the end of 1985, top CIA officials knew they had a leak inside the agency but could not find it.
Ames continued drinking and selling information to the Russians. In Italy, police picked up this top CIA officer drunk in the street. Still, he was not fired, and he continued selling secrets, eventually earning at least $1.5 million.
Who caught Aldrich Ames? Not the CIA, the FBI. Despite his drinking and lengthy record of serious fumbles, Ames worked inside the CIA as a mole for nine years, and the CIA couldn't find him. Were it not for the FBI, which arrested him in 1994, Ames might still be there, drunk, insolvent, philandering and selling secrets.
Question: if the CIA cannot spot such overt trouble in the office down the hall how can they spot hidden problems on the other side of the world?
Summarizing the Ames story, Ames was grossly incompetent and a clear security risk who was drunk much of the time, but he was surrounded by people who were, apparently, even more incompetent than he was.
How can this be?
Because government intelligence agencies are reluctant to fire incompetent people.
They do not deny this. They are afraid a disgruntled, unemployed worker in need of money will go to the enemy and sell everything he knows.
Virtually immune to firing, incompetent workers are kept inside the agency and shuffled from job to job. As the years go by, each intelligence agency accumulates a larger percentage of deadwood. The agency as a whole gets dumber, and there's nothing anyone can do about it. To fire these people is to risk turning everything they know over to the enemy.
My personal estimate is that any government intelligence agency more than 20 years old is so riddled with incompetence that it needs a million dollars and fifty researchers to find out who is buried in Grant's tomb.
The CIA is 50 years old.
Senator Jesse Helms has said that on the Armed Services Committee he sat through many hours of top secret briefings being told what had already appeared in the NEW YORK TIMES and WASHINGTON POST.
But let me emphasize, it isn't just the CIA. All intelligence agencies around the world have the same problem -- Russian, British, Chinese, all of them. They cannot kill their former employees, or no one would go to work for them, and they don't dare fire anyone who knows anything important, so they all gradually fill up with blockheads. An agency may contain a lot of bright people but the agency as a whole becomes inexorably more dimwitted.
The rare occasion an agency scores a coup is only because it is up against other intelligence agencies full of blockheads.
The second fundamental difficulty that cripples government intelligence agencies is their inability to analyze the data they collect.
Henry Madison Research, Inc. does not have the money to work with that the CIA does, but we do have what the CIA does not -- a model of how the world works. This model tells us what information to pay attention to and what to ignore. You were introduced to the model in CHAOSTAN, THE FULL STORY.
The model's foundation is the two fundamental laws that make civilization possible: (1) Do all you have agreed to do and (2) do not encroach on other persons or their property. (see The Two Laws)
To the extent these laws are obeyed, we expect peace and prosperity. To the extent they are violated, we expect trouble.
From these two laws the model builds upward to the venerable system of Natural Law and free market "Austrian" economics. If you want to get deeply into these revealing subjects, check the Recommended Reading sections of my short "Uncle Eric" books WHATEVER HAPPENED TO PENNY CANDY? (on economics) and WHATEVER HAPPENED TO JUSTICE? (on law).
An intelligence agency that used this model would soon discover that their country's worst enemy is its own government. Embarrassing. Better to avoid the question of models altogether. Just collect and file every piece of information that comes in the door.
They gather and store virtually all the data they find, so the important needles get lost in the bureaucratic haystack.
Sometimes they do try other models. During the cold war the CIA had one that said, pro-Soviet means bad guy, so anti-Soviet must mean good guy.
They'd give money, weapons and information to any cutthroat who claimed to be anti-Soviet: Saddam Hussein, the Shah of Iran, Noriega, Mobutu, Marcos, Diem -- the list went on for pages and included anyone in Afghanistan who was fighting Russians.
"Blowback" happened in 1993 when some of these same Afghans used the training the CIA had given them to help bomb the World Trade Center in New York.
Is this Henry Madison model the last word in predicting the behavior of governments and markets? Certainly not, but I am highly confident it is a lot better than anything the CIA has.
I know it is a shocking thing to think about, but nevertheless true, that the best intelligence data and analyses you will find anywhere is not in government agencies but in the financial industry, from newsletters. When a person in the financial industry is right, the market rewards him; when he is wrong he is punished. And swiftly. No government agency has such strong incentives. Those people can be dead wrong for thirty years and they will still have their jobs.
The government is not quite flying blind, but it certainly cannot see as well as you can if you read financial newsletters.
Fascinating. Clinton is not as well informed as you are. It explains a lot.
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NOTICE, July 2006. This offer is dated and appears no longer available. The information is shown here as part of the original text only.
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For an excellent history of the CIA, including lots of revealing insights about
how the CIA's bungling has led to the waves of terrorism that threaten us today, get the Discovery Channel's tape series, "CIA, America's Secret Warriors." It's $35.00; call 800-709-5566. I consider the third segment, "Blowback," to be essential for readers of EWR.
"We are in an information revolution that no longer requires the kind of CIA that we used to have, because, frankly, I can get it faster and cheaper off the Internet than the CIA can get it for me." -- Jack Platt, former CIA officer, 1963-1987.
*** No one knows how much the federal government keeps secret from us. Estimates of classified data range from 2 billion to 10 billion pages. That's a stack of paper 600 miles high. Presently secrets are created at the rate of 10,000 per day, says Eleanor Randolph in a LOS ANGELES TIMES article.
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All Back Isses are availabe in printable, searchable PDF in the EWR Archive.
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