Saturday, December 11, 2010

Wikileaks and Anonymous: Rise of Non-Organizations

By Dr. Suhaib Riaz.

The havoc created by Wikileaks and Anonymous has forced the political world, and more recently the business world, to sit up and take notice of a new phenomenon: The non-organization organization. Consider Wikileaks in terms of our traditional understanding of strategy and organizations: It identified a space where the traditional media giants were not competing - providing a mechanism for anonymous sources to deliver sensitive material, and then to allow a link back to those materials through their own or other established media stories for audiences to check for themselves. Technologically, nothing too outstanding by today's standards. But strategically, quite a new space, some would even call it a type of "blue ocean" space - an uncontested market space - that was waiting to be exploited. There is even a well-chalked out vision and mission, often reiterated by the founder, Julian Assange, as "scientific journalism". Clearly, exploring a new media space such as this was bound to rub against some pretty sensitive political terrain.

What is interesting though, and has caught many by surprise, is the connection between this strategy and the organizational form of Wikileaks. While in some ways, it can be considered an organization, in other ways, it is a non-organization. The non-organization element is built deep into its structure, which allows it to get material from sources that no one knows about. To avoid denial of service, it has taken the form of a non-national organization (as opposed to a 'transnational' or 'multinational') i.e. no one could really say which nations it belongs in and operates from. As far as we know, there seems to be no clear organization structure - there is one visible founder - and the rest is murky.

The other non-organization in the news is even more murky: Anonymous. It prides itself on having no structure, no leaders, no clear membership, no locations and so on, and is simply described as an "internet gathering". Yet, it is clearly well organized enough to be able to launch denial of service cyber attacks on big businesses such as Mastercard, Visa and Paypal (thought these have largely been symbolic so far). There does seem to be some vision, mission and strategy, as the Financial Times reports:
"As an “internet gathering”, they are simply whoever decides to sign up to their cause on any given day – and they follow the lead of whoever comes up with the latest online attack or prank. The main thing that unites “Anons” is the willingness to lash out collectively at organisations they see as threatening the free flow of information and ideas online. Attacks on WikiLeaks, the whistle-blowing site, have acted as a rallying cry and recruiting sergeant for “Operation Payback”, an offshoot within Anonymous."
Clearly, such non-organizations with unconventional strategies had to come under attack from established players. There seems to be a rough division building up here between the organized world of political and business elites and the non-organization and its supporters - though it is even more complex than that. The legal, ethical and social acceptance of these non-organizations has a long way to go. The rhetoric we see on both sides of the divide is essentially the contestation of the social legitimacy of these non-organizations, going on live right now, and likely to continue for a while. As expected, some have had moments of confusion amidst this contestation - witness Amazon's fiasco at selling an e-Book of Wikileak's cables in the UK, while it disallowed service to the group in the US.

We should expect more such confusion and contestation rhetoric in the near future. Love them or hate them, it does seem these non-organizations are here to stay, and the organized world will have to find ways to adapt to this reality.

Wednesday, December 1, 2010

Global Debt Crisis

By Dr. Suhaib Riaz.

Strategists currently have a watchful eye on the massive macroeconomic changes unfolding, including the European debt crises (Ireland, with Portugal, Spain and more to come), currency instability and other related problems. Strategic decisions will reflect the impact of these macroeconomic changes in many ways – witness Nissan’s recent decision to restructure its production and support functions to dollar-linked economies such as US and China to avoid currency volatility.

The Global Financial Crisis is quickly becoming referred to as the Global “Debt” Crisis, which is long overdue. I first wrote about the importance of scrutinizing debt practices underlying the crisis here and here (.pdf), presented it here, and recently again brought it up here (with co-authors).

Economist Hyman Minsky first proposed the detailed link between debt and economic cycles. Debt increases during boom periods up to a tipping point where returns from inflated assets can no longer service debt. While this view is now enjoying some revival, what is missing is a recognition of the role of social legitimizing mechanisms through which a debt-induced boom period comes about. The practice of debt has acquired a halo, or what institutional theorists call “social legitimacy”, through the aggregate (yet time-bound) success of business organizations, consumers, and indeed sovereign governments that rely on debt practices. Till the crisis hit us, there was an increasing perception that debt practices are sound in a fundamental and time-invariant manner. Debt was fixed in the public imagination as a taken-for-granted practice associated with economic success. However, this logic is flawed – or at best is only temporarily acceptable during boom periods. Sooner or later, debt comes calling in substantive terms.

Three historically unique developments, all connected with debt practices, require particular investigation due to their dominant role in the current crisis. Though often considered separately, their combined impact deserves more attention. The first is the lax financial regulation on a new and large set of leverage tools, such as derivatives. The second is the historically large concentration of power in a few players in the financial industry, many of which are key nodes in networks of debt. The final aspect is the increasingly global nature of the networks of debt. Recent news on how the US Federal Reserve bailed out European Banks, including Barclays and UBS, shows how these aspects tie-in across the globe. Put together, these three factors act toward increasing the scale but decreasing the frequency of debt-based crises, as larger contagions of business, consumer and government constituents across the globe are created to save smaller contagions (witness Europe's bailout plans for Greece and Ireland; the United States’ government bailout of banks and industry, etc.). These contagions are but grandiose efforts to cloud the substantive problems of debt through continuing to legitimize and thereby preserve existing debt practices. However, no matter how large the contagion, it cannot avoid substantive problems forever and only serves to increase the severity of a crisis when it actually unfolds. 


These substantive problems are what will likely lead to further government bankruptcies in Europe, and perhaps even to the abandonment of the Euro, in the worst-case scenario. Though this sounds far-fetched today, one thing we have learned during this crisis is "if anything can go wrong, it will" - the worst-case has often been the one that unfolded.

The legitimacy and ideological support provided to debt practices across a wide network of industry, regulators, governments, professionals, business schools, and more, deserves investigation in these times. However, in an environment marked by political handwringing and lack of political will, such deeper exploration of economic practices and questioning their socially constructed legitimacy is not easy. Yet, that alone makes it incumbent upon thought leaders to do so.