Jihadists will prosper using the methods of America’s entrepreneurs.

Summary: How might the various jihadest organizations evolve during the next decade? They might follow the same path as emerging industries in capitalist economies, driven by the same forces of competition to to grow and innovate so that the best grow far larger than anyone imagined possible at their beginnings. We cannot imagine the details, but the general dynamics are easily understood. If so, the future holds many strange and perhaps terrible things. Our current policies, built on arrogance and ignorance — and above all on a refusal to learn from experience — might end badly for us.  (2nd of 2 posts today.)

This is a follow-up to Business 101 tells us what to expect next from jihadists: goods news for them, bad for us. The structure of the jihadist “industry” resembles that of other early stage industries entering their periods of rapid growth and innovation. Such as the automobile industry in the 1920’s, before the massive consolidation that took it from thousands of small companies to dozens of giants (Canada went from hundreds to zero), and the cutting edge sectors of the software industry during its many revolutions.

This is a heavily paraphrased excerpt from Risk and Reward — Venture Capital and the Making of America’s Great Industries by Thomas M. Doerflinger and Jack Rivkin (1987). This passage discusses the automobile industry. I have substituted the jihadist “industry” and changed some of the text. However, the reasoning remains the same. Note that the quotes and numbers are real, from the author’s description of the early auto industry.

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An industry takes off

The jihadist industry resembles the classic high-tech industries (e.g., semiconductors, biotechnology). A few thousand dollars are all that is needed to start an insurgent group, and if it scored some early success more people and funds roll in. The flip side is that the industry is incredibly volatile, with fast-growing groups sprouting up and then shriveling like so many mushrooms.

As in the case of automobiles and computers, those outside the jihadist community are slow to appreciate its tremendous potential because they did not anticipate how rapidly it would improve in effectiveness. This is actually typical of both revolutionary industries and movements.

Growth

To be sure the jihadist industry has grown more slowly than its French counterpart. It took only 5 years for France to get from the calling of the Estate-General in 1788 to Robespierre’s Reign of Terror in 1793. The jihadist industry followed a more typical trajectory, from “criminals … who are willing to be guns for hire” (per David Petraeus, 9 November 2003) into a serious threat to the region’s regimes in only 11 years. The central reason for this superior performance is that as in the early days of automobiles and computers, no single company monopolized the jihadists. From the beginning it was a competitive free-for-all. They had a second and equally important advantage: local entrepreneurs run the groups, people who had faith in their revolution. The elites of the region, even their supporters, are rational, skeptical, and often wrong — and remain safely on the periphery where they could do little damage.

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Local regimes were various combinations of corrupt, incompetent, tyrannical, and impious. But practical arguments for revolution explain only part of jihadist groups’ growth. Many in the region fall in love with the movement. This infatuation has many dimensions. Some love the power. Add the elements of danger and religious faith, and the fascination of jihadism can be easily understood even by us in the West.

Regional elites watch with alarm

Such excesses alarm the levelheaded elites of the Middle East, who believe that the jihadist craze threatens the equilibrium of their economies and very societies. Jihadists are bad credit risks, and their rise leads to capital flight out of the region. So the elites keep a close watch on the jihadists, intending to learn if such a luxury as fundamentalist extremism is within the means of those indulging in it. As the editors of {Middle East Bankers’ Magazine} wrote: “That the prevailing stagnation in the market for bonds is due very largely to jihadists seems an incontrovertible fact, sucking capital out of the productive economy. … jihadists glory in their extravagance.”

Despite these worries, Middle East elites take comfort from the belief that jihadists will quickly saturate their market and their growth slow. When Mr. xxx, founder of a powerful jihadist group, said that they would have 500 thousand adherents in a few years, Sheik Pxxx (a senior Saudi Prince) exclaimed that this was preposterous and advised Mr. xxx to stop saying such nonsense if he wanted more financial aid. In 2006, the year that Sheik Pxxx dispensed this wisdom, this group had 65 thousand followers; now eight years later the figure is 1.7 million.

In less than a decade a gigantic regional and even world power, the backbone of the rising Islamic faith, might spring to life in the Middle East. As a citizen of Baghdad said recently, “One must see for himself, one must get into the atmosphere of the tremendous undertaking; one must himself walk these streets before one begins to grasp the immensity of the jihadist undertaking.” Another wrote, “The XXX group has quadrupled its size in the past 2 years. There has never been a time during this period when new projects were not underway, and there has not been a time in 5 years when we were not working day and night.”

Financing the growth

Although huge quantities of capital are needed to build the jihadist industry, the task is being accomplished with minimal help from the region’s elites.  Although they assuredly appear in the story, they do not loom large in the center. Jihadism is one of those rare industries where the talented and resourceful entrepreneur needs little outside capital to build a giant group. The jihadist with a competent small group, technically skilled and properly positioned in the marketplace, can start with little capital and watch enormous resources roll in after success. The growth bears little relationship to the capital invested (much like the early auto industry; Ford’s profits in its first 15 months were 10x its starting capital).

Go to jihad, young man!

Here is an industry worth getting into. Thousands of adventurous entrepreneurs have done so, but few survive for long. One study concluded that between 2006 and 2014, 485 jihadist groups formed in the world, but 262 had folded by 2014. Of course, many of the 243 survivors will fail during the next few years, and the failure ratio would be higher if all the fly-by-night groups were listed. Many of these were backyard affairs that never got off the ground, and others were grandiose but poorly run affairs that did not deserve to succeed — and few did.

The reason for the high death rate is that in the jihadist business a wrong decision can be fatal. Furthermore, jihadist groups have to make the right operational decisions; no marketing savvy can save them from accurately targeted cruise missiles. The key to success is having leaders who know the industry intimately and can make the right moves. The successful jihadist groups tend to be partnerships between technically competent fighters and local leaders who contribute capital, marketing savvy, and management talent.

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Conclusions

The world is changing in ways we cannot reliably predict and perhaps cannot even understand. We can futility fight to hold back this tide. Or we can adapt to it, mitigate its more harmful effects on us and perhaps even channel it. But our current policies seem guaranteed to produce bad or disastrous outcomes.

For More Information

Some posts to help you understand our foes.

(a)  “Guerrilla Entrepreneurs“, John Robb, 22 October 2004.

(b)  Here are a few of the more useful reports about the competition between al Qaeda and the Islamic State:

1. “ISIS, al-Qaeda compete for supremacy in global jihad“, Al Monitor, 11 February 2014 — “Much media attention has recently focused on a statement issued by al-Qaeda’s central command on the Afghanistan-Pakistan border under Ayman al-Zawahri’s leadership, declaring that the Islamic State of Iraq and al-Sham (ISIS) has no relationship with the central leadership of al-Qaeda.”
2. “Jihadi Competition After al Qaeda Hegemony“, Clint Watts, Foreign Policy Research Institute, February 2014 – “The ‘Old Guard’, Team ISIS & The Battle For Jihadi Hearts & Minds”.
3. “ISIS gaining ground in Yemen, competing with al Qaeda“, CNN, 22 January 2015.

(c)  Posts about ISIS, the Islamic State

1. Before we start a new war with ISIS, let’s remember how we stumbled into the last two, 21 August 2014.
2. The long-simmering conflict in the Middle East breaks out, surprising US experts, 26 August 2014.
3. America plays the hegemon while ruled by fear and machismo. FAIL., 2 September 2014.
4. The solution to jihad: kill and contain our foes. Give war another chance!, 8 September 2014.
5. One day in America shows our eagerness for war. We’ll get what we want., 10 September 2014.
6. America and the Islamic State both hope to change the world with rivers of blood, 19 September 2014.
7. “SAS kill up to 8 jihadis each day, as allies prepare to wipe IS off the map.” Bold words we’ve heard before., 24 November 2014.

(d)  About our war with Islam:

1. The Fight for Islamic Hearts and Minds, 20 February 2012.
2. We are the attackers in the Clash of Civilizations. We’re winning., 23 September 2013.
3. Handicapping the clash of civilizations: bet on America to win, 24 September 2014.
4. We seek a future of war with Islam, while wearing a cloak of virtue, 9 September 2014.

(e)  Posts about Islam:

1. Hatred and fear of Islam – of Moslems – is understandable. But are there hidden forces at work?, 3 August 2010.
2. Should we fear that religion whose believers have killed so many people?, 4 August 2010.
3. Hard (and disturbing) information about schools in Pakistan – the madāris, 1 May 2011.