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High Tech Warfare

The cost of the defense establishment becomes increasingly hard to pay for by a nation strapped by debt. Defense stocks are down as investors worry about the withdrawal from Iraq and cutbacks in military spending in general. However, the old joke about “military intelligence” being a contradiction in terms may have a new wrinkle for high tech warfare, and high tech warfare defense stocks, as military spending focuses on more effective means of projecting power in a world of increasingly asymmetrical warfare.

In Thomas Friedman’s book about the explosion of digital technology, “The World is Flat,” he gives an example of modern, high tech warfare. In a command center in Iraq officers are watching a battle as relayed by a predator drone which, in turn, is piloted by a solder at a computer station in California. The “bird’s eye view” of the battle coupled with the ability of soldiers on the ground to see the same view gives the US forces a decided advantage in the engagement.

As the risk of massed battles with the Soviets fades into the past the need for means of mass destruction has given way to more sophisticated means of finding and diverting or destroying the enemy. Military intelligence, of the high tech warfare kind, may, in fact, have its day.

A number of defense stocks are in companies specializing in solutions for “asymmetrical warfare.” “Asymmetric warfare” is a conflict where the two sides have distinctly different resources, tactics, and, often, motives. A classic symmetrical war was WWII whereas the Iraq after the initial success and Afghanistan are prime examples asymmetrical warfare. In asymmetrical war theaters one takes advantage of the other side’s weakness and exploits one’s strengths. Rarely do both sides have a match in strengths or weaknesses.

Companies that can come up with cost effective solutions to take advantage of enemy weaknesses will keep selling their high tech warfare products even if the Pentagon needs to slash its budget.

To the extent that modern warfare can be viewed as occurring within one’s home territory (World Trade Center attack of 9/11) then companies making surveillance and rapid response solutions could be considered high tech warfare product developers and manufacturers.

High tech warfare products, when viewed from this broader perspective include detection systems for ports and airports, high tech sensors for domestic and battlefield use, training systems for high tech products, underwater acoustic warfare and sensing systems, and much, much, more.

Like the manufacturer of bullets during conventional warfare the product need not be all high tech warfare but needs to in useful, cost effective, and innovative. In a world of stressed budgets large, costly machines will likely give way to means of making the battlefield solder smarted and more effective.

If this line of reasoning works for long term investment it will work with companies that can come up with cost effective, innovative, readily applicable solutions for asymmetrical warfare, homeland security, and the like. The idea of putting up a wall along the US and Mexican border sounds like the Berlin wall. A better approach may well be cheap sensors along the usual smuggling routes, or better yet, in the offices of those profiting from moving drugs and other contraband into the USA.





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