Chief Executive Officer & Co-Founder of iDefense, a private agency specializing in information intelligence. He is an authority on national security issues and has published twelve books on intelligence and covert warfare. He serves on the National Security Agency (NSA) Advisory Board and the Department of Defense's Joint Service Advisory Group. His latest book is "The Next World War-Computers Are the Weapons and the Front Line Is Everywhere," (Simon and Schuster, August 1998).

What's been happening for the last few years is a migration from the terrestrial to the virtual. . . . In the same way that we've had down the centuries, terrestrially, the seeds of conflict--power, money, political influence, territory and so on--they're all being replicated in the virtual space. And with it, conflict is migrating too. The significant difference though, is that down the years, it's been soldier, sailor and the marine that's been in the front lines. That's true to some extent still; you'll still have Bosnia, you'll still have Somalia, Rwanda and so on. They're different types of conflicts, but still very serious. In the virtual space, it's going to be the private sector, as well as government, that is going to be in the front line. It's the soft underbelly. That's where you attack because you get maximum leverage, more bangs for your buck.

That's a different paradigm from any one that's been before. It's not simply a matter of the CIA or the NSA defending the government, or intelligence agencies serving governments around the world. It needs to be done differently. Because every private sector company of any size, and every government agency who are under attack on a very regular basis needs to have intelligence, indications and warnings: "This is coming at you tomorrow and it looks like this," kind of thing. Then they can respond to it. And that's what our defense has been set up to achieve.

So it's basically the same old risks--thieves and rapists and pillagers in a different environment. . .

I'm not sure about rapists, but thieves and pillagers, certainly. And what you see being replicated is all the problems that existed terrestrially. You've got vandals, you've got organized crime, you've got extensive economic espionage, you've got 30 nation-states with very aggressive offensive information warfare programs. So you're seeing all the stuff that we had before. But it's also very different, because you and I can go into our local computer store and buy what is essentially an immensely powerful weapon: the computer. And you can load that weapon with very powerful bullets, which are hacks downloaded from the web, and you can fire that weapon at pretty much anybody you choose. . . .

Historically, it's been governments that have invested in some new gizmo or other. They take 20 years to get into service, and they've had the access and the control of that technology. Now you and I have control. That's a huge shift. And it's a shift that governments are ill equipped to deal with, because it's a fundamental change in how you look at national security, what you look at as defense and offense. And the world in which we are currently living in, this kind of different environment, is essentially a world of chaos. There is no arms control. There are no mechanisms by which we can produce order out of chaos---not yet. There will be, in time, but there isn't at the moment. So it's a sort of free-for-all in the virtual space. . . .

It's a very different world, and we're only just beginning to see the dimensions of it. And nobody yet has a true handle on the threat, the opportunity, what is effective defense, what can we do to create an effective offense. Nobody has got that yet. But we're getting a picture, even though it's a little blurred.

But what are we defending against here?

. . . For example, when I was in Moscow a couple of years ago, it was very clear to me, from talking to the senior people in the scientific and intelligence communities, that they already feel they're at war. They are convinced that they are engaged in the next world war, that it is happening in cyberspace, and that they're losing. They're very active in the area, but they think that America has a very significant advantage, which is why the Russians have come up with two proposals for arms control agreements in cyberspace.

Well, they haven't got much of a reception for that, because America and its allies think that we're winning the war, so why should we have a treaty? But it is a very dynamic environment, where everybody sees that they need to play, and everybody is trying to seize advantage. And all the aggressors currently have the opportunity, because nobody is properly defended.

What can you say to the average person, to persuade them that this war really matters--that their sons and daughters will not be hauled off and shot in foreign places in this war?

A little while ago, the Pentagon demonstrated in an exercise that it was possible--even easy, actually--to hack into the power grids of the 12 largest American cities, and to hack into the 911 emergency system, and shut all of those off with a click of a button. Now, that isn't somebody getting shot, and you don't see the blood coming out of the body, and the body collapsing on the ground. But I can assure you, tens of thousands of people would have died.

To put that slightly differently, the cost of the "Love Letter" virus, which affected everyone . . . ranges between $4 billion and $10 billion. That's the equivalent of a complete obliteration of a major American city. And that was one individual from thousands of miles away.

So these things are extremely expensive, and very damaging. And they are also going to create a change in how nations balance against each other. Who is powerful and who is not, what is power projection and what is not? Does Singapore become more powerful than the United States because they understand how to control territory? . . . This is creating a whole different way of thinking about how we conduct our affairs, what threat looks like, and how we address and confront that threat.

Given the fact that the United States is so far ahead of everybody else, are we looking at a whole new era of American imperialism?

Well, I think that there is a both a yes and a no. America is the most advanced technology country in the world, no question. It is also the most vulnerable, because we are so connected. The capabilities that currently exist to wage information warfare, to attack a system, to destroy a network, to turn off a city or devastate a country are around.

The problem is, America is a huge and largely inert bureaucracy. I can attack a nation that I know is attacking me today--Russia, for example. I know that they have created significant damage to me. Now, can I retaliate? Do I have the capability? Yes. Can I do it? Well, that depends. You need legal sign-off. Is it an act of war or is it aggression or can you allow it? Is it a breach of a convention ? Will the politicians bear that? Can you actually convincingly supply the evidence? And on and on and on and on.

Now, if I am a market-state, as CEO, I can arbitrarily take decisions. If I am a small nation-state, a dictatorship if you like, that creates a very different dynamic. It's not a question of my needing to have ten tank divisions to have any impact at all. I just need a couple of smart guys with a really cool computer who understand how to do stuff. I can achieve an awful lot more with very little, provided I'm flexible and dynamic.

I could argue that you can achieve all that because you're not hamstrung by values like democracy and accountability.

Absolutely. Of course, that's true. . . .

Are we heading to a whole new realm of dictatorship?

We're looking at a change in the dynamic. The influence of the nation-state is absolutely declining. Nobody argues that. The influence of the market-state, the big global companies, is rising very powerfully. Many of them are more powerful than nations, in fact. . . . So the challenge for the nation-state is to continue to remain relevant. Now, does Washington remain relevant to its people? . . . If you go to Silicon Valley, or any other high technology center, Washington is largely irrelevant. They don't do anything. They don't actually know anything about the pace and course of the revolution. So how relevant do I consider government to be? In my line of business, I consider it to be very relevant. I also consider government to be a very important, vital instrument of democracy, and I believe very strongly in democracy. But while that's all well and good, you have to continue to provide value as a government. And if you don't, you're lost.

Why is the ability of government, of the traditional nation-state, falling so far behind the new market-state in terms of delivering value?

Because the nation-states, as they should in a democracy, slowly evolve. They take pressure and they absorb pressure and then they bring out change in a slow and well-paced way. That's a great strength in a democracy. This is a revolutionary environment, however. And the pace of change is enormous. We've all seen it--how many new chips do we get each year for our computer, what how many new PDAs or Palm Pilots have we seen emerge in the last 12 months? The pace is enormous. And it's going to continue in this way, everybody seems to agree, for as far as one can see. . . . What can government do to move at that kind of pace? . . .

Governments can always do something. The question is, can they do something fast enough? And if you look at the way the process is currently working, you have to agree that the pace of change is not matching the challenge. . . . All I have done my whole life is cover war and its consequences . All of the seeds of war are here: tremendous conflict and tension in society; the growth of the disenfranchised; all the things that you can see as points of potential conflict are around. And yet, governments, because they're largely inert, are treating business as if it's business as usual. Well, it very definitely is not. And it's a big concern, frankly, because I think democracy is going to find it very hard to adapt to these kind of very fundamental changes that are occurring. And most political leaders have no idea--none--because they're out of touch with the people.

But if a war is largely conducted, led, and prosecuted by the market-state, as you call it--the private sector--and in the commercial interests of the private sector--what will that war look like?

. . . For example, we had some human intelligence the other day that an oil company was going to be attacked, in the virtual space, by a group that believed it was pillaging the rain forest. Well, they didn't succeed in attacking the oil company, so then they went for a company that is heavily invested in the oil company. And they went into their email system, and caused a high degree of chaos. Now, that's not a usual protagonist, but it's a protagonist using the virtual space.

So you can see conflict happening at a number of different levels, with a number of different target sets. A market-state may choose to take out another market-state. Take a hypothetical situation where the whole telecoms world is operating virtually. It's all migrating there now. And you get a kind of Saddam Hussein of the telecoms business. Well, what are telecoms going to do? . . . Are they going to call on the UN or are they going to get the Group of Eight to come and help them? No, they're going to take care of business. And they would produce an environment that would take that particular individual out of their face. And then they would create something among themselves that would try to ensure that there were some checks and balances that made sure it didn't happen again.

There's no rule of law there, though.

Right. . . . And this environment is global. It has recognized no national boundaries, and all our laws are framed around national boundaries. And it is very difficult, when boundaries fall away, to make law apply effectively. For example, the National Security Agency is not allowed, by law, quite rightly, to gather any information on any American entity, be it a company or an individual. And they don't. Now, are they able to take advantage effectively of the largest information resource that the world has ever seen--the world wide web? No, because it's not very secure, and their processes are not designed to deal with that very effectively. Can they help American business to confront information warfare attacks that come from overseas? Well, not really. . . . . Can I do all of those things? Absolutely. Why? Because I'm private sector, and I'm free moving. Now does that make me amoral? Very definitely not. I'm a highly moral guy, and I run a highly moral company.

But what about the guy that comes after you?

Well, that's the problem. Because there are lots of people out there who see the world with very different eyes. The movement against globalization, for example, is already producing virtual terrorism, and that is going to be an accelerating problem. .. .

But your job is being on the frontier of the security sector in this new market-state. You work without rules. You work without a net. How do you distinguish yourself from, say, a vigilante organization--an Old West posse? How do you assure people that you are not part of a very, very dangerous trend in society?

Well, from a personal perspective, because I've seen so much of the consequences of war and of chaos, I wish to play a part in not having chaos. My job is not offensive information warfare. Could we have the capability if we chose? Sure. But would I ever launch an offensive attack? Absolutely not. That's not our business. If others choose to do that, fine. All I provide is the intelligence that says, "This is an indication, this is a warning, this is what you need to do." And I can then serve, not just America, but I can serve Japan and Asia from iDefense Japan, and I can serve Europe from iDefense UK. So hopefully, I can serve the globe without fear or favor in an impartial way, with intelligence that enables everybody to defend themselves.

But you have been shaped by a couple of thousand years of morality and ethics. How do we know that, in the future, these techies will be shaped by any of that? What kind of a world are we looking at, in which these market forces go at each other without any restraint?

That's a very interesting question. I actually believe that we may have been shaped for 2000 years or whatever of morals and ethics, but you can strip that away in a heartbeat. It's gone. Look at Bosnia--an evidently civilized society, as we use that term, and doing the most appalling butchery, and it happened in a heartbeat. So I don't think it takes much to get from where we are today to where we don't want to go tomorrow.

And I think that your question is well posed, because the generation that is coming up behind me, the real computer-enabled generation, has a whole series of values that are different to mine. They have also a very different experience. They've been educated and lived by and in the virtual space. . . . And so what you and I might choose to see as a moral and ethical framework in which we can perform is really not going to exist in the same way. The guidance and the structure that we get from our parents and from our government and from our legislators and so on is simply not there. They are not around to provide it. So we'll make this up as we go along . . . and we hope it's all going to work out, because by and large, we're good people. And by and large, I choose to believe that people are good . But there's an awful lot of bad in the good, and who is going to provide that over-arching guidance? It's a bit of a vacuum right now. . . .

How can the public sector ever develop the capability of dealing with these kinds of problems when you gobble up their talent? You pay their people three or four times more than the taxpayer is prepared to pay.

Well, that is a very good question. A lot of the government agencies that have been a home for highly trained talent are finding that they're hemorrhaging the best people, because people like me are hiring them. And it's absolutely true, I offer a lot more money, I offer better benefits, and I offer share options. . . . So in every area, whether it be law enforcement or intelligence or the defense community, there is a tremendous pressure on government, and they are simply not able to match it. They're stovepiped into the old matrices--you punch this ticket, you rise up the ladder and so on. And it's just not suitable for this environment. They have to compete on equal terms. I was speaking to somebody in a private sector company the other day who has hired a number of people out of the FBI. And Louis Freeh, the director of the FBI, had asked him to come to the office and he said, "Look, you can't keep hiring my people." Well, get a life, you know, this is capitalism at work, and this is a capitalist society. And we're not going to defend you from your own incompetence. We're going to do what we can to make ourselves more successful. . . .