Is War Good for Business?

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War is obviously good for some businesses. But is it good for society? ‘Of course not’ is most likely your immediate response. And certainly mine. But not so fast. It’s complicated …

The issue was interestingly discussed in The Economist recently – ‘What Bigger Military Budgets Mean for the Economy‘. I took the bait, expecting to read about growth in specific industries and GDP increases in some (many) countries.

What I got was something entirely different: Broad insight into research on how military spending affects society and the economy in the broadest sense. Such as how different the effects are in poor vs. rich countries. For poor and less developed countries, high military expenditure is notoriously bad because the potential return on civilian investment like health, education etc. is very high. And because of corruption. While the situation is entirely different in highly developed economies, where military spending may actually be an important stimulus.

At this point it becomes particularly interesting. Not really surprising, rather the opposite – when we think about it. Those of us who’ve been in the technology sector for a while, are very familiar with the significant ‘spillovers’ from military research to ‘the rest of the world’ over the years.

Much less obvious is why this is the case, why so much great innovation is coming from military research. Ponder this quote from the article for a moment:

… An obvious objection is that the government could achieve the same results by supporting R&D in general, without pumping money into the armed forces. In an economic sense that may be true. But there is a political constraint—namely, how to marshal support for experimentation that may fail. Public support for defence is less susceptible to mood swings. Without having to worry about its next grant application, the American military system has been free to churn out innovations, from duct tape to the internet, without which modern life would be scarcely imaginable.

I call it the ‘play factor’. I worked at a military funded research institution many years ago, and fondly remember my research advisor’s focus: “Play with it, find out how it works, maybe you’ll come up with something.” Algorithms, chips, computers, software, tools, ideas, …

Not the only environment and focus that creates or stimulates innovation, but surely an important one. With a very proven track record. Duct tape and the Internet, as mentioned in the quote, are the tip of the iceberg.

It really has little to do with war or weapons or the military, it’s the attitude. The periods during which Google and Apple (and many others) were most innovative, was when ‘go play, come up with something’ was prevailing in their R&D groups. It always works. The key requirement is freedom to play – experiment and fail. And continue.

Isn’t it ironic that this particular freedom is mostly found in the military – or where/when the military pays?

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