In part to address these concerns Kissinger convened a Special Defense Panel at the NSC, headed by K. Wayne Smith, to come up with options the president might exercise to pressure the Soviets in the event the SALT talks remained stalled. Marshall was one of the principal members of this special panel, along with some of the country’s best and brightest minds on national security affairs, including General Andrew Goodpaster, then serving as the supreme allied commander in Europe (SACEUR), arguably the US military’s most important command; Charles Herzfeld, a physicist who had recently headed the Defense Advanced Research Projects Agency (DARPA); William Kaufmann; and Jim Schlesinger.
Early on, to provide context for the panel’s eventual recommendations in specific areas of military competition, Herzfeld suggested that they needed a sense of “the general, broad background” of the security challenges confronting the country, in particular an understanding of where the United States stood in its military competition with the Soviet Union, to include an analysis of key military balances and long-term trends. The others agreed that such a national-level assessment was needed. In the past, when the US military was far ahead of the Soviets, particularly in offensive strategic nuclear arms, naval forces, and military research and development (R&D), careful comparative assessments of the sort proposed by Herzfeld had not been as important. But now the competition was close. The United States had far less margin for error. In fact, the Soviets appeared to have caught up with the United States and to be positioning themselves to move ahead in at least some areas that the United States deemed important.18
Looking back years later, Marshall concluded that Herzfeld was advocating they do “what was, in effect, a first net assessment.”19 He and Schlesinger agreed to take on Herzfeld’s proposal. It soon became clear, however, that Schlesinger’s OMB workload would not permit him to devote the level of effort required to perform such a formidable task. So it fell upon Marshall to write the assessment.20
The experience confirmed Marshall’s conclusions, as expressed in his 1966 paper for Kaufmann, regarding the difficulties of measuring the relative military power of states. His assessment for the Special Defense Panel contained brief and generally unsatisfying discussions of where the United States stood relative to the USSR in ground forces, naval forces, tactical air forces, air defenses, and strategic offensive forces. Strikingly, the document lacked even basic comparative data on US and Soviet force levels (such as the numbers of military personnel, tanks, divisions, ICBMs, tactical aircraft, etc.). Instead it presented Marshall’s best judgments as to the state of the US-Soviet military balance in light of existing trends. All he was really able to do was to make “a start on what would have to be a much more systematic and elaborate effort.”21
In a three-page summary of the full assessment, Marshall began by stating, “Currently, it is difficult to come to clear cut conclusions” about the US and Soviet force postures.22 One reason stemmed from the differences or asymmetries in the two sides’ force postures. In the case of offensive nuclear forces, for example, the USSR appeared to rely far more on ICBMs than on bombers, build less expensive missiles, and operate its nuclear forces differently than did the United States. In addition, there existed no analytic means to assess the capabilities of US forces to deal with Soviet forces in specific contingencies. Yet another reason Marshall cited for not being able to reach clear-cut conclusions was the lack of data in such areas as logistics and readiness, even though military history demonstrated that such factors could greatly affect combat performance.
Nevertheless, this first net assessment did suggest one broad conclusion. Across the board, US weapon systems appeared to be more costly than their Soviet counterparts. The American F-4 fighter, for example, cost $4 million, whereas the CIA estimated its equivalent, the Soviet MiG-21, to cost only $1 million.23 This led to concerns as to whether the United States was “on the way to pricing itself out of the military competition with the Soviets, or at lease severely handicapping itself through a defective weapons acquisition process, high cost day-to-day operating practices, etc.”24
Lacking detailed data, all Marshall could do was note that the US military was pursuing a strategy that emphasized the quality of its equipment and personnel rather than trying to match the Soviets in the numbers of their major weapons and forces. Yet the US service chiefs regularly downplayed the value of their own chosen strategy when undertaking assessments of the Soviet threat or when arguing for more resources. Later, as the Pentagon’s director of net assessment, Marshall would devote much of his office’s resources and energies to trying to answer the main question raised in this first net assessment: Was the United States pricing itself out of the competition?
What he did not know in 1970—although he and Schlesinger already suspected as much—was that the CIA was greatly underestimating the burden Soviet military spending was placing on the USSR economy. The passage of time—and Marshall’s persistence—would show that the higher costs of US forces in fact produced military capabilities superior to those of their Soviet counterparts, and that the USSR’s command economy was far more prone to inefficiencies than the conventional wisdom of the day allowed.* What was crystal clear in 1970 was that neither the data on US and Soviet forces nor the requisite analytic methods were at hand to conduct the kind of careful net assessments needed to understand where the United States stood in its overall military competition with the USSR.
In July 1969, not long after taking office, President Nixon appointed a “Blue Ribbon” defense panel (also known as the Fitzhugh Commission, after its chairman, Gilbert Fitzhugh) to study the organization and operations of the Defense Department. At the time Fitzhugh was the chairman and chief operating officer (CEO) of the Metropolitan Life insurance Company. The commission was instructed to present its recommendations to both Nixon and Defense Secretary Melvin Laird, a former Wisconsin congressman who had established a reputation as a defense hawk and a critic of McNamara’s approach to managing the Pentagon.
In July 1970 the Fitzhugh Commission delivered its report, Defense for Peace. Among its 113 recommendations to President Nixon and Defense Secretary Laird, the report called for creating a net assessment group, reporting directly to the secretary of defense, which would undertake “net assessments of the United States and foreign military capabilities and potentials.” A related recommendation called for establishing a long-range planning group that would integrate “net assessments, technological projections, fiscal planning, etc.” and focus on the longer-term future, beyond the day-to-day activities that often overwhelm senior policy makers.25 This group, too, would report directly to the defense secretary.
Later, after Marshall had moved to the Pentagon, he became curious about which panel members had pushed for the formation of a net assessment group and what the underlying motivation had been. It turned out that the panel member who had pushed the hardest for a net assessment group was Ruben Mettler, who at the time was president and CEO of TRW, Inc. Mettler believed that the secretary of defense needed a comprehensive picture of the state of the US-Soviet competition, where the competition was headed, and what the most important issues were.26
In December 1970 Nixon met with Kissinger and George Shultz, who then headed the Office of Management and Budget. Frustrated with the lack of useful intelligence reaching his desk, Nixon directed them to undertake a study aimed at reorganizing the foreign intelligence community. Nixon anticipated that they could cut the intelligence budget by 25 percent.27 Kissinger appointed Marshall to represent him on the effort to develop the reforms the president wanted.
Although he was soon to leave RAND and formally become a government employee, Marshall was still alternating between Santa Monica and Washington while the report was being prepared, and did not have the time to take the lead. Shultz asked Schlesinger to lead the study, but Schlesinger was himself busy. Consequently Marshall’s old RAND colleague, William Kaufmann, did the actual drafting.28
Schlesinger submitted the re
port in March 1971. To no one’s surprise it found that the recent substantial growth in the size and cost of the US intelligence community had not resulted in a commensurate improvement in the scope and quality of its products.29 Among the reasons cited for this “disturbing” situation were the increasingly fragmented and disorganized distribution of intelligence functions; the community’s growing duplicative competition in collection; unplanned and unfocused growth; and the high costs associated with the rapidly expanding reliance on technical collection systems, such as reconnaissance satellites.30
To address these problems, Schlesinger recommended that the intelligence community be reorganized, and provided three options for doing so. Looking to avoid reforms that would require congressional action, Nixon cherry-picked from among the options.31 From the second option the president approved the recommendation that the director of central intelligence (DCI) assume greater responsibility for leading the intelligence community, thereby giving better focus to its efforts while reducing redundancy and attention on areas of marginal value. Henceforth the DCI would be responsible for planning, reviewing, coordinating, evaluating, and producing national intelligence.32 From the third option he adopted the idea of establishing a National Security Council Intelligence Committee (NSCIC), to be chaired by Kissinger, to represent the concerns and needs of senior policy-level intelligence consumers.33
Kissinger asked Wayne Smith take the lead in implementing these changes. Once the main changes had been decided upon, in September 1971 Marshall was asked to draft the final decision memorandum for Nixon along with letters on the reorganization to DCI Richard Helms at the CIA and Secretary Laird at the Department of Defense (DoD).34 Once Marshall had finished the drafting, Alexander Haig and Wayne Smith began circulating the decision memorandum to the principals to get their general acceptance. During the review process they resurrected a Fitzhugh Commission recommendation, which had not been included among Schlesinger’s three options, to establish a net assessment group (NAG) within the NSC. Marshall’s recollection is that he was unaware of this suggestion when he began fleshing out what Nixon wanted and drafting implementation memoranda. Nor did he include any such recommendation when drafting the implementation directives. But as soon as the NAG had been added, Haig and Smith started lobbying Marshall to take the new position.35
Nixon signed off on the reforms on November 5, 1971. Regarding the NAG, Nixon’s directive stated: “As a related matter, I am directing that a Net Assessment Group be created within the National Security Council Staff. The group will be headed by a senior staff member and will be responsible for reviewing and evaluating all intelligence products and for producing net assessments of the US capabilities vis-à-vis those of foreign governments constituting a threat to US security.”36 However, the NAG’s initial focus was on the intelligence reorganization rather than net assessments.
Kissinger, already swamped with myriad other responsibilities, joined Haig and Smith in asking Marshall to head the NAG, and in December he agreed to take over the new position and transition to government service as soon as the paperwork could be completed and processed. Marshall began work as the NAG director in January 1972, while still a RAND consultant. Three months later he was officially brought on board as a US government employee.37
Kissinger did not immediately pursue the net assessment aspect of Marshall’s new position. His reason: Melvin Laird, who considered himself the “strategist in chief” insofar as defense strategy was concerned. Even though he had ignored the Fitzhugh Commission’s recommendation to establish a net assessment group, barely a month after Nixon’s intelligence reorganization established the NAG Laird signed a directive establishing the position of director of net assessment in the Office of the Secretary of Defense.38 Laird’s move was purely bureaucratic. He was not enthusiastic about the prospect of national net assessments being done by NSC staff outside of his control. So although he created the position in OSD, Laird did not appoint anyone to it. Instead, his special assistant, William Baroody, assigned responsibility for net assessment to an existing long-range planning unit in Laird’s Executive Secretariat under retired Army colonel Donald Marshall.
Laird’s maneuvers served his aim of keeping the NSC out of the net assessment business. Kissinger backed off. He was disinclined to contest whether the NSC or the DoD should oversee net assessments with a defense secretary as politically powerful as Laird. Instead he delayed initiating the first national net assessment, which called for a comparison of US and Soviet ground forces, until the fall of 1973, after Laird had left office.
In the meantime, Laird’s resistance to allowing the NSC to undertake national net assessments had at least one positive, if unintended, consequence. The delay gave Marshall time to think about the nature and scope of net assessment. During the time between taking over as NAG director and the beginning of the first national net assessment in the fall of 1973, Marshall developed a robust conceptual framework for net assessment.
In standing up the NAG Marshall decided one of the first things he would do would be to talk with people who had some understanding of what a net assessment group might do, and to recruit the kind of people who could support him in his efforts.39 He reached out to two old friends at the Harvard Business School, professors Joe Bower and Roland Christensen. Marshall had met Bower and then, through him, Christensen, while at RAND. He had been impressed with their work on both economic issues and organizational behavior. Bower’s dissertation on financial analysis and capital investment in certain industries closely mirrored Marshall’s views on the important role organizational processes play in decisions. Bower found that oftentimes a firm’s bureaucratic imperatives offered a better explanation of its decisions than what an analysis based strictly on financial factors would produce. And both Bower and Christensen had participated in the meetings on Soviet institutional behavior Marshall had conducted for Ivan Selin during 1968. Marshall also contacted a third colleague, James March, who had helped to found the field of organizational theory.
Bower mentioned that he had a possible candidate for the NAG in one of his courses at the Harvard Business School, George “Chip” Pickett. Pickett was then on active duty in the Army and getting ready to graduate. The very fact that the Army had sent Pickett to such a demanding institution as the Harvard Business School suggested he was among the best and brightest young officers in the US military. In addition there was Pickett’s background in Army intelligence, which suggested he was well prepared to help Kissinger monitor the reorganization of the intelligence community.
One evening shortly thereafter Bower phoned Pickett at his home: Would he be interested in going to work for a fellow named Andy Marshall on the NSC staff? Although Pickett knew nothing of Marshall, he did know that being on the NSC staff was a rare opportunity for an officer of any rank. Pickett said he would be delighted to serve. Marshall interviewed him in Kaufmann’s office at MIT,* whereupon Pickett became Marshall’s first hire. He would prove to be one of his best.
Next Marshall approached Robin Pirie, a naval officer who had served in the Pentagon’s Office of Systems Analysis. Pirie was a submariner. Like all submarine officers, he had served under the demanding and often capricious eye of Admiral Hyman Rickover, who ran the Navy’s nuclear propulsion program and who was a power unto himself. Pirie had somehow run afoul of Rickover, but the submariner had impressed Pat Parker, who had served with Pirie in OSA. Parker, who at the time was the deputy assistance defense secretary for intelligence, was yet another one of the many people in Marshall’s extensive circle of professional acquaintances that he consulted in looking for good people to bring into the NAG.
Pirie’s interview with Marshall went well and he was hired in anticipation that he would spend most of his time getting started on assessment work. He joined the NAG in mid-1972, a few months after Pickett but, thanks to Kissinger’s reluctance to begin a national net assessment while Laird remained in the Pentagon, for more than a year Pirie could not do much mo
re than discuss with Marshall how one might conduct a net assessment.
Marshall and his tiny staff were assigned an office on the third floor of the Old Executive Office Building adjacent to the White House, next to that of the chairman of the President’s Foreign Intelligence Advisory Board (PFIAB). While bureaucratic friction between Kissinger and Laird delayed the start of the first national net assessment, there was nothing to stop Marshall from thinking about the nature of such assessments. Shortly before Marshall was formally installed as the NAG director, he produced a twelve-page draft memorandum aimed at articulating a national net assessment process. With the US involvement in the Vietnam War coming to an end, Marshall recognized that the United States had an opportunity to reorient its defense strategy and policy and military posture. Net assessments, he suggested, could provide needed insights into the roles US military forces should play and the problems and opportunities confronting the US defense establishment.40 By August Marshall had further distilled his March draft into a two-and-a-half-page memo, “The Nature and Scope of Net Assessments.”
The August memo fused Marshall’s diverse knowledge and understanding of strategy—and of how the world really works—into a framework for analysis that has stood the test of time. Over forty years later, “The Nature and Scope of Net Assessments” remains the definitive, enduring vision of net assessment. The memo does not offer a by-the-numbers methodology or a formula that one can mechanically follow, but rather a clear statement of the aims of the enterprise and the reasons for net assessment’s enduring value.
Marshall began the August memo by explaining the need for careful, net assessments, noting that “National policymakers want to know how the U.S. stands in various types of international competition. They are interested in our relative position and any trends that may affect it. Further, it is most important to know what causes the trends.” He continued,
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