Quickly Scaling a Hedge Strategy

The 2024 House authorization and appropriation bills for the Department of Defense contain language that is a welcome sight. In a section entitled “Accelerating Change with a Near-Term Hedge,” Congress requires a renewed emphasis on innovation stemming from the urgent threats clearly visible in Eastern Europe and the Western Pacific. The new requirements include a better-funded Defense Innovation Unit (DIU), the establishment of and refocus on cutting-edge service-level innovation organizations creatively called NIFEs (Non-traditional Innovation Fielding Enterprises), and a regular reporting regimen to maintain accountability.

Because words matter, however, there is a key element of this new congressional language that must be clarified – the use of the word hedge. In portions of the language, hedge refers to a portfolio of niche capabilities that is already tailor-made for this type of approach. In other portions of the language, hedge references a strategy. It is in this latter case that a huge warning is in order.

A hedge strategy is designed to limit risk, specifically if the prevailing strategy unexpectedly fails. For some, it may be considered a sideshow or a distraction as the main strategy carries the burden of weight and responsibility within the expected environment.

Importantly, we must recognize that the prevailing strategy is already failing. We acutely need “a new acquisition culture” and must disrupt “a broken, slow acquisition system.” We already shoulder the burden of “growing and innate tactical and logistical risks” and are weighed down by substantial industrial base risks stemming from “a lack of capacity and diversity.” As a result, we need a new prevailing strategy and not a small hedge strategy making up one tenth of one percent of the president’s budget request.

The HAC-D and HASC appropriations and authorization language recognizes this important truth, but the reader must not miss it. We need to scale, and scale quickly!

We must urgently sprint towards large-scale use of non-traditional sources and solutions that include private capital to engage the mighty weight of American ingenuity and the American economy. We need to quickly engage widespread tools of culture design while applying NIFE principles to “all accounts,” slashing our way to large scale efficiency, operational effectiveness, and organizational change. We need to stop admiring the problem and start taking bold steps to solve it!

Far more important than scaling a hedge portfolio, we must quickly scale this hedge strategy to replace a prevailing one that is already failing us!

Brig Gen E. John Teichert (U.S. Air Force, ret.) is the former assistant deputy undersecretary of the Air Force for international affairs. His previous positions have included the senior defense official and defense attaché to Iraq, the commander of Edwards Air Force Base, and the commander of Joint Base Andrews. The views expressed herein are his own and do not reflect those of the Air Force, the Department of Defense, or the U.S. government.