The hidden side of attack method combinations and international terrorism

We recognised that sport is the modern religion of the Western world. We knew that the people in England and America would switch their television sets from any program about the plight of the Palestinians if there was a sporting event on another channel. So, we decided to use their Olympics, the most sacred ceremony of this religion, to make the world pay attention to us. We offered up human sacrifices to your gods of sport and television. And they answered our prayers. From Munich onwards, nobody could ignore the Palestinians or their cause.1

Most terrorist groups are diversifiers. But why? Why don’t terrorist groups always choose the single attack method with the highest expected payoff attached to it? In 1973, for example, the IRA perpetrated 108 attacks. These were a mixture of bombings, facility/infrastructure attacks, hostage taking, armed assaults, assassinations and hijackings. That is, nearly all of the attack method categories identified by the GTD were used by the IRA in a single year of operation. Why didn’t the IRA simply choose the attack method with the single highest payoff, whether that was fatalities, grassroots support, potential concessions from the government or media attention? Why didn’t they do that? Is there some logic to it or is it just happenstance? To answer these questions, we need a theory of portfolio choice that deals in combinations.

In looking for an answer, we also uncover something interesting about international terrorism. Apart from the obvious fact that terrorist groups have targets in different countries, what is there to be gained by terrorist groups (and some individual terrorists, like Carlos the Jackal) from operating internationally? Is there some aspect of the payoffs that such international groups attain or some aspect of the risk that they bear that we are missing? The epigraph to this chapter is from a member of the Black September Organisation (BSO) and refers to the Munich

Olympic Games attack on the September 5,1972. It was this single terrorist action that generated a vast amount of attention for the group. But from 1971 to 1973, BSO was responsible for more than 30 attacks using a variety of attack methods, including armed assault, hijacking, bombing, assassination and hostage taking.2 In just three years, the group used a combination of five different attack methods and, what is more, they used them across more than a dozen different countries. Why didn’t Black September just choose one attack type and what are the implications of choosing a combination of attack types? And what else might they have gained from attacking targets in Austria, West Germany, the United Kingdom, Jordan, Egypt, Switzerland, the Netherlands, Italy, Canada, the United States and elsewhere that we might have been overlooking up until now?

The key to the hidden logic of attack method combinations and international terrorism lies in the basic, even mundane, concept of diversification. Diversification or not putting all the eggs in a single basket is, according to Markowitz (1952, p.77), both observed and sensible. Since diversification is something that is not done accidentally, though it might be done naively, we can look for the underlying logic or rules of behaviour that imply it. Because, as Markowitz says, diversification is observed, we can also use the concept to rule out certain theories that might be candidates for explaining attack method choice. Any theory that does not imply diversification must be ruled out (Markowitz 1952, p.77). For example, in parts of the ‘qualitative’ terrorism studies literature, researchers argue that terrorists seek the maximum expected value of whatever payoffs they are interested in (e.g. Surette, Hansen & Noble 2009).This, of course, implies that the terrorist will always choose the single attack method with the highest expected value of payoffs. Since this rules out diversification and since diversification is both observed and sensible (for reasons to be explained in a moment), this ‘basic expected value’ hypothesis must be ruled out.

Why would we make a fuss about diversification? If terrorist groups purposely or naively avoid putting all their eggs in one basket isn’t that just a basic fact? Interesting perhaps but surely not important in any deep and meaningful way. On the contrary. The importance of diversification runs very deep indeed. Diversification reshapes the entire risk-reward trade-off for terrorism.The implications of terrorists’ observed diversification, even if it is a product of naivety, are important because a combination of terrorist attack methods can have a higher expected payoff and less risk than any attack method deployed individually. Furthermore, international diversification expands the terrorists’ opportunities to generate higher payoffs with less risk. If we look at Table 5.1, we can see the average fatalities and standard deviations for each attack method category. We might think that the upper limit of expected fatalities is the average outcome of the highest risk attack method. It isn’t. A combination of two or more of these attack methods can produce a higher average outcome with more certainty (less standard deviation) than any attack method considered on its own! And this applies to every type of payoff the terrorist group might seek.

It is entirely likely that, by failing to consider terrorists’ combinations of attack methods, terrorism analysts have underestimated the payoffs accruing to terrorist groups while simultaneously overestimating the risks that those groups have to bear. In this chapter, our primary task is to show how diversification changes the terrorists’ opportunities. It does not just provide more opportunities in some banal sense. The fact that a terrorist group that attacks two European countries instead of one has twice the number of opportunities is not the sort of increase in opportunities that we are talking about. Rather, what we will show is that diversification of both attack methods and target locations increases the terrorists’ expected payoffs (whatever they may be) and decreases the risk that must be borne to obtain them. There is a decision rule that implies diversification. This is the mean-variance rule. We sketch the outlines of what this rule says about decision-making in a risk- reward context with diversification and extend it with some insights from behavioural finance. On the orthodox side, we have MPT. It is complemented on the behavioural side by BPT.

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