In-Q-It is a not-for-profit that reports only to the CIA, and is designed to insert the agency into the shadowy world of high technology. Covert ties to high-tech already exist, but Tenet has opted for public presence in the Valley. Without the CIA's seed capital on the table, Tenet fears, genius techies will be too busy with consumer products to invent new spy apps. So the goal of In-Q-It, ( "In" for intelligence, "It" for information technology, and "Q" after the character in James Bond movies) is to fund start-ups and, more fundamentally, promote the view that developing spy technology has market payoffs. In-Q-It doesn't hope to alter the evolution of spy tech inventions so much as nudge them along at a faster pace. "The needs of business and the CIA are quickly converging," said Gilman Louie, the firm's new CEO (and the founder of Microprose, a gaming company). "As these two entities look for ways to find answers to similar problems, In-Q-It will work to be the bridge between them."

Louie's only partially right. A few years ago, CIA agents and businessmen may have been running down the same track, but they're not converging anymore. In the field of information management, business has sprinted far ahead, leaving the CIA winded and wondering what to do. Its once vaunted monopoly on data sorting pales in comparison to the powers of the marketplace. Add all the Lexis-Nexis type info providers and the thousands of technical trade journals, and you have more facts than agency analysts will ever compile. The challenge for the "intelligence community" is not in getting the news -- CNN already does that far better than 007 -- but in making sense of it. And with the rise of the internet and an overwhelming quantity of free data, that challenge has become a serious dilemma. Either the CIA can stay in its secret sandbox, or it can venture out into the private sector's public playground, where the competition is stiffer, but the quality of available intelligence is premium. The fact that the CIA chooses to go public says a lot about the agency itself, but even more about what the private sector has become: a surveillance net of its own.

ANNOUNCED AT THE END of September, In-Q-It operates from a fairly creative business model for promoting invention, a hybrid blend of R&D, PR and direct investment. The core of the company will be a series of white papers assessing market weaknesses in particular technologies. In-Q-It will use these papers as briefs to persuade larger VC firms to make investments from which both the market and the CIA can benefit. Chris Tucker, a senior analyst at In-Q-It, says the focus is on search engines, data sifting software, and info security. Other than that, company officials remain quiet about this ostensibly public venture. (In-Q-It directors include John Seely Brown of Xerox PARC, Jeong Kim of Lucent, Alex Mandl of Teligent, and Norm Augustine of Lockheed Martin). Agency sources say the CIA dreams of a super-search engine that can sort and translate data into any language, quickly strip audio files into text, and catalogue images automatically. Microsoft et al. have an eye on the same prize, so what makes the CIA think it can be a player in this field? After all, the firm's stake is only $28 million for the first year, a thin bankroll in the venture capital arena, where even bit players ante in with half a billion.

"I am not sure that the CIA has the market power to influence the market," says Ivan Eland, an analyst who follows the agency for the CATO Institute, a libertarian think tank. "I am not sure they are gaining anything except another bureaucratic entity." That assessment is by no means limited to libertarians. Most of the VC community greeted the news of In-Q-It with snickers, as did good-government watchdogs of the agency. The most charitable interpretation of the CIA's new project holds that it signals a move away from archaic procurement regulations. (The Defense Department chokes on the same red tape, and the army has warehouses filled with boots from WWII testifying to that inefficiency.)

There was a time when the military was the sum total of the high-technology market. During the Vietnam War, defense department money was poured into targeting technology and number-crunching machines, which evolved into today's silicon microchip. And in the late '60s, defense money seeded ARPAnet (American Defense Advanced Research Projects Agency) which gave birth to the internet. In a sense the military is to credit (blame?) for the World Wide Web and e-commerce, and all those pie-in-the-sky dot com ads on primetime TV.

THE QUESTION IS, CAN THE INFORMATION revolution rise above its origins in the ghetto of military R & D -- or will it always retain a resemblance to its martial past? The fashionable answer is that technology can be whatever we want it to be, that optimism is the only way forward. It's almost like the '50s redux, only instead of enlisting as an agency analyst, a cool grad student would have the CIA finance her IPO. Sure, there are a few who worry about privacy and other dark sides of the information age, but mostly these critics limit their dissent to ad hoc attacks against nosey government policies. Systematic critiques smell too much of Marxism. But you don't have to believe that capitalism is inherently flawed to see that technology's promise to liberate often falls short, and that when the market gets its hand on military tech it acts very much like it's operating in the war-time paradigms of communication, command, and control. Between the way RealNetworks tracks audio downloads, and Microsoft embeds tracers in every Word document, to name just two examples, the market has developed a highly sophisticated surveillance apparatus.

How else to explain the profit margins in civilian data mining and tracking? Spy tech is such a growth industry that it's expanding at double-digit rates every year. Only a few decades old, it already gave us the first baron with political aspirations in Ross Perot, whose Electronic Data Security financed the launch of the Reform Party. In Canada, there's a robust market emerging for consumer encryption that was previously only available to governments. Thailand leads the edge on smart cards (most citizens carry one), and that tech is wending its way here -- with a pilot being tested in the government's backyard, on riders of the Washington DC metro. Most analysts predict that, in no more than a few years (a decade tops), those cards will become ubiquitous -- and linked to bank accounts, which (as the recently passed banking bill shows) will be linked in turn to insurance companies and health records, brokerage firms and assets files, and just about anything the CIA could ever want to know about anybody. The spooks of the future will not be using wire-taps, they'll just put in a call to Citibank. So the real reason the Valley thinks the CIA has no business in surveillance may be that that market is already locked up tight by private firms.

Documents obtained under the Freedom of Information Act show just how enmeshed in surveillance the private sector already is. In 1997, a company called Image Data was building a photo database of every American -- purchasing data in bulk from state motor vehicle departments -- which it planned to market as an online weapon against check fraud. Clients were to be department stores, but the Secret Service turned out to have an interest as well. The FOIA request, filed by the Electronic Privacy Information Center (EPIC), reveals that Image Data and the feds had regular meetings. (Image Data has spent the last six months transforming its system into a fraud protection program where consumers choose to participate.) The point is not that the government covets information (which it does), but that the market place is in position to supply it, having already developed the technology for its own purposes.

Another case of the market evolving faster than the spies involves the National Security Agency and Crypto AG, a Swiss encryption company. Until a few years ago, Crypto AG supplied encryption machines to over 120 countries. Officials from Iran, Iraq, and the Vatican, to name a few, relied on Crypto's tech for top secret dispatches. What nobody knew was that the NSA had a deal with Crypto, which made those encrypted messages as easy to decipher as a billboard on Times Square. Yet even with its backdoor access, the NSA relied on Motorola for the decoding grunt work, according to a well-researched article in the Covert Action Quarterly.

It's a measure of how far we've come since Dwight Eisenhower's famous farewell speech as president, in which he warned of a coming military-industrial complex. It's worth recalling his chilling lines:

"Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we... have been compelled to create a permanent armaments industry of vast proportions... This conjunction of an immense military establishment and a large arms industry is new in the American experience... Our toil, resources, and livelihood are all involved; so is the very structure of our society."

Of all the unintended consequences of that unholy alliance, Eisenhower never foresaw the deep damage to the environment that the government helped cause when it accelerated the growth of the industrial sector. Rare was the politician who thought seriously about industrial pollution until 1962, when Rachel Carson wrote about DDT and activated the environmental movement with her book Silent Spring. If the great inventions of the industrial revolution carried a hidden cost to the environment, we should expect the inventions of the information revolution to extract a price of their own. The factories gave us brown fog; what will the electronic empires bring? In-Q-It suggests that many future inventions will have to do with surveillance, whether it be new methods for tracking data or people. So perhaps the penalty for e-progress will be reduced privacy, and surveillance will become our acid rain.

Mark Boal writes a column about surveillance for the Village Voice.