Silicon Valley’s Ultimate Exit: Arguments for and Against the Network State | Balaji Srinivasan

Silicon Valley’s Ultimate Exit: Arguments for and Against the Network State | Balaji Srinivasan

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The Hidden Forces podcast features long  form conversations broken into two parts,   the second hour of which is made available to  our premium subscribers, along with transcripts   and notes to each conversation. For more  information about how to access the episode   overtimes, transcripts, and rundowns, head over  to forces. You can also sign   up to our mailing list at  Follow us on Twitter at Hidden Forces Pod   and leave us a review on Apple podcasts. And  with that, please enjoy this week's episode.  What's up, everybody? My name is Demetri  Kofinas, and you're listening to Hidden Forces,   a podcast that helps investors, entrepreneurs,  and everyday citizens get an edge by equipping   themselves with the knowledge needed to anticipate  the challenges and opportunities of tomorrow. By   sharing my critical thinking approach and by  challenging consensus narratives about the power   structures shaping our world, I help you make the  connections to see the bigger picture, empowering   you to make smarter investment decisions. On this week's episode, I speak with Balaji  

Srinivasan, an angel investor, entrepreneur,  and prominent futurist who's views on crypto,   the future of education, and the network state put  him at the forefront of innovation and disruption   in money, business, and politics. I invited  Balaji on the show to help me work through some   of the thoughts and feelings that I've expressed  in recent episodes related to the state of our   markets and our politics. And while technology and  culture may seem tangential to these larger forces   that tend to dominate the frame and govern the  news cycle, I would argue that they actually   run directly through both of them because I think  Silicon Valley culture and the ongoing disruptive   dynamics associated with social networks, mobile  devices, automation, and now cryptocurrencies   are not only restructuring and remaking the  commercial world, but they are increasingly   encroaching upon the traditional assignments and  obligations of governments and the state. We see   this perhaps most notably in the case of privately  issued digital currencies, but I would argue that   this culture of disruption runs much deeper and  its consequences for society are much broader   than most of us realize. In fact, I would argue  that what we are living through today is nothing   short of a political revolution, and while I think  our systems of government are ripe for disruption,   I'm concerned that the solutions being put forward  by Silicon Valley entrepreneurs, financiers,   and the broader commercial sector do not  adequately reflect the interests or the concerns   of the vast majority of people whose lives would  be most affected by these changes. Nor do I think  

the implications of such a world for democracy  and civil rights have been properly thought out.  The second part of our conversation would normally  be released on our overtime feed, but Balaji and I   didn't begin to get into the network state part of  this discussion and its implications for society   until the last 35 minutes or so of the first half.  So, instead I've put that part of our conversation   behind the pay wall and released the second half  for everyone to listen to on the main feed. I   think it's an absolutely illuminating conversation  and Balaji was incredibly generous with his time.  If this episode makes you want to dive deeper  into the topics we discussed today and you want   a transcript of this conversation, as well as all  the source material, notes, and questions that I   put together and relied on in preparation for this  discussion, you can access all of that, either   directly through our website at,  where you can also go through our episode library,   or by visiting our Patreon page  at  

There are links to both the website and the  Patreon page and the episode summary as well   as a link with instructions on how to connect the  overtime feed to your phone so you can listen to   our premium conversations just like you listen to  the regular podcast. And with that, please enjoy   this enlightening and highly educational  episode with my guest, Balaji Srinivasan.  All right, Balaji, welcome back. Great to be here.  So we were talking about the ... I  was trying to focus in on the deeper   organizing principle or issue that would make this  possible or not possible or create friction, and   that ultimately is power. I mean, nation states,  nation states are arguably the most powerful  

entities on the planet. They control physical  space, they can apply pretty much whatever   laws they want domestically so long as they can  either get consent from their people or they can   crush them, one way or the other. Actually, this  makes me think about something. Have you ... I   mean, you must have seen the Matrix, obviously. Sure.  That's one sort of analogy. Have you read Theodore  Kaczynski's Industrial Society and Its Future?  I am familiar with it. I have a riff on that  from a different direction if you're interested,   which is ... Sure. 

I actually think, I mean, so that happened only  about 30 years ago, right? A Unabomber basically   went and mailed bombs for a bunch of people  to get his manifesto in the Washington Post,   I believe, right? And if you think about it, he  willing to go and kill a bunch of people for the   distribution, and I think about that a lot. For the distribution, what do you mean?  Yeah. Well, so in tech and this took  me a long time to articulate ...  Oh, to get his pamphlets distributed? Yeah. 

What a fascinating way to think about that. Right?  Wow. So he literally ... At the time,   distribution was so scarce that he had to  kill multiple people for the distribution. 

Fascinating. 30 years ago, right? And now today,   anybody can go and set up a YouTube channel  and have whatever a million viewers, right?   And so distribution went from this incredibly  scarce thing that you needed to kill people to   get a Washington Post op ed into like ... Or  not you needed to, but this guy decided to,   into something that was much more abundant where  people are now trying to crack down on that,   right? And what I think about often  when I think about Twitter is I'm like,   there's a lot of people who aren't Ted Kaczynski,  They might not want to go and kill someone   for the distribution, but they'd certainly  scream at them online for the distribution.  Yeah. Right? And so if you  

think about a power law, like when your Kaczynski  is all the way out there, their sentence is parse,   right? Kaczynski's sentences are grammatical  and there are some interesting ... I mean,   he's a genius mathematician and he put out some  interesting ideas, but he's also a lunatic, right?   And I think that that actually describes  a significant fraction of the people on   Twitter who are extreme attention hounds and what  have you, right? Because it shows that this guy   is willing to kill for the distribution,  what would other people do if not kill?   Yeah? Something I've thought about a lot. That's really brilliant. I really like that.   Yeah, I tried to get Ted on the show. Really? 

When I watched the ... From jail?  Oh dude, I tried. I mean, I had developed  a good relationship with the warden.  Wow. Of this federal penitentiary in Colorado.   He was one of the very first guests I  wanted on because when I started the ...  Was this Supermax? Supermax, yeah. 

ADX Florentine? No, I don't think that's   the one. Maybe that's the one. Okay.  I mean, maybe. I can't  remember now the name of it.  That's fine. But it was in Colorado and it was a Supermax   and they printed out my emails presumably  and gave them to him because I find him so   fascinating because I think though he was clearly  disturbed and in ways deranged and clearly his   tactics were immoral to kill people and maim them.  He was in many ways I think prescient, and if   you read his work between some of the clearly  sort of odd deranged kind of insane writings. 

Sure. There's this lucid prognostication   that I think has in many ways really come  true. Now that we're kind of moving off a   little bit from the network state, but let's ... Let's talk about this actually, because it is   related. Yeah.  And essentially if I'm to slightly  rephrase what you're saying, Kaczynski is   one of the most articulate exponents of  what we might call anarcho-primitivism. 

And Luddite-ism. Yeah, and anarcho-primitivism, maybe it's a bigger   word for the same thing, but it's essentially  the idea that technology was a mistake, that   the natural state of humanity should be basically  being in greenery, that we just need to destroy it   all and stop and go back to Eden, right? And the  thing about this is the reason that has appeal to   some chunk of people is humans, in my view, aren't  built to think quantitatively so they aren't built   to think about the fact that the nature that they  enjoy is a very tamed version of nature, and that   truly being in the wilderness with rain lashing  down and tigers around is actually not fun,   and humans are actually built to be technological  species. That's why we don't have fur or claws.   Over time, a lot of those things have been  pushed off of the mainframe or into devices. 

Actually, there's this good book called How  Cooking Made Us Human by Richard Wrangham,   I believe, where he argues that fire  externalized certain enzymes so we   didn't need as much energy to digest things.  I don't know if you know this book, right?  No, I'm actually familiar with that theory. Okay, great. And so probably also true   for tool use or whatever. Anyway, so ... That essentially the technologies that we   use transform us biologically. Correct.  We evolve along with the changes  that actually come from our brains. 

That's right. That's right. And with that  said though, because people like nature,   they sort of think oh, this is my map to  the anarcho-primitivism kind of camp, right?   They think yeah, tear it all down, it'll  actually be better. And I actually think   that this taps into limbic system things where  burn it all down, that's a human thing. Nature,  

that's a human thing. Utopian thinking of this  kind is a human thing. So, it taps into some   limbic system stuff where the natural enemy or the  natural opponent of the anarcho-primitivist is a   transhumanist, which is much more my camp, right? And interestingly enough, just to kind of maybe   abstract that a bit, could you also say that it's  really the evolution, the evolution of the human   being to such a degree that what you're looking  at is a different species, is a different animal.  Yeah. Well, so the thing is that how would  you measure progress by the year 3000,   okay? A thousand years from now. I thought  about this a lot and I actually think that the   single best ruler, in the sense of a ruler  to measure things, like a measuring stick,   the single best ruler would be how much math do we  know? Do we know new theorems? And the reason is   math is cumulative, math is abstract, math is  digital. If there's an alien intelligence species,   it would know math. If you've seen the movie  Contact, it's actually pretty well done in terms  

of communicating in terms of ... Sure.  Communicating in terms of prime numbers, right?  Prime numbers are a universal and a very powerful   thing. And so if you say okay, we are advanced  in math, that would encompass a transition   like the transition from the human ancestor to  homosapiens, right? Or there may be multiple human   ancestors. There's evidence that Neanderthals are  [inaudible] and there's introgression and so on.   So, the reason is do we become  half machine intelligence?   Is CRISPR rolled out? Do we genetically modify  ourselves? There's all kinds of possible   human futures that may not look very human  at all, but how could you say that we've   actually leveled up? Well, if you're better at  math by the year 3000, then your civilization   has advanced in a very fundamental sense. Now there are a bunch of people who'd be like,   "Oh, that's so horrible. Oh, I now am back  in within the anarcho-primitivists." Right?  

But that's kind of like the choice in the sense  of we're either going to go towards the stars or   everyone's going to kill each other and we're  going to regress to this stone age mentality.   And I have been surprised as to how many  people have romanticized the stone-age thing.   They do so, of course, from their fast internet  connections and their iPhones and their   climate controlled apartments or they're  manicured lawns, but romanticize it, they do. 

And of course, there's someone who might say,  "Well, why can't we just stick in the middle?   Why can't we just have washer dryers and  cars and lights, but not this crazy like   limb regeneration, ocular restoration, brain  machine interface type stuff that you guys   want? And kind of the answer there is it's pretty  hard to stop technology. I mean, you can. You can   tear down the Roman empire, you can stop it for  a while at the expense of destroying society,   and that may be the goal of many folks.  And then there's the goal of transcending,   and this is kind of what Thiel talks about, which  is the race between politics and technology,   between those people who basically just want to  tear it all down, who would vibe fundamentally   with the anarcho-primitivist mentality, and  then those people who want to transcend.  This is really freaking fascinating.  It took us this long to get here.   So, I have a number of things I want to  point out or questions I want to pose,   many or all of which are philosophical. One is all  progress good? How do we decide is it universally   good simply to progress, and how do we define  that? I'm just going to throw that out there.  

Then there's another question about what is the  good life, right? How do we measure the quality of   a human life? What is good? I don't know if you're  familiar, you probably have read Nick Bostrom's   Superintelligence. This gets funneled directly  into thinking about designing intelligence systems   and AI. Do we ... And kind of a way to maybe  crystallize it is I wouldn't want to go live   in the year 3000 with an alien species that  derived from human beings, that's very different   from me. Maybe they're incredibly intelligent  mathematically, but on a sort of psycho-spiritual   level, there's no connection there. But would you want to go back to the year   negative 500,000, or actually I should look back  at the exact history. Would you want to go back  

and live with the protohuman ancestors? Live as a muskrat.  Yeah, exactly. That's right. No, but I mean, so that's a   really great point, and so I guess one of the  questions is ... I guess, for sure, this is   really interesting. I mean, there's ... A lot of  this just has to do with just an innate tension   that comes out of moving forward, out of  progress and identity, but I think maybe,   Balaji, maybe what I'm picking up on here is  really when things begin to move too quickly.  Well, let me put it in a different way. Like speed. 

Let me jump in for a second, right? Yeah. Yeah, yeah, yeah.  The fundamental issue is I really wouldn't  care that much if the anarcho-primitivists   just wanted to go and live in the jungle by  themselves and destroy all their possessions   or what have you, but that's not what they want,  they want to destroy yours too. They want to burn   the whole thing down, right? Like fire-- Well, like Kaczynski says you might as   well basically scrap the whole  freaking system and start over.  Exactly. And so these folks are  essentially civilizational suicide   bombers, right? Yeah. 

They are not content with just killing themselves,  which you might try to argue them out of it,   but it's ultimately their right. You can't stop  someone from doing that really. Euthanasia is   legal in many places and if someone's really  motivated, it's really hard to stop them.  Well, also though understandably, they can't  live their lives unless they have everyone   else adopted as well, because there really is no  longer any ... There are very few places where  

human beings haven't actually entered and altered  the landscape, so I understand their perspective.  So, I mean, I understand it, I'm less sympathetic  to it because if they want to just take off all   their clothes and go and wander in the Rockies or  the wilderness and be like Ug and live with stones   and try to make fire from that or whatever they  can do that, right? Kaczynski actually kind of did   that, he had some skin in the game, right? Yeah, yeah, yeah.  He was a mountain man for a while. But we know just historically that   civilized more technologically advanced societies  ultimately encroach on more Aboriginal nativist   groups. That's what happened to the Americans.  They simply weren't technologically advanced   enough to protect themselves from the Europeans,  and they ultimately lost their civilization. 

Oh, that's true, but this kind of person, the  anarcho-primitivist is not really even pro a   primitive tribe, right? They're not pro anybody  because they don't respect other people's wishes.   As I said, if they just wanted to get a group  of people and just go ... I mean, you're right,   that over the long sweep of history, civilization  tends to expand into "uncivilized areas"   but there's tons of tundra out there, right?  If you've seen a satellite map, there's a lot   of space out there which is just basically  wilderness and they could go and live there.  Well yeah, except there you run into two  issues. One, there's very little wilderness.   Two, ultimately that level of the way that human  beings operate in such vast expanses was because   population density was very low. Sure. 

Ultimately, the planet's got way too many people  to live that kind of life so you'd have to blow it   up if you really wanted to live that way. Well, so this is the logic of the   anarcho-primitivists. I  mean, the thing about it is   I encourage it. I mean, it's funny to put it this  way. I encourage them to follow that in VR, right?   Where they can basically be ... Like Neuralink, in  an interesting way. Do you know what Neuralink is? 

Sure, of course. Brain surgery.  Yeah. Neuralink may give them what they want   in a way that they didn't realize it because it  gives them a brain machine interface that they can   visualize themselves traipsing through the jungle,  and they've got their fruits or whatever, and it's   the idealized hunter gatherer where they're always  perfectly shaved and they never get gangrene.  So here ... Basically like ... Go ahead.  No, no. You understand my point of view. 

I do. I do. I do. So, I mentioned The Matrix. This  brings us perfectly to The Matrix. Before we go   down this road, I do just want to throw out again,  because I think it's an important observation.   How much of this is really not about  having a problem with progress and change,   but when change comes too quickly. Sure.  We see this in politics and I think this is what's  scary to people as well, it's scary to me as well,   that we move into a world where people very  quickly disassociate with the physical world.   And then I think is ultimately  destabilizing and dangerous because we do   actually live in the physical world. Sure. So, let me be more sympathetic here. Right?  

So as I said, the anarcho-primitivist thing,  the reason I bring that up and transhumanism   is those are two ... That's actually I think  the real pull, that's where I think society   is realigning towards. Let's call it technological  progressive and technological conservative, right?  Interesting. That I think is the real pull,   where it is do you push faster? Do you push  nuclear power, brain-machine interface,   genetic modification, space travel,  the internet, cryptocurrency,   life extension, limb regeneration, bionic eyes,  right? Bionic limbs, all of this awesome stuff.  We're going to have sex like  they did in Demolition Man.  

We're going to put some helmet on and ... Who knows? Who knows, right? But basically   do you push all of that stuff or do you pull in  the other direction and try to hang on to the   current situation, be as Amish as possible,  or what have you, or do you try to forge,   of course, like the triangulation of some ...  Okay, well, we go for it but not quite so fast,   and so on, right? Okay. And the  way I kind of think about this is  

a lot of it boils down, but what's actually  kind of interesting is the west is Black Mirror   in a way that the global south and much of Asia is  not, okay? I think if Asia, especially let's say   India, Israel, these countries are  more like bright sun than Black Mirror.  You're saying we can look at the  same objective phenomenon and one,   the west, views it in a negative way and  the east views it in a more positive way.  Well, it's not just the same ... It's  maybe the same devices and some of the same   technology, but there's a fundamental difference,  which is the introduction of these devices,   of the internet and the mobile phone and so on,  one of the most important facts of the early 21st   century is that in China the technological  and political capitals were basically in the   same place, namely Beijing, right? Because the  government saw fit to make sure all the CEOs   were in Beijing. I mean, Shenzhen's a capital as  well, but it's not the same as Beijing, right?   All the CEOs are in Beijing so they can call  them all in for a meeting if they need to,   the firewall is operational, they kind  of set all it up in that way, right?  Whereas in the U.S., the technology and  political capitals are 3,000 miles apart,   DC and SF. And what that resulted in is it results  in a situation where tech basically developed its  

own culture, right? And one of the things is  there weren't enough people who had careers in   New York or DC or Boston who had a spouse who  went vertical when Google went vertical. And if   that had been the case, you might've had a degree  of intra household, intrafamilial, offsetting of   text appreciation with the collapse of traditional  media and traditional academia and whatnot, right?   The academia collapse is about to happen. It's  in process, but media has certainly happened.  Had that happened, had that occurred, had there  been a greater degree of not just economic but   societal alignment, then the gain might've been  ... That the loss might've been outstripped by a   gain, and they might've been happier with it, but  instead it was 3,000 miles away and it was also   something where a tech is very largely populated  by immigrants. So, depending on your count,  

60% or 70% of tech is it's Indians and Chinese  people and Persians and Korean people, Vietnamese,   South Americans, Nigerians, Palestinians, Israel,  people from all over the world, right? Work in   technology, or came to Silicon Valley, right? And so those are just different social networks.   They're absolutely not the old money of the east  coast, right? They're not the backscratching,   they're not the nepotism, they're not the families  who were here since the Mayflower or the Civil   War. They weren't in the country for a hundred  years, they may not even be in the country for   10 years. And so it wasn't continuity. All of  these nouveau riche people were not married in,   they were not aligned with these old families  on the east coast, and so the east coast has   just seen its fortunes crater and plummet  as a function of this new technology, which   is why they're all Black Mirror on everything. Now I recognize by the way, that Black Mirror   itself comes out of the UK and so on, but let's  say that their vibe is one of Black Mirror because   they feel with some justification, right? That  basically the east coast or the U.S. can no longer   win in a game of free markets and free speech. Wait, wait. So, you're saying that, because this  

is something I'm not familiar with, what you're  saying is that in the east and Japan and China and   Singapore and Taiwan and Hong Kong, et cetera ... Japan is a little different, leave them out for a   second, but go ahead. Okay.  In rising Asia, but also ... In the tigers and China.  In the tigers, in China, in India, and  also to an extent, in South America,   Africa, a place of Africa, big parts of the  Middle East, they've risen with technology. 

That's very interesting, and that makes sense,  I guess, right? Because their development cycle,   they came into developed world status with the  recent information technological revolution and   the collapse of the Soviet Union and the opening  up of global trade coincided with all of that.   So, they're more ... Yeah.  That's fascinating. That's not something  that I'd ever put together, ever.  Yeah. So, it's huge. So, I mean, and  now would you call them developed world   versus I think actually that term doesn't even  apply anymore because I now think of it in terms   of how many times have you heard of over the last  year, year and a half, people say, "Wow, the U.S.  

is behaving like a third world country." Right? Well, I've said that before sometimes.  You've said it sometimes. Yeah, yeah, yeah,  exactly. Because you see the power going out   in Texas, you see the fires in California, you  see the fact that the public health has gone out.   By the way, the public health going out is like  the power going out, it's like a public utility.   It means the commons are a tragedy, it means the  state has failed, right? So when the health has   gone out, just like when the power has gone out,  you don't expect someone to operate a restaurant.   When the health has gone out, they're operating  in this biohazard thing where the state was   supposed to control that. Public health is  both a technology and a state thing, right? 

So all these people are saying oh, the U.S. is  like a third world country, and so on, and the   origins by the way, the term third world came from  the Cold War when there was the U.S. and the USSR   and the non-aligned countries. Non-aligned countries, yeah.  Yeah, or really NATO Warsaw Pact, non-aligned  countries, right? First, second, and third world.   And third world just became a synonym for  poor country, messy country, slums, dirt,   et cetera. And today though, really, I think  it's better to think about it in terms of   ascending world and declining world, because the  U.S. is absolutely part of the declining world.  

Most Americans don't understand this yet  because they haven't been either overseas or   they're in denial or it's code for something. How so? Can we distinguish between culture   and power? So are you saying, because I  would agree that in many ways culturally,   the U.S. has been in decline, relative in power  it has been in decline, but in the world that   we're moving in today, I would argue that the  country that's going be best positioned is   actually going to be the United States because of  its geo-strategic positioning and its geography,   and it'92s also its rule of law, its natural  resources, et cetera, et cetera, et cetera.  Okay, so I actually did a whole thing with Mark  Lutter on this because some of what you're saying   sounds like the Xi'an thesis. Yeah. Yeah, it is.  Yeah. Yeah, it is. It borrows from Xi'an.   And others, Tim Marshall and other people who it's  very, very geo-strategic geographically focused. 

Okay, so there's some good things in ... I  have no beef with Xi'an, nothing personal   there or anything like that. And there's, I don't  know, 10% or 20% of his book that I think has some   good stuff on shale oil, and I do agree that  that at high enough prices reduces dependence on   Middle Eastern oil, right? That part I agree with.  However, I disagree with almost all of the rest of   it and I can give you certain reasons. Sure. Fantastic.  Right? Okay. So, first, basically, so I mentioned  this in a Charter Cities podcast a while back,  

I can give some links. Which podcast?  Charter cities podcast. Okay.  With Mark Lutter, but I'll give the quick version.  Okay, so first the idea that lots of people   is a huge advantage is simply not the case in a  robotic era, and like Xi'an quotes, he says, "Oh,   China's getting old, and so on." I'm like, China's  going to get robots and so are a bunch of the rest   of the world. And if you think about Instagram  and how Instagram with 12 people was able to beat   Kodak, which had probably more than 12,000 at that  time, I don't know the exact number, but it's in   that ballpark, the scale of people, the number of  people you need to do something when it's digital   is just far less. And I don't know ... Yeah, in some ways you could say that  

lots of people becomes a liability.  You could also see it that way.  Exactly. Exactly. You are bringing us back by the way to build joy,   why the future doesn't need us, where he was  quoting Ted Kaczynski and Ted Kaczynski talked   about how in such a world people would just become  useless eaters and they'd become a liability of   the state structure. And then, this was actually  going somewhere where I want it to go and I'll   just throw it out there so it's there, is are we  moving in a world where the elites are going to   basically either decide to call the population  or they're going to pacify them through VR and   narcotics and other neurological interventions. Culled would be obviously really bad.  Yeah. I hope not. But what I actually think happens   is human needs and wants are endless, and so what  I actually think happens is neither of those two,   I think if the 1800s was farming and the 1900s was  manufacturing, I think the 2000s is going to be   the obvious replacement that it's  non-obvious is going to be investing.  

Everybody becomes an investor and the 99% this  century are investors and the 1% are ... So,   99% are capital and the 1% are labor,  because investing in something it's very   similar to just clicking the buy button  on Amazon. It's an unskilled process to   just click the button. There's skill  of course in picking the investments,   but you can just follow a fund manager and  give them a cut. And then the 1% are labor,   which are the people who are actually motivated  and capable of going and building new things.  What does that though do for  the social contract, right?  So we've evolved a sense of morality in  politics and a certain sense of obligation,   the obligation to the community around us.  You're describing an extreme ownership society,  

in some ways you're describing almost a narco  capitalism, but it's basically a society where   everything is based on ownership. Is that  roughly correct? And then what does that do for   people's standings, quality of life, et cetera? So here's the thing. So, I would actually not call   myself someone who idolizes crypto anarchy.  I actually believe in crypto civilization.   And what I mean by that is there's a lot of  good things about crypto in terms of being   able to decouple and being able to be "sovereign  individual," et cetera. But I think the sovereign  

collective has a lot of power to it, more power  than a sovereign individual. And also it's more   legitimate in a bunch of ways. And it's also  more likely to be able to sustain itself.   The problem with Ayn Randian objectivism or what  have you, I find her books entertaining and so   on. I'm not going to be like, "Oh, everything  Ayn Rand sucks," but fundamentally just from a  

leverage champion, one person can't stand against  7 billion, but a group of people can often, right?  And they have a common culture and a common  alignment. So, in terms of what does that   future look like? I think it looks like something  where there are thousands start-up states around   the world, start-up cities and city-states  and digital states that you can choose from,   and you get to the age of majority and  just like you choose a university today,   you choose the city or cities that you want to go  and migrate to. And essentially everybody talks   about democracy and capitalism. Those are very  important. That's voting with your ballot and  

your wallet respectively. But the third force  is migration, which is voting with your feet.   And with technology today, with the internet, we  can design political systems that actually use all   three forces and just set the sliders differently. The way I actually think about this is if you   think about the root of democracy, the whole  concept is based on consensual government,   the consent of the governed. And so what I think  we want to strive for, what I believe in is 100%  

democracy as opposed to 51% democracy. So, in  a 51% democracy, 51% can outvote the other 49%.   Do you know what Fosbury Flop is? No.  If you Google a Fosbury Flop, you've seen it, it's  a pole vaulter who just barely clears the bar.  

A 51% democracy is like a  Fosbury Flop where you just   barely get over the bar. It's a minimum amount  of consent. And what happens is 49% of people   did not consent to that leader. And so  therefore they tug and they resist. And   so you have to use more coercion and coercion  leads to backlash and in the next election-  Direct democracy, rule by majority, majority  rule, that would be what you're describing. 

Exactly, and a bare majority rule is the  best technology we had for a long time,   because we've had- We've have a Republican democracy, there's not   bare majority rule. And it isn't  even about the electoral college.   And we have a Constitutional government with a  Bill of Rights. So, there are lots of things that   the majority cannot take away from us as  individuals, which is an important distinction.  So I think that a lot of that stuff, a lot  of the American stuff is great for 1776.  

The reason I don't think it applies today, for  example, is the entire concept of representative   government, well, a lot of it was invented  because of constraints of space and time.   It wasn't just about being informed. It was that  not everybody could make their way down to DC to   vote on every issue at every moment. But in  theory, you could poll everybody every time.  

Now to be clear, I'm not necessarily saying  I'm not advocating for 100% direct democracy.  I am however saying that some of  the reasons that it was designed   were due to the paper constraints of what you  could do at that time. When people think, oh,   how do you modernize the political system? They're  like, "Oh, let's put voting online." Right?   And that is similar to what we talked  about earlier, where you've got paper   and you have a scanner, and then you go to a  digitally native file and you start thinking   about it truly digitally from first principles.  So, you have offline voting and you have Estonia,   which has e-voting, but it's basically the  same system. And then you can think about   it from first principles. What does a digital  state look like? And so I think a digital state  

starts with the consent of the governed and a  real people. So, that's a problem today is we   always think about politics and why do we think  about politics, you're thinking about the law.   You're thinking about the state, you're thinking  about coercion. You're thinking about a gun   as the most fundamental thing. And  we've been so habituated to this.  I think the way to get something done  is to try to get a piece of the state,   to be mayor of this, or head of that, czar of  this, president of that. And then you've got a  

gun to point at everybody who gets in your way.  You can coerce, you can mandate, et cetera. If   you're CEO of something, though, what you quickly  find is your ability to say, "I'm CEO, do it   exactly how I want," is actually fairly limited.  You have to persuade most of the time. You can't   really mandate. And the more your mandate- But you're doing that within a legal structure  

that ultimately has the coercive  use of force that keeps order.  Yeah. Except the thing is so that we are  relying way too much. Coercion is a last resort.   I'm not an anarchist, but a minarchist or  someone who believes, not even just a minarchist,   but just from a pragmatic standpoint, the  more you coerce, the less legitimate you are.  I agree with that. And unless you can coerce, right.   And so what we have done is we've gotten  ourselves into a state where people don't   consent anymore and the less consent, the more  coercion and the more coercion, the less consent.  

It's a negative feedback loop. And so a way  around that is you build internet polities. So,   let me give you a concrete example. A lot of  the stuff is in my book, but a concrete example.   So, Austin, Texas is running out of power.  San Francisco has this terrible school board.   What you could do with the internet is rather  than wait for an antiquated two or four or six   or whatever year election cycle, et cetera,  you can just set up the shadow school board.   You set up the shadow government of  whatever region. And you just start  

organizing people in a hierarchy where just like  you start a company, you declare yourself CEO,   you declare yourself the head of this community  organization. You don't necessarily need to   call it the shadow government. You can call  it whatever name you think is suitable.   Maybe it's the community of work or what have you. And then you start acquiring people and you might   say, "Well, what do they do?" Well, you're not  a government, are you? You can't tax people.   You can't point a gun at people. You don't  have police or whatever. And you say, "Well,  

guess what? You focus on everything  you can just convince people to do   through volition rather than coercion," which is  actually a lot of things. For example, you can   organize everything from babysitting and childcare  when folks need to rotate because they're working   from home. You can organize meetings where  people align on what the curriculum is.  Right. But the world... So,  what I'm challenging is that,  

first of all, we know historically that there's  a point of inequality in quality of life,   at which point people will begin to employ  violence in order to obtain what you have.   Does that make sense what I'm describing,  or do you not agree with that?  I think that that is actually more elite on  elite violence in the sense that I think most   of the people who you hear, if you actually go  and analyze it, and you actually look at who   the author is of a given piece, most of the  people you hear talking about the rich are   the folks who are angry that there's some people  who are richer than them. Many of these people who   are so angry are born to old money, especially- What about labor movements in the late 19th   century? Well,   actually, I mean Marx or Engels those guys were-- They became...they became very   violent. Marx or Engels-- 

No, not Marx or Engels. All the workers in the-- Yea, yea, but the leaders of those movements.  Yeah. But they were tapping  into a popular movement.  They created that popular movement. But you don't think-  Okay. Ok, so, let's   say, do you think Donald Trump  created the Trump movement,   that he wasn't actually capturing and politicizing  something that was already deeply there?  Yes, there is public sentiment. But  I think that a lot of demagoguery   taps into something that is a mile wide and an  inch deep, and most of it is emotionally aligning   people against something rather than economically  aligned them for something. It's actually  

relatively easy to get people mad about, whether  it's immigrants or entrepreneurs or this or that   group of the day, and to get them to destroy  something. And of course the US, now that a big   chunk of the country doesn't like immigrants and  a big chunk doesn't like entrepreneurs. It's not a   great place to be an immigrant or an entrepreneur. I haven't sat out to plot this, but I would   imagine that there's a very tight correlation  between economic conditions, economic disparities,   et cetera, and the rise of populous demagogues and  even international conflict between countries. So,  

could Hitler have taken over Germany if he hadn't  come in 1933 and it was 2000? In other words,   there is a strong correlation between the  underlying conditions and the emergence of   a authoritarian figure who taps into deep rages. I think there is something to that, but I think   it was more the initial frame on it that I wanted  to poke on, which is you think of the Magna   Carta. That really wasn't the King versus the  peasants, even though it's often framed like that.   It was the nobles versus the King, right? And  so a lot of this stuff is really intra elite   as opposed to the poor versus the elite. But those elite grabbed their power,   historically have taken their power from  the people. If they can align themselves   with the people, then they're able... And that's  actually what populism is, because the existing   elite have control of the institutions  and the infrastructure and the military   and the populists offset that by basically  commandeering the power of the population. 

Right. And here's the thing though. Basically,  normally the way this is phrased is, oh,   these folks in the US are going to go after these  tech guys. And there may be something to that,   but here's the thing. Americans are actually the  global 4%. 95%, 96% of the world is not American.  

And Americans have been rich for a long time.  And it is actually, once you're post peak and   start declining, you're going to hear, I  think, a lot more about American privilege.   And everybody who is mad about Iraq and about the  US throwing its weight around abroad and so on,   you're going to hear way more of that this decade,  because the US has the relied on coercion for so   long and so aggressively, that it's less able  to convince. I mean, this reached an apotheosis- 

That's a great observation. I certainly agree  with the general observation that America has   wrecked its credibility and it has made it very  difficult for it to have the moral leadership   to command the world internationally  and to set the moral agenda.  Exactly. And so here's the thing, normally  the kind of frame that you hear on this is,  

oh, we're going to take money from these rich  Americans and so and so. And I'm not saying that   something like that may not happen in the US. But  the next step is going to be the world wanting to   take money from the rich Americans. And that's  going to manifest in many, many different ways.   Basically America is no longer the leader of  the free world. This is not one presidency or   what have you. This has been going back decades  and decades. But most people don't realize this,   COVID was like a military defeat of the US, in  the sense that if you go and Google 2018 national   biodefense strategy, there is this whole document  which purports to here, I'll just Google it,   the exact thing, national biodefense  strategy, 2018, I think is the thing. 

So it's supposed to prevent against both  manmade and natural threats. Yeah. Here it is.   New biodefense strategy combats man-made natural  threats,, by Jim Garamone. And so this   was something where it was touted as being able  to protect against the biological weapons part   of WMD. And there was a steering committee and  so-and-so is chairing it. And they even mentioned   the Spanish flu and the anthrax and Ebola. And  on paper, it sounded like, dude, we're totally   prepared. We've got a plan for a plan for a plan,  et cetera, et cetera. Of course there was no plan,   or rather maybe there is something written down  on paper, but there's no execution on that plan. 

And so this was a military defeat. It  wasn't just that state, local, and-  Does that imply also that you think  this may have been a bio weapon?  No. No, I don't. I don't think it's a bio weapon.  I think it's possible to escape from a lab   that maybe the US government funded, by the way,  like the Wuhan Institute of Virology got some-  There was some connection between Duke, I think. Yeah, exactly. Like,   it's the gain of function stuff and- Yea, the gain of function stuff.  There is a lot of credible... That is not crazy.  If you're a PhD, I've looked at a lot of the  

stuff, I talked about it actually early last year,  and now there's been actually some pretty good   work by a doctorate at MIT on this. I'm forgetting  her name. I think Alina Lu, I think that is...   Is it Alina Lu? I may be misremembering it. But  anyway, the point is that the origins of the virus   aren't actually what I'm focused on right here.  It's more that local, state and federal government   failed, public health failed, police failed,  fire failed, power failed, public schools failed,   the US failed internationally. It was just absent.  And what you heard from people were things like,   which is actually kind of remarkable, if you  mentioned that X country or Y country was doing   better, people would sort of snarl at you. And  I understand why, because you're under stress   and so on, COVID's a stressful time. But they  wouldn't even be like, "Okay, we can learn from  

that. Maybe we can do X or do Y." They'd say,  "Well, are not a Patriot," or "We're not last."  Being first, and the "leader of the free world"  is extremely different than not being last. "Hey,   we're not number N" is not really like this  great rallying cry that people might think it is.   And people would say things like, "Oh, New  Zealand, well, that's an island, China, that's   a totalitarian dictatorship," blah, blah, blah. At  the same time that the US is carbon copying China,   because the Italians had locked down as a copy  of the Chinese and the Americans copied the copy   without acknowledging that they were doing a copy.  And that was the worst of all worlds because,- 

Well absent the locking people inside their  buildings, and the Chinese lockdown was on   a whole different level than what the US did. Here's the thing. So, we don't know which of those   videos is real versus what have you, but it's  absolutely the case that they took it extremely   seriously. And here's the thing though, and this  is important thing, when it's China versus the US,   people get crazy and irrational. How about  Taiwan versus US? How about democratic Asia and  

Australasia? How about the fact that- Or Japan?  Yeah. Australia is conservative and New Zealand  is progressive, but they both managed to get this   under control. Oh, they're islands. Okay. And  you start going down this list of excuses and   fundamentally it's basically just something where  DOS is just not... It doesn't have high stake   capacity anymore. It doesn't have the ability  to manage or build infrastructure or come to  

enough alignment on what to do. It's  not really a country anymore. It's   just a group of people in a physical area that  don't share anything in common. It's very hard   to think of something that every American shares  in common beyond the fact that they're governed by   this empire and that they value the dollar. If  you're trying to think of a value, it not like  

99.9% of people salute the flag or believe  X or believe Y, that's just not the case.  So I know that sounds harsh, but I'm making some  observations. I'll drive to a conclusion. Let   me pause there and see if you disagree  with any of those observations so far.  First of all, I love how you engage  intellectually. It's so satisfying. I love   how you think openly. As you were talking,  what I started to get more clear on here  

is, and I don't want to divert  anywhere from where you're going.   I agree that we're dealing with a  huge amount of dysfunction. I think   my response to that has been, can we fix it? I  think your response and the response of other   people that you align with intellectually,  philosophically is, can we exit? Can we build   something better? Can we build something new? And I think where the tension exists,   because I'm actually theoretically okay with that.  I don't know that I necessarily have an attachment  

to the red, white, and blue. But I think the  real thing for me is what do we value? You said   it in terms of what do we share in common? What  do we have in common? And I think that's where   I find myself increasingly at odds with, I  don't know if it's what the term would be,   this cross-section of crypto and trans  humanism or futurism or Silicon Valley.   What concerns me is that Silicon Valley's  values are very different than the values   of many people who live in Western  Democratic countries. I think that-  I'm sympathetic to that and let me offer some  thoughts. Basically I think the first network   state is the kind of place, let's say we're  successful in this project, is very focused   on technology simply because of... It's like when  Twitter started, it was mainly tech people doing   it. Lots of these things, when crypto started,  it was mainly tech people. And then eventually  

it grew into other kinds of markets. Financier's,  human rights activists using it abroad and so on.   And in the same way, I think that the first  network states, I think will probably be focused   on things like trans-humanism. But the second and  the third and the fourth and the fifth might be   veganism, CrossFit, maybe the Benedict option  where people can live a Christian life. Maybe   anarcho-primitivism where they just get a nature  preserve and they can all be... Which is fine with   me so long as they're just doing it on their own. But here's the question though, Balaji,   that I think suggests, or that assumes that  we can live in a world where we don't need   to solve major collective action problems. And I  am of the mindset that we are moving into a time  

where we're going to have huge problems of the  commons that require collective level solutions,   where we need strong governments in order  to solve those problems. So, go ahead.  You may want strong governments in order  to solve those problems, but you can't get   those strong governments or at least in the  West without being able to start new ones.   Because that's the thing is it's not about the  strength of the government in terms of how much   it can coerce. We're so loaded on that.  We're so like, "Oh, let's get more power"-  Not more competent. I mean also  competent, strong government. 

Competent, exactly. Because here's the thing.  Why is it the case that private companies could   develop these vaccines so much faster? The US  government, everybody has mental model of the   US government from movies, which is probably  more valid from, let's say 1933 to 1968.  Independence Day in 1994. Yeah, exactly. So, the period from Hoover   Dam to Manhattan Project to Apollo. That was a  period when technology favored centralization and   mid-century you had one telephone company and  two superpowers and three television stations.  Yeah, monopoly. Yeah. All the talent went to these gigantic  

countries and it was all focused at the state and  the state allocated it and so on. And so you get   these books which I very much disagree with like  Innovative State, which says all innovation comes   from the state, all due to the state. But if  you rewind the clock further backwards in time,   of course there's physics before NSF. There was  engineering before any departments of engineering,   railroads, aviation, automobiles, those  things grew largely out of the private sector.  

Obviously there's a public sector involvement in  railroads, but the Wright Brothers went and did   their aircraft, their first one without any grants  to my knowledge at least. And if you go back   further in time, like Cisco mechanics came out  of actually the empirical study of steam engines.   So, to was the apply that led to the theoretical  rather than vice versa. So, you go back further in   time and yes, science, technology exists without  the state, mathematics existed without the state,   certainly without the US government. It  is not a necessary condition. In fact-  What I would say though, is that the European  Enlightenment and also all previous intellectual   flowerings were very closely connected  to the state, because the state of course   was the organizing economic principle of  society up until the last few hundred years.  I disagree with that in many ways. For example,  the Wild West, you didn't have a strong state.  

It was organized by capitalism to  a greater extent. That was closer--  Well, that means, I was saying  after--I'm talking about past the last   few hundred years with the rise of capitalism. Well, even the Renaissance Period was all of these   competing principalities. It wasn't a giant  centralized state. In fact, there's an argument-  Right, but they were principalities in other words  and there's an interesting point about the rise of   the merchant class. And that goes back to, again,  the beginning of this movement of capitalism.  Yeah. There's a good book that also gives a  counter argument here, Where's My Flying Car.  

Very much worth reading. That guy would be a good  person to bring on your show by the way. Also The   Roots of Progress guy, Jason Crawford, also good.  He wrote a book review of the first one who wrote   Where's My Flying Car, and his premise, which I  agree with, is that the centralization of science,   we don't have the counterfactual. We do see, and  I did see, a lot of this being choked through   bureaucrats. And if you look at the average age  of, example, the NIH grant recipient, you actually   see this bell curve-ish thing, moving upwards  in time, roughly by one year as the years tick   on. It's like a cohort of people who've all just  award grants to each other. Just ages with time.  And that is science by bureaucracy,  which if you wrote an NIH grant,   I did this 15 years ago or thereabouts, but it's  probably the same, I hear it's the same today.  

You really have to have done much of the work  prior to even putting in the grant. And so you're   getting the money for something that hasn't been  done, because otherwise the reviewers will say,   "Ah, this is impossible or it's not feasible,"  et cetera, et cetera. And it's this whole stupid,   bureaucratic process. And it's fighting for  actually relatively small sums of money. I   remember pulling somebody out from academia.  I'm like, "Why are you spending all this time   on a $200,000 grant when your colleague here has  a $200 million in VC to go and do something real?"  And so the point is that bureaucratic science  has a whole set of megaphones to herald it,   and I'm not saying that there aren't successes.  Obviously there's what people will list, which are  

true. You've got the internet and you've got the  human genome and you've got the self-driving car,   which came out of DARPA and whatnot. But we don't  have as counterfactual, which is what happens   when you have instead 50 individual billionaires  who can do things like what Yuri Milner is doing   with the Breakthrough Prize or what Elon is doing  or what Jeff Bezos is doing now at Blue Origin.  

I think we're going to see something different,  where it's not bureaucratic anymore. It's based on   you don't have just one NIH, you have  50 people who can fund at that level.  And frankly, much of the scientific research  establishment is just to make work program   where there's a relatively small number of  people who produce really innovative research   and were simultaneously too elitist and not  elitist enough. Too elitist in the sense of  

lots of smart people aren't getting  these grants or research jobs,   not at least enough in the sense of a lot  of people who are "full- time scientists."   For example, in biomedicine, because you have  these sort of slave labor wages that people are   paying post-docs, you don't have the incentive  for laboratory automation. You have people who   are literally still manually pipetting 20 years  into robotics, when that's an obvious application   for industrial robotics, when in  Amazon warehouse has happened a long time ago.  But I'm not saying this as a theoretical thing.  You can see a video. I built a robotic sequencing  

factory with some of my colleagues. This is  something which can be done. Can every single   step be automated? Well, you might need micro  fluidics for certain pieces and so on, but more   and more of it can be. However, if you have these  postdocs who are just paid small amounts of money,   grad students are paid small amounts of money,  there's incentive for automation, isn't there?  Okay. What am I pointing out? Coming back to  the stack to say a lot of the idea that, oh,   the state is so great and so on, oh, we have  to reform the state. The reason people think  

you have to reform the state or you have to do  centralized science is because alternatives don't   exist yet. We have to build those alternatives  and then you can have a true comparison.   And then you can say, "Yeah, okay, starting  something new sucks. We need to reform something."   But here's the thing. Whenever we've been able  to do that, because actually the most important   innovation sometimes is the meta innovation of  being able to do something new in the first place.   How do you start a new currency? That was an  insane concept in 2007. You walk into a VC's  

office and say that they think you're crazy. Peter Thiel and Levchin did for PayPal. They   actually did go in and say that, but that's not  what they did. They built something that was   difficult and invaluable and a hundred billion  dollar company, but it wasn't a new currency.  No, it was embedded in the system to begin with. It was embedded in the system, but it was great.   I take nothing away from them. It was awesome.  Still it was embedded in the system. So, 2008,  

when Satoshi came up with a white paper in  2009 launching Bitcoin, that was a true zero   to one an epochal thing, which innovated on  how to innovate in the first place. Oh wow,   you can start a new currency? That's within our  capabilities? I didn't even know you could do   that. And now a kid in a dorm room can start a  new international cryptocurrency. That's insane.   if you think about it, the growth of crypto,  it's at a trillion dollars, Bitcoin alone,   it's obvious that all of this  innovation in the financial system,   even just basic things like speed of  settlement. Or the fact that you have  

cryptographically protected wallets so the custody  is local rather than all being centralized.  All of these things, some are obvious,  some are non-obvious innovations.   All those things are being held back. And if  you think about, my friend Alex Rampell is a   partner at a16z, pointed out that, I think they  got to T plus three settlement in the late '90s.   And then they got to T plus two in 2017 or  something like that. And he's like, plus 17 years   between every T, in every time set. I forget the  exact dates, but something along those lines.  

And that's the glacial pace at which the  existing system is moving. But within Ethereum,   you settle in minutes and have done so for more  than five years now. It's been operating 24/7.   And that works in any country in the  world, it works programmatically for   pretty much any amount, modular  fees. And they're working on scaling.   And that's 10X better on several different  dimensions when you can build something new   rather than just be forced to reform the system. So a lot of people who say, "Oh, I want to reform   the system," et cetera, they're only doing so  because they don't actually have the option of   creating a new one . And opening up that option  is important for another reason as well, which is,   if you think about Microsoft, the only way  that Satya Nadella was able to gain the   political capital to truly reform them from  the inside was to show that Google and Apple   and Facebook and Amazon had massively succeeded by  doing things that Microsoft wasn't or couldn't do.  

And so eventually after he took over, he could  point to their massive undeniable successes in   markets that Microsoft used to be dominant in, to  say, " Hey, let's do open source. How about cloud?   Maybe we should be multi-device rather  than try to force everything on Windows."  And so on and so forth. There were many deeply  baked assumptions that had got Microsoft to where   they were that were now holding Microsoft back  that couldn't be overturned without the example   to show that wouldn't lead to doom, but rather to  great success. And in fact, staying intransigent   and staying hooked on the past was going to lead  to doom. Now a reformer like Satya wouldn't even  

be able to come along without those external  examples. Thing would just go into the ground.  O

2021-03-04 15:19

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