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EVERY SPOKEN WORD
155 min read · 31,167 words- 0:00 – 2:40
Introduction
- BSBalaji Srinivasan
Had somebody actually said, "Oh, I'm gonna found a currency," in 2007, 2008, almost every VC would've looked at them like they had four eyes.
- SSSteph Smith
[instrumental music] Today, I had the absolute pleasure of talking to who I think is one of the most fascinating minds on the planet right now. That is Balaji Srinivasan, who you might recognize as the former CTO of Coinbase, the former general partner at Andreessen Horowitz. He was also the co-founder of genetic testing company Council and earn.com, which was acquired by Coinbase, an angel investor in many successful companies like Deal, Replit, Ethereum, and Superhuman. And today, we brought him in to discuss his bestselling book, "The Network State." And as you can imagine, when you talk to Balaji for three hours, you can cover a lot of ground. We cover the difference between a nation and a state, how constants become variables, the cloud continent, the newest Leviathan, digital power, your identity stack, calibrating risk, polycentric law, cloud regulations, building fast with atoms, founding versus inheriting, the powerful versus the powerless, and just about everything in between. So I hope you enjoy this conversation as much as I did.
- SPSpeaker
[upbeat music] The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. For more details, please see a16z.com/disclosures.
- SSSteph Smith
[upbeat music] All right. We've got Balaji on the line. Balaji, thanks so much for being here.
- BSBalaji Srinivasan
Great to be here.
- SSSteph Smith
I have to confess, I am a Balaji fan. I've probably consumed an unhealthy amount of Balaji content, so very excited about this. Thank you for invading my brain. Um, I also read your book recently, which is what we're gonna be talking about today, this idea of "The Network State." And I also have to say that similar to when I learned about cryptocurrency, it kind of forced me down this rabbit hole to reconcile what happened around me in, in the outside world, how monetary policy worked, as an example. "The Network State" kind of did the same thing, but with, with other concepts, right? Like nation, states, what are these things? So I'm excited to dive into that, but I wanna introduce the audience to a simple frame that I think was, again, an aha moment for me, which is that technology has been able to reshape our lives at an individual level. I think many people can understand that. They can grasp that. Uh, also at the company level, right? We've been able to start new companies that are digital. It's also reshaped our ability to participate in that ecosystem, and then more recently, currencies as well, right? The network has changed that,
- 2:40 – 15:13
Nation vs state
- SSSteph Smith
and your book discusses how technology can actually potentially create new states. Very interesting concept. Um, and in order for us to dive into that, why don't we start off with what we have today, which are nation-states. So how would you define a nation, and how would you define a state, and how do those kind of interplay together?
- BSBalaji Srinivasan
I actually have this at the beginning of chapter five in the book, and the thing is we hear the term nation-state as a compound, you know, like a, you know, the, the phrase really, and we don't really give too much thought as to what it means. But, um, it's useful to think about the distinction between those two words, because they're actually very different. The nation, that's like-- that comes from the same root as natality, like the Latin, like natus, and so it's like common birth, common descent. So like the Japanese nation, they have shared ancestry, shared culture going back hundreds, you know, of, of years and, you know, shared language, all, all that type of stuff. And then separate from that is the state, which is the administrative unit, that thin layer that sits over the nation, okay? And the state could be of, you know, the Japanese people themselves or could be, you know, for example, 1946 after World War II, the American government was basically the state over the Japanese nation, right? And so once you think of this distinction between the nation and the state above it, the cons- the nation state was every, you know, ethnic group has the right to have its own government. Now, the thing about this, of course, is, um, that's like an abstraction, but in con- in concrete terms, um, many of the ethnic groups on the planet do not have their own government and/or they do not have their own territory, which is another part of it. Uh, and so like, you know, if you're talking about the Catalonians or, uh, you know, the, the Kurds, these are groups that, um, have, you know, long histories, and they have like a legitimate nature from, from the perspective like the 1700s, 1800s person who think about, you know, the nation state, uh, they, they have a-- they, they would be considered a real nation, but they do not have, um, territory. In the global game of musical chairs, they didn't get a seat, okay? So like you have this map of the world, and everybody's kind of moving around it, and they just lost out on a seat. They're a stateless nation, okay? And so like the Kurds, for example, their ethnic group overlaps or their historical lands overlap like Turkey and other kinds of places, okay? And, um, the Catalonians, for example, they overlap modern Spain. The reason for this is that the maps that we have are actually very abstract constructs. You know, if you think about a map of Africa or actually even in the US, you have these straight lines, you know, on a map. Whenever you see straight lines on a map, that's like some surveyor said, "Okay, I'm gonna put this here because the latitude." That's some like abstract political decision. In a sense, a map is like a digital layer above the physical world. You don't see the lines of the map in the physical world, right? Often, those boundaries on a map do not reflect the ancestral, you know, long-running boundaries of language and culture and so on. There is, however, a feedback loop where what happens is those borders or those boundaries that humans impose then in turn change how, uh, humans start living. And so you will have something where there's now a sharp transition from French to German as you cross the Franco-German border. Signs change, you know, languages change. That human digital thing has caused a digital crease- ... in the physical world, whereas before it might have been more continuous, right? Before we had modern mapmaking, before the world was mapped, you sort of had a gradual cline, a gradual, you know, shift, right? So once you think of the difference between the nation and the state, that the nation is this group of people with common birth and the state is this administrative layer, and you think about how that relates to maps and so on, you can start thinking, "Oh, okay, the exact configuration that we have today is not only not how it's not always been, but not how it always will be."
- SSSteph Smith
Yeah. I think that was another aha moment for me because in my lifetime, those lines have been constant for the most part, right? There's exceptions, but you kind of accept that this is the way the world works, right? These are the countries. And I think another, uh, interesting, uh, concept that you, you mention in your book is even the United Nations is perhaps named incorrectly, right? It should really be like the, the Chosen States or something along those lines, and-
- BSBalaji Srinivasan
The Selected States. Yeah. There's, there's a guy actually, the Kazakhstan head, he actually made this remark. He's like, "Look, if we allowed every group in the world with a legitimate right to self-determination to get their own territory, there'd be chaos. We'd go from 193 countries to 600." That's what he said, right? I think it's probably way more than 600, but that just gives you a sense of, oh, okay. I used to be against word games for the sake of word games, but then I got more into it. And one way of thinking about that, if, if you-- you know DALL-E 2?
- SSSteph Smith
Yep. Exactly.
- BSBalaji Srinivasan
If that's right. Yeah.
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
So DALL-E 2, I, I had this tweet, like the age of the phrase, right? The short phrase, like whether it's a tweet, you know, on social media, or whether it's a 12 or 13 or 14-word phrase to go and reset your cryptocurrency, your wallet, you know, passphrase, or if it's a short phrase with like just a single, sometimes character or single word that's different that changes what the computer generates. You can actually see that changing one word changes what is in somebody's brain, you know? Um, and the concept of Russell conjugation, I sweat, you perspire, but she glows. The same behavior can be flipped neutrally, negatively, positively without lying necess- You're-- what you're just doing is you're just changing the tone of it, and so you can flip all of those variables negative if you wanna make somebody look bad or flip all them positive. He is, you know, in an uncontrollable range, but she claps back righteously. You know? That kind of thing, right? And you just characterize the situation differently. You Russell conjugate it, right? And, uh, so the point being that that slight choice of word now with DALL-E 2, we can see a tiny change evokes literally a different visual in the computer brain, and it also evokes a different visual probably in the human brain. Okay?
- SSSteph Smith
Yeah.
- BSBalaji Srinivasan
This is like a very quant-- Right? Okay. So with that, this, just to descend onto this concept of the nation, the fact that people have conflated the nation and the state recently, like people just say nation state, they don't realize there's a difference between the nation and the state. Many states today are actually not nation states. Japan is a canonical example of a nation state. Israel is. Others like, let's say India, that's like more of a civilization state. There's lots of different ethnic groups. India is more like Europe, you know? Like the South Indian and North Indian are like historically as different as like, you know, a, a Spaniard or somebody from Finland, okay? There's, they're actually-- India was not a country until recently. It was a civilization. They did have things in common, but a civilization state is different from a nation state. That's one example. Or you have something like, um, you know, Singapore or, or the United States, which is a multinational state where there's many different ethnic groups under one administrative zone. It's not a nation state, it is a multinational state. Now, people could argue that there was an American nation, like by the mid 1900s. There was a lot of effort to kind of pack down people like, uh, Teddy Roosevelt talked about he wanted the end of the hyphenated American, you know. He didn't want people to be, "I'm a Polish American or this American." Everybody's just an American, right? So there's an enormous process where the state was trying to pack in and centralize and remove those, um, points of distinctiveness. Everybody would just think of themselves as American only. And by mid-century, you could argue that was somewhat successful, and that was like peak centralization. And, uh, why, why is that important? Well, then people start not thinking about the difference between the nation and the state. We're all-- The state itself has formed the nation. Do you see what I'm saying? The state now says, uh, the German state is Germany. The French state is France, right? The Italian state is Italy. The American state is America, and it waves a flag and so on. And it's to the state's advantage to identify itself with the nation. One way, one analogy I have in the book, which I think is a funny way of re-thinking it, it's like, uh, labor and management.
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
And in a small company, they are actually literally the same. You know, the founder is both the CEO and the person who's going and taking out the garbage or, you know, fixing the computers or whatever. Like, every job is done by like one person, right? There's no, you know, division of labor or what have you. And then as the company scales, then management and labor arguably get more alienated or whatever, and then people can say, "Oh, management is disaligned with labor." And what's interesting is those people who will accept that are often folks who will contest the idea that the state and the nation are disaligned. But it's actually a very useful analogy to see that they can be aligned, but they can also be disaligned, right? It's not-- I'm, I'm obviously not, you know, somebody who's, uh, anti-management, but I recognize that you want equity structures and things like that to align, you know, folks, right? Once you kind of realize that the nation and the state are different, you can reexamine all these words. Example, multinational, right? So multinational for a multinational corporation, it's actually a misnomer. It really should be called multi-jurisdictional or multi-state, because it's not as if Google has like a direct ambassador to the Catalonians and the Basques and the Kurds and so on. It's actually talking to the states that have, you know, the administrative units, right? So it's multi-jurisdictional, multi-state. The United Nations, as we just discussed, is really best called the selected states because it doesn't have all the nations of the world, right? And in fact, many nations missed out on that game of musical chairs, and they don't have a seat at the United Nations. And now you can actually realize, oh, there's a whole queue of people, peoples really I should say, groups, right, with long histories and cultures that are boxed out of the United Nations. And, uh, you know, one that's, you know, very prominent is like the, um, you know, I've mentioned the Kurds, Catalonians. One that's like sort of becoming a nation are like the Taiwanese, you know, where there, there wasn't like historically this huge necessarily difference from mainland China, or at least there was some difference, and a lot of folks in Taiwan came from mainland China because, you know, the Kuomintang and, uh, the, when the Nationalists lost the Civil War, you know, a bunch of them, you know, mo- moved out. Now Taiwan is like this... That, that's a very famous example of something that's sort of on the boundary between just a group of people and like a full-fledged country that's recognized by everybody, 'cause China leans on people to not recognize Taiwan, right? And, uh, but, but that's like a famous example, but there's lots of other things that are in this sort of boundary zone in different ways where some countries recognize them, but not all, you know? So it's not part of the club fully, but it's also not totally not part of the club. It's like in this nether zone. There's this book called "Invisible Countries." What I'm getting at is once you distinguish the nation and the state, you reexamine words like multinational, you reexamine, reexamine words like the United Nations, you reexamine words like national security or phrases like national security. Really, that's like federal security, right? Nation is often used to mean the whole thing, but really it's like federal, like the overall government, right? And you realize you've actually-- There's a base that's been stolen, you know. The nation and the state are different, and once you realize the nation and state are different, you're like, "Oh, well, America actually is not a single nation. At a minimum, it's binational."
- SSSteph Smith
As you said, the nation and the state are not always aligned, and there is this gray zone. Many people accept that these lines are very concrete, they're very binary, and I think many of the examples you've given show that they're not necessarily. And I think that relates directly into this idea of a network state, because if you accept that the lines are binary, they're set, you can't change them, there's no point of even going into this concept of a network state. But as you dive into these gray zones, and actually just to bring up one quick, uh, example from, from your book is even just naming countries that many people didn't realize have emerged in the last couple decades, right? You think back to like the largest countries like America, China, et cetera. They have much longer histories, but there are new countries on the map that have happened within our lifetime. So that was another example of gray becoming part of the existing infrastructure.
- BSBalaji Srinivasan
This whole concept of constants becoming variables, I think
- 15:13 – 16:49
Constants becoming variables
- BSBalaji Srinivasan
is a very important characteristic of our age. 14 years ago, there was-- It wasn't like fiat currency and cryptocurrency, right? There wasn't a distinction. It was just like, you know, it's currency. What, you're gonna go... If you had walked into a VC's office in 2008, 2007, and you'd said, "I'm gonna found a new currency," okay? Well, actually, Peter Thiel and PayPal, they kind of tried to do that, okay? But they didn't really say that that was the thing. They said, you know, it's like online payments and so on. They had the idea of founding a currency. But the fundamental issue, you know, which Satoshi later put a finger on, but it wasn't obvious, was decentralization, and then how you actually make a decentralized backend in the blockchain, all this stuff we know. Had somebody actually said, "Oh, I'm gonna found a currency," in 2007, 2008, almost every VC would've looked at them like they had four eyes, and they would've said, "What, are you gonna go petition like the IMF and the World Bank? Oh, it's like... And it's deflationary? To- Haven't you read Econ 101? Paul Krugman proved that deflation is bad, and you can never make..." You know, th- they just quote these like priests to you basically to say that it's impossible. It would just be a joke, you know, to try and do something like that. And so those people are, were thought of as jokes. But Satoshi figured out, uh, a new way that literally started on a message board. You know, like he posted this on the, uh, like the Metzdowd cryptography, you know, message board. And what Satoshi realized that I don't think most people realize is, uh, even if this is implicit, you can think of the internet
- 16:49 – 20:52
The cloud continent
- BSBalaji Srinivasan
as basically like giving rise to a new continent, okay? Imagine an Atlantis that just arose out of the middle of the ocean, and people were just taking commuter flights there back and forth each day, okay? So you'd spend eight hours in Atlantis and 16 hours at home. That's really what the internet is. You know how I can prove that?
- SSSteph Smith
Well, we're in it right now.
- BSBalaji Srinivasan
Well, right. Exactly. Like one way of thinking about it is ask themselves what percentage of their time they spend, their waking hours, do they spend looking at a screen of some kind, okay? Whether it's a laptop, mobile phone, tablet, uh, you know, their smartwatch, something like that, right? What percentage of that time is that for you, Steph?
- SSSteph Smith
I unfortunately have to say it's probably like 14 hours [chuckles] a day, but I'm, I'm probably an outlier.
- BSBalaji Srinivasan
Something like that.
- SSSteph Smith
Uh, I'd say probably the average person though, right? It's, it's a third of their day, maybe eight hours.
- BSBalaji Srinivasan
That's right. So what that means... A- and that's up from basically zero in 1991.
- SSSteph Smith
Yes.
- BSBalaji Srinivasan
Right? So, you know, this, this Atlantis, this cloud continent, right? So just to extend the metaphor, we're taking these commuter planes up to the cloud continent 14 hours a day and coming back, and we're only spending two hours of our waking lives, in your case, on the land, and 14 hours in the cloud, right? For other people, it might only, only be a few h- like three or four hours, but like that's amazing. Billions of people have migrated huge chunks of their lives to this cloud continent, okay? When I say billions, I mean like three something billion just on Facebook, right? And you add all the people with smartphones and so on. So let's say it's on the order of three, four billion people in the world. Half the people of the earth have-- are now spending half their lives in this cloud continent, half their waking hours, okay? Up from nothing in 1990 something. When we think about that, that is actually a different way of visualizing the whole thing, and you realize the internet is actually on par with the discovery of the Americas for the Europeans, right? Yes, of course, there were people in the Americas before the Europeans got there. Uh, I talk about this in the book actually, that like if you go and look at the Bantu expansion or the Mongols sweeping across the world, there's, there's essentially no ethnic group that has ever had some location since time immemorial. They just killed the previous folks and kind of took over their territory or whatever, right? So leaving that whole part of things aside, from the perspective of the Europeans, like quote, "The discovery of the New World," was this, you know, huge thing. You know, s- similar to like the folks who, uh, went over the Bering Strait. Their discovery of the Americas was this huge thing. It was this new frontier, right? Which is obviously thousands of years earlier. This internet frontier where we've migrated to will over time give rise to new countries just like the Americas did, right? The, the Americas-- The people came there and they didn't think of themselves as American or Brazilian or Mexican or Canadian or something like that. Nowadays, North and South America have... They're all, you know, slogged into the same grid as like the Old World, right? But initially, they thought of themselves as English or French or, you know, they were colonists, they were settlers, right? They didn't identify with the new land as primary and the Old World as secondary, right? They didn't think of themselves as a Polish American or English American, right? They thought of themselves as just English. And that's similar to folks who spend all of this time in this cloud continent but have not made the flip, right? You're spending the majority of your time in the cloud continent, but you're not thinking of yourself as a cloud person-
- SSSteph Smith
Yes
- BSBalaji Srinivasan
... first yet.
- SSSteph Smith
Yet is the key word. I think-
- BSBalaji Srinivasan
Yeah. Yet.
- SSSteph Smith
I think one-
- BSBalaji Srinivasan
That's the key word, right?
- SSSteph Smith
... interesting thing for, for you to share would be, I think for, for many people, like the individual you might have just described, they in reality spend a lot of time in the cloud, but they don't actually see the cloud or the network as a true challenger to something like the state or prior to that, religion. Um, and you talk about this as
- 20:52 – 31:11
The three leviathans
- SSSteph Smith
this idea of a new leviathan. And I think what would actually help people wrap their head around this is, is what are some examples of where the network did challenge the state, where there was almost like a head-to-head or a, a, a strong sway that the network had in our wider world? So I, um, I mean, one thing I've heard you talk about is WallStreetBets, which people might think is, is kind of a silly example, but there are larger ones, right? So, so what are some of those examples?
- BSBalaji Srinivasan
The concept of a leviathan generalizes... A- and, you know, this is the, the least common word in Silicon Valley is God, okay? Or in technology is God, all right? So basically, I'm t- gonna talk about God for a second. So the concept of leviathan generalizes God, and what it basically means is, in this context, it's like Hobbes' leviathan, and I'm just kind of, you know, taking that concept and, and taking it a little bit further. And the leviathan is that all-powerful force that stands above all men and makes antisocial people behave in prosocial ways, okay? So I have introduced three leviathans: God, state, and network. And it was actually gratifying. I have this passage in there in one of the footnotes, uh, by a guy named Jacob Burckhardt from "Force and Freedom." Did you see that passage? I'm not sure. It's like footnote N or whatever of it. Uh, and there's a lot of footnotes in the book, you know.
- SSSteph Smith
There's a lot of footnotes, a lot of links, but it, it's great. Why don't you, uh, why don't you share what that footnote is?
- BSBalaji Srinivasan
Yeah. Yeah. So here is, um, here is this, uh, pretty cool footnote. I think it's cool, at least it's the kind of thing I think is cool. Um, so this is from a book that was written almost 200 years ago, okay? "Force and Freedom." And, uh, I, I found this after I had written much of the book or whatever, just like, just like, you know, just flipping through old stuff, and I was like, "Ha ha ha." Um, [lip smack] and he identifies essentially three forces in the world. Uh, he calls them state, church, and then the third force he calls culture, right? And this is way before the internet or anything like that, obviously, right? And by the state and church are kind of, uh, as a, a, you know, th- that you can kind of guess what those are, right? Um, culture he defines as all the peer-to-peer interactions between people. Everything that is... So as soon as you get peer-to-peer, he doesn't say quite peer-to-peer. He says, uh, I'll just give the exact quote. Hold on. "Our theme is the state, religion, and culture in their mutual bearings. We are fully aware of the arbitrariness of this division into three powers. Uh, the division, however, is a mere device to enable us to cover the ground. Indeed, any historical subject must proceed in this way," right? "The three powers are supremely heterogeneous to each other and cannot be coordinated, and even if we were to coordinate the two constants state and religion, culture would be still something essentially different. The state and religion, the expressions of political and metaphysical need, may claim authority at least over their particular peoples and indeed over the world. For our special purpose, however, culture, which meets material and spiritual need in the narrow sense, is the sum of all that has spontaneously arisen for the advancement of material life as an expression of spiritual and moral life. All social intercourse, technologies, arts, literature, and sciences is a realm of the variable, free, not necessarily universal of all that cannot lay claim to compulsive authority." Wow! Okay? That's like 200 years ago, and what he's talking about in modern language would be culture is the network of peer-to-peer volitional interactions between people, as opposed to the top-down impositions of the church and the state respectively. And this relates to the concept of leviathans, and the three leviathans I describe as God, state, and network, right? And h- how do you think about this? So in the 1800s, what's the most powerful force in the world? God. Why? You do something wrong, you steal, God will punish you, right? That's why you don't steal, okay? By the 1900s, enough people didn't believe in God You had Nietzsche writing about how God was dead and, you know, essentially the, uh, the basis for a lot of civilization. You know, you had this-- You went from this decentralized law enforcer who would hit you with lightning bolts if you did something bad. People actually believed in that as like the super cop, right? People didn't believe in that anymore, so instead you had the rise to a greater extent of the state filling that void, right? The uniformed police forces, the boys in blue. In the extremists, it's the Soviet Union of a totally godless state and so on. And in fact, that was a huge collision in the 20th century between the Soviet Union, which was a pure state, and America, which was a God state combination, like the Marine Corps of mid-century would say, you know, "For God and country." So in the 1900s, why didn't you steal? Because the state would punish you, right? Even if you didn't believe in God, the boys in blue would get you. That's why there's so many police procedurals on TV, right? Because the state is portrayed as omnipotent domestically. All of those things, even like a small little boy, you know, who knows what a cop and a robber is, right? They can see the uniforms and so on and so forth. They are also, you know, taught, oh, the U.S. military abroad can go and invade any country, blow anything up. It's big, bad, all-powerful, blah, blah, blah, right? And until, I think about 2019, those kinds of things, while rickety, they, like, people kind of believed in them. And now what we're getting into is the third leviathan, which is the network. And what that is, is that's, uh, the cryptocurrency network. That's the social network. And now the network, you have a third thing. You, you don't steal because the network won't let you. Either you'll get canceled by the social network, or you will not be able to take it because the encryption prevents you, and it is a third way of thinking about it. God would smite you, 1800s. State will punish you, 1900s. Network won't let you, 2000s, okay? These are three different theories of the prime mover. What is the most powerful force in the world? Is it God? Is it the U.S. military, or is it encryption? All kinds of political arguments, moral arguments, um, cultural arguments, social arguments, a lot of them reduce down to who is my leviathan? Like, what is, what is the final thing that I'm invoking that says like, basically like, "My dad can beat up your dad." Like, "My God is stronger than your God." What do I think of as that, you know, thing? And of course, there could be conflicts within people of God, right? And there can be conflicts, as I mentioned, between people of God and people of the state. Christians and the state, like the Soviet Union persecuted, you know, people of God. And there can be conflicts between people of the state and people of the network, like, you know, the antitrust cases against tech companies or, you know, the State Department versus Tornado Cash and, and so on and so forth, right? Once you kind of see this, it's actually like a vocabulary for parsing the world. And just to generalize this, this is a part that's not in V1 of the book, but it's coming in V2. So with, you know, God, we're familiar with the concept of atheist, monotheist, polytheist, right? Okay. So atheist doesn't believe in God. There's also agnostic and so on, but just for our purposes, right? So atheist, monotheist, polytheist. Uh, atheist doesn't believe in God. A monotheist like, you know, a Christian or Muslim believes in one God, and a polytheist like a Hindu believes in many gods. Zero, one, N. We can now generalize this to the astatist, the monostatist, and the polystatist, and let's say the acoinist, mon- monocoinist, polycoinist, or, uh, um, you might say a numist, like numism is like the study of coins, right? So what's the astatist? The astatist is an anarchist, okay? They don't believe in the state at all. So it could be a crypto anarchist, it could be an anarcho-communist. They just don't believe in the state at all, okay? Zero states. Monostatist, that's somebody who believes that their empire should run the world, right? Like a national greatness neo-con or like somebody who thinks China should dominate the whole world or whatever, right? Um, or back in the day, like someone... the Roman Empire, the Soviet, right? Soviet imperialist. That's like a monostatist. Our state should run everything. And then the polystatist is, uh, like somebody who's into competitive government, digital nomads, okay? Switching between countries, uh, multiple passports, okay? Now, you can also apply the same framework to coins, to the network. Acoinist is the no coiner. They don't believe in coins at all. They hate coins, right? You know, Web3 critics, blah, blah, blah. Okay. Monocoinist is like the, uh, let's... the Bitcoin maximalist or a maximalist of any one, you know. They, they, they think their digital currency or their network is just the number one everybody, right? The polycoinist, I mean, you know, there's actually, uh, there's Polychain, right? There's Multicoin. Those are literally funds that were set up on the premise that multiple coins will exist, which was controversial at the time that they set it up, right? Like in, you know, I think Polychain was set up in 2015-ish, or thereabout. Multicoin, I don't know the exact timeframe, but around that time. I'm just deeming those as two funds, which are Polychain and Multicoin. So the polycoinist, okay, or the polypnumist is another term. Numis is like, numism is the study of coins, like numismatic, right? They believe in multiple coins. Now, here's what's interesting. Once you have this cleavage of the world, right, you can realize, so that's like a three times three times three, um, many ideologies can be further slotted into like combinations of these. For example, you have somebody who's the atheist monostatist acoinist, right? That is somebody who is like your secular East Coast establishment person who believes... doesn't believe in God, believes in the U.S. government, and especially the regulatory state, and hates coins. You know, crypto anarchists, Bitcoin maximalists, they're an atheist often. Sometimes they're a monotheist or a polytheist, right? Let's say a- often an atheist. They are an astatist. They, they don't believe the state should exist, but they're a mononumist, okay? So that's a real conflict that's gonna happen between the atheist monostatist a numist And the athe- the atheist, a statist mononomist, right? That's like, that's a collision because they, they have different gods, right? That's gonna be as bi- like the US government and the US dollar versus Bitcoin is as big a clash as like, you know, I don't know, Christian Muslim was during the Crusades or something. That's a, that's a, that's a clash of, um, you know, or like the Soviet Union versus the US. Those are two fundamentally different class of ideologies, right? Go ahead.
- SSSteph Smith
I think to many people, that would seem a little outlandish, and I'm, I'm just, you know, being the devil's advocate. What comes to mind is these are all collective, um, terms or structures or things that we all believe in or don't believe in, right? Some, some level of belief depending on where you fit in that, uh, matrix. And for many people, let's say if we
- 31:11 – 38:50
Digital power
- SSSteph Smith
use God as the leviathan, the repercussions, as you're saying, of like not behaving in certain ways, for them, the people who believe in that, they're like, "I'm going to hell." That's like, uh, a lot of force or at least imagined force. The same thing is true with the state.
- BSBalaji Srinivasan
Yes.
- SSSteph Smith
Right? So if, if I do something wrong, I'm going to jail. A lot of force again. Um, what's interesting about the new leviathan that you're describing as the network, there's force, but it, it's not, um, approached the same way, if, if that makes sense. Like it, it's actually-
- BSBalaji Srinivasan
Yes
- SSSteph Smith
... a lack of force in some ways. It's, it's cryptography and it's, it's using the network to enforce certain things, but without the same force that you imagine through God or the state. And I think that's maybe why it's hard for some people to imagine this being a leviathan, because a lot of people view the network as what, what is just a bunch of semiconductors and servers and, and bytes running back and forth. Um, but I think that's why it's important to think through like... or to, to give these examples of where the network has actually been incredibly strong relative to other leviathans.
- BSBalaji Srinivasan
Well, so here's the thing is basically, um, one of the things I, I, I touched on there and I t- talk about more in the book is fusions of leviathans, right? So you introduce these pure forms of like God, state, and network, and you can have like fusion. So I mentioned like God plus state is the American state, right? And there's different versions of network plus state. Uh, one is the version that I, you know, the titular version of the book, uh, the eponymous [lip smack] network state, which is a fusion of network and state that, uh, you can think of as the network is the state, like it's, it's the government, right? The network is the nation that underpins the state because you have a social network online that is actually giving legitimacy as opposed to a physical, physically based nation where everybody lived together. It's a digitally based nation where everybody thinks the same and they're, they're aligned that way rather than same language. They have same culture, but this culture is online. There's different ways of parsing that. But to your point, in terms of force, well, um, one fusion i- of a, a, a kind of network state is sort of what China's building, right? And actually what the US establishment is building. And so you connect the network to drones, right? You connect the network to robots, you connect for s- physical actuators, and that's like one way of thinking about it. So now that absolutely is force in the physical world, and in fact, that's already being deployed and, and so on, right? Another way of thinking about it is, um, which is already there. So this thread that I just pasted into chat. So this is a while back, but basically, you know, I was thinking about digital power and how to articulate it. Digital power is not really soft power, okay? If you're deplatformed and seeing all your money frozen, that's much more than just influence. But it's also not what we traditionally think of as hard power because it's invisible, it's intangible. You can use it on 100 million people. There's no optics. There's no like fireworks. Nothing blows up. There's no nuclear explosion. Like the human brain is not trained to react to the use of digital power. It's not dramatic in that way. It's like a bit flipping on a server, right? Um, so I was trying to think about how to classify it, and then I eventually was like, "Oh, you know, here's a four-part classification." Analog soft power, analog hard power, digital soft power, digital hard power, right? You could also say physical soft power, physical hard power, digital soft power, digital hard power. And what is that? Analog soft power, that's culture and influence, okay? Analog hard power, that's bombs and bullets. This is the classic soft, hard power. Digital, digital soft power is ranking and recommendation. Digital hard power is deplatforming, freezing, and seizing. And so the key differentiation is soft power is probabilistic and hard power is deterministic. Soft power, you're persuading. Hard power, you're compelling, okay? So now you start to actually see, okay, that's another way, uh, besides the obvious thing of drones and so on, or, or you know, that's like compelling in a very gun, gun pointed at you kind of way. You can compel in a different way with, with the network where you lock people out, either of their accounts online or their, they can't access a building, their key card is disabled, right? Their, their funds are frozen. Their account, i- has permissions reduced. They're suspended, et cetera. That's actually a very significant punishment. In China, for example, like people, uh, their COVID codes are used. The red and green zones, uh, are often marked as like COVID red, and then they can't travel. Their WeChat doesn't work. And yeah, in theory, like it doesn't actually affect their physical body. Like they're not like hurt, okay? But they're basically un-personed. They are disconnected from huge chunks of the Chinese network. They have to rely on a friend to do things and so on. They are just much less like independent than they were, right? It's similar, though it's not quite there, to like exile, like when you're exiled from the community in like Greece or whatever, right? So it's like digital exile. I, I, I think digital power should not be underestimated. Even if it's like flips on bits on servers, it's growing in power. Drones are the most obvious example, but locking you out of an account or digital soft power like downranking you, these are big things that can totally crash somebody's, uh, you know, company. They can make or break you socially You know, et cetera, et cetera.
- SSSteph Smith
Yeah, and I think it's, it's directly correlated to our dependency on the network. So as more people go online, as more people spend more time online, as we talked about before, if people are spending eight hours of their day online, that's a third of their living hours, uh, half of their awake hours, in which that is important to them to some degree. And as it gets more integrated with work, let's say, that's, that is a meaningful sense of power, to your point. One interesting aspect to consider as well is that with all of these forms of powers, there's tiers, right? So, like, you could think of the most extreme tier of hard analog power, uh, or force is, like, the death penalty, right? But, but you can actually dissuade someone from doing something by saying... You know, applying a night in jail, or maybe it's a month in jail, right? So there's, there's tiers to it, and I think there's going to be tiers as well to digital power, right? Where it's not just, um, the extreme version at all times, but also it can be where you lose all access to your digital life, and that's, that's quite significant.
- BSBalaji Srinivasan
And the thing is, your digital life just becomes your life, you know, in the sense of it's your login to all kinds of things, right?
- SSSteph Smith
Yeah. Why don't we return to this idea that, you know, it sounds like this digital power concept may not resonate with everyone, but I wanna give a couple of these examples 'cause they really resonated with me, that you've shared in, in your book and otherwise. So, I mean, uh, I mentioned WallStreetBets. That's maybe a silly example. Another example of a network, uh, utilizing some degree of force is Amazon HQ2. That's an example that you gave where actually, like, some concept-
- BSBalaji Srinivasan
Yeah. Persuasion, though. That's not force.
- SSSteph Smith
Yes, exactly.
- BSBalaji Srinivasan
Yes. So that, that, so, you know, there's convincing and there's compelling.
- SSSteph Smith
Yeah. I mean, something else that you've said is your immigration policy is your firewall. You've also shown how networks can be utilized in unison with humans, of course. So another example that you've given is the power of 12 Instagram engineers to beat 12,000 from Kodak, right? So-
- BSBalaji Srinivasan
Kodak, yeah. Not, not an example that's original to me, but yes, it's an important example.
- SSSteph Smith
Right. And so I think it, it's, it's important to recognize how the network does change the game. It, it changes people's, uh, ability to participate within these systems, to challenge the state, to tallent- challenge previous leviathans. And I think with that understanding, it, it-- let's return back to the idea of the network state and actually building these new lines that, that many people assume are, are very much set.
- BSBalaji Srinivasan
Yeah. So, um, so I
- 38:50 – 55:28
The identity stack
- BSBalaji Srinivasan
actually, I start off the book with this, which is like, you know, because people skim nowadays, and so network state in one informal sentence is a highly aligned online community with the capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from preexisting states. That's, like, an informal sentence to just kind of describe that. Highly aligned online community, okay? So it's not just, you know, a "Game of Thrones" Facebook group, okay? It's not just people who are there to pop popcorn. They are highly aligned. They all think of themselves as literally part of the same community, okay? And they've got leadership, and they've got an org chart of some kind, and they've got probably membership dues and a cryptocurrency, and, like, this is at the top of their identity stack, okay? You know, what you do is not what you are. You may not think of yourself as a left-hander, even if you are left-handed. It used to be, "I'm Jim. I'm 32. I like the Steelers," you know, "Live in Philly," whatever, something like that. Those are less and less common as bios, right? Instead, what people do is they put #X, you know, like #BTC or, you know, pound this movement, pound that movement in their bios. They will, um, they'll basically put their tribal flags there, both their attack and their defense. Like, if y- you kind of instantly know where somebody's coming from when you know their tribe, right? There's various shibboleths, various words and things people put in there that identify what gang they're informally a part of, what social network they are self-identifying with, and that probably also accepts them to some extent. They are also ready to sort of defend that identity. They're putting it out there on their sleeve, and often the attacks when somebody will attack them, "Ha ha, lol, another Bitcoin nutter," or something like that, you know, they'll-- people will say that, right? And the next step is it has a capacity for collective action, right? So it's aligned, and it has common beliefs. Capacity for collective action, that's the part I was talking about with respect to the org chart and the leadership. So again, this is an extremely selective filter. The vast majority of online communities do not have a capacity for collective action. Why? Because y- I can... You know, if you look at a, a, a Twitter following, right? Let's say somebody has, um, a million followers on Twitter, okay? How many likes does s- uh, does a typical tweet get? Actually, a pretty good thing would be if you have a million followers to have, uh, a thousand or 2,000 likes. That's actually pretty good. On the order of 0.1% to 0.2% are actually engaging with it. That is not what I'm calling a capacity for collective action. That is a capacity for popcorn action, okay? "Uh, yeah, it's a cool tweet. Boo," like this, right? Okay. A capacity for collective action would mean that when you put something out to 1,000 people, you get 1,000 likes. You don't get one, right? You put something out to a million people, you get a million people hitting the button, basically. That's what a capacity for collective action is. It's something where the group moves as one. If you go and look at the Web2 internet, okay, you look at Hacker News, and you look at Reddit, and you look at Twitter, there's an aspect of it which is, um, you can't unsee once you see it, which is its entropy. It's just 30 random links. Every time you refresh the page, 30 random links, okay? And what that means is it's like intellectually you're like, "Oh, hey," you know, a shiny object. "Oh, there's another one in that direction. Oh, that's cool. Look," right? And so what happens if you randomly move, like, you know, a meter in this direction and randomly in this direction and then randomly in this direction, right? Do you make any progress? Probably not, right? That's actually what's, like, the so-called spherical random walk. You, you just kind of just drift away from the origin or what have you. Um, and You know, by contrast, if you have a focused direction and you're like, "I'm learning AI and I'm l- learning this today and that tomorrow and that and that and that," then you're moving in a direction. Now, there's ways of combining these, by the way. I'm not saying serendipity is always bad. Um, the flagella of E. coli famously that have... They have the tumble mode, you know, where it, like, randomly seeks it out, and then it finds the nearest food supply, and then it runs along, uh, that, that thing, right? So it has, uh... It's like tumble and run, okay? So you can combine the random search with the directed search, and you get a good combination, okay? Um, similar in some ways to, like, stochastic gradient descent or, or something like that. [lip smack] And so the, uh, point being, though, that, um, if you're just doing lots of entropic stuff, you're not making progress on an axis. And if you have lots of people who are just online to hit random buttons, to doom scroll, to whatever, to just click this and that, and just popcorn, there's no compulsion, they're... Th- that's why they're wasting time, right? They're turning an hour of just looking at the screen into, like, a few clicks. It's a very low efficiency conversion of their intellectual energy into output. The, the capacity of collective action changes that. So now you have this meta-organism. Okay, what's the third part of the definition? A network state is a highly aligned online community with the capacity for collective action that crowdfunds territory around the world. Once you've gotten people, you know, 1,000 people in a Discord or something like that, it might turn out to be, by the way, another kind of app, because, for example, Discord doesn't, like, enforce tasking. Once you've done that, once you've shown a capacity for digital collective action, once you can get 1,000 people to like something, which is hard, by the way, very hard to do that, okay? And you might need new kinds of apps. Once you can do that, well, you can get to a very high bar of collective action, which is not just getting 1,000 people to like something, but 1,000 people to buy something, and in fact, not just to buy any old thing, but to crowdfund territory and move in together.
- SSSteph Smith
I'm gonna pause you there because-
- BSBalaji Srinivasan
Right? So not all, obviously-
- SSSteph Smith
... I wanna get to the rest of the definition, but, but that is something that, you know, is quite the leap. Of course, yes, I agree with you, getting 1,000 people to do anything, even if it's liking a tweet, that, that is hard.
- BSBalaji Srinivasan
Yes.
- SSSteph Smith
But get me-
- BSBalaji Srinivasan
Yeah
- SSSteph Smith
... to, from there to crowdfunding land.
- BSBalaji Srinivasan
Sure. Totally. So I had this, um, this article called "Software Is Reorganizing the World," uh, you know, almost 10 years ago, and it had a little table in there, which I will... Uh, let me see if I can find it. Classification of cloud formations taking physical shape, right? It's a very picturesque term. A cloud formation, I define it as a group of people who meets on the internet, okay? And taking physical shape means they materialize out of the cloud and actually all come and aggregate in person. And even in 2013, almost 10 years ago, I was tracking these cloud formations taking physical shape, and here's a table, right? There's scale and duration, right? Scale is the number of people and duration, okay? So the simplest is two people, scale is two, duration is one day. So coffee with a LinkedIn con- contact, okay? You meet someone on LinkedIn, get coffee with them, whatever. That was... I don't know if anybody's using LinkedIn today. No offense to the LinkedIn people listening to this, all right? But that, that was happening back in the day, all right? So, all right, coffee with LinkedIn contact. Then two people for a month is you meet a remote engineer, you interview them online, okay? And you bring them in for an onsite, okay? Come in for a month, okay? Two people for a year, that's like match.com, even in 1995. I mean, obviously now there's Tinder or whatever, but point is, like, match.com was, like, the beginning of that, let's say 1995. Two people for 10 years, that's like eharmony.com. Like, oh, they come together, they're, you know, it's like very high intention, form a, you know, matrimonial bond with somebody, right? Okay. 10 people for a day, that's like a hackathon. Obviously had been going on for a while, right? 10 people for a month, that's like a data science type program or, you know, one of these, one of these sort of immersive courses where people come and meet up. You know, they take a course for a month and come somewhere, right? 10 people for a year, those are like hacker houses, which have started in the late 2000. You're probably aware of some people who have kind of moved in and just get a big house in, you know, uh... And, and, and the, the downside is communal living, but the upside is communal living. So the downside is there's other people around, uh, so you don't have total privacy or whatever. But the upside is you get a much nicer house than you would otherwise. Like, economies of scale get really good quickly with house.
- SSSteph Smith
There's also the digital nomad version of that too, right? Where you don't actually have communal living, but kind of as you talk about cloud first, land last, the digital nomad hubs like Canggu or Lisbon or Chiang Mai are equivalents of this, right? Like, I would put them probably on the, like, 10,000 people for couple years.
- BSBalaji Srinivasan
Well, it's funny because people, people flit through them, but they don't stay. It's interesting. It's one of those things where it's like th- maybe the 10,000 people in the cloud, there's like 100 people who are in that location at any one given time or something like that, right? That community is kind of there and then it's gone, it r- It's, it's like a, it's like a cloud, like, drifting through an area versus them all actually being present.
- SSSteph Smith
Right. Well, I think... So that's an interesting perspective. I, I would say that's true for some of them. I would also say that some of them are actually quite stable, and there are many nomads that spend, like, you know, many years in, in a given place, if not their intention-
- BSBalaji Srinivasan
Yes
- SSSteph Smith
... is, is for quick, so.
- BSBalaji Srinivasan
But they're, but they're... But 10,000 digital nomads in one location, while it's good and it's on the kind of track towards this, is not what I would call a cloud formation unless all of those 10,000 people are basically friends with each other.
- SSSteph Smith
I see. Okay.
- BSBalaji Srinivasan
And this is actually... This is an important concept I have in the book. One of the things I developed, and this will be more, more in the V2, I've got a lot of graphics and stuff. Quantitative definitions of terms from, that we've been using sort of verbally for a long time, right? So for example, what is a nation? There's like, like a dozen definitions that I've got in the book or something on that order. You know, somebody's like, "It's got a common language." "Oh, no, it's, it's, uh, the folks who've lived in a territory." Or, "No, it's a common ancestry." Or you have, um, like Renan's definition, which I really like. It's like, uh, a group of people who have done great things and wish to do great things together. My definition is it's a densely connected subgraph in a social network What exactly does that mean? A graph in, in the math sense, it's like nodes and edges, right? Densely connected means, um, all nodes are connected to all other nodes. For example, if you have four nodes as a subset of a giant graph that has 100 nodes, and those, those four nodes form a complete graph, they're densely connected if each of those four is connected to the other three. You know, it doesn't have to be a fully complete graph, but it's just a densely connected graph that's much closer to a complete graph than a random group of 10,000 digital nomads might have no connections between themselves. So that's not what I define as a cloud formation. This gets to our original thing about people are used to using the internet individually and informally, collectively, and this is now formally and collective. If you have a densely connected subgraph amidst a bunch of loosely connected nodes, that's a natural unit of association where these folks should be capable of self-government, right? Because they all kind of know each other. My, my friend Jaan Tallinn, uh, who's like early Skype engineer, you know, very prominent investor and so on, um, he had a really amazing take on this, which I'm gonna quote. This is, this is Jaan's phrase. He's like, "Balaji," like, you know, kind of paraphrasing him. He's like, uh, you know, "I've been early to three things in life: AI, crypto, and dance."
- SSSteph Smith
[chuckles]
- BSBalaji Srinivasan
I'm like, "Dance?" Now, so he's like the investor in DeepMind, by the way-
- SSSteph Smith
Right, right
- BSBalaji Srinivasan
... which is obviously... Right? And, uh, you know, I've, you know, like I, I've also, you know, I've been-- we've both been early on a bunch of this type of stuff. So AI and crypto. I'm like, "Dance? What do you mean?" And so what he meant was basically that when you see, um, you've probably seen this in movies, but maybe you've seen it in real life. You know, let's say there's a, a couple who's really good at dancing, right? What happens is they're like locked on, you know, uh, like a very choreographed kind of thing. The entire dance floor kind of clears back in admiration and looking at the coordination of these two people. People like seeing other people moving in formation. Or put it in another way, when you can get a group that is very highly aligned, as demonstrated by the fact that they've... E- even if you're not consciously thinking of, oh, they must have practiced a lot for that, right? Their motion is pleasing to the eye. But they have, they are obviously, quote, "self-sacrificing," like one person's elbow is not where the other person's face is at that time. You know? They-
- SSSteph Smith
Right
- BSBalaji Srinivasan
... they have c- coordinated the whole thing.
- SSSteph Smith
Yeah.
- BSBalaji Srinivasan
Okay? That is now something that garners respect from the outside because that's a unit. It's a coordinated unit. You can visually see it's a coordinated unit. These people are all acting together and, uh, so as such, because they respect each other, they gain respect from the outside world. So to a non-obvious extent, this community, if it's highly aligned, if it can do a dance digitally, right, where it's moving in formation, that group, now you start thinking of it as a unit, and you both respect them and you don't want to mess with them. If I have to rephrase it another way, it's AI, crypto, and social.
- SSSteph Smith
Okay.
- BSBalaji Srinivasan
Okay?
- SSSteph Smith
Walk me through that.
- BSBalaji Srinivasan
Because social technologies allow people to coordinate.
- SSSteph Smith
Yes.
- 55:28 – 58:08
Cloud first, land last
- SSSteph Smith
that someone would want to go from that online digital collective unison to doing that in the physical world?
- BSBalaji Srinivasan
One point I make in the book is, look, o- obviously I love digital space and so on and so forth. Uh, this is something, by the way, which I found the V3 is hard to communicate, um, because people will hear something and they'll immediately bucket it into V1 or V2, but not V3, okay? And so let me... So cloud first, land last, but not land never, okay? Why do I say this? Whenever I talked about the network state or something like that, people would hear one of two things. They'd either hear, "Oh, it's totally digital. Yeah, that's great. You know, the physical world doesn't matter. We're all online, cryptocurrency, internet," blah, blah, blah. Or they'd hear, "It's purely digital, you moron." Like, you know, "The humans are still physical beings. We still have guns. There's still buildings. Are you gonna eat online? What are you... You know, you idiot." Like another tech guy, stupid tech bro, whatever, right? Okay. So they'll basically hear that it's purely digital, [lip smack] but it's not purely digital. It is a cloud formation that has the ambition of projecting into the physical world, okay? Just like Google has offices all around the world, and your login gets you into any Google office, right? Why do they have physical offices? Well, they do have meetup points and so on, right? You might argue there's less need for physical offices than there was, but there's still a need for it. You still wanna have meetups. You still wanna have... You have data centers. You have this kind of thing. Cloud first, land last, but not land never, right? Um, [lip smack] another version of this are, like, the embassies of a country around the world, right? Uh, another version of this are, like, Starbucks chains around the world, right? You know, like res- you know, like basically a, a chain that has, uh, restaurants or storefronts around the world, okay? Um, and the examples I've just given are those that are basically l- you know, commercial real estate or, or, you know, they're companies or they're states. Like embassies, it's like states, or companies, it's like a Starbucks around the world. But you could have it where it's not a Starbucks or a Google office, but residential real estate. You could have essentially a network of communities where it's not a Google login to enter and you see a Google logo. It's not your workplace, it's your residence, right? You have essentially an ethnic diaspora around the world, and you walk in, and it's a little piece of home everywhere you go.
- SSSteph Smith
Right. So I understand that-
- BSBalaji Srinivasan
Right? Now why would you want... So why would you want something like that, right?
- SSSteph Smith
Well, even more so than that. So I can imagine why a digital community would want to have these physical lo- locations around the world. Google's a great example for offices. I can also imagine an example where it's a bunch of people
- 58:08 – 1:04:30
Diplomatic recognition
- SSSteph Smith
who want these, yeah, these co-living houses, and they just operate around them. But one very important aspect of the network state is the need to be diplomatically recognized. So why that step? Why not just operate within the states that already exist, where you have these communities that are digital with a physical element? Why that extra step to be diplomatically recognized in your own state?
- BSBalaji Srinivasan
Not every business needs to have the ambition of becoming a public company, let alone becoming Google or Facebook, right? Like, so it's totally fine to have, you know, a sandwich store or, like, a hardware store or something like that, okay? In the same way, think of there being a funnel, okay? So in the book, uh, you know, in V2, the way I'm defining it is network society, network union, network archipelago, network state, okay? Network society or startup society, that's just, like, one person with a dream, okay? Network union, now you go to, uh... Or, or let's start, it, it starts as a net- network society, startup society. It's one person with a dream, and they assemble a small group, right? Then stage two is a network union, where they're now able to have that union being able to take collective action, right? So, which is a huge step above, like, 99.9% of online groups do not have this capability. In fact, messaging apps, Discords are not built for tracking collective action. This is kind of the unification of cryptocurrency and Discord. You will get something that actually tracks that and has leaderboards for people, and everybody can see who did what collective action and so on, who participated. There's a karma board, all that type of stuff, right? Um, many things will be useful. So, so the short answer to your question is, there's things that are useful just as network unions and just as network archipelagos that don't need to become full network states. Just like there's things that are useful as hardware stores or small businesses that don't need to become Google, right? What's an example of a useful network union that's, that can do digital collective action? An example I give in the book [lip smack] is of, uh, like a professional guild, okay? So it's a guild of designers. And why? So those thousand designers, let's say they're in a, they're in a, a network union. Um, well, 99% of the time they're just chatting and they are exchanging info on their latest designs. Uh, maybe each day somebody says, "Hey," you know, like, "Here's my work. Um, I'd love a boost." Right? And, uh, so you know, you maybe, like, if you think about it, there's 1,000 people. So if you have three people a day, each person gets, like, one boost a year or something like that. Kaboom. So they can ask for it. They're actually asking for something from the community. In return, they are expected to give to the community and then RT or fave or whatever. And, uh, this is disclosed on their, on their thing. They're like, "Look, I'm part of this community. I'm part of this network union. We're all signal boosting each other." And, um, then some folks may not be able to put in time or they may not have an account. They could put in capital instead. They'd be like, "Look, I couldn't make it today, but I'm paying my union dues in capital rather than time." And that exchange rate is determined by, like, the union leader, right? So 99% of the time this, you know, guild, it's boosting its members. It's helping to find those members a job, right? Somebody needs a job. I'm out of work. Okay. And then everybody just... Okay, of the other 999 people, someone can find them a job right away, right? It starts to be a very powerful support network, a professional guild. That's why these things existed for many years. We're kind of rebuilding them online, okay? And that's useful in its own right. And then 1% of the time that person is under attack online, and then the, the, uh, union leader looks at their bylaws and, you know, it, it's not an unqualified defense of them, right? But most of the time, online attacks are distortionary or, you know, they're distorting of, of some, some kind. And, uh, so they basically say, "Okay, this guy's being attacked or canceled or, you know, something unfairly. Here's their version of the story. We're gonna signal boost that to get them out, uh, get, get that up there." Because it is actually in somebody's time of need when their status is lowest that they need the boost the most. And if everybody in the community acts together, the other 999 people cannot be attacked for supporting this person, right? So you essentially join the union, 99% of the time it is for, like, kind of upside. 1% of the time it's like cancellation insurance, protection against downside, right? So that's an example of a structure that should exist, that will exist, that we're gonna see lots of, that's a purely digital structure. And you can do that for designers. You can do that for electrical engineers. Basically, you'll see all kinds of guilds like this, right? Okay. Next step is something... And that's digital only, though. You don't have to have any physical for that, okay? It's just protecting your digital life. Your... Okay. The next step is like a network archipelago, which takes that capacity for collective action that the network union has demonstrated [lip smack] and now applies, as I mentioned, to crowdfunding territory in the physical world and having people live together. Now, when even two people from an online community start living together, let alone 10 people, it completely changes everything, right? You know, one concept, uh, you know, they mention is like companies have logos, but communities have flags. And an important thing is, you know, like if you go to thenetworkstate.com, if you see the logo in the upper left, it is what we call the plus flag. The plus flag stands for new country.
- SSSteph Smith
Okay.
- BSBalaji Srinivasan
Get it?
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
That's kind of clever, I, I thought, right?
- SSSteph Smith
Yeah. Yeah, yeah.
- BSBalaji Srinivasan
And 'cause, you know, the plus, every day you're hitting that. In the upper right of Chrome, right there, what do you see? The plus, new tab, right? Every single app, the plus is new this, new that, right? So it stands for the principle that one can create a new country, right? It also stands for win and help win, right? Positive sum. So you could imagine each of these people, they're part of this network union, and they want to become part of a network archipelago, and so they're hanging the flag of their community in their room. They're seeing it every day. They've got it on their profile. And eventually they save up the money or the time. They're able to get to a remote work job or something like that, and they're able to find one of the other 999 people in the community and be like, "Hey, look, why don't we go and get a group house together?" And now let's say there's six people who are associated with this in Boston. They start doing meetups and stuff. They don't live together right away, but they do meetups and other kinds of things. I mention this in the book. They start doing meetups, build trust, and you might like three of the people there but only wanna live with two of the people or, or something like that, okay? This concept of group houses, hacker houses, room,
- 1:04:30 – 1:09:35
Root access to land
- BSBalaji Srinivasan
all that stuff is a big thing among, you know, kind of the younger generation, as you know. Or as your scale increases, you buy an entire apartment building with like 300 people, or you buy like essentially a small town. And guess what? Now you've got self-driving car town because you have unanimity. You're the self-driving car community. You put 400 people into middle of nowhere Nebraska, okay, 1,000 people, whatever, and now the roads are all zoned for self-driving cars. You can rip up the roads. You can do whatever. You, you have root access to the physical world because you have alignment. [lip smack] If you're building a network archipelago, you want to build it on like Burning Man style territory probably, right? Or at least territory that nobody else wants. There's a website called like landandfarm.com. You can see that there's like properties which on a per square meter basis are like 1,000X cheaper than Palo Alto. You know, why is, why is Cornell, why does Ithaca have higher property values than other things, you know, nearby? It's 'cause lots of smart people move there and thereby increase property values by moving there. So these 1,000 people can make something out of nothing into something in the same way that you can take a domain name that doesn't have any value and turn it into something, 'cause all these pointers are now looking at it, all these backlinks are now looking at it. So capacity for collective action, you have these 1,000 people, they take a territory in the middle of nowhere that doesn't mean anything, and they make it into something, and now suddenly it's valuable, right? This, this dance, right, that collective action turns something that any one person could not have done into something that 1,000 people can do together when they're moving as a multicellular organism.
- SSSteph Smith
Just one example, by the way, of that is, is Canggu, which I mentioned earlier. Back in, I think it must have been around like 2013 or so, Canggu was very empty. Um, you know, there's pictures of it back in the day where there's like Deus and one other building and, and then a bunch of rice fields. And it took one person, uh, who ran a co-working space or wanted to open one, and he worked with the locals. He built a fiber line there. And now if you look at Canggu, it's, I mean, it's, it's completely full, thousands of nomads. And to your point about property values, I think I saw a tweet the other day of someone, a friend of mine who lives there, who basically said that his rent there was more expensive than his rent in Singapore, where he used to live. And so yes, that's a, like a, a perfect example of where property, as you're saying, that no one cares about can be turned into property that people care about. Uh, but do a lot of people want to do this?
- BSBalaji Srinivasan
How many people do you need to do Google? How many-- What percentage of the world moved to the United States? Tiny percentage, right? That completely changed the world.
- SSSteph Smith
Yeah. I mean, it strikes me that, that there are people who will wanna do this, but will they want to move to like rural Utah or some, some land that no one cares about? I guess you just need a few is what you're saying.
- BSBalaji Srinivasan
A tiny percentage of the world moved to the US. And the example of the United States, though, has been because there was new land, right, so to speak, at least from the perspective of the Europeans, um, there were social experiments in democracy and capitalism in particular that then propagated back to Europe and to the rest of the world. Like the French Revolution, while it was bad, was influenced by the American Revolution. All the democratization, lots of the market stuff, all kinds of things happened in the New World and came back to the Old World, right? To an extent that I don't think people fully appreciate. You know, it's like the Margaret Mead thing, right? Never doubt that, you know, a small group of highly motivated people can change the world. Indeed, it's the only thing that ever has, right? And so mass appeal, I mean, one thing I think that's kind of interesting is, just to hover on that point for a second, um, mass appeal comes last, right? Like, it-- That's like after something has completely been proved out and, and so on and so forth, and nothing ever goes from 0% to mass movement. Like, I shouldn't say nothing ever. Um, it is hard to get it to mass movement overnight, and even if it does seem to do that, it is because lots of prerequisites were installed. Billions of people with smartphones, and they've got experience with Instagram, and you've got 5G LTE, and you've got the App Store, and you've got this, and you've got that. That's why TikTok could ride behind all those prerequisites, 'cause people knew what social networks were, they knew what smartphones were, they knew what app stores were, they knew what a feed was, blah, blah. So sliding behind all of those things, TikTok... I mean, TikTok is like, you know, a good company or whatever, and it's, it's well executed. Um, I'm sure, you know, people also say it's spyware, blah, blah. But leaving that aside, they were not an overnight s- they were not just an overnight success 10 years in the making. They were like 10 companies in the making.
- SSSteph Smith
It's very easy to dismiss this idea of startup societies and then eventually a network state, because there are going to be many failures, just like there are many failures with startups. And then we look at the successes today, but there's, you know, almost infinite numbers of people who tried to build the next Google somewhere in the last 30 years, right? And, and, and of course, we, we see the eventual success. And I, I wonder how you think about that in terms of the number of experiments that need to happen in order to, you know, see this, this network state.
- BSBalaji Srinivasan
How valuable do you think plane flight is?
- SSSteph Smith
I don't know. Very valuable. [chuckles] Yeah.
- BSBalaji Srinivasan
Very valuable, right? Okay, so click this link, and this is a century of aircraft accidents. And so
- 1:09:35 – 1:19:40
Calibrating risk as society
- BSBalaji Srinivasan
you can literally see, you know, in this graph, it's like as of, you know, uh, August 2022, 28,896 accidents with 159,859 fatalities in basically the last 100-something years of aviation, okay? Twenty-eight thousand accidents, fatal accidents, right? And a lot of non-fatal accidents, okay? So the point... I mean, no plane crashes, no planes. No train crashes, no trains, right? No explosions, no internal combustion engines, right? Basically, no risk, no reward. And so, you know, in a, in a h- in a big way, like we have virtualized all risk, and that's progress, right? And it's not all risk, but a lot of risk has been virtualized, where it's just financial risk and so on and so forth. I, I kinda think people are foolhardy about physical risk, where people will, you know, uh, like do bungee jumping or skydiving or things like that. They will, you know, do... They'll, they'll take risks, in my view, with no reward beyond just the thrill of it or whatever. But they'll be averse to, "Okay, let me try an experimental drug that could save, save your life," right? You know, w- euthanasia is legal. In fact, it's like the sixth leading cause of death in Canada. Like, you can kill yourself, but you can't take an experimental drug.
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
Okay? That's a, that's actually a misallocation of risk in the physical world. Instead, an alternate society would lionize those people who took one for the team and took a risk on an experimental drug. This is actually, at the beginning of the pandemic, by the way, we could have had a vaccine in a week. Why? Because mRNA vaccines could be printed out. All that time over those nine months was not spent... I mean, some of it was spent manufacturing or whatever, but a lot of it was spent information gathering on whether the thing worked. There's a way to fast-forward all of that, and that would've been with challenge trials. What's a challenge trial? You have a bunch of healthy, brave volunteers at the beginning of the pandemic, okay? And they get the vaccine, and they volunteer to expose themselves to it. I mean, you could've, you could've drafted the military for this, by the way, if you wanted to have groups who s- people who said, "I will risk my life for the country," or whatever, right? Soldiers. You could have asked for military volunteers. You, you would've gotten soldiers who would've volunteered, okay? And you could have gotten it from different demographics and so on, 'cause some people are in their 40s and 50s or whatever, even in the military, right? You could have done this. You could have gotten extremely good data very quickly and iterated on it if you had people who were willing to risk their lives for the greater good, for the health of the population. And of course, you'd pay them and so on, just like you pay soldiers in a, in a battle, and you give them awards and whatnot, uh, and, and you reward them for taking this risk for the whole team. And they're not doing it to kill other people. They're doing it to save lives, right? Look, I'm not saying that you don't need a military at times, okay? But this is actually the kind of thing which is, is like a brave thing to do, right? Now, that kind of society, which is, uh, clear-eyed about physical risk-taking, okay? And that has considered the pros and cons. But what it does is it basically says, again, no plane crashes, no planes. I mean, there's another... There's a book called "The CRC Handbook of Chemistry and Physics." You're, you're-- You know what this is?
- SSSteph Smith
[chuckles] I have not read that yet.
- BSBalaji Srinivasan
"The CRC Handbook of Chemistry and Physics" is the kind of thing that I would flip through in high school. Why? It was basically, like, printed out ... math world or printed out the math portion of Wikipedia before that existed. You know, all the compounds, especially the older compounds, you'd see, you know, smell and taste. Like cyanide, it had alm- you know, and, uh, how, how did we know that cyanide smells like almonds? There's some guy who took a hit for the team. He was like, "Almonds," just, you know, croaks after that, right? Because they, like the old school chemists were crazy enough to like smell and taste the compounds. That's why we have, you know, th- that, that's why we know how to do, um, flavors in foods, right? That's a, you know... It is, it is because somebody's taking the hit to take that test. At some point, it needs to contact the physical world. Someone must take a risk at some point.
- SSSteph Smith
Right. No risk, no reward.
- BSBalaji Srinivasan
No risk, no reward. Now, the thing is, this is being pathologized to be like, "Oh, you're encouraging them to take a risk, so you're exploiting them. You're exploiting them to take a risk," and so on. Okay. Well, like the, the issue with this is it kind of assumes that there's no informed consent that's possible, you know? Uh, if you're, if you're not paying somebody to do something, you're exploiting them. If you are paying them to do something, because you're paying them, you're convincing them to do it when they wouldn't have otherwise do it, so you're also exploiting them. Everything's exploiting other than convincing people to go, you know, letting people to go bungee jump and take purposeless risks and self-destructive risks and military risks, and that's all fine. But, but you can't have calculated risk, right? Okay. So I disagree with that philosophy, and I understand why people have that philosophy that all other people's physical risk is exploitation. But I think it can be done in a proper way, and I think the way to do it is you start with this online community. You start with a network union. You develop lots of movies. It's basically a content union, okay? You develop movies, you develop books, you develop little short films. All this stuff is open source, okay? Why? It's almost like... Have you heard the term devotional content?
- SSSteph Smith
No.
- BSBalaji Srinivasan
It's basically like, like Bitcoin maximalists in a sense are devotional content. Lots of folks on Twitter are cranking out what I consider devotional content for their hashtag. They're cranking out devotional content, which is, "Here's why my cause is good. Here's why you're bad," right? "Here's why I want to abolish the police. Here's why I want to..." Like Social Security or something like that, okay? Th- that's... Abolish the police is more like the kind of thing that gets you to zealous level, right? Bitcoin gets you to zealous level. Devotional content, okay? So what you'd have is lots of movies like "Dallas Buyers Club," okay? Not exactly in that register, in that tone, but like some "Dallas Buyers Club" and some "Limitless." Do you know "Limitless"?
- SSSteph Smith
I've heard of it. I haven't seen it.
- BSBalaji Srinivasan
I'm sure... I'll let me describe these two movies.
- SSSteph Smith
Yeah, please do. I've seen "Dallas Buyers Club."
- BSBalaji Srinivasan
Okay.
- SSSteph Smith
But please, for those who haven't.
- BSBalaji Srinivasan
So Dal- why don't you describe "Dallas Buyers Club"?
- SSSteph Smith
So the movie is about a man who happens to get HIV, and at the time, I think there are drugs that potentially could cure him, but he cannot get access to them. Am I remembering this correctly?
- BSBalaji Srinivasan
That's right. Yes.
- SSSteph Smith
Yeah.
- BSBalaji Srinivasan
And, and how does-
- SSSteph Smith
And it's his fight to, to basically get that access and also get that access for other people, and I think he basically ends up breaking the law, getting in trouble because he's getting these drugs to himself and other people. Uh, he ends up dying, I think, but sorry, another spoiler. Um, but am I remembering that correctly?
- BSBalaji Srinivasan
That's right. But basically, the primary agency preventing him from getting the drugs is the FDA, right? And this is based on the true story of like ACT UP, where, um, you know, people would do die-ins, uh, where the FDA was preventing them from getting access to these... I mean, these people were, you know, had this life-threatening condition, obviously. Fundamentally, they're miscalibrated on terms of risk, right? They want to minimize PR risk for themselves, the agency, as opposed to allowing people to take a risk on their own, right? And why is that? It's because media only covers it when a drug doesn't work and doesn't cover it when, um, a drug does work but is being delayed. Calculations of so-called drug lag, um, depending, I mean, like Alex Tabarrok and, you know, others have pulled things together on this, right? You know, Daniel Henninger's written about this. Depending on how you calculate it, the number of lives that's been caused by the FDA... Basically, if you have a drug and it was held up by 10 years, and then once it was approved, it reduced morbidity and mortality by X percentage. That means FDA's delay of 10 years multiplied by that is how many lives it cost relative to just taking the risk at the beginning and shipping it, right? Now, there is risk, okay? But once you start having the ability to take calculated risks, you can move at the speed of software. Basically, do, do you know, for example, who Banting and Best were?
- SSSteph Smith
I-- They're familiar, but why don't you share?
- BSBalaji Srinivasan
We need to get Banting and Best zones, okay? Banting and Best, they won the Nobel Prize in the '20s, 1920s. Why? Because they came up with the concept for insulin supplementation to, uh, treat diabetes. They, they had the hypothesis. They tested it, um, on dogs, okay? Then they tested it on themselves. Then they tested it on patient volunteers, and like, you know, it's like a miracle drug, like people jumping out of bed type stuff, right? And then Eli Lilly had like scaled production for the entire North American continent in like two years, and they won the Nobel Prize in like two years after they started, okay? That is like when pharma moved at the speed of software. That is what is possible in the physical world once we can get a zone outside the FDA, once we can exit the FDA. People don't understand how bad the FDA is. Your, your entire life, it's like tens of trillions of dollars of value is being held back by FDA. It's like incalculable how bad they are as an agency. And we saw this during COVID, where they were holding back... I mean, FDA is why we were flying blind in, you know, February 2020, because they were holding back the tests. That's why the journos were reporting that, "Oh, there's no pr- problem. It's not in the US yet." Actually, it was in the US. Why was it in the US? Because it had actually come in via China, and, uh, people were not able to run tests to confirm it, 'cause they had to get a so-called emergency use authorization from FDA, which was delayed. So what happened was actually some labs actually did civil disobedience, just like "Dallas Buyers Club," and they defied FDA, and they just went and ran the tests. And later they got sort of a blessing from the journos, which was okay. They Russell conjugated it as civil disobedience versus "Running an illegal test," blah, blah, blah, right? So they, they basically blessed it retroactively, so FDA did not go and crack down on those labs that actually managed to get the testing data out there, okay? Vaccine could've been had in a week, okay? The tests could've been there immediately. Fundamentally, FDA is... The problem with it is it's, uh, it's got control over the entire world. The single most important technological problem to solve in the world is the problem of regulatory harmonization. Regulatory harmonization is a process by which a group of unelected bureaucrats in
- 1:19:40 – 1:32:03
Regulatory harmonization
- BSBalaji Srinivasan
the US write the regulations for the entire world. Just like a small co- uh, just like a small website, right, will outsource its login to Facebook login, okay? Because, you know, hey, Facebook's big, you know, right? But in so doing, it's beholden to Facebook. You know, I, I respect Zuck, but I also don't necessarily want the login system to be completely at the discretion of some engineer there, right? In the same way, a small country, you know, Czechoslovakia or like, you know, some, some small country will outsource their regulation to the FDA, the SEC, you know, FAA, right? And they'll say, "Oh, well, look, you know, America's regulators, uh, should be good enough for us. We're a small country of a few million people. This is a big country. It's got a big market. Therefore, if a country-- if a company can get through FDA regulation, then we'll approve it for sale, uh, the product for sale in our country. If the plane can get through FAA, we'll approve it for sale. If it can get through, um, SEC, then okay, it's, it's like, seems like a decent financial product. We might list it on our stock exchange or something, or allow our citizens to buy it or something like that." This is actually something that is sought by FAA, SEC, FDA respectively. If you go to their website and look for harmonization, they intentionally convene working groups with all the rest of the regulators in the world to say, "Use US har- regulations. Harmonize. Have everybody singing in unison." Now, the thing is, both big business and big government like this. Obviously, the regulators like it because, um, when you, when you become a federal regulator, you're not doing it for profit, you're doing it for ambit, right? Ambit in like the s- the scope, like, uh, you know, ambit, same root as ambition, right? Um, you know, uh, uh, it's like a relatively uncommon word, but it's like the scope, extent, or bounds of something, right? [swallows] So if a CEO wants maximum profit for their company, a regulator wants maximum ambit for their regulatory agency. They just want scope. "I'm like the most baddest, you know, biggest regulator around," right? FDA brags that they regulate something like 30 cents out of every dollar. They like brag about this, how big their regulatory ambit is. The most powerful regulatory agency in the world. It's the Food and Drugs Administration. Literally everything you put in your body, every bite you take every single day is regulated by FDA in the US and around the world, right? So its power is absolutely immense. We have bionic eyes. They exist. We have super soldier serum. It's already real. Did, did you s- see that post of mine?
- SSSteph Smith
No, I didn't.
- BSBalaji Srinivasan
There's a little mouse on the left-hand side, and there's a myostatin-null mouse on the right-hand side, okay? And in the second row, that's the chest of the mouse on the left and the mouse on the right, and that's literally like Captain America before and after. That paper is com- came out like 15 years ago. People have known about myostatin null. Literally this one... If you just inhibit myostatin, there's different ways of doing it. You can do knockdown, other stuff, and there's other things, follistatin, blah, blah. You could make somebody basically naturally jacked, and you know what the side effect would be? Because muscle is metabolically expensive, they'd be able to eat whatever they wanted. And of course, you know, people say, "Oh my God, you know, there'll have to be side effects." It's like Icarus. We flew too close to the sun. Well, actually, no. There don't have to be side effects. Yes, there might be plane crashes, but we eventually figured out how to get aviation basically without plane crashes. In the same way, you could figure out dosage, and with enough volunteers, enough people, you could probably get like very effective either natural or artificial steroids or equivalents that would make somebody naturally muscular and fit. Uh, just like we take caffeine every day, and it's a known drug with known pluses and minuses, you have something that's like that, right? This is just like one example. I can give like 50 more, okay? The point is the FDA is holding back so, so, so much. So that is like why you, why you want like a network state, okay? So Network Union, as I mentioned, so you know the progression. Network Union just does things digitally and collectively, so it's like a, like a guild working together, right? A network archipelago, now you're getting offline territory. But some things do, yes, require changes in the law. So that's the highest level. A network state is something that has that collective action cap- capacity and the content, has, which, which aligns people, has the physical footprint, and it has like the square meters of physical space. And then the last step is it gets big enough and strong enough and morally aligned enough, it can do the dance, right, that a city or state or country recognizes it and does a deal with it, okay? And what are the precedents for this? So like Wyoming has its DAO law. It's literally built an interface effectively to the Ethereum network, right? Or El Salvador, Bitcoin's the national currency there, so it's built an interface to the Bitcoin network. Or, uh, Nevada has, you know, done a deal with Elon for the Gigafactory, right? So that's like there, okay? Or Amazon with HQ2. Um, Google tried something like this with Sidewalk Labs. It got pushback, but the concept was there, okay? Point is that lots of these sovereign entities, cities, states, countries, um, or let's say not lots, enough of them, okay, have been doing deals with companies and digital currencies that there is feasibility there. And so the s- the, what you'd want is you want a group of people which is large enough, motivated enough. Maybe it's 1,000 people, maybe it's 10,000, maybe it's 100,000, maybe you need a million people. I don't know the scale of it. That's an empirical question. That they can go to all of the different mayors and governors and maybe presidents of the world, 'cause they're, they're-- it's a parallel process. That's the awesome thing. You're no longer just negotiating with just the US government, et cetera, right? Forget them. Like, the US federal government will be the last mover on everything. Like, everybody's over-indexed on, "We need to reform the US government." No, you need to exit the US government. Ig- uh, I shouldn't say ignore, but just assume they can do nothing good, okay? Assume they can do nothing good and basically just focus on the other 96% of the world, right, of who are not American, and the enormous part of the US which is breaking away from the US government. Uh, meaning you, you wanna try to get a sanctuary city for biomedicine, a sanctuary city for cryptocurrency, a sanctuary city for self-driving cars, where federal law is not enforced, right? Officially.
- SSSteph Smith
And is it not enforced only along that plane, or is it you are, you are creating completely new sets of laws?
- BSBalaji Srinivasan
Well, it's both. So basically, the thing is, [lip smacks] you can do this both within and outside the US, right? Outside the US, harmonization is rejected. Inside-- So basically, the unelected bureaucrats of Silver Spring, Maryland, no longer have power. Why, why do I say that? Because those bureaucrats... I mean, for example, when Facebook is criticized, you know who runs Facebook. It's Zuck, right? You know he's in control of it. He's, like, attacked by name constantly. People personalize it. "It's Zuck's company," blah, blah. Can you name a single person who works at FDA?
- SSSteph Smith
No.
- BSBalaji Srinivasan
Right. Despite the fact that every single bite you take every day is regulated by them. There's zero personal accountability, okay? If they're ever criticized, it's this abstract thing of the agency which has billions of dollars in annual budget and essentially infinite hit points, can't go bankrupt, right? It has appropriations from the government, right? You know, so no individual is ever accountable there. They're not accountable to the electorate. There's no elections, okay? And they're not accountable to the market because they have career tenure and can't be fired, and they're anonymous. They're not even accountable in terms of public criticism. So it's this totally unaccountable agency that determines everything you eat and drink, your vaccines, your drugs, your this and that, and has delegitimated itself in its performance over COVID, where it held back the vaccines. It also, you know, the Johnson & Johnson vaccine got held back by, like, a few weeks over some stupid sca-- Like, the, you know, the problem, by the way, with the COVID conversation around, like, vaccines is either being like, "Yay, everybody, you know, is forced to take the vaccine," or, you know, "Oh my God, vaccines are a World Economic Forum conspiracy, Klaus Schwab," et cetera. And what there hasn't been is option three, which is we needed this in a week, and we could have, like, essentially gotten them to the vulnerable first. Even if manufacturing needed some time to scale, which it would have, you get them to, like, the elderly rapidly, right? And you could have avoided, like, a million dead. That million dead is on the FDA's head, like, because challenge trials could have been done, you know? And so that's, like, a different interpretation of, like, the problem with this, right? Now, the thing is that no country around the world has this formulated in quite this way. That is to say, despite the fact that these are f- you know, ostensibly sovereign countries, they don't have the narrative that, A, FDA is illegitimate and, or delegitimated, and B, also, and this is important. I wanna make this important point. I'm not saying zero regulations and a total free-for-all of, of all kinds. I'm actually saying a V3, right? So I'm not saying just end the FDA. I'm saying exit the FDA. Just like you didn't just end the Fed and replace it with nothing. You're ending the Fed or exiting the Fed and replacing it with Bitcoin. The reason being, just to talk about this point for a second, 'cause I think it's important. I've just spent all this time tearing the thing down. Now let me give something to it to build it back up again. People want a regulated marketplace in the sense of they want a regulator that will do star ratings, like quality ratings of, you know, most actors and bans of bad actors, right? So you get a star rating, one to five stars on, like, you know, something, you know, that's, that's a, that's a product on the market, and the zero star bad actors, the scammers, are just, like, kicked out of the market entirely. One way of doing that is a national state-based regulator like FDA, FAA, SEC, et cetera. Another way of doing it, which is actually not thought of as such but it's really important, is a cloud-based international regulator like Amazon, eBay, actually even Gmail, Apple, et cetera. How are those regulators? What do you mean? Well, obviously Amazon has star ratings. eBay has star ratings. And they also kick bad actors, right? And they kick bad actors on the merchant side. Uber and Airbnb are also regulators. They're international regulators. They're better than the taxi medallions or the hotel regulators because Uber is tracking every trip, right? They're giving star ratings on both the driver and the passenger. They're checking that payment can go through and that the passenger is good for it and so on. And then they are decommissioning people who have low ratings on either side or are abusive. This is just, in a sense, a much more intrusive regulator. No taxi medallion could possibly do anything like that, right? They, they do a, I mean, a very cursory inspection every six months that the windshield wiper still works. They're not getting reviews from every rider, certainly not collecting them in real time, certainly not looking at the... They, they have to get a ser- it has to be, like, an accident for them to actually write up that taxi driver, right? So it has to be a right tail kind of thing. So the state-based, paper-based regulator is fundamentally less efficient than the cloud-based international regulator, which also has data from around the world. Moreover, it's inefficient in a different way, where typically we think of the state-based regulator as adversarial to the industry, right? Oh, the taxi regulator is supposed to be adversarial to the taxi companies, keep them in check. What actually happens is they form a duopoly against the customer, where there's a cozy relationship between the taxi regulator and the taxi drivers, since the taxi drivers sort of, they get to know the regulator, but the taxi riders just flit in and out, you know? Like, taxi riders have nothing in common besides driving a taxi, but the drivers keep meeting with the regulators, eventually form social bonds. In the same way, the FDA is, in many ways, adversarial to pharma companies, but it's also cooperative with them against startups and against patients who want novel treatments, okay? So Uber and Lyft actually changed this, Airbnb changed this because now you have a regulator-customer-provider complex. It's Uber, the regulator, the Uber driver, and the Uber passenger versus Lyft, the regulator, and the Lyft driver for the, the passenger, right? So the star rating and the provider are linked together, and the efficiency comes from competition between regulators. It is, it's what's called polycentric law, okay? So it is within the same jurisdiction, you have choice of law, okay? I pick the Uber app or the Lyft app, or in another
- 1:32:03 – 1:38:54
Polycentric law
- BSBalaji Srinivasan
country, GoJek or, or Grab, right? You have choice of regulator, right? Now, even two choices is better than one. Yeah, I get that it's duopolistic in, in some ways, but there's other, like, ride sharing apps and so on, right? That's a model where you're not saying no regulation whatsoever. You're saying a choice of regulator. Regulators are actually incredibly valuable. Like, like, th- these are multi-billion, multi-- 'cause the reason being because people want to pay one price to enter a market. The diligence of regulators say, "That's a legit regulator, that one isn't." And then they don't wanna go and test every product in the market. They want to know it's at a basal level of quality and, and look through it. Otherwise, you have a situation where every coffee you get at Starbucks, you need to put a dipstick in it to see, uh, you know, is this poisonous or not, right? Okay. So, so the point is the V3 combines aspects of the V1 and the V2 to get, like, a third version. For example, with Bitcoin, right? It has aspects of gold, which people talk about, but it also has aspects of fiat. Why? You can send it across borders, you can represent it digitally, you can program with it, and so on and so forth. You can't do any of those things with an inert block of gold. So it's digital gold, right? It is not just a dumb, you know, throwback to V1. It's not competitive as V1. V2 beat V1 for a reason. V3 takes the good aspects of V1 and the good aspects of V2 to make something that's better than both, right? Um, this would be a V3 where, yeah, you don't want the totally unregulated market for patent medicines and scams and so and so. They had great upside, and they had great downside. But you also don't want this, you know, harmonized environment where unelected bureaucrats just impose uniformity on everything, and no one can take any risks. And it's so risk intolerant that it's the riskiest of all, right? Because if you don't take small risks, you end up taking the biggest risk, which is not taking risks, and then you, you, you just, you never explore anything new, and you can't adapt, right? So the V3 says no regulation is bad, but this regulation is also bad, and we can do better with cloud regulators, right? International regulators. And what would that look like? Again, just to go into the FDA example, because the reason I go into this in, in great detail is this is one of the most motivating things as to why we need new states, right? There's a certain level of innovation you can get to that's sub-sovereign, and there's a level that you actually need sovereignty for of some kind. At, at a minimum, a sanctuary city for biomedicine. Some governor, right, could put their state on the map by saying, "This is a zone where..." Let, let's say it's Texas, right? They say, "Guess what? Approvals will now go through UT Austin." We do-- 'cause the thing is, the reason is you need some name brand, right, for-- that, that people respect locally to be the regulators. Okay, we've got some scientists there. We've got some physicians there and so on. So you have some reputable brand in this jurisdiction which is taking over review. So you're really not changing that much. What you are doing now is you're introducing the crucial thing of competition between regulators, right? And you might say, "Oh, this is, you know, biomedicine. I don't know, man. Like, you know, bio is, like, really important." And, and so... And the thing is, people just don't know about this market, okay? But basically, routes outside the FDA, like right to try laws, like CLIA labs and the LDT pathway, like compounding pharmacies, off-label prescription by MDs, and countries that aren't fully harmonized with FDA. For example, you can go to Germany for stem cells. Each of these things has been attacked by FDA. So off-label, people think it's bad, right? But there's a, there's a good, you know, article called, like, "Assessing, um, the FDA by the Anomaly of Off-Label Prescription," right? I think this is by Tabarrok, which is worth reading. This is almost 20 years ago. And essentially, his point is that while off-label sounds bad, oh, right, it actually means that the, a doctor can prescribe a drug for some purpose other than what the FDA approves it for, and that's actually the way that, like, all kinds of things seem to work, right? Okay. Once you understand the degree to which FDA holds things back, once you understand that, that they've harmonized the whole world, once you understand that they cannot be, uh, you cannot... Democracy doesn't work in this case because they're not up for election. You've never run an election on the FDA, okay? Uh, markets don't work because they can't be fired. They're not like a company. They don't go bankrupt. So whether you believe in an electoral or market theory of accountability, they are completely unaccountable and anonymous, right? The press isn't holding them accountable either, right? So you can only exit them, and you need a new technique to exit them. That can be, uh, outside the US. You get places like Germany and so on to, to allow for stem cells. Uh, you, you get places that allow for, um, biomedical treatments that the US is holding back, right? Um, or it's inside the US, and you're having sanctuary cities. Just like a sanctuary city, they won't enforce federal immigration law, right? So precedent has been set. In fact, actually, states are diverging from the federal government on education, on gun laws, on abortion laws, on marijuana laws. Like, if medical marijuana can be legal, why can't, you know, like, like every other kind of experimental drug that you might wanna take be potentially legal, right? And you just have... Obviously, you, you have some framework around it. It's not no framework, but finally, you have choice. You have something that's outside this monopoly of the state regulator, right? Again, unelected and unfireable. The FDA-free zone alone, I mean, there's so many other reasons I think that we need innovation on sovereignty. But that alone is how we get to life extension. That alone is how we get to transhumanism, we get to brain machine interface, we get to limb regeneration and super soldier serum and all this stuff. There's so much stuff that's being held back, okay? Like by... I mean, that's why you see articles constantly like, "Scientists have discovered X," right? And you're like Wow, that's amazing. You're, you're, you're taking, like reversing this guy's aging by like 10 years. Their, their hair is repigmenting from, from gray to black, right? Um, here's an example of that. 'Cause people have to see this stuff 'cause they don't believe it otherwise.
- SSSteph Smith
They don't have the same exposure. If you, if you don't see the examples outside of your reality of FDA or non-self-driving cars or whatever society that you live in, it's, it's impossible to even imagine that there are these other realities.
- BSBalaji Srinivasan
Exactly. It's Bastiat's point, seen and unseen. Are you familiar with that?
- SSSteph Smith
I think so. I, I didn't realize that was from him, but yes, exactly. Like it, it's, it's impossible to imagine those realities until you see it, and then it's like this spiral of, "Wait a minute." [chuckles]
- BSBalaji Srinivasan
That's right. It's basically, it's like, you know, it's, it's basically something where it's like I show people... So for example, take a look at this thing that I just sent you.
- SSSteph Smith
One, it says patient image pre-treatment and patient image post-treatment, and yes, exactly like you said, it's like gray hair. The man looks like he's in his 80s to a full head of brown, black hair.
- BSBalaji Srinivasan
People don't understand that we're not like, you know, within 10% of optimal or something like that. In many areas, we are 1,000x,
- 1:38:54 – 1:43:07
Building fast with atoms
- BSBalaji Srinivasan
10,000x, 100,000x off from what is possible, right? You know, people said the pandemic was not gonna be something, and it's like, you know, millions of people were affected by it. Like, it takes years to build a train station in the Bay Area, and it takes less than a day in China. That is not a, "Oh, they're 10% faster." They are literally 100x faster, maybe 1,000x. If, if you're talking one day or like, let's say nine hours, right, versus a year, okay, that is about 1,000x faster. It's just a totally different thing. You know, your cost, by the way, the cost for everything comes way down because it's now a subroutine. You can just invoke that. Boom, boom. Okay, train station, train station. Look, clone stamp like this, right? Versus the completely antiquated kind of thing in the physical world in the US, and all of that is the state. All of that is the state holding this back, right? And so ways to exit the state and gain sovereignty are how we re-innovate in the physical world. And in a sense, by the way, we talk about the V3, you know, Thiel has talked about how we can innovate in bits but not in atoms, right?
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
And what the network state is, is among other things, it's many other things, but it is a recipe for using bits to reopen innovation in atoms.
- SSSteph Smith
Well, yeah, I think, I think that's a really important point because it's easy for people to see the exponential difference between physical and digital. A simple example is physical mail can take days, weeks, months. Digital mail takes seconds, right? So, so they can see the delta there, but I do think it's hard for people to imagine that exponential delta within the physical world because it feels slower inherently. But I think the train station example is showcasing that, yeah, it's not gonna happen in seconds, but there is a massive delta between what we have in certain arenas and what we could have.
- BSBalaji Srinivasan
Yes. So, you know, a friend of mine, when I showed him those videos, he's like, "Okay, you reset my belief in what is possible," right? This is senior executive at a trillion-dollar company. Didn't know, and it was, it was basically like, you know, he's like, "This is why we're doing bits," and so on and so forth. I'm like, "Atoms are actually possible in other places and times," right? So other places, so I'm showing China here where there's 1,000x. There's another link that's worth looking at, which is Patrick Collison fast. You know, patrickcollison.com/fast, right? That's also worth putting up on screen, where he goes to other times and shows that the US used to be much faster in building things. And by the way, you know, people will say, "Oh, China's authoritarian. That's why it can build fast. We're a democracy." We, you know... They're basically making a virtue out of incompetence, right? That's actually not the case because, quote-unquote, "The US was a democracy." I mean, if you think the US was a democracy mid-century, it was able to build fast then. I actually do argue that it's part of the nature of the political system, but it's not necessarily democracy versus authoritarian. And in fact, actually, the democracy of the mid-20th century America was quite authoritarian, right? Democracy, like capitalism or Christianity or communism, is so capacious a term that it can mean both X and its opposite. Communism, for example, meant kill all the capitalists, and then it means capitalists can be in the Communist Party, right? Christianity meant tear down the Roman Empire, and it also eventually meant have Christian kings and build a Holy Roman Empire. Like, democracy means tons of different things over time periods. Like, the ancient Greeks thought democracy... Uh, there's a great book called, uh, "Against Elections: The Case for Democracy." Uh, it's a hilarious title, okay? And it basically says that the ancient Greeks, they used a mechanism called sortition rather than election. Do you know what that is? It's like-
- SSSteph Smith
No
- BSBalaji Srinivasan
... random selection from the population, and any-- They drew, drew lots, and anybody, uh, so, so your president could be anybody from the community. What did that do? It eliminated the whole process of running for office, and what it also did is it kind of ensured that you had to maintain a high level of virtue in your community and actually a high level of equality because anybody could be the leader, so, you know, right? And, you know, you drew lots, right? And, uh, you know, at first this seems like a crazy system, but the awesome thing about history is, you know, people estimate there's 100 billion people who've ever lived, right?
- 1:43:07 – 1:46:18
Looking to history
- BSBalaji Srinivasan
You have one life. And so just like we look at other places in the galaxy and we know what our star system looks like, but there's like dual star systems and black holes, all these crazy things in the huge expanse in, in space. There's this enormous expanse in time where there's other configurations of humans that are totally counterintuitive to our current orientation. We think we know this current state, well, it doesn't work anymore. But let's say this current state of affairs kind of works, or at least the ones that we've always, always known over our tiny window of 20 or 30 or 40 years on the world. But when you st- take the 100 billion human lifetimes and look at all these other configurations like other star systems, you're like, "Oh, that's how elections used to work. That's how regulation used to work. That's how it worked here." And you can pick little subroutines from there and say, "This was compatible with human nature back then." And maybe we can update it and make it work in the present day.
- SSSteph Smith
One, one thing that you brought up which is important is this idea that there, there has to be the potential for a challenger. So like, you know, if you, if you take the taxi example before, it's like, yeah, I could choose Person A's taxi or Person B's taxi, but I didn't have an alternative outside of the taxi system. And something that's coming to mind is, as we talked about the lines drawn around the world, or at least within our lifetime or let's say my lifetime, they've been mostly fixed. Obviously outliers, um, but mostly fixed. And to me that, that reminds me of this idea that there, there are many people around the world who, who just assume that there is no challenger. Um, and, and we've seen that competition drives innovation in many domains. And so it, it's almost fascinating to just imagine that we can get to potentially exponentially better societies if we do have challengers. But there's almost like this underlying assumption that there aren't. There are challengers within the societies that we have, but not challengers to the societies.
- BSBalaji Srinivasan
I mean, just to talk about this for a second, like the US establishment is currently fighting, has been fighting simultaneous conflicts with, uh, tech, with half its population, with Russia, with China, with, in to a lesser extent, with Israel, India, Hungary, France, Brazil, with the Brexiteers in Britain, um, with Web3 now, and with crypto. Like it's just fighting on so many different fronts at the same time. At the same point, it is printing tons of money, and in many ways its state capacity has fallen through the floor, where SF takes 20 years to reopen a bathroom. Or c- uh, you know, I had this thread where it's like a trillion-dollar disaster for the F-35 and like the Zumwalt, this is, you know, like this, uh, [lip smacks] Navy ship, and that's a disaster. And, uh, the Ford-class carrier, another multi-billion. Like disa- incredibly expensive things that we just sort of, we're numb to it, 'cause you see another $100 billion here, $100 billion there, a trillion dollars here, a stimulus here. It's just money being thrown down a rat hole. It's like a, a kid who-- I mean, one of my points, uh, you know, there's an article I wrote called, uh, "Founding Versus Inheriting." One really good way of thinking about the current US government and the US establishment really, 'cause more than just the US government,
- 1:46:18 – 1:55:31
Founding vs inheriting
- BSBalaji Srinivasan
the reason that it doesn't underst- it, it can't execute is partly because it hasn't had competition, but partly because it's essentially inherited a monopoly from better men. If you think about the difference, think about a, a founder who sets up a factory, okay? They pass it down to their heir, who passes it down, and it's just cranking out widgets and churning out money, and it's a great-grandson or whatever of the founder who's inherited the factory, okay? One day... And so it, it seems like the thing is working. It's, you know, DuPont brand widgets or something like that, right? And the great, great-grandson has the famous name and, you know, he's got the money, and everybody looks at him legally as the legitimate heir of that founder, 'cause hey, look at, here's all the documents, the chain of custody or whatever, right? Then one fine day, that factory has to switch from making widgets to making masks or, uh, like servers or s- something new. It has to do something new. This great-grandson does not have the skill of the founder. They cannot change the assembly line. They don't know what they're doing. Neither do the career managers who have been hired over the time. Like the ability to do something from scratch, to do something new, that was the domain of the founder. So all these people are just running systems that men better than themselves set up years and years ago, right? They're not the founders, they're the heirs. And so we understand this within the context of a factory, that the like great-great-grandson of Rockefeller or DuPont or whatever is not Rockefeller or DuPont. Um, I mean, in one sense, like, you know, half your genes go to your child, and then half again and half... More generations you go down, it's not like the same person anymore. It's like one, one half to the nth power, n generations down, right? So not the same person, but they are legally, they're legitimate, they're just not competent. They were selected for legitimacy, but not competence, right? And so what you wanna do-- Now conversely, if you select for competence but not legitimacy, that's like someone taking over the factory, blam, blam, blam, hostile takeover, or not even a hostile takeover. That's at least a legal thing. Like seizing the factory. Maybe they're actually good at operating it, but they're considered illegitimate. The society's like, "You just stole it from them," blah, blah, okay? That's like, for example, nationalization of oil fields and stuff like that, you know, with various independence movements through this kind of thing. So, so you want is both legitimate and competent, and simply just identifying that as an axis, right? Legitimate and competent. Well, that's why you need to have re-foundings. Because, you know, nobody would have elected Elon to run Tesla or elected Mark Zuckerberg to go and run, you know, at, at 30-something years old, to run a $3.6 billion communications network. Had-- He, he could only have proved it by doing it, by founding it, right, from scratch. So the from scratch aspect is so ridiculously important, and that relates to all of our current institutions because they're decades, in some cases hundreds of years old, and they're just built for a different time and by better men. The, the people today, you know, like George Washington organized like the armies of the United States from scratch, right? The NYPD was at one point organized from scratch, right? Even FDA or whatever was organized from scratch at one point, right? These organizations are now so many generations down that they're just inherited by heirs, okay? And sometimes they're literal heirs in the sen- and I, I talk about this in the book, uh, in, in, in the founding versus inheriting chapter that I just pasted in here. But sometimes they're literal, literal heirs in the sense of like a DuPont or a Rockefeller or, you know, like Sulzberger, who's inherited The New York Times from his father's father's father's father's father, right? Like, it's like five generations. Um, and by the way, just on that, I do talk about that in the book. It's like there's this great website that you should check out. It's called techjournalismislessdiversethantech.com. And the point being that actually the journos who endlessly talk about tech diversity and so it's, are far less diverse than tech itself, right? A lot of these tech journalists are basically employees of some East Coast nepotist who's inherited millions of dollars and/or a newspaper and is funding their whole operation. So they're meritless nepotists and/or employees thereof who are attacking the self-made, right? And once you see that, you're like, oh, these, these journos are basically like dogs on a leash. They're hitmen for old money, right? Assassins for the establishment. They have no legitimacy whatsoever. It's literally old money attacking new money. The meritless attacking the merit, you know, the meritocracy or the more meritocratic as privileged. It's like the privileged att- you know, it's like actually this amazing inversion when you, when you apply that lens to it. The thing is, this entire establishment has, uh, you know, it's declining legitimacy, but it has legitimacy, it doesn't have competence. And so it can't innovate because it's not selected for founders. N- like if you were a founder, would you go to the US government or the US establishment? No, that the whole point is you can't found anything. You can't-- Like, your career ambition is to try to paste some language into an 1,100-page bill the night before it gets approved in a vote where nobody reads it, right? Like, and it's deployed to the entire country. It's-- Imagine if, like, that's how, like, Google was coded. Some giant political meeting, blah, blah, and someone, like, pastes in some JavaScript. Obviously, that could be malware. Obviously, it could be self-interested. Obviously, that's not, like, the way to test something, to roll it out, to deploy it. Like, future historians will look at our current time and these institutions as so insane in many ways. Like, just one example is the thing I just mentioned where you're deploying code to 300 million people that you haven't read, you haven't tested in the sandbox, you haven't got any, you know, room for iteration. The, the people who are responsible for writing it aren't responsible for implementing it. It's, like, totally broken on that level. On another level, you're voting for somebody and the contract isn't binding. They give some campaign promise and they say they're gonna do something, they're not gonna do it. It's literally like buying something that's labeled milk and getting orange juice. That's fraud. In the commercial, you know, in the commercial setting, that's fraud, right? So electoral fraud is when, I mean, the most routinized version of it is when a politician says they're gonna do X, gets your vote on that basis, and does Y. Then people say, "Oh, Balaj, that's representative democracy there." I'm like, well, your vote literally didn't count, and your vote doesn't count. There's literally no-- you have no recourse. They've got, like, where it's, you know, some form of immunity, right? You basically, you cannot sue them for not voting your way, right? So it's all completely symbolic. And the alternatives, I mean, those are just, like, two examples of, like, ridiculous examples of how bad the current system is. And so you cannot fix that system. You have to figure out a way to get outside it. Why do you want to get outside it? Well, I mentioned the FDA as a huge motivation, but there's lots of others. You want self-driving? You're gonna need sovereignty. Do you want drone delivery? You're gonna need some form of sovereignty. Do you want, like, you know, to be able to have nuclear power? You're probably gonna need some form of sovereignty. Like, Wyoming is pushing some of this. There's, there's good things happening in some places that are, like, accelerating it. You want to innovate in the physical world, you're gonna need some form of sovereignty. One of the big recipes of the network state is not just to say Thiel's correct observation, you can innovate in bits, you can't innovate in atoms. You can build a billion-dollar business online. You need a billion permits to build a shed in San Francisco. That is true. We reconcile that tension by using bits to innovate in atoms by building this aligned community online, and the alignment is ridiculously important. They need to do the dance, right? They need to coordinate and choreograph together. They need to be able to... If they can't all hit like on something, they literally can't do anything else. But if they can do that, then they might be able to do a lot of other things. You've turned them into a multicellular organism, right? The content is also really important. It's not just the code, it's the community and the content as well as the code, right? So all the messaging they're putting out. The Declaration of Independence, it actually had that thing at the beginning which says, "With a, with an eye towards the opinion of all men," right? Actually, here, what is the Declaration preamble? I just want to get that right. "When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another," uh, you know, blah, blah. "A decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation." Okay? That's a really critical thing. Essentially, uh, something that tech people underestimate and undervalue is that something like 10% or 20% or 30% of your actions, you need to allocate, like, at the header, just like HTTP headers, right? You need to allocate space for the moral justification for what you're doing in almost everything you're doing. Basically, let's just say first order everything, right? It's almost like I'm doing this because, and then you do it. For example, if you're fighting back on Twitter, you might think that everybody has seen the full context of the whatever number of tweets and attacks and so on back and forth. You basically have to assume that most people are coming in with absolutely zero context, and in your limited space, you need to include the reason that this person att- you know, like, this person attacked you in the first place. You're defending yourself, and then the attack. So you're literally the, this very spare space, spare capacity you have there, you have to put your justification for the attack or the counterattack or the defense before you actually do the defense, right? In the same way, for every product, that moral justification, we are doing this because X is good and Y is bad, right? That is there, and that is like, you know, just baked in. It's like,
- 1:55:31 – 2:23:16
The one commandment
- BSBalaji Srinivasan
it's like whether it's a logo or it's a slogan or it's a mission statement or it's a catechism or whatever you wanna call it. I call it the one commandment, right? Which is your moral differentiation from society at large. That tells you, okay, we are, you know, society at large has gotten something wrong. We're gonna get it right. And to get it right, we're gonna need to shape the physical world. So you use bits to come to consensus, and you say, "This group is now aligned. We need self-driving. Why? Because the current NHTSA is an abomination. The current thing of tens of thousands of automobile deaths a year is an abomination. We have the technology to fix it. We can't just retrofit the roads necessarily. Why? Because it's like trying to send maybe electrical power over a water line." Okay? The current roads were not built for self-driving. If you built a town for self-driving, it would look totally different. You would have, uh, the roads would have sensors instrumented there. They might be segregated farther away from human tra-- You wouldn't have, like, human crossings of the roads. All kinds of things you can engineer your way out of the problem, where you just assume the road is completely self-driving. Everything changes in terms of an engineering thing. You're not trying to send electrical power over a water line. That's one of the reasons self-driving is so hard, is you have to assume all of this legacy baggage there. If you could take that away, it could be easy. And in fact, we know this to be the case because guys like Rio Tinto, these are-- this is a huge mining conglomerate. Even as far back as, like, 2013, on closed roads, on private mines that they were running, when they're the only ones who are running the, the miners and trucks, they just run them all from Perth in Australia. They can run the, the mine remotely, okay, and move the things around because there's no one else on the road, or because it's a private road where they know all the, all the cars on it, right? This is a great example, a self-driving car zone. You have this moral commandment. You align people with their bits. [lip smack] You get that alignment, and then they go and take physical territory, and they just relentlessly negotiate with enough governments until they get a sanctuary city or they get a deharmonized zone. And they don't just replace it with nothing, they replace it with a new regulatory paradigm.
- SSSteph Smith
One clarifying question. So when you say that they develop their own regulatory framework, is that just... Using the example of self-driving, is that just around self-driving, or is the intention that they regulate or re-regulate everything from education to taxes, et cetera? Or is it embedded-
- BSBalaji Srinivasan
Right. So the one commandment concept is, I think it's a, it's a, it's a useful thing in the book. It's actually one of the more important things in the book. And the concept is when you talk about morality, right? Uh, so l- I'll give the short version, then the long version. The short version is you cannot change everything society at once, but you can also not give up completely on societal change. So just like a startup sets out to fix one thing, right, in the market, a startup society sets out to fix one moral failing of society. Okay? So you're not saying, "Okay, uh, profitable, unprofitable." You're saying good, bad, or you're starting with a moral premise. It's not a market premise. This is really important. Like a lot of DAOs, for example, will start with a market premise, and they'll be like, "Hey, you can all make money. Come here." Right? And, um, you know, what it reminds me of is, uh, that scene from "Idiocracy." You know, the guy's like, "You like sex and money, too? Wow, me too!" Right? Like, you know, it's like these are, these are like the human universals where there's absolutely no community there. People are just there for the money. They're there when airdrop, right? When token. It's like joking, but it's like, you know, dogs, like, waiting for some scraps, and they'll just grab the scrap and then run off or whatever, right? And so there's nothing in co-- That's not a real community. That's just a bunch of people who are just there for, like, an airdrop or something like that, right? So join a bunch of Discords for the airdrop or whatever, right? So starting money first is wrong, right? Money comes... It's a superstructure on top of a community. Okay? It's a way for the community to represent its debits and credits between each other. And that's why you see a bunch of these coins just drop to zero because there's no true community. There's speculation on whether they build a community, and then it drops to zero because they don't build a community. One way of thinking about it is, um... So one commandment. What's, what are examples of one commandment? So I mentioned the, um, the digital Sabbath example, right? Uh, where you're saying, "Look, technology is, uh, technology is good, but you can have too much of a good thing." Just like, you know, highways. I think the internal combustion engine is good. Cars are good generally. I mean, electric engines are even better or whatever. But you could overdo it where, uh, you know, San Francisco, for example, had a highway that blocked access to the waterfront. And so you had overdone it, so you, you say, "I'm not against cars. I want a V3 that takes away that highway so we have a walkable waterfront." Um, and so in the same way, you're like, "Look, I'm pro-internet, but I'm not pro-internet all the time with all the notifications." So we have community support, and we say we're offline 12 hours a day, and just internet is cut 12 hours a day. And everybody's now-- Just like the weekend synchronizes people, and they're like, "Okay, we have Saturday and Sunday off." Right? The Soviet Union actually tried making it so that they could work seven days a week. So you had Mondays and, and Tuesdays off, and somebody else had Tuesdays and Wednesdays, and somebody else had Wednesdays and Thursdays. They tried these kinds of experiments, okay? And the problem is that there's a utility of everybody knowing that Saturday and Sunday are off generally. Means you don't have the coordination. Imagine you have to schedule your weekend like that, and you could never overlap with somebody else, okay? So coordination and everybody picking the same defaults totally changes things. Once you have everybody accept in this community that I'm offline 9:00 p.m. to 9:00 a.m., guess what? Like, that changes the community. "Okay, hey guys, let's go and, you know, uh, like we'll go for a, a run or, or, you know, um, you know, we're all gonna, uh, have a outdoors dinner or something like that." I don't know. Y- you could figure out the exact timing, and maybe on the weekends, it's actually like you're offline 12:00 p.m., you know, like an entire day you're off or something like that, right? And this is offline day, and we're gonna all do things, right? And so once you have that coordination, just like the weekend, new things arise out of that when you can assume everybody's points at the same thing, you know? Literally new societal adaptations arise. And the thing about this is money runs out, but a moral premise doesn't. Being part of that community, if, if digital Sabbath is important to you, being offline some of the day is important to you, if, if, you know, like just, okay, everybody knows I'm offline, and it's okay that I'm offline, and as this community expands, like more and more societal conventions, people know not to email you then. If you're offline, by the way, 9:00 p.m. to 9:00 a.m 95% of jobs, it'll be fine, right? Like some jobs or whatever, you need to be a site reliability engineer or something like that. Maybe it's more than, like more than 95%, but like most jobs don't expect you... You know, that's only like plus four hours or something like that relative to where normal working times are. Uh, 'cause people expect you to be asleep eight hours, something like that. So 9:00 PM to 9:00 AM, you should be pretty much okay even outside your society. But as it grows, if it becomes a million people, it's a totally different world, you know? Like, um, all kinds of things get scheduled for offline time th- versus online time, the coordination thing. This is a resource that doesn't run out. Money runs out. Morality, a moral premise doesn't. This is differentiated from the outside world in like a permanent and persistent and interesting way. It's like a wellspring that doesn't run out, right? Another example, keto kosher, okay? So you've got a network archipelago by my definition, so you don't just have an online community. You've crowdfunded territory, and you're treating sugar like cocaine, okay? You're interdicting it at the border. You're literally not allowing... So every store and every restaurant doesn't, is not filled with high fructose corn syrup and chocolates and, you know, 'cause what you have are, you have these really sophisticated corporations that have set it up so that when you're at the checkout line for something, you're hit in the face for five minutes with some, you know, chewy chocolate, like, you know, sugary kind of thing, right? So the point is like to wear down your resistance. You just wanna be on a diet or something and avoid sugar, but it's like literally, you know, these experts from Madison Avenue have set up something to be maximally tempting to you and put it in the checkout line so you're looking at it the whole time, right? So they're trying to whittle it down, right? Against that giant corporation, your community collectively can provide some resistance by setting the defaults in a different way, right? This is-- Now, you know, what I'm describing there is like sort of outside of the normal like left-right kind of spectrum, right? Because you're talking about a community that's in the interest of the community. It's neither, uh, you know, it's neither left or right. It's like, it's basically something which is just for what the community's values are, right? And what they would do is they'd say, "Okay, no sugar at the border. Just not there." You have healthy food. You have lettuce. You have, you have, you have fruits. You have tomatoes. You have other kinds of stuff. Every meal is healthy. Every meal at somebody's... You know, you don't have to ask, "What are your dietary restrictions?" Everybody's now snapped to grid. It's not, "I'm offline 9:00 PM to 9:00 AM." It is, uh, "I am snapped to grid on a different thing," which is I'm, I'm either full keto or I'm just very low sugar or so-some-something like that. You can imagine variants of this. There's keto kosher. There's the paleo people. There's the carnivory community. You could also have the vegan village, which is as different from the carnivory community as, um, both are from mainstream society. But I would bet that both the vegan village and the carnivory community would both be far healthier than, you know, McDonald's-eating mainstream America. Do you know what I mean? Like, they're quite different from each other, but those are both self-consis- Vegan village, they're eating lettuce and tomatoes and stuff. Carnivory, they're eating at least, they're eating like real meat and stuff, but they're not eating this processed horrible stuff, right? And so probably 20 pounds lighter, 30 pounds lighter, okay? And this, again, this is a resource that doesn't run out. When you join that community, that moral premise where you have inverted something that society said was good, you're saying it's bad. Society said it's good or at least acceptable to have sugar. You're saying it's actually morally bad, and everybody in your community agrees with that, so you get social support for that. The defaults are set for that. You literally need to travel outside of your day, outside of the town to go and pick it up. It's literally like getting drugs, right? So you've now got several levels of defense, and this is, again, it's morality focused, right? And, uh, you know, uh, what, what's interesting about this, by the way, just to put it on, uh, to relate it to something else. Mike Moritz, uh, you know, famous investor at Sequoia, he's like quasi-retired now, famous guy. And you know, I, uh, he has this saying which I think is very clever, that all of, you know, Sequoia's best startups are, you know, have... They satisfy one of the seven deadly sins, okay? So it's like, uh, sloth or gluttony, pride, lust, et cetera, right? And, uh, what he means by that is it's really hard to build a company, and so you need to satisfy some sort of visceral drive, right? The more intellectual, the more academic, the more idealistic one's view of human nature, like, "We will all gather to deliberate on X," right? The less likely that is going to, uh, be a thing, right? Um, not impossible, but less likely. And so once you start doing this, you can actually s- uh, uh, take a lot of startups and you can map them. Tinder is lust. Uh, Twitter is wrath. Instagram is pride, and so on and so forth, right? Uber Eats is like gluttony, right? Um, and many things, productivity apps are arguably sloth or whatever, right? Because that it is hard to build a company, and you do wanna align it to a visceral drive. The problem is that the seven deadly sins are sins for a reason because you can overdo it, right? The reason they're sins is they all relate to lack of self-control. And the... And when you have lack of self-control, well, that's bad in various ways. Y- you're fat. You're, you're not on a diet or something like that. You spend too much money. You know, you get mad when you shouldn't get mad. Like, not being in control of yourself often means if you don't have self-control, other control is imposed on you. Others will control you, right? If you don't control yourself, others will control you in some way, which is bad. The other issue is that once these companies get really big, they're no longer simply, like, fighting for survival and they have this visceral drive. Instead, they're kind of e- actually creating the deadly sin. Netflix, you know... This is an offhand comment. I'm not, like, holding it against them or whatever. But they did say something like Netflix is competing with, like, having wine with your wife.
- SSSteph Smith
Right. They're competing-
- BSBalaji Srinivasan
Or whatever
- SSSteph Smith
... for your time.
- BSBalaji Srinivasan
Yeah, but they said it-
- SSSteph Smith
The net attention that you have.
- BSBalaji Srinivasan
Yeah, yeah. It's, it's like this famous quote. It's like competing for all of your time, including, like, wine with your spouse or something like that. It's meant to be tongue in cheek, but it's also true. It's like people would rather have that than Netflix most of the time. Right? Like, you know, maybe once in a while you watch a movie or something, but so the issue is that these companies, once they get to a certain level, are exacerbating genuine, like, sins, right? And in many ways, America's become like, uh, not just America, the West, whatever, lots of the world has become like a, quote, "sinful society" in that sense, right? Where people are being pushed out of their desired, like, self-control by these companies that are pulling them in these directions for private profit, right? And now again, I'm like... You're like, "Wow, this is a really different tone from you. I thought you were like a super capitalist, pro-profit VC kind of person." I am, but I'm also really fundamentally a community person with, you know, both, both capitalism and democracy, by the way, are tools. They're conflict resolution tools, you know. Democracy is elections. Capitalism is markets. But like within a family or even within a company or a community, not everything is an election or an auction. Many things are just a decision that is arrived at organically where people are just aligned, they're harmonious, you know? It doesn't have to be... Like it's, it's a conflict where you've got multiple competing options between an election. We need to have an auction because, you know, like w- people really want this, they want to bid on it. Lots of things can be allocated by community if you have a real community. What's the opposite of the seven deadly sins? Well, Keto Kosher is the opposite of gluttony, right? It's satiety, right? Digital Sabbath is like, um... I mean, it's opposite of several things, but it's probably the opposite of like wrath. You're not getting mad on Twitter. It's opposite of sloth. You're getting out of the house, right? Rather than being, you know, online all the time. And so now the opposite in some ways, the startup company is saying, "Look, uh, it's hard to build a startup, so we, we, we have this visceral drive that we're satisfying." Here what we do is we actually flip it, and probably you could take, uh, the seven cardinal virtues and build a startup society on this, each of the seven cardinal virtues. You invert the Moretz thing, right? And again, I'm not critiquing Mike here. Like his, his framework is a good framework in the sense of satisfying those visceral desires, but any good thing can be overdone, okay? And I think we've overdone it in some ways. How do you bring it back? These startup societies, as opposed to startup companies, have a moral innovation that may start with the seven cardinal virtues, or there's other things that are like this in other religions. The seven cardinal virtues is from Catholicism, but there's other religious kind of things. You take one of those and you're like, Keto Kosher is attacking the gluttony problem. How are we doing this? The community is giving you support. Our one commandment is sugar is bad, right? [lip smack] And then that one commandment, by the way, leads to other things. If sugar is bad, continuous glucose monitoring might be good. So everybody gets CGM meters, and now you're snap to grid in a different way. You can assume everybody in the society, 1,000 people, 10,000 people, 100,000 people have continuous glucose monitors, and maybe they all opt in in some privacy preserving data sharing way to say, "Here is the glucose response of, you know, when I eat lettuce, I get this result." Then you go further down the tech tree. "Hey, I'm not just monitoring glucose, I'm monitoring my vitamin D levels and this level and that level." So you get a quantified self community out of that, right? So once you have that moral innovation, the moral innovation actually enables the technological innovation. This is something that we've sort of forgotten because what's happened in modern society is the technological progressives and the political progressives have separated, and the moral innovators who are coming up with new slogans online are different than the people who are making new technologies. In the past, that was actually one movement. For example, public health, right? In the early 1900s, the moral innovation was like, cleanliness is next to godliness. Let's not all be filthy and so on. The technical innovation were like sewers, right? Hand washing and all that type of stuff, right? And those two, two things went hand in hand. That moral innovation doesn't cost you anything, but it does mean you actually have to be concrete about what you believe in that is different than society at large. And I'm not saying come up with your own Ten Commandments and your whole new religion. I am saying, however, one commandment, just like a focused startup has one thing. You have one commandment like sugar is bad, and then you can take that and you build a community out of that, and then you'll get your second and third and fourth derivation from that, like the CGM stuff and so on that comes out of it, right? And that's just one example, but in this fashion, everybody has one thing that they think... Or maybe a few things, but often they can identify one thing they think of as like the problem with US society. Like they might say, "Oh, people are gambling too much on coins and assets and so on and so forth." They might say, "People are eating too much," or, "People are too mad online. They're canceling each other," or, "They're too lazy and they're not fit," or, or something. A lot of these things line up with the cardinal virtues thing I was talking about, right? Or [lip smack] Tinder encourages like bad personal relationships, and we need something that's, you know, like much higher commitment level and much more courting beforehand, right? Everybody has some critique of society like this, and now you can be president of your own startup society, okay? You can start solving that problem because you set up your shingle, your one commandment. You have your whole set of graphs and charts, all your historical arguments that say why you actually think this is bad. You're willing to put this at the top of your Twitter profile and defend this in public, okay? Because people will... The thing is, you're arguing society is wrong, right? You're arguing you are right, society is wrong, and then you've recruit a community of like-minded people that believe in this. And then either it's online or it's offline or it's some combination thereof. You start getting territory, and then maybe you eventually need like, uh, like a sovereign recognition to become a full network state. But even a network union or network archipelago can get very far. You are solving the problem for yourself. You are... Remember the thing we were talking about, the Bastiat, the seen and unseen, which you mentioned. You are now making the unseen seen. You are showing in the sugar-free zone what the impact of sugar is on the sugar full zone. Everybody's 30 pounds lighter here, right? Diabetes has dropped X percent. Everybody's like much better looking, oh my God, right? Whatever, right? You know, like they, they, they have just let all these other conditions maybe go away when they're not overdosing on sugar all the time. And so that 1,000 people reforms a million people, 10 million people, 'cause they make movies about what they're doing.
- SSSteph Smith
I like the analogy or almost the framing of evidence over confidence, right? In, in the, in the societies that we have today, they tell us what should be done, um, and perhaps the best way to, to actually show an alternative is through evidence, right? So through these small societies that show, not say, what is better.
- BSBalaji Srinivasan
That's exactly right. And basically the key thing is So I mentioned the term president of a startup society, president of a network society, okay? The number of people in the world who could feasibly become president of the United States is actually... So you have to be, like, 35 years old, natural-born American citizen, some other requirements, okay? So only 4% of the world is American, and to apply those requirements, it probably chops it in half again, right? Let's say it's maybe under 2% of people could become president. And we're told this thing in school that anybody can become president and so on, but it actually means 98% of the world cannot become president of the United States. And even the president of the United States cannot actually fire these regulators who have career tenure and so on and so forth. There's a whole to-do over that, right? Schedule F and... Practically speaking, first, 98% of the world cannot actually become president, and that president doesn't even have power over these regulatory agencies. So the current pathway cannot fix those regulatory agencies. There is no path to reform within the system. It's literally like making Blockbuster into Netflix, right? Making Barnes & Noble try and become Amazon, making BlackBerry into Apple. You couldn't do it. You just disrupted. You had to build the alternative system, right? You could not have turned England into America or the UK into America. You had to build America, right? So now, though, you declare yourself president of a startup society, and guess what? The vast majority of the world, 98-- They'll all laugh at you. "Lol, look at this idiot." Like, "Oh, you're president of sort of..." Right? You know, it's like, you know, ba- basically you're imaginary president, and you want that. You know why you want them to do that?
- SSSteph Smith
Because they won't stop you.
- BSBalaji Srinivasan
Exactly.
- SSSteph Smith
Versus if, if you do have enough power, if you do have enough attention, then you are actually putting friction between you and your goal for a period of time.
- BSBalaji Srinivasan
That's right. That's right. So, so, like, the whole Gandhi line, which is overused, but it's also, you know, first they laugh at you. You want them to laugh at you, right? They're not taking you seriously. You know what? Because here's the thing. You don't need to win an election. You do not need to get 51% support. That thing you were mentioning at the beginning of will the majority go with this? Everything doesn't have to be calibrated to whether the low-attention voter can be convinced of this premise, right? Uh, you know, with co- and, and actually the way they're convinced, here's another deficit of the current system, it's all acting. You know, you're increasingly seeing people who are selected just for being influencers or actors in a literal sense, you know, whether it's Al Franken or it's Trump or it's Reagan or it's... You have folks who are literally actors and who are selected for their acting ability to be politicians. But actors are liars. Like, we don't think of it that way because actor is prestigious, a liar is not prestigious, but an actor is a very skilled liar. They're, they're incredibly convincing on camera. You believe they have that emotion. They blend into the character, and then cut, and they stop crying. You know, just get a tissue. They're like, "All right, what's my next scene?" You know? Like that, right? And so you're selecting for politicians that are liars because, you know, there's that saying, like, actions speak lou- speak louder than words. They actually don't. Online, words speak louder than actions. You know why? You see the Twitter feed of, I don't know, AOC or, like, you know, any other politician, whatever. You see their Twitter feed. What most people are not looking at anywhere near as constantly is not just their voting record, but their actual actions. Their actions are not legible in the same way. One of the things that crypto does, by the way, is we're gonna be turning the LinkedIn resume of self-declared things into a feed of crypto credentials that is awarded to people by you. You close a sale, you get a crypto credential. It's an on-chain proof from your CEO at the time that you closed a sale for this amount at this time. You solve a math problem, you get a crypto credential from your professor, right? So you now have a machine-readable, on-chain resume that's provable. It's not simply assertions. It's timestamped. It happened at the time. It's digitally signed by that person. Now actions start speaking on the same scale as words, and now you can start award-- »cause there's a feed of them. It's visible in the same way as the words on, on, online, except it's on-chain. And now you can actually start filtering your society by those people who actually are doing actions and not just words, or actions plus words, right? Actions plus words is valuable. Actions alone is valuable. Words alone is usually not as valuable. And so, you know, you, you put this together, and what you've got is something where you h- your, your concept of evidence over confidence is really good because confidence is the confidence of the actor. It's also the confidence of the confidence man, okay? Evidence is the evidence of one's own eyes. You can go... And here's the thing. You don't have to go and move to the society. You can tour the society. You can tour it in VR. You can tour it online. In fact, a good startup society, as I mentioned, you know, 20, 30% of your case is making the moral case for what you're doing. They're constantly preaching their case from scratch over and over again, just like you're constantly pitching your startup, right? That tagline that you've heard 10,000 times, that person on the other side is hearing once, the first time.
- SSSteph Smith
Mm-hmm.
- BSBalaji Srinivasan
Right?
- SSSteph Smith
Yep.
- BSBalaji Srinivasan
So you're constantly making that moral case. You're making it in videos. You're making it in content because you're recruiting people to your community, but even more than that, you're trying to set an example for the rest of the world. And they may not adopt the entire thing, okay? They may not say, "Oh, you know, well, look, digital Sabbath, we can't be offline 12 hours a day, but maybe we'll do eight," or some silly iteration thereof, right? But that's good. Y- just like Google's example of using Linux eventually forced reform on Microsoft, and now they own GitHub or whatever, right? That would never have been done within the organization. The reform had to come from without. But it was reform. It was-- But it was practical reform. It wasn't saying, "Hey, let's rely on this thing to change." You have the 1,000X. You have the people exiting to that jurisdiction. You have the loss of faith in the old, but you also have the building up of faith in the new, and that forces reform.
- SSSteph Smith
Yeah. I, I think the parallel to startups is really illuminating in the sense that every startup, as you said, has some sort of tagline, some sort of minor thing, minor at the time that they're founding, that can extend. It has inertia of, in some cases, all the way to Google. In some cases, it ends up just being a bootstrap startup. In some cases, it's somewhere in between. Um, and They, similar to the idea of these startup societies are often ignored, and then as they get bigger and bigger and bigger, they become too big to be ignored. And then there's other routes at that juncture too, right? Some of them are absorbed and bought. Some of them continue to ascend and actually overthrow the, the existing, uh, company in that space. And so, yeah, I think it's, it's really interesting to consider that many of these startup society ideas will sound silly to many people at first. But they do become something, or, or they evolve over time, or they can evolve.
- BSBalaji Srinivasan
That's right. And basically, like startups, startup societies are like startup companies in this way where, uh, startup companies, I, as I mentioned in the book, it's like if you think about Twitter or SpaceX, right? Twitter sounded insanely trivial. SpaceX sounded insanely ambitious, okay? Oh, 140 characters breakfast tweet. Uh, what is this, you know? And SpaceX sounded okay, yeah, sure, you're gonna beat NASA? All right. Good luck, right? So essentially, they were at opposite ends of the spectrum, but they're both now like $10 billion companies that have changed the world. One of them was considered too trivial. The other was con- infeasible. Lots of startup things are like that, where they're just outside the Overton window and all of it is in the execution. And so, you know, this guy, Idan Levine, had this great tweet where he's like, "What is like the craziest thing..." A- and he's like a fan of, of this, and so he's like, "Let me see, Pat and Faraz." He's like, "What is the craziest thing that would work as a one commandment?" And that's a really good question.
- SSSteph Smith
What is your answer to that?
- BSBalaji Srinivasan
Oh, I mean, there's gonna be things I couldn't even predict, right? I mean, the obvious stuff is like [lip smack] language communities, you know, like religious communities. You know, you're gonna have, uh, for example, like Rod Dreher has this book called "The Benedict Option," right? If you wanna be a religious Christian, guess what? Now you can actually do that. And you don't have to impose your values on the rest of society, nor do you have to a- y- so it's that V3, right? You're not imposing Christianity on people who don't agree with it, nor are you seeing your Christian culture eroded or what have you. You go and gather with others, and you actually go and crowdfund terror and you practice and you actually live that holy life. And that's always harder to do in practice than in theory. People will... Have you, uh, if you heard the term trad, right? People will LARP being trad. I know that's two internet abbreviations in one, okay? But they will sort of pretend that they are like super traditional or whatever online 'cause they inhabit this sort of fantasy world. But the actuality of how the trad stuff interacts with modernity, you know, for example, there's, um, [lip smack] in, in Judaism, there's something called like, uh, modern Orthodox, right? I don't know if you've heard the term, right?
- SSSteph Smith
Modern Orthodox.
- BSBalaji Srinivasan
Um, it's basically-
- SSSteph Smith
Sounds like an oxymoron, but [chuckles]
- BSBalaji Srinivasan
... it, it tries to synthesize like traditional, you know, Orthodox Judaism with the modern world, and it has to make interesting kind of trade-offs for that. You know, when you actually build that society, maybe it'll be pleasing, maybe it won't be. And the way you can test it is whether it attracts emigrants from the rest of the world, right? In fact,
- 2:23:16 – 2:34:58
The powerful vs powerless
- BSBalaji Srinivasan
there's this really... Here's a, here's something. This is going in V2 of the book. This is new content, okay? Ready for new content? Take a look at this pretty cool, uh, video, okay? And then here is a like, uh, here's a visual version of it so you can see it in a graph, okay? So click the second link first. The population rank of every US state over 100 years, okay? And actually, you know, there's a better version of this that has like, you know, goes all the way back to 1770. This is only over 10 years. You can watch that YouTube link as well, which kind of has an animation of this. The thing is that the US has had something where, especially over 200 something years, different states have been like number one and the ones that are pulling in all the internal immigrants from other places, right? People talk about the US as a nation of immigrants, and that is talked about as coming from other countries. But there's two wrinkles on that. First is it's not just a nation of immigrants, it's a nation of emigrants, right? Tautologically, every immigrant emigrated from somewhere, so they left. Why did they leave Poland or India or Iran, right? Or China? You know, sometimes it's leaving like communism, like China, or Nazism, le- fleeing Germany. Or you're leaving an economic basket case like India was. Or you're leaving, you know, just for, in search for a better life like many people are, right? But fundamentally, the people who leave are not the wealthy necessarily. What they are are the politically powerless. This is really important, by the way, because people say, "Oh, Balaji, all your exit stuff, it's all about like rich guys leaving and leaving us holding the bag," blah, blah. And I'm like, "Have you looked at the profile of immigrants globally?" Like, they are not on balance the wealthy, right? In fact, the wealthy and powerful have big houses and political power in places like San Francisco, and they control the government. Whereas the n- the new money, right, the immigrants are the ones who do not control the government and thus had to leave San Francisco because they could not get YIMBY through, because they could not fix, you know, the streets or whatever, because they got attacked, 'cause they got priced out and so on and so forth. So those who leave are not those who are financially wealthy. Those who leave are those who are politically powerless, right? And once you look at it, they are often those who are, in a sense, fleeing, right? I mean, one way of putting it is, and this is kind of reductio ad absurdum and, and it may seem like a digression, but entertain me. Um, [lip smack] was Stalin rich?
- SSSteph Smith
Depends i- in, in what part-
- BSBalaji Srinivasan
Well-
- SSSteph Smith
... of society
- BSBalaji Srinivasan
... that's the thing is he d- it wasn't money, right? In fact, there's a Quora quote or something like this. I'm not sure this is true, but it, it's very plausible. Like, you know, Stalin didn't even have change in his pocket, right? But he could walk around and it's like, you know, "Grand Theft Auto," you just carjack a car, right? That's like how Stalin and like the nomenklatura walked around like the Soviet Union. They just had like root access to everything. They could commandeer your house, sometimes your wife, you know, like, you know, like your, your farm or whatever. That's what collectivization meant. It was the people, and it was the people, it's the Communist Party and it's the nomenklatura that controls everything, right? So was he rich? No, he was powerful, right? Meaning rich, I mean, like a wealthy person must still persuade, right? They're giving you money for something, and you can reject that offer or not. But the powerful can compel. So persuasion versus compulsion, right? Convincing versus coercing, those are different things. So was Stalin rich? No, he wasn't rich, he was powerful. And once we acknowledge that as a limit case, right, you can pull it back and you'd be like, "Okay, actually power is a different axis from wealth." And there can be people who are powerful but not wealthy. There are people who can compel, who cannot convince, and vice versa. Those who control territory are those who are powerful, and those who set the laws are those who are powerful. If you could set the laws, why would you leave?
- SSSteph Smith
Right.
- BSBalaji Srinivasan
You wouldn't, right?
- SSSteph Smith
There's no incentive to exit.
- BSBalaji Srinivasan
There's no incentive. You're setting the laws. This is all bespoke, made to you, blah, blah, blah. Why would you leave, right? This is-- You've, you've, you've carved out some stupid, you know, bailout or something like that, you know. Um, you're, you're, you're not seeing the folks who own housing in SF and who have been blocking housing, those are not the folks who are leaving. It's, uh, it's the new people who are leaving, right? The politically powerless are leaving. And so the reason this is important, by the way, is often things are framed as masses versus elites, or like these rich elite are leaving. It's actually typically, it's at least three groups. There's masses, there's elite, and what Peter Turchin calls the counter-elite. Once you ha- that term is a glorious term 'cause it clarifies so much, right? You're no longer-- Basically, you don't get into this silly kind of situation of saying that someone who, VC, you know, millionaire or like a tech founder or like a, you know, biomedical... You don't get into the silly game of like, are they elite or are they mass? Instead, they're the counter-elite. The tech folks are a global meritocratic group relative to like basically the white nepotists of the American establishment. Now, I'm not the kind of person, by the way, who thinks white is an insult, okay? But the US establishment does. And the-- So once you kind of apply that lens and you see how many of their businesses, how many of their media corporations, how many of their East Coast kinds of things are either literally inherited in the sense of like passed by father to son, like "The New York Times" company, like Salzberger to Salzberger, five generations, or informally inherited, like the Kennedy name, the Pel- you know, like the Pelosi name. It's not East Coast. I mean, she's on the West Coast, but like, you know, these are like famous family dynasties, right? Um, a very large fraction, if you go to that, uh, that article, founding versus inheriting, there's a paragraph there which is like I say, "Now, of course, someone who attains political office isn't always a familial heir, though it's more common than you might think." And if you click those seven links, you'll see an article on so-called widow succession, hereditary politicians, history of wives replacing their dead husbands in Congress, the Kennedy family, the Bush family, the Clinton family, the Roosevelt family, and the list of the United States political families, and there's actually quite a lot of them, right? This is also, there's this movie, "The Distinguished Gentleman," which is about like name recognition, you know. So America has a nobility. It has d- de facto, like hereditary titles. That's a huge advantage in running for office, is that hereditary name of being a Kennedy or something like that, right? And so against that elite, that hereditary elite, sometimes in the literal sense of i- inheriting a media corporation, these, what I call the meritless nepotists, right? And just calling them that, by the way, scales fall from the eyes. So much becomes clear. Old money against new is a, is an eternal story. It's literally the old money calling the new money rich. That's like literally what it is, okay? Once you kind of see that, you're like, "Okay, it's elite versus counter-elite." And what that will probably mean is the US establishment wins within the territories of the US that they control, but they lose outside the ter- y- there's parts within the US that I think become more sanctuary city-like, uh, you know, diverging in different ways to the left and to the right of the federal government, and there's countries outside that diverge away from the federal government. And so what happens is the US establishment will have more power over fewer people.
- SSSteph Smith
Well, well something that, that comes to mind is, I think I heard you say something along the lines of Google News basically made every magazine compete with every other magazine.
- BSBalaji Srinivasan
Yes. Ah.
- SSSteph Smith
Or every other blog compete-
- BSBalaji Srinivasan
Yep
- SSSteph Smith
... with every oth- other blog. And I, I wanna hear your take on how certain technological shifts like remote work, you know, we can, we can relate this back to the network state, but even separate from that, change the game in terms of every state or every city competing with every other city out there for talent.
- BSBalaji Srinivasan
The US is a nation of immigrants, but it's also a nation of emigrants, where the people who left were those who were politically powerless, as we just talked about, from other countries. But it's also a nation, and it's not the financially, it's the politically powerless. But it's also a nation of internal emigrants. Less appreciated is the degree to which the number one, two, three, and four states in the US have been in flux over time. They have attracted people and repelled people and so on, and looking at that over time actually tells a really interesting story. Again, you know, we live 20, 30, 40, 50, 60. Like if you're very old, you've seen some of these ups and downs, right? But once you take the window that's longer than a human life, 'cause we've got data going back. Remember, I think about a billion, 100 billion people have lived. If you go back, you get more data. You only have one life, right? So let's, why don't you get some leverage out of that, right? That's what history is, it's leverage, right? Financial leverage, in a sense. It is alpha, okay? Other configurations of humans worked. So you look at these charts and you see, oh, wait a second, like in the 1800s, Ohio was a really big deal. It was like one of the top states, attracting lots of people. Like Pennsylvania, you're like, "Oh yeah, that was like when it wasn't the Rust Belt." It was like making stuff, right? Like the Ohio River, all this stuff was like really important. And then you come, you know, forward and you see like New York was like... For example, the very beginning of the US, Virginia was big. And now you kind of vaguely remember this if you've read any early American history, you'll hear people talk about like, "And as a Virginian," you know. Like state identity was actually a big deal then. Why? Because we have to work back, but in the, like, the 1700s, individual, what are now US states, like Pennsylvania was settled by, like, William Penn and his, you know, followers, and, like, Massachusetts Bay Colony is like the Northeast, and, uh, like Virginia is like the, uh, the Cavaliers and, you know, Tidewater, all these different districts, right? Uh, not districts, like, like sub-colonies. They were as different as tech companies were in, like, the year tw- 2008, right? So you have Larry Page in Google, you have Zuckerberg in Facebook, you have Steve Jobs in Apple, you have Bill Gates in Microsoft, you have Jeff Bezos in Amazon. These are founder-run companies with different cultures and different personalities, and so on. Now today, now that four out of those five companies have had their founders leave, right? Now today, Microsoft, Google, Amazon, and, uh, and Apple are much more similar than they were 10 years ago. A lot of people have the resume of, "I did three years here and two years here and three years here," and, but, like, big tech is its own thing. Facebook is the outlier because Zuck is still a founder, and so he can actually do big things like rebranding to Meta. It can take risks, okay? Point being that putting those states together, like Virginia was an identity of its own, like Virginia was a whole thing. After the Civil War, it went from the United States are to the United States is. Like, these states lost more of their, you know, like individual identity and became like, you know, a federal government, like a, like a union where they were just administrative subdivisions, right? And even more of that was knocked down over the early 20th century and the great centraliza- you know, FDR did another big step with the 10th Amendment basically being repealed. Everything that was supposed to be left to the states was now something where you could set up these regulatory agencies like the FDA and so on. They just said, "Hey, everything is interstate commerce, therefore the f- the federal government regulates anything," right? So all this centralization happened, but even during this period, even during the high centralization, you still have people moving between states. And now you have something like Florida that's been coming up over the last 20 years, and it's really, with the Miami thing and so on, it's really giving California competition, right? But that's not something that just came out of nowhere. If you look at this graph, the VisualCapitalist graph, you see, like, you know, Florida's been, like, gaining traction for decades. And so it was, it's an overnight success like, you know, 50 years in the making or whatever. You, you see with this is that internal competition of this kind between administrative subunits is very important for keeping things healthy. Um, and this is the, remember that we're talking about, like, the different Leviathans.
- 2:34:58 – 2:40:10
The competition for people
- BSBalaji Srinivasan
This is the polystatus model as opposed to the monostatus model, right? There's always a tension between these, okay? There's this whole, uh, Chinese, um, saying, which is, "The empire long united must divide, long divided must unite." Why? Because when it's long united, you have stultifying bureaucracy harmonizing, like I was talking about. It's, it's not responsive, et cetera. Then you decentralize, you divide. Then what happens? You have a period of, "Oh, it's all chaotic. Oh my God, I wish we had common standards," et cetera. So then you reunify. "Oh, wow, we've reunified." And then there's a honeymoon period and, you know, so each time there's, like, a honeymoon period of, "Wow, we've got our independence. Oh my God, it's chaotic. Oh, let's reunify. Oh my God, it's sclerotic. Oh, let's divide," right? So it goes in cycles like this. And that's not to say that you come back in the same place. One of the points I make in the book is the helical theory of history, where from one axis it looks like progress, from another axis, another projection, it looks like going in a circle. But if you look at it from outside, it's like, you know, maybe it's, uh, x of t equals cos t, y of t equals sin t, z of t equals t is the parametric equation for, like, a helix in, like, 3-space. So it's, like, cyclical on some axes and it's, you know, linear on others, right? So you are still making progress sometimes, even if it seems like you're going in a circle uniting, dividing. Bring that to the present day, what we are going through and what we are going to see is much more polystatism, and the network state is a way of not just using the existing administrative units like Florida and what have you, but setting up new ones. Imagine a United States where you couldn't just found a company, but you could found the next California. Let's say to first order, the 34 million Californians own California, okay? Like this huge territory or whatever, right? The 500,000, let's take a smaller s- uh, state, Wyoming. Like about 500,000 Wyomingians or Wyomingers, I actually don't know what the... I'm sure someone will be like, "It's-"
Episode duration: 2:52:31
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Transcript of episode 8rWIsc34N9Y
