Daily Balajisms – Anarcho-tyranny

Smart regulators compete for tech talent. Bad regulators drive away everyone.

Balaji Srinivasan often mentions a concept of anarcho-tyranny to describe the current demise of San Francisco – a city that has a 29% office vacancy rate, the highest ever recorded.

As a working-class Uber driver, you get a $60 parking fine if you overstay a few minutes, but the criminal that breaks into your car walks free, as the city de facto legalized theft under $950. This is a case of a bad regulator – with high false positive and false negative rates. Regular people get excessively punished, while criminals walk scot-free.

Liberal democracies engage in a delicate dance between chaos and tyranny. You want enough liberty for creative people to prosper and deliver innovation, but at the same time you need to provide a high-trust predictable environment with basic civil order and quality infrastructure.

Balaji has a sci-fi scenario of American Anarchy vs Chinese Control. An extrapolation of current trends in Blue cities and the Chinese turn away from internationalism and capitalism of the early 2000s into a more pronounced socialism and nationalism. After some bundling, we are for quite some unbundling in the post-American West, before we can rebundle into something better and smarter.

If you can’t imagine raising kids in a city, the city will fade away. Balaji divides countries and places into declining world and ascending world. India is an example of an ascending world, while San Francisco is part of a declining world. Or a Bright Sun vs Black Mirror. The ascending world is rising with tech, the declining world resents tech.   

After covid, when remote work became the moral innovation, the city experienced a tech exodus. The mayor of Miami, Francis Suarez with his “how can I help” attitude towards tech and finance sectors is the opposite of SF leadership.

There is a great deal of ruin in a nation, said Adam Smith. And some countries take a decades-long plunge into chaos. Argentina was once a rich country but it went sideways and never recovered.

But the case of Venezuela might be more instructive here – as it is closer to the anarcho-tyranny example. Once a relatively prosperous country, that plunged into crime and economic catastrophe. An oil rich country where people were having the Maduro diet (the subtitle of the book says: “How three-quarters of adults in Venezuela lost an average of 43 pounds in two years”).

To describe it as socialism is simplistic. Belarus is fairly socialistic and it definitely drives lots of creative and freedom-loving people out of country, like China does. In places like Venezuela and SF it is a curious case of socialism for criminals and a hell for ordinary people. The result is that not just creative people are leaving Venezuela, but everyone who can. Bitcoin is a life boat in places like Venezuela or Lebanon.

Due to the current (central) bank crisis, America is the new Argentina, thinks Balaji. This sounds dystopian, but at least he didn’t say Venezuela (which is much worse). If the de-dollarization trend materializes, the US might experience something close to what some satellites of the Soviet Bloc got, when the Iron Curtain fell. Some underwent hyperinflation and crime waves. Some transformed into Western liberal democracies, some went sideways.      

A smart regulator, like Uber or Bolt can ban bad actors and rate customers, providers and partners. Bad actors, like scammers with malicious intent, get zero stars and are driven out of market. Others are incentivized to improve on quality of their services or behavior with 5-star rating system and detailed real time tracking.

Compared to Uber or Bolt, which are digital regulators using AI and real-time tracking, a taxi medallion is an analog regulator relying on an annual inspection and often engaged in cozy relationships with taxi companies it is supposed to regulate.   

The current US establishment is bad at perceiving weak signals and capital allocation. The old elites are the opposite of an ideal venture capitalist, says Balaji. They can only perceive phenomena that have the size of a constituency (10-50%) but are constantly baffled with weak signals (like 0.01%) that can go exponential and even cause a digital death (from one to zero).    

Balaji believes that crypto-anarchy is better, than anarchy or anarcho-tyranny. But even better is crypto-civilization. But before we can get to the other side, we are for quite some unbundling. And bitcoin is a parachute and a life boat in stormy chaos.