The Network State vs Fractal Localism
On scaling safe experiments in moral innovation
I have recently written a review of The Network State book by Balaji Srinivasan. Balaji has retweeted the article and focused on one specific part of the review – that city states (v1) were defeated by nation states (v2). Therefore, one cannot go back to v1 in order to defeat v2. One needs a v3 - network states.
In this article I want to compare The Network State to Nassim Taleb’s Scala Politica, as they implicitly share many concepts and frameworks.
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From seeing like a state to learning like a machine
Scala Politica is about fractal localism, a concept coined by Taleb, that is opposed both to an abstract universalism of Kant, as well as an absorbing monolithic nationalism of the printing press age.
It’s all about appropriate scale and layering. And about the fact that politics and morality doesn’t scale. Often virtuous people can create tyrannies, and people that follow self-interest can create prosperous communities. A morality of the individual doesn’t scale to groups and vice versa.
Taleb gives an interesting example how one can be at the same time a libertarian on a federal level, a republican on a state level, a democrat on a county level, a socialist on a communal level and a communist on a family/tribe level.
But Balaji in his book discusses an idea that China “might be able to make a pencil” thanks to AI. In another words, technology can make previously infeasible ideas work. Network states might be a third option of exit from both the Chinese Control and the American Anarchy dystopian sci-fi scenarios. And they might scale due to a right balance between moral and tech innovation.
Technology and culture scale governance
Taleb says that the centralization and scaling of the nation state was enabled by technology. I think he means that the printing press and literacy are on the straight line to the Peace of Westphalia and Napoleonic wars. Balaji often quotes that “Snapchat is on a straight line to dissolution of the nation state”. Because people can suddenly share intimate moments with others thousands of miles away, but don’t know their next-door neighbors.
Tech startups enable a Pareto-improvement in both scale and quality. Big Corps do scale, mom-and-pop lifestyle businesses do quality. If you do both, you are in the technology startup business and enable tech innovations to reach scale. If you launch a startup society, and aspire to become once a network state, you strive to scale a moral innovation in one domain – what Balaji calls the One Commandment.
Startup societies scale moral innovations
Balaji intends to let a thousand startup societies bloom. He sees them as the new SaaS. A society-as-a-service. With similar SaaS metrics – effectively selling membership like Harvard and not products like Slack. A startup society can be launched by a single individual with a laptop. The second step is a network union, which has a very high bar in terms of alignment and collective action.
A third step is a network archipelago that crowdfunds land an creates in-person communities. It is like a reverse diaspora and a reversed tornado – starting first in the cloud and using AR, metaverse, and web3 to later print-out fragments of the virtual community from the cloud onto the land. Only after some scale is achieved and proven through an on-chain census - in terms of members, real estate and annual income - a diplomatic recognition from a sovereign might come – and the final level -the network state can be achieved.
Balaji mentions that sufficient scale alone means de facto diplomatic recognition, and he mentions proof points like El Salvador adopting bitcoin, the Amazon HQ2 and the Tesla Gigafactory deals, the DAO law in Wyoming, the .co and .tv domain deals between sovereigns and the internet companies.
Skin in the game and filtering
In my review I mentioned the concept of semipermeable membranes (hard to enter, easy to exit) and the term membranics that Alexander Bard uses to oppose a Platonic top-down imposition of too detailed rules for a new society. Instead, one can filter people at the border of the membrane – imagine a prestigious night club with a strict bouncer. But once you are at the club, if you behave within confines of normalcy for that environment, one doesn’t need to prescribe your behaviors and actions in detail.
Taleb in Scala Politica mentions that skin in the game is not only about symmetries of risk sharing, but also about filtering of bad actors that exit the pool. Drivers that can hurt also themselves, if they crash other cars, is a good example. Really bad and reckless drivers thus gradually exit the pool. Another example is ergodicity – Gell-Mann observed that it is quite different if 100 people visit casino for a day or if one person visits casino for 100 days. On a day x he or she will hit the absorbing barrier and get financially ruined.
Balaji mentions filtering of bad actors in the context of smart regulators, like Uber and Amazon (and future network states)– bad actors get eventually zero stars rating. This is distinct from one start rating, where a person might have good intentions but they need to improve the quality of their service.
Balaji has also quite a strict example for collective action of a network union (a second step towards the network state, after the startup society). If your network union manages to organize calls to action with almost 100% of members joining for 100 days, Balaji says this is a really a high bar and a proof of highly-aligned community and he is willing to fund such communities. This implies filtering people who are not highly responsive to collective actions of that network union.
Balaji also mentions social smart contract as the next constitution, and also a possibility of demanding collateral upon entering the network state, where some fines can be deducted when the smart contract is breached, implying a skin-in-the-game and symmetry – a rule of code.
Balaji says that in the last decade the goal was to get everyone online, this decade will be about getting everyone aligned. Not in big national monoliths, but into fractal network unions/archipelagos/states. The genius of his One Commandment idea lies in what Taleb calls via negativa – removing rather than adding new complexity. The One Commandment for a startup society, like Keto Kosher sugar-free society, allows the community to truly focus on one moral innovation, and thus act like a startup.
Balaji, in line with his concept of optimalism, mentions that not all startup societies need to reach the scale of network states. Often, they might end up at the level 2 – the network union – and be a sort of an online guild for graphic designers that enables apprenticeship and protects them from online cancelation. This is in line with fractal localism idea of various politics/governance for various scales.
These network states would later form something like United Networks. Because the current UN is rather something like the “Selected States” (selected nations that happen to have a state and have already achieved diplomatic recognition).
The ease of alignment and exit - instead of minority and majority rules
Taleb says “neither minority nor majority rules”, and this means no individual should be coerced by the collective – be it an absorbing monolithic nation, abstract universalists or an intolerant minority (memetic) tribe.
Balaji’s idea of the network state and its intermediate forms like network unions can be seen as vehicles to make both alignment and exit radically easier. In my review I wrote that the ease of exit is paramount to something like an ethical cult concept. If cults trap their members through various manipulations, the inverse of cults should put the ease of exit above all and actively work on improving the ease of exit.
The alignment can be increased through right people and right culture and these can be selected through applying various tech instruments like crypto-REITs for real estate of the network archipelago (solving for NIMBYism), zero-knowledge proofs of HODLing periods and contributions to collective actions, NFT-like passports and various on-chain censuses and social smart contracts.
The exit can be improved with what Balaji calls H(orizontal)-YIMBY – sprawl is good in remote areas and building horizontally with something like modular (container) houses is good. Balaji says that the Burning Man is great but we need the Building Man. Exit is also enhanced with concepts like zero-knowledge karma that will enable also pseudonymous economy, another balajism.
The radical improvements in the ease of alignment and exit should decrease the power of majority rule by the legacy nation states and also minority rule of “the most intolerant wins” minority memetic tribes.
A Bright Sun that sunsets outdated regulation
An interesting idea from Taleb’s Scala Politica would be to contemplate also sunsetting some kind of network unions/archipelagos/states. But currently the need is rather the opposite – there are lots of temporal events like the Burning Man, but the question is how to create permanent and highly-aligned (online and in-person) communities around one moral innovation that will be composable – one could be a netizen of many network states.
This is related to Taleb’s concept of optionality - a portfolio of small bets with high potential upside, or a barbel strategy - combining a few large safer bets, with a portfolio of many riskier bets.
And these network states would sunset the outdated regulation that prevents technological progress.
Balaji has this metaphor of a Bright Sun of the ascending world that embraces technology (because people’s lives, in places like India, got better with mobile phones) versus Black Mirror of the declining world in the West that demonizes tech (because the media establishment and journos saw their fortunes crumble with the arrival of new tech competitors).
This is in line with Taleb’s thinking about inequality as being dynamic and not static – in the US many people get into top 10% of wealth but only few years of their life. Equality should be also about the downside (losing money) – not just upside. Europe might be more equal in Gini coefficient terms, but the richest families of Italy are the same as 500 years ago. In the US this is more dynamic and the Forbes list keeps changing.
Balaji also often mentions the distinction between born-rich vs built-rich. Also a distinction between financially rich vs politically rich. Often rich people don’t have political power and need to exit – e.g. from dysfunctional San Francisco to a more pro-business Miami.
Special innovation zones will unlock trillions
Deng Xiaoping transformed China with special economic zones that unlocked something like 100 trillion dollars. Because capitalism was suddenly legal in some areas. This is also an example of a small-scale safe experiment in moral innovation. It didn’t matter if the cat is black or white, when it caught mice. The saying “backwards will be beaten” resembled the spirit of Meiji Restoration and a kind of smart nationalism – combining harsh truths with aspiration for greatness. A kind of growth mindset. It wasn’t the chest-beating call of “we are the number one country”.
Network states are the extension of the special innovation zones idea, sunsetting outdated regulation and unlocking trillions of dollars in longevity in particular and tech in general. But with major differences – network states will focus on moral innovation first (e.g. life extension is good, fitness is good…), will be seeking root control, will be globally decentralized and thus nuke-proof, and will have the opacity of borders/members enabled by AR, web3, metaverse and the emerging pseudonymous economy in general.
Pseudonymous economy would solve also for racism, sexism, ageism… and an inadequate one-dimensional classification of people that Taleb sees as a problem, together with bigoteering, and discusses in his Scala Politica.
A shining city on a hill will be in the cloud
Balaji says that network states should start cloud first and land last, but not land never. This approach is digitally native and enables both the fractal localism of city states and the scale of nation states.
Network states will have a capital city in the cloud serving as a central meeting point, with fragments printed out on land. This will be possible thanks to metaverse and the new convergence device after mobile phone, that Balaji thinks will be AR glasses.
Balaji says that a free internet is to the US, what America was to the UK. A frontier was reopened in 1991, when commercial internet was allowed, and everyone could find a bare land set up a shop (a new domain). And the internet truly only started in 2020, with lockdowns and zoom-schools. Online became primary and the physical became just a print-out copy of the online content.
The Aligned Movement
It became apparent that mainstream media are just downstream media now. Twitter is upstream of media, and media is upstream of politics.
But Balaji says, social media like Twitter are entropic and zero-sum. The links distract us and go in all directions. There is no group dashboards and metrics. The opposite of entropy is work. Imagine the news you can use and highly-aligned communities that level-up together and focus on truth, health and wealth.
Startup societies and network states will provide an exit from current virtue signaling and social wars that destroyed asabiyya of the West and were enabled by fiat and quantitative easing.
I wanted to share some ideas and concepts where Nassim Taleb and Balaji Srinivasan meet despite their differences in many areas. You can read also my article The Talebian and Thielian Moment that I wrote early into Covid-19 pandemics.
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