Summary of The Network State by Balaji Srinivasan

  • Post category:Summaries
  • Post last modified:August 5, 2022
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Short summary reading time: 2 minutes

Summary: 45 minutes

Book reading time: 8h48

Score: 9/10

Book published in: 2022

Takeaway

  • Modern states have failed to safeguard the principles on which they were built.
  • They’re difficult to reform because their current structure is attached to their past.
  • They’ve missed many moral principles.
  • They’re no longer adapted to the future.
  • The same way you create new companies for new ideas, new states help you start from a clean slate.
  • Network states start as startup societies built on top of a community gathering online around an innovative moral principle called the One Commandment.
  • As they grow, they crowdfund actual physical space and become a network archipelago where “netizens” can meet in real life.
  • They become network states once they gain diplomatic recognition.

What The Network State Talks About

The Network State is a book written by Balaji Srinivasan. It’s a historical, political, and technological manifesto that takes a historical and sociological perspective to justify the need for new states. It also explains how to build them, which technology to use, and why now is the right time to do so.

When I learned about Estonia’s e-residency in 2015, I wondered if it’d ever be possible to create a private, online state.

The idea, as I’d imagine it, would work in the following way:

  • You pay a yearly fee
  • You receive a passport that enables you to visit/work/live in countries that have an accord with the private state.
  • You pay your health insurance to that private state as well as your taxes, and social security so you can have a pension later on.

Voila.

That would enable you to be part of a country you choose with people you like. Since the country is private and its “customers” can leave it at any time, it gives the “government” a lot of incentives to ensure it does a good job.

After everything the Internet had enabled, the digital country seemed to be the next step.

And then I learned that Balaji already had the idea.

Damn.

It’s not fair because Balaji Srinivasan is one of the most intelligent people in the world. He’s a “genius” in the literal sense of the term, so whatever he does, he’ll do it better than anyone.

I couldn’t find much about him. I know he’s from India, but I don’t know where nor what he studied. Apparently, he also founded and sold a biotech startup for $300 million. He also worked as CTO at Coinbase.

Finally, he’s known to be the coiner of the phrase “I am post-economic” which means “I made enough money not to care about it anymore”.

I enjoy podcast episodes with him as a guest, but he’s also so smart he’s annoying to listen to as you know you’ll never be able to reach his level.

Anyway.

Find below a summary of “The Network State”.

It was a (too) long and complicated book to summarize. It’s not for everyone. If you don’t know about web3, international relations, history, or political science, you’ll be lost.

Balaji excels in each of those and uses complicated terms which at times, makes the book more of a technical manual than a mainstream book.

Some stuff was interesting, but some others were ridiculous. Furthermore, Balaji is way too focused on [email protected], America, Israel, and India.

He believes web3 can be an exit for states that neither one US establishment’s sponsored wokeness nor [email protected]’s authoritarian smart city.

He forgot nations can simply stand in the middle, with digital progressivism on one hand, and value conservatism on the other (like much of post-Soviet Europe and the Middle East).

The network-state is a highly interesting idea, but unlikely to ever see the light of the day. Few states will tolerate a better alternative, especially when that new state starts crowdfunding lands on existing states.

But…I can’t deny it can be the catalyst for a new, private, digital country that will help innovators innovate without suffering from dictatorial rules by state agencies. I think a cruise ship is a more likely scenario than the network state described by Balaji.

The Network State is a good book, but unless you want to start one yourself, I don’t recommend it. It’s long, complicated, boring at times, you need a lot of prerequisites and overall, you’re unlikely to finish it.

I’d encourage you to read the long summary instead.

It’s 10 000 words, or 45 minutes of reading!

More than enough to get the gist.

Get the book here!


Short Summary of The Network State

Modern states have failed to safeguard the ideals they were built on. The US establishment is as ruthless and unethical as the Ch!n€s€ CCP.

Citizens can scarcely enjoy their full rights such as private property, freedom of speech, or democracy.

Innovation is stifled due to many regulations and agencies that impose their rules without having been elected.

People are deeply divided and the quality of management does not improve, but worsens over time.

But why create a brand new state? Why not reform altogether?

Because states are historical in nature. Their structure is irremediably attached to their past. Sometimes, it’s much easier to start with a clean slate than to fix something that’s too broken.

Enters the network state. The network state is a digital-first, private state offering the same services to its citizens as any other state – except it does it better.

A network state starts with One Commandment. This Commandment is a moral innovation that assembles a group of people and motivates them to start something greater than their individuality, together.

This could be a sugar-free society, for example. Such a network state would forbid the sales and purchase of hyper-processed, sugar-packed food.

The state starts as a startup society gathering online. They develop their own law embedded in smart contracts for enforcement, issue their own cryptocurrencies, and establish their “digital capital” to hang out in VR or AR.

As the state grows both in budget and members, it starts to crowdfund actual physical places around the world. Members can now visit each other in real life. The startup society becomes a network archipelago.

Once it’s sufficiently big, the network archipelago seeks diplomatic recognition and becomes an effective network state.

Table of Content


Summary of The Network State Written by Balaji Srinivasan

Chapter 1: Quickstart

A network state is a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from pre-existing states.

The difference between a state and a network state is their structure.

States are defined by their territory. A network state is defined by the people that are part of it.

image 6
The network state in one image. Illustration from the book.
  1. A network state is geographically decentralized and connected by the Internet.
  2. You can start a network state from your computer.
  3. The network state focuses on growth.

A successful network state attracts people and the other way around. Its aim is to build the best type of society possible.

You found a network state in seven steps.

  1. Create a startup society: this is an online community whose members want to be a part of something greater together.
  2. Unionize it: an online community is not coordinated. An online union is, and is capable of collective action for the well-being of the community.
  3. Build trust online and offline: Get the members to meet in real life and build an online crypto-economy.
  4. Crowdfund physical nodes: crowdfunds apartments, houses, villages, and towns to establish a place where your members can come and live.
  5. Connect your physical nodes: link the geographically separated communities together online.
  6. Broadcast the development in real life: thanks to web3, you can show in real-time the net worth and number of members of your state.
  7. Gain diplomatic recognition: as you grow, you’ll gain power and diplomatic recognition to become a real (network) state.

Why would you create a network state at first?

Because things, as they exist now, are constrained by their past. Countries can’t reform well due to their attachment to their history.

When you create a new state, you start afresh with a clean slate and can create something brand new without any historical constraints.

Creating > reforming.

There are six ways to create a new country currently.

  1. Election: people vote for a new country which is then created.
  2. Revolution: usually involves violence. Not recommended.
  3. War: same as above.
  4. Micronations: the problem is that no one really cares about a group of dozen people starting a country in the middle of nowhere.
  5. Seasteading: build a country on a cruise ship and live there the majority of the time.
  6. Space: start a new country on a new planet. Technologically unfeasible for now.
  7. Network state

The seventh way is the network state.

Think of a network state as a reversed diaspora: instead of being linked together due to their identity, the members choose to be linked to each other.

But how do you define a new country?

You need both numerical and societal criteria.

  • Numerical: you need enough people. 5 million is already something!
  • Societal: you need external recognition. Bitcoin was mocked at its beginning, and now it’s legal tender in several countries.

The reason why crypto can help you with your new state is that money has numerical and societal aspects.

A startup society can follow the same path.


Chapter 2: History as Trajectory

2.1 Prologue

In the experiment of state-building, we stand on the shoulder of giants.

While a tech startup needs to come up with tech first and company culture second, a startup country needs the culture first and tech second.

Since culture has evolved through history, we need history to look at where we came from so we can see where we’re headed. And of course, we need history not to make the same errors we did in the past.

  • History is how you win an argument. By proving what X did when Y happened, for example.
  • History determines legality: behind every regulation, you have something bad that happened (eg: terrorist attacks for airport security).
  • History determines morality: religion starts with history.
  • History tells you who is in charge: history books are written by the winner of wars.

A startup country starts with a moral issue.

A startup country is not a company that is selling you a product.

It’s a community that is inviting you to join it because it’s better, and it’s better because other countries have a moral deficit.

So, the founder needs to do two things.

  1. Explain what this moral deficit is.
  2. Find examples in history where this moral deficit did not occur.

2.2 Microhistory and Macrohistory

History is a cryptic epic of twisting trajectories.

History is slow. An action can have decades before we see its real consequences (eg: invading Iraq).

It’s also big. Billions of humans take actions every day that influence history.

Finally, it’s complicated because humans (the subject of history) don’t want to be studied.

Seen this way, it looks obvious that any system will not remain stable over time. Principles such as “over the long term, the victory of the proletariat is inevitable” can’t just happen because everything is constantly evolving. Also, it’s too easy, too simplistic.

History is a complex dynamical system that we study by measuring it.

Hence the need for microhistory.

Microhistory is the history of a reproducible system, one which has few enough variables that it can be reset and replayed from the beginning in a series of controlled experiments.

Microhistory is the history stuff small enough so that we can record them and measure all the variables that influence their outcome.

Eg: a chess game.

It can be repeated ad aeternam and past performances can tell us about the future (how to win at chess). The past helps you plan the future.

-> the more uncertain you are about the past (your chess experience), the less likely you will win.

Macrohistory is microhistory at scale.

Macrohistory is the history of a non-reproducible system, one which has too many variables to easily be reset and replayed from the beginning.

At small scale, it can be the unpredictable flow of a turbulent fluid.

At large scale, it’s world history.

Macro and microhistory are on a continuum together.

-> it is the assemblage of microhistory that gives us our macrohistory.

Big data = big history.

image 12
Macrohistory is the aggregation of microhistory.

The problem is that this data can be fake (made by bots) or falsifiable.

This is where Bitcoin becomes interesting. It’s the most accurate form of record because it (almost) cannot be falsified.

So, a history recorded on the blockchain would be verifiable and would help against the bots and fake data.

This is the future of the study of history: we will be able to look at the logs, knowing that what they have recorded is real. The historians of the future will also have a much clearer and complete vision of today than we do of the Roman Empire, for example.

This way of recording history is bottom-up (all the small events form the bigger picture). Currently, we record history in a top-down approach.

2.3 Political Power and Technological Truth

In the top-down view, history is written by those who win.

Political power triumphs over (tech) truth.

Political power cares about history because it’s where it derives its morality.

Eg: [email protected] insists on UK’s imperialism.

Politics use history in two ways.

  1. Political determinist model: history as written by the winners.
  2. Political mascot model: history as written by winners pretending to be acting on behalf of losers: this version of history is about looking for proof in the past of your enemy doing something bad to the ones you pretend to protect. Eg: the Soviet Union looking for proof that America oppresses the proletariat while not mentioning their own gulags. Everyone is doing this nowadays.

One of those techniques is the atrocity story. Politicians stress the need for war (or intervention) by outlining the “atrocity” done by the enemy.

It’s used and abused all the time to justify things like draconian airport security, [email protected]!n€ mandates, etc.

This explains why we need a bottom-up cryptographic history.

There are several models of “scientific” history to choose from.

  • Technological determinist model: technology as the driving force of history: while political determinism advocates for a slight change of history for benefits (Eg: Marxism), tech determinism highlights that a society can also benefit by not falsifying historical data, like Newton’s Laws, for example. Politics come and go. Science stays.
  • Trajectory model: history is the sum of trajectories of individuals which can be studied thanks to the data we have about how they behaved in X and Y situations.
  • Statistical model: using history to predict the future: in statistics, the future is predicted based on what happened in the past.
  • Helix model: linear and cyclical. The same things happen over and over again (cyclical) but with better technology (linear).
  • Ozymandias model: civilization can collapse.
  • Lenski model: organisms are not ordinal: it’s not because B beats A and C beats B that D will beat C.
  • Train Crash model: those who don’t know history are doomed to repeat it.
  • Idea Maze model: those who know history too well will never invent the future: this is the opposite of the Train Crash. Something that failed in the past may succeed in the future because society will be different. It applies to business ideas and investment, not to political systems.
  • Wright-Fisher model: history is what survives natural selection.
  • Computational model: history is the on-chain population: you need to take everyone into account for a correct representation of history, or it is biased.
  • Genomic model: history is what DNA (and languages, and artifacts) show us: text can be faked. Genes, languages, and artifacts, less so. As a result, history should be based on them.
  • Tech Tree model: history is great men constrained by the adjacent possible. That means that you have done the same thing as Churchill or Charles Martel, had you been in their place.
  • Data exhaust model: history as the analysis of the log files. History as the analysis of every type of trace it has left.

All of these models existing not for their own sake, but to draw some sort of conclusions from history, some sort of practical heuristics.

When top-down and bottom-up history collide (that is, the clash of the political power and technological truth), tech truth wins.

Eg: when the NYT wrote a story about an uncharged Tesla, Musk took some data that proved the NYT had lied about the story.

Now, not every truth can be proven with data because some truths are relative. For example, a political truth is true only if everyone believes in it. Eg: money, borders, laws.

Once you understand that, the need for a consensus between tech truth and political power appears evident – meaning a balance between nationalism and rationalism.

  • Nationalism: a group sharing an identity, a narrative.
  • Rationalism: inconvenient facts.

Tech history is what has worked. It’s science.

Political history is what has worked to be powerful.

Assembled together:

  • Our political theory of history says that social and political incentives favor the propagation of politically useful narratives.
  • Our technological theory of history says that financial and technical incentives favor the propagation of technological truths.
  • Political actors were constrained by technological truth.
  • Technological truth can be constructed by societal consensus.

Let’s now generalize these observations into a broader theory.

2.4 God, State, Network

The collision of top-down VS bottom-up, of political power VS tech-truth, is a collision of Leviathans.

A Leviathan is a higher form of power that simultaneously watches over you so you behave well, but that could also crush your enemy. Religions have gods, political movements have their states, and cryptocurrencies have their networks.

Movements that aren’t religious often worship states or networks.

Understand: everyone believes in something.

The first Leviathan was God (1800s). People behaved well because they thought they’d rot in hell if they didn’t.

Then Nietzsche wrote that God is dead. What this meant was that the belief in God was dead. The elite didn’t fear anything anymore and no longer had to behave well.

So the State became the new Leviathan (1900s). If you committed a crime, God wouldn’t punish you – but the state certainly would.

This led to the two world wars.

Today, both states and gods are dying. The next Leviathan is the network – the Internet, and the crypto network. If you commit a crime, the network will punish you.

Network > state > gods.

Today, the most powerful force isn’t God or the US army. It’s the blockchain. Without the encryption key, no one can do anything.

-> encryption limits the power of the government in a way no legislation can.

  • Encryption > state violence: when communication, transactions, or digital borders are encrypted, states can’t crack them. Groups can escape state control.
  • Crypto economy > fiat economy: cryptocurrencies can’t easily be banned, seized, frozen, or printed.
  • Peer-to-peer > state media: Internet archives can prove stuff the state media doesn’t want to.
  • Social > national: social networks change the nature of the state. The Westphalian system conceptualizes states and citizens as people sharing values within a geographical area. The social network dynamites this vision.
  • Mobile > sessile: smartphones help people move which is a powerful political statement. Borders stay, people don’t.
  • Virtual Reality > Physical Proximity: by putting on the headset, you go to a new world with new laws. You escape the state.
  • Remote > In-person: The network state is a conceptualization of a state based on the people, not on the land. This increases leverage against the state.
  • International > National: the network gives you a choice of where to host your data, for example.
  • Smart Contracts > Law: paper law is costly, complicated, unpredictable, and ineffective.
  • Cryptographic Verification > Official Confirmation: a blockchain is a truth machine. This is a revolution the like of writing itself.

While the state is dying, it’s not completely dead yet. It’s still a Leviathan.

Eg:

  • The GDPR
  • The lockdowns
  • Julian Assange, Ed Snowden
  • Digital de-platforming of state critics: there isn’t much difference between [email protected] which deletes any mention of [email protected]@nm€n, and Facebook or Twitter which delete mentions of whistleblowers or Hunter Biden’s laptop.

Now, what happens if we get both state and network working together?

When you have two (or three) Leviathans fighting each other, they will alter each other and become hybrid.

God/state is the US in the 1950s. For God and the Country.

God/network is a diaspora without a country (Israel before 1948).

God/state/network is the Jewish diaspora after Israel.

Network/god: it’s an AI god, something like DALL-E that gives instantaneous answers from all of humanity’s knowledge.

Finally, we have network/state. There are different ways to build it.

Namely:

Positive network/state

An existing government fuses with a network.

Eg:

  • El Salvador embracing Bitcoin.
  • Estonia and Singapore where everything is online.

-> cities are fusing with networks. Why not countries?

Negative network/state

[email protected] using tech to spy and control, or the US government cracking down on tech (which explains why all tech founders besides Zuckerberg have resigned. They don’t want to be demonized and lose an anti-trust lawsuit).

[email protected] has taken over its tech industry, and the US is about to do the same.

Synthesis: God, State, and Network

Can we make the three Leviathans cohabit?

Yes. The network/state as we’ve described offers greater efficiency and consent. But it doesn’t yet offer meaning.

This is why you need a One Commandment.

You need to attract the right people for the right reasons, and money isn’t enough. You need a moral innovation.

Eg: sugar is bad, so we’ll build a Keto society.