Decentralization, Recentralization

The Possible Futures 

It’s not about the future, it’s about the possible futures.

Why? Because causality exists. Because we can run controlled experiments. Because human action can influence outcomes. Because we aren’t communists that believe in the historical inevitability of utopian outcomes, but technologists that believe in individual initiative subject to practical constraints.¹⁹⁵

The previous two chapters were about those constraints, about the past and the immediate present. They orient us to discuss several possible futures, before picking out one trajectory to focus on - the one where we materialize many startup societies, get a few diplomatically recognized as network states, and rebuild high-trust societies via a recentralized center.

Some caveats before we begin, though.

When it comes to the past, every history is, inevitably, just a story.¹⁹⁶ That is, any tale of the past is necessarily abridged, abbreviated, edited, and idiosyncratic. You can’t convey 5000 years of written records any other way. And our tale of History as Trajectory is no different: it’s like the “why now” slide at the beginning of every entrepreneur’s deck, a practical history¹⁹⁷ of particular events that lead to the feasibility of the network state. But we cited our references, so you can check our facts.

On the topic of the present, our chapter on the Tripolar Moment is the section of the book that is likely to be the most dated. Intentionally so, because we endeavored to move most references to current or near-past events to this section.¹⁹⁸ So, think of that chapter as being very much a worldview circa mid-2022; like the Kalman filter, we reserve the right to incorporate new information to update it.

Now to the subject of the future. As you’ll see we do believe a recentralized center of pragmatic network states can emerge, and describe several scenarios where this could happen. But our projections are just scenarios, and throughout we keep in mind volatility, reflexivity, competing curves, and the consequent limits to predictability.

First, volatility is rising because the internet increases variance. Social media is social volatility (go viral or get canceled), and cryptocurrency is financial volatility (go to the moon or get rekt). Volatility makes correct predictions more difficult, but offers upside for those who predict correctly. And volatility is good for insurgents and bad for incumbents, because the former only need to get lucky once while the latter need to keep staying lucky. It’s no longer just individuals that are subject to high volatility, as entire countries can rise and fall overnight. So, in a high volatility environment, only Bezos-style invariants remain constant. All other observations should be taken as tentative — they are true until they are suddenly not.

Reflexivity is Soros’ term for the feedback loop between participants’ understanding of a situation and the situation in which they participate. In systems made of human beings, putting something out into the world results in a reaction, and then a reaction to that reaction, and so on, often resulting in positive and negative feedback loops rather than textbook convergence to equilibria. Thus, when collecting data on such systems, let alone forecasting them, one must keep in mind that people will react to predictions themselves, sometimes to make them come true. In social science, unlike physical science, every row in a dataset represents a human being with a mind of their own.

The concept of competing curves refers to the fact that there are many simultaneous technopolitical movements competing at the present moment, different phenomena rising from zero to affect millions over the course of years, months, or even days. For example, if you take a look at this graph of how people met their spouses, you can see several different curves rising and falling as different cultural movements “come online,” until the internet just dominates everything. Another example is the market share of social networks over time; a third is Ray Dalio’s graph of the rise and fall of nations.

The point is that you can identify the players, but not always the outcome, in a complex multiactor process. Applying this to our scenario analysis, we have some trends that are synergistic and others that are antagonistic. For example, many trendlines point to diminished American power, but at least one points in the other direction: the West’s willingness to weaponize its tech giants for domestic and foreign conflicts alike. Does this give American dominance another few years, another decade, or many more than that? We can identify the curves but not always which ones win out.

Predictability has its limits. In our view there are two kinds of predictions that matter: the physical and the financial. The physical prediction is a very specific bet on the trajectory of a ball, on a genomic base call, or on the electron configuration of an orbital. It’s checked by reproducible experiment, and your device fails if it fails. The financial prediction is at the opposite end of the spectrum: it’s a macroscopic bet on the volatile, reflexive behavior of other human beings. It’s checked by the unforgiving market, and your fund fails if it fails.

We aren’t as interested in betting on manipulation-prone government statistics. According to the Chinese government of 2021, the number of COVID deaths in China from mid 2020-2022 was zero. According to the San Francisco government of 2021, the crime rate in SF was declining. According to the US establishment of 2021, the inflation of the dollar was transitory. All this reminds us of the Soviet government of 1932, who said the harvest in Ukraine was glorious.

As we discuss later, it is useful to create on-chain shadow statistics that are more verifiable, reliable, and censorship-resistant than these easily faked indicators. But outside of that, predictions on official government statistics are otherwise uninteresting because of how obviously political they are. So we steer clear of that kind of thing — in our analysis of possible futures, we’ll either predict something is technologically (and hence physically) feasible, or that it could result in a financial return, or both. And we’ll give recipes for how to make those predictions reality, or prevent them from becoming reality, in the form of fictional scenarios on good and bad futures.

So, to recap: our history is just a story, our analysis of the present may presently be dated, and our forecasts for the future may be confounded by volatility, reflexivity, competing curves, and the limits of predictability. With that said, all models are wrong, but some are useful; so with caveats cataloged and provisos provided, let’s proceed!

Analytical Axes and Scenario Analyses 

We start by describing new lenses to view the world in the sections on Sociopolitical and Technoeconomic axes. These are mental models that hopefully help compress large amounts of data into rough patterns.

Next, in the section on Foreseeable Futures, we put on our tech investor hats and project out into the near future, describing developments we anticipate. These aren’t just random investment theses, though; they’re pieces of the future that are relevant to startup societies and network states.

We then game out one specific science fiction scenario in detail that we think is unfortunately quite plausible: American Anarchy, Chinese Control, and the International Intermediate. In this scenario, we project a Second American Civil War triggered in part by a broke US government that attempts Bitcoin seizures, a situation we call American Anarchy. Unlike the first Civil War, this would be a stochastic struggle between two Networks rather than an explicit dispute between two States. It would be more undeclared than declared, more invisible than legible. And this conflict could end in decentralization and disunion instead of centralization and consolidation. As radical as that sounds, many thinkers from across the political spectrum already foresee something like this happening in different ways, including Stephen Marche, David Reaboi, Barbara Walter, and Kurt Schlichter, though like me none of them are particularly happy about the prospect.

Meanwhile, in this fictional scenario, the CCP implements an intense domestic crackdown on the other side of the world to maintain stability, preventing Chinese people from freely leaving the digital yuan network with their property, a result we refer to as Chinese Control. As America descends into anarchy, the CCP points to their functional-but-highly-unfree system as the only alternative, and exports a turnkey version of their surveillance state to other countries as the next version of Belt and Road, as a piece of “infrastructure” that comes complete with a SaaS subscription to China’s all-seeing AI eye.

In the name of putting a lid on the anarchy and restoring “democracy”, the US establishment then silently copies CCP’s methodology without admitting they’re doing so, much as they cloned China’s lockdown after loudly denouncing it. Similarly, after spending a decade pretending to decry “surveillance capitalism”, the US establishment formally deputizes many Big Tech companies as official arms of the surveillance state. However, the establishment’s implementation of this digital lockdown is as tragicomic as the CCP’s version is totalitarian, and is porous enough to permit serious resistance.

Strong Form and Weak Form Models of the Future 

This is the world we could be barreling towards. You don’t have to believe in it to found a startup society, though. So why talk about it at all then? Because in a high volatility time, it’s worth thinking through models of how our future could be very different from our present.²⁰⁰

Think of the American-Anarchy-vs-Chinese-Control scenario as a strong form model of how NYT, BTC, and CCP could collide, with startup societies and network states arising out of that atom-smasher as deliberately created alternatives to Wokeness, Maximalism, and Chinese Communism.

The weak form model is that things don’t work out precisely this way (few things do!), but that the general trend is correct. That is, in the future the US Establishment does lose relative control, the CCP does try to exert absolute control, and Bitcoin Maximalists do advocate for no control. The way of life propounded by each of these ideological communities will get extreme, but will also be itself justified as a reaction to the other two perceived extremes, as discussed in Extremes and Counter-Extremes Are Undesirable. So we’ll still need to build societies with consciously chosen tradeoffs between submission, sympathy, and sovereignty, instead of unconsciously capitulating to either an extreme or counter-extreme. And that again leads us to startup societies and network states.

So, using the strong-form scenario as a base, we discuss a number of Victory Conditions and Surprise Endings for different factions. We also give a bit more detail on the desired outcome, the trajectory we want to shoot for: a Recentralized Center of high-trust societies.

Building the Future Rather than Defaulting Into It 

Our goal in thinking all this through is not pessimistic but pragmatic: to change what we can change, by setting up a fourth pole as an alternative to the failing US establishment, to maximalist crypto-anarchy, and to the centralized surveillance state of the CCP.

We call the raw material for this fourth pole the International Intermediate. It includes American centrists, Chinese liberals, Indians, Israelis, web3 technologists, and essentially everyone from around the world that wants to avoid both the American and Chinese whirlpools.

At first blush, this group represents ~80% of the world population and has little in common save their disinclination towards both anarchy and tyranny. But a subset of them will be smart enough to realize that exit is a stopgap, not a solution. People tend to imitate what they see, and if American Anarchy and Chinese Control are the most prominent games in town they will eventually be imitated.

So isolationism is off the table. Yet so is direct intervention, as both the American and Chinese theaters will snarl against any outside interference.

The answer then is innovation rather than isolationism or interventionism. A subset of the International Intermediate needs to build something better than both American Anarchy and Chinese Control, a concrete improvement over the propaganda, coercion, surveillance, and conflict that may soon characterize the two pillars of the global economy.

In other words, the rest of the world will need to lead. They can’t hope for the US establishment or CCP to figure it out. And that’s the Recentralized Center: a circle of startup societies and network states built by pragmatic founders, a group of high-trust communities architected as intentional alternatives to failed states and surveillance states alike.

Sociopolitical Axes 

Old mental models for understanding the world are quickly going out of date. Not only are things changing faster, things are changing faster on new dimensions. New sociopolitical axes are emerging. Seeing the world through old lenses risks being caught blindsided by the political equivalent of a runaway truck. People who thought the financial crisis of 2008 was unthinkable just weren’t looking at the right graphs. Michael Burry was, though.

In the same spirit, what are some new graphs we could look at, new themes for conflict and cooperation, new sociopolitical axes that are underestimated? That’s what this section is about.

International Indians 

I am moderately bullish on India, but extremely bullish on Indians.

Why? Well, first let’s talk about India the country. If you’re in the West, haven’t been paying attention to India, and think it’s still just an uninteresting “Third World country,” you can be forgiven for that. But take a look at the following links to orient:

• Here is a visual comparison of parts of Los Angeles vs India.
• Here’s a graph showing hundreds of millions of Indians getting cheap mobile internet service over the last five few years
• Here’s an amazing economic survey of India showing growth over the last decade
• Here’s a chart showing India is now #3 in tech unicorns after the US and China.
• Here’s a post that discusses the overall picture: The Internet Country

Putting that all together, there are now significant chunks of the “ascending world” which are cleaner and better maintained than the “descending world” environments of Los Angeles and San Francisco. That doesn’t mean the curves are the same — just that they overlap in a way that would have been unthinkable a few decades ago.

Next, let’s talk about the Indian diaspora. There are about five million people of Indian ancestry in the US, UK, Canada, and Australia, and a fair bit more if we include the full South Asian diaspora. They have done quite well over the last few decades. While the first generation came over with portable technical skills in medicine and engineering, the second generation within the West speaks English without an accent and with full cultural fluency - resulting in many Indians in law, filmmaking, and media. Some have even ascended to the commanding heights of politics and technology, like Kamala Harris, Sundar Pichai, and Satya Nadella.

That sets up an interesting State-plus-Network dynamic. Using our terminology, the Indian State may take one step back for every two steps forward, even though it’s been moving forward as of late. But the Network of the global Indian diaspora is just on an exponential rise. Indeed, I think the 2020s will be for the Indian Network what the 2010s were for the Chinese State - somewhat ignored at the beginning of the decade, but an important global force by the end of it.

Recall that “China had its first unicorn in 2010, and it took five years for it to get to five unicorns; the year after that, it had twenty. Ecosystems develop very slowly, and then all at once.”

Please don’t think of this as Indian triumphalism at all — I actually find it surprising! It’s just recognition of an unexpected new player entering the arena that many still underappreciate. For further context, you might read A New Idea of India or Our Time Has Come.

Transhumanism Versus Anarcho-Primitivism 

An important emerging political axis is transhumanism versus anarcho-primitivism.

Briefly, transhumanists think technology is good, and want to use technology to change humanity in fundamental ways. Conversely, anarcho-primitivists think technology is bad, and want to to return to the wild, de-industrialize, and abandon technology. They think of humans as pollution on this great Earth.

There are right and left varieties of each, though they overlap. Left transhumanists like Klaus Schwab of the World Economic Forum to some extent give rise to right anarcho-primitivists, and vice versa. Basically, left transhumanists make changes to the human body that rightists find aesthetically unappealing. Conversely, right transhumanists advocate improvements to the human body that left anarcho-primitivists find terrifying.

It works in reverse as well. Some anarcho-primitivists advocate a back-to-the-land kind of traditional masculinity that some transhumanists find constraining. And some anarcho-primitivists want a Unabomber-like end to industrial civilization which would (among other things!) destroy the supply chains needed for the life extension sought by transhumanists.

The Identity Stack 

An issue that confused me for a while is why criticism of San Francisco seemed to anger some people irrationally. Couldn’t they also see that prices and feces were both up and to the right at the same time? Eventually what I realized is that everyone is patriotic about something, and those people were patriotic about their city, while others were patriotic about their countries, companies, or even their cryptocurrencies.

To elaborate on this point, for someone who identifies themselves as a San Franciscan, criticism of the city is taken personally, because that isn’t a swappable piece of their life. Their company? That’s just a job, it’s replaceable, what they really care about is the Golden Gate Bridge, the Presidio, the 49ers - a sort of romantic identification with the city itself, and many of the people that live there.

Others affiliate with their national identity first, above their city identity - they’ll move between military bases at the drop of a hat, which are interchangeable, but they are willing to kill and die for the flag with which they identify. Or they might be “based” out of Seattle for a time, signifying that their location is immaterial, while signaling their deep love for democracy online, an identity that is non-negotiable.

Still others are patriotic about their companies, those things they’ve founded and funded, breathed life into, those entities that took all their capital and intellect to build, which are always far more fragile than they look from the outside, and which some callous outsider could break for likes with a few morale-draining tweets.

And yet others characterize themselves by their cryptocurrencies, thinking of themselves first and foremost as Bitcoiners or Ethereans. These folks are often digital nomads, indifferent as to whether they see the sunset in San Francisco or Singapore, or what crypto exchange lives or dies, so long as they can check in with their community of holders each day.

In each case, there’s typically a large economic, social, or political stake in the thing people are identifying with. The city patriot may be a homeowner or otherwise invested in city governance. The country patriot may have signed a military contract. The company patriot may be a founder or early employee with a significant equity stake. And the cryptocurrency patriot is often a sizeable holder of coins.

Now, not all things are like this; people can be right-handed without identifying themselves as right handers, they can do something without being something. So top-level identity, primary identity - that’s precious, it’s rare, it’s the identity that supersedes all others. People might use seven daily apps but they have even fewer primary identities - usually only one.

Primary identities need not just be about city, country, company, or cryptocurrency. They can be related to religion, ethnicity, or professions like “journalist” and “professor”. There’s a huge up-front sacrifice required to become a tenured professor, or to publicly convert to a new religion, and for this reason such primary identities often make it to the fore of someone’s Twitter bio.

Example: Twitter Bios

Here’s a concrete example of the identity stack, with three Twitter bios:

• Jim: #HereWeGo #SteelerNation — All Things PA — Father — Husband — #Christian — #ArmyVet

• Billy: Immutable money, infinite frontier, eternal life. #Bitcoin

• Bob: Army retired, anti-terrorist assistance program, husband, father, grandfather, Iraq vet, educator, but most importantly an AMERICAN!

Again, everybody is patriotic about something. Jim loves his city; Billy is patriotic about technology and transhumanism; Bob would fight for the American flag.

The collection of all that defines someone, in rank order, is their identity stack. The top of the identity stack is the primary identity: the Pittsburgh Steelers for Jim, Bitcoin for Billy, and America for Bob.

And, as noted, primary identity is precious. It’s the identity that supersedes all others. To build anything great — a company, a currency, a civilization — an affiliation must beat out the rest of the identity stack to become someone’s primary identity. That’s a high bar to meet.

Technoeconomic Axes 

The Internet Increases Variance 

The internet increases variance. Digitization allows situations to be taken to their logical conclusion, instantly, even when that digital logic doesn’t quite work in physical reality. This means things can flip from zero to one, without warning. An overnight success, ten seconds in the making. The only certainty is rising volatility.

First, the observation: over the last 20 years, we’ve gone from 30 minute sitcoms to 30 second clips and 30 episode Netflix binges. From a stable 9-5 job to a gig economy task or a crypto windfall. From a standard life script to 30 year olds living with their parents and 20 year old startup CEOs.

This is a very general phenomenon. You see it in the dashboard of every internet disruptor. With Uber, for example, relative to the time of a standard taxi ride, some Uber trips are much longer and others much shorter.

Why is this happening? Because the internet connects people peer-to-peer. It disintermediates. In doing this it removes the middleman, the mediator, the moderator, and the mediocrity. Of course, each of those words has a different connotation. People are happy to see the middleman and mediocrity go, but they don’t necessarily want to see the moderator and mediator disappear.

Nevertheless, at least at first, when the internet enters an arena, once the Network Leviathan rears its head, this is what happens. Nodes that had never met before, could never have met before, now connect peer-to-peer. They can form something terrible like a Twitter mob, or they can form something amazing like ETH Research. You get extreme downside and extreme upside.²⁰¹

One analogy is to a centrifuge. If you take a sample of biological fluid from your body and centrifuge it, you’ll see a bunch of layers that were previously mixed together. Then they all get separated out. That’s what the internet is doing to society, to institutions. It’s just centrifuging it into its constituent parts, whether that be albums separated into songs or newspapers disaggregated into articles.

That’s the unbundling. Then comes the rebundling. The songs get grouped into playlists, the articles grouped into Twitter feeds. This step too is profitable; it’s not the same as what came before, it’s a v3, it’s a flexible bundle. It’s the helical theory of history, where from one standpoint we’ve come full circle (“rebundling into an album-like playlist”) but from another axis we’ve made amazing progress (“anyone can play any individual song and create whatever playlist they want”).

With that said, that rebundling is still higher variance than the pre-internet bundles that preceded them. There are millions more playlists than albums, millions more Twitter feeds than newspapers.

BlueAnon, QAnon, SatoshiAnon

As the internet increases variance, we see more upside and more downside in everything.

Technologists focus on the upside, because the gain from the wins (like search engines, smartphones, social networks, and artificial intelligence) should compound while the losses should be one-offs. That is, once you find a winning formula, or a rebundling, you can cheaply scale it across the rest of the network relatively quickly. So, this probably should lead to more net upside over time, just like every past technological revolution has. I think we’re already way in the black with the internet (almost every piece of information ever in billions of people’s hands for free at any time, for starters), but it depends on your metric.

Conversely, the establishment can only see the downside outcomes. That is, the BlueAnons can only see the QAnons who are worse than median, not the SatoshiAnons who are far better than median. It’s a bit like Paul Graham’s concept of the Blub programmer. Just like the Blub programmer can look down to see incompetence, but can’t look up to see brilliance, the establishmentarian can’t comprehend the upwards deviations of the internet. They think it’s just weird.

Just like Hollywood once compared Netflix to the Albanian Army, the US establishment doesn’t yet understand how much better Satoshi Nakamoto or Vitalik Buterin is than every apparatchik they have in the Federal Reserve system. And they don’t understand that upward deviation is creating a more competent group of global leaders than the American establishment, a more meritocratically selected group than the nepotists of the East Coast.

Just as it allowed Satoshi to rise.

Social Media is American Glasnost, Cryptocurrency is American Perestroika

There are two particular ways that the internet increases variance worth noting: social media and digital currency.

• Social media increases social volatility. You can go viral or get canceled, experiencing large overnight gains²⁰² or losses in status.

• Digital currency increases financial volatility. You can go to the moon or “get rekt,” experiencing large overnight gains or losses in financial status.

There’s a parallel in history for this: glasnost and perestroika. Mikhail Gorbachev, the last Soviet leader, thought he could reform Soviet society by allowing more free speech (via glasnost) and free markets (via perestroika). He didn’t quite understand what he was in for. The resultant instability helped bring down the Soviet Union.

Similarly, social media is like American glasnost and cryptocurrency is American perestroika. Just as Gorbachev unleashed free speech and free market reforms because he believed communism could be reformed, the US establishment actually bought their own narrative in the 1990s and 2000s about their ostensibly free and democratic society. Only now are they realizing that the many speech and thought controls that their predecessors had set up and hidden in plain sight - like stringent regulations and high capital requirements for broadcast content production - was actually the key to their continued power.

Now that it’s clear that the Internet is to the USA what the USA was to the USSR, that it’s truly free speech and free markets, they are trying to tamp down the American Spring they’ve unleashed, but it may be too late. Obama was in a sense arguably America’s Gorbachev, as he allowed technology to grow mostly unimpeded from 2008-2016, to billions of users, without fully realizing what would ensue.

The 100-Year Information Tsunami

Few institutions that predated the internet will survive the internet.

Why? Because the internet increases variance, it causes huge surges of digital pressure on older institutions that just weren’t built for it. They can’t handle the peak levels of social and financial stress that the internet can unleash. They’re like seaside towns that weren’t built for a thousand year flood. Michael Solana’s post JUMP is quite good on this topic.

Indeed, this is a good analogy, because one of the ways to think about the internet is as a carrier of massive information waves. Most normal waves propagate in physical space –– the standard partial differential equations (PDEs) are 1-, 2-, or 3-dimensional (e.g. longitudinal waves like a slinky, transverse like electromagnetic waves, or earthquake-style spherical waves). But these information waves propagate on highly dynamic social networks where the topology²⁰³ of connection & disconnection changes quite a bit.

Naturally Physical to Natively Digital 

The digital is primary and the physical is now secondary.

Three Phase Transition

The digital transition happens in three phases: there’s the physical version, the intermediate form, and then the internet-native version. If you’re into electrical engineering, you can think of this as analog, to analog/digital, to natively digital.

• One example is the transition from a piece of paper, to a scanner which scans that file into a digital version, to a natively digital text file which begins life on the computer and is only printed out when it needs to be.

• Another example is the transition from face-to-face meetings, to Zoom video (which is a scanner of faces), to natively digital VR meetings.

• Yet another example: physical cash, to something like PayPal or fintech (which is just a scan of the pre-existing banking system), to the truly native digital version of money: cryptocurrency.

Once you see this pattern you can see it everywhere, and you can look for those spaces where we’re still stuck at the v2, at the scanned version, where we’ve taken the offline experience and put it online, but not fundamentally innovated.

Truly Digital News: Dashboards, On-Chain Event Feeds

Newspapers are actually only partially digitized. In 1996, the primary version of The New York Times was the physical paper and the mirror was the website. Then, gradually, more and more weight got shifted to the digital version. Now it can fairly be said that the physical paper is just a printout of the website, a snapshot at a particular time. And there are online-only features like interactive graphics that are impossible to replicate in the physical paper. Most importantly, the comments section is really social media, particularly Twitter, where all the reporters are located.

But this is still really just a newspaper, put online. Most of it can be printed out. What’s the next step in this evolution? What does natively digital news look like? There are at least two concepts of interest here: morning dashboards replacing the morning newspaper, and cryptographically verifiable event feeds replacing tweets of unverifiable content.

Dashboards > newspapers. If you are in tech, the first thing you look at each day may be a personal or company dashboard, like your fitbit or your sales. This is good. The first thing you look at each day shouldn’t be random stories someone else picked. Should be carefully selected metrics you want to improve. This is a good vector of attack to definitionally disrupt newspapers.

If we think about it from Clayton Christensen’s “jobs to be done” perspective, newspapers have this incredible pride-of-place — first thing you look at in the morning! — but typically do not add enough value to deserve that position.

On-chain event feeds > Twitter > newspapers. One key observation is that just as many sports articles are digest of box scores, and many financial articles are summaries of the day’s stock action, so too are many political and tech articles merely wrappers around tweets.

Because news breaks on Twitter. So, eventually, the next kind of newspaper will look something like a cryptographically verified version of Twitter. The first draft of history will be the raw on-chain event feed, written directly to the ledger of record by billions of writers and sensors around the world.

In other words, truly digital newspapers will be on-chain event feeds. Digitally signed crypto oracles, not corporations.

Remote Work to Remote Life

My friend Daniel Gross remarked that 2020 will be seen by future historians as the year when the internet age truly began.

The lasting impact of COVID-19 is that it flipped the world from physical to digital first. Because the internet in 2000 or 2010 couldn’t bear the load of the entire physical world. But by 2020, it kind of could. Now it’s not just about remote work, but remote life.

During the pandemic, every sector that had previously been socially resistant to the internet (healthcare, education, law, finance, government itself) capitulated. Those aspects of society that had been very gradually changing with technology shifted overnight. For example, the convention of politeness shifted: now it was rude to ask for an in-person business meeting, as you’d do it remote if at all possible.

With vaccination, many of these things have flipped back, but they won’t come back all the way. Digitization was permanently accelerated.

It used to be that the physical world was primary, and the internet was the mirror. Now that has flipped. The digital world is primary and the physical world is just the mirror. We’re still physical beings, of course. But important events happen on the internet first and then materialize in the physical world later, if ever.

From Printing to Materializing

All value eventually becomes digital, because we are generalizing the concept of “printing” from inking a piece of paper to actually materializing digital things in the physical world. This is counterintuitive, and you’ll have objections. But let’s get there in a few steps.

1. Much value creation is already digital. If you’re reading this, you’re probably an information worker. You may not have thought about it this way, but the majority of your waking hours are probably spent in front of one screen or another — a laptop for work, a phone on the go, a tablet for reading, and so on. So, most of your life is already spent in the Matrix, in a sense, even before the advent of widespread AR/VR. Short of a pullback to an Amish or Andaman Islander existence, most of your life is and will be digitally influenced in some form. Moreover, much of the value in the physical world comes from blueprints created on a computer in some form; eg, the iPhones manufactured in Shenzhen gain much of their value from the designers in California. So, a good fraction of value creation is largely digital.
2. More value creation is becoming digital. Read Packy McCormick’s article on “The Great Online Game,” and think about every information worker essentially pressing buttons to earn cryptocurrency in a giant globalized internet economy. That’s what 2030 or 2035 is on track to look like.
3. Much spending is already digital. Think about what fraction of your spending already goes to digital goods like books, music, software-as-a-service, and the like. Now think about what fraction of the remainder goes through a digital interface of some kind, whether through an ecommerce website like Amazon or a point-of-sale terminal via Apple Pay. So, it’s already fairly uncommon for people in industrialized societies to do a fully offline purely physical transaction, which might be conceptualized as “hand a five dollar bill over at a farmer’s market for several tomatos.”
4. Many actions can be analogized to printing. Now take this one step further and think about the remaining offline components as “printing” something out, though you can use the word “materializing” if it suits. You hit a button on Amazon and a complicated multijurisdictional delivery process ensues, resulting in a box landing at your front door. You hit a button on Uber and a car arrives. You hit a button on Doordash and food arrives. You hit a button to rent an Airbnb, and then another to open the smart lock, and the door to housing opens. You can do the same for the door to your coworking space office, or the door to your electric car. So, more and more of the goods people prize in the physical world are in a sense “printed” out.
5. Many printing actions can be fully automated. Today, there’s a human in the loop for things like food delivery. But as robotics improves, this could in theory become a completely electromechanical process, just like printing. Every individual step from the farm to table could be automated. As this visual shows, there are already robots for each step: robots in the fertilizer factories, for harvesting, and for last-mile delivery. As an exercise, it’d be useful to a full stack example where someone “prints” out an apple and it’s fully robotically grown and delivered, even if in practice you’d have stockpiles of apples rather than (slowly!) growing them on demand.

So, if you put all that together, all value is digital. Everything starts on the computer, generates cryptocurrency, and can be used either to buy digital goods or to pay robots to materialize things in the physical world.

Humans will still exist, of course, but the economy will become the cryptoeconomy. All value goes digital.

The Productivity Mystery 

What is the productivity mystery? Well, we really should be in the middle of a golden age of productivity. Within living memory, computers did not exist. Photocopiers did not exist. Even backspace did not exist. You had to type it all by hand.

It wasn’t that long ago that you couldn’t search all your documents, sort them, back them up, look things up, copy/paste things, email things, change fonts of things, or undo things. Instead, you had to type it all on a typewriter!

If you’re doing information work, relative to your ancestors who worked with papyrus, paper, or typewriter, you are a golden god surfing on a sea of electrons. You can make things happen in seconds that would have taken them weeks, if they could do them at all.

We should also be far more productive in the physical world. After all, our predecessors built railroads, skyscrapers, airplanes, and automobiles without computers or the internet. And built them fast. Using just typewriters, slide rules, & safety margins.

This is a corollary to the Thiel/Cowen/Hall concept of the Great Stagnation. Where has all that extra productivity gone? It doesn’t appear manifest in the physical world, for sure, though you can argue it is there in the internet world. There are a few possible theses.

1. The Great Distraction. All the productivity we gained has been frittered away on equal-and-opposite distractions like social media and games.

2. The Great Dissipation. The productivity has been dissipated on things like forms, compliance, and process.

3. The Great Divergence. The productivity is here, it’s just only harnessed by the indistractable few. The founders of tech unicorns, for example, may have more ability to focus online than most.

4. The Great Dilemma. The productivity has been burned in bizarre ways that require line-by-line “profiling” of everything, like this tunnel study.

5. The Great Dumbness. The productivity is here, but we’ve just made dumb decisions in the West while others have harnessed it. See for example China building a train station in nine hours vs taking 100-1000X²⁰⁴ that long to upgrade a Caltrain stop. Now, yes, I’m sure not every train station in China is built in nine hours, and wouldn’t be surprised if some regions in the US (or the West more broadly) do better than SFBA. But feels likely that a systematic study would find a qualitative speed gap, 10-100X or more.

6. The Great Delay. The productivity will be here, but is delayed till the arrival of robotics. That is, for things we can do completely on the computer, productivity has measurably accelerated. It is 100X faster to email something than to mail it. But a slow human still needs to act on it. So, in this hypothesis, humans are now the limiting factor.

   Essentially, representing a complex project on disk in something like Google Docs may not be the productivity win we think it is. Humans still need to comprehend all those electronic documents to build the thing in real life.

   So the problem may be in the analog/digital interface. Do we need to actuate as fast as we compute? That would mean zero-delay robotic task completion will be the true productivity unlock. And that we haven’t gone full digital yet. So long as humans are still in the loop, we won’t get the full benefits of digital productivity.

I don’t know the answer, but I think the line-by-line profiling approach used on the tunnels is a good but slow way to find out exactly what went wrong, while the approach of looking at other countries and time periods — namely, studying history — could actually be the fast way of figuring out what might be right.

Linguistic Borders of the Internet 

If the organic borders of the physical world are rivers and mountain ranges, the organic borders of the internet are software incompatibilities and language barriers.

The first of these is obvious: Facebook’s ecosystem is distinct from Google’s is distinct from Ethereum’s, because the backends don’t fully overlap, because they’re incompatible at the software level.

The second is a bit less obvious. You can imagine the internet being cut up into continental-scale pieces, with the English-language internet being the largest with billions of people, the Chinese-language internet being the second largest with 1.3 billion, and so on for the Spanish-language, Japanese-language, Korean-language, Russian-language internets.

One huge difference between the English internet and Chinese internet is that the former is global and arguably decentralized while the latter is heavily concentrated in China with the CCP maintaining root control over most key nodes.

Another important consequence is that the English internet is about to admit a billion new users in the form of all the Indians who are newly coming online. And because the Indian internet becomes a much bigger part of the English-language discourse, it will be difficult for the US establishment to censor the English-language internet as much as they want to, because hosting can be based in the sovereign country of India.

Network Defects 

A network defect is when increasing the size beyond a certain point decreases the value of the network. Metcalfe’s law doesn’t include this dynamic as utility is projected to just increase to infinity as network size grows, but there are a few different mathematical models that predict this outcome, such as congestion-based models or this post by Vitalik.

Repulsion within a network is a key dynamic that can lead to network defect. The idea is that two or more subgroups within a network have such conflict that it reduces the global value of the network for both, until one of them defects to another network. So it’s a network “defect” in both senses of the term: a failure and a political defection.

Foreseeable Futures 

AR Glasses Bridge Physical and Digital Worlds 

Augmented reality (AR) glasses may be the most foreseeable invention of all time.

In the 90s and 2000s, people talked about the convergence device. Gates imagined it would be a smart television, but it turned out to be the iPhone. What’s the next convergence device? I think it’s AR glasses. Take the following technologies:

• Snapchat’s Spectacles
• Facebook’s Oculus Quest
• Google Glass Enterprise
• Apple’s AR Kit
• Augmented reality apps like Pokemon Go

If you put all those together, you get a vision of augmented reality glasses that give you instant-on access to the digital world in your field of view, and perhaps darken with another touch to give you virtual reality. Anyone can teleport into or out of your field of vision with your consent, you can “right click” on any object to get AI-informed metadata on it, and you can get computer-guided instructions to execute almost any physical procedure from repairing a machine to sewing.

We know that millions of people manage to wear glasses all day, and they’re lighter than headsets and easy to take on and off. So these may become as ubiquitous as phones. It will be an engineering marvel to get there, of course, and while Apple is a strong contender Facebook may be the most likely company to be able to ship them given its progress with Oculus and founder-led innovation.

Why will AR glasses be so big? If you think about how much of your life is spent looking at a screen, whether it’s a laptop or a phone or a watch, >50% of your waking hours is already spent in the matrix. AR glasses would reduce “screen” time in one sense, freeing you up to compute on the go without looking at a screen per se, but increase digital time in another sense, as people would constantly have these HUDs active to see the world.

This means even more of our daily experience will blend not just the physical world dominated by natural law, but the digital world run by human-written code. The offline world still exists, physics and biology still exist, but algorithms and databases run even more of human existence. The Network surrounds us to an even greater extent than the State did.

If combined with some kind of gesture interface (gloves, rings, or perhaps just sophisticated motion tracking), you might be able to use your hands to do anything in the digital realm. So, with AR glasses, the digital and physical realms fully blend, and people would actually be able to see and interact with an open metaverse in real life.

Experimental Macroeconomics 

Cryptoeconomics is transforming macroeconomics into an experimental subject.

Why? Because you can actually issue a currency, set a monetary policy, get opt-in participants, and test your theories in practice. The proof is in the pudding. And, if successful, the pudding is worth many billions of dollars.

This refutes the premise that economics and business are wholly disjoint. They aren’t disjoint at all. Microeconomics is the theory of individuals and firms, which is directly related to running a business. Each price you set, each company you start, is a kind of microeconomic experiment (albeit usually a poorly-controlled one).

Macroeconomics, by contrast, until recently was off-limits to experiment. A first step forward was MIT’s Edward Castronova early work on virtual economies like World of Warcraft. Now anyone can create a cryptocurrency, set monetary policy, and see what happens.

Perhaps the closest thing to experimental macroeconomics prior to cryptocurrency was the experience of setting up & scaling massive two-sided marketplaces like Airbnb, eBay, Google Ads, etc.

You quickly learn that ideology is a poor guide. Naive libertarianism and progressivism both fail. Why? Basically, people want to make money on those platforms. They absolutely do respond to incentives, unlike the naive progressive model that it’ll all be altruistic behavior. But the marketplace operator has immense power to shape incentives for good or ill. So the naive libertarian belief in a fully decentralized Hayekian order does not always come about.

American Anarchy, Chinese Control, International Intermediate 

Here we give a bit more detail on a sci-fi scenario²⁰⁵ in which the US descends into a chaotic Second American Civil War, the CCP responds with the opposite extreme of a total surveillance state that traps wealth in its digital yuan network, and the rest of the world - if we’re lucky - builds a stable alternative of opt-in startup societies that peacefully rejects these extremes.

To be clear, you don’t need to believe in this scenario to build startup societies and network states. But it’s a mental model for the future, which we present for the same reason that Ray Dalio put out a (somewhat euphemistic) model of how the US order could fall to an external competitor, and Peter Turchin put out a (less euphemistic) model of how the US could fall into internal disorder.

American Anarchy 

Prosperity, Tyranny, or Anarchy?

The progressive vision is that the West is getting more free, equal, and prosperous.²⁰⁶ The dystopian vision is that we’re actually in the incipient stages of tyranny, whether that be fascist or woke respectively. What’s under-theorized is a third possibility: namely that, in the US at least, the inconclusive power struggle between Democrats and Republicans means America is headed for anarchy.

As the events of 2021 unfolded, it became clear that even with unified control of the federal government, the Democrats were no more effective than the Republicans had been with comparable power four years earlier. Neither faction proved capable of implementing the total top-down domination that some in their party advocated and many in the other party feared.

Meanwhile, the non-partisan state-capacity of the US as a whole continued to visibly decay. Squint past the pandemic’s half-ignored, TSA-like COVID regulations and you saw a half-ignored, TSA-like COVID regulator — namely, a failing state that people did half-ignore, and arguably had to half-ignore, because the USA itself was now the TSA, and the TSA, they knew, was safety theater.

Today, in the territory governed by this inept bureaucracy, we now see power outages, supply-chain shortages, rampant flooding, and uncontrolled fires. We see riots, arsons, shootings, stabbings, robberies, and murders. We see digital mobs that become physical mobs. We see a complete loss of trust in institutions from the state to the media. We see anti-capitalism and anti-rationalism. We see states breaking away from the US federal government, at home and abroad. And we see the End of Power, the Revolt of the Public, the defeat of the military, the inflation of the dollar, and - looming ahead - an American anarchy.

What’s coming isn’t fascism or communism, like the left-wing and right-wing pundits would have us believe, even though they don’t believe it themselves. What’s coming is the exact opposite of that, a world where the civilized concepts of freedom and equity are extrapolated to their decivilizational limit, where you ain’t the boss of me and we are all equal, where all hierarchy is illegitimate and with it all authority, where no one is in charge and everything is in chaos.

We can argue this may be preferable to the status quo, in the same way some think the chaotic Russia of the 1990s was on balance better than the authoritarian Soviet Union of the 1980s. We can argue it may be inevitable; as the Chinese proverb goes, “the empire, long divided, must unite; long united, must divide.” And we can argue that this transitional period of anarchy may be lamentable, but that it’s better than the other team being in charge, and that we can build a better order on the other side. Maybe so, and that’s what this book is about. But prior to any rebundling, I think we’re on track for quite the unbundling.

Maximalist vs Woke

With that poetic introduction over, let’s get down to specifics. Rather than seeing an indefinite continuation of the postwar order, or the long Second Cold War between the US and China that many are preparing for, the US may be on track to descend into an American Anarchy, a chaotic Second American Civil War between the US Establishment and its people.

We foresee two main factions. The first will align around the US federal government, NYT/establishment media, wokeness, the dollar, and the Democrat party; they’ll say they’re fighting for “democracy” against “insurrectionists.” The second will align around state governments, decentralized media, maximalism, Bitcoin, and the Republican party; they’ll say they’re fighting for “freedom” against fiat “tyranny.” We can’t predict their names, but rather than Democrat Blue and Republican Red, let’s call them Wokes and Maximalists, or (more neutrally) Dollar Green and Bitcoin Orange.

Crucially, in this scenario, many non-whites will switch sides from Democrat Blue to Bitcoin Orange, because whether black, white, Latino, or Asian, everyone’s savings will be crushed by inflation. Many tech founders and independent writers will also go Orange; tools like Square Cash will facilitate mass exodus to Bitcoin, and newsletter writers will put out narratives that contest establishment media.

Conversely, many institutional loyalists will flip from Republican Red to Dollar Green, including the police, military, and neoconservatives, simply because they are in the final analysis the kind of team players and “natural conservatives” who would have fought for both Tsarist Russia and the Soviet Union. My country, right or wrong.

The role of centralized tech companies will be key. By default they’ll swing to the Dollar Green side, but many tech founders will lean Bitcoin Orange, so we could see centralized tech companies supporting both sides — with older and fully wokified firms like Google firmly on the Green side, and newer founder-controlled firms located in places like Miami and Texas trending Orange.

How America Builds Towards Conflict

How could something as radical as a Second American Civil War happen? You could write a book on this, and several people have, but in lieu of that we’ll give a bullet pointed list. Before reviewing it, you might want to re-read Ray Dalio, Peter Turchin, and Strauss & Howe if you want more context, as we won’t be able to recapitulate every citation that informs this projection. Done? OK, here we go.

1. Political polarization is way up. All the graphs show this now. The US is not really a “nation state” any more, but a binational country comprised of two warring ethnic groups that disagree on fundamental moral premises. It is about “god, gays, and guns”, but it’s also also about censorship, surveillance, and inflation.

2. State capacity is way down. The competent America of mid-century, the left/right fusion that FDR put together, the America that combined a powerful centralized state with social conservatism, the America depicted in countless movies, the America that won World War Two and the Cold War — that country is over. This US government can’t build a bathroom in San Francisco, let alone a cost-effective fighter jet, destroyer, combat ship, or aircraft carrier.

3. Economic prosperity is declining. All the political infighting of the last decade happened during a period of relative prosperity, even if it was based on the artificial expedient of printing money. But now that we face potentially years of inflation and stagnation, unhappiness will increase. Already you’re seeing articles coming trying to acclimatize people to lower standards of living, to “eat bugs and live in a pod.” And Turchin’s cliodynamical graphs put numbers to these feelings.

4. Envy is increasing. This is normally phrased in terms of “inequality”, and that is indeed one way to look at it, but let’s rotate it by a few degrees and talk about envy. The return of great fortunes, the rise of social media, and the decline in religion has led to escalating envy. Every day, people can see others online who appear to be better off than they are, and who appear to be rising while they are falling. Whether that rise is real or not, whether it is due to the other person’s own efforts or not — it doesn’t really matter to the person who feels they aren’t getting ahead, who feels they are falling behind.

   Without a rising tide that lifts all boats, the “rational” act for some is to sink the other boats, to pull escaping crabs down into the bucket. Why? Because misery loves company, and because stopping someone from getting too far ahead means they can’t outcompete you for houses or mates. The only way out of this negative-sum trap is to build provably positive-sum systems and high-trust societies. But that’s exactly what the US establishment is not doing.²⁰⁷ It’s fomenting hatred on social media every day, and giving new reasons not to trust it — whether that be the insistent assurance that inflation is transitory or all the other episodes of official misinformation.

5. Foreign military defeat looms. Leaving aside your feelings about the pandemic, the military propaganda beforehand is worth reviewing. In 2018, the US Department of Defense put out press releases on its preparation for a pandemic, on its sophisticated vaccines…and then nothing happened. This was the first time many in the public had the opportunity to directly compare statements about “secret military programs” to the actual results, just as you might compare projections by corporate executives to the actual results. And the size of that gap was remarkable. It indicated that at least some of the US military was just words, and not real.

   I remarked on this in early 2021, months before the defeat in Afghanistan gave yet another example of the gap between US military rhetoric and reality, where Kabul wasn’t going to fall in a few days and then it did.

   As of this writing, we’re four months into the Russo-Ukrainian war of 2022. After an initial surge of attention, global interest in the conflict has dropped off a cliff. The New York Times and other establishment media outlets have now instructed the US administration to pursue peace, and various reports indicate that the Ukrainians are quickly plowing through ammunition stockpiles while the Russians are gaining ground with long-range artillery. To be clear, it’s not at all obvious what will happen - there’s fog of war with everything - but in the event of an outright Russian victory, defined as gaining territory they didn’t have prior to the war, that wouldn’t augur well for the US establishment.

6. US states are pulling away from the feds. There’s enormous coverage of US politics at the national level, because it attracts clicks from all over. But local politics doesn’t get the same attention. However, if you’ve been paying attention, there has been a multi-decadal trend wherein states have been pulling away from the federal government and each other on matters like guns, immigration, abortion, gambling, marijuana, and other matters. This is part of the Future is Our Past thesis: it’s reversing the de facto 10th Amendment repeal by FDR’s government, and more broadly is part of the gradual Western decentralization since the peak centralization of 1950.

7. Authority has lost respect. The old American left said something like “we all need to work for the common good” while the old right said something like “pay your dues and you’ll achieve the American dream.” The new left says “we are all equal” and the new right says “you ain’t the boss of me.” So, the old left/right combination supported self-sacrifice and a stable hierarchy²⁰⁸, while the new one attacks all hierarchy as fundamentally illegitimate, as oppressive or tyrannical. This is reflected in the defacement and degradation of virtually every US institution over the last few decades, from the office of the presidency to the statues of American founders. George Washington and the US Capitol are no longer sacred.

8. National divorce is discussed. Secession is now officially part of the platform for Texas’ Republicans. And there have been an increasing number of pieces on the topic of “national divorce” from Democrats and Republicans alike, including NYMag (“No, We Can’t Get a National Divorce”), Stephen Marche (The Next Civil War), Barbara Walter (How Civil Wars Start), Michael Malice (“The Case for American Secession”), David Reaboi (“National Divorce Is Expensive, But It’s Worth Every Penny”), and the American Mind (“The Separation”).

9. Radicalized movements reject the status quo. There have been countless words written on wokeness, on how it’s a radical ideology that thinks of the US as intrinsically corrupt — as systemically x-ist for many values of x — and therefore doesn’t really seek to reform America so much as to capture the state to completely transform it. See Wesley Yang, Richard Hanania, Matthew Yglesias, John McWhorter, Bari Weiss, and many others for discussion of different aspects of this.

   The thing about wokeness is that it’s not just a superficial weed growing out of the topsoil. It has a root system, a theory of history and ethics that’s built on thousands of papers, on generations of academic humanists, on Foucault and Derrida and the like, on deconstruction and critical race theory and so on. I happen to think of it as a mostly evil doctrine, as sophisticated evil promoted in the name of good, but I recognize it has ideological content.

   The Republican party isn’t really capable of dealing with that. But Bitcoin Maximalism is. If you haven’t heard of it, you will. Bitcoin Maximalism is by far the most important ideology in the world that many people haven’t heard of - yet.

   There’s philosophical depth to Maximalism. It represents a root-and-branch rejection of the inflation that powers the US government and thus pays for everything. It fuses the worldview of Mises, Rothbard, Hayek, and Ron Paul with Bitcoin. It naturally aligns with the loss of trust in institutions, with the suspicious individual who (understandably!) no longer trusts the federal government or US institutions on anything. It’s not merely an edit to the state, it’s the end of the state. And it’s a push from an ideological direction the Wokes are ill-prepared for, because it’s an aracial ultra-libertarianism rather than the white nationalism that folks like Marche and Walter think will be their foe.

   If you want to understand Bitcoin Maximalism, read The Bitcoin Standard or the tweets from accounts at hive.one/bitcoin (not all are Maximalists). But be aware: just like wokes who reject “civility” on ideological grounds, maximalists have developed verbal justifications for being “toxic.”

   I disagree with the fundamental moral premise of Maximalism, which is that Bitcoin is the only coin and all other digital assets are sins.²⁰⁹ I don’t believe in one coin anymore than I believe in one state or one god. But I understand the power that such a belief system has. Americans don’t believe in one god anymore, don’t believe in monotheism. So their choice is between one state and one coin, between ideological monostatism and mononumism.

   That is, to beat something like the US establishment in a civil conflict, you don’t just need bravery, you need a more powerful Schelling Point. That’s what Bitcoin is for the Maximalists: the one coin that’s the alternative to the one state. If and when the dollar collapses due to inflation, the orange coin becomes the new blue jeans, the global symbol of freedom and prosperity.

   (And what’s the alternative to that alternative? Many network states as alternative to one nation state, many coins as alternatives to the one coin, many beliefs as the alternative to one belief system. That’s the polystatist, polynumist, polytheist model we describe later on in the Recentralized Center.)

10. Bitcoin seizure could be the trigger event. All of this is a combustible mix, and there are many possible trigger events, but one that I see as particularly likely is a combination of (a) ruinous inflation followed by (b) a soaring BTC/USD price and then (c) the attempt by an insolvent federal government to seize Bitcoin from citizens.

    On the Bitcoin side, this isn’t a short-term price prediction or anything, and there are of course various possible failure modes²¹⁰ for BTC that could prevent Bitcoin from being the specific cryptocurrency that drives this scenario. Nevertheless, because the Bitcoin protocol has mostly been technologically fixed for a while, its partisans have focused to a much greater extent on political innovation — like getting it recognized as a sovereign currency. Add in the moral importance that Maximalists attach to Bitcoin, and its global name recognition, and BTC is likely to be the coin of contention.

    On the other side, the general concept of asset seizure isn’t really even very sci-fi given the overnight freezing of funds for Canadian truckers and 145M Russian nationals. The main difference is that cryptocurrency is built to be hard to freeze. A bankrupt state can and will try to seize funds held at centralized exchanges, but for those that have taken their funds off exchanges, the state will need to go house-to-house, and rubber hoses don’t scale.

    A US establishment attempt to seize Bitcoin in a time of high inflation would be like a repeat of FDR’s gold seizure (Executive Order 6102), except it’d be done during a time of declining state capacity rather than rising centralization.

    The reason something like this could be the trigger event is that neither side could easily back down: Wokes would have no power if their state went bankrupt, and Maximalists would have no money if they surrendered to the state.

    Thus, this seems like a relatively foreseeable event that could kick off the Second American Civil War — especially if the seizure bill is passed by the federal government and some states refuse to enforce it.

    How could that happen? A state-level refusal to enforce might just be part of the growing divergence between states from the federal government and each other, similar to the justification for sanctuary cities and the like. But if you wanted a statutory rationale, you could imagine a Constitutional Amendment proposed to ban Bitcoin seizure, something that would put the right to hold BTC on par with the right to free speech and the right to bear arms. Such an amendment could be ratified by many states in the run up to a possible seizure bill. Even if it didn’t pass nationally, any ratifying states would then cite their ratification to justify their refusal to enforce.

A War for Minds, Not Lands

It’s a mistake to think a Second American Civil War would look anything like the first Civil War, or like World War 2 for that matter. It’d be nothing like the movies with huge movements of uniformed soldiers, tanks, and planes.

Instead it’ll just be a continuation and escalation of what we’ve seen over the last several years: a network-to-network war to control minds, rather than state-to-state war to control territory. A fusion of America’s domestic conflicts on social networks and its foreign conflicts in the Middle East.

The best way to visualize this is to look at the physical map of Union-vs-Confederate right before the Civil War, the physical map of Republican-vs-Democrat by county, and then the digital map of Republican-vs-Democrat in the same period.

In the first Civil War, ideology and geography strongly coincided. The victory condition for the North was obvious: invade the South. Conquer the territory to conquer the minds. They didn’t have to kill every last Confederate, they just had to show that resistance was futile to get the remaining Confederates to stop fighting.

In any second Civil War, ideology and geography would only weakly coincide. Look again at that map by county. Is one side really going to invade the other? Or vice versa? Is the US establishment going to seize corn fields or will its opponents move to capture big blocks of cities? Is either side going to use huge bombs on territories where they’d kill at least 30% of their own team? Could nuclear weapons be targeted enough to use as political tools to get the other side to concede?

No. Instead it’ll be a war for minds, not lands. And if we look at the map of digital space, suddenly much becomes clear. Here, the two sides are fully separated, as the Union and Confederacy were. And now we can see why there’s been such an emphasis on cancellation, deplatforming, silencing, and shunning…on making people say certain words and hoist certain symbols. Because making a person or a company post a particular hashtag indicates control of minds which is in turn control of digital territory.

All the discussion over the last few years around “free speech” doesn’t really engage the fundamental issue, which is that this is a time of information war, where the victory condition for one side is to invade the minds of the other side — because it cannot feasibly invade the territory.

To invade the minds of the other side, and to control the digital networks — because the tech companies that greenlight transactions, communications, and online behavior have in many ways become the de facto privatized governments of the Western world. The power to determine what people can and cannot do in the digital world belongs to the people who run these networks. And so controlling these networks, by controlling the minds of people who run them, is the key to maintaining control over the US in a digital time. That’s why there’s been such a push by the US establishment to wokify the big tech companies.

However, a network that can’t be controlled in this way, and that isn’t run by any one person — like Bitcoin — well, that’s a form of resistance. The set of web3 networks that are more decentralized²¹¹ than centralized Silicon Valley tech companies, that are run by communities — those too are a form of resistance.

As such, if the first Civil War was the “War Between the States”, the second Civil War will be the “War Between the Networks.” The graphs we’ve shown relate to Red-vs-Blue, but add a tint of yellow to each group and rotate it a bit. Then you’ll get what we think is the likely future axis of conflict, which is Bitcoin-Orange-vs-Dollar-Green.

In areas where Greens control the state, they may use militarized police, tech company surveillance, deplatforming, denunciation in media, arrests, seizures, and the like. In those areas, Orange may respond with an insurgency campaign that looks like Northern Ireland or the Middle East. But in areas where Oranges control the state, and Greens are in the minority, these tactics could reverse. Think about the BLM riots, or Jan 6, or the doxxing of Supreme Court Justices by angry establishmentarians, or the various street fights between right and left, or the constant digital struggle that plays out online every day, and project out a future where those kind of network warfare tactics become daily occurrences. Like the portmanteau “lawfare”, think of this as “netwar.”

Maximalist vs Woke Rotates Left and Right

The reason the terms “left” and “right” don’t exactly fit for the projected conflict of Orange vs Green is that in many respects the Bitcoin Orange would be the revolutionary class faction and the Dollar Greens would be the ruling class faction.²¹²

Basically, those who side with the US establishment in this scenario would be the same personality type as those who sided with the ancien regime during the French Revolution: they’d be fighting to preserve the past. Their message would be one of particularism, of American nationalism, of continued dollar supremacy.

By contrast, those who side with Bitcoin Maximalism would be a revolutionary personality fighting to overturn what they saw as tyranny. Their message would be one of universalism, of a system that puts everyone worldwide on the same playing field — and that doesn’t privilege America over the rest of the globe like the dollar does.

This will be an extremely uncomfortable position for the US establishment, because for the first time²¹³ in memory they’ll represent the technologically conservative faction, the less universalist side, the pre-modern side.

But you can already see the foreshadowing in terms of how legacy media inveighs against technology, how they hate the future, how they want to jam social media and the internet back into the garage, how they want to turn back the clock on all those things that have disrupted their political control.

Maximalism is thus a kind of leapfrogging. If Trump invoked a mythical past, and the US establishment represents an attempt to freeze the present in amber, the Bitcoin Maximalists are willing to drive the system towards an uncertain future. That’s why a fair number of conservative Republicans will side with Green, and why revolutionary Democrats will side with Orange. Bitcoin Maximalism is a movement that knows it can’t “Make America Great Again”, because that America no longer exists and perhaps never did, so it’s willing to take the entire fiat system down.

Orange is thus comfortable with a higher level of chaos than a suddenly conservative US establishment. It is ok with the uncertainty of crypto-anarchy over the certainty of inflationary tyranny. And it is not looking to mend the federal government, but to end it. Unlike the reformist Republican, Maximalism is playing to win. And so it might.

Who Wins?

It’s extremely difficult to forecast what happens, but I do think that in the long run the Maximalists may win at least some territory in a Second American Civil War, because they’ll eventually outlast the money printing of the US establishment. The value proposition in the American regions that go Maximalist will be “freedom”, though others will perceive it as anarchy.

Why could Maximalists win a war of attrition? Every day the price of BTC/USD goes up is another victory in the Maximalist social war against the US establishment; every day it goes down is a temporary defeat. ²¹⁴ Because the US government can’t invade the rest of the world, and because other states won’t necessarily listen to it, it can’t easily seize Bitcoin globally. So long as the long-term price trend is up, which is not guaranteed, then Maximalists win.

That does lead to a related point: with an estimated 300M cryptocurrency holders worldwide at the time of writing, hundreds of millions of people who aren’t Maximalists already believe in Bitcoin. And it’s on track to be billions by 2030. So long as those holders don’t sell their Bitcoin, that’s a fundamentally new international support network of a kind that MAGA Republicans don’t have. That is, a man in Brazil doesn’t necessarily care about American Republicans vs Democrats — he’s not an American nationalist, and doesn’t have a dog in that fight — but he may well hold Bitcoin. And so long as he doesn’t sell BTC for dollars, he’s indirectly supporting Maximalists. Yet his foreign support comes in an intangible and ideological form that feels acceptable to the proud American Bitcoin Maximalist, as opposed to (say) the explicit support of a foreign military getting involved on US soil.

With that said, the US establishment could also win a war of attrition. Their starting advantages are immense: the universities, the media, the military, the intelligence agencies, most of the tech companies, and the federal government itself. The US establishment also has an elite global support base: all the people who sympathize with it around the world: the McKinsey types, the Ivy grads, the frequent flyer class, and the people who still think America is the country from the movies.²¹⁵ Even if the establishment can’t force foreign governments to seize BTC, they may try seizing Bitcoin for their own reasons, though other states will instead vector towards the direction of economic freedom.

Moreover, even if the US establishment does lose some territory, it will likely hang on to the Northeast and the West Coast. The value proposition in those regions that stick with the establishment will be “democracy”, though others will perceive it as fiat “tyranny”.

During all this, the pressure of conflict could force people to the ideological extremes. The closest movie archetypes for the Green and Orange sides could be a more oppressive version of Portlandia and a more functional version of Mad Max. Cartoonish caricatures come to life.

Wars Aren’t Romantic

If it’s not abundantly clear, I take no sides here, and am not rooting for anarchy. I’d prefer a stable world where we could focus on mathematics and getting to Mars than the chaos that may soon ensue. And I have no illusions about how bad civil conflict can get; there are no unscathed winners in wars. Read David Hines for a good depiction of what political violence is actually like.

Political violence is like war, like violence in general: people have a fantasy about how it works. This is the fantasy of how violence works: you SMITE YOUR ENEMIES IN A GRAND AND GLORIOUS CLEANSING BECAUSE OF COURSE YOU’RE BETTER.

Grand and glorious smiting isn’t actually how violence works. I’ve worked a few places that have had serious political violence. And I’m not sure how to really describe it so people get it. This is a stupid comparison, but here: imagine that one day Godzilla walks through your town. The next day, he does it again. And he keeps doing it. Some days he steps on more people than others. That’s it. That’s all he does: trudging through your town, back and forth.

Your town’s not your town now; it’s The Godzilla Trudging Zone.

Point: civil conflict is not romantic, it’s not targeted, it’s not proportional. It’s insane. If you think the scenario of American Anarchy is a possibility, you probably want to get as far away from it as you can, regardless of your “sympathies” with either side.

And then you should help build a peaceful alternative to American Anarchy. But not the alternative that China will offer, which we’ll cover next.

Chinese Control 

Attempted Coup Leads to Total Control

While in the West we may see American Anarchy, in the East we could see Chinese Control.

Before the US enters serious internal conflict, it could support some kind of China Coup — whether with words or with more than that — as written about by Roger Garside in the eponymous book China Coup, as hinted at by parties as different as George Soros and America’s JSOC, and as previously accomplished in many acknowledged regime changes and unacknowledged Color Revolutions around the world.

For reasons we’ll get into, I don’t think such a coup is likely to be successful. But the reaction to any coup attempt by the CCP could be the most intense crackdown on domestic opposition we’ve ever seen. It would be an AI-powered ripping up of Chinese society by the roots that puts every citizen under suspicion and makes it very difficult for Chinese nationals to leave with their property, to “runxue”. It may also be accompanied by deniable (or overt) Chinese retaliation against the US for attempting a coup, retaliation which could take the form of targeted shortages of key physical goods to exacerbate American inflation and supply chain woes.

If and when the coup is quashed, the CCP will then export their coup-defeating surveillance state to other countries. And their value proposition to the world will be Chinese Control — the complete opposite of American Anarchy.

China Blocks the Exits

A specific prediction is that we’ll see a world where it becomes increasingly difficult for Chinese people to leave the country or get their property out of the digital yuan ecosystem without CCP permission. Take the existing hukou system of internal passports, the WeChat system of red/yellow/green travel restrictions based on health status, the aggressive COVID lockdowns, and the recent passport restrictions — then fuse them with a surveillance state that can track people globally, a WeChat superapp that can unperson them, and a digital yuan that can freeze their assets.

There are trends that point in the direction of digital and physical movement restriction already. Chinese passport issuance has already declined dramatically, down “95 per cent in the first quarter compared to before the pandemic.” Outbound travel is similarly down 95%, with 8.5 million people leaving China in 2021 relative to 154 million in 2019. China has also been using COVID quarantine codes to stop people from moving money or moving around. And Chinese capital controls, always strict, may get even more intense with the rollout of the digital yuan. So that makes exit hard.

Conversely, on the entrance side, while it will still be possible for approved Chinese citizens to travel to places like Iran or Russia that are effectively military allies, the countries where the Chinese state lacks a hard power presence will start turning down Chinese nationals due to espionage concerns. This has already been happening.

This combination of outbound restrictions imposed by their government and inbound restrictions from other governments will make life hard for the Chinese liberals and internationalists who disagree with the system, the “runxue” types. They won’t be able to politically dissent, but it’ll also be hard for them to leave the country with their property, as many will want to do. Such an act will be prevented or portrayed as a traitorous run-on-the-bank, particularly if the economy isn’t doing well. Think about how enthusiastic Putin has been about the “renationalization of the elites”, and how closely the CCP has been watching Western tactics during the Russo-Ukraine War. They recognize that any commercial linkage with the West is a point of vulnerability during a conflict. So it’s quite likely that CCP will increasingly make it difficult for people to exit physically or digitally.

The Path to Chinese Control

What are the factors that lead us to this prediction, that CCP will emphasize the “loyalty” part of Hirschman’s triad and turn strongly against both voice and exit?

1. Shutting down opposition across the spectrum. This plot from MERICs is worth looking at, as it reminds us that the CCP is not solely against US-style “democratization”, but also against many different kinds of ideologies that differ from the party-state’s current line. Whether that opposition is Maoist (like Bo Xilai), democratic (like Hong Kong and Taiwan), Islamic (like the Uighurs), Christian (like the churches), technologist (like Jack Ma and other founders), or even ultra-nationalist, the CCP stands at the middle of an ideological circle and constantly monitors everyone for deviation.
2. Inculcating Chinese nationalism. Just as the US has gone through a Great Awokening since the 2013, Chinese society has been driven by Xuexi Qiangguo into a phase of ultra-nationalism. There is opposition to this internally, but it remains to be seen whether it actually flips the nationalism or simply moderates it.
3. Building a surveillance state. Much has been written on this, but the sheer scale of what has been built isn’t well understood. While it’s worth being aware of Gell-Mann amnesia, this is actually an area where US establishment media is closer to reality than it is domestically, in part because relative to the Chinese state it’s actually opposition media. See videos like this from DW and this.
4. Hooking it into AI. Read Kai-Fu Lee’s AI Superpowers and then read this, this, and this. Supplement it with Dan Wang’s letters, or this 2019 post from a Chinese intellectual published at Reading the Chinese Dream that is still able to question the deployment of all the surveillance.
5. Piloting the system during COVID. The green/yellow/red health codes rolled out on WeChat during the early days of COVID are used for travel restrictions - and have been repurposed to simply prevent people from traveling in a deniable way.
6. Cutting off digital and physical exit. Misbehavior in China can get you removed from WeChat, which is like unpersoning you given how many services it’s hooked into, public and private. More recently, China has repeatedly made it difficult to leave the country on the grounds that doing so would spread COVID: “Trips in or out of the country made by mainland citizens in 2021 plunged nearly 80% compared with the level in 2019, NIA data showed.”
7. Selling to other governments. Both China and the US have sold surveillance technology to the globe, but one difference is that China can execute better in the physical world - so smart cities built with Chinese technology have full-stack surveillance.
8. Justifying as anti-imperialism. The educational system and the big-screen movies like Battle of Lake Changjin and Wolf Warrior 2 position China as defending itself from Western imperialism. And this filters down to the small scale, like this video of an official defending Shanghai’s lockdown with the narrative that China will eventually have a war with the US, so citizens need to get in line for the lockdown.
9. Pointing to relative stability. The “Harmonious Society” narrative begun under Hu Jintao has been mentioned less in an international context by Xi Jinping, who has not exactly been pursuing harmony abroad. But it’s still a useful tool to justify social control — like NYT talks about censorship and social controls to preserve “democracy”, CCP talks about censorship to maintain “harmony.”
10. China Coup could be the trigger event. The US establishment has put out videos and articles that come close to calling for a coup in China. George Soros broadly hints at it in speeches like this. And folks like Roger Garside literally wrote a book on it.

An attempted coup, whether actually American-backed or simply accused of being such, could be the trigger event for rolling out a fearsome system of Chinese Control. AI would be turned on the population, and any even mildly Western-sympathic groups would be pattern-recognized and dug out by their roots. Nationalist mobs might participate, online or even in person. It could get very ugly.

The last part is important: Chinese Control would have significant popular support. The country is heavily nationalist now. It is possible the swing towards nationalism partially reverses — there are significant factions in China who do not like the current trend — but I think it’s too much to think that China is going to “go democratic.” America’s internal chaos means it is simply not an admirable model for much of the world anymore, and while some educated Chinese liberals may indeed want to runxue, there is momentum towards nationalism among much of China’s youth. I may be wrong about this, but putting it all on one person or even one party doesn’t feel right. The ideological current towards Chinese ultra-nationalism feels stronger than Xi the person, or even the CCP, and may outlast him in the event of a black swan.

Anyway, with the coup defeated, CCP would then sell a turnkey version of their coup-defeating surveillance state to other countries as a way to (a) stop any possible contagion of American anarchy, (b) control crime, (c) prevent increasingly mobile citizens from leaving with their funds to other countries, and (d) prevent unrest of any kind, legitimate or not. It would ensure that any leader currently in charge remains in charge, and would be picked by many governments for exactly that reason.

China Caveat

There’s an important caveat to all this. Much Western coverage of China is unremittingly negative. And certainly the scenario described herein is not a particularly rosy one. But we need to temper that negativity with a dose of realism.

First, why are we even discussing China? Why aren’t we discussing Chad or Chile? Because China has on balance executed phenomenally well since 1978. After Deng Xiaoping’s reforms, the country really has risen to the workshop of the world, with an enormous trade surplus, a surfeit of hard currency, and dozens of huge new cities. It’s the #2 economy, the #2 military, and the #2 in tech unicorns. All of that happened from a standing start over the last 40-odd years, since Deng’s turnaround of China (called Boluan Fanzheng).

Conversely, over the last 30 or so years, the US establishment has squandered perhaps the greatest lead in human history, going from complete and uncontested dominance in 1991 to internal conflict and potentially implosion. Moreover, as noted in What about China, huh?, it’s not that the US establishment is more ethical than the CCP when it comes to civil liberties, it’s just less competent. After all, the US establishment also does warrantless surveillance via the NSA, unconstitutional search and seizure via the TSA, arbitrary confiscation of property via civil forfeiture, censorship of political keywords just like WeChat, and has pushed for disinformation agencies, civilian disarmament, digital censorship, and the like. The US establishment copied the CCP on lockdown, without ever really admitting it was doing so, and funded the lab that may have leaked the coronavirus. It’s also bombed and destabilized many countries around the world. And if we’re honest, over the last two decades, the US has killed and displaced far more people abroad than the CCP has.

That might be hard to hear for a Westerner, but what all of that means is that (a) the CCP does have some cred with many “neutral” countries, (b) it also has cred with huge swaths of its own population thanks in part to both nationalist propaganda and actual execution, (c) that relative cred will grow if America descends into anarchy, (d) the cred will make it easier for CCP to roll out more Chinese Control at home and abroad, and (e) the cred will actually attract some Chinese ancestry people back to China even as others want to leave.

Wait — that last point seems paradoxical. How could people want to come to Chinese Control if we’ve just spent all this time talking about so many want to leave?

Think about Microsoft. It’s a strong company. Most people in the world would be glad to get a job at Microsoft. But many of the very best would find it stifling, and would instead strike out on their own to join or found a tech company. There’s simultaneously a demand for some people to join Microsoft while others want to leave.

In the case of China, this is compounded by China’s evaporating soft power in regions where it doesn’t have hard power. The climate of suspicion towards Chinese nationals has ramped up dramatically in recent years, and it’s generally not flagged as “racism” by the establishment press. This could make a good number of Chinese ancestry people leave rather than be singled out in the event of a hot conflict.

So, that’s what could happen to China: significant inflows of Chinese ancestry people, along with some outflows (or blocked outflows) of elites.

And the Chinese Control scenario we’ve described, while dystopian to the ambitious and freedom-seeking, will likely be acceptable to many people who prize stability over all else and see scenes of flames and gunfire (whether representative or not) coming from American Anarchy. It won’t be trivial to beat the average standard of living that Chinese Control may be capable of delivering. It will appeal to many. And that brings us to the International Intermediate.

International Intermediate 

What’s the International Intermediate?

They’re just the people who don’t want their societies to descend into American Anarchy, but also want a better option than Chinese Control. That’s India and Israel, but also American centrists, Chinese liberals, global technologists, and people from other places that want to steer a different course from the US establishment, from crypto-anarchy, and from Chinese Control.

Why mention India and Israel so prominently? Call it a hunch, but those two groups are #1 and #2 in immigrant tech founders in the US. India is, separately, also #3 in tech unicorns after the US and China. At the state level India and Israel are now highly aligned, and at the individual level Indians and Israelis tend to be globally flexible and English-speaking.

So, insofar as there is a third technological pole outside the US and China, it will probably have significant Indo-Israeli character, with servers positioned in their respective territories, and deals inked across borders.

Of course, it will also have contributions from all around the world. It’s probably easier to say who the International Intermediate is not than who it is. It’s not the US establishment, or places heavily aligned with it. And it’s not China or heavily China-aligned regions like Russia and Iran. But it could include places like the Visegrad countries (anti-Russia but also skeptical of much in America), or South Korea (which elected a pro-Bitcoin head of state), or even Vietnam (now pulling away from China to side more with India).

Because it’s “everyone else”, by default this International Intermediate is just raw material — the 80% of the world that is not American or Chinese is just a formless mass without internal structure. Indeed, that’s what happened to the “Third World” during last century’s Cold War. The Non-Aligned countries weren’t just not aligned with the US or USSR, they weren’t aligned with each other.

This time, however, rather than being the Third World / non-aligned movement, a subset of the many billions of people in the International Intermediate can align around web3 to try to build alternatives to American Anarchy and Chinese Control. And that subset we call the Recentralized Center.

Victory Conditions and Surprise Endings 

Many video games have the concept of good and bad endings, like Shattered Union and Starcraft. We’ll take that approach with the sci-fi scenario we outlined, describing some Victory Conditions for different factions as well as Surprise Endings that give an unexpected twist. Again, this is a way to think through an uncertain future with some scenario analysis, not a hard and fast set of predictions.

The Victory Conditions 

The “Base Rate Fallacy” Fallacy

This is a scenario where the US establishment wins, and averts American Anarchy.

In 2020, Tyler Cowen wrote about how “base-raters” and “growthers” differ regarding the coronavirus. Growthers looked at the growth rate of the virus, which at the time was exponential. Base-raters start by asking how often something has happened before; they assume things will more or less stay the same.

So, base-raters assume the post-war order remains intact; the dollar remains number one; the USA stays number one; China will collapse like Japan; everybody always says the West is declining, but it’ll always reinvent itself; it’ll be okay; you’re too concerned or worried about this, etc.

If the Base Rate Fallacy is assuming tomorrow will be like today, then the Base Rate Fallacy Fallacy is assuming that the Base Rate Fallacy is always a fallacy. After all, tomorrow often is like today! The growther always thinks that change is going to happen, but it may not.

So what does the establishment win scenario look like? It’s the same thing we’ve already got. The post-war order just keeps on keeping on in a zombified fashion. There’s no dramatic acceleration or collapse. Instead, the West just keeps reinventing itself and all is mostly well.

If you want a faithful rendition of this worldview, this thread by Vuk Vukovic is decent. I disagree with many bits of it, including the idea that discord is our strength. And I think in general that the thread is fairly anti-empirical; the graph of long-run interest rate trends alone shows that something is going to run out of juice eventually. Still, it’s worth a hearing.

China Can Make a Pencil

This is a scenario where the CCP wins, and Chinese Control triumphs.

How might China become the most prosperous and stable country in the world, even if it’s unpopular in some places abroad, and even if the US attempts to financially or socially sanction it? China would become an autarkic autonomous autocracy.

To understand this, let’s start with a famous libertarian story: “The Pencil.” The idea is that no one person can make a pencil. After all, a seemingly simple pencil is composed of wood, graphite, yellow paint, the metal that contains the eraser, and the eraser rubber itself. But creating each of these things in-house would require running a variety of different agricultural and mining operations. So instead of having one person do all of that, the capitalist system makes a pencil in a “networked” way. We use prices as an API, so that different organizations can spin up, produce components in a cost-effective way, use their profits to grow or maintain themselves, and adapt without coordinating with each other.

But that was then. Maybe Chinese Communism with the digital yuan is different. What happens if you have a computer system which really does know about every vendor, that has every record of every payment, that can actually see the global supply chain, and that knows every single person (or robot) required to make that pencil? It is a large, but finite problem after all. Maybe such a system can solve Hayek’s calculation problem.

We already have proof points for this. If you run a two-sided marketplace, you’ll find contra Hayek that not all knowledge is local. For example, Sidecar lost to Uber because drivers set prices themselves, as opposed to setting them centrally. Hayekians would agree that Sidecar’s approach was optimal: drivers have local knowledge and central planning can’t work. But Uber’s central planning did work. They had a global view of supply & demand. And riders wanted speed, not price shopping.

So, that’s what this win scenario contemplates. If China integrates AI with the digital yuan, and makes their entire economy computable, at their scale they might actually be able to make a pencil. And everything else.

Recall that previous abstractions like “six degrees of separation” or “written history” became very real once social networks digitized decades of interaction and communication by billions of people. So too would previous verbal abstractions like “the economy” or “the supply chain” become actual computable objects when you have every transaction and vendor in the same database. Basically, all the blockchain supply chain concept actually could work, but only if all payments (and hence receipts) are on-chain — or in something like a blockchain, which is what the digital yuan may be.

This is doubly true if AI-driven robots are carrying out many of these functions. China might be able to internalize huge swaths of the economy. It could mean full stack production of everything, hyperdeflation of living costs within China, where labor becomes electricity. In this scenario, no one person can make a pencil, but China can make a pencil, because they can algorithmically coordinate the supply chain of millions of cooperating humans in a way no one has ever been able to do before. They’d still need the raw materials, but their alliances with African countries, Russia, and places like Iran might take care of that.

It’s essentially the vision of Red Plenty, Soviet-style central planning made feasible with superior computation and robotics — so that the robots actually did what you said they’d do, and didn’t have that pesky self-interest getting in the way like humans did. It’d be a riff on Aaron Bastani’s fully automated luxury communism, where the communistic parts would be the robotic parts — as they would lack any economic interests of their own, and move as one.

In this win scenario, the Chinese Communists might have the highest standard of living on the planet, as much higher than the US as the US was relative to the USSR, not only because they actually make physical things, but because they could see the full stack, have data on everything, track every transaction, and deploy AI and robotics in the physical world.

Of course, that standard of living would be achieved in an ethnonationalist society with a bone to pick with the US in particular. And it might result in a Greater East Asian Co-Prosperity Sphere 2.0, this time under Chinese rather than Japanese terms. Everyone would have to bend to Chinese hard power to get the benefit of their robotic economy.

In this scenario, the Chinese might even choose to copy the tactics America used in the Russo-Ukrainian war: namely, physically sanction any group or state that opposes them, thereby cutting them off from the supply of goods from an increasingly physically autarkic China.

I don’t like this world, because it cuts against the convenient outcome of the late 20th century, in which the system that produced freedom also produced prosperity. But the experience of two-sided marketplaces shows it is a possibility.

The Surprise Endings 

Duopoly of Digital Despotism

In this surprise ending, the U.S. establishment and the CCP work together to stop the global Bitcoin and web3 insurgents. It would be like the US and the USSR aligning against the Third World.

Now, there was actually one example where that happened, when the US and the Soviet Union were on the same side, and that was the first Iraq War in 1990. The Soviet Union actually voted with the US in the UN Security Council to condemn Iraq. That was a huge moment, because normally they were reflexively oppositional.

The explicit version would be something like this, where the otherwise hostile US establishment and CCP both decide that BTC and/or web3 are a threat to their power, and try to denounce it at the level of the UN, a bit like their quasi-cooperation on non-political issues.

There’s also an implicit version of it, where they team up without teaming up. The US establishment on many levels admires the CCP crackdown on speech. For example, in The Atlantic they said China took the right course on internet speech, and in the NYT they noted that Free Speech Is Killing Us. The US establishment did copy Chinese lockdown, without admitting it.

And so you could imagine them teaming up without teaming up, where China does something, then the US establishment copies it, maybe without acknowledging it, and they thereby perform an unacknowledged pincer attack against technologies that oppose them, a bit like the Molotov-Ribbentrop Pact.

We call that scenario the duopoly of digital despotism.

Bitcoin Ends Human War, but not Robot War

A key thesis of The Sovereign Individual — and an important argument for Bitcoin and cryptocurrencies more generally — is that if a government cannot seize money, then it cannot start wars.

Why? If a state can’t coerce, it can’t pay to enforce conscription, or pay the conscripts themselves, or seize the money to pay for all the equipment needed to prosecute the expensive industrialized wars of the 20th and early 21st century.

There’s a book called Gold, Blood, and Power: Finance and War Through the Ages that describes how finance was a weapon of war, and that the 20th century was one of the first times where huge wars have been fought without any country running out of money. The only thing the countries ran out of were bodies, because they were giant centralized states that could seize everything in their territory, and could propagandize everyone in their territory, and could just drive total war. So the Nazis, Soviets, and Americans just grabbed everything in their territory to fight these wars, like enormous ghosts that commanded millions of bodies in these titanic ideological combats.

How did they command those bodies? If you think about The Tripolar Triangle, the lower left corner of NYT is voice, and it’s convincing people with words. The lower right corner of BTC is choice or exit, and it’s convincing people with money. You can think of these as left and right democracy respectively.

But there’s a third pole. The top pole is loyalty. It’s CCP. Today, it’s AI. And it’s convincing people without convincing people at all. Because they’re all literally one. It’s harmony. And robots fit at that pole. Why? Because unlike a human soldier, a robot can’t be propagandized. And unlike a human soldier, a robot doesn’t need to be paid, just charged.

So: the problem is that Bitcoin could end human war, but not robot War. There would still be the question of funding the industrial capacity to manufacture the robots in the first place. But if you could get past that bootstrap problem…then there’s a scenario where CCP’s AI beats both BTC and NYT, and war keeps going. And now the only reliable soldiers are robot soldiers that can’t be propagandized by NYT and don’t need to be paid in BTC.

Towards a Recentralized Center 

Our base scenario doesn’t contemplate an extended Second Cold War between communism and capitalism.

But we do think that the choice between American Anarchy and Chinese Control can be seen as a kind of global ideological struggle of a different kind, as a choice between decentralization and centralization.

Do you go with the failed centralization of NYT and the declining US establishment? The total decentralization of Bitcoin Maximalism? Or the totalitarian centralization of the CCP?

A better answer might be: none of the above. That instead of choosing either anarchic decentralization or coercive centralization, we choose volitional recentralization.

In Defense of Recentralization 

When you mention a recentralized center, at first it seems laughable. The centralists will say “what’s the point of decentralizing then? Just stick with our existing system!” And the decentralists will say “new boss, same as the old boss, I prefer freedom!” Derisive references to Rube Goldberg Machines and Animal Farm will abound.

But the whole point is that the new boss is not the same as the old boss, anymore than Apple was the same as BlackBerry, Amazon was the same as Barnes and Noble, or America was the same as Britain. Recentralization means new leaders, fresh blood. Just as companies and technologies keep leapfrogging each other, so too can new societies with One Commandments combine moral and technological innovation to genuinely progress beyond our status quo.

Recentralization is not about going full circle and making zero progress. It’s the helical theory of history. Recentralization, done right, is a cycle back to centralization from one vantage point but a step forward from another.

I don’t agree with him on everything, but Yuval Harari has a good quote on this:

I mean we need institutions actually more, but there is this wave of distrust against them. Now, it doesn’t mean we need the old institutions. It doesn’t mean that we have to stick with the old media. Maybe we need new media institutions, which will be more diverse, which will give more people a chance to voice their opinions, but in the end we will need to build these institutions. The idea that we can just do without them, that we’ll have just this free market of ideas and anybody can say anything, and we don’t want institutions to kind of stand in the middle, and curate and decide what is reliable and what is not reliable, this doesn’t work, it’s been tried so many times in history.

You know, if you look at religious history, to take a counter example, so you have in Christianity, again and again these people coming and saying, “you know, we don’t want the Catholic Church, this institution, let’s just every person can read the Bible for himself and know the truth, what is more simple than that, why do we need an institution,” and you have the Reformation, the protestant Reformation. And within twenty years or fifty years, they realize that when you let every person read the Bible for themselves you get 100 different interpretations, [each] radically different.

So eventually someone comes and says “No, these are the correct interpretations” and you get the Lutheran church. And after 100 years, someone says “wait, but the whole idea of the Reformation was to get rid of the Church so we don’t want the Lutheran church. Let every person just read the Bible and understand by themselves.” And you have chaos. And after 50 years, you have the Baptist church, and this church, and that.. you always go back to institutions. So it’s the same with the kind of information explosion that we have right now.

Note that in this example the Protestants, and then the Lutherans, and then the Baptists had to attract people to their interpretations. Many other competing denominations did not. This process of constantly forking and innovating and having it compete in the marketplace brings in new blood.

And that’s the concept of the recentralized center. The way to demonstrate it’s a step forward is via mass exodus of people from both American Anarchy and Chinese Control to the recentralized center, to high-trust startup societies and network states.