The Sovereign Individual

The reason I wanted to write this article is because:

  • it’s a real cypherpunk bible about where the world is going and it helps to understand the ideological view of many bitcoiners
  • because I tend to believe it’s right on so many fronts
  • given the track record of being right of this intelectual movement, it may not be a bad idea to take it into consideration

By the way, it was written in 1997. If you have not read it yet, when you are done reading this article, please let me know if it’s worth paying attention to these predictions.

But the very main reason is that this book also changed the way I think.

Until I read it, I thought that collective opinion mattered if you wanted to conduct the world in one way or another and that if we somehow managed to agree on something, we could make things work in a particular way.

Basically, I thought that trying to convince people made sense.


For example, I used to believe that if we all agreed that some renewable generation technologies were good for the planet, we would magically be happy with paying exorbitant $/kwh prices to make the world a better place. If someone disagreed with me, it would almost be my duty to convince that person he was wrong.

I also thought that if I made an effort in “educating” every citizen on the benefits of paying high taxes to sustain a welfare State, then the goal of living happily ever after would be around the corner and that very few would take advantage of the system. Everyone outside that mono-thinking block was my enemy.

Also, in Spain for example, there’s this public idea that small neighbourhood stores should be protected at all costs against large malls or Companies like amazon and that we should voluntarily buy in these small stores even if we have to pay higher prices.

Now, I believe that trying to put a direction to collective thought is pretty near to psycopathy

What this book is basically saying is that collective opinion is absolutely irrelevant, that in the end, we will end up behaving according to individual incentives and that even if I make a huge effort in convincing everyone of how essential it will be to improve the planet, in the end, most will tend to try to pay the minimum price per kwh possible, we will always try to pay the smallest amount of taxes within the law as well as we will never choose close by small stores if they offer me no advantage compared to a couple of links on my amazon app.

Public opinion, as a result, tries to fight the market and the only thing it can actually do is to delay it, not stop it.

The main point of the authors of this book is, that given the above, the information age is completely changing the main incentives that have made humans organize during the last few centuries in Nation States, and that consequently, this will have a massive impact for our society.

Historical context

This book explains that one of the main factors to explain the way we organize ourselves is to maximize our security, our huge efforts to protect our life and those of our loved ones. As such, it explains that it is the “logic of violence” what explains this organization.

And, what is the logic of violence? It’s how either defense or attack are incentivised by different factors.

For example, during the paleolithic era, people hardly owned any physical goods. It didn’t make sense to own because things deteriorate and it’s preferable to simply obtain them from nature whenever they are needed.

In order to avoid violence, you could simply avoid other tribes competing for resources.

If you own no posessions and you indeed avoid competition for resources, in theory you wouldn’t have incentives to carry out violent actions because it would provide no benefit to you whereas it could potentially mean serious harm for your health/life.

A small nomad tribe, as a result, seems like ideal to maximize your defense and security.

Neolithic

This era drammatically changes the logic of violence because people start finding value in owning stuff. The land, linked to a particular physical location, forces us to own it and protect it, to stay in the same location and to own physical utensils and tools that can’t be easily moved around.

As a result, there are advantages if you associate with others to attack that land (economies of scale in violence) but also advantages in association for defense.

Proto-States are born as a result, as a way to defend from threats of physical violence. Those that specialize in violence become the leaders and division of labour allows the emergence of warriors a new social class.

Walled cities start during this period as a new defense mechanism.

Gunpowder

It changes everything again. Leaders, that used to feel protected behind their walls and armies, start to feel the urge to defend themselves differently against the new threat and alliances start in the shape of marriages between kings, princes, princesses, etc… Also conquering new territories is a way to create larger, safer and more powerful kingdoms, just the same way as large Companies feel the urge to grow and diversify in order to become more independent from their main business. Modern Nation States are born as a consequence of this trend.

These modern States quickly learn, for example France right after the French Revolution, the importance of creating a State where cooperation could be easier thanks to a homogeneus language, education, armies, public services, following a bit what Rome had acommplished many centuries earlier. Romans understood very early that spreading a common culture provided cohesion and easier cooperation in a large Empire.

As people’s rights improve and sovereignty slowly moves from monarchs to the people, these advancements generate progress because they create environments in which rules are clearer and more objective than before.

The information age

In an, in my opinion, extraordinary analysis, both authors apply the same historical framework to try to forecast how the information age could change the way we organize ourselves and they reach some really intriguing conclusions. I will focus in what I believe the most relevant ones.

Transportation and distribution of goods and services both private and public stops being based on the movement of atoms and starts more and more being the movement of bits (information).

Consequently, the information age completely breaks former economies of scale both in the corporate world as in the logic of violence, in finance, education, energy or information control.

I will focus briefly on these trying to summarize the book’s conclusions:

Security, education and information scale

In conventional warfare, scale has advantages, as the bigger the Army, the bigger the chances of winning a battle.

In the current world, this is less frequently the case especially with regards to cybersecurity. States are increasingly unable to protect us against the new kinds of threats and see new ones to their control of information and invent the term “fake news” as if it was always orchestrated campaigns organized by foreign secret services when in fact, in most cases it is just different versions of the truth.

We have always had different versions of the truth. An entirely different matter is the fact that before the internet, only State approved/sponsored versions of the truth had the ability to reach a massive audience.

I’m afraid that the world we are going to is both fascinating and terrifying. Now there are people that share files on the internet with which you can build your guns with 3D printing, are able to manufacture nanocopters equipped with biological weapons and drones that could until only very recently be accessed by big Armies, can increasingly be owned by smaller organizations with smaller and smaller resources.

That’s the entire point of technology, to increase human capabilities whether it is for individuals or organizations and whether they are good or bad.

This completely threatens the reason States were born in the first place. Its size becomes utterly irrelevant in the information age.

Regarding the control of information, politicians increasingly become the target of our wrath, not only because their failures are more public, but because before the internet we used to believe there was such a thing as an authority in politics, as if they had particular skills, while we now realize that not only this is not the case, but that there seems to be a particular simiocracy going on by which only the most mediocre tend to be able to reach power.

The reason why should be clear at this point: politics is about giving favours with someone else’s effort and about building trust with voters by arguing “you are one of us”, or “we are the same” regardless of the fact this particular kind of trust is systematically broken.

Only a very mediocre individual is able to last in such an environment in particular that which is especially scared of the consequences of his/her mistakes. Very competent ones with good intentions have tried, but the lack of meritocracy regularly kicks them out as in an inversed natural selection process.

With regards to education, mandatory State sponsored education has turned into a completely sclerotic public education unable to adapt to the labor market.

Idiots argue that education should be free regardless whether it sucks or not, as if your time was worth wasting learning nothing useful.

In countries such as Spain, the public education is the endogamic job market where you can easily find husband and wife, father and son, brother and sister, where they “coincidentally” happen to find a job in the same place!

Anyone who has tried the extraordinary quality of publicly ranked courses online understands that it is only a matter of time the education system is turned upside down.

While it used to be the case that the value could be kept in physical locations where educators could teach their lessons, now the value is kept by professors themselves with the ability to reach massive audiences regardless of credentials or résumé.

The scale in finance

Gold failed as a monetary standard because it was not ready for a global economy in which transactions had to be way more frequent and far.

Scaling gold required trusting 3rd parties that provided IOUs which gave gold a better:

  • Transportability
  • Easyness to validate
  • Divisibility
  • Lower custody costs

Bitcoin is the solution to the problems of gold and does it without the need to trust 3rd parties as internet already allows in the case of education and information and increasingly more in the case of security or the energy system.

In this book, the authors already in 1997 anticipate how a cybermoney could create a difficult to tax cybereconomy, especially in those jurisdictions that have traditionally competed to attract foreign capital.

Besides, you should add the fact that for the first time since the paleolithic period, you can take your entire wealth with you wherever you go.

Also, having a big chunk of your assets in cyberspace completely changes the logic of violence as cryptography allows for the first time way cheaper defense than attack.

There is no doubt that some countries will be more forward thinking and its citizens will benefit from this. Others will be more restrictive and the likely scenario is that its citizens will start looking after jurisdictions that take better care of them.

The current COVID crisis makes it more evident that there are threats where the State not only is not the solution but can also make problems way worse.

This will end the fiat system that has made the welfare state more viable than it would have been otherwise.

Corporate scale

It used to be the case that importante Companies in the XX century used to be large, because scale could be turned into better costs and as a result better prices for its customers.

In important Companies in the XXI century most of its assets are digital; value is in the data they own. Whatsapp was sold for a whopping $19bn with only 55 employees.

Today thousands of social media stars are able to sell millions thanks to having the ability to reach audiences that no TV station could dream of only 25 years ago.

Energy

We’ve always needed to transport energy from where it is generated the cheapest to where it is consumed and although I believe it will take some time, at some point we will be able to store electricity affordably and at a massive scale.

At that point in time, almost anyone will be able to generate its own electricity and the massive transportation and storage facilities ran by public or typically semi-public organizations will not be needed any longer.

We will therefore depend less and less from gigantic infrastructures and the State will lose a significant revenue source in terms of taxes.

Scale again loses its advantages

The vision

In summary, the information age is radically changing the incentives that in a different moments in history made us organize ourselves in a particular way.

The access to a wide variety of information sources is polarizing every single country’s public opinion to levels unknown. Even parliaments in some countries have an increasing number of political parties and despite that, few feel properly represented there. Consequently more and more people feel less identified with an increasing number of people in their country and this is a global phenomena that seems to be happening everywhere.

Thanks to the advancements that we have mentioned, individuals have bigger and bigger capabilities that only huge companies and armies could dream of.

On one hand, individuals will need less and less large Companies and States and on the other hand new technologies will increase the fiscal pressure of States. In my opinion this will create a techtonic collision that will generate larger social tension.

The State is a parasite that survives thanks to individuals and millions of individuals live from the State. They will not make this transition an easy ride.

We will defend ourselves by searching for ways to get the maximum from it by paying the minimum and all these advancements allow individuals not only to need it less and less but also to pay less.

As I explained in the beginning, it is utterly irrelevant if you believe in the welfare State. Both you and millions of other individuals will behave according to your individual incentives and this will completely break the State as we know it.

We moved from tribe/chieftain sovereignty, to monarch/Emperor’s sovereignty, to people’s sovereignty and we are likely to move towards individual sovereignty soon.

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