On The Other Side ep 67 - The Network State: what it gets wrong + alternative models w/ Josh Dávila
Primer: Balaji Srinivasan’s The Network State is highly popular in crypto circles. Why? What is the book about? What did Balaji not consider in his framework? Josh Dávila breaks down the network state in this episode of On The Other Side.
Background
Entered the crypto world in late 2016
Had recently graduated college and was working a job that paid little
Saw crypto as a way to make money fast
During that time, Ethereum got a lot more interesting and resonated with him
Was involved with various left wing political groups. Thought that Ethereum was something relevant to the political left
Found himself in a job that had to do with blockchain
Became frustrated with the left’s hand-waving about crypto
Started a blog called The Blockchain Socialist. It developed more into a podcast
Balaji’s The Network State
Blockchain governance is focused on designing and improving institutions and not necessarily about circumventing the state
There were a number of problems with Balaji’s The Network State
The book has 2 parts:
The description of what the Network State is
Why the Network state needs to exist/is inevitable
Balaji’s reasoning is that people are frustrated with failing institutions
However, he thinks that that thinking is embedded in a far-right type of politics
Balaji has this idea of 3 leviathans that make people behave prosocially:
God
State
Network
Balaji alluded to technical networks or social media networks, but not really to networks of people who are into the same thing
There are 3 main powers in existence:
Woke Capital (The New York Times, the American government, the military)
Communist Capital (The Chinese Communist Party)
Crypto Capital (everyone who does not want to be stuck in the battle between the two authoritarians and are interested in crypto)3
In his view, Balaji’s framework is a reductive view of seeing the world and is very American
Balaji proposed Network States, based on the idea of a community that is largely based on exit
In Balaji’s view, people will congregate over different values, put their money together, buy land, and declare sovereignty within a sovereign nation and gain diplomatic recognition
He realized that this is a re-creation of the thing that Balaji hates in order to create a utopia where people only live with other people who are highly aligned with
It ignores the question of why would a sovereign state grant sovereignty to something within their sovereign land
Often times, the creation of nation states is an extremely violent process involving some sort of war or geopolitical conflict
Balaji states that Network states do not need to be violent, but he does not deal with the antagonism between nation states and network states
Plenty of DAOs are starting to declare themselves as a network state
Why Are People Intrigued With The Network State?
Biggest reason is that institutions are failing
If someone is interested in crypto, they more or less agree with that sentiment because crypto presents itself as an alternative monetary system
Was worried when he first heard about the Network State
Early projects throughout crypto history tried to do something similar, but he thinks it is naive and a little bit delusional
Balaji said that a network state needs to have a social smart contract but did not explain any further
There’s a general feeling of lack in a lot of people. People want to feel connected to others and this idea of a network state where people do things together sound nice to them
People have asked him on Twitter conversations about the Network State
However, they have yet to read the book
Buying Land For A Network State
Balaji is repackaging what a lot of libertarian projects have already been doing in the past — buying land in a third world country and investing foreign capital into it
There’s a huge history of countries being destroyed by colonialism
Most types of colonialism today are a type of neocolonialism, where it's not state directed, but it's largely capital directed
Have to think about the infrastructure on the piece of land:
If there is no infrastructure, the amount of investment is going to be huge
If there’s existing infrastructure that is administered by the nation state, they are going to cut you off from those services
If you are investing capital, you need to make a return. However, most infrastructure investments are not profitable
Alternatives To Network States
They are less interested to exert sovereignty over land
Instead, they are trying to piggyback on the state/infrastructure
Their focus is on the extra layers that the state and the market does not provide
The Expectation Of Returns And Its Impact On Crypto
A lot of people in crypto come from the tech/VC world
When you take VC investment, there is an expectation of a return
This holds back crypto, making it not able to fulfil its more helpful and useful role
Commons-Based Governance VS Exit-Based Governance
The network state is based on an exit-based governance
In Balaji’s 2013 Y Combinator speech, he gave a speech titled Silicon Valley's Ultimate Exit, which was the beginnings of his Network State idea
It’s similar to VC investments where the venture capitalist sells the startup at the pinnacle of its growth
The alternative is Commons/Common Property — A property regime that does not allow a single entity to own all rights over a piece of land
This idea is not new. Elinor Ostrom has been discussing about it
A commons require people to speak to others and have relationships with them
When there’s conflict, you can’t just exit because you live in a society
“You can think of capital as almost like the governance token of the economy under Capitalism.”
- Josh Dávila
Capital could also be thought of as a form of governance
The idea of the commons is not to value capital as something that should govern our resources, but to think about things in a multifaceted way
The Tragedy Of The Commons As A Misconstrued Concept
The Tragedy of the Commons was coined by an economist who was a hard right winger
He treated things that were not Commons as Commons
He noted that this does not work because people are not able to work together
When Ostrom describes the Commons, she differentiated Commons as a type of good (e.g. fishes in the fishery) from Commons as governance (e.g. something that is governed by the people who are part of the collective group)
After many years after his work was published, the economist admitted that his work was bunk
Can Private Property Coexist With Commons?
A lot of people in crypto heavily emphasize private property
As a socialist, he thinks that private property should be abolished
Likes Primavera’s research on Extitutions — How do you take an existing institution and its rules and subvert it in ways that still comply with the rules of the institution but change the purpose and reasoning behind those rules
He differentiates between private property and personal property (e.g. your toothbrush)
Why Do We Avoid Commons-Based Governance?
Capitalism is a type of dictatorship by capital
It makes people feel that their opinion does not matter
As a result, people do not develop the skills needed to collaborate with one another or how to deal with conflict effectively
The Dawn Of Everything
Recommends people to read this book
It expands on what types of governance and property relations are possible or have been done before
What we are in right now is not normal
Anything Else He Wants To Add
His blog and podcast series Overthrowing The Network State is going to continue
Have done 8 episodes so far and will be doing more
Have a Discord and subreddit for the Crypto Leftist community
Have community calls where they explore alternatives to the network state
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