New Countries

April 2021

@balajis has recently proposed how futuristic countries may come about. This seems enabled by a combination of dissatisfaction at existing governments[1] and new technologies (blockchains and cryptocurrencies, in particular) which are prompting ideas of radically different social structures. It's an interesting and thought-provoking idea. He's also offering $100 in BTC for constructive feedback... so here goes.

TL;DR: He's a strong and convincing storyteller. Ignoring that, the idea still appears to stand on its own fairly well, and he's not the only one doing it. Amoveo (cryptocurrency) has some related ideas.

Context

In March 2021, Balaji spoke with Tim Ferris for over 3 hours (one of Tim's longest interviews) about this and several other dramatically futuristic topics, reaching millions of listeners. This episode might go on to become one of Tim's most important episodes. Or possibly the most comical. Either way, why should society remain the way it is now anyway? Of course it'll change. And since innovation seems to happen simultanously, there are probably other people thinking about crazy new country structures[2].

So what is Balaji doing?

He has a new project called 1729. It's a kind of community, centered (for now) around a newsletter and website. Nothing new there.

He's made one important change to the standard "newsletter community" model: he's building an economic model of participation into it which rewards value-adding activities like learning skills (education) or being healthy (healthcare) with cryptocash that holds value outside the community. It's like someone offering you money to quit your job and move across the ocean to join their startup.

Except he's doing this with the whole world, and it's a country you're being paid to join, not a business.

Even this isn't that novel; online-to-offline communities have been done before, or are being done (eg the Roam Research community maybe starting a ranch in Utah and living together under the iconic/heroic Conor). But not at this scale.

Possible Outcomes

Let's assume he has the funds to support $5000 ($100 for the first 10 submissions for 5 tasks) per week for 5 years ($1.3M).

After a few years there'll be several million people begin participating in this community (citizens of this country). They'll be talking, doing life together, sharing conversations and experiences.

Over time, shared beliefs are established, built around real economic value (and therefore minimising spam/trolls).

As these real relationships build, people who interact online start to move closer together offline, because some things are just easier and nicer to do offline (eg have dinner together). There may be some critical number of members in a particular location to catalyse this, but a physical community absolutely could form, like many other existing physical communities.

As the community grows, gains members, and prospers, the members of this "diaspora" become influential outside the community. This is really the cornerstone of the theory, and depends on the community being filled with people interested in adding value. Are Balaji's heuristics for people sufficient? The critical ones might be:

  • Willingness to do "tasks" (work) for others
  • Interest in personal health (decreasing need for a healthcare system)
  • Desire to learn (which increases the quality of task work and compounds in value)
  • Willingness to invest financially in the community (pay others for their work)

Alternatively, after some time, people might just become jaded and leave. Possible reasons:

  • Unhappy with governance
  • Insufficient real liquidity or value creation
  • Some unknown reason

More likely, other people will have similar ideas and we'll see lots of other new countries beginning, and possibly some long-existing digital communities realising their power and deciding to exercise it.[3]

Metrics

Balaji includes some metrics for his country.

Population

An obvious one. One less obvious by-product if this metric is highly public is that it may encourage people to spread the word, prompting FOMO just like you get when you see a green stock ticker.

On-chain GDP

I love this metric, because measuring it will encourage economic activity to move on-chain.

There will be (even more) really interesting dynamics with local governments as this happens. For example, if you are earning, investing and spending Bitcoin in a "foreign nation", what should your local tax contribution really be, and why? How could that happen?

Earning

  • If you're providing value to someone online, cryptocurrency is the most efficient way to compensate you. Think this is a strong statement? Consider the work required to transfer traditional currency, making sure to include all the work, and not just the energy used by the network infrastructure at transaction time. The bulk of the energy consumed by traditional currency is actually in the financial institutions, the people working at those institutions, the laws (and lawyers) to govern it, etc. Next to that huge energy expenditure, Bitcoin might seem pretty green. And there are new blockchains offering more efficient systems (though there are stability arguments and philosophical arguments[4] against this).
  • So it's likely that compensation in cryptocurrency will increase and eventually (mostly) replace traditional currency.

Investing

  • Like traditional currency, crypto can be invested, loaned, and otherwise used to grow wealth. But more generally if you're holding the currency and using it for a significant percentage of your expenditure then, through opportunity cost, you're invested.

Spending

  • Why isn't this happening already? Probably regulation.

Acreage

And here the virtual community is tied into something undeniably and measureably physical. This metric is related to the requirement of community influence, as those holding land tend, historically, to influence those who don't.

There's already a lot of real-estate wealth held by people who became rich on-chain, and it's likely these people would be interested in this new country since it'll be full of other people like them (network effects), so there's a good chance that this metric could rise pretty quickly.

It's worth mentioning that, similar to futarchy, this is something that @zack_bitcoin has been thinking about for Amoveo.

Questions and Thoughts

How is policy created?

ie, how does politics work? How are decisions made in this country? How is a military mustered, or education provided, or taxes levied? And are those even necessary in this new country? Could the country use a futarchy-based system? Amoveo is one crypto-currency experimenting with futarchy built into the protocol. Essentially this allows citizens to "vote with their wallets" on everything, not just which companies or products they like.

Will there be a barrier to entry?

There's a growing gap between those who believe in crypto, and those who don't. There are already many Bitcoin millionaires. If this continues, and it seems likely it will, then at some point it'll be extremely hard to catch up with those who believed from the beginning, and at that point, those people are their community with their own financial moat. Even if the blockchain growth doesn't continue, maybe there's already enough "off-chain" wealth which was created "on-chain" that those wealthy people (and their ideologies) can bootstrap a very real new physical community.

What could we throw away in current systems?

How much baggage do our current governing or societal structures carry which we could throw away in Balajistan? Policy is organisational scar tissue (something bad-a wound-happens, and a the policy-a scar-forms in its place). Some institutions are clearly outdated:

  • Banks and classical financial institutions (DeFi + Blockchain are inevitable)
  • Schools (glorified day-care -> guided creativity)
  • Legal systems (lawyers -> blockchain programmers & mathematicians)

What happens when people do bad things?

They can be fired from companies, but how will this new country deal with that? This could be delegated to the question of governance, but that feels like a bit of a cop-out. Policing and maintaining law-and-order are necessary and will be tricky. Then again, these problems of policy are well; it's just a case of implementing them.

Will there be reification competition?

(Thanks @mkstra for this thought) Will real cities compete to host this country (or part of it)? As the massively beneficial outputs and wealth become obvious, it seems likely that savvy mayors will work on making their cities attractive for members of the community. And would this conflict with the sovereignty of either party?

When and where will it be?

Are we building this thing for us, or for our children? Which countries will allow such a self-governing state to exist in their territory?

One way to start small: take, for example, a small US state, and convince enough people of influence there to join, so that, over time, this state effectively turns into the Balaji-state. The new state would have to abide by the same federal laws, but internally would be full of the new state values and culture. This probably isn't optimal as US immigration laws will prevent many people from taking part.

Instead of congregating in one place, the more likely (and simpler) scenario is that this society would congregate in multiple physical places simultaneously. This could begin with local meetups over the next year or two. The people attending those meetups would be the early-adopters, and those keen to build, so would probably be keen to, for example, move close together, begin working together in spare time, etc.

What about a military?

As the china-taiwan conflict reminds us, brute force and violence is still very much in vogue.


Notes

[1] - Is this a good proxy at dissatisfaction with life in general, and so is the government able to regain their reputation with some clever policy changes? Or is this a one-way change?

[2] - If societal change is fuelled by technological change, as it feels it might be, and if technological change is accelerating due some compounding effects, we should expect society to change more in the next 100 years than it did in the last 100 years. Though this is not necessarily true; technological change tends to come in unpredictable steps.

[3] - As artists are realising, they have so much power in being the gatekeepers to their community. In the information age, they own the labels, not the other way round. See Non Fungible Taylor Swift

[4] - Proof of stake allows the rich to get richer (rewards are a percentage of staked amount, resulting in compound growth for the stakers). Proof of work allows anyone to do "an honest day's work for a days wage". Counter-argument: the difficulty of that day's work has increased to a point where the wage isn't worth it for most people.

Thanks

Big thanks to Rico Meinl and Markus Strasser for reading drafts of this and suggesting improvements.

Send feedback and thoughts: Twitter // ric@rmhsilva.com

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