Balaji’s Network State: Reviewing Its Goodness and Feasibility

“That’s the question everyone is asking these days, Andrew. What’s the new system? What’s the new system?”

One of the top thinkers of our day said this during a private meeting I was in. It was me, her, and Andrew Yang. The fast one I’ve pulled here is that she was addressing Yang, not me, but the words perfectly illustrate the task of the 21st century.

The speaker is a brilliant woman who runs a prestigious think tank. This wasn’t an uncommon meeting for Andrew Yang and me at the time.

It was 2018 and as we hopelessly tried to gain traction running for president, we paradoxically found ourselves in meetings with a stunning potpourri of leaders. This list includes congresspeople, obscene billionaires, little billionaires, crypto punks, think tank leaders, and financial titans. The twist is that many of them never intended to support us; they were simply intrigued by this guy who seemed to have an answer to this question that, indeed, everyone was asking.

WHAT’S THE NEW SYSTEM?

This question is what first brought me to Andrew Yang in 2017 and landed me on the founding team of his presidential campaign. Having lived in Silicon Valley, it was quite easy to see where technology, capitalism, and failing government were taking us, and it was a bad place. When I met Yang, we agreed that we needed something big, something that prioritized human well-being. His Universal Basic Income was the best and most practical thing I had heard at the time (yes, really!), so I joined his team.

Despite this, everyone knows Universal Basic Income is not enough. A small income floor will help keep people afloat, but then what? Surely our society can promote more than poverty-based survival.

Over my time on the campaign, I heard a lot of ideas. Magical systems of benevolent neighbor networks, 3rd parties, socialism, a return to free-market, direct democracy, and all sorts of strange apps that seemed to think they could replace democracy through the App Store.

All of these ideas lacked in one way or another. I came to see three critical dimensions that any change to the social system needed to fulfill. These three dimensions are:

1. The idea must work with the trends of technology
2. The idea must host practical logistics it’s proposed government reform
3. The idea must align the incentives of human self-interest

All of the ideas I heard during my time with Yang struggled to meet one of these criteria and thus lacked a convincing pitch.

THE NETWORK STATE

The most compelling idea I’ve read about is Balaji S. Srinivasan’s Network State, recently detailed on the website of his new project, 1729.com.

Balaji’s idea summarized is that a group of people can eventually obtain collective bargaining power over a Nation-State, and eventually gain statehood, by organizing in the cloud, building a community, pooling assets, and buying land.

The Network State as Explained on Balaji’s Website:

• We recruit online for a group of people interested in founding a new virtual social network, a new city, and eventually a new country
• We build the embryonic state as an open-source project
• We organize our internal economy around remote work
• We cultivate in-person levels of civility
• We simulate architecture in VR
• We create art and literature that reflects our values
• We eventually crowdfund territory in the real world, but not necessarily contiguous territory, (more like a thousand apartments, houses, Cul de Sacs, etc., he says)
• Over time, community members migrate between these enclaves and crowdfund territory nearby, with every individual dwelling and group house presenting an independent opportunity for expansion

You can sort of think of the Network State as a social network with a cryptocurrency that crowdfunds territory and operates as a sovereign collective.

BALAJI’S CASE FOR NETWORK STATE

Balaji makes a whole variety of points detailing the benefits and practicality around this solution on 1729.com. I’ve also listened to him speak about this on a few podcasts as well, so I will crowdsource some of the ideas.

Why people want this

Balaji argues we need and want a clean slate to build something new without historical constraint. He says that it’s the same reason why we use a new sheet of paper for a fresh idea — we’re not constrained to the scribbles of the past.

• To validate this point, many political thinkers, activists, and everyday people want a fresh government, given my experience. So that desire is real. Starting anew has just never really seemed like an option. In many ways, one could compare Nation-State vs. Network State’s situation to the horse vs. car. People wanted to go faster and farther, but they didn’t know the car was an option until someone thought of it.

Balaji argues people form communities in 2021 based on ideology rather than the old way, geography. This is causing increased frustration as governments struggle to serve their people.

• This claim is also valid. Anyone who spends a lot of time talking online instead of hanging out with their neighbor is a living example of this.

Why it can work

• Balaji says there are two definitions of a country: numerical and societal. Numerical basically means the number of people or capital. Societal basically means the influence that those numbers command.
• For a numerical example, Balaji cites many countries with small market caps and small populations (5mm people is common). He says, look at how easy it would be for a cloud community to get bigger than that. He is not wrong. r/WSB has more people than about 140 countries. With that many people declaring themselves a state, exerting financial influence, and working collectively, they will eventually be recognized. I think he’s right on this.
• Balaji compares the Network State to cryptocurrency by citing how effortlessly cryptocurrency has exerted influence on the financial system, which is arguably the stronger system compared to the Nation-State.

FEASIBILITY OF THE NETWORK STATE

It took me about 20 minutes to realize the Network State is obviously going to happen. I’m not exactly sure how or in what capacity, but it’s happening. An expression in Silicon Valley is that it’s easy to predict the future; it’s just hard to know when it’ll happen. If you keep up with history and technology, you will find yourself quickly predicting the future. I have succeeded at it many times.

I’m not saying the Network State is good (analysis on that below), but I am saying it’s obviously happening. The reason the Network State (TNS) is going to happen can be explored by referring back to the three points above:

1. Technology: the Network State follows with and is supported by the power of technology’s future, which is generally unstoppable. TNS checks this box.
2. Government: like with Crypto, people will do this, pooled resources command influence, and you can’t shut down the internet. The result is that the Network State will be built, and then it will eat parts of the Nation-State. End of story. There will be no negotiation. There will be no lobbying. TNS checks this box.
3. Economics: the incentives are aligned here because individuals all gain through this system. More rights and financial freedom are enabled. Self-interest and money align. TNS checks this box.

The central question in social contract theory (a fundamental philosophy behind government) is how much freedom should individuals give up to gain the security of the collective? History is riddled with ideas surrounding this. Some like Hobbes said we need to give up everything for protection from a Monarch. Others like Locke believed in a more free and small government. Nearly all of the ideas required a group of people to be in charge of making the rules. This is where a lot of problems begin. Who do we choose? How do we choose them? What happens if we choose them and they suck?

Balaji’s Network State still has many details of this sort to be determined. I also recognize that the Network State is a method of forming a state rather than a fixed set of values and principles to guide all states. Despite this, I believe, given the radically different nature of how a Network State is formed and governed, and the principles that will be universally true for all of them, a structural analysis is still valid.

For simplicity’s sake, I believe we can chiefly assume most Network States will probably be some form of democratic, decentralized governance. In other words, people write their own rules collectively, the rules are enforced by computer programs, and if you don’t like the rules, you can pick a new community (or, hell, you could fork it and make a new one).

A key feature here, however, is that if you don’t like your state, you can easily leave. This flexibility of choice in a state is weird to us now, but I find it a fairly potent form of state accountability. We have already seen this sort of people vs. those in power with the Justin Sun vs. Steem debacle.

Concluding feasibility, Network States could be a niche trend of the anti-establishment, or it could the next logical form of governance that seems radical today. Right now, it’s hard to know. But without a doubt, it’s happening in some capacity. I think the niche scenario is probably a 10-year time scale, and anything more significant is a 30-year time scale.

IS THE NETWORK STATE GOOD?

After working as Andrew Yang’s Director of Marketing, I left marketing behind to finish answering the question, “What’s the New System?’ My specific interest in “the New System” has been how we can design this new system for human well-being. Or, Flourishing, as Martin Seligman refers to it. This intersection of psychology and government is precisely what I’ve studied full-time, as my job, for the last year.

What is good?

To me (and many in psychology), well-being is the only KPI, or bottom-line, of any life and inadvertently any societal system (social or financial, primarily). In my view, well-being is the end-all-be-all answer to what makes life worth living, how we should measure progress, and how we should determine ethics.

When we look at modern capitalism and status quo governance, we can see that we are failing on the measure of well-being. Suicide, depression, divorce, and many other social indicators are all going up and in the wrong direction. As I often say, if everyone is sad and wanting to kill themselves, what’s the point of all of this effort to achieve material progress?

Most people evaluate the efficacy of a social system based on the success of the financial system it promotes. People measure social systems that way because financials are easy to measure, and people think financials are a close enough proxy to well-being. I’ve studied this extensively. It’s only marginally accurate. The short summary is that individual income growth, not GDP, not GDP per capita, is the only measure that is reliably related to increases in life satisfaction. Additionally, this is only constant at low-income levels. Money has little impact on our well-being at higher levels. This is because we have human needs that money can’t fulfill!

For these reasons, a state of any type needs to be considerate of whether it is well-designed to promote well-being rather than casually waving its hand at a grinding financial system claiming things will work out.

This is where reviewing the goodness of the Network State means reviewing it through the lens of well-being.

Well-being and Governance

To be clear, the task of “designing” a system for human well-being is a bit of a loaded one. As you’d imagine, psychological well-being is terribly complex. Despite the popularity of many books touting one big answer, there is no one big answer, or “monism,” to the good life. This is empirically true. In contemporary psychology, well-being is an umbrella term used to refer to a range of characteristics that make up the good life. At this moment, there are 13 rigorously tested and verified characteristics* that we know to independently contribute to well-being. Yes, thirteen! You don’t hear about this often because 13 sources of well-being is not so catchy or trendy. Worse, the sources are not fixed things you can easily instruct folks to do, or “ought” to do, like ten jumping jacks.

This all means that the best way for a social system to provide well-being is not to try to provide well-being but instead promote well-being. There are many things a state can do to promote well-being, but if we were to keep it simple stupid, I believe it could be narrowed down to these four items:

1. Physical Security / Financial Security
2. Freedom to Develop
3. Support Early Childhood Development
4. Design Communities for Interpersonal Connection

In my view, a state’s ability to deliver on these four needs provides us with an effective heuristic to initially screen a concept.

If you look at the list, the first two items are more orthodox, and they’re not likely to be changed much by the Network State inherently, so I won’t cover them much here.

The last two are less orthodox, and I believe the Network State’s inherent design impacts them. I’ll review how this happens, but first, I will explain why needs three and four are essential state-promoted provisions for well-being.

Support Early Childhood Development

Early childhood, 0–6, is without question the most crucial phase of a human’s development. Bad parenting or living in financial straits during this phase can send a child into an anxious-depressive state for life. Some of the most effective ways to mitigate the risks of a child’s needs not being met are to live in shared communities. Shared communities decrease costs for parents, and psychologists also say children benefit significantly from exposure to different adults. Neighbor-parent Facebook groups are abundant and an indicator of the desire for this. Enabling community networks can improve parenting which is the lion’s share of the “nurture” we think of in the nurture vs. nature equation of how we become who we are.

Design Communities for Interpersonal Connection

It’s not a dispute in psychology that a sense of belonging and an abundance of human connection with the people we love is one of the most effective forms of medicine against depression, anxiety, and neuroticism (three of the most common psychopathologies). Connection has also been found to be the most influential source of meaning in life and one of the most reliable emotional highs. One prominent team of neuroscientists even referred to connection as being “in some fundamental neurochemical sense, an opioid addiction,” given the boost our brain receives when hanging out with people we like. This means connection picks us back up and brings us up high. Truly, the benefits of connection are near endless and touch every facet of our life.

A RETURN TO THE TRIBE

If we want to intentionally promote well-being, and if we had to fall to the level of a single answer, a monism, I believe that it would be to support the development of ideologically based communal living. I choose co-living because the frequency of interactions and shared experiences, which are abundant in shared communities, are found to be vital in driving connection. I believe co-living should be ideologically based because the magic does not arrive when living with people we do not connect with.

If a state can promote scaled co-living while otherwise maintaining general security, freedom, and financial progress, they are well beyond the 80/20 towards the good life.

On my initial read, the Network State is well-suited to execute on a return to community-oriented living and well-being.

How the Network State Promotes Well-Being

First, the Network State supports and enables remote work. Remote work creates geographical freedom, allowing Network States to live in less developed locations where the land is malleable to communal infrastructure. Additionally, remote living often reflects a lower cost of living which will support early-child rearing for couples.

Second, Network States are inherently ideological. I recognize the risk of echo chambers, but those already exist without the benefits of physical proximity. In my view, at least people will be happy in their echo chambers rather than sad.

Third, the Network State fundamentally promotes intentional living. This may seem minute, but in my view, it’s transformative. As Martin Seligman has found, learned helplessness is the human default, and hope, or in this case, the power to choose, must be learned. If you can easily choose your government, it’s hard to question whether or not you can select every other aspect of your life — your community, your location, your work. It’s all your choice, and that awareness of autonomy is found to be one of the essential self-stories that foster the many sources of well-being.

With a trend towards remote work, a governance system supporting it, ideologically based communities and housing, and the power to choose, the Network State seems to be naturally poised to promote well-being.

For these reasons, my initial read on the Network State, in its most preliminary and nascent ideology, is that it is a promising direction.

REMAINING QUESTIONS AND PROBLEMS

It should go without saying, the Network State and my thoughts on it are within this optimistic phase of almost complete speculation. Where this goes is unknown, but I think the proposed idea from Balaji has compelling roots. That all said, before I would advocate moving towards this system, we’d need, at a minimum, some substantial thinking on both the logistics and implications of a Network State. I imagine one could draft up hundreds of questions with ease. For me, I’ve simplified my questions into a few key themes below.

Logistics

How does a Network State defend itself in these tiny geographical pods against the laws of the Nation-States they are in?

• This is a late-stage problem based on Balaji’s vision, but I struggle to see a world where my little apartment complex of whatever online state won’t be free from the United States enforcing its laws.

How are public services executed?

• Continuous geography of a Nation-State has the benefit of seamlessly sharing the costs of public services. Nine thousand little pods will struggle to set up water on their own. In my view, this would make them dependent on Nation-States and ultimately not in control.

What is the vision around membership and the flexibility of changing membership?

• Changing your affiliation too frequently would undermine the system as a whole, but being able to vote with membership is a substantial feature.

Access and Governance

How does this system provide for people who do not have financial freedom or geographical freedom?

• The Network State sounds excellent if you have money or remote work. Otherwise, how this becomes transformative for an hourly worker is unclear to me as they commute from their online state apartment into the United States to work as a barber. I believe it is essential for the “new system” to provide a pathway for all people.

What is the governance model, even if decentralized?

• I’m not well-versed, at this time, on blockchain governance, and I recognize all states will vary, but what is inherently possible matters. I assume most will be democratic, but democracies carry risks of oppressing minorities.

How does the Network State maintain legitimacy when it will effectively resemble the internet and its many dark corners?

• E.g., the 8chan dark web state where rape and whatever else is allowed. One could argue that these states would be too small to gain bargaining power, but it’s not like large groups of people carrying out atrocities is uncommon in this world.

— —

The referenced thirteen sources of well-being are most notably laid out in the book Transcend by Scott Barry Kaufman. Dr. Kaufman is one of the leading thinkers on human psychology, well-being, and human potential.

1. Positive Emotions
2. Negative Emotions
3. Life Satisfaction
4. Vitality
5. Environmental Mastery
6. Positive Relationships
7. Self-Acceptance
8. Mastery
9. Autonomy
10. Positive Growth
11. Engagement in Life
12. Purpose and Meaning
13. Transcendence