The Network State: Marta Belcher in Conversation with Balaji Srinivasan | Another World Exhibition

You.

Hi, I'm Marta Belcher. I'm the president and chair of the filecoin foundation. And I'm here with a man who, in my corner of the universe needs no introduction, Balaji Srinivasan. He is the author of the Network State, the former CTO of Coinbase, and a former general partner at Andreessen Horowitz. Welcome, Balaji. Thank you so much for being here.

Great to be here, Marta.

So we are here virtually at the Institute of Contemporary Art in London, and we're at the closing reception for the exhibition of Christopher Coolandran Thomas's Another World. And this exhibition is profiling the Tamil Liberation Movement's attempt to start a country, which, you know, really is, I think, in line with what you talk about in your book, the Network State, which really details this alternative approach to countries that isn't land first, but in fact is network first. So could you really give us a description of what the Network State is and what your ideas are in that book?

Sure. So you know, the Network State, it's at the network state.com's free online book, if you want to read it, is essentially about the concept that, you know, we've seen within our lifetimes that we've started new companies like Google out of a garage, new communities like Facebook out of a dorm room, new currencies like Bitcoin from a white paper on a message board. From very modest beginnings, these multi billion dollar, multi billion person things have arisen. And so the question is, is that the end of the line for the Internet? Are we just going to stop at starting new companies and new currencies, or can we go one step further? Perhaps we can start new stuff, cities or even new countries and take the associations that have, you know, arisen on the Internet over these last 10, 20 years and turn them into something more meaningful. And I think we can. And the Network State is kind of about that process. And it's as different, in a sense, from cryptocurrencies as cryptocurrencies are from tech companies. There's certainly a continuity, but a bunch of new ideas.

And so just to get a little more granular, when you say create a country, how do, like, that's, that's no small task. Right. How do you do that?

Right. So, so first, just to, you know, suspend disbelief, new countries have been started. And for example, do you know what the population of the United States was around the time of independence?

I don't know.

It's about 2 million, something not that large, actually. Right. And actually many of the, quote, founding fathers of the US were teenagers or in their 20s. So new countries were founded by people like you and me, often younger than us, when countries are much smaller, even within living memory. You know, Israel was founded and India was founded and Singapore was founded. People who are in their 80s were there before those countries arose and are now there afterwards. And in fact, actually, if you look at the list of, you know, what defines a country is different definitions, but perhaps the most simple definition. Are they a member of the United Nations? The number of UN member countries has actually risen from about 50 something right after World War II to almost 200 today. And that's because the breakdown of the British Empire and the French Empire and then after 1991, the Soviet empire led to all these new countries arising. So it's not just that new countries happened historically. It's not just that they happen within living memory. They've happened actually over the last few decades. Estonia is a new country, 1991. And it's true that over the last 30 years, we've had an era of what the author of Invisible Countries calls cartographic stasis, okay, where there have only been a few new countries like East Timor and South Sudan. But we were in a similar kind of freeze on new currencies for a long time until Bitcoin and Ethereum came out, and then it went vertical. And I do believe, as I get into in the book, that is actually we're about to enter the era of new country formation as well.

So how exactly would you do that?

Okay, so the short answer is cloud first, land last, but not land never. Almost everybody who thinks about, quote, how do I start a new country, they think about the land or the law. And both those are actually not the right place to start, in my view, at this, at this present time, the place to start is actually on the Internet, in the cloud. And what do you do? You. You instead, you start with. You start by building an online social network that has a sense of purpose and that grows large enough that it can crowdfund little pieces of territory all around the world. And at first that's just maybe two people in an apartment, but then it's maybe 10 people in a group house or 50 people renting a community center. Eventually it gets to a few hundred people that can buy an apartment building or a few thousand that can buy a subdivision of a local community like little Chinatown or little India. So this is a visual of a social network that owns pieces of territory, crowdfunds pieces of territory all around the world. Okay. And so this social network has, it has like a community in Tokyo and in Mumbai and in Sao Paulo and New York. And it's just a piece of the city. Okay. It just owns a few buildings, perhaps near each other. But the cumulative population of this community worldwide is, in this case, 1,729,314 people with an annual income of $157 billion. Perhaps that's all provable on chain with zero knowledge proofs and a square meter footprint. That is 136 million square meters in this example. So the collective population, annual income and real estate footprint is on par with that of a legacy nation state, basically. You know, 1,729,340 people is right between Latvia and Bahrain. Okay, just for, for context, most countries are actually small countries. And in fact, there's a gif that I have here, I'll just show you, which shows how you go from one person to 17 to 172. A thousand something. 17,000, 172,000 and then a million. You can think of this as like a startup that somebody starts and grows, but it's a startup country, not just a startup company or a startup currency.

So I think that raises the question, um, sort of, why do we need to do this? What is the benefit of. Yeah, what is the benefit of a network state over what we have now? The more traditional nation states, you can.

Do it without historical constraint. You don't have to argue with somebody. You don't need to fight a battle. You need to erase somebody's writings in order to write on your piece of paper. You don't have to. You know, every new startup doesn't begin with one CEO besting another one in a duel. Right. You know, it's not like there's a finite number of companies in the world and you have to go and kill one of the CEOs to be the CEO. That's not how it works. Instead, it is something where you can just start something from scratch. And if people like it, they become your customers. And you pull away backlinks, basically, in the generalized sense, you pull away customers from others. And it's like a. You've got a magnet that's a more powerful magnet. It pulls business towards you from these others. So it's peaceful. You're not taking it over, you're just pulling it. Right? And so we understand the benefit of new for everything else. Why do you have a bare plot of land? Why don't you just always buy a building? Why do you ever Buy bare earth. You want to start from scratch, right? Why do you ever code something from scratch rather than adapt something? So. So we understand the benefit of new everywhere else, right here. The reason we don't think about the benefit of new is we think that starting a country must involve a war or a revolution, right? And you know, going back to the Thumbel Ilam example that you mentioned, the network state is actually a third alternative to either A, knuckling under to the current government or B, fighting a revolution. It is C, it's sort of a digital immigration approach. If you go to option C. Like the Puritans were not able to have political control within England, so they left, right? And they were able to build a community of their dreams in the US if they gave up on the land, they could have the lives, right? They could have, you know, the light, you know, the lifestyle that they wanted, right? In their case, like a godly lifestyle. So if you're willing to compromise, you might be able to start something new. So that's. So the first is on the desirability of just starting something new in the abstract, right?

It would be fantastic to get a sense of what, what exactly you think is being held back, that some of, at least some of these new network states could be addressing.

Any jurisdiction that legalizes physical innovation can bring founders there. The only thing you can do in California, in California, especially today, this is now 10 years later. But it's only going to get worse. In California, you can build a billion dollars business in the cloud, but you need a billion permits to build a shed in your backyard. Okay? So you have total, right, so think about that, right? You have total route over the cloud. You can just hit a button and these digital girders just go up and down, right? But in the real world, you can't even walk outside and like move a stop sign around or a post office box. You wouldn't even think about doing that, right? Part of the answer, by the way here is if you think about Burning man, right? Burning man has, you know, if you've seen like the, you know, Burning man drone photos and stuff like that.

Oh, of course. It's iconic.

It's iconic, right? So you have these. You have these gigantic, you know, this gigantic community, right? And the crucial thing is it's basically built, you know, over, not overnight, but in like a day or two, right? A few days, right? And here, just to show this image, right? You know, here's like a visual of Burning man, right? And here's. Here's another one, okay. The key thing about this is what is the big difference between Burning man in San Francisco? It's neither nimby, which is not in my backyard, or yimby, which is, yes, in my backyard, build high density. It's himby, it's horizontal sprawl, which you're all told is bad, but it's actually good. Why is it good? Because everybody can just build and they're not building on top of their neighbor. Okay. Because they're not building on top of their neighbor. They can move things around. This is what like a startup town or city would look like. There's all of this modular snap together housing where you can build like a military base instantly that you can use for civilian purposes. Like you can set up a. Have you heard the term man camps? Do you know what those are?

No.

Okay, so man camps are basically these. They're not like great to look at. Okay. But you can just instantly set up when you're doing like fracking or oils or something like that. Like these instant towns in the middle of nowhere with power, water, electricity, all that stuff is technology that does exist and it's relatively cheap.

Right? And it seems like, you know, from what you're saying and what you were saying before, the physical manifestation is in some ways not as important as the legal and regulatory manifestation. Like you can build what you're going to build and live how you're going to live. And maybe that's a Burning man camp or maybe that's a high rise or whatever it is. And it is not hard to make a building appear if you don't have a bajillion regulatory permits and hoops to jump through. That's not the hard part. Like the part that is hard is really getting the legal and regulatory space. Right? And that's also the part that's important because that's the part that says, can we innovate.

Well, here's the thing. Once you've got this cloud group that has the alignment of purpose, that's really what it is, by the way, the alignment of purpose. If there's a will, there really is a way. Now if you have a large enough cloud group, well, guess what? Because they're in the cloud and because they care about this, they can negotiate in parallel with a hundred different governments around the world. They don't all need to be sovereigns. Okay, now just to. Just to again give some suspension of disbelief, okay? You know, cities like Miami and New York have their mayors accepting Bitcoin, you know, as their salary. Okay? US States, Nevada did a deal with Tesla for its Geiger factory. Okay. And Virginia did deal with Amazon for its HQ2. Wyoming has the new Dow law where it's like interfacing with Ethereum and it's legalizing nuclear power. Okay. And then at the sovereign level, Tuvalu did a deal with GoDaddy for the TV domain. Columbia did a deal with GoDaddy for the CO domain. Like if you ever gotten your name CO, that's like a Columbia deal, Right? And El Salvador, of course, had Bitcoin as its national currency. Okay? So whether you're talking like a city like Miami or New York or a state like Nevada or Virginia or Wyoming, or even a sovereign country like Tuvalu or, or Colombia or El Salvador, the land is open for business. It's already doing deals with the cloud, with companies like Tesla and Amazon and with currencies, cryptocurrencies like, like Bitcoin and Ethereum. Right. When I say doing deals, I mean in the broadest sense of it is interfacing with them. There's a lot of countries in the world, a lot of cities. You don't go to the number one. I mean, Linux didn't go and negotiate with Microsoft. They were obviously the number one. You know, Bitcoin didn't start by trying to do a deal with the Fed or Goldman. They went to all the folks who are on the margins of the system, who are locked outside the system, who are still competent and who are not actually able to build what they want within the system. And they went to those people and they built the next system. And then, you know, Goldman now has to buy Bitcoin or certainly talk about it. And Microsoft eventually capitulated and bought GitHub. Right? You go outside in, you build on the margins of Empire and you reform it from outside.

Right? And it's. You don't even. And I think the thing that you're saying and the point that you're making that's so powerful is the whole point of this is that you don't have to negotiate with and deal with existing powers at all.

Yes. So I have one caveat. One caveat which is I actually would say it's a little different than you don't have to negotiate with them at all. It is more that you can build leverage before having to negotiate with them. Okay, so the thing is, think of this as a V3, and let me explain what I mean by that. The v1 is we must negotiate with existing institutions and reform them and so on and so forth, right? Everything must be done within Microsoft, must be done within the Fed, and so on. The V2 is we can go and do Linux or Bitcoin as a pure Internet thing and just pure open source and no, you know, no connection to the man and so on. The V3 is I will use Linux to build a company like Google that then defeats Microsoft, right? Or competes with it. I will use Bitcoin and I will build a cryptocurrency exchange that interfaces with the fiat world that then becomes bigger than the legacy banks. Right? So that is a fusion of both the reforming and refounding impulses, right? It's not as simple as just saying I'm never going to negotiate with them, et cetera. That's like the pure rejectionist approach, which I understand, and it has a good to it, but taken too far, it means that you actually never, you know, you're just always content being on the margins, right? Instead, find some access, some arbitrage where you can get enough freedom. You fight the battle not to win, but to exit. You build up enough energy, you prove a better example. You pull the customers of the old to you and then you eventually win. That's basically what we, what the network state is. It's a way to get a zone of freedom where you can compound, level up peacefully, build an alternative to the existing system and reform it that way.

Now, speaking of sort of how you operate within sort of the existing world, so one thing you're talking about is, you know, you start out in network state in, you know, from wherever you are in some other country. And, you know, as you're building the network state, you're doing that using today's, you know, technologies. Right. And you've mentioned a number of times cryptocurrency, and I imagine a big reason that you're mentioning cryptocurrency, and I'd love to hear sort of, you know, why cryptocurrency is, is so essential to this sort of network state idea. But you've mentioned a number of times cryptocurrency, and I think there's this idea that with cryptocurrency you really don't have to rely on centralized intermediaries and you don't have to be subject to centralized intermediaries not liking what you're doing and shutting you down. And similarly, there's this broader set of technologies that I think I would love to hear your view on. Um, you know, how do we do this when you are relying on centralized technologies and you're relying on not getting your whatever Reddit account suspended. You know, how do you need decentralized technologies in order to make this work? And to what role do those decentralized technologies play both when it comes to cryptocurrency and broader than cryptocurrency?

Yes. Now, okay, so why is cryptocurrency so crucial for this? And let me talk about the decentralized stuff beyond just cryptocurrency. Let's say that you are a million person global social network and you are negotiating with a hundred thousand person country. Let's say you're negotiating with, I don't know, Tuvalu. Right. It'll be the Tuvaluans who are bought into the network state that are leading those negotiations. It's not simply some like mercenaries coming in with a pile of money. Okay, so you have the local, let's say pro innovation Tuvaluans. They have their friends in the network state that have a billion dollars behind them. But now here's the key thing. If that billion dollars is in cryptocurrency now, the network state has, you know, let's call it leverage because they need, you know, the, the, the Tuvaloons need to ink a deal and now you can hit a button and you deposit, I don't know, a million as, as a show of good faith. If it wasn't cryptocurrency, then it could be seized by a government and it wasn't really your property. When you're talking about like a sovereign to sovereign deal, the question of who actually has root becomes important. If they could just hit a button and seize everything like they did, by the way, you know, with for example, Russia's assets or the Canadian truckers or the, the Taliban or you know, various examples of unbanking and deplatforming. You don't have to think any of those are like good guys to know that that power exists to seize the assets. If they can seize the assets of Russia, they can definitely seize the assets of your network state if you're negotiating. Unless they're in Bitcoin or some other cryptocurrency. Right. At which point, now there's a conversation. Now you cannot be compelled. Instead they have to move to convincing. Right? You have the leverage to do deal. So the fundamental thing of cryptocurrency is allows a digital community to have leverage in a way that it did not before. I actually written a couple of articles on this, like for a kind of a domestic American audience and like a foreign audience. But if you, I'll just put them on screen for A second. Okay, then this is kind of a global argument, which is to say every country that is not the US Or China doesn't want the use of China having root control over its entire country. Right. You could hit a button and in theory, Facebook could deplatform, you know, the Prime Minister of the UK or all the members of one party or another. That's just too much power, you know, that is not. You're not a sovereign anymore, you're a colony, if that happens. Right. How do you get that, that, that back? Well, this article is called Great Protocol Politics and essentially makes a point that while it seems crazy today, the future doesn't belong to China, the US or to tech companies like in Silicon Valley. It belongs to these free and open protocols on the Internet, which are effectively the equivalent of open source. They're not just open source, they're open state and open execution open source. You can only see the source code. But an open state protocol like Bitcoin or Ethereum or filecoin or something, you can, you can see the database and you can follow every single instruction.

So as a final question for you, I want to know what your message is to the people who are building these decentralized technologies and thinking about what the future of these decentralized technologies should look like.

The macro message is that I don't think the Internet has stopped. I actually think we're just at the start. This is not something where we've just topped out and plateaued and this is the end. We're still at the bottom of the j. There's going to be massive change to all of these institutions. Any institution that was not built on the Internet will probably be disrupted by the Internet. And those in this audience that understand that you can be part of not simply reforming, but refounding and building these better alternatives rather than simply just having it be disrupted and everything break into pieces. You build a better version with the technologies we've got, you can build literally a better version of media like citizen journalism rather than corporate journalism. You can build a better version of science. There's something called decentralized science where it's not just everything locked behind paywalls, but the data sets and all. Everything is out in the open, it's on chain, it's provable. So you can reproduce it. Right? Right. You can build not centralized social networks, but decentralized social networks. You can have not, you know, elections that 50% of the population is contesting at any time, but things that are actually on chain, which are actually predicted by private keys and so on and so forth. Every institution in society where there's some problem with it, with enough creativity and cleverness, you can build a digitally native variety of it and improvement on it. And that's what you should probably set your mind to. And if you're interested in this kind of stuff, this is stuff that I talk about. So you can find follow me on my Twitter or go to thentworksuite.com well.

This has been an absolutely fantastic conversation. Thank you so much for talking to us about the Network State and really how it ties into this artwork here at the ica. So thanks so much for being here.

Thank you. Marta.