Please enjoy this transcript of my interview with angel investor and entrepreneur Balaji Srinivasan (@balajis). Formerly the CTO of Coinbase and general partner at Andreessen Horowitz, he was also the co-founder of Earn.com (acquired by Coinbase), Counsyl (acquired by Myriad), Teleport (acquired by Topia), and Coin Center.
Balaji was named to the MIT Technology Review’s “Innovators Under 35,” won a Wall Street Journal Innovation Award, and holds a BS/MS/PhD in Electrical Engineering and an MS in Chemical Engineering, all from Stanford University. Balaji also teaches the occasional class at Stanford, including an online MOOC in 2013, which reached 250,000+ students worldwide.
His new book is The Network State: How To Start a New Country. You can also read it for free at 1729.com.
Transcripts may contain a few typos. With many episodes lasting 2+ hours, it can be difficult to catch minor errors. Enjoy!
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Tim Ferriss: Hello, boys and girls, ladies and germs. This is Tim Ferriss. Welcome to another episode of The Tim Ferriss Show. And my guest today is the one and only Balaji S. Srinivasan. You can find him on Twitter, @balajis. Balaji is an angel investor and entrepreneur. He has the first and second place records for longest podcast episodes ever on this podcast. We will probably keep it to two and half to three hours. I say with great confidence. Now, formerly the CTO of —
Balaji Srinivasan: People listen to them.
Tim Ferriss: They do. They do. People listen to them.
Balaji Srinivasan: They did. Yeah.
Tim Ferriss: A lot of people. The last two appearances were two of the most popular episodes, certainly in the last year to 18 months. Formerly the CTO of Coinbase and general partner at Andreessen Horowitz, he was also the co-founder of Earn.com acquired by Coinbase Council acquired by Myriad Teleport acquired by Topia and Coin Center. He was named to the MIT technology reviews innovators under 35, won a Wall Street Journal innovation award, and holds a BS, MS, PhD in electrical engineering and an MS in chemical engineering, all from Stanford University. Balaji also teaches the occasional class at Stanford in his spare time, including an online MOOC in 2013, which reached 250,000 plus students worldwide.
His brand new book is The Network State: How to Start a New Country. And we will certainly wade into those waters and explore all of the related topics in depth. But let us begin, if we can, Balaji, with the current state of the crypto market. I know a lot of people would love to hear your thoughts on what you’re observing. And just to date this, we are recording July 1, 2022, and then perhaps hearing your thoughts on the India sphere, but let’s begin with those two prompts.
Balaji Srinivasan: Sure. So I’m not a trader. I’m much more of a long-term investor/angel/VC. There’s a fun tweet today by a guy, Travis Kling. “I’ve been doing this for 46 straight months. I’ve never seen one like this before.” And he’s just basically got a list of all the carnage in the markets. And the thing is that carnage is in the crypto markets, but it’s also in the non-crypto markets. And it’s a little more pronounced in crypto, but it is definitely a systemic type of thing. And the way I think about it is there’s very few spaces that I get into where I don’t have an all-weather thesis that works independent of the price.
And so I was in genomics way before people were talking about genomics. I was doing machine learning way before people were talking about machine — it’s weird to see people talking about stuff that you’re doing like 10 or 15 or whatever years ago. Not to say it in a thump chest way, but just that you want to try to identify these things that have value independent of that.
And the fundamental value of cryptocurrency is can you have a system where the root permissions are independent of the US and Chinese establishments? That is the fundamental question, is one of digital freedom because, and I can tease that out and so and so forth, but it’s fundamentally do you actually have property rights on the internet? Digital property rights? Or can somebody with a police badge from the US or Chinese establishment, depending on what side of the world you’re on, get into all of your stuff, surveil all of your stuff, take all of your stuff, freeze and seize all of your stuff and so on and so forth, right?
So that fundamental question of whether digital property rights should exist and whether they will be valuable in the medium to long term is what gives me confidence in the space, not the specific price. So I can talk more, but that’s — prices down, prices up, I would only invest in those kinds of things that I believe further that aspect of freedom and control.
Tim Ferriss: Question for you. In our first episode, I think at some point, you mentioned for someone who is not going to make a full-time study of things, splitting their allocation to crypto, and this is not investment advice. This is two people talking for informational purposes only, but splitting 50/50 Bitcoin, Eth. Does that still hold or would you, based on what you’ve seen since and what you’re seeing now, maybe any developing thesis changed that?
Balaji Srinivasan: No, I’d say stick with that. Again, not investment advice and so on, but basically, those ecosystems are just still absolutely massive. As I said, I think I said something like buy it and then hold it for 10 years and let’s see where we are in 10 years. The fundamentals in terms of not just number of users, but conversation.
If Twitter was open source or rather, more specifically, if it was open state, that to say not just the source code was available, but the backend was available, the database was available not just through an API, but that you could just hit a key and see every tweet, if you wanted to, every public tweet, at least. If it was open state and you could plot the number and the depth of interactions on Bitcoin and Ethereum and all of their offshoots, not just those keywords, but the thousands of keywords and memes and communities, and so on, that would be built on these, these are like countries that have built up. Those are things that just have mass to them. And you can mark them to market, they’ve got downs and they’ve got ups, but they are absolutely massive things with tens of millions of dedicated people around the world and they’ve come out of nowhere.
So yeah, I don’t believe that they’re going to go away, but again, not financial advice. This is just my personal belief. You can get much more sophisticated than that. But the absolute worst thing to do by the way, and this is maybe obvious, but I’ll just say this, is the worst thing to do is buy an asset when it’s in the news and sell it when it’s in the news. And what you instead want to do is —
It’s inevitable that something will pique your attention. And then what you do is you set a calendar reminder, let’s say 30 days, 60 days, 90 days, so that you are almost retargeting yourself and then you go and you actually do research on it outside of the scrum, outside of people yelling about it. You intentionally do it async to the market sentiment because there’s a famous cartoon where it is a guy he’s like, “This looks like it’s goodbye.” And someone over here is, they’re like, “Buy, buy, buy, buy, buy.” And then the guy’s like, “This stock could really excel,” and someone over here is, “Sell, sell, sell, sell,” like this, right?
And it’s this hilarious loop, which you don’t want to be the current thing. You don’t want to be the person who is buying high and selling low. And I think the only way to not do that is set calendar reminders, assess your portfolio, whether it’s a quarterly basis or something like that, and try to make async decisions. You almost never want to sell on bad news, buy on good news. That’s my macro outside of any given specific thing.
Tim Ferriss: Yeah. Let me add one thing to that, which is humans in general, and I succumb to this sometimes too, overestimate their predictive abilities. So what is very helpful is set a time. It could be once a year, Jan one, Jan five, doesn’t really matter, where you sit down and you identify say, I’m just picking a timeframe, “Six months from now,” and you grab a bunch of potential asset classes or stocks or indices. So maybe it’s Bitcoin, a barrel of oil, S&P 500 and make your predictions. And then set a reminder to look at them three months or six months later, when you may, as you are influenced subconsciously by chatter on Twitter trends, in the news and so on, to think that you know where things are going. Let’s see how successful you were over the preceding six months. So that’s also a good way to check your cognitive biases.
Balaji Srinivasan: Can I talk about that for a second? The predictability in —
Tim Ferriss: Yes, you go.
Balaji Srinivasan: Okay. So this is something I actually write about in the book, which is we’re reentering high volatility times. And the thing about this is most people don’t think about it this way, but companies and governments shield people from volatility to an extent that we don’t really think about that much, and now, that shielding is going away. For example, when you go and buy a laptop from Apple and they quote you some price, let’s say, I don’t know what it is, $1,499 or $1.990 I don’t know what the number is, I’m just making that up. When they quote you that price, that’s a price that they are selling it for, but the price of aluminum is bouncing around the price of — there are rare earth elements on the back end that’s bouncing around. Their cost of goods is if they were just buying spot prices, bouncing around every day. And so in theory, their margin could shrink or grow or whatever on a given day.
Now, what do they to deal with this? They buy in bulk, they have various futures contracts, and so on. They buy and sell collars so they give up some of the upside on that margin to bound their downside. They’re getting aluminum for X dollars per kilogram, as opposed to greater than X or lower than X.
So those companies actually buffer all kinds of crazy variations to give you that clean, dependable $99 or $29 or $1,499, whatever price. And governments do this as well in lots of other ways. That’s why you don’t have people walking down the streets with AKs. That’s why you don’t have mobs pillaging and so on and so forth.
Tim Ferriss: Wait, wait, wait, hold on. Can you tie those two things together? So I followed you on the futures contracts, and maybe if they’re dealing with currency, certainly, they would have other protections in place, but how do we go from that to preventing people from walking around with AKs?
Balaji Srinivasan: Sure, sure. So basically —
Tim Ferriss: I believe there’s a connection. I just would love for you to elaborate.
Balaji Srinivasan: Absolutely. So it’s social and financial volatility. And the way of thinking about it, so let’s start with financial because it’s a little more quantitative and people know that, right? So there’s this concept called market depth. And if you’ve ever looked at Coinbase Pro or any crypto exchange, you see this V like thing with the buy orders on one side, the sell orders on this side. And this is how a price is born. Normally, most people in normal life are price takers. You go to the store and you buy orange juice for whatever the price is now, 50 bucks or something in red. I don’t what it is today, but you know what I’m saying, right?
Tim Ferriss: Yeah.
Balaji Srinivasan: A gallon of orange juice is, I don’t know, some price. And you’re a price taker. It’s set price. $4.99 or something like that. The thing is if you start emptying out the shelves, if you buy 100 units of orange juice, and then you go to the next door, it might be $5.50. And then the third store hears you’re coming, and they set it to seven bucks and so on and so forth, right? You start moving the market price. You are now a price setter, in a sense, when you start clearing out units. So you’ve got 100 units at $4.99 and then 200 units at $5.50, and now you can get 300 units at seven, and your supply increases as the price increases. And then conversely, on the other side. And so that is actually how a price is born. Most people don’t usually think about this, because you’re buying like single individual consumer units. You’re not a bulk purchaser, but when you’re purchasing in bulk, suddenly people are negotiable. They can make more money on it. They’re okay with negotiating.
What’s my point? This idea of market depth, just like we see a price shift back and forth with sentiment, that’s the same concept in the financial terms as the Overton window. The Overton window is the set of what things are politically acceptable, and sentiment shifts back and forth. Here’s the current center, and as radicals push that thing that was totally unthinkable moves to the center. Or conversely, conservatives push and suddenly, it gets pushed back. That’s like buy and sell pressure. In fact, you can think of it a lot like that on any given issue. And you have essentially almost votes. You have 1,000 votes for this level of the policy and 5,000 votes for this level of the policy and 10,000 votes for this level of policy, and then you have someone on the other side.
And when you can shift over those vote banks, you shift that midpoint, which is a policy. Just like if you can shift over the order book, you shift over the price.
Tim Ferriss: The price.
Balaji Srinivasan: Yeah. So —
Tim Ferriss: That’s clever.
Balaji Srinivasan: Right. Okay. So at least you kind of see —
Tim Ferriss: I like that. Yes.
Balaji Srinivasan: That is the macro of how I think about prices and policies. When people say, “Oh. It’s getting political.” What they’re really talking about is just like with the price example, most people are price takers, as I said, you go and buy the orange juice, just like most people are law takers. The law, the policy is just applied to you. But if somebody is powerful enough or it’s a weird enough situation, that law flexes.
Concrete example, Singapore, I’m taking an example that’s out of our time and place and so people don’t get mad. Singapore, like two and a half decades ago, I think in 1987 [Ed. note: Balaji pointed out post-interview that it was 1994.], there was an American citizen, Michael Fay, who was vandalizing things in Singapore. And —
Tim Ferriss: I remember this.
Balaji Srinivasan: You remember this, right? And Singapore was going to cane him as per Singapore law. And frankly, had he been a Singaporean or even been anybody other than an American, he would’ve been a law taker. The law would’ve just been applied. But all kinds of pressure got applied on this side of the policy market and Lee Kuan Yew was like, “Okay. We’re going to reduce the number of strokes of the cane.” He didn’t set it to zero because that would’ve been too much of a give, but as a consideration for the — the US government made it a diplomatic situation and the president got involved and all the stuff for tiny SIngapore, so the pressure for Singapore was significant on the policy side. And so now, the law was negotiable.
That’s what it means for something to “get political,” is that you have huge masses of people that assemble and they shift the midpoint of the Overton window, just like huge mass of people shift the midpoint of a price. Now, the thing is, as I mentioned earlier, with Twitter, that backend is not open state. So because it’s not open state, we cannot see sentiment moving as we can with price, not as easily.
Tim Ferriss: Not as easily.
Balaji Srinivasan: Once we put —
Tim Ferriss: Go ahead. Yeah.
Balaji Srinivasan: We —
Tim Ferriss: I was just going to say there are other tools that I also, you probably don’t know this, but I pay a good amount attention to this type of thing on a number of fronts. So Google Trends. They’re not open state exactly, but you can track certain types of sentiment or interest or fear longitudinally, but continue. I didn’t mean to interrupt.
Balaji Srinivasan: No, no, no, no. Yeah, you’re right. In one sense, we’ve got far more information than we ever had. In another sense, I know we have 100 or 1,000 X left to go. And the reason is that think about the difference between, and this a tech analogy. So you might be like, “Well, think about it, huh?” But think about the difference between AT&T Unix and Linux. So if you’re an engineer, you’re like, “Yeah, dude, AT&T Unix was good, but it wasn’t hackable. I couldn’t customize it. I couldn’t take it apart, look at the engine block. I couldn’t make it work on tiny devices and giant servers. I couldn’t make it mine.” And so currently, it’s good, yes, that we have Google Trends and that we have — you can get some sense from the Twitter API and so on, but they’re very locked down in a certain way where there’s queries you can’t easily run. You might have to pay a lot for the API and so on so forth.
Versus if that data set was open, we’d have completely different understanding of society and history and politics. It would be at the same level as the unlock going from AT&T Unix to Linux or the unlock of going from PayPal to Bitcoin.
Tim Ferriss: So let me jump in because the next question I want to ask is what’s some of the, to you, most foreseeable technological developments are that you say almost treat as assumptions in building out your vision for the future over the next X years, and you can choose X. And this might be a place also where we can sneak in and I’ll let you do it one very primitive way. Maybe it’s primitive. You tell me, but it’s lo-fi way of identifying possible trends through, you pointed out, a stealth topic that showed up in my most popular episodes in the last 12 months. I’ll let you take that wherever you’d like.
Balaji Srinivasan: Totally. So what’s the stealth topic? So basically, I saw the list of the top 10 Tim Ferriss podcasts last year, where I was number one and number two, despite how long they were. So hopefully, listeners got something out of it. It was an honor just to be nominated and very important —
Tim Ferriss: Like the Academy.
Balaji Srinivasan: Yeah. Very importantly, by the way, to my knowledge, the Tim Ferriss rankings, they’re not juiced or editorialized and so on. Did you know that —
Tim Ferriss: No.
Balaji Srinivasan: You’re probably aware of this. Maybe your listeners aren’t. The New York Times best seller rankings are an editorial product.
Tim Ferriss: Oh, absolutely. I’m 100 percent aware of that because I had, just to give an example, one launch week with one of my books, which came out through Amazon Publishing, which put me squarely in the crosshairs of almost everyone in the traditional book/publishing world sold, I want to say 120,000 copies through Nielsen BookScan for that one week, and it was number four on The New York Times best seller list in my category. And the book that hit number two sold somewhere between 10 and 12,000 copies verified through Nielsen BookScan.
Balaji Srinivasan: So do you know about The Exorcist lawsuit?
Tim Ferriss: I don’t.
Balaji Srinivasan: Okay.
Tim Ferriss: I do not.
Balaji Srinivasan: So basically, back in the ’80s, the guy who wrote the book The Exorcist, which actually got turned into a movie, sued The New York Times because his book, a different book, Legion, hadn’t been included in the best seller list. And in their explicit, written defense in the courtroom, NYT said, “The best seller list was actually neither mathematically calculated nor was an objective measure of sales. Rather, it was editorial content, and as such, is protected as free speech under the US constitution.”
The most charitable interpretation is Google’s rankings. Google’s rankings, what is the number one hit for Sinatra? Now what’s funny is you’ll get a different, if you Google it, you’ll probably actually be surprised. For a long time, it was the Sinatra web framework, and now it’s Frank Sinatra the Wikipedia article. And the thing is that’s a great example of what should it be. Most people who are looking for Sinatra are probably looking for the web framework, but most people on the planet —
Tim Ferriss: That is the most Balaji statement ever, but continue. Do you think that’s true?
Balaji Srinivasan: Right. Most people who querying Sinatra, as opposed to Frank Sinatra —
Tim Ferriss: Oh, all right.
Balaji Srinivasan: Right?
Tim Ferriss: I see. I see what you’re saying —
Balaji Srinivasan: Are probably —
Tim Ferriss: Okay. All right. Fair enough.
Balaji Srinivasan: Because it’s a very proper noun to query, right?
Tim Ferriss: Yeah.
Balaji Srinivasan: So they’re like if you could measure it, and Google is the kind of company that when it was good, it was measuring this kind of stuff, their intent, basically, you could argue as to what was number one. Is it the thing that people want to get? It’s like searching for Apple. Should it be the fruit there? Or should it be — well, actually, if they look for apples, they want the fruit. If they want Apple, then they want the company. That kind of thing.
Balaji Srinivasan: Anyway, but Sinatra is a good example. Point being that that’s something at least Google people know that the ranking is not objective. When you call it a best seller list, the impression is that it’s a numerically ranked thing and it’s not editorialized, but it is.
Anyway, point being, coming all the way back up, Tim Ferriss’ unjuiced, unedited list was interesting because I looked at that, that’s actually some open source analytics itself. And when I looked at that, I was like, “It’s interesting. There is a stealth topic here, which I’m also really interested in, that Tim’s listeners are interested in, and I’m not sure it’s being named as such, and that is transhumanism. And that’s Huberman Lab, that’s life extension, that is brain-machine interface, and it’s limb regeneration, it’s all your fitness stuff, it is all the recovery stuff and so on. All of that is a whole, growing, in my view, positive trend. The problem is people have pathologized that they think transhumanism is like the, I don’t know, the Klaus Schwab version from the World Economic Forum where you all become misshapen monsters and you’re edited and you’re —
Tim Ferriss: Harvesting adrenochrome from orphan children in Romania?
Balaji Srinivasan: That’s right. so —
Tim Ferriss: Something like that.
Balaji Srinivasan: — we need probably a different term for it, and I’ve got some terms that I’ve been thinking about. Often, you have the positive and the negative version of any term. You can Russell conjugate it positively and negatively. He was righteously angry or he was incandescently mad or whatever. You can change the —
Tim Ferriss: Yeah. The sweat, transpire, glisten depending on —
Balaji Srinivasan: Sweat. Yeah, exactly.
Tim Ferriss: — who you want —
Balaji Srinivasan: I sweat, he perspires, she glows, right? But what was I saying? So the point is —
Tim Ferriss: Transhumanism and alternate terms.
Balaji Srinivasan: That’s right. So whatever else you might call it, you could call it — I like to use term optimalism as opposed to optimism. You are optimizing yourself. You are being positive. There’s an objective function. Transhumanism, you might say it’s just a change, whether that change is positive or negative is unstated. But optimalism is, in a sense, you’re improving. You’re getting better. It is optimal physical fitness. It is optimal health. It is taking care of oneself. It is optimizing finances. It is optimizing everything. Very in tune with, I think, what a lot of your listeners are for. So that, to me, if you ask about foreseeable futures, transhumanism is an all-weather thing, or let’s call it optimalism. People will want to get better. And I think science is now really starting to catch up there. And this is actually one of the good things about the state receding and coming back and not being able to — the Overton window on this is absolutely moving. People are much more skeptical of the FDA, and that actually has good aspects because it means that more treatments and so on can get through.
All right. So you asked about foreseeable futures. So one of them is optimalism/transhumanism. A second one, which I think this will be completely obvious to pretty much everybody who’s in, let’s say, big tech, but maybe not as obvious to people outside, is augmented reality glasses. Should I talk about this?
Tim Ferriss: Yeah, absolutely.
Balaji Srinivasan: Okay. So, in the late ’90s, and probably the early 2000s, people talked about the so-called convergence device. And you can go and look at the LexisNexis archives and so on, Bill Gates would talk about the convergence device. And what did he mean by that? He thought it was going to be like a television, which would combine a computer and a phone and all of these other things. Why? It’s because in the ’80s and ’90s, everybody had a TV and everybody talked about the TV. And the household gathered around it and they interacted with the remote. So it seemed like a reasonable thing that people who’ve been habituated using the TV could do something else. And it turned out to actually, the convergence device was not the television, it was the phone that acquired all of those characteristics, but they were correct that there was going to be a convergence device.
And there were also people who were interested in “mobile” prior to the iPhone. Jack Dorsey, actually, the reason Twitter, I believe, has 140 characters is it was some SMS payload constraint that he understood how important mobile was going to be years before the iPhone even came out. Most people were not seeing that. Most people, even after the iPhone came out, there’s this great core thread that’s a time capsule that’s something like, “What’s the point of mobile apps?” It was in 2010 actually and they’re like, “What’s the point of mobile apps? Is it just going to show me coupons as I walk by a store?” Do you know the story? Have I talked to you about this?
Tim Ferriss: No. Mm-mm.
Balaji Srinivasan: So my friend, Yishan Wong, he actually, I think he replied to this. Let me see if I can find this thread. Without mentioning coupons, why and how is mobile the future? Will the next revolution really be based around deals and incentives? I think it was from 2010 or something like that.
And the thing is that post is a great time capsule because from today’s standpoint, we’re like, “What are mobile apps good for? Everything. Everything is good mobile.” There’s Uber and there’s Airbnb and there’s Google Maps and on and on and on. And then when you actually go and think about it, the issue is that a lot of the, because people have been so used to operating computer in sessile fashion, meaning immobile, their imagination wasn’t enough. They were like, “Why would I just want to do that on the go? I don’t have a full mouse. I don’t have a keyboard. I have to tap on a screen,” and so and so forth.
And Yishan’s point was humans are mobile. And so therefore, even if the interface is smaller, even if your UX is worse, even if it’s more constrained and it can’t do everything, it has that 1,000 X value proposition that it’s always available to you at all times. And that alone means that every app will become a mobile app. This is totally obvious today. Is probably pretty obvious by 2015. It was absolutely non-consensus by 2009, 2010, when that thread came out, except for within the tech people who were investing in mobile.
So what is similar to that? I, and of course not every future comes to bear and so on and so forth, but what would I consider something which in five years or 10 years, we’re going to be like, “Duh, super obvious, of course. Huh,” and now today they think you’re a weirdo and that’s never going to happen? When it goes from you’re stupid and insane and that’ll never happen to, obviously, that would always be the way it was. I love that because there’s a very short gap in the middle of that exponential. Other things that were like that were masks during COVID or pseudonymity actually in the crypto community.
But what is specific one? So AR glasses. So AR glasses, if you combine a few things — so Snapchat spectacles, which Spiegel’s immense credit, he has persisted with after tons of criticism. And hardware is really hard to iterate on. So he’s persisted with that. He’s made that a big thing, and I give him a lot of credit for that because it’s very difficult to do that over multiple generations. It’s the kind of thing that your CFO wants to cut. It’s the kind of thing that the street doesn’t like. It can be low margin, blah, blah, blah. Anyway, Spectacles are out there. I’m not sure how well they’re doing, but they’ve definitely improved a lot. I like them. I have no Snapchat stock by the way. I’m just saying with everything, it’s a good product.
So Spectacles, Facebook’s Oculus Quest again, something which Zuck deserves, I think, a huge amount of credit for putting two billion into that 10 years ago. They’re only now really starting to recrue it because there were several iterations and there was a lot of technology they need to go into Oculus Quest to get it to where it is now, Oculus Quest is. So Spectacles, Oculus Quest, Google Glass Enterprise, which I think is doing reasonably well, Apple’s AR. So Google Glass Enterprise, basically, they’re using it for industrial applications, not walking down the street yet, but for industrial applications like a surgeon or a mechanic or something like that.
Tim Ferriss: Yeah. Less likely to get punched in the face when you’re using it that way.
Balaji Srinivasan: Yeah. Right. Well, so I’ll come to that point. Apple’s ARKit. So the AR kit is you can hold your phone up and you can see a glowing orb or something like that on the other side. Or for example, you’ve got a ruler app in the phone, and you could hold it up and it’ll just, boom, it’ll show you, blueprint style, what the measurements are of your walls. And then apps like Pokemon Go, which are augmented reality apps.
And you put all of that together and what do you get? You get something which looks and feels just like a normal pair of glasses that you’d get from LensCrafters or something like that. But you tap it, and you get Terminator vision over the world. And maybe you tap it again, and it darkens and you’re in VR. And it’s as lightweight as normal glasses, which we know are a form factor that people do use. Millions of people use them every day. They look like normal glasses so they don’t stick out to the world at large. But what they do is they make you hands-free.
So remember the thing we were saying, well, humans are always mobile. Well, why would people want AR glasses? They want the use of their hands. They want the use of their hands and they want to be outside, and they don’t want to be stuck inside all the time. And so this will make us truly mobile again, because you won’t be — mobile phones will be seen as this intermediate stage where you go and walk around and you’re like this all the time. And I’m not sure if it’s Huberman who said this on your podcast or something, but he was like, “The way to wake up, to be alert, is to look up.” Do you know that trick?
Tim Ferriss: Yeah. I think he did share that on his and my first conversation on the podcast, I believe that was in that episode.
Balaji Srinivasan: It’s almost you’ve got this primitive caveman, and he’s coming out of the cave and he’s like, “Who will Aug smash today?” and looking up this and he is kind of surveying and he’s alert or whatever. That maybe that’s the adaptation, but the opposite of that is staring down at your phone and actually — Sergey Brin, many years ago, remarked that it was emasculating to do that. And who knows what the biomechanical feedback loop that’s going on is, but heads up is heads up.
MIDROLL?
Tim Ferriss: How much of the purpose of Alexa as a device in the home do you think is just developing training data and better tech so that it can be ported over to mobile use in some type of application with, say, AR-enabled glasses?
Balaji Srinivasan: I mean, it’s a really good business in its own right. I mean, they’ve sold tens if not hundreds of millions of those devices. So, but yeah, the training data, I mean helps, helps a lot. And all three companies Apple, Google, and Amazon have these smart speaker things, which they’re kind of interesting. If you snapshot today and then you think back 30 years, the kinds of things that have converged. The clock radio has become this — that’s the closest analog to that in the 1980s household for an Amazon Alexa thing is that and the phone obviously has combined lots and lots of different gadgets.
And then we’re going to now see if you look at the Solana crypto phone, when you walked out of your house in the ’80s or ’90s, you’d have your wallet and your keys, and then maybe your credit card. And then later you have your phone. And it’d literally be a physical wallet and a physical key and a credit card and so on. And eventually that’s all going to converge into a different kind of thing, because it’s amazing that your cash and your wallet, and your keys to your car, and your credit card, can all be thought of as a private key on your phone.
Tim Ferriss: I suspect we’re very close to that. I mean, you have Tesla, which is phone tethered, and then you have say Apple Wallet, and then you have fill in the blank. We’re very close to that, I would imagine.
Balaji Srinivasan: We’re close, but it’s one of those things, it’s sort of like gathering threads. So you have to gather all of the skeins together so that now a Tesla car can be basically opened by your phone. And then you have to sell so many Tesla cars. That’s 10 percent of the market and you’ve educated the market. And then you do it for your wallets for your private keys, and then you do it for your passwords and so on. So you’re gathering all of these different skeins and then you make that tapestry or that coil.
Tim Ferriss: What is that word that you’re using? Skein?
Balaji Srinivasan: S-K-E-I-N.
Tim Ferriss: E-I-N. All right. New word. I’ve it’s a length of —
Balaji Srinivasan: It’s like a length — I think the official definition — length of thread or a yarn —
Tim Ferriss: A length of thread or a yarn loosely coiled and knotted. Got it.
Balaji Srinivasan: Maybe I’m mispronouncing it, but I think it’s skein.
Tim Ferriss: Skein. No, you got it. Skein. All right. Yes. You gather the skeins. Sorry to interject.
Balaji Srinivasan: Yes. So you ask for foreseeable future. So first is transhumanism / optimism, and I have this tweet, which is “Super soldier serum is real.” Okay. Have you seen this one?
Tim Ferriss: I have not.
Balaji Srinivasan: Okay. So you’ll like this one. Super soldier serum is real. Okay, this article is from PLOS. It’s 15 years old or whatever.
Tim Ferriss: Myostatin inhibitors or something. Possibly.
Balaji Srinivasan: Yeah, exactly. And so on the left hand side, wild type mouse. On the right hand side, myostatin and null, and look at the chest on that guy. Like, holy moly. That’s why I put the Captain America before and after. This is like — go ahead.
Tim Ferriss: Oh, yeah. Oh, yeah, yeah. If you are able to work with knockout jeans and so on, you end up with animals like bully whippets. So people who have seen a whippet, will envision this very, very, very thin dog that looks something like a greyhound. But if you look up a bully whippet, you’ll see something very, very different indeed. And there are also cattle breeds that have been bred selectively, which is the slow way to do it for this type of myostatin inhibition. So they end up looking Arnold Schwarzenegger times 10, basically.
Balaji Srinivasan: Exactly. That’s right. And the thing is that there’s this movie, Limitless, that I really like. And the reason I like it is it changes the normal Hollywood formula at the end. See normally, many Hollywood formula movies about science fiction stuff nowadays have a sort of Icarus thing to them. He flew, he was too bold, and he flew too close to the sun and his wings melted. And he came back to the Earth and so he should not have ever flown in the first place. And it’s basically, “You arrogant technologist, you added, but there’s always some constraint and it will be subtracted from you. You’ll never learn,” or whatever. This kind of intrinsic conservatism. And what’s awesome about, it’s a 10-year-old movie, so I’m spoiling it for people, but what’s awesome about the end of Limitless is that he engineers away that constraint.
And because in real life, guess what? All of our planes don’t crash either. We managed to outdo Icarus. It wasn’t some arrogance of thinking we could fly. We could fly. We could figure it out. Yes, there were some crashes. We figured it out. We got it down to a not just a science, but to an engineering.
And so similarly, a lot of people, when you show stuff, this myostatin thing or whatever, they’ll be like, “Oh, but it’ll give you cancer.” Or “Steroids will screw you up man,” or whatever. I’m like, that may be the case if you are not throwing all the science and engineering in the world at it. So here’s a kind of controversial statement. You know, Lance Armstrong, the Tour de France winner? I may be getting some of the facts wrong in this, but my understanding is he had serious testicular cancer, his doctors gave him some kind of treatment. And then he came back to win multiple Tour de Frances. He was out racing other guys, many of whom were also juiced. Okay. But the point is, yes, within the game, sure, he broke the rules, should be punished. I don’t dispute any of that. From an abstract perspective, I want to know what his chemists were doing because that is some Nobel Prize worthy stuff. To bring back somebody from testicular cancer to that level of physical fitness is insane. Whatever it was that they were doing.
Now, is it possible — people again, they’ll come up with the Icarus line. What are you talking about? He probably dropped five years off his life. Okay. Maybe he did. I actually don’t know. But if he did, I think a lot of people might still take that trade off in the trade off space to come from testicular cancer to ridiculously ultra fit and so on, but five years less of life, I don’t actually think that’s a necessary thing. Again, go ahead. Yeah.
Tim Ferriss: So let me hop in here. Because this is one domain where I have some familiarity. So for people who want to get an idea of how doping functions at the highest levels, or the higher levels, at the highest levels, you’d need to get the — actually there’s a film called Icarus, of all things.
Balaji Srinivasan: Oh, really?
Tim Ferriss: A documentary which goes into the Soviet State’s use of doping and from a biochemical and also even just mechanical logistics perspective. It’s just staggeringly complex and fascinating, I think. There’s a book also, it’s quite old, but called Game of Shadows: Barry Bonds, BALCO, and the Steroids Scandal that Rocked Professional Sports, which is also quite a good read when it comes to, assuming you don’t want to get into too much of the biochemistry, but let me say just two things. So one is related to Lance. Arguments have been made that until he lost muscle mass through cancer treatment, primarily in his upper body. That he was an excellent cyclist, but not of the caliber that we saw afterwards and that part of the success, not all of it, but a component to the increased level of success —
Balaji Srinivasan: Again, it’s a new version of the bulk and cut.
Tim Ferriss: It was the recomposition of his body and distribution of muscle mass. I do think the Lance example is super interesting and I would just also pick up on one lost skein. I’ll use skein.
Balaji Srinivasan: Sure.
Tim Ferriss: From earlier, if people want to see examples of literally, they’re referred to as double-muscled cattle. So these are mutations, due to mutations in the coding sequence of bovine myostatin. Belgian Blue is the one that you can most easily find. And the photographs of this are quite mind boggling.
Balaji Srinivasan: Oh, yeah. Belgian Blue is great.
Tim Ferriss: Yep. Yeah.
Balaji Srinivasan: The traps on that thing are just crazy.
Tim Ferriss: Oh, everything. It doesn’t doesn’t even look they should be able to walk. And in some cases, due to selective breeding and other types of interventions, that is the case with chickens now who are bred for consumption. They can’t support their own weight on their legs past whatever it is. I’m making it up, something like week six. But I don’t want to take us too far afield. We’re going to come back to The Network State, but —
Balaji Srinivasan: I actually want to talk about this thing you just said and let’s come to The Network State.
Tim Ferriss: So yeah.
Balaji Srinivasan: So one thing that’s kind of important about this is, and this will relate to The Network State thing is the title, that book Game of Shadows and some of the words, cheat and fraud, and so and so forth, the fundamental issue, and even with the Soviets and so on, all of this stuff is being done in the shadows. It’s on the border of the system. It’s by the bad guys. What it reminds me of is actually in the Soviet Union itself. There were two kinds of groups that talked about capitalism. The first were the dissidents, the guys who eventually became reformers and so on. And so that was a tiny, tiny, tiny minority of people. They were the people who could get outside of their childhood and all the propaganda on how evil those capitalists were. Weren’t they imperialists? Weren’t they pointing guns at us? And they killed our brave Soviet soldiers. Lenin’s revolution. Hadn’t everybody sacrificed so that you, the worker, could have this bountiful life? And you’re so ungrateful and evil. So there’s that small group of academic types who could get outside their head. But there was a much larger second group of capitalists. You know what those guys were?
Tim Ferriss: Tell me.
Balaji Srinivasan: The black marketeers. And they lived down to every stereotype of the regime. They would cut you for some vodka. They would basically — they were totally unregulated shadow capitalists who — go ahead.
Tim Ferriss: So are those guys team biology? I’m just trying to —
Balaji Srinivasan: No, no, no, no.
Tim Ferriss: — tie this together.
Balaji Srinivasan: Tying this together. My point is that when our moral premise — in the Soviet Union, the moral premise was capitalism is bad. And if capitalism’s a crime, only criminals will be capitalists. And it took enormous amount of effort over 70 years to flip that moral premise and be like, look, capitalism is at least acceptable, if not good.
And then what happens is all of this stuff, you unlock the basic dispassionate gears of civil society. You have accounting and you have supply chains, and you have financing. You have all this stuff that we think of as boring corporate stuff, where it comes out of the shadows. You have courts that deal with edge cases. Because in the abstract, basically once you’ve denounced capitalism and pushed it into a corner, the Soviets could say, “And what happens if someone cheats you? Huh? Well, that’s what happens under capitalism.” And the answer is, yes, it does, true. That scams or whatever do happen, but we have courts and we have mechanisms. And in the abstract, the whole thing can be denounced as obviously unworkable and so complicated. You have all these edge cases, you have the chancery court, which determines in the liquidation who gets what kind of outcome. You have senior debt, you have all this type of stuff. Meaning, sorry, I know I’m mixing a few things. Point is you have Delaware law and corporate law. You have liquidation preferences, you have —
Tim Ferriss: Went from Belgian Blue to Delaware corporate law in 27 seconds. I like it. The range!
Balaji Srinivasan: Point is basically that there are a lot of details when you actually come and implement capitalism. And from the outside, if you haven’t done that, it makes it sound too complicated. A Rube Goldberg machine that’ll never work. Why don’t we just seize everything, comrade, and redistribute it from the state? And the thing that’s already there is the thing that’s functioning. And the thing that isn’t there is the thing that seems can be attacked in a thousand ways is this thing that doesn’t exist.
Tim Ferriss: Totally.
Balaji Srinivasan: Point is, once that moral premise got flipped, once it was allowed for the bulk of 99 percent of people to engage in this, yeah, there’s a whole machinery that comes in. And so once we can flip that moral premise and we can say, look, life extension is good. And more muscle is good, and the whole Icarus narrative is wrong, the Wright Brothers are right, Icarus is a myth. Wright Brothers, that’s a reality. We actually were able to fly. Icarus was just a mythical thing. The reality is a Boeing 747 or whatever. Airbus. Name some recent flying aviation company that hasn’t had some issues, but whatever. The overall planes work.
So in the same way, once we flip that moral premise and say optimalism good, enhancement good, then we start shifting it out of Game of Shadows and Soviets and the doping scandals and cheating, all those negative adjectives and we start going to the positive stuff of what Huberman is doing and what David Sinclair is doing. And so on and so forth. The reason I just want to identify this, I actually think that moral language, that moral premise, is everything and it’s often not articulated.
Tim Ferriss: No, I agree with you and just like making the market, setting the price, depth charts, we talked a bit about the Overton window and sort of shifting that depth chart as a way of becoming political, if you’re an active player, so to speak. And I think that also applies here.
I just want to say a couple of things about the doping and performance enhancement, just for people who may be interested in going a little bit deeper. Another documentary, and you could learn a lot just by watching first, I would suggest Bigger, Faster — I always say this the wrong way. Let me correct.
Balaji Srinivasan: Bigger, Faster, Stronger?
Tim Ferriss: Well, it’s Bigger, Faster, Stronger, but I think for trademark purposes, I’m going to flip it. Bigger, Stronger, Faster was a documentary that was made in 2008. And it is a fascinating exploration of performance enhancement. And it also shows the advantages that richer countries have in performance. And in a sense, doping and competition at the highest levels is very similar to, let’s call it tax optimization on the positive side. Tax evasion, if you want to look at it in that, through that lens is, they will look at something, in this documentary, use of erythropoietin, so EPO, used to increase the oxygen-carrying capacity of your blood. Which is why athletes also will use blood doping. So they might have use of EPO banned by WADA. So you cannot do this in the realm of sports, that’s against the rules.
Then you have blood doping, which at different points, and in different capacities, has been either allowed or not allowed. It’s the same thing. If you train at altitude and then you develop blood that has more oxygen carrying capabilities, and then you infuse yourself with that, that’s kind of quadrant two.
Then you have quadrant three, which is sleeping in an altitude simulation tent. And there are different paradigms —
Balaji Srinivasan: What are the axes? Sorry. I missed the axes. What are the —
Tim Ferriss: Forget about the axes for now. It’s just comparing four different options. And then there are a few others. And it’s just to point out that the, and again, I don’t want to dwell on this too long, but you can look at four approaches to achieving the same ends with different legal status or different status with respect to the rules, which doesn’t automatically mean all of them should be allowed, in my opinion.
But secondarily, there are countries that do not have Olympic-sized swimming pools to train in, and nonetheless, have athletes who are sent to the Olympics to compete in swimming. So I do think that there are, in some respects, incentives that are aligned with athletes to preserve the current state of doping, because with more money, with more state support, you can actually game the system more effectively than, not necessarily lesser players, but less-resourced players.
So I would just say that I don’t think all athletes would want to agree to, nor teams, nor states, to, say, the all-drug Olympics. If people haven’t seen the all-drug Olympics skit from Saturday Night Live, they should look it up. It’s actually pretty entertaining.
Balaji Srinivasan: So let me poke on this a little bit, because I —
Tim Ferriss: Let me add one more thing. Then you can poke on this too.
Balaji Srinivasan: Please.
Tim Ferriss: I would also say definitely I’m not a doctor. I don’t play one on the internet, but people should — muscle mass is good to a point. Preserving muscle mass, avoiding age related muscle atrophy like sarcopenia, super important. Bone density, et cetera. But there are arguments to be made that stepping on the gas with anabolism could be contraindicated for longevity past a certain point. So I would just say there’s a balancing act between sort of autophagy and a number of things we know work for longevity as it stands right now, at least in mice and possibly in canines. And that balance is something I think people should look at. There will be a future guest on this podcast, Dr. Matt Kaeberlein. That conversation’s going to get into a lot of that.
But please feel free to push back or tease apart.
Balaji Srinivasan: One thing, just one thing, actually, I love this. This is great. I’m learning stuff also. But I think the framing of it in terms of athletes and the Olympic games or drug Olympic games, and so on, the thing is, as you’re aware, in this century or in this sort of phase of humanity, we’re moving away from spectator sports. And I don’t really care that much about the Olympics or the NFL, or something like that, but I do care about physical fitness and running and lifting, and so on and so forth. And so fine for somebody who wants to go and do it professionally, but I do care about the average person’s health and for the average person, or any person, that’s not a game. The absolute metric is what is their personal muscle mass? What is it? When 100 people run around a track, maybe one of them wins, but the other 99 also get a cardiovascular benefit from that.
And that’s kind of what I’m focused on is not the zero-sum aspect of who wins this zero-sum competition, where it’s this artificial and constrained environment, but rather the non-zero-sum of how do we improve people’s health across the population generally. Even if it is true that these guys who are extreme elite competitors, have something to teach us broadly, nothing on the field really matters to anybody outside the field, beyond the entertainment, unless there’s some cool discoveries that come out of there. And we’re curing testicular cancer or we’re having treatments for them that make them run around Lance Armstrong after his thing. That’s kind of where I’m coming from.
Tim Ferriss: Yeah. I think we’re more on the same page than you might imagine. What I would say also is the point I’m making is that the dose makes the poison, right? Paracelsus. With so many things. And this includes a volume of exercise. It includes drug intake. And much like we were talking about technology and looking around corners and seeing what will be obvious, or at least widespread, say five years from now, you can do that with performance enhancements, sports very easily, too. You look at race horses, and then you’ll look at, say, patients with wasting diseases who are using various interventions, because it is their, or they view it as their means of last resort. And then you have bodybuilders and then professional athletes, and then you have rich people. So if you just kind of track that progression, you can spot a lot of things super early. I mean, you can spot modafinil 10 years —
Balaji Srinivasan: That’s a great point.
Tim Ferriss: You can spot, say, modafinil, Provigil, things like that, 10 years before it’s widely known as a possible performance enhancer for cognition, which I would not recommend people do, by the way. It’s still pretty poorly understood.
Balaji Srinivasan: Honestly, just monitoring that funnel and publishing that funnel on a quarterly basis would be one of the most important newsletters. That’d be an awesome funnel to track.
Tim Ferriss: I put it into The 4-Hour Body when I wrote it in 2008, 2009. It’s still reliable. You can track that stuff. It does require some manual labor just because, sure, competitive horse trainers aren’t just going to sit down with you over a cup of tea the first time you meet and tell you all about their doping regimen for a lot of understandable reasons.
Balaji Srinivasan: You mean a different word though, but by the way, I agree with you on the exact dose of something, more is not always bad. I agree with all that. The only thing that I’m saying is just, and it seems a small thing, but it’s like, I don’t to even use words doping, shadows, cheating, etcetera, because that is conceding territory to folks that want to pathologize improvement. And that’s basically, that’s the only thing I’m coming at is that like, to sort of pull the chip, that limiter chip that’s in our heads, and remove that chip and basically be like, “Actually, no limits.”
Tim Ferriss: Well, so I think it is important to develop an awareness of the words you use, because at least if you understand those words, they sort of form the concepts and the boundaries of your thinking. At least the boundaries of what you deem acceptable and unacceptable. So you should be very aware of the language you use.
Again, I don’t want to dwell too long on this. I will just say that if the opposite of pathologizing use of, just to choose one class anabolic androgenic steroids, if the opposite of pathologizing it is freedom in the form of anyone taking however much they want whenever they want, I don’t think that swing to the opposite end of the pendulum is going to be a net positive for people. So the awareness is important
Balaji Srinivasan: Well, that’s the thing.
Tim Ferriss: As is the due diligence. Let me just say something real, real quick, Balaji, which is I have used a whole slew of these compounds, post-surgically, to ensure full recovery of my left shoulder, which I had completely reconstructed. And I’ve talked about this publicly because I’m not ashamed of it. I think it was absolutely, strategically, medically the right thing to do. I’m not recommending people do that. There are both medical and legal consequences that can follow from all these things. So speak to your GP, speak to your physician, if you want to discuss this kind of thing. But I just want to make it clear that I’m not just an observer in this sphere. I do think there are times and places where it makes a lot of sense to use these extremely powerful molecules, but they can be misused with long term consequences.
Balaji Srinivasan: Totally. So two things there. One is, the reason that the Soviet example is actually quite good is they would also kind of jump to, “Oh, so you’re for capitalism. Well, then everyone can auction everything at all times. And everything is always prices and evil hedge funders will take your house.” And the thing is that, all I’m saying is let’s not pathologize this. Let’s not put this in a box. Let us actually think. I mean, you don’t have to go to the other extreme of roided up, whatever, whatever the thing that jumps to people’s minds. There’s an entire infrastructure and entire continuum that can be built out when we’re not just balled up in the corner of Game of Shadows and cheats, and doping, and pathology. That’s all I’m saying.
Tim Ferriss: It is a great title, though. It is a great title. Just the fact that you remembered it and have said it so many times, it’s a good title. You’ve got to be — I mean, I know it’s not your style of title.
Balaji Srinivasan: Oh’s, it’s a great title. Yeah. Well, no, no. That’s the thing —
Tim Ferriss: It’s like death tax.It sticks. It sticks in your head. It’s deliberate.
Balaji Srinivasan: That’s exactly right. I mean, there’s actually this amazing app that people, it came out recently DALL-E 2. Okay.
Tim Ferriss: Yeah.
Balaji Srinivasan: And what I’d love about, have you ever heard about this? You’ve seen this?
Tim Ferriss: I have access to DALL-E 2. Yeah.
Balaji Srinivasan: You have access to it. Great, good. So, and there’s also open source — not open source. There’s more public versions that people can mess around with. So the thing is that shows the power of words more, to somebody who’s of a quantitative bent, more than anything I could say, because you can write three words into DALL-E 2 and get an image out from that. And it’s effectively like an extremely compact programming language. I say like, I don’t know Balaji, improving musculature. I don’t know. Something like that.
Tim Ferriss: That would be great.
Balaji Srinivasan: Let’s see. But the point is that if you were to actually write that out in computer code to build some of those images, it would be thousands, tens, hundreds of thousands of lines of code for some of them, but you can literally do it in three words. And when people say, “Oh, I’m not a number, I’m a name.” There’s actually a wisdom to that because words are these super high dimensional vectors, and you can combine them to these really complicated manipulations in just a few phrases.
And what’s kind of interesting is that three different technologies are all converging on the power of really, really short phrases. And those are AI, as we just talked about, where you just give a few words and the computer is able to figure out all of this stuff. Crypto, where you have 12 words or 13 or 14 words and it’s a mnemonic, which stores all of your cryptocurrency. I mean, literally you could store $100 million in those words. You could store all these possessions. And then obviously social media where a few words can be a hashtag or a phrase that starts an entire movement. And that is on every building and everybody quotes, and so on and so forth.
So those three points, by the way, why those three technologies, I know it’s almost seems trite to say AI, crypto, and social, but those three technologies are, in a sense, cognitive or social technologies in a way that rocket ships and internal combustion engines are not because those don’t interact with humans. These do. These touch humans in different ways.
Anyway. So basically, I used to kind of think that all the word games that they played in academia in the humanities weren’t that important. And it just bored me as to why they were doing this. And now I realize it’s insanely important because a slight tonal shift in a word, that Russell conjugation thing we were talking about, you would get a totally different looking DALL-E 2 image based on the tone.
Tim Ferriss: Sure. And that’s a good point.
Balaji Srinivasan: That makes it concrete. So that’s why I basically — building our own vocabulary and thinking about it consciously from the beginning, sometimes coming up with words. For example this guy, Peter Turchin, who I like some of his work. Do you know him?
Tim Ferriss: I do not.
Balaji Srinivasan: Have you heard of him? Yes, no.
Tim Ferriss: Nope.
Balaji Srinivasan: So he came up with a term which he calls cliodynamics. And cliodynamics is — Clio is the muse of history. And so essentially the concept is he named this term, it’s the science of history. It’s a quantitative form of history. And so he just took that term Clio and he put it in front of it. It’s kind of a nice sound to it and it’s kind of cool. And he just made that word and he is using that word. And I think it’s a great word.
And what this is similar to, by the way, is if you’re an engineer and you’re writing code, what you’ll find is, and you probably do this, actually, when you’re writing your book, you’ll find that you write 100 or 1,000 or 5,000 lines of code, and there’s certain concepts, certain nouns and verbs that you keep using. And sometime online, 3,700, you’re like, “Oh, that noun is actually the core data structure of my entire program. And that verb is the core data structure of my entire program, and that verb is the core function of the whole thing.” It’s a little bit like you’re writing a book and on chapter three you’re like, “Wow, that should be the title of the chapter.”
Tim Ferriss: Yeah or the book. That’s —
Balaji Srinivasan: You abstract it out —
Tim Ferriss: That’s how a lot of people work. Yeah. Or a screenplay, right?
Balaji Srinivasan: Yes, sir.
Tim Ferriss: They come up with the title on page 78, where it somehow emerges as a theme with a label. But let’s talk about The Network State. Let’s start with the simple question which is, what on Earth is a network state?
Balaji Srinivasan: We were just talking about words and this is something which is chosen for this purpose to have several different definitions. I’ve got a definition of it and then I’ve got several different ways of talking about it. Here’s a definition and then it won’t seem informative, then I’ll go through it, or at least it’ll seem like a mouthful. A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of stability, an integrated cryptocurrency, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population income and real estate footprint to attain a measure of diplomatic recognition.
Okay. Now you might be like, Jesus that’s not a sentence. That’s a paragraph. The thing is, there’s tons of things which are very simple to describe or interact with, but very complicated to implement. For example, Google has this really simple interface of you type something into it, but to implement Google is actually quite difficult. And in particular, if you ask to me to define not what a network state is but what a nation state is, people will have a tough time doing that. They might say, “Oh, it’s regions on the map,” or something like that, “It’s a country.”
When you want to give a precise definition, that’s not a circular definition — the term nation state, for example, first, nation and state mean something different. Nation comes from the root word, same root as natality. It’s from common birth. And so, a nation that’s a group of people with a common culture, like the Japanese people, and they have a Japanese language, and Japanese culture, and they’re ethnically Japanese, and so on, and so forth. And then, the state is the system of laws and government that nation sets up to manage its own affairs. They’re as different as let’s say, labor and management in a factory. The same nation could have very different states on top of it.
A place like France is aware of this because they have had many different kinds of governments and so on, on top, but in our day-to-day language, the nation and the state are conflated. For example, you’ll hear the term national security, or multinational, or national as a synonym for federal. They’re actually conflating things because really a multinational, it’s not like it’s operating with the Japanese nation, and the Catalonia nation, and the Kurdish nation, and so on. It’s multi-jurisdictional. It’s operating in this jurisdiction, and that jurisdiction, and whatnot. The word underneath has gotten abused. Similarly, like national security, it’s really like state security. It’s not really the security of the people, they’re sort of abusing a term.
There’s been this drift and this confusion and the reason for that, is that states want to identify themselves with the nation, in the same way that management wants to identify itself as being the same as labor, and to not have a division between the two. Now, sometimes that’s good and sometimes that’s bad. It’s good if management is actually aligned with labor, and economically aligned, and so on. It’s bad if management is disaligned and in the stereotypical case of the evil CEO exec with the golden parachutes. That’s the bad case.
In the same way, when people try to make this extremely tight identification between the state and the nation, it’s not actually the case. The people can have a totally different government, if they so choose. They shrug it off and that tiny layer of folks that are in the government, just gets deprecated and a new government is set up if people pull their pointers away and they set up a new thing. That’s what happened, for example, in the former Soviet Union, when the Soviet governments fell.
Okay, so my point is that these things that we interact with on a daily basis, we don’t usually have to go to first principles and define them from scratch. If we just talk about the definition of a nation state, this itself — and then, the reason I want to talk about that for a second is, it will be more clear why the nation state is a complicated thing and why a network state has a multiclausal definition, because each one of those clauses takes care of a different failure mode.
There’s all these different people who’ve tried to start new countries and just like a venture capitalist deal will have this term and that term, it’ll have drag along, it’ll have liquidation, it’ll have prorata rights, and so on. And so on every single term in this contract, anticipate some conflict or failure that had happened in the past, and that’s why it’s a more complicated contract. And the same way this definition of a network state goes through a ton of different kinds of failures from just putting a flag on an oil platform and trying to call that a country, to going and trying to start a war, and so on. There’s many different ways that people have failed to start new countries. And this definition, I think, is constructed to route around all of them. That’s why it’s a complicated definition.
All right, but first, let me just talk about the definition of a nation state. First, the nation itself we just talked about how that is this body of people that’s united by common descent, history, culture, or language, and the state is the government. But even that question of, “Okay fine, what is a nation?” You can actually drill into it and all of these thinkers, all these famous thinkers, Rousseau, Hegel, Marx, and Mill, all these guys that you read about in school and may vaguely remember, all of them are now actually something that an entrepreneur or someone who’s very applied would have to think about.
Why is that? Because if in the 2010s, we started to ask a question that we had never really asked in the 2000s, and that question was: what is a currency? In the 2020s, we’re going to start asking the question: what is a nation? It actually becomes something where the thing we took for granted —
Tim Ferriss: Sorry, Balaji, just a quick question.
Balaji Srinivasan: Yes.
Tim Ferriss: Nation or state?
Balaji Srinivasan: Nation, first.
Tim Ferriss: What is a nation? Okay.
Balaji Srinivasan: What is a nation? Because the nation comes before the state. You could have a nation without a state. For example, the Kurds are a group of people that have a common ethnicity, and culture, and so on, but they don’t actually have a state. The Catalonia, they’re in the territory of the Spanish, where the Spanish state governs, but they’re people without a state. And actually when you think about this, the United Nations is actually a misnomer. It’s more like the selected nations that happen to have their states.
There was actually a guy, the guy who’s currently running Kazakhstan, and he’s like, “We can’t endorse the principle of self-determination for every nation because we’d go from 192 in the UN to like 600 nations.” Because all of these new states would pop up rather, because there’s all of these hundreds of nations around the world that do not have their own state.
And so now, the thing is when you start seeing it this way, it’s a lens on the map that most people just don’t think about. You’re turning a constant into a variable. When we talked about it earlier, about volatility increasing, the biggest way that you can increase volatility, is you turn something that you were a total consensus on and a hundred percent of people agreed on, into something that only 80, or 70, or 60, or 50 percent of people agree on. And when you do that, when you take that constant, you turn it into a variable, all assumptions change. If you’re a programmer, for example, the difference between operating and assuming that it’s just the United States or just in English versus coding your program to work in every country and every language, is an enormous change. It can be done, but it’s a significant difference.
Concretely, why do I say constants are becoming variables? Well, there are PC examples I can point out and there’s un-PC examples.
Tim Ferriss: Let’s do both.
Balaji Srinivasan: All right, let’s do both. Okay. Well constant two genders, variable and genders. Okay. That’s a great example of a constant that became a variable, where there was something that was simply an assumption in the 2000s that very much turned into a variable. And literally, all kinds of back ends and databases had to get rewritten, turning something that was assumed as a constant into a variable.
Another example is the US dollar. Before Bitcoin, no one really thought that was a variable, and now it is. It’s a huge variable. It’s something that a significant fraction thinks of every day as something that they can swap in or swap out to at some percentage. It’s no longer the thing that you must reform. It is the thing that you can exit from.
Once you start seeing this, that constants are becoming variables, you start seeing it across life. And very roughly speaking, you have the — I’ll just use this phrasing, but you have the woke and the tech, who are both sort of in different ways disaligned with each other, but also aligned with each other, in terms of turning all social political constants into variables and all economic things into variables.
Let me give you the tech side, because it’s easier to talk about. For example, is a meeting, is it in person or is it virtual? Now we have to actually choose. Oh, when you’re reading that book, are you reading that book physically? Are you reading the digital copy? Simply the digital version of everything starts introducing combinatorial complexity. Oh, you’re talking to somebody. Was it on the phone or was it one of these 10 different apps? Oh, you’re watching the news. Well, it’s no longer a CBS, ABC, NBC, but it’s whatever number of different things.
Now there’s a good to that, there’s alternatives, there’s choice, there’s all this type of stuff. Obviously, people have said there’s a bad, “Oh, my God, people are living in their own filter bubbles.” Really they’re mad that there’s more than one filter bubble, but basically this is great decentralization, great fragmentation. All these constants are becoming variables on the economic side and tech is pushing that. And then on the political side, woke is pushing that and lots of things that people just took for granted. For example, the police. Do you have a society with police? People just thought of that as a constant and then you have a significant double digit percent of the population, less today, but that was actually saying defund the police, abolish the police. And you have NYT op-ed that says, “Yes, we really mean defund the police.” That’s a big variable. That’s a huge, enormous change. That is what I call in the book, I called it a moral flippining or moral inversion, where something that was good becomes bad or bad becomes good.
When you have something like that, you start to actually create different nations because you have the fundamental premises of what are good and bad in a population change. The US is not really a nation state, arguably it never was, but it’s not really a nation state. At a minimum, it’s a binational Republic, which has the red and blue nations underneath it. You can see this, there’s graphs. For example, there’s a CGR article from 2017 that I link, where you can actually see on social media that the red and the blue are literally different clusters and it pops out to you. They just literally only link to each other.
One way of looking at this that’s really unambiguous is if you look at marriage patterns. People typically will say that they will marry across their race. But you know what? Democrats will only marry Democrats to a higher percentage and Republicans are tending to only want to marry other Republicans. That has been growing. The thing is that you iterate that out one generation and what happens? That becomes ethnicity. Ideology becomes biology. If your political party is so important to you are not going to marry outside it, then in one generation, it becomes at a minimum like Protestant, Catholic, or Sunni-Shiite, or something like that, Hutu, Tutsi, whatever. It becomes something that’s actually tribal, as opposed to ideological. The ideology changes the biology.
These are things where they’re extremely deep questions where you just didn’t even have to think of them as variables, because you were born into a world where they’d been fixed as constants. Let me pause there, get your thoughts.
Tim Ferriss: How does the network state solve for this, or codify it upfront, or allow for those types of moral flippinings?
Balaji Srinivasan: Short answer is that it says that the nation is the network that forms online that is defined by the moral premises they share. You literally have like a survey, which is the good, bad survey. And sometimes, explicit is better than implicit. For example, the founder of this community actually has something, which is like, I believe capitalism is good, bad, law enforcement is good, bad, entrepreneurship is good, bad, human improvement is good, bad, two genders are good, bad, and so on, and so forth. You have a set of preferences and some of them are going to be not the extremely hot button issues, but they’re going to be things like carbs, good, bad, and so on, and so forth. I’ll come to that, actually.
I know it sounds funny, but one of the things about this is once you define a community on the basis of what they think is good and bad, it’s so strong, it’s ridiculously strong because they agree on the basic premises. And then they can crowdfund. You don’t have politics in the same way, because they don’t have internal disagreement. They have alignment. They agree on what the good world should be. And then, they can crowdfund things. They can appoint leaders. They are essentially organically aligned for a cause.
That filtering of the internet into these network nations is actually the first step. The reason the definition has all these clauses, to give you some examples of failure modes. If you go to YouTube and you look at how to start a new country or whatever, you know what all the things start? They’re joke videos, but they’re kind of funny, do you know what they all start with?
Tim Ferriss: What do they start with?
Balaji Srinivasan: Get some land. And they’re like, “But all the land is spoken for.” Blah, blah, blah, blah. The first step they take is the wrong step. Why? Because land is the most contentious, zero-sum, insanely fought over thing. Russia and Japan are fighting over the Kuril Islands. There’s little islands in the Mediterranean that the Turkish and Greek states are fighting over. People fight over land so much over the stupid — Canada and Denmark were fighting over this stupid uninhabited piece of land. Do you know what I’m talking about? This — hold on.
Tim Ferriss: No, it doesn’t surprise me.
Balaji Srinivasan: Well, what was this island?
Tim Ferriss: Humans like to fight.
Balaji Srinivasan: Yeah, Hans Island. Here’s the thing. Why would they fight over something like Hans Island? If you go and look at it, it’s this uninhabited, frozen island in the middle of nowhere. The non-obvious thing, very non-obvious I think, is that they can see it on a map. In the 1800s, there was this conflict and it was called 54° 40′ or fight. Are you familiar with this?
Tim Ferriss: One more time? Probably not.
Balaji Srinivasan: 54° 40′ or fight.
Tim Ferriss: No. I was stuck looking up the Falkland Islands because I was thinking about the Falkland Islands in this context as well, the Islas Malvinas.
Balaji Srinivasan: Yes.
Tim Ferriss: I don’t know 54° 40′ or fight.
Balaji Srinivasan: Okay, so 54° 40′ or fight was basically this mid-1800s conflict over the boundary in the Pacific Northwest. The thing is basically, the Americans wanted the border with what we would now call Canada to be at 54° 40′ or they would fight a war. Now in actuality, I think it turned out to be the 49th parallel, rather than 54° 40′. The thing is, think about that. The latitude and longitude, this thing, this map construct that everybody could share, became something that lots of eyes were on and then they were fighting over it.
Now, you might say that’s the most obvious thing in the world, Balaji, of course they’ll fight over a map. They can see a map, et cetera. Let me complicate that picture. First is, the map was not actually not always visible. In pre-1492, much of the world was unmapped. The entire “New World” was not mapped. Maps actually just got better and better. For a long time, there was like, “There be dragons.” There were parts of the world that were unmapped. It was called terra incognita and there was this time of mystery. It was the frontier, but it was a frontier to the nth power because you didn’t even know the land existed. It seems like we’ll never actually have that again until we get to space, but I argue it’s actually existing again already in a non-obvious way and that is on the internet.
Point is, when people can see something, they will fight over it. The concept of mimesis, if they can see it, they’ll fight over it. If they can see Hans Island, they fight over it. They see a border, they fight over it. And you can see, for example, the Franco-German border between France and Germany.
The border you can’t see is the border between Twitter and Facebook. And what do I mean by that? What is the border between Twitter and Facebook? Well, Twitter has like 330 million users. Facebook has 3.6 billion. And for each person, you could define the border as for their time spent on — let’s say 3.6 billion Facebook users, 330 million Twitter users. The total is 3.9, 3 billion max. It might be like 3.7. There might be an overlap there. For each person you can define a zero to a hundred percent in terms of the time that they would spend on either they’re 100 percent Twitter or 100 percent Facebook. The border region would be those people who are 50/50. That might be a group of 70 million people in the world who spend exactly 50 percent of their time. And there’s people who are farther from the border, who are 30/70, and people who are really far from the border near the capital who are a 100/0, and vice versa.
What I’m describing there is literally something that you could compute. It’s not an abstract thing. If you had access to all of Twitter’s data set and all of Facebook’s data set, you could compute this. Here’s the thing. Nobody has access to both, so nobody can compute it. You can estimate it and so on, but unless Twitter and Facebook got acquired, they wouldn’t be able to literally find out who was on the border region. They could do sampling and stuff, but there’s a cloud that is descended. These gigantic networks cannot really see their borders that well. They can see themselves, but they can’t see what people are doing outside. They have less control, in a sense and less visibility. And so instead, what they fight over, are the visible things, like the use of the network, and so, and so forth, but they’re going to fight over border regions less. The only way they can fight over border region, is to make their products so attractive that they can pull people from that border region.
Now by the way, lest of me said that these are trivial things to talk about. Twitter’s 330 million people. Facebook’s 3.6 billion. Both of those are bigger than France and Germany combined. These are enormous, enormous networks. It’s a huge chunk of humanity and the fact that we cannot see the border region, means that the entire geography of how humans operate is actually changing.
You have to remap how you think about geography because in physical space, for example, two people they’re near each other, there’s a physical distance metric, and so on. In digital space, it’s a bunch of islands that can snap too. I can be near you, as I am right now, and then snap away and be really far. That applies not just for individuals, but for entire continents. For example, in the physical world, Russia is basically always going to be adjacent to Japan, and Ukraine, and Iran, and so on. Russia, the country doesn’t move around that much. I mean its borders can expand and contract, with the Soviet Union it’s bigger, when it’s the Russian Federation it’s smaller, but it’s not like it’s suddenly adjacent to Argentina. It’s not suddenly adjacent to Mexico. It was involved in the Cuban Missile Crisis at the height of its power, but it’s not projecting power all over the world.
By contrast, somebody like Vitalik of Ethereum, his network of people or the Solana network, suddenly this network can be adjacent to another network. Solana can start taking users from Ethereum. It’s like this huge island of 30 million people just surfaced out of the ocean next to Japan and started pulling people from them.
Tim Ferriss: Gojira! Yes, Godzilla.
Balaji Srinivasan: Yeah, exactly. Atlantis is real, digital Atlantis, this huge island, what the heck? It can then disappear and vanish and you can also vanish.
Tim Ferriss: Yeah.
Balaji Srinivasan: Your thing can be like, “We want to cut off those network relations and we want to move our island somewhere else.”
The thing is that I’m downloading one of about, I don’t know how many, 10, 15 different things that turn constants into variables. One of them is the nation that we take for granted. The single group of people is breaking up into multiple nations that are defined by networks. Another is the currency is breaking up. A third is the geography is changing. A fourth is the moral principles that underpins society are changing.
And so, when all of those things are in flux, you need something to catch it on the other side because otherwise what people will do is they will try to assert that old thing that just doesn’t exist anymore. That’ll be something that does not acknowledge the reality of the situation. It’s like closing the barn door and then expecting to get all the horses back inside, when there were forces that were more powerful than that thing that spread them all out, those entropic forces. You have to go to where those horses are, and loop them up, and maybe have new ranches or whatever there to extend the metaphor.
Tim Ferriss: Okay. What I’d love to do, and this is just how I like to think about teaching in general. If you’re teaching someone a golf swing, you show them once, you do it side by side, then you have them take a couple of free swings, and then provide feedback after that.
Balaji Srinivasan: Sure.
Tim Ferriss: What I’d like to do is just paint a picture or get your help to paint a picture of where we might be going. And then we can back into digging into some of the nuts and bolts and concepts of the network state.
I’d like to break that into two pieces. Let me just set a framework, if I may. It could be five years, it could be 10 years, or whatever time frame. Let’s just pick a timeframe. Maybe it’s five years, but you can pick. The first is, just take a few minutes to paint a picture for where you see America in a handful of years. And again, you can pick the distance, just so we have an idea. And you have had some predictive accuracy with a number of things over the last handful of podcast conversations, so just to set the stage for like, okay, if your default is do nothing, don’t move, this is what you might see coming based on A, B, and C. And then, just a few minutes on that.
And then after that, painting a picture of, if you were taking the pro side of a bet. Let’s just say, you’re talking to some politician and they’re like, “Ah, Balaji, you’re full of shit. The US is going to be this, this, and this. Not much is going to change. I’m going to bet a million dollars that this network state thing is not going to be a thing.” And you said, “Okay, I’m going to take a million dollars on the other side of the bet and here’s the picture I’m going to paint as a possibility.” Because when I hear network state, a lot of things come to mind. I’m listening very carefully. I’m thinking on one hand of like E citizenship and Estonia and how that might be tweaked because most of the people who are getting this E citizenship have no plans to actually reside in Estonia. And then I’m thinking on the other hand of Christiana, this basically started as a sort of squatters territory within Copenhagen in Denmark, that has its own social structure of sorts, its own economy of sorts.
I have a lot of these free floating ideas, but if you could just talk about like, okay handful of years out, what your vision of the US looks like and what might change. And then if you had to paint a picture of if I had to bet on a nation state coming into existence and getting some traction, this is what I could see happening. And then we can back into the rest of it.
Balaji Srinivasan: Let me start with the first part first. This is just a scenario analysis. Do I want to say it’s a base case? Let’s say I think it’s probable. I can’t say it’s 100 percent. And there’s things that happen that are reactions to trends you predict, but it’s hard to predict exactly what that reaction is. But here goes. I call it American anarchy, Chinese control, the international intermediate, and the recentralized center. Okay? This is my base-level world view for what happens in the next five to 10 years.
So, what is American anarchy? So I actually wrote about this for Bari Weiss’ newsletter last year, “How We Changed Our Minds In 2021,” but the short version is some groups think everything will basically be as it is. What Tyler Cowen calls base-raters. They just think everything is going to be the same. Everybody’s agitated or paranoid or whatever, and it’s just all going to be okay. Whatever. And then you’ve got folks who think that the US is descending into either fascism or communism, or something like that respectively. Essentially right or left authoritarianism. And they’re reacting to that, and they’re like, “Oh, my God.” And you’re seeing this every single day on social media. People are pushing back against this. And the thing is that while those two groups all share — they’ve got huge differences. One thing that is true verbally, rhetorically, conceptually, cognitively, is even if there’s left and right vectors that point like this, they’re both pointing anti-authority. They’re pointing against hierarchy. And so the left might say, “We are all equal,” and the right might say, “You ain’t the boss of me,” but both of them point towards this concept of, “You can’t control me. No hierarchy is legitimate. I do not trust authority,” and so on and so forth. So that is a subtle vector sum on one axis. Even if the left and right cancel, the anti-authoritarian aspect is summing. Right? Does that make sense?
Tim Ferriss: Yeah, it makes sense.
Balaji Srinivasan: And if that is the case, then it’s the thing that is not conceptualized that we’re actually driving towards. The consensus is for anarchy, because the left and the right can agree that the hierarchy is illegitimate in some way, that the institutions are illegitimate, whether it’s institutionally X-ist, or if it’s all the deep state and stuff. Both of them are tugging on it in a certain way where there’s a vector sum towards taking it apart.
And the thing about that is that American anarchy is the ultimate in liberty and equality. Everybody is equal because there’s no bosses. Everybody is free because there’s no laws or hierarchy. There’s an aspect of this that is the ultimate of democracy and the ultimate of capitalism. Everyone’s doing whatever they want, right? And that strain exists in American culture on both sides. There is a deep liberty thing. And then you’ve got folks who will actually say anarchy is good. And they might say it’s good as anarcho-communism, or they might say crypto-anarchy, where you’re imposing something like Bitcoin on top of it. Basically it’s like the physical world is very chaotic, but you have a digital world and digital property rights that are there. So some kind of structure online.
But the issue here is we have seen what the transition to anarchy looks like in many countries around the world over the last couple of decades. There’s a book by Barbara Walter called How Civil Wars Start, which there’s a lot of things I disagree with her on, but I actually give her credit for essentially pointing out that many American interventions and other interventions overseas, NATO and other stuff over the last few decades, they have been with the intent of spreading democracy, and they have caused anarchy. Like Mexico is way more chaotic than it was. Ioan Grillo has this book called El Narco where he talks about how Mexico’s democratic transition attended this huge burst in the anarcho-terrorism and violent gangs and so on and so forth. Tunisia, Libya, Egypt; a bunch of these countries, we’ve seen them go from reasonably okay to kind of anarchic. And there’s a playbook for how that looks.
And actually, if you before and aftered, if you just teleported somebody from 2005 or 1995, ’97 essentially, to today — I mean, you could track it back and be like, “Well, Oklahoma City happened in 1995,” and, “There’s the Unabomber.” There’s always something that you can say was a trendline all the way through, but Visual Capitalist, for example, has a graph of riots and shootings and bombings and stuff like that, and it’s up and to the right. It did something where it surged in 2020 and it came back down, but it’s rising. And it reminds me a lot of crypto, where what happens is it surges and it crashes and then people write it off. And they’re like, “Ooh, it’s over. That crypto thing is done.” But it’s not done. It’s coming back. And that surge in anarchy in 2020 that came down, yeah, 2021 and 2022 is more peaceful than 2020, but it’s way more anarchic than 2017, which was, itself, more anarchic than 2012.
So American anarchy is on the rise. And what does that actually look like? There’s lots of ways it can play out. I happen to think it’s going to be something like maximalists versus wokes in the US. I mean, there’s lots of different triggers. This is just a sci-fi scenario right now. I’m just spitballing. But —
Tim Ferriss: And by maximalists, you mean BTC maximalists? Or what kind of maximalists are we talking about?
Balaji Srinivasan: Yes. Bitcoin maximalists versus wokes.
Tim Ferriss: Are there enough Bitcoin maximalists in the US to constitute a critical mass for that?
Balaji Srinivasan: So I think Bitcoin maximalism is the most important ideology in the world that people don’t know about.
Tim Ferriss: Mm-hmm (affirmative).
Balaji Srinivasan: Okay? And why do I say that?
Tim Ferriss: I can hear people clapping through the silence. A lot of people listening are going to be getting out of their seats for that one, so please continue.
Balaji Srinivasan: Well, the thing is that from the outside, people would think I’m a Bitcoin maximalist. Okay? But it’s a log scale. To a truly devout orthodox Bitcoin maximalist, I’m a statist cuck. Okay? Because I’m fundamentally a pragmatist, basically, right? And —
Tim Ferriss: You’re a very middle of the road crypto-anarchist.
Balaji Srinivasan: But I’m not a — see, that’s the thing in this book. I’m actually not a crypto-anarchist. So that’s one of the reasons —
Tim Ferriss: I’m just playing around, yeah.
Balaji Srinivasan: No, no. What you’re saying, it’s actually extremely important because — there’s so much I could say. Let me see if I can download it. First is one of the chapters in the book is centralization, decentralization, and recentralization. And the thing is, when you say recentralization, what happens is both the centralized and decentralized guys looks at you like you’ve got four eyes. The centralized guys say, “Wait a second. We’re running America. We’re running China. The US establishment exists. CCP exists. Why would you want recentralization? We have an operating centralized system here.” And the decentralized guys would be like, “Why would you want recentralization? We’re talking about taking power away from these totally illegitimate establishments with Bitcoin. We’re talking about breaking the state and defunding the government and so on. We’re defunding the police. We’re defunding everything. And we’re talking about breaking these tyrannies and getting away from the surveillance state. Why would you ever want to rebuild something like that?”
So the thing is that recentralization has the smallest constituency right now, but I think it’s the right constituency. And one of the things I put out in the books is the helical theory of history. So the linear theory is we’re just progressing. We’re just improving. We’re getting more equal, we’re leveling up, everything’s getting better, and so on and so forth. There’s something to be said for this. On some axes, on some measures, humans have been improving. Like our knowledge of math, for example. That is a roughly cumulative chart. It has drops, when you have the Dark Ages and stuff like that, and it’s not all the way up to the right, but it’s up and to the right.
Then you have the cyclical theory of history, and actually one of the things I talk about in the books is both a left and a right and a libertarian cycle of history. But the right side of history is strong men create good times, good times create weak men, weak men create hard times, hard times create strong men. Where it’s basically like this Nietzschean band of Spartans —
Tim Ferriss: This is The Fourth Turning, right?
Balaji Srinivasan: Yeah, yeah. So it’s Nietzsche and this band of Spartans, they go and build a great society, and then these degenerates take it down, and then we have to, from the chaos and ashes, rebuild again and so on. What’s funny is the left has their own version of this, which is these zealous revolutionaries manage to fight the man and overthrow it, and then a Stalin-like figure comes and compromises the revolution, and the new boss is the same as the old boss, and then it comes back to this. And then the libertarian has a version that’s also like this, which is the startup founder goes and rebels against the bureaucracy. They manage to build an operational thing that is actually much more egalitarian, and it’s got a flatter hierarchy and takes care of all the bureaucracy and it’s actually more competitive, and then what happens is that bureaucracy encrusts this and the libertarian founder rebuilds the state.
And one of the points I make is all through those cycles are the same cycle. Because it’s not just the right cycle of being strong, and it’s not just the left cycle of being zealous, and it’s not just the libertarian cycle of having an innovation. You kind of need all of those at the same time to actually go all the way around the cycle to fight that establishment.
And when —
Tim Ferriss: So what do you think the US looks like in five years, just if we could paint a picture?
Balaji Srinivasan: Oh, sure. Like BLM and Jan 6th all the time.
Tim Ferriss: You mean in terms of events, or in terms of discussion?
Balaji Srinivasan: In terms of there will be mobs that are gathered online. It’s like stochastic network warfare between two groups. Is it five years? It might be 10 years. I don’t know the exact timeframe. It could happen faster, it could happen slower. But fundamentally, I think the catalyst is if you look at interest rates, and you look at the graph, if you ever look at the long-term graph of interest rates, it’s this graph —
Tim Ferriss: Yeah, I have actually. But we should put it in the show notes for people.
Balaji Srinivasan: We should put it in the show notes. And I just want to find this graph. Longterm chart. So if you go to this graph and you click Max.
Tim Ferriss: Mm-hmm (affirmative). All right. So this is tradingeconomics.com/united-states/interest-rate. Mm-hmm (affirmative).
Balaji Srinivasan: Yeah. So United States interest rate, Unites States Fed funds rate at tradingeconomics.com, right? And you click —
Tim Ferriss: I’m looking at Max. Mm-hmm (affirmative).
Balaji Srinivasan: Okay. So what do you see? You essentially see something where over a 40-year timeframe, you have a trend that is very much down and to the right. Yeah?
Tim Ferriss: Yep.
Balaji Srinivasan: And what that is is this is something where — one of the things I write about, and Dalio has actually also talked about this, there are trends that affect humans that are longer than the cycles that we’re intuitively familiar with. For example, you’re familiar with the cycle of your breath. That’s a few seconds, right? You’re familiar with a day. You’re familiar with basically the seasons of a year. And that’s actually what most people are familiar with. Beyond that, maybe the election cycle on four years. Or the longest thing someone might be familiar with, frankly, are venture capital funds or startups, which are 10-year cycles. That might be the longest thing where you can run an experiment and see a few reps of it, in a five or 10-year timeframe, over your life, right? A venture capitalist might see hundreds or thousands of five- or 10-year-long experiments, that most people don’t really track things over that timeframe. And any normal human cannot really track things over 40 or 50 years. You have to dedicate your life to that.
So anything that’s happening over multiple decades, you really need really good charts and stuff to see what the heck is happening. And this graph is one of the best and most important, because it’s so unambiguous. And what it shows is essentially that the US economy, we have run out of juice. The Federal Reserve being able to print money and so on, it just keeps going down on this trend, like interest rates. And if you notice, every time they try to jack it up, it has to be pushed back down and kept down for longer and longer and longer. If you’re seeing that in that graph?
Tim Ferriss: Yeah.
Balaji Srinivasan: And now, the next time, they’re going to be forced probably to bring interest rates all the way to the floor, maybe before the 2024 election, and I think you will see very serious inflation as a function of that, because they’ll print money. And we’ll actually have genuine goods shortages because we have all these supply chain things that are hitting. You have China doing its crazy stuff with the ports and the COVID lockdowns, you have the — do you know the slow steaming regulations?
Tim Ferriss: I do not know the slow steaming regulations.
Balaji Srinivasan: Basically some ESG thing. This is a great example of the moral flippening. I’m getting this secondhand, so I might have it wrong, but I believe it is reducing the speed of cargo ships to cut down carbon emission. So rather than —
Tim Ferriss: Let me just define two things real quickly. So you mentioned Dalio. Just for people who don’t know, Ray Dalio, former — let’s just call him head principal at Bridgewater Associates. At least at the time I interviewed him, the largest hedge fund in the world. Around $175 billion or something like that. ESG, environmental, social, and governance factors. So just that leads into what you were just discussing. So please continue.
Balaji Srinivasan: That’s right. So, just to summarize it, basically we have more money, they’re eventually going to need to print again, we have literally fewer goods, where China is cutting off supply, there’s sanctions, there’s wars like Ukraine, there are COVID lockdowns, there’s stuff like this slow steaming, which is this huge self-inflicted wound by the ESG thing where every single container ship in the world has to slow down now.
So you have a lot of things that can sum up into something where it gets non-linear fast. And if that happens, and you do have not just the inflation we have now, but genuine serious inflation, or even hyper inflation, that is when society comes apart in the US. Because people have been so freaking angry at each other in the 2010s in a relatively booming market. In the 2010s, up until 2019, things were decent economically, but man, were people mad at each other. And when there’s actual genuine scarcity, if that does happen, if physical goods are hard to come by and inflation has destroyed your currency and so on, and you have a country where people are heavily armed, and they’re yelling at each other on social media, and you’ve got 50 governors, you’ve got a very potent cocktail for bad things. And we’ve seen this in lots of other countries that, frankly, America was involved in partially destabilizing. Like look at Libya or something like that. Or Mexico, or what have you. But that people just really do believe on some level, “It can’t happen here.”
But I think American anarchy, unfortunately, is where we’re heading. And what exactly does that mean? I’ll try and paint a picture. So first of all, in 1861, if you go and look at the map in 1861, you have the Union and you have the Confederates, and the ideological and the geographical coincide. You have the North and you have the South. And we take for granted that the victory condition was for the North to just invade the South. Because by invading their capital and burning and so on, they didn’t just destroy their supply chain, they also killed their morale. And eventually they got the entire South to concede, and they could flip them ideologically. And the Emancipation Proclamation, Reconstruction; they uninstalled the software in their heads and installed software with the new moral premises. Same in World War II; invade Nazi Germany, denazify them, capture the capital.
The ideological and geographical coincided, and that’s how we think of wars as working. Now today though, if you go and look at a map of the US and you look at Republican/Democrat, it’s not in clean states. It’s very fractal. It’s at the individual county level. you’ve got a little red here, a little blue here, purple here. It’s extremely grouped together. It’s fractal. And so what that means is that in physical space, these two nations are cheek by jowl. But in digital space, as that graph I showed you showed, those two social networks are just clustered apart in digital space. They are separated in digital space. Did I show you that graphic? Did you see it? It’s this one —
Tim Ferriss: Yeah, you did. Yeah, I got it. And we’ll put this in the show notes for everybody. Mm-hmm (affirmative).
Balaji Srinivasan: Yeah. It’s this one that I just shared, right? So when you see that graph, you’re like, “Oh, okay. So in physical space, people are cheek by jowl, but in digital space, they’re far apart.” And that’s where the battlefront is. And you can reconceptualize the last several years as a social war. Because if in a physical war the goal is to invade territory, in a social war, the goal is to invade minds. And now, when we think about cancellation, deplatforming, hashtags, etc., etc., the point is what you’re trying to do is get a node on their side to flip from blue to red or red to blue. And how do you do that? Because they’re now uttering your hashtag slogan, “BLM” or “MAGA” or something like that. They’re uttering that slogan. That node is flipped. It’s like capture the flag. You’re seeing from their utterance that they are saying the thing that indicates they’re now on your team, right? They’re raising a flag over their company, etc. and you are able to cancel and silence those people who are saying things that are contrary to your view and so on and so forth. It is essentially something where because you are constrained from using physical violence, since what are you going to do? Invade a corn field? Invade a city? That doesn’t actually work. You’re winning digitally. It’s digital warfare, right?
Now, when I say constrained from using physical violence, as we’ve seen, we’re starting to see stochastic digital violence. The Proud Boys and Antifa and so on punching it out in the street, that’s actually an extremely unusual thing in the ’90s and 2000s America. You just never saw left and right wing militias punching it out in the streets. But you see that now. That’s actually something that is de rigor. I don’t know. It’s like an event. You wouldn’t be totally shocked that that’s happening, that political violence is happening in America. But it is. And it’s on a ramp.
And so you put all that together, and basically what I see is serious inflation, Bitcoin mooning, and then the US government trying to freeze or seize the Bitcoin with something that’s similar to Executive Order 6102.
Tim Ferriss: My question for you just quickly on Bitcoin mooning. So we have not yet seen, I don’t think, in the charts Bitcoin as an inflation hedge in the same way that, say, gold perhaps has. Why would that be different this time around?
Balaji Srinivasan: And so this is not 100 percent. It’s possible that I’m wrong about this. But Bitcoin —
Tim Ferriss: And I say this as someone who owns quite a bit of Bitcoin.
Balaji Srinivasan: Totally. Totally. So here’s the fundamentals argument for that. Sometimes there’s certain things where the correlations only are visible over the very long run. Like the interest rate graph we were just talking about. In this case, we haven’t seen a long run of the Bitcoin, but what we have seen a long run with is gold. And the fundamental thing is Bitcoin’s core value proposition is seizure resistance. That is to say all stocks can be seized by hitting a button, as was done with the Canadian truckers, or as was done with the Russian sanctions on 145 million people. Hundreds of billions of dollars, I think, was just frozen, because those assets existed on servers that the US establishment had root control over. And when I say the US establishment, that’s not exactly the US government. There’s the government, but then there’s also the network of people who are loyal to the US establishment. Those are certain tech CEOs, certain newspaper publishers, and so on. It’s all the folks who are basically supporting the current order. If those folks can hit a key and freeze your assets, you don’t really own your assets. In a wartime scenario, as what happened with Russia just now, the assets aren’t theirs.
Now, outside the US this has meant that a lot of countries are reexamining whether they want to have so much exposure to things that the US government has root access to. And actually, J — I should say J. Powell. Powell actually had a speech on the dollar’s rule in competition just a few weeks ago, where he mentioned actually stable coins.
This is not — you can probably find a better version of this, but it’s basically, “Rapid changes are taking place in the global monetary system that may affect the international role of the dollar. A central bank of digital currency is being examined to help the dollar’s international standing.” So that is not some random person. That’s the chair of the Federal Reserve mentioning, A, that the dollar’s international standing is being called into question, and B, that cryptocurrency and stable coins are related to the preservation of that standing. Okay?
So when you zoom out signal and noise, that’s remarkable. Relative to where Bitcoin was in 2010, 10 years later the Federal Reserve chair saying the dollar’s role in international finance is being reexamined and cryptocurrencies are a part of the mix of policy responses? That actually shows we are — whether you want to call it winning, certainly affecting and changing things.
So the thing is, only those assets that can’t be frozen or seized are your assets. And Bitcoin has a root system that extends way outside the United States to hundreds of millions of people around the world that value it. And that is not the case for your frozen assets on a stock exchange for your valueless dollars, your chair that you can’t move across borders, and so on and so forth. There’s a shelling point which has been built up which is probably going to be Bitcoin.
Now, why is it not gold? Well, the thing is, there’s either physical gold or you have some certificate which has counter party risk. So if it’s a certificate, you’re back to square one where it can be seized. And even with physical gold, Executive Order 6102 showed that a sufficiently motivated central government can defeat gold. We have not yet seen that Bitcoin can be so defeated. It is in question.
Executive Order 6102, for those who don’t know, is FDR’s gold seizure. So the very organized US government at that time was able to seize the gold and then resell it on international markets at a mark up. It was just this giant tax on all Americans. And something like that, I think, is quite likely to happen. Because it just takes all the rhetoric on, “Abolish billionaires,” “Tax these rich guys,” blah blah blah, all that type of stuff, which is — people won’t care that someone took on risk to invest in Bitcoin or hold Bitcoin during the — they won’t care about any of that. They will care if Bitcoin is a million dollars and the dollar is inflated and it’s 2027 or 2028 and you need this to fund the US government.
I know that sounds crazy, but think about it like this. In 2010, there were people who had seen the Arab Spring, and they had seen how important social media was abroad. If, nevertheless, having seen that, you projected that by 2020 or 2021, the most important political issue in the world would be whether the President could tweet for a time period, that literally one bit flipped on a server in Virginia — you remember the thing we were talking about with mimesis and what people fight about? 54° 40′ or fight, right?
Tim Ferriss: Mm-hmm (affirmative).
Balaji Srinivasan: This account, the bytes on this server on Virginia, and when I say Virginia, it’s probably Amazon’s servers that Twitter is hosted on, the bytes on that server, the little bytes that record what somebody was saying, that’s where the fight is. Whether this person can or cannot tweet, billions of people around the world wanted to know whether that bit would flip this way or that way. Okay? That’s insane from the perspective of 2010, even knowing that Twitter and Facebook had done the Arab Spring, that they’d caused social revolutions abroad, that they’d connected hundreds of millions of people. If you had written that the entire politics of the world would depend on whether the United States President could tweet, it would be an extrapolation.
But that’s what I’m trying to tell you. I do think that if, in the 2010s, social media became what all politics is about, by the end of the 2020s, cryptocurrency becomes what all politics is about. You will not be able to fund your government without it. Go ahead.
Tim Ferriss: All right, let me hop in here. So there are three things that I’d really love to cover, and we’ll see if we can do it.
Balaji Srinivasan: Please.
Tim Ferriss: Just because I don’t want to let this go too quickly, because I know it’s a question that’s on a lot of people’s minds. So you’re painting a picture for Bitcoin appreciating in value based on the difficulty in seizing Bitcoin by a central actor like a government. Now, many people — “Not your keys, not your crypto” — will have their crypto in trusted third parties, and will not have cold storage and be going through all the Jason Bourne stuff necessary to implement all of that well. Right? Or they’ll do it in a B- fashion and it’ll all be trackable anyway. So if they throw you in a jail cell, you’re going to give up your keys. Probably.
But so I do want to make sure we hone in on if you had to bet on —
Balaji Srinivasan: An extremely important question.
Tim Ferriss: Yeah. Yeah. So let me just lay out my menu, my wishlist here. And we might tackle it in reverse order. But the first successful network state: what does it look like? That I would love to hear your answer to. Then you have, “Bitcoin maximalism is the most important ideology no one has heard of.” I want to double click on that and understand why that’s the case. And then, coming back to the most recent conversation we’ve been having, what would need to change for Bitcoin to actually behave from a pricing perspective as an inflation hedge? But it has seemed to be, up to this point, a risk on asset with instant liquidity in a market that never closes. And when shit goes sideways or people get afraid, there’s a sell off. So it doesn’t seem to mirror the behavior of, say, gold, in perhaps the traditional way that some investors view it, as an inflation hedge or hedge of other types.
So I’m just wondering, if a lot of people who participate in crypto are not going to have cold wallets, and therefore not perhaps enough of a critical mass to move the market, and again, there are a lot of assumptions baked into this question, but what would need to change for Bitcoin to suddenly behave in the way that you are describing? Is it the international devaluing, and when I say devalue, I mean more perceptually, of non-US governments and central banks and so on with respect to the US dollar? But even if that happens, I fail to see how that makes the hop. So could you just paint a picture of what needs to happen for Bitcoin to behave in the way that Bitcoin holders would like it to behave?
Balaji Srinivasan: Well, see, here’s the thing, the reason I’m not a maximalist is many reasons, but one of them is I don’t think everything can be reduced to money. I actually think maximalist, often in some ways, sort of how wokes are the opposite of Nazis, they’re both racially obsessed — white people are the best or white people are the worst — but you get a lot of the same things, separate graduations and all this stuff. Maximalists are the opposite of communists in the sense that they’re both economically obsessed and the communist thinks everything, it should be within the state and it’s the fault of business, and the maximalist is, actually, often the opposite. The issue is, why am I not a maximalist? Well, for example, there’s many things you can’t just buy. If you’re in Syria and you have a hundred BTC, what do you actually want to buy? You want to buy peace. You want to buy a walk down the street in a high-trust neighborhood where there aren’t bombs flying around. The conversion —
Tim Ferriss: Balaji, just for people who don’t have the definition, could you define what is a Bitcoin maximalist? What is that ideology or belief system?
Balaji Srinivasan: There’s different definitions, but I would define it as somebody who thinks that any digital asset other than Bitcoin is a sin.
And it is — people have made the comparison of wokeness to a religion. In my book, I actually talk about it as a doctrine, which is related to religion, but not exactly the same, more than a technicality. The wokes, they actually don’t worship God, they worship the state and or the network. That’s to say, they’re not about thoughts and prayers, they’re about pass a law. They’re not all employed by the state, they’re outside of it, and they act through it on a network. Maximalists are similar in that they’ve got the zeal of a monotheist or of a monostateist, like a communist, but they’re a mononumist for a coin. One of the things that’s interesting is a communist would be pathologizing profit, and a Christian fundamentalist or religious fundamentalist would pathologize interest, and a maximalist pathologizes digital issuance. So, just to click on that, a communist, they think of all profit as exploitative, that boss is obviously screwing somebody because he did a markup.
Why couldn’t he give it away for free to the community? He’s stealing some for himself. There’s 50 arguments you can make against this, but the problem is that it’s intuitively appealing to people that profit is getting one over on somebody. It feels like a scam. Communists were able to get hundreds of millions of people to buy into this notion. It was something where rather than say, “Look, there’s good profit and bad profit and manage this,” they just pathologized the whole thing. Interest is similar. Christian fundamentalists, other religious fundamentalists, there’s things about usurious interest rates. Are you familiar with this concept, usury?
Tim Ferriss: Yep, usury. Yep, I am.
Balaji Srinivasan: Yeah. So what was the concept? It was, basically, they take the good and true thing that debt is bad, and I would actually also agree that most Americans are in way more debt than they’re supposed to be or should be, and it’s like a power tool. They take the valid concept that interest can be abused, is being abused, has been abused, and they turn it into something which says, “Interest cannot happen.” But if interest cannot happen and interest is banned, because all interest is usury, you break the economy. You can’t, there’s no price in money.
Tim Ferriss: Let me just hop in for a second. So, usury, I’m just going to give a definition here. The illegal action or practice of lending money at unreasonably high rates of interest.
Balaji Srinivasan: Yes. Yeah. And everything is unreasonably.
Tim Ferriss: Yep. Yeah. Everything is unreasonably, right.. Anyway, we can get into what that means, but yes, exactly.
Balaji Srinivasan: Yes. So, because any rate of interest is unreasonable under some religions, like Islamic finance, for example, or very religious Christian groups were against interest of any kind, at all. Then, what happens is every single financial model breaks. You cannot figure out, “Should I allocate money into this building project or this tech?” Basically, the power user tool goes away. You might say, and I might agree with you, that the average Joe should not be buying all the stuff on credit and debt and they’re getting screwed by it. I might agree with you on that, but I don’t think you can take away the power tool, because it just breaks the economy. And then we go to issuance. If the communist pathologizes profit and the fundamentalist pathologizes interest, the maximalist pathologizes digital issuance. They’re okay with the issuance of paper equity, that’s to say, you can go and incorporate a company and pre-mine the shares of the company for the founders, that’s an accepted thing to do, every single company is like that. You’re pre-mining the shares, oh, my God.
The thing is that you get people to buy into it or not, and it’s your own efforts, why do you issue that new currency? Why do you have that stock? Why doesn’t everybody just get paid dollars in your company? Why is it not all dollars? Why equity, equity is a scam? That’s what lots of folks on Hacker News will say, they’ll say, “All startup equity market is zero, it’s not worth anything.” Well, the reason is that, again, going back to first principles, the value of an equity or stock is a net present value of the future dividends that would go to that share. Basically, you buy a stock and then you assume that in 10 years or 15 years, Facebook goes public, and it pays out dividends. You paid $10 down, you get $50 in dividends in 15 years. Actually, that’s a win. Now, of course, in practice, for tax reasons, other reasons, companies will do buybacks. There’s lots of ways where that Econ 101 or Microecon 101 concept, the dividend has been abused granting all that.
But fundamentally, there is an income stream there, and the reason that you don’t just have somebody just give dollars to everybody at a company is that through their efforts, they can go and close sales, they can close deals. You can go and close a sale for $10 million, that brings in revenue into the company. In theory, that could be dividend ended out to the shareholders, and therefore, your individual efforts can boost the value of that equity in a way that you cannot really boost the value of the dollar. The dollar economy is so massive that your individual efforts will be a drop in the bucket relative to a million other people who are doing things. So your effort results in results — effort and results, that’s capitalism. That’s the thing, Deng Xiaoping’s key insight, the reason that China boomed, is he allowed the farmers to keep some of their grain, that their effort led to results. So effort leads to results, that’s what equity is. It gives you that shot. I know I’m explaining super basic things, but honestly, this community has gotten its head into this religious fundamentalist mode where —
Tim Ferriss: This community, meaning BTC maximalists?
Balaji Srinivasan: Maximalists, yeah. Because they’ve gotten their head into a religious fundamentalist mode where — by the way, some of the fault here lies with the SEC, as well. Fundamentally, we have not been able to make the analogy between digital equity and paper equity. Why? Because the SEC has tried to say, “Oh, they’re all unregistered securities, and so we’re going to throw everybody in jail, and so on and so forth.” So, what does that mean? That means that, look, do I think that a digital asset is the same as an equity? No, I think it’s a horseless carriage versus a horse-drawn carriage. At first, you make the analogy, but it’s also about fundamental differences. With a digital asset, you can issue it to all of your users, they can use it in programs, it’s on-chain. It slices, it dices. It does tons of things a paper equity does not. But it is similar in one sense, which is that a paper equity is something that incentivizes people to build out a company, and a digital asset incentivizes people to build out a network.
Now, the problem is that the SEC, you’ve got a pincher attack of the journalists and the maximalists, basically, the bureaucrats and the maximalists, because on the one side, you have these guys who are stuck in the past with orange groves and how we — the SEC guys who are trying to pathologize the issuance of digital assets and saying, “Ah, we’re going to go after that. That’s unregulated issuance of assets.” The crucial thing, by the way, is they’re not going after the bad actors in the space, they’re going after — for example, they went after Kik, which is a fairly reputable company, they just randomly targeted them for enforcement. They’re just going after not the bad actors, the actors they can get the maximum headlines on. What that does is it forces Web3 people to not make the analogy to equity. When they can’t make the analogy to equity and they have to shy away from it with all kinds of stupid word games and so on and so forth, people do get the sense, “Oh, there’s something up here. They’re not being totally straightforward with me,” and then that pushes it.
It’s this trampolining, and then the maximalists attack it as, “Ha ha, it’s actually equity in disguise, it’s an illegal crowdfunding,” or whatever. The thing is, that same maximalist is typically anti-Fed, yet pro-SEC. They’re the most selective crypto-anarchist ever where you’re against a federal reserve, you what I’m saying?
Tim Ferriss: For the discerning crypto-anarchist. I don’t often engage in crypto-anarchy, but when I do — yeah.
Balaji Srinivasan: Yes. The thing is, it is fundamentally, in a sense, unprincipled. It is basically something where there is a rationale for it, which is number go up technology. Anything that seems to make the price of Bitcoin goes up is good. If that means banning every other coin, so the only coin people can buy is Bitcoin, well, that’s good. Again, though, this is the communist zero-sum mentality, because if the Web3 crypto economy didn’t exist, I don’t believe that Bitcoin would be where it is. You need all this infrastructure around it to build it up, I think that’s super obvious.
Tim Ferriss: You need more cultural awareness, you need the zeitgeist to shift. All of these things, or a lot of them, contribute to the rise of Bitcoin also, indirectly.
Balaji Srinivasan: Yeah. Yeah. To me, that’s insanely obvious, but the thing is that the 21 million, again, there’s an aspect of it that’s zero-sum like the communists, which is one person’s gain is another person’s loss. If you’re getting Bitcoin, I must be losing Bitcoin. One of the ways you see this is in the Bitcoin community, you don’t see that many crowdfunders. You see, actually, fairly large crowdfunders in Ethereum and so on. Now, what does the maximalist community have? I’ve criticized it, but let me actually say certain things that — it’s very complicated, because maximalism has — shorter way of putting this, many of the things that they say are things where I agree with some or all of it, but it reminds me of — it’s like somebody who’s a progressive and they would agree with many statements about how you need to have equity and not discriminate against people and so on, but then they see people saying those things, going and burning down Black businesses because — it’s completely the opposite of what you actually seem to want, ideologically. This is harming these people that you’re claiming to help. So the words don’t match the actions, necessarily. If the words are, in this case, for greater freedom and so on, why are you arguing for governments to crack down? Why are you arguing for willing buyer, willing seller to stop? Why are you trying to pathologize capitalism? That doesn’t seem to make any sense. That’s because I think maximalism got twisted in this ideological knot, which, unfortunately, is going to be very helpful. Now, that’s the paradox. You’re like, “What? Why? That’s an unusual…” Here’s the thing — I know I’m digressing, but I’ll bring it home. I’ll bring it home. Okay.
Tim Ferriss: And then I also want to hear what Bitcoin would need to do, or what would need to happen, or what will happen to make Bitcoin behave in the way that so many holders, such as myself, would like it to behave —
Balaji Srinivasan: Totally.
Tim Ferriss: — in terms of —
Balaji Srinivasan: So, the answer is one of the things I’ve learned over the last 10 years, 15 years is the value of irrationality. All of the other people in Web3, basically, are in it for technology or finance or something like that. Maximalists are in it for fundamentally political/moral/social/ethical things. I think there’s a continuum, whereas I said, some of the words I agree with, but a lot of the actions and behavior, I don’t. Still, I recognize the zeal, and zeal really, really, really matters. Zeal matters because zeal is the difference between selling when it’s low, and zeal is the difference between selling never. Zeal is the difference between talking to everybody about it all the time and making it your life, and just having it be one component of a otherwise healthy life. Zeal means putting it at the top of your identity stack, putting it in your profile, having it be part of your existence. The top of your identity stack, that’s a really precious space, what you identify yourself as.
You might live in Missouri, but you might not identify yourself as a Missourian, you might identify yourself as a Bitcoiner or as a Christian or as a Republican or something. That top identity thing is really important, and that’s something that maximalists must have. And so, what I think is actually going to happen is the political spectrum will rotate, I think. Imagine adding yellow, a splash of yellow, so that red-blue becomes orange versus green. Orange versus green rotates it, and so it’s Bitcoin orange versus dollar green. On the dollar green side, are actually quite a few Republicans. A lot of the Security State people, military people, neocons, folks who basically side with — at the end of the day, they will choose the American flag and they’ll choose the US government and so on. The other side is Bitcoin orange, and here, actually, lots of Democrats will actually choose this side.
For example, Jack Dorsey, Glenn Greenwald, a lot of the Substackers, a lot of the tech founders, these are folks who would never fold into Trump, but they also are just fundamentally anti-establishment. They have that rebel DNA, that fundamental rebel DNA, just like a lot of those Republicans who will side with dollar green don’t really like the current US government, but fundamentally, it’s my country, right or wrong. So, it’s a rotation of the spectrum. If the normal political spectrum is left versus right, this is top versus bottom. The authoritarian is dollar green and the libertarian is Bitcoin orange. That rotation is a pretty big shift, I’m not sure what percentage of both parties shift. It might be that orange is 60 percent Republican and 40 percent Democrat or something. But one of the most underappreciated aspects is many, many non-white people will shift to Bitcoin orange. The reason is that inflation hits African Americans, Latinos, Asians, and whites all at the same.
If you look, the more equities and other assets you hold, in some ways, you’re more buffered from this, at least you can have some ups, as well as some downs, but inflation is absolutely crushing people of color. For example, Jack Dorsey, who has Square Cash, that’s actually very popular among the African American community, among other communities. It has a different user base than your typical tech app. In fact, he’s gone and talked about that, given talks about that and written tweets about that. And so he’s probably seeing this in the numbers, that inflation is hitting this group harder. So because of that, the moral legitimacy of the establishment is called into question, because they define themselves — if you read, again, something like Barbara Walter’s book or something, she imagines that this future civil war or conflict will be between a tolerant, diverse establishment and some 4chan Nazis. But that’s a wash, that’s an easy win, that’s a 90/10 win, that’s 99/1, or whatever.
When you rotate it and instead it is, basically, all pro-freedom people who are Bitcoin orange and against inflation and probably, maybe, more people of color than not than on the other side. And then you have, “Well, it’s still our flag. It’s still our country. It’s still our state,” that’s now set up for something that’s much closer to a 50/50. That’s actually something where a lot of people would be torn between those two groups. When it’s 50/50, unfortunately, that’s when conflict is maximum. So that, unfortunately, is how I anticipate things to go.
Tim Ferriss: When do you think digital gold will behave like gold, if ever?
Balaji Srinivasan: Great question. All right. So, now let’s talk about that, some of the practicalities. These practicalities really matter. Why do they matter? Well, the question of whether Twitter could censor somebody’s account and so on was an abstraction, because people just assumed that they wouldn’t hit it. You should assume every single thing gets weaponized in crazy ways. We have not yet had total cyber war. We’re going to see some crazy things as a function of that, and that’s going to push people to truly “Not your keys, not your coins”-type stuff. The problem is, right now, a lot of coins are on exchanges. What I think we’re going to see is every possible edge case and failure mode will happen, but maximalism is not simply a technological thing. Really, it’s mostly a political thing now. So, first, what are all the things that will happen? I think you will see freeze and seizure orders given to centralized exchanges. They may have, however, the moral support from their community to not comply.
They may be located in red states where the governor says, “This is a sanctuary state for crypto.” Because if you think about the concept of a sanctuary state for immigration or for abortion or for gun laws, all of that groundwork has already been laid. One of the things I predict in the book, I talk about, is I think that maximalists will introduce a Constitutional amendment for no seizures of Bitcoin, just like free speech or right to bear arms, can’t seize Bitcoin, fundamental right. I actually think you’ll probably be able to get that through in a fair number of US states. Maybe not the full Constitutional amendment ratification process, you may not get the quorum that’s necessary, but I think you’ll get that ratified in some states. And then those states that are ratified, it can point to that and say, “We ratified it, therefore it’s a law of our state, therefore we’re not seizing the Bitcoin,” and companies could put their servers there. This is the level that I think things are going to get to, they’re going to get really intense.
Or they keep them in El Salvador, or they keep them somewhere else. And then the question is, like the Andrew Jackson thing, the court has made its judgment, let them enforce it. Just as I said, in 2010, would it have seemed insane to say that the billions of people would care about the position of some bytes on a server in Virginia where Trump has access to tweet or not? That would be insane. I’m telling you, people are going really care where that money is in five or 10 years. They’re really going to care if they can freeze it or not. Now, a few other things that can hit. Quantum computing could hit. It is possible that the Chinese, who are working heavily — this is the thing about the book, I talk about there’s so many different billiard balls in this theater, it’s like a World War, in the sense of there’s all these different theaters happening, and you could just be absorbed with the American theater, but there’s the Asian theater and there’s this theater and there’s that theater.
So the Chinese are working very aggressively on quantum. I’m not an expert in quantum computing, I know enough to be dangerous. But there’s a scenario where quantum decryption advances fast enough and quantum encryption isn’t there or it’s expensive, and you can do decryption with high qubit systems that are in one location, but encryption, you can’t do outside, or something like that. Quantum-safe algorithms just don’t get distributed in time. I’ve seen people argue about this. I’m not saying I’m strongly on one side or the other, but that’s a wildcard that could come through that breaks some of the assumptions on the cryptography. There’s other attacks that could happen. Firewall attacks, where you try to block the packets that are going through, and then the people pipe them over Starlink, or they try to do port randomization, or they try to encrypt the traffic so it looks you’re sending an email when you’re sending a Bitcoin transaction. Oh, my God, there’s so many things people could try.
One of the issues is the Bitcoin network itself is not extremely high capacity for on-chain transactions, so it’s hard for everybody to use it on-chain all the time, but people can go and hold large amounts of money with one transaction. I am seeing stats which show coins coming off exchanges since, I think, early 2020 or thereabouts. I am seeing those numbers, I think Glassnode has some of those numbers. So you can see, I think, a decline in this. Why? Because, actually, one of the the funnier things, it’s hilarious, it’s actually pulling money off of exchanges. You know what it is?
Tim Ferriss: I do not.
Balaji Srinivasan: DeFi.
Tim Ferriss: DeFi.
Balaji Srinivasan: DeFi, because you can only engage with it through a decentralized wallet, for the most part. There are centralized exchanges that let you do it, but regulations make it hard. Because of that, people have moved more and more funds locally. There’s been a financial incentive to pull funds locally. Incentives ultimately work, so it’s a funny thing where DeFi, the thing that lots of maximalists hate, may actually have pulled more funds. That’s a hypothesis, but I think —
Tim Ferriss: The unknowing, avenging angel for the entire sector is this demonized, decentralized DeFi.
Balaji Srinivasan: Exactly. Exactly. Sometimes things are like that. So, I can’t prove it, but my strong hunch is people will bring the BTC locally, they will transform it into something like WBTC or renBTC or something like that in a DeFi thing, and then do something with it. There’s several different operations that are like that. Probably somebody like Dune or Nansen or something could support my hypothesis, shoot me down or confirm it. Anyway, coming back up. So, the thing is, the Bitcoin seizure resistance point, there’s many holes in the story, in the sense that there’s many things that people can and will press on from central exchange seizures to lower capacity on the chain and whatnot, but the pushback to that, and this is an important and subtle thing, I’ll try to articulate it, when you have the state coming after you, you can double down on the network, meaning internet-type technologies, but also peer-to-peer network of people and so on, and you can do things like Zcash, which encrypts all transactions. You can do digital nomadism, you can move overseas.
You can do all these run and escape and exit things and those can be good, but it’s a tactic. Ultimately, you can’t just only exit. Sometimes what you’re doing is you’re exiting with a tactful retreat and you then get to higher ground, you get to a more secure position, and then you can push forward. The Puritans made it all the way to the US to escape persecution, and then 170 years later, the power they had built up, they were able to invade Europe. Or Google, they escaped to this corner, which is search, and they built up their resources there. And then they had billions of dollars, they could invade Microsoft’s territory with Google Docs. So sometimes you retreat to a corner, you fight hard enough so that you’re not being invaded yourself, you build up power there, and then you can come back. That’s kind of what the maximalists have done, though not super conscious, necessarily, maybe some of them are conscious.
Everybody else is thinking zero knowledge and all this stuff and I think that’s good, that’s the network innovation. The maximalists are actually taking some of the state’s playbook and using it, so the El Salvador thing, various Bitcoin bills. Their innovation is actually on the political level, not technological. They’re basically a, quote, political party, but really a political network. In this sense, they’re like the wokes. The wokes exist, really, as a network thing, they exist in academia and so on. They’re a ghost that can animate a Democrat sometimes and make them do something.
Tim Ferriss: Sorry, that’s good. I like the image.
Balaji Srinivasan: You like the image, right? Here’s why I say that. If you look at Hillary Clinton or Joe Biden and you look at what they were saying in the ’90s or ’70s or something, they’re saying completely different things. In a sense, a politician is inhabited by a ghost that speaks through them. In fact, this is actually a very powerful model for thinking about a lot of things. When you think about ideologies are ghosts that occupy a huge number of hosts, and then they animate them and their eyes glow a certain color to fight each other. For example, Russia versus Germany in the 1940s, we think of that as communism versus Nazism, but now, it’s flipped and the Germans are liberals and the Russians are nationalists, but they’re still fighting. So the ideology’s flipped, but the tribes are still fighting. Sometimes one tribe picks left tactics, the other tribe picks right tactics, and then it flips, and one tribe’s picking right tactics and the other tribe’s picking left tactics. The point is this concept of a ghost that’s inhabiting a politician is also happening with maximalism.
For example, the guy who was running against J.D. Vance in Ohio, Josh Mandel. Did you see his tweets on Bitcoin?
Tim Ferriss: I assure you, I have not.
Balaji Srinivasan: Okay. See, the thing is, this is the stuff I track. The reason I track it is because it’s —
Tim Ferriss: That’s why we’re friends. I’m just kidding. That’s why I can have you on the podcast, so then I can ask you.
Balaji Srinivasan: So, he casually tweeted something, Mandel was like, “Ohio must be pro-God, pro-family, and pro-Bitcoin.” The thing is that — look, as I said, I think Bitcoin will draw significant support from the working-class Democrats, to an extent, because of the inflation thing. The fundamental thing about that is it doesn’t matter what the establishment says, how good their propaganda is, when you’re seeing your money crumble underneath. In fact, the more they say it’s transitory, the more they say things — one of things that’s going to be a big message, unfortunately, censorship is going to increase dramatically if inflation happens. Do you know why?
Tim Ferriss: Tell me.
Balaji Srinivasan: Because in Argentina, in other countries where inflation has happened, the government argues that talking about inflation causes it, because you’re causing people’s price expectations to rise, therefore you’re disloyal if you talk about inflation, and you’re undercutting the stability of our society. And so, therefore, they publish public inflation stats that are fake, and then you have to actually have stats outside of Argentina that are real. Now we are faced with the issue of — that’s something which the 2000s or whatever, you could tut-tut at Argentina, Banana Republic, blah, blah, blah. Once you need shadow stats that have to sit outside, not Argentina, but outside America, shadow stats on inflation that are powerful enough to resist attempted censorship by the US government. I actually wrote this post last year with the spec on this at 1729.com/inflation inflation, that actually goes through the whole problem, which is actually quite a nontrivial problem, because you need censorship-resistant hosting, you need to scrape lots of prices. You need to have maybe some instrument that is an actual, not a stable coin, but a flat coin.
You’re tracking oranges, you’re tracking bread, you’re tracking milk, and you’ve got a coin that remains flat against those things. That’s what actually people care about, maintaining their purchasing power, not so much whether it’s flat versus a dollar that’s inflating away. That post actually integrates, it takes everything that we’ve been doing in crypto and puts into one thing. It’s the price signals, all the price feeds. It is the decentralized hosting, because states will try to take it down. It is obviously Bitcoin, but it’s also Ethereum with the DAPs, blah, blah, blah, it’s crypto oracles. It’s everything into one app, which is the inflation app, that I think becomes the new coin market cap. It’s the thing people refresh every single day that mainstreams Web3 and BTC. I know that sounds like, “Oh, my God, that’s terrible,” and there are bad aspects to it, no question about it. One of the things that I’m talking about with this book is anticipating that level of instability, what do we build on the other side?
Tim Ferriss: Can we actually pause for one second? You’ve been sharing while we’re talking. We’ve been sharing things in the chat. I’ll share one that you might enjoy.
Balaji Srinivasan: Okay.
Tim Ferriss: We don’t need to spend a lot of time on this, but you’ll probably enjoy it.
Balaji Srinivasan: Yeah, exactly.
Tim Ferriss: This is a post I put up in January, 2021 and it’s a picture of the Reserve Bank of Zimbabwe with a $100 trillion note. And in the description, I just say I had it framed years ago to remind me of how quickly, quote unquote, “money can change in value.” And then went into a discussion of ultra inflation and the belief that some people have of, “That can’t happen to reserve currency,” and on and on and on. So I’ll include that in the show notes.
What do you think one of the first successful attempts at a network state will look like? And related to that, because you mentioned the carbs good, carbs bad, as one possible decision to be made that is woven into the fabric of a network state. Just as an example.
Balaji Srinivasan: Yes.
Tim Ferriss: And I’m wondering how you preserve, if this is important, sort of rational adaptability in the face of new evidence, right? Because evidence could come out, turns out carbs are good, right? Or whatever it might be.
Balaji Srinivasan: Insanely important. Very important.
Tim Ferriss: And so how do you prevent Wild, Wild Country and some sort of disintegration into — or not disintegration, but the formation of a calcified religious state when setting the parameters for a network state? So first, what might a successful network state look like? What would you wager? And how do you prevent the calcification that I mentioned? But you were going to say something else with respect to the Zimbabwean $100 trillion note.
Balaji Srinivasan: There’s people who say, “Oh, that reserve currency can’t fail,” and so on and so forth. They’re actually the inverse of the maximalist. You’re not having a rational argument with them. You’re having an argument about faith. And the reason is, one of the chapters or subsections in the book is, I call it “God State Network.” And the question is, what is the most powerful force in the world? Is it an almighty God? Is it the US military? Is it the government? Or is it encryption? Or in the past, you might have said capitalism, peer-to-peer networks, and so on. God state network, the thing is, it’s a generalization of religion. Religions worship a God. But a doctrine, if you look at that in the dictionary, it could be a political or religious or other movement.
A doctrine, you have, as your leviathan, it could be a God, it could be the state, or it could be a network, right? So communism is not a religion, but it’s a doctrine because they worship a state, right? Maximalism is not a religion, but it’s a doctrine because they worship a network. Wokeness is sort of partially state, partially network where they live on the network, but they animate the state. Okay? Communism was actually also partially state, partially network because they had this international network of communists, but they were primarily state. The mid-century US, for example, was half God, half state, because it was, “For God and country, we’ll fight the godless communists.” Right? But it was mostly state, but with a God dosing. So you can make hybrids, not just pure forms.
But God state network is actually a really useful lens to start looking at movements. Because the reason that guy is saying to you that the reserve currency can never go away, is he worships the US government, in a sense. Even if he doesn’t understand it, he really thinks it can never go away. Right? There’s this series of books, or a series of essays, when communism didn’t work out, and it was called The God That Failed. People put religious level faith into that. Right? You’ve probably heard the term, “America’s [civil] religion.”
Tim Ferriss: Yeah.
Balaji Srinivasan: The Constitution as similar to the Bible. And so one of the issues is, that those people who are really asserting that the reserve currency won’t fail are often the ones who suspect on some level that maybe it could, and they just can’t imagine a world without that and they don’t want you to undermine their God.
And you’re a traitor or you’re unpatriotic and so on and so forth. And sometimes if you talk to somebody who’s very religious, they’ll say, “Well, if you didn’t believe in God, people would just commit all kinds of crimes and so on.” By the way, there’s more argument for that than you might think, because if you actually believe in hellfire, then it’s decentralized law enforcement. The law might only catch you at some probability. But if you actually believe in Hell, then doing this little crime, even if the law doesn’t see you, well, you’re going to Hell and that’s more of a penalty than the — it’s scalable law enforcement, if you can get people to really believe in it, right? There’s actually a metalogic to it. But, okay. People who don’t believe in God, what do they believe in? They believe in the boys in blue. They believe in the state.
Okay. What if you don’t believe in either? You’re not just an atheist, but you’re an astatist? Then you believe in the network, then you end up in something like maximalism or crypto tribalism. Okay. So the thing is that that dispute — I mean, Carl Schmitt wrote this book called Political Theology. And he’s like, “All these religions…” I mean, he himself was a Nazi jurist or whatever. But basically Nazis and communism, et cetera, these are all — many people have observed, these are all effectively like religions. They’re either religions themselves or they’re God replacements. And they animate huge numbers of people to fight, as if a religious kind of thing. So therefore, we’re not just having a scientific discussion. It’s a fundamentally religious discussion. Just something that one should think about when you’re talking about this kind of thing, there’s some folks who look at it dispassionately.
And why would you be able to look at it dispassionately? It’s because, you may not realize this, you have some island of stability on your own. You had this great phrase before, “You’re like a tech-enabled Jason Bourne.” Actually, I thought about it after and I’m like, “That’s much more you than me.” I’m not going to be doing all the stunts in the movies in the same way that Tim Ferriss is. Right? But the thing is, that if you have very high sense of agency, if you’re a CEO or you’re a founder or you’re a president, or you’re very driven and so on, then you can find your footing on something. You’re not a joiner of a movement. But if you don’t feel like that, and most people don’t for lots of good reason, you need to have a movement that supports you in some way where you can’t just create one from scratch. And that’s actually one of the things I want to help build.
So that brings me to your next question. Basically, if it’s not these ideologies of conflict, right? Because in an era where everything is cracking, these ideologies, these ghosts, are set up to recruit. They’re set up to pull you in. And for example, if you were unfortunate enough to be in Eastern Europe between 1939 to 1945, right? All these guys had to choose between the Nazis and the communists. That is an absolutely horrible — the answer is neither. The answer is GTFO. Right? Both of those are dead ideologies, and when they ask you — what were you going to say?
Tim Ferriss: Just for people, “Get the fuck out” is what that stands for. Yeah.
Balaji Srinivasan: Exactly. Right? And it’s true. Those people who were caught in between that vice, nobody ended up well off. Right? And so there’s this false — it’s like the Iran-Iraq War. Who wants to be in the middle of that? That’s Shiite versus Sunni. My answer is neither. I do not want to be involved in this false dichotomy, this giant conflict. David Hines had a good thread, which I quote on this, which is like, what political violence is actually like. Basically —
I’m just going to quote this at length. This is from seven years ago. Not seven. Five years ago. He was like, “People have a fantasy of how political violence works. You smite your enemies in a grand and glorious cleansing because of course you’re better. But grand and glorious smiting isn’t actually how violence works. I’m not sure how to really describe it so people get it, but this is a stupid comparison. But here. Imagine that one day Godzilla walks through your town. The next day, he does it again. And he keeps doing it. Some days he steps on more people than others. That’s it. That’s all he does. Trudging through your town back and forth. Your town’s not your town now. It’s a Godzilla trudging zone. That’s kind of what it’s like.”
I mean, if you think about BLM or a giant riot, it’s not some surgical kind of thing. It’s just burning things down, blowing things up. It’s in the name of some higher cause. That’s why people do it. But it’s extremely non-targeted. That’s why friendly fire happens in wars. People get blown up, people get blown to smithereens. Immense damage and destruction on both sides. War really, really sucks.
And I know that’s super obvious to say, but all the wars that, with the exception of the military class that’s actually gone overseas and fought, the US hasn’t actually had experience with that in living memory. It’s got all these violent video games. I like some of these games and so on, but it’s all fantasy type stuff. And it’s not a reality. And once you actually live through that in World War II or the Korean War or something, you don’t want any more of it. And you go back to a peace mode. You understand that things cons spiral in a bad way. Right? But having had that go for 70 years, people are now being drawn to these ideologies of conflict. And what is the alternative?
So the thing is, and this is, I think, one of the more important concepts in the book, these abstractions to pull out, one of the concepts I had there is, the one commandment. Okay? So I mentioned God state network and how you can make hybrids of them. Right? So the network state actually requires a one commandment. So you actually have something that’s like — it’s not just technology and politics, but something that’s similar to faith. Okay? And so what do I mean by a one commandment? I mean, you take society at large and you have one focused moral innovation relative to society at large. And then you have an opt-in startup society. It could literally be like you buy some land in rural Pennsylvania or Minnesota. It could start as a digital community that crowdfunds land around the world.
Okay. So it could start digitally. It could start physically. I recommend starting digitally for a variety of reasons. But you have this community where you have a moral premise. Okay? Let’s say — I give several examples. But there’s different tiers of how aggressive that moral premise can be. It could be something like, “Cancellation is bad.” Okay? “Cancel culture is bad.” So that’s something that you could do purely online. How do you do it purely online? You form a guild where people are there and they’re helping each other out in just some general work matters. But if one of them is canceled at one point, which is a rare event, that group all defends them as one. Okay? So that’s something where there’s a moral innovation relative to society at large, where society at large is sort of neutral to negative on cancellation, but isn’t actually able to stop it.
This group actually says, “That is a danger to our life. It’s a big enough deal that I’m going to join a society that’s an anti-cancellation society. I’m going to pay some percentage of my income, effectively, in cancellation insurance by being part of this society. And I have 1,000 people and I will work with them on just normal, fun stuff. 99 percent of the time, we’ll just share each other’s content, launch each other’s products, advise each other. one percent of the time, we’ll have to defend each other online, and it’s like a guild.” Okay?
So that moral innovation, crucially, that group is not saying, “Change the traffic laws.” They’re not saying, “Change everything else.” They’re just innovating on one focused dimension. It’s very similar to a startup, right? A startup is all about focus. One thing you’re changing, right? Let me give a second example of the one commandment.
Carbs bad. Okay? So this is something — if the first you would need what I call a network union, a digital only thing, carbs bad, you’d need actually some physical component. You’d need what I call a network archipelago. So you’ve got a physical network of spaces. It could be small cul-de-sacs or gyms. Things that your community has crowdfunded around the world. And what do you do with the moral premise “Carbs bad?” That moral innovation? Well, you basically implement keto kosher at the border. You intradite it. You take it seriously. And if you really seriously take “Sugar and carbs bad,” and you take that to the nth power, and you have a small town that really thinks sugar is bad, what happens?
Well, first of all, it changes everything on the store shelves. Okay? Every single grocery store, there’s no cookies. There’s no candies. There’s also no high-fructose corn syrup stuff. A lot of the prepared stuff. A lot of that stuff goes away. It changes every restaurant. They can no longer add syrups and things to their food to make it tastier. It changes every meal. So first of all, that alone does a lot. Changing every single meal and every single grocery store and every restaurant within these borders is a pretty big deal. As I said, keto kosher, there’s a precedent for it, which is kosher, of changing food, but that’s pretty big. You go further. Once you’ve got this done, probably, people lose 30 pounds coming to the community. So you have photos that show before and after. That your moral innovation led to a technological innovation. Okay?
Progress used to be thought of as moral and technological progress together. For example, the public health innovators in the early 1900s, public sanitation, like sewers, okay? That was both “Cleanliness is next to godliness,” and it was obviously a technological innovation for all the pipes and stuff. Right? But the will came first, and then the way. Those things were actually highly related. Then what happened is those split over the course of the 20th century, and so now you have the tech innovators over here who do startups and stuff. And then you have the moral innovators who are political activists, social entrepreneurs, and so on and so forth. And we don’t actually think of those as the same kind of thing, but actually, there’s a market for revolutionaries. So on the tech side, it’s obvious. You have venture capitalists and you have founders. Do you know what it looks like on the political side?
Tim Ferriss: Tell me. I do not.
Balaji Srinivasan: It looks like activists and philanthropists. So you have activists on the right and left, and you have philanthropists on the right and left, who are backing these activists. And those activists can be activist/activists. They could be aspiring young politicians. They could be NGOs. They could be various kinds of things. Folks who want to foment social change of some kind, right? Like a technological innovator who sees a problem in the market and wants to build a change here, these people see a problem in the law or in society and they want to take something that was a one and turn it to a zero. Something that was bad and turn it good or vice versa. And they get funding from a philanthropist or they do it themselves. It’s like bootstrapping. And they try to drive change in society.
Okay? And when you start thinking of them as a moral innovator, just like a tech innovator, so what is the ultimate win of a moral innovator? It’s like, Obama’s a community organizer, and then he becomes president. That’s like a guy starting a company in their dorm room and becoming Zuckerberg. Right? And when you see this, you’re like, “Okay.” There’s actually a term that we use both in the corporate world and in the political world. You know what that term is? It’s president. Okay? The president and CEO of a company, and the president of a society, right? So the president of a startup society has aspects that are similar to the technological innovator, but they also have aspects that are similar to the moral innovator. And they started that moral innovation. So I’ve mentioned two so far, like the cancellation proof culture, right?
Or the carb free zone. But you take the carb free zone, you start iterating it. Okay? So first is, everybody’s dropped 30 pounds. There’s no sugar. You’re buying more and more territory. People are like, “Whoa, this is amazing.” And crucially, you have border control, right? You have an immigration and application process. People sometimes get mad about this and I’m like, “Look, if Harvard can do it, if The New York Times can do it, if they can filter aggressively, everybody who steps into Harvard Yard or into The New York Times’ company slack, then you have license to do it.” You have complete moral license to be as ruthlessly selective as they are. Right? On the institutions they care about, they’re highly, highly, highly, highly selective. Right?
So you have moral license to do that. So you have moral license to be selective. Now, by the way, being selective on entrance is different than not letting people exit. You don’t let everybody into your house, but if they want to leave your house, of course you let them leave. So they are different, entrance and exit. So you have selective migration in, and you’re looking for people who have written about keto stuff —
Tim Ferriss: And you mean physical migration, or is this digital presence?
Balaji Srinivasan: Yeah. Digital and physical. Basically, they don’t just get an account. See, the difference is, in the 2000s, people just wanted everybody to sign up online. Right? Social networks were just about quantity, quantity, quantity, quantity. Just get everybody online. Right? That was the right decision at that point. They were just meant to be super viral. The thing is, there’s a network effect, but what we also have is we have a network defect. Okay? When you get to a certain scale of a network, everybody starts fighting with each other because they weren’t selected on the basis of aligned moral values.
What happens is, the network effect, normally the whole Metcalfe’s Law at n², the more people, the more interaction, assumes those interactions are a positive sum. But you have to very carefully engineer a network for that to be the case. Something like Twitter has a global leader board, which is inherently a zero sum. If you’re rising in the leaderboard, I’m falling, or vice versa. So that results in coalitional zero-sum behavior. A group of people aligned with each other to get to the top of the leaderboard and knock others down. That means that you have a network defect because people polarize and surround certain moral beliefs, and the network actually starts becoming less valuable as it increases in scale.
Just like a company, just hiring more people is not necessarily the optimum strategy. So the network defect means that in this era, you don’t just want to be super viral and grow to the moon. You want to grow to the limit of what makes sense for your community to work. And that could be very different for different kinds of one commandments. I’ll give several other examples. So the carb-free one, right? If you take that further. When I say carb-free, obviously, it should really mean sugar-free. Low-carb / sugar-free.
Tim Ferriss: Yeah. Actually, Balaji, may I pause you for one second just to ask a logistics question? So on the physical migration piece, I’m wondering how that would need to be formatted so you wouldn’t run afoul of state or a federal —
Balaji Srinivasan: Various laws?
Tim Ferriss: Exactly. Right. Discrimination laws. I mean, let’s just say it’s a small town. You mentioned archipelago. So they could be distribution of islands that are very small, like private residences or gyms or whatever it might be. But if you wanted to make it a little larger, such that you could actually have a sizable community, it seems like it would have to be maybe privately owned, such that the town was actually considered a sole residence or something like that.
Balaji Srinivasan: That’s right. So there’s the intra US, outside US, and so on. So there’s something called the Bona fide private club exemption to those laws, which basically says, if you are a bona fide private club with dues-paying members, then you can have restricted access to the facilities. For example, 24-Hour Fitness basically has dues-paying members and not, right? Harvard is very selective about their admissions, right? New York Times is selective about their admissions. So you have a genuine community online that you start with that you’re selective on admissions. And then that community goes and buys land together. Right? Now, might there be lawsuits and stuff like that? It’s possible there’s lawsuits. But this is a global thing. And just the concept of a selective online community, I mean, every Facebook group is selective. Every single Google Doc where you can add and remove permissions is selective. Every Twitter group DM is selective.
That’s actually something which is so baked into the culture and society that we sort of take for granted that you have permission control over things. So I do believe that that is coming. That you’re going to be able to take those opt-in networks that people can select into online and then materialize them in the physical world. Okay? Now, laws are going to be different all over the world and people will lose their minds in different ways and different aspects of this. Other things you can do, by the way, is you could if need, if you need to, just literally set quotas. And so, you are hyper-selective, subject to having X percent of Y group and A percent of Z group and so on and so forth. Right? That’s also potentially an approach. Right? And different countries actually do things like that. They just literally set quotas.
Tim Ferriss: Schools do it too, even though they don’t like to talk about it.
Balaji Srinivasan: Yeah. That’s right. So quotas are actually not terribly bad necessarily, because at least it sets a numerical target. You have to hit that target, and then subject to the target, then you’re done, and you’ve basically shown that you’re fine. So, point is, I do believe that if colleges and workplaces and private clubs and so on exist, if Facebook groups and Twitter groups and Signal groups — if selective admission exists of any kind, right? Which it does, then that group should be able to crowdfund territory. And if it can crowdfund territory, then it can erect a border around it. Now, crucially, this is not a typical corporation. It could be literally a co-op. There could be many structures. It could be all coin holders.
So it has more legitimacy than just a company doing it. Okay? So it’s like a hybrid where it is really a group of people. It’s hundreds or thousands or tens of thousands of very highly motivated zealots and activists. Right? Who believe in this. So it doesn’t feel like, “Oh, it’s just some CEO or whatever, doing it on their own.” This is why I also wouldn’t call myself a libertarian. Going back to that thing about, “Oh, just go and get some land,” a lot of people will try and be like, “Oh, I’m going to be the prince of so and so, and I’m going to go and put a flag in some random unclaimed territory.” Sealand is like this, or there’s this spot in Eastern Europe that’s like this, or a spot in the Sahara Desert. “I’m going to be the prince of this.” Right?
So they have half the picture, which is yeah, starting new countries is good. But they don’t have the other half, which is the obvious thing, which is, okay, you and what army. Right? Or, more specifically, you and what nation? They don’t have a nation. They don’t have a community. They don’t have a people. And they start with these tangible things like land and laws that actually come last in the evolution. Okay? You know what it’s like, is people have lost such track of history, they don’t understand the organic formation of communities. And they just skip to the laws and the explicit stuff, as opposed to all the implicit agreements that precede those laws, of which those laws are simply an encoding of those agreements and acculturations that happen over a long period of time. Right? You with me so far? Right?
Tim Ferriss: Totally. Yeah. I am. I have another question in a few moments. So I might jump in in a sec, but please continue.
Balaji Srinivasan: Okay. So I’ve talked about a one-commandment society, which was the cancel-proof one. Just to extend the sugar-free one for a second, the keto-kosher, sugar-free society. So step one is, all meals change. All restaurants change, all grocery stores change. On the one hand, that’s a big thing. On the other hand, it’s focused. Again, you’re not saying traffic lights change. Okay? You’re not saying there’s 50 other regulations, thousands of regulations that apply. You’re not trying to change building codes. You’re not trying to have self-driving cars. You’re focused on one thing in that community. Do one thing really well. And that one thing, of sugar-free, after people lose 30 pounds, then what happens? Maybe then, everybody gets equipped with a CGM, continuous glucose monitor. Right? Or you start rolling out other quantified-self stuff to the community.
That moral innovation unlocks another moral innovation and another, and you start going from one commandment to 1.5, and you start actually building it out. Now, to your point earlier about, how do you know that this isn’t some kind of cult? How do you know that it doesn’t go wrong? It’s checked by exit. Everybody can leave at any time. It’s literally got to recruit subscribers. And if you don’t like it, you don’t subscribe. And if you do like it, you keep your subscription. And if you liked it, but now don’t like it, you cancel and you leave. Okay? It’s society as a service, SAAS. The next SAAS. Okay? Isn’t that good?
Tim Ferriss: Yeah. That’s good. Clever.
Balaji Srinivasan: And that is something where it also does something else, which is, it’s 100 percent democracy, rather than 51 percent democracy. 51 percent democracy is what it sounds like. 51 percent democracy is 49 percent dictatorship. 49 percent of people did not vote for this guy at any time nowadays. And for the last 30 years or something like that, these elections have been very, very close. And they feel, rightfully so, that they did not get their guy in power. And they do not feel empowered. This is not just in the US, this is In lots of countries, at any time, on the order of 50 percent of the country feels the election — they don’t agree with the election, right? I’m not talking about any particular situation. Simply the fact that we just keep getting 51 percent, 49 percent. 49 percent, 51 percent.
The alternative to that, where it’s like the Fosbury Flop — we’ve talked about the Fosbury Flop of democracy. Is 100 percent democracy where every single person in this community has agreed to be there and can leave at any time. They have consented. And it’s a consensual society. The consent of the governed is actually the upstream thing, of which voting is only this very downstream thing and voting can be manipulated. Voting in the Soviet Union — you know how they voted in the Soviet Union? You went there and you had a ballot, and it had nothing on it. If you wanted to vote for the communist, and you could write the name on it if you wanted to vote for a non-communist. And everybody would look at you and be like, “You really want to do that?” Right?
Balaji Srinivasan: The poke is, in that quite a few counties in the US, there’s also only one party on the ballot. So it’s actually not as dissimilar in the sense that the smoke-filled room of the primary is the actual election. And then the public just simply ratifies whoever’s at the top of that party’s selection process. Right? So that’s the poke, is that laughable communist process that we talked about, is not that far away from a primary or a party selection process that’s the real election, and then people just pick their party candidate in the general. Okay. Go.
Tim Ferriss: Okay. And go. All right. I’m warmed up. I am, just to be clear to everybody listening, very deeply interested in this entire conceptualization of the network state, which is why I’m asking all these clarifying questions.
Balaji Srinivasan: Yep.
Tim Ferriss: So you mentioned 100 percent democracy. People have to be recruited. If they don’t want to be part of the community as a subscribing member, they can leave. Now, one could say, “Well, even if we look at the 49 percent ruled by dictator effect, if we want to call it that, in the United States, people could leave. They could leave.” Now, taxation would follow them, unless they renounced citizenship and so on and so forth, but they could physically leave. But a lot of those people either don’t have the means or the will or fill in the blank to relocate. So I’m imagining — you brought up El Salvador earlier. It’s like, all right. If someone burns their bridges, socially and professionally, moves to El Salvador to be part of a crypto centric community, and then they end up — I’m not saying this is the case. But they’re like, “Oh, shit, this is turning into The Mosquito Coast and Animal Farm all wrapped into one. This is a mess,” they could, in theory, leave, but there may be any number of factors. Maybe they married someone and had kids with someone who doesn’t want to leave.
There are all sorts of attenuating factors that could influence their ability to migrate. So my question following up on that is, what are some of the most interesting attempts that anything related to network state that you could mention? And the reason I bring it up is, for a while I remember in Silicon Valley, there was a lot of talk of seasteading. Seasteading, seasteading, seasteading.
Balaji Srinivasan: Sure. I talked about that in the book.
Tim Ferriss: And people can look this up. Yeah. Right. And certainly, there are experiments being run and have been run for a long time with intentional communities that have, on some level, let’s just call them tenets of a doctrine, right? Or agreements or commandments. So where would you point? What are some interesting things that you’re seeing that you think are worth mentioning?
Balaji Srinivasan: One important thing I just want to say is that in the book, I make a distinction. I talk about startup societies and network states. And I define a network state as actually one that has diplomatic recognition from an existing sovereign. Which is an unusual definition, because you might say, “Wait a second, why do you care whether Florida or Denmark or the United Nations recognizes you? Why should that matter? You should be able to just do it totally from scratch. And the reason that I have — that’s a very high bar for diplomatic recognition. The analogy would be Bitcoin starting as a pure internet phenomenon, and then eventually, getting listed on Bloomberg and eventually becoming the sovereign currency of El Salvador. It obtained diplomatic recognition, but it took like 10 years. The reason is that as I can get into diplomatic recognition is actually very important because it means the existing — it’s almost like the crypto-fiat exchange. The exchange between crypto and fiat, the ability to be halfway dollars or 95 percent dollars and five percent crypto, that exchange turns out to be a critical part of the entire transition to crypto. In the same way, the exchange or the interface between crypto countries and fiat countries is the diplomatic recognition of a network suit. So that portability is one dimension of it. Another dimension is the one that you’re talking about, which is physical migration. And the thing is that — there’s like several things I can say.
So first is if somebody plans poorly, initially, you can’t be their keeper. You can’t necessarily look out for them on everything. What you can do is you can try to reduce the cost or the barriers to exit. And one of the things I mentioned when I talked about earlier, I said American anarchy. On the other side of the world, what’s burgeoning is the opposite of that, which I call Chinese control. And the scenario that I think might happen in China is there’s this book by Roger Garside called China Coup, and various guys, George Soros has kind of hinted at this. There’s this group the Psywar Group in the US that put out a video about a month ago that’s talking about cyber war and has photos of China and how they’re doing psywar in China. Did you see this video? This Ghost video?
Tim Ferriss: No, but I would love a link. We’ll put it in the show notes as well.
Balaji Srinivasan: So short answer is or short version is, I think it is possible. I can’t say a hundred percent but that some kind of China coup will be attempted against Xi Jinping or the Chinese Communist Party. But I don’t think it’s going to — so whether it’s like actually us backed or not, I don’t know, but for Garside to put out a book like this, for Soros to make the comments he has, for this JSOC to put that video out there, for all to talk about oh, they’re not a democracy, and so on and a lot of the same energy versus Russia, it’s quite possible that some kind of China coup will be attempted. I don’t think it’s going to succeed for a variety of reasons, but that’s like the thing that the Chinese system is armored against.
And I think that the response to an attempt like that would be an AI eye. The AI eye of the Chinese state ripping out any piece of civil society by the roots that possibly collaborated with that. And the consequence of that, I couldn’t imagine but it’d be like cutoffs of physical goods as targeted reverse physical sanctions, like, “Okay, we’ll sell you chairs, but not these key screws that you need for certain military things.” Like it’d be viewed as this insanely hostile act. And you might say, “Well, I mean, the government is smart enough that it won’t try that, they’re established, smart enough, they won’t try that.” I’m like, “Have you noticed nuclear brinkmanship with Russia?” Have we seen some of the stuff — even if you agree as I do that the Ukrainians deserve freedom and so on, I don’t think that some of the stuff where it’s like being very casual about nuclear war is smart.
And I also think that the fact that they’re still poking on things like Taiwan and so on while they’re in the middle of the Russia-Ukrainian war, there’s very statements are being put out on Taiwan, I think Biden put out some statement and pulled it back and put out some statement. This does not show a degree of caution on this topic. My point is, I think while American anarchy is happening or before it gets underway, Chinese control could follow a Chinese crackdown. And what does that happen? What does that mean? It means Chinese people can’t leave the country. It’s already happening where passport issuance is like down 95 percent over there. They’re using the QR codes that they set up for the COVID stuff for internal lockdowns. There’s already the preexisting hukou system of internal passports. They know that lots of Hong Kong people want to leave but they don’t want people to leave with their money. And a lot of Chinese people now want to leave with their money. It’s called Runxue, R-U-N-X-U-E, or run philosophy.
It’s like basically there’s three responses for the upper-middle class, middle-class Chinese liberal, and those are rat race, lie-flat, get out or runxue. Okay. So runxue will — the problem is there’s reactivity on everything. And the more popular that becomes, the more it’s going to be portrayed as some combination on patriotic, some combination like trying to take your money and leave after all China is done. So they’re cutting off the exits in their own way to your point. So Chinese control is on their side of the world.
And you know what they’re going to say is, they’re going to say, look, we just stopped this American-style anarchy. And they’re going to export that surveillance state to lots of countries, and they’ll say, “Look, this is just total stability and you will never have anarchy. And you will just be able to rule forever because our AI eye picks up every possible form of organization against you, any possible form of dissent. And that’s just total order without any feedback signal whatsoever on power, whereas anarchy is the total opposite of that. I feel this world that — I’m seeing things tracking towards that where you have just total disorder over here, which will be justified by saying it’s not the Chinese all-seeing eye and you’ll have the Chinese all-seeing eye justified by the fact that it’s not the total disorder here.
And it’s like the Nazi versus communism thing, except it is total decentralization versus total centralization. And the alternative to that is many different examples of re-centralization. And what I mean by that is, you said pick El Salvador, pick another country. The thing is that if you didn’t like GM and you didn’t like Ford and you didn’t like Chrysler, well, you could found Tesla. You could found something that actually — I mean, it’s very hard. Elon’s the first car — you have to be Elon maybe, but it was possible to do so. And with software, if you don’t like some software company, you didn’t like Google Docs, people could found Notion. Even a big company, you could tackle like this. So the thing is that ability to start that startup society, even if it doesn’t have the full diplomatic recognition of a network state is how those options actually increase because you mentioned, oh, if you don’t like the current options, go to El Salvador. But El Salvador’s fine. I’m proud of them.
Tim Ferriss: Just too good. No, I didn’t say that. And I’m fine with El Salvador. I don’t have personal issues with El Salvador. I’m just saying that most of the experiments we’re talking about —
Balaji Srinivasan: What I mean is of the menu.
Tim Ferriss: Yeah. The menu, I’m just like it seems like the crypto tail is wagging the dog a bit in the same way that the tax tail wags the dog when people are like, “Yeah, it’s great in this place,” and I’m looking at them in Zoom and there are like tires on fire in the street behind them with razor wire around their compound. And I’m just saying, “What the fuck are you doing, man, to save whatever you’re saving?” Anyway, that’s all I’m saying.
Balaji Srinivasan: Yeah. So that’s the thing is also one of the big things about what I’m talking about here is it’s absolutely morality first and money second. And that’s saying missionary over mercenary. So there’s this great interview from several years ago with, gosh, is it Charlie Rose had an interview with this historian called Paul Johnson. And he essentially points out that the for-profit colonies in America mostly fail, but as the religious ones, that the cohesion and commitment to make it through the brutal winters, just like the religious maximalist community has the cohesion and commitment to make it through the brutal crypto winters. And bring it back around to what we were talking about earlier. The situation that we’re potentially entering in the US, it could be like the next Great Depression, it could be the Great Stagnation or the Great Stagflation or the Great Inflation.
It could be not something that bounces back in a year or two years like our previous experience but something where the government cannot print money and cannot fix it. And it has to actually be fixed with like genuine innovation and not top-down control and silencing of all dissent and not anarchy in shooting people, but actually, innovation that could be, by the way, very non-consensus. The reason, by the way, I bring up something like carb-free or sugar-free rather is if you think about great startups, some of them are very ambitious-sounding like SpaceX, and others sound incredibly stupid and trivial like 140 characters. But now, today, both Twitter and SpaceX are big companies. And a lot of startup societies will be similar. They’ll either sound totally trivial, like carb-free or insanely ambitious like FDA-free. And the thing is, you don’t necessarily know which startup societies are going to work. You just have to run the experiment and allow people to set them up. Society is a service and allow people to opt into them. And that’s what a lot of this book is about.
Tim Ferriss: Hmm. So I want to take one quick sidebar and then we’re going to come back to the main thread. In the very beginning of this conversation, I asked you to comment on the current state of the crypto market and the India sphere, and we did not get to the India sphere.
Balaji Srinivasan: Yes.
Tim Ferriss: Would you mind just taking a few minutes, not very many, but just a few minutes to share any and all thoughts, first, defining what India sphere means and then thoughts on the India sphere.
Balaji Srinivasan: Well, so here’s what I’ll say about India. I will just give a couple of links because I can talk about it verbally, but Sanjeev Sanyal actually put out an economic survey of India here. I’m just going to link that here about three or four months ago. And it just has tons of maps and those maps show like nighttime luminosity, the national highway network, the airports, the water connections, the issue is, this is obvious if you’re on the ground, but it is the most obvious for somebody who knows India enough to have visited but it’s not there every single day because if you’re there every single day, it’s kind of gradual, it’s an improvement but it’s gradual, but you don’t necessarily appreciate it. And if you’ve never come and you have nothing to benchmark it against, you don’t see the changes. But for the intermittent visitor, it’s astonishing what’s happened.
And what’s really good about this set of graphs is it shows it for the whole country. So lighting, highway buildouts, airports. Basic infrastructure has been dramatically improved over the last 10 years.
Tim Ferriss: Yeah. Tap water, potable water.
Balaji Srinivasan: Potable water. Exactly. So the thing is India is becoming — and 4G and all the internet stuff. If you look at this whole thread, basically, the second reference I’d point you to is an article called “The Internet Country” by tigerfeathers.substack.com. And that is a ton of graphs on just the digital story. And it’s showing the build-out of literally like a billion people now. It’s like 800 million, something like that got onto some of the fastest cheapest mobile internet in the world over the last five years. And so the H1-B doesn’t even matter anymore, what matters is the TCP/IP visa. The labor shock this represents, the culture shock this represents, like most people haven’t gamed this out but the majority of English speakers on the internet are or soon will be India. Like English-speaking culture is going to be influenced by like Indian culture. It is just like this total thing that’s not on people’s radars. They have not priced the sin.
Okay. Most of your followers will probably be Indian by like 2030 or something like that. Most of your upvotes, most of your like comments and stuff, a very large fraction already are, but it’s something where it’s like two giant tanks of water that are now connected by the internet and that are diffusing into each other. The other thing is also during that process, see, for many years Indians had — like my parents’ generation, because they grew up in India, they came over with accents and so and so forth.
They had portable technical skills in engineering or medicine or something like that. But they weren’t really culturally fluent. They knew how to operate in India but not really in the US or in the globe. The internet dramatically changes that because all those kids in India understand Instagram memes and TikTok and all that stuff. They are internet-native. They’ve learned it as a second language and maybe if they speak, they might have an accent but even that, it’s like you’re getting AI audio generation and so on and so forth.
So the cultural fluency is there in a way that was absolutely not there. So there won’t be like foreigners. You won’t know that they’re Indian in a thread. That’s a huge difference that many people has not been culturally acclimatized that quickly ever before. On the internet component, I don’t think people have thought about it. And then the government component, look, there’s pros and cons of any government. And in many ways, I think India’s government is like two steps forward, one step back. There’s the saying India disappoints both the optimist and the pessimist, but two things about that. That’s a good one, right? It’s not mine but somebody —
Tim Ferriss: It’s pretty good. Yeah.
Balaji Srinivasan: So this link that I just pasted in, if you just go and you read the India budget government document.
Tim Ferriss: And just to pause to tell people that I’ll put all of these links in the show notes at tim.blog/podcast, so you’ll be able to find all these very easily. Please continue.
Balaji Srinivasan: Yes. So it’s like it’s got digital universities, drone farms, telemedicine, open source, like it is an extremely tech-savvy future-forward thing. It’s insane how smart it is. Don’t take my word for it, read it yourself. And then as contrast, go and read Mike Solana’s article. Mike Solana’s a great guy, smart guy from Founders Fund. He’s got a subset called Pirate Wires; he’s article he wrote called “Trillion Dollar Paint Job” from last year, August 11th, 2021. And essentially what he points out is —
Tim Ferriss: Yeah, piratewires.com.
Balaji Srinivasan: Yeah. piratewires.com. And the article is called “Trillion Dollar Paint Job.” And what he pointed out about six months before that set of tweets about nine months ago is this gigantic multi-billion dollar budget is — like what are they building? The only thing they were doing was banning cryptocurrency. He was like the one exciting thing in the entire bill were the charging stations for electric vehicles. He’s like:
“Charging stations for electric vehicles account for a tiny fraction of expenditure and appear in almost every recap of the bill. Why such relentless focus from the media on so minor an element of our bold new infrastructure strategy? I think we’re all desperate for a sense of forward motion. The charging stations at least represent something new, a physical change that alters our world for the better. But beyond that, it’s not at all clear what our political leaders are trying to build.
“I do however have a sense of what they’re trying to destroy.”
Bingo.
Essentially, the East Coast establishment, the US establishment basically hates these tech interlopers. And rather than figure out how to have everybody take a cut or whatever and level up together, has decided to try to fight it, which is now resulting in, I think, going to be a bad — some of it actually worked where they managed to wokeify and capture Google and these big companies, which is really bad because it means that they are going to be turned into surveillance machines — are already. Have you seen the Google AI thing that’s trying to say “landlord” is bad language in your Google Doc? Did you see that?
Tim Ferriss: No, but happy to link to it for people.
Balaji Srinivasan: So it’s like Google Docs, landlord, suggest thing. I mean, the thing is, look, it’s Google. There’s this apocryphal story which I believe is not actually true but it’s like the reason that Spanish people speak Spanish with a lisp is because supposedly the king spoke with a lisp and wanted people to do that. That mythical story, Google has literally billions of users. It has, if it decides to use it, the power to shape language and speech and thought with its suggests, with its auto-completes, with things like this. So that power in centralized hands is an insane thing. Like it’s almost impossible to — because it’s undetectable, you think of yourself as paranoid. This is an explicit example where this suggest is explicit. Anyway, thing is —
Tim Ferriss: The sanitizing of cognition.
Balaji Srinivasan: So that will be a way that the social war is going to be fought where Google and things like that are weaponized against the population, which is why we need these Web3 and other services so that you can get off of Google and get off of Amazon and get off of these wokeified things. Anyway, coming back up, rather than trying to work with tech, they wanted to fight it, kill it, wokeify it, antitrust it, capture it. They’ve been impartially successful in that but what they’ve also done is they’ve turned the latest generation of tech founders very much against the US establishment. All the guys who are running companies that are worth less than a hundred billion are basically pro-Bitcoin and less aligned with the US government.
I should say all but let’s say, I don’t know if they managed to capture Google, they did so at the cost of splitting, alienating, and polarizing a generation of up-and-coming founders, not just in the US but very importantly, outside. Tech has been pushed outside of the US. And the US is no longer like the majority of tech. Most tech actually happens outside the US. So the whole concept that’s very America-centric, that it’s all in Silicon Valley, Silicon Valley is — have you heard the term metonym? It’s like a peculiar use —
Tim Ferriss: Nope, but I’m guess — it’s like an antonym or a synonym but it’s a metonym. So it’s a word that is like an umbrella term that captures a bunch of things.
Balaji Srinivasan: So metonym is when you use a place to stand in for a concept. So like Hollywood is movies, and Silicon Valley is tech, and so on.
Tim Ferriss: I see.
Balaji Srinivasan: And I had this tweet, which was deprecate metonyms via decentralizing technology. So finance is not Wall Street. Advertising is not Madison Avenue. Film is not Hollywood. Education is not the Ivy League. Space isn’t NASA. Cars are not Detroit. And technology is not Silicon valley as obsolete as Broadway. And the thing is, you can already see some of those things happening. Cars are not Detroit, it’s Tesla. And space isn’t NASA, it’s SpaceX. And film, it’s starting to move away from Hollywood as well. Advertising’s already not Madison Avenue, it’s arguably moved away quite a bit. But once you see that, you’re like, and I probably told them, you’re like, “Oh, all of those things were like points in the US which dominated certain industries and all of them are getting decentralized by technology at the same time.”
Anyway, coming back up. So with the India thing, A, there’s Sanjeev Sanyal’s economic survey of India which shows all the maps, B, there’s Tigerfeathers, which surveys on the digital buildup, C, there is this link to the Indian government’s — like their spending bill. It’s essentially spending bill. It’s their budget basically. And then D, the comparison of that to the American budget of this I think the same fiscal year or plus minus one and the enormous gap. Absolutely enormous gap where technology is seen as a tool to make India and Indians more prosperous across the political spectrum. And it’s basically seen as opposite in the US. I understand why; it’s because the rise of technology correlated with a relative fall of American living standards globally relative to the rest but it didn’t have to be like that in my view. We have a better leadership; it didn’t have to be like that. So that’s a quick summary on India. And I think that’s enough data.
Tim Ferriss: That’s great. And we will link to all these things in the show notes. So Balaji @balajis on Twitter.
Balaji Srinivasan: Oh, wait, can I say one more thing? Let’s say one more thing.
Tim Ferriss: You can. Well, you absolutely have to also mention where people can find The Network State: How to Start a New Country.
Balaji Srinivasan: Sure. Absolutely. Okay.
Tim Ferriss: So you can say another thing.
Balaji Srinivasan: I will say one thing and I’ll say that last thing. Okay. So the one thing I was going to say is going back to that God’s state network framework, I’m bullish on Indians and modestly bullish on India. That is to say the Indian state I’m like very modestly in favor or very modestly bullish on but the Indian network of the global diasporic Indians connected to certainly many Indians within the Indian territory, but not necessarily the Indian government per se, or Indian establishment even. The Indian network, I’m very bullish on. And actually, one of the dark horse projections I have in the book for the future is that by 1945, the 20th century was the USA versus the USSR, the Americans versus the Russians, the two guys who were on the edges, who everybody could see growing. They had huge populations in the 1800s but they were kind of on the periphery.
Europe just slugged it out between themselves. And eventually, in that title fight, it was the Americans versus the Russians. I kind of think that by 2040 or 2050, maybe sooner, maybe later, that there’s a chance that this century is the Chinese state versus Indian network. So the centralized signic state versus the dharmic decentralized global network. I kind of think that’s how things line up. And the real sort of — you have to sort of squint to see this as an edge case but in the same with the UK sort of handed the torch to the US, which was an English-speaking kind of thing, in some ways, the US, I think, may hand the torch because the global English-speaking internet is going to become Indian. In so far as the US as a country doesn’t exist and you have all these startup societies and so on, that decentralized English-speaking internet will have very strong Indian representation around the world. And the opposite of it will be like the Chinese control.
Now, I know that’s like very speculative and I’m connecting a bunch of dots and so on. And that’s not at all like — one very important thing here is it’s probably it’ll come out on the 4th of July. None of what I’m saying or I’m thinking in the book, I would not call any of it like anti-American any more than I’d say than Washington was anti-British or that Herzl, or Ben-Gurion was anti-British or Lee Kuan Yew was anti-British or even the Indian independence movement was anti-British. They were like critical of the British for a time. But afterwards, after a little bit of distance, America, India, Israel, Singapore, all have good relations with Britain. They’re basically post-British. They weren’t anti-British. And the key question is rather than be like pro-America, if this won’t last, if this current Pax Americana won’t last, what does post-American look like without any hostility really towards the old thing, indeed with gratitude towards everything it contributed, but recognizing that not everything can endure?
And people realize that the currency won’t endure, but perhaps the state won’t endure either. And we need to think about positive new models for the future that do not involve condemning the past. We don’t condemn Britain all the time. We’re basically grateful towards it or positively inclined towards it, but we’re moving along another axis. So rather than be pro or anti-British, rather than define it as post-British, rather than pro-American, what does post-American look like and prepare for that. And you know what, maybe I’m completely wrong. Maybe all the base-raters are right, maybe everything just continues and so on, but if you think that we might want to actually try to build an alternative in the same way a founder or an activist doesn’t simply let things happen but take things into their own hands, I think I’ve got a model for that. I posit some model, putting it out there. It’s at the networkstate.com. You can also read it at 1729.com and that’s like an online book and so on. So by the time this podcast goes out, that’ll probably be live.
Tim Ferriss: All right. So one more time. What were the URLs just so people catch them?
Balaji Srinivasan: So go to 1729.com and you can read the book online. Download the PDF and you can click and you want to buy it on Amazon. So it’s free to read online and you can check it out. Oh, and also subscribe because we’re going to be releasing more chapters and so on. I know that normally, an app is supposed to be dynamic and a book is supposed to be static but I think of this as a book app because you put something out into the world and people are going to react and there’s going to be incomplete things or things I want to say differently and so on and so forth. And so I’ll keep editing it/ and I’ll keep setting out new stuff. So subscribe and get all that for free if any of this interested you. 1729.com.
Tim Ferriss: 1729.com. And we talked about the origin story of that separately. So we won’t get into it right now.
Balaji Srinivasan: Yes, it’s basically the publisher of the book. Yes.
Tim Ferriss: Balaji, very nice to see you again. And for those who aren’t watching the video, these are two contrasts and style. You’ve got sort of my floral pattern full of all sorts of embellishments that I need to keep my mood stabilized to get even a modicum of anything done. And then you’ve got Balaji in his Spartan what looks like tech war room preparing for the future with no golden feathers. No drawers.
Balaji Srinivasan: I have a plant here. It’s just out of frame. It’s like the Canadian girlfriend. My plant is just out of frame. And do you know the reference?
Tim Ferriss: I don’t. I like it even though I don’t understand it.
Balaji Srinivasan: It’s basically like, oh, I have a girlfriend but she’s in Canada.
Tim Ferriss: That’s Balaji’s plant.
Balaji Srinivasan: Yeah. So the plant is just as —
Tim Ferriss: It’s a cactus that needs water once every 70 years.
Balaji Srinivasan: Yes, exactly.
Tim Ferriss: As a symbol of resilience.
Balaji Srinivasan: That’s right. It is highly resilient. And I have my whiteboard on the back for my math, so that’s fine.
Tim Ferriss: Oh, man. Well, Balaji, I really appreciate you taking the time. I’m excited for you. I’m excited for people to read The Network State: How to Start a New Country. You could find it on 1729.com. Check it out. Balaji, of course, you can find on Twitter. He is insightful and prolific @balajis. We will link to everything we mentioned in the show notes at tim.blog/podcast. And thank you, Balaji. Always fun to see you.
Balaji Srinivasan: Thank you, sir.
Tim Ferriss: I appreciate the time.
Balaji Srinivasan: All right. Thank you very much.
Tim Ferriss: And to everybody listening, be safe, be kind, and thanks for tuning in.
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Big fan of your content overall Tim, and I really enjoyed this episode specifically. There is a lot to learn from Balaji, but I found the comments around the future of the US and other large global economies in the next 5-10 years particularly interesting. In the future, would love to hear more details (from Balaji or other guests) about immigration laws/regulations in the US and other countries, how the importance of physical boundaries is changing and the potential impact on existing/emerging networks (countries, companies, etc). Legal immigration in the US is rarely discussed (illegal immigration, also an important issue, is the key topic for politicians), but it continues to be a difficult process and makes it challenging to attract/retain talent. This may play an important role in the future of the US as other countries encourage more innovation, adopt new immigration approaches (eg, remote work visas) and expanded remote work capabilities and crypto open up opportunities globally.
Balaji is point on, India versus China is coming.