Moving into the Information Age (Part 2)
Takeaways from the Second Half of The Sovereign Individual (Davidson and Rees-Mogg)
As I discussed in my first piece on our transition into the Information Age, we are moving into the new new world order. In 1997, Davidson and Rees-Mogg argued that this brave new world would be financed by cryptographic assets that exist in cyberspace, that nation-states (AKA countries) would become irrelevant, and that our current form of democracy would die along with the welfare state that it supports. Scared yet? Me too. I mean, just look at the cover of the book.
Don’t you, too, want to sit out alone on the edge of a long ominous tree branch in your Sunday best as you await the swirling dark, grayish blue sky to open up and swallow you whole? Seems great, no? Bring on that sovereign individuality!
After finishing the book, I am not sure that the authors wanted it to seem great, or terrible… In fact, I am not exactly sure what their intentions were in writing this book other than to forecast the ways in which our society would be reshaped in this new age. And while the authors missed more than a handful of times in their predictions, they also hit the nail on the head more far more than they missed, which makes the book an interesting read. So, let’s parse out some of the main points from the second half of the book.
Enterprises Scale Down to Become More Mobile
Davidson and Rees-Mogg continuously harp on the fact that companies and other institutions will become leaner as a result of microprocessing. In the Information Age, there will be far less bloated, bureaucratic, and monolithic institutions. Part of the reason for this will be because computers will do more of the work that humans once did. Another reason for this is that companies will need to be leaner and more mobile in case they have to “vote with their feet” and quickly pick up and leave a jurisdiction if it imposes too heavy a tax burden on them. We’ve seen some evidence of this as Coinbase’s valuation rivals that of Goldman Sachs’, while Coinbase only has 4% of the employees that Goldman Sachs does. Coinbase also did not list a business headquarters address on the SEC white paper that they filed to go public. They simply wrote “Address not applicable” on the document. In essence, with Coinbase, we now have a mobile company that is valued nearly at the same amount as one of the biggest investment banks in the world. Score one for Davidson and Rees-Mogg.
Also on this topic of companies (and individuals) moving to more favorable tax jurisdictions, we have already begun to see this within the U.S., as, apparently, a whole lot of Californians followed Elon Musk and his company, Tesla, as well as Joe Rogan out of California into more welcoming tax jurisdictions.
And California wasn’t the only state to experience an exodus. High earners in finance and tech also left states like New York, along with many other now former New Yorkers. These exoduses have resulted in New York and California losing congressional seats to Texas and Florida, which was just announced this past week. But it was COVID that made them leave, right? This doesn’t have anything to do with not getting enough for your tax dollars, right?!
Well, Davidson and Rees-Mogg actually cover that angle, as well. They argue that these exoduses would be catalyzed by a virus that spread globally, causing a public healthy crisis. Eerie, I know.
The Reshuffling of Inequality
In the new new world order, income inequality within jurisdictions will rise, yet opportunity will spread worldwide, as Davidson and Rees-Moog claim that “the beneficial impact of information technology will include helping to overcome many of the obstacles of development that prevented the majority of of the world’s population from enjoying many of the benefits of free markets during the modern period.” In other words, people in Africa, South America, Eastern Europe and Southeast Asia (among other regions) will have access to opportunities via the internet that they did not have in the Industrial Age (an age in which the people of these regions’ labor was largely exploited), and they will not need to emigrate to experience these opportunities. Academics and the woke intelligentsia love to talk about a post-colonial world. Well, here it is. The diminishment of the power of nation-states should usher it in. Though, it won’t be Marxist ideology that governs this new world; it will be unbridled capitalism. And, according to the authors, only the hospitable jurisdictions will thrive.
I found it odd that Davidson and Rees-Mogg, two conservative thinkers, seemed to value this idea of a new globalism as it pertains to the spread of opportunity. It was odd to hear the term “globalism” or “globalist” in a seemingly positive light, the polar opposite of how Hillary Clinton-bashing Fox News talking heads use the term.
Davidson and Rees-Mogg argue that the leveling of the playing field for global opportunities has the potential to lessen the brain drain effect, and even diminish the effects of racism. No one cares about your race, gender, religion, etc. if you can do the work, the authors claim. This seems like a good thing. However, there are also bad things to keep in mind. Unemployment amongst the technologically illiterate, and the just simply illiterate, will increase, and with the diminishment of the welfare state, Davidson and Rees-Mogg simply warn their readers simply to brace for violence. The authors claim that there will be less world war-type violence, but much more local violence. And that will be a lot of violence just in the U.S., considering that the authors reported that as of 1997, “90 million American adults were judged incapable of writing a letter, fathoming a bus schedule, or adding or subtracting, even with the help of a calculator.” That number has dropped to 43 million as of 2020, but this is still a lot of people who will likely struggle in the Information Age. This reminded me of a piece in The Atlantic entitled “The War on Stupid People”.
The Role of Government Changes
Davidson and Rees-Mogg argue repeatedly that the “government’s principal economic function from the perspective of those who pay the taxes is to provide protection of life and property.” However, since tax bases will erode in the Information Age because “welfare states will lose their most talented citizens through desertion,” protection will become a big private enterprise. Everything from gated communities to personal bodyguards will become more normalized.
Davidson and Rees-Mogg also argue that as the nation-state loses its relevance, demagogues and reactionaries will foment conflict as a means to seize power, and nationalism will spike. Sound familiar?
Also, as nation-states lose relevance, Davidson and Rees-Mogg claim we will see more financial crises as well as the inability of nation-states to meet their pension liabilities. And we’ll see governments downplaying the fact that both of these things are happening, while non-censored information to which people have immediate access (see Twitter, TikTok, or even this very platform, Substack) informs the literate populace otherwise. Governments once had a monopoly on information and will lose their grip on it in the Information Age.
As the Nation-State Declines/After the Nation-State
So, according to Davidson and Rees-Mogg what does a post nation-state, post-democracy world look like? Well, we can look forward to lots of violence and disorganization in the short term. Fantastic! But the authors don’t seem to like anarchy and don’t see it as part of the long-term vision.
The authors believe that new “tribes” will form and that “communities and allegiances will not be territorially bounded. Identification will be more precisely targeted to genuine affinities, shared beliefs, shared interests, and shared genes, rather than the bogus affinities so prominent in the attention of nationalists.”
Altruism or helping others will become much more of a private endeavor, as the government will lose its power to provide welfare services.
Nationalist “neo-luddites” will view the transitory “cognitive elites” with disdain, while ambitious people will view the migratory life as part of the price of getting ahead. (Davidson and Rees-Mogg like to refer to these “neo-luddities” as the “losers and left behind” - very kind terminology. I get the feeling that empathy is not their cup of tea.)
“Narrow-casting” (I love this term) will replace broadcasting. Fewer people will trust mainstream media, and they will tailor their news feeds to smaller outlets and independent journalists.
Education will become privatized. (See synthesis.is, what Elon Musk uses to educate his children)
Perspectives will be reversed: Davidson and Rees-Moggs state, “To hear the critics tell it, the advent of factory jobs was an unprecedented evil and ‘exploitation’ of the working class. But now it appears that the only thing worse than the advent of factory jobs is their disappearance. The great-grandchildren of those who wailed about the introduction of factory jobs are now wailing about the shortage of factory jobs that offer high pay for low-skilled work.”
Politicians and lobbyists will lose power. Citizens will cast ballots directly on legislative positions. Davidson and Rees-Mogg state, “Any set of economic expressions, comprising entry, on-going contracts, and exits, could be converted into an expression of political ‘voice’ simply by involving multitudes of people in the decision-making.” (This is remarkably similar Charles Hoskinson’s vision for Cardano.) Political leaders like Lee Kwan Yew, the founder of Singapore, a well-governed country that also serves as a tax haven, will become the new model for what a model politician/leader looks like. In the new new world order, Davidson and Rees-Mogg believe that “‘political’ issues will recede into entrepreneurial judgments, as fragmented jurisdictions seek to discover which policy bundles will attract a viable cross-section of customers.” The authors believe that citizens will be viewed as assets and that governments will be controlled by their customers. Ideally, this is how things should work in our current democracy, but, as most of us know, they don’t.
As the old system dies, “barbarian” groups like the Russian mafia or the Japanese Yakuza will have their way, at least for a period of time.
Really can’t wait for this Information Age to hit its stride! Sounds like it will be totally non-anxiety provoking…
Closing Thoughts
While we’ve seen evidence of a lot of what Davidson and Rees-Mogg predicted, I still remain critical of this work. My biggest critique is that I believe that the authors assume people to be purely economically or financially motivated. People like to live in countries, states, and cities for more than financial reasons, which is why large amounts of people continue to pay higher taxes to live in certain jurisdictions. Based on the description of “the sovereign individual” in this book, I fit the bill in certain, ways, especially in regard to how I have picked up to move to different regions of the world to pursue different opportunities (not necessarily to avoid high-tax jurisdictions, though). However, I can testify to the fact that moving around so much gets tiring, and that people eventually like to settle down. So, I am not sure that people will so readily “vote with their feet” whenever they don’t like the tax rates of a jurisdiction. Also, taking New York State as an example, most of the people who I know who complain about the high taxes in New York are or were employed by the government. Quite ironic and quite comical. However, if the tax base of New York continues to dwindle as the ultra-wealthy leave, will New York continue to be sustainable? I don’t know.
Also, as Peter Thiel points out in the book’s forward, the single biggest megapolitical development that Davidson and Rees-Mogg didn’t foresee was the rise of China. Thiel states, “The twenty-first century People’s Republic of China under the Communist Party has created its very own version of the Information Age with decidedly nationalist, ethnically homogenous, profoundly statist characteristics…Communist China has crushed the city-state of Hong Kong as ‘a mental model of the kind of jurisdiction that we expect to see flourish in the Information Age.’” The rise of China surely throws a monkey wrench into the predictions of Davidson and Rees-Mogg. If democracy dies in the West, we may simply see authoritarianism flourish. Nation-states of the world may end up looking more like China than they do Singapore.
Had I read this book in 1997, I would have been much quicker to just dismiss it as some libertarian fantasy projection, as I am sure many who read it back then did. (Then again, I had no idea what the word “libertarian” meant back then, nor would I ever have picked up a book like this in 1997, so there’s that.) However, as so many of the authors’ predictions have begun to play out 24 years later, I am a bit less dismissive. I do believe we are witnessing a shift in power, and some of that has to do with a shift in the concept of money. It also has to do with widespread access to information. The Internet is the new printing press. This is exciting, yet also dangerous. More independent voices than ever are being heard and have the potential to be heard, yet people can let their biased views run wild, as they both produce and consume highly-subjective content. Regardless, I am still a staunch believer in the pros of the information revolution outweighing the cons. As I mentioned in the first edition of this newsletter, I’ve been inspired by DIY culture for decades now, and I believe in the power of the human spirit. I also believe that while people tend to show the worst of themselves while posting from anonymous or pseudonymous online accounts, many also utilize websites like Kiva to help facilitate life-saving change, and many more rely on online communities for support and to maintain purpose in their lives.
In the end, we’re moving into this brave new world whether we like it or not. Whatever it ends up looking like, try not to be the guy sitting alone at the end of a long tree branch at the onset of a storm; instead, lean in and use the fact that we are so connected to contribute something good to the world.
Best,
Frank
Twitter: @frankcorva
Currently Listening To: “We Thought Nation-States Were a Bad Idea”, by Propagandhi
Feeling a bit out on a limb myself - That doesn’t seem possible when I see the financial situation of others, but there you go - a world where it’s pretty difficult to feel secure if you really internalize the risks - That brings me to the next observation: I see so many people around me who seem not to think there are any financial worries - And I live in the risk-averse society of Japan - Surreal