Review: How to Start a New Country

A review of How to Start a New Country by @balajis

I.

The thesis behind Balaji’s How to Start a New Country seems to be something like this (paraphrasing)

The ways people have tried to start a new country up until now have been bad, either because they are too difficult to make work (elections, micronations, seasteading, space) or they are violent (revolution, war). In the last five years or so technology has advanced to a point that gives us another option for starting a new country, and we should start doing that.

The new option that recent internet technology has given us is the Cloud Country, a.k.a. the Network State. It starts out as a group of people, possibly geographically distributed across the globe, coming together online to form a strong community based on shared beliefs and ideals. They start doing the things you might expect from a new city/country, except they do them purely online:

We build the embryonic state as an open source project, we organize our internal economy around remote work, we cultivate in-person levels of civility, we simulate architecture in VR, and we create art and literature that reflects our values.

But the idea of the network state does not stop at virtual cities. Balaji explicitly outlines a path to bring a community like this into the real world:

Over time we eventually crowdfund territory in the real world, but not necessarily contiguous territory. Because an under-appreciated fact is that the internet allows us to network enclaves. Put another way, a cloud community need not acquire all its territory in one place at one time. It can connect a thousand apartments, a hundred houses, and a dozen cul-de-sacs in different cities into a new kind of fractal polity with its capital in the cloud. Over time, community members migrate between these enclaves and crowdfund territory nearby, with every individual dwelling and group house presenting an independent opportunity for expansion.

Then Balaji ends the essay with a brief discussion on what he means by the term “country” and how realistic it is that a network state as he describes it would be able rise to the level of infuence of similarly-populated traditional countries, namely having a seat at the United Nations.

He chooses two dimensions along which to track the legitimacy of a network state towards being considered a “country.” The first is a numerical dimesion:

The numerical definition begins with visualizing a nationrealestatepop.com site similar to coinmarketcap.com, where the number of cloud country members, the acreage of real estate owned by those members, and the on-chain GDP are tracked in realtime. Eventually a cloud country of 5M people worldwide with thousands of square miles of (discontiguous) community-owned land and billions in annual income demands recognition.

And the second is a societal dimesion:

Could a sufficiently robust cloud country with, say, 1-10M committed digital citizens, provable cryptocurrency reserves, and physical holdings all over the earth similarly achieve societal recognition from the United Nations? A cloud country with a population of this size would actually fit right in the middle of the pack globally, as out of the 193 UN-recognized sovereign states approximately 20% of existing countries have a population of less than 1M and ~55% have a population of less than 10M. This includes many countries people typically think of as “real”, like Luxembourg (615k), Cyprus (1.18M), Estonia (1.3M), New Zealand (4.7M), Ireland (4.8M), Singapore (5.8M), and so on.

After outlining these definitions, he points out that the current scale of social media is reasonable evidence that it is possible at the moment to build communities of the size needed for a cloud country, in the range of 1-10M.

Still, once we remember that Facebook has 3B users, Twitter has 300M, and many individual influencers have more than 1M followers, it starts to be not too crazy to imagine we can build a 1-10M person social network with a genuine sense of national consciousness, an integrated cryptocurrency, and a plan to crowdfund many pieces of territory around the world.

II.

To be clear, I am a fan of this idea and not only would I like to see it start happening, I would join a network state that stood for values and a vision I believe in. Therefore the rest of this essay is going to be a discussion of what is good about network states and what are the barriers to them being successful. You won’t find arguments about why network states are bad, because I don’t believe they are.

With that out of the way, let’s talk about the good parts.

Make Your Own Rules

The idea of starting from scratch and only inviting your friends and gradually building a sprawling network of apartments and houses and farms and cabins across the world is certainly cool.

And because you are starting from scratch, you decide the rules. A crucial step in founding a new network state will be the creation of the founding documents. The equivalent of the constitution of a traditional state. It lays out what rights and responsibilities members have in their roles as citizens of the new country. Every network state will have their own constitution, and each one will be different according to the vision and values of the founding members.

The proliferation of network states each with their own constitution would provide choice, and competition. Choice because every person on the internet would have the option of joining any network state, and they would likely make that choice in large part by how closely they identify with the values embodied in the founding documents. Competition because the way network states grow and become more powerful is by attracting talent. Network states that provide an environment that attracts kind, smart, driven people will win out over those that don’t.

Choose Your Own Country

The idea of voluntary citizenship is also appealing. The founding members of a cloud country would come together organically because of the ability to find each other online and form a small, tight-knit social graph, but that may not scale beyond a few tens or hundreds of members. After that, the state would need to establish an application and recruiting process in order to expand the ranks.

Whereas in traditional countries you are born into citizenship whether you like it or not, you can choose to be a citizen of a network state. In a world where there are hundreds of cloud countries and they all have marketing websites and public constitutions posted on their domains, a part of the global coming-of-age ritual may be choosing your own citizenship. Lots of people will choose to stay with the network state they were born into, because most people are molded to agree with their childhood environment. But the option to choose would be a radically valuable escape hatch for those who grew up feeling out of place in their communities.

Economic Advantage

Network states are formed around shared values and have voluntary membership. This (I assume) will lead to a more homogeneous politics within the population, and a stronger feeling of patriotism, because you chose to be a citizen. This in contrast to large traditional countries where politics has devolved into tribal status competition, and no meaningful laws can get passed.

Because of the more cordial, more aligned environment in which laws are decided upon in a network state, it would be possible to move on ideas like universal basic income relatively quickly.

Fiscal policy isn’t the only thing a network state can do to give economic advantage to its citizenery. Just as a traditional IRL country uses taxes to provide infrastructure like roads, bridges, and schools, a network state can levy taxes to provide digital infrastructure like courses on programming, and apprenticeships at online business run by members of the network state.

For the same reason traditional countries cannot innovate in economic areas like UBI experimentation, they cannot innovate in areas like school curriculum. For that reason, it’s becoming less valuable to attend traditional school at all levels, and the opportunity cost of not learning how the modern, online-first world works is increasingly high. Network states can combat that state of affairs by innovating on education systems and providing those to their citizens. That education will in turn provide economic opportunity valued at high multiples of what you could get by going through the traditional school system.

III.

Now let’s talk about what stands in the way of thriving cloud countries.

Bound By Existing Laws

The first and foremost hurdle that comes to my mind is the requirement that a network state first exist within a traditional state that is much more powerful. The network state must abide by the laws of the state, or states, where it is embedded, and the only flexibility to innovate is within the boundaries of those laws.

Citizens of a network state cannot simply stop paying traditional state taxes and start paying taxes to their new network state. Any taxes collected by the network state must come on top of taxes already paid to the traditional state. This limits the ability of network state to raise funds through taxes, because however patriotic members are, paying taxes to two governments can easily eat into necessary living expenses.

This limitation is mitigated by the fact that building community online is relatively cheap, and early members of a network state are likely to be highly technical. Setting up and running online community software like chatrooms and forums for free is possible and would be a good way to bootstrap digital community without requiring a lot of up front capital.

Regardless, constrained ability to raise money from its citizens is certainly a limitation that will need to be overcome for the network state to scale into an entity recognized on the world stage.

Subject To Direct Counteraction

Another problem of starting and scaling a network state within the borders of a more powerful traditional state is direct action by the traditional state against members of the network state. This probably wouldn’t happen in the early life of a network state, as a small group of people with few resources is hardly a threat to an existing sovereign. But one thing that is unquestionably true of the internet is that it enables a small group of people with few resources to grow into a large community with billions of dollars of capital at its disposal.

When a network state reaches that level of wealth and visibility, traditional regimes that are already on the oppressive end of the spectrum are likely to crack down on members of the network state. Why? Because the network state provides an alternative to living under the rule of an autocrat, and as more people choose that alternative, the power of the autocrat dwindles.

A strong network state would provide funding and legal help to citizens who wanted to move from one traditional sovereignty to another. For example, a family living in Belarus who joined a powerful network state with enclaves all over the world could choose to emigrate to France with the help of their new community.

To prevent people from joining cloud countries and taking advantage of the global, freedom-loving lifestyle made possible by them, oppressive regimes would surveil and target people who came under suspicion of working with or being part of network states. If you recently participated in a chatroom hosted by a network state, the secret police might show up at your door in the middle of the night and cart you off under the charge of collaboration with foreign agents. This would deter people from associating or learning about network states, and although it would probably not prevent eventual global adoption of the idea, it is a roadblock that the movement is likely to face as it expands from more liberal to less liberal traditional countries.

The Language Barrier

The last barrier to the creation of successful network states I will talk about here is the language barrier. The logical conclusion of a country created online and where membership is available to everyone across the globe is that people from every country, every religion, every language, would have an equal chance at participating.

It’s almost certain that the first and initially largest network states will conduct business in English. English is, however good or bad, the language of technology, of science, and of the internet. Lest you think I’m downplaying the importance of other languages on the internet, I will just point out that there are more than twice as many English articles on Wikipedia as any other language. I’m not trying to say anything about the intrinsic value of English over any other language, and in fact I’m proposing that the reliance on English will be a factor that makes the first cloud countries weaker than they might be otherwise.

To create a truly global network state, the language barrier will have to be overcome. Maybe by seamless in-browser translation technology, or brain implants that let us understand every language. But until the most powerful network states are fully open to participation by people speaking all languages, the vision will not be complete and network states will be weaker for not being able to incorporate ideas and contributions from all people.

IV.

Overall I am excited about the idea of the network state. It seems to me like a clear path for leveraging technology to create a societal structure that allows for more freedom, more sense of community, more global mobility. Those are all things I like very much and want for everyone in the world.

As with any social change that is viewed as radical by most of the population and challenges the existing power structures, it’s not liable to come about overnight. We are at a point now where the seed of the idea is being spread to a small number of open minds who will start thinking about it and working on it. Over time, the projects built by those early adopters and the communities built around those projects will come to form what we will end up considering the first network states.

Those first efforts will be subject to the barriers I decribe above along with others I didn’t have time to think of or write about. There will be setbacks, some efforts will die out and others will be created, having incorporated the knowledge gained by those first few pioneers.

Just as Bitcoin now has a trillion dollar market cap, network states will eventually control trillions of dollars of GDP. My hope is that these cloud countries will be more cohesive, more collaborative, and faster-moving than their traditional counterparts, and therefore able to unlock human potential to a level that seems currently unimaginable.

Matt Roll @mroll