Toppling the Temples to Power
Think of legacy institutions as temples to power. Instead of seeing the jungle’s revenge as nature defying human progress, we can see it as evolution over intelligent design.
It eats through just about every traditional concept, and leaves in its wake a revolutionized world-view, with most of the old landmarks still recognizable,
but transformed in fundamental ways.
- Daniel Dennett, from Darwin’s Dangerous Idea
In the Tikal region of northern Guatemala, a vast complex called el Zotz hides under thick growth. The complex includes temples, plazas, and thoroughfares once teeming with Maya. This once-great civilization eventually drifted into obscurity. Some say a mixture of drought and excessive foresting caused the inhabitants to abandon the city. Since its heyday a thousand years ago, the jungle has been unforgiving in its vengeance.
A tidal wave of flora has swallowed the buildings, roads, and temples, turning mighty stone structures into mounds nearly indistinguishable from the surrounding landscape. Mother Nature can be relentless as she uncurls her snakes or unfurls her fronds. So, the city has returned to nature in unparalleled beauty and biodiversity. On the ground, of course, one can easily get tangled among the vines or bitten by insects, which once made it tough to map the city. But in 2016, archaeologists began using laser-guided imaging technology to discover el Zotz’s true extent, which is nothing short of breathtaking.
A Lesson in the Leaves
Still, el Zotz is an object lesson. Intellectuals have turned the collapses, like that of the Mayans, into Malthusian horror stories. And these stories are not entirely wrong. But a different interpretation recommends itself: Though humans can design big, amazing things, our plans and designs will eventually succumb to natural systems, which—though robust and orderly—are unplanned and undesigned. So, instead of seeing the jungle’s revenge as nature defying human progress, we can see it as the victory of evolved systems over intelligent design.
But this doesn’t mean there’s no more room for human ingenuity.
As we enter the next era, we will start to mimic the patterns of natural systems so that our human systems are more resilient. And, indeed, if we can use better protocol design to unleash a thousand systems that take their cues from Darwin. Nature, too, is about well-designed protocols, even though a designer does not design those protocols. DNA is catallactic. DNA is code. And in biology, code is law. At the macro scale, we get planetary ecosystems that include wonders like the Great Barrier Reef and the rainforests of Tikal.
In the age of cryptocurrencies and smart contracts, the codebase is akin to DNA. With code, we can create systems within systems (within systems) that compose the layers of a technological and sociological stack. According to the codebase, these layers express different properties, which gives rise to a dizzying array of possibilities. These possibilities amount to five main areas of transformation in how human beings organize themselves. These are incommensurable with some of the older ways. Therefore, each case has an evolving technological ecosystem that threatens to replace the old order, which comprises the various temples to power. It turns out that, like the temples to the Mayan gods, our modern temples require their own forms of blood sacrifice.
Governance
The first temple to power is the Nation-State, with its grand legislatures and executive palaces. Taxes supply blood for the gods in this temple. But a wave of technological solutions is allowing people new capabilities to self-govern.
The decentralized autonomous organization (DAO) is one such system, which can be instantiated in any number of groups using any number of consensus mechanisms. As more and more groups experiment with self-government using DAOs, the more they’ll see the power of programmable incentives and decentralized consensus. Indeed, the most promising feature of DAOs is not collective decision-making at scale. It is the built-in right of exit. The threat of defection looms over any system, which, unlike predatory states, has to provide value to keep members.
The temple gods are angry, though. Their very identity is wrapped up in the urge to control. They feed off our fears and leverage the extractive nature of the control structure itself. Power’s priest class exists in a command hierarchy that offers them a sense of place, which they protect through increasingly illiberal means. And they worship in the Church of State on whose altar we will be sacrificed over and over again. This is the essence of Centralism. Instead of experimentation, variety, and choice in governance systems, they believe theirs is The One True Way.
The more Decentralists challenge their authority within a burgeoning ecosystem of cryptocurrency tokens, digital ledgers, and forking systems, the more draconian they become in their vain attempts to clearcut or burn our nascent rainforest.
Finance
The second temple to power is the Central Bank, with its esoteric symbols and shadowy meetings. Around them are supplicant banks, which serve as satraps in a system of private profit and socialized losses. All-seeing eyes and pyramidal structures are apt for a group that controls the sorcery of transmutation. In other words, these reverse alchemists need no longer turn gold into cheap alloys. They can magically debase the currency simply by adding zeros. Our blood sacrifice is inflation, which is nothing more than a tax on the powerless.
Decentralized finance, however, offers an alternative for the digital era, one that is transparent and disintermediates. With control and visibility of one’s assets, anyone can gain exposure to global markets and alternative currencies with the properties she seeks. Decentralized finance offers an alternative to default systems whose existence has depended on suppressing alternatives. DeFi grows harder and harder to suppress. In fact, the more anyone tries to regulate it, the more anti-fragile it becomes. As developer Justin Goro reminds us, cryptocurrency is a beast that evolves so that “the more the state clamps down, the better the evasive technology will get.”
Unlike the legacy system, these alternatives offer financial services to anyone with an internet connection. These systems are generally owned and controlled by their users in a quasi-commons, not by middlemen. One can lend, borrow, long/short, earn interest, and more without custodians skimming off the top.
The powerful do not want ordinary people to escape crippling inflation or securities regulation. Financial institutions want us to operate within their matrix of go-betweens, brahmins, and fund managers, so we think their great pyramidal scheme is the only game in town. With DeFi, one can take out or pay off loans worth millions without needing a lawyer, manager, or even personal identification. This is unprecedented in human history. The most powerful bankers in the world are understandably concerned, for their system is being threatened by underthrow.
Enterprise
The third temple to power is the public corporation, with its top-heavy management hierarchies and short-term incentives. Corporate gods extract blood sacrifices through the corporation's legal architecture, which relies on centuries-old organizational operating systems and static shareholder models.
A significant power shift is near, which promises to transform some public corporations into for-purpose partnerships with dynamic shareholder models.
Instead of decisions flowing up and down chains of command through a layer of middle managers who create little value, enterprises are turning to self-management models like Holacracy that empower all and privilege no one. The mission is the boss.
Instead of the traditional model that gives rise to a Taylorite class of scientific managers accountable to a disconnected cabal of shareholders, self-managed organizations also use rulesets that ensure decision-making authority gets distributed more broadly. In other words, those with the most local knowledge and direct accountability make decisions with expertise niches.
Instead of founders and investors gobbling up a more significant share of proceeds, these forms disburse shares and dividends among all partners and colleagues from the start, according to the value of their contributions, including time and labor. Dynamic equity models slice up the pie according to principles encoded in their business agreements.
As more enterprises make these power shifts due to increased complexity, these new forms will become predominant. They point the way to a state of affairs that requires better rules, not better rulers: a world without bosses.
Aid
The fourth temple to power is the Welfare State. Though connected to the first temple, it has its own inertia. In terms of its extractive nature, it might be the most voracious of all. This temple sits on a great moral high ground after all, from which the slings and arrows of sanctimony can be launched. That makes the Welfare State among the most difficult to reform or dislodge. People simply can’t imagine that an underclass of relatively poor people can become anything more than liabilities to be managed by functionaries.
The Welfare State depends on wealth transfers that cause its recipients to become dependent. Massive constituencies become addicted to these transfers, expanding the underclass the system was designed to help. The transfers create a perverse punishment of society’s most productive while rewarding the idlest. This assessment might seem cold, but reality can be cold. A society whose authorities disburse aid by algorithm instead of targeted altruism creates terrible unintended effects. It also grows and entrenches a parasitic administrative class. Who will make sure all the boxes get ticked and the largesse dispensed? Those who will agitate to preserve the status quo.
Nearly a century ago, the welfare state grew so that a vast mutual-aid sector was eventually crowded out. In other words, people used to weave their own safety nets, but welfare-state functionaries made the need for this sector redundant. With the rise of cryptocurrencies and DAOs, not to mention ballooning debt unfunded obligations, the prospects for renewing the mutual-aid sector grow brighter by the day.
Defense
The fifth temple to power is the Military-Industrial Complex. Though connected to the first temple, it has its inertia. Like the welfare state, its appetite is insatiable. Its mission, once national defense, is now to expand an empire that extends around the earth. Instead of feeding on dependency, it feeds on war. Some argue that a global hegemon is good for peace, and yet what sort of peace can last when administered by an unholy alliance between those who profit from conflict and those whose raison d’etre is war? The blood sacrifice to the temple gods is not just tax but literal blood.
President Eisenhower warned the world in his 1961 farewell address,
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
It’s debatable whether the subsequent growth of this complex could have been avoided. But Eisenhower was right. His warning went unheeded.
Thus, the final of the Five Disruptions is called polycentric defense. This change vector might be the toughest, as most people can’t imagine a world without a monolithic military brass orbited by contractors. The concern is that, without that monolith, there would be no defense at all. Even standard economics textbooks call defense a ‘public good,’ which means it’s hard to supply the good and avoid free riders. So, no taxation, no defense. Today, the world’s preeminent military power spends more than the next ten powers combined. And, in reality, free-riding is rampant. The system is also enormously wasteful.
One defense contractor charged taxpayers $4,361 for a drive pin that should cost $46. Overcharging is common and is a predictable consequence that the military functions in no way like a typical market actor. It is a monopsony, a single market buyer, with expansion incentives. But there is precedent for a more competitive polycentric military that doesn’t continue to bloat or degenerate, causing wars among smaller states. Consider the Hanseatic League.
Six hundred years ago, the Hanseatic League was a regional group of city-states that coordinated defense. This group held both economic and military sway in an area that went from Novgorod in northern Russia to trade zones near London. It lasted for about 500 years. The Hanseatic League established free trade among its members and created a navy and defense force to protect cargo. It succeeded in mostly eliminating pirates from the Baltic Sea.
Modern defense organizations will likely use unconventional warfare because it’s cheap and effective. One need only think of the effectiveness of the mujahedeen against the major powers in Afghanistan. Furthermore, if the incentives align around preserving peace rather than perpetuating war, each region would have a stronger incentive to help neighboring regions defend themselves before an enemy arrives on its shores. If the various defense centers got resources through more direct means—such as dominant assurance contracts—market forces would get injected into the defense ecosystem. Regional defense entrepreneurs would provide the people with what they need rather than providing politicians with whatever is politically expedient.
As a final note, as more of the world puts its stores of value into the cloud, there is comparatively less value to be expropriated in meatspace. Bitcoin, the first and perhaps still the most resilient cryptocurrency, shows us the way. In short, authorities can invade a country to take over territory or steal its gold, but private keys live everywhere and nowhere. More and more value will live everywhere and nowhere, which means wars of appropriation are likely to decline as more economic energy gets stored in decentralized networks. More struggling jurisdictions will come to view expatriates as refugees of a dying hegemon.
Consider management consultant Matt Gilliland’s transaction-costs model of underthrow. Gilliland writes, “When the perceived (risk/time-discounted) benefits of switching to an alternative exceed the perceived benefits of the status quo — including the perceived switching costs — people will switch to the alternative.”
This formulation can be translated into steps:
Create overwhelming value in an alternative system.
Expose the diminishing benefits of the status-quo offering.
Change people’s perceptions of the status quo system relative to that of the alternative.
Reduce switching costs.
Improve customer value within the alternative system.
Yes, there will be setbacks. And things are likely to get worse before they get better. But the Decentralist revolution is a djinn, and Bitcoin’s pseudonymous creator, Satoshi Nakamoto, opened the bottle in 2009.
In reflecting on these temples to power, we could add others, such as energy.