What is Power?
As Thomas Schelling shrewdly put it, “The power to destroy things that somebody treasures, to inflict pain and grief is a kind of bargaining power, not easy to use but used often. In the underworld it is the basis for blackmail, extortion, and kidnapping, in the commercial world, for boycotts, strikes, and lockouts. . . It is often the basis for discipline, civilian and military; and gods use it to exact discipline.”
POWER is a balanced combination of exertion and protection. In agricultural societies, POWER belongs to the king who could monopolize violence in a given area by using religion to maintain the loyalty of warlords who are experts in violence. In the industrial societies, POWER belongs to the mega-government who could create a military force capable of deploying overpowering violence against any other state by using money collected from a portion of state total output. But in the future information societies, the megapolitical balance between extortion and protection is breaking because the cost for individuals to protect their own digital wealth is decreasing by using encryption technology, and the cost for government to extort individual’s property is increasing because of low mobility cost, globalization of ideas, internet effect…… At that point, who could own the POWER?
We need to know when, where, and how to use POWER cuz it will help us to figure out the logic for future resource allocation.
What determines the evolution of societies?
Throughout history, violence has been a dagger pointed at the heart of the economy. Each of the previous stages of society has corresponded with distinctly different phases in the evolution and control of violence. The key to unlocking the implications of political change is understanding the factors that precipitate revolutions in the use of violence.
(1) Hunting-and-gathering societies [Climate is the key factor]
The earth is 4.5 billion years old, living things are only about 1.5 billion years old, and humans are only 150k years old (let’s be humble). The last glacial season ended in 20,000 BC, and around 12,700 BC, the earth’s temperature returned to the same level as it is now. This temperature is particularly suitable for animals and plants to survive, leading to the start of hunting-and-gathering societies. At this moment, Homo sapiens began to leave Africa and traveled all over the world till South America.
(2) Agricultural societies [Topography is the key factor]
The emergence of agricultural societies is closely related to the distribution of natural resources. Since wild grains and domesticated animals are widely distributed in Eurasia, agricultural civilization began to appear in Southwest Asia and the Middle East; the Yellow River and the Yangtze River in China. Agricultural civilizations developed very late in the Americas and Australia due to their natural scarcity of natural resources and geographic isolation. In most arid regions, agriculture is limited to small areas of land with reliable water sources, making people less willing to move elsewhere. Moving has become increasingly costly so organized looting and pillaging have increased. Groups specializing in violence became precursors to government.
(3) Industrial societies [Microbes & Technology are the key factors]
In 1492, Columbus discovered the Americas and brought microbes that killed 75% of the native Americans (Europeans had antibodies while America was isolated from the world), which minimized the internal trouble for forming a trade circle around the Atlantic Ocean, leading to the prelude of industrial civilization. The development of gunpowder and printing are also crucial for the emergence of industrial societies. Gunpowder separates the exercise of power from physical strength, thereby reducing the opportunity cost of business activities. While printing promoted the widespread of new knowledge, lowered the cost of literacy, and undermined the monopoly of the church.
(4) Information societies [Microbes & Technology are the current factors]
What is happening now?
The pandemic (microbes) has increased the cost of population mobility. On the one hand, people are more willing to stay in their own countries, increasing the government protection power. On the other hand, people’s attention is inclined to the Internet (virtual world) and themselves. So some possible consequences: First, the digital economy will continue to expand(also for the crypto ecosystem). Second, People are reluctant to go to the office or be full-time employees anymore because the epidemic has allowed them to enjoy the freedom of WFH (once taste never go back). Third, WFH allows people to have more of their own time, which would increase self-awareness and decrease the external desire, making the thought control by commerce and government become more and more difficult. [Just guess]
Blockchain and encryption (technology ) are starting to create more and more user cases now. These two technologies are precipitating a profound change in the logic of extortion and protection by tipping the balance dramatically in the direction of protection. Although history told us that it takes a long time for the invention of new technology to have a huge impact, still we could feel we are in the torrent of evolution.
Look into each stage again…
I summarized the below table to compare some fundamental characteristics of each stage. It’s only my own understanding.
What is changing now?
(1) Individuals could be more and more powerful
- We could protect our property by ourselves using encryption technology. Blockchain infrastructure also makes centrally controlling (exploiting digital assets) more difficult.
- We could protect ourselves from government exploitation by moving all around the world. The digital economy can run anywhere on the earth, and no longer need to be trapped in a specific place.
- We could have a sense of belongings in the community (DAO) we love. The new, non-territorial affinities are flourishing. It will form a new “ingroup” to which individuals can identify without sacrificing economic rationality.
- Individual productivity will be improved using the leverage of internet effects like media and coding.
(2) Government is becoming more and more useless
The cost of state government is starting to surpass the profit we could get from it：
- Cost generated by the government: direct cost (tax + social insurance premium) + indirect cost (freedom of speech, etc.) [increase in cost per person due to population reduction];
- Benefits we could get from the government: personal safety protection + property protection + national sense of belonging + social security ie. medical/education/pension [The treasury is becoming depleted]
(3) Organization form is changing from large corporates to smaller-size community
Economies of scale is the rule guiding the whole industrial societies, but we could see currently it starts to become “diseconomies of scale”. Why? 1. The premise of the scale effect is diminishing marginal costs (the proportion of fixed costs decreases as the scale increases). But in the information age, fixed costs are inherently less; 2. Mass production is no longer in line with social needs. Necessities still need mass production but digital economic activities are more personalized; 3. Large enterprise has many departments in order to reduce the cost of info exchange, but the current cost of info-communication through the Internet is already very low; 4. It is easier for micro-businesses to avoid taxes so to lower its cost.
Enterprises always choose large scale at the cost of efficiency in the past. When the scale is not necessary now, the importance of efficiency increases. Smaller-size organizations could get every member motivated by aligning personal interest with the group interest, and everyone could have a sense of ownership. That is happening in the crypto world, and that’s in the form of DAO.
Reference:
[1] <The Sovereign Individual>
[2]<Civilization, modernization, value investment, and China>
