Government & Software in 2021

The opening of John Palmer’s 2016 post about software & government outlines just how fast the networked world (built with bits) was catching up to the world of atoms in the mid 2010s. His thoughts on government, crypto, and DAO’s feel prescient when read today in 2021. We just went through COVID, and there are some massive macro winds shifting us in the direction of the world that Palmer predicted. In the 2000s and 2010s, software ate countless industries. It now looks like software is starting to eat governments.

Governments Iterate Slowly

Most institutions are bound by slow moving, archaic processes despite digital progress. I saw a video today of a top ranking US official debating about whether or not we should ask Americans to photocopy their id as a part of a potential voter registration process.

I won’t comment on the specifics of the drama brewing in the US over voter verification law, but there’s a word in that last paragraph that may have caught your attention.

Photcopy?

In 2021, why are we photocopying anything? How is it possible that the wealthiest country in the world is so far behind countries like India and Kenya with digital identity?

It doesn’t stop there either. Most modern governments are incompetent with digital technology relative to what’s possible. This hurts them with currency, digital identity, and representation of property rights. Consider the US in 2021:

Currency: The government had a hard time wiring its citizens relief money during COVID.

Digital identity: As I mentioned, we’ve seen upheaval and controversy over voter verification laws and voting integrity in the last year.

Representation of property rights: Car and home titles are represented by pieces of paper and networks of middlemen are required to ensure the legitimate transfer of ownership from one party to another. This issue of ownership & custody over assets came up during the Robinhood/GME debacle as well.

You could argue that the reason for this lack of technical competence in our institutions stems from the fact that talented technologists don’t want to work for governments. This is absolutely true – why build dashboards for municipalities when you can go build a company instead? Top software engineers aren’t exactly dying to work for the state.

But are there ways to prioritize this? Would it not be worth it to temporarily take a group of elite engineers and put them to work at double their current salary on overhauling our nation’s digital systems? I would argue that the ROI would be outstanding for every American citizen, but even this kind of decision can take months, if not years, to execute on.

Democracy is less efficient as an evolutionary mechanism than markets.

I love democracy. Honestly, I would rather live in a slow moving, technologically crippled democratic and free market society than a ‘move fast and break things’ technologically advanced authoritarian state. Palmer mentions that governments, with their slow moving systems of voting & debate, have the Lindy advantage. They’ve been around far longer than startup cultures, and we should respect that.

However, we don’t have many opportunities for experimentation or rapid iteration in governance. Long ago, before the world was settled in the way it was now, a new frontier existed in the physical world. You could always move westward and start a new life – or maybe even a new country or city. Governments today act as the equivalent of local monopolies or oligopolies over forms of governance. It’s not like the business world where you can walk down the street to a new taco stand if you get tired of waiting in line at the one you’re standing at. There are no 14 day governmental free trials. You’re in, or you’re out.

Let’s contrast these dynamics with what software businesses are capable of. Software speeds up the pace of iteration, and it does this at scale. Tech companies can push new updates to a massive population in minutes. Our current political systems require years of campaigning, intense debate, and voting before things get done. The business world allows for experimentation and competition amongst ideas. The governmental world is monolithic and hard to change – the regime is the regime.

Successful software companies have built billion person communities online. They’re capable of making updates to their product & changing the rules of their platform on a day to day basis. Iteration happens rapidly, and customers willingly choose their product over dozens of competing products every single day.

Until the early 2020s, software companies operated in their own domain. These platforms accrued user bases that dwarfed the population of most governments. But social media, search platforms, and internet services companies still live (mostly) separated from politics. Platforms do have influence over elections & politicians, but Facebook can’t roll out its own system of government to its users.

Blockchains now allow organizations like software companies (not necessarily our current software companies) to compete directly with the state in several domains.

They allow for new forms of currency, new forms of governance, new ways of creating & enforcing contracts, and more. These issues of currency, digital identity, and representation of property rights are actively being solved by the builders of cryptonetworks & blockchain based products.

The next equivalents of Web 2.0 founders may be the founders of cities and nation states. At a minimum, many will be the founders of DAO’s and crypto companies.

Companies like Amazon & Facebook were able to coordinate the activity of billions of people around the globe – both with their customer/user base and employee base. Amazon built a logistics network that rivals the complexity of running a nation state, and Facebook, if the entirety of its user base (2.85B users) were a nation state, would be twice the size of China. What happens when the next Mark Zuckerberg or Jeff Bezos decides to start a digital organization that rivals the nation state?

To me, this is the opportunity that people like Balaji Srinivasan see with the idea of the ‘Network State‘. The point of this post is to leave you with an idea: that maybe software will disrupt governments in the same way that it’s disrupted everything else. I’m not necessarily saying that these new experimentations in governance will be better by default. But I am saying that I think they’ll happen, and that the experimentation and trial and error that will result from it could be a good thing.

We have a collision of factors all happening at once that make me feel like this shift may be inevitable. Each of these macro shifts could warrant entire posts by themselves, but I’ll keep it brief. I’ll leave you with a list, and you can make your own decisions:

1) Our current institutions are in decline: see the loss of trust in the media, the US government (by both parties), and rapid decline in religious participation for proof.

Faith in American media is falling. Source: Axios
Public trust in government is falling. Roughly 20% of Americans believe that the US government makes decisions that do right by citizens. Source: Pew Research Center
See Millennials & Gen Z.

2) People are now closer with comrades they meet on the internet than with their local neighbors.

You’re more likely to meet a romantic partner online than in person, and many people’s social circles are primarily online – or at least mixed online/offline.

Couples are meeting more online than in person (from 2017 study). Source: Statista.
Through what medium do people engage with their most important social groups? Online, Offline, or Mixed?
Source thegovlab.org

3) People are fed up with their local officials (see tech migration from SF and CA).

COVID was a catalyst for movement within the US. Americans are migrating primarily from city centers into southern or rural states with low state income taxes. Tech workers in SF were amongst the most mobile – fleeing a regulatory environment that isn’t exactly fond of them.

4) Cities can now compete for citizens.

Cities like Miami and Austin recruited from the base of disgruntled SF natives. Mayor Francis Suarez of Miami seems to be pioneering the official-as-CEO model – becoming his regions lead salesperson and bringing untold millions in revenue to his city.

5) COVID showed us that, in some areas, the digital world is now primary and the physical world is secondary.

Remote work is widely acceptable, and in some cases mandatory. Things went virtual – college classes, graduations, work.

6) The world is being decentralized rapidly (see DeFi, and Web3 for a preview).

DeFi Total Value Locked: as of 7/11/21

Source: DefiPulse

7) We have widely adopted non-governmental money.

Crypto market cap is $1.35T.

Source: CoinMarketCap

8) Enormous digital communities can be built by founding teams (i.e. Facebook, Reddit, Bitcoin, Ethereum, etc..).

Value is being settled on open cryptonetworks at scale, DAO’s are getting huge, and the user bases of major social media platforms are larger than the largest countries in the world by population.

Source: https://money-movers.info/
Source: https://open-orgs.info/
Source: Datareportal.com
Source: worldometers.info

9) The tech & appetite is there – founders might start building government-like entities, not just companies.

I’ve started to see this sequence of events & macro trends as a cohesive narrative. It feels like we’re living through a real life transition into the world that the Sovereign Individual depicted 20 years ago. The transition might be amazing for individuals, and bad for our current institutions. A society with sound institutions is important, and I’d love to see them succeed, but each passing day is making me less confident in most of what we have today.

If you’ve read this far and are skeptical or disagree, I’d love to hear from you. What holes do you see in this argument that software will start to shape the state? What would prevent this shift from creating innovation & experimentation in government?

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