Ideas from Andreessen's Book Recommendation: The Sovereign Individual

People were subjects of kings once; today they are citizens of governments. This evolution is not over. A book recommended by Balaji Srinivasan and Marc Andreessen, serial entrepreneurs and investors, charts the path ahead.👇

In 1997, The Sovereign Individual presciently asked: what if economic activity happened through "encrypted cybercash"? If the govt can't trace transactions, it can't impose taxes. This will be a crushing blow.

The power of the govt comes down to the "balance between extortion and protection." Assets in physical form are vulnerable to theft and extortion. The govt's protection is needed. But what if "powerful encryption algorithms" protected assets instead of the govt?

Here's another factor weakening the nation-state: falling returns on low-skills. The industrial revolution and the assembly line let low-skilled workers be productive. This gave the government a large tax base. But today low-skills jobs are getting automated or digitized.

This creates a shrinking tax base and a restless population. The returns on high-skills, meanwhile, are rising. People scale products and services through the internet, and amass great wealth. The trends favor the sovereign individual.

Employee controlled governments V/S Customer controlled governments. All employee controlled organizations have 1 overriding incentive: maintain and expand employment. They don't care about running deficits or providing good service. All bureaucracies mainly feed themselves.

Democracies are employee controlled organizations. But tech is empowering the customer, i.e., the tax payer. Able to work, earn, and spend from anywhere, people soon won't be stuck with predatory governments. They'll shop for governments the way we now shop for everything else.

Transitions are violent. The book states: "It is reasonable to suppose that social peace will be in jeopardy as the Information Age unfolds."

The law of diminishing marginal returns hurts all ageing institutions. In the 20th century, the "number of ships in the British Navy shrank dramatically" while the expenses and the number of employees "sky-rocketed." Something similar will happen to nation states.

Bottom line. The book ends with some counter-intuitive advice: don't jump too uncritically into computer technology. Get a "traditional liberal education." Learn to notice, understand, and solve problems. You'll always have relevance, demand, and value.