Watch this to see the sheer size of the crowd:

All talks are now available for free here, and you’ll see a full recap at the bottom of this post. But before I cover what our speakers covered, I want to explain why we organized the Network State Conference in the first place…and why we think it’s so important to move from digital communities to physical societies.

From Digital to Physical

The old world is fading, and the new world struggles to be born; now is the time of popups.

Yes, that’s a joking paraphrase1 of Gramsci. Yet it’s also serious. Because the old postwar world is fading rapidly, as you can see from every headline on political chaos, military pullback, and monetary collapse. At the same time, the new world struggles to be born, because it’s not yet obvious what comes next.

One answer, half2 the answer at least, is that the successor to the rules-based order of America is the code-based order of the Internet. The rationale is that (a) the Internet is the only thing with global economic scale comparable to China and has also (b) given birth to an entirely new digital legal system that already de facto manages ~99% of global communications and transactions…yet is (c) still somehow largely invisible3 in the discourse despite its ubiquity.

That invisibility of the Internet is why so many struggle to see the code-based order as the successor to the rules-based order. The typical riposte is that the Internet just isn’t even a place4…so how could it possibly succeed the physical part of the old world?

The riposte to that riposte is to note that Christianity also isn’t a place, yet there are Christian5 places…because there are churches, cathedrals, and entire countries with the cross on the flag. Similarly, yes, the Internet itself is not a place, but there are Internet places…like startup offices, tech conferences, datacenters, and entire countries with Bitcoin as the national currency.

That means the cloud can take physical form. And that brings us to popups.

From Popup to Permanent

We define a popup as an internet community that temporarily meets up in the physical world, and terraforms it in some fashion while doing so. Concrete examples include:

• The Cursor Cafe

• The Claude Hat popup

• The AngelList Founders Cafe

• Coinbase’s Basecamp in Vermont

• Ethereum’s Zuzalu and its global spinoffs

• The Zcash Network State popup at Network School

• And the dozens of popups featured at the Network State Conferences

Here are some photos of popups. Starting from the top left and proceeding row-wise, that’s Cursor Cafe, Anthropic’s Claude Hat popup in NYC, AngelList’s Founders Cafe, Coinbase Basecamp, the ZCash Network School popup, and finally Ethereum’s Zuzalu:

Obviously, the term popup implies something evanescent. But if it’s successful, you can go from from a popup (which is a physical prototype) to a permanent (which is a production deployment). To make this concrete, below are photos of permanents, starting with the Tesla Diner, our own Network School, then SpaceX’s Starbase, and finally the new Solana Economic Zone in Kazakhstan.

Moving from popup to permanent may mean graduating from leasing real estate to buying it, much like starting on Heroku and eventually moving to your own datacenters. And it may even mean negotiating with governments for a measure of diplomatic recognition, as the Solana network state just did.

Seen in this light, a popup is similar to a startup, with a roadmap for starting up small but eventually scaling up big. It’s the third6 kind of thing: from internet company to internet currency to internet community. And it may also be the next big thing, at least according to no less than Ben Horowitz, cofounder of Andreessen Horowitz.

And that leads us to the Network State Conference.

Network State Conference 2025

This year’s Network State Conference was huge, with thousands of in-person attendees and more than a million views online. Our primary goal was to demonstrate that it is now politically, financially, and technically feasible to materialize your internet community into a friendly in-person community.

And I think we succeeded in this aim! We put tiny communities on stage alongside Vitalik Buterin, Richard Teng, Ben Horowitz, Brian Armstrong, Amjad Masad, Ranveer Allahbadia, Nas Daily, Noah Smith, Arthur Hayes, Bryan Johnson, Andrew Huberman, and the governments of Singapore, Dubai, Abu Dhabi, and El Salvador. In doing so, we established that there’s now an entire ecosystem now available to support you socially, politically, and financially as you turn your digital community into a physical society.

Of course, it’s rare to have so many prominent speakers at a single conference, or to see attendees glued to their chairs long into the evening. I think the reason is that Network State is not about selling a product. We are instead advocating an idea: the idea that a better world is possible, that you too can found or find your ideal community, and that we can take the once-functional parts of the 20th century rules-based order and rebuild them in a 21st century code-based order.

The Recap

All right. Now to the recap.

The core of each year’s Network State Conference are the talks by physical startup societies, both popups and permanents. We also feature governments, investors, coins, companies, services, writers, and creators with an interest in startup societies. Below we’ve organized speakers by category, with a link to their full talk on YouTube. We’ve also included a few relevant talks from previous years’ conferences (2023, 2024, 2025) and the Network State Podcast.

• Governments

  • 🇸🇬 Singapore (Jacqueline Poh): Jacqueline Poh runs JTC, which is Singapore’s $40B real estate arm. They’re recruiting global technologists to relocate both to Singapore and to the new Johor-Singapore special economic zone.

  • 🇦🇪 Abu Dhabi (Wai-Lum Kwok): Wai-Lum runs Abu Dhabi Global Markets (ADGM), the financial regulator that created pro-crypto rules early on. They now run regulatory sandboxes where global companies can work with Abu Dhabi prior to full regulatory approval.

  • 🇦🇪 Dubai (Rashid Mohammed, Expo City): Rashid is CTO of Expo City Dubai, an exhibition site that Dubai converted into a startup city. They’re building an open city OS for startups to test urban tech.

  • 🇸🇻 El Salvador (Stacy Herbert, Bitcoin Office): Stacy directs the National Bitcoin Office of El Salvador. The country now offers streamlined AI rules, 180-day tourist visas, and pro-business/tech regulations to bring in global founders.

  • 🇵🇼 Palau (Surangel Whipps Jr, President). The President of Palau spoke to Balaji about embracing crypto and implementing rns.id for a new kind of state-backed digital ID card, which has already been issued to figures like Tim Draper and Vitalik.

  • 🇲🇭 Marshall Islands DAO (Adam Miller). Adam Miller’s talk covers the new Marshall Islands DAO law, which is perhaps the best legal framework in the world for crypto-native entities, AI agents, and DAOs. More than 250+ of these entities have already been registered via midao.org.

• Investors

  • Naval Ravikant. Naval is one of the world’s most famous investors. In his fireside chat at Network State Conference 2024, Naval discusses the right to exit, the fractal frontier, and how technology enables people to opt into new forms of political and social organization.

  • Andreessen Horowitz (Ben Horowitz): Ben Horowitz is cofounder of Andreessen Horowitz, the world’s largest venture capital firm with $46B under management. A16Z is now interested in funding internet communities as the third step after internet companies and internet currencies.

  • Polychain (Olaf Carlson-Wee): Olaf founded the first crypto hedge fund, now a multibillion dollar firm named Polychain. He sees network states speed-running the path from bare land to Dubai and Singapore, given the >100X increase in internet-native youth from 1995 to 2010.

  • AngelList (Avlok Kohli): Avlok is CEO of Angellist, a platform with $100B+ in assets. Influenced by Network State book, AngelList recently opened a Founders Cafe in San Francisco. He thinks of popups as the natural next step for tech.

  • Dragonfly (Haseeb Qureshi): Haseeb is cofounder of Dragonfly, a multibillion dollar crypto hedge fund. He views crypto as “laboratories of democracy” for ownership experiments, and spoke about the mechanics of token distribution from proof-of-work to points.

  • YCombinator (Garry Tan). Garry Tan is CEO of YCombinator, which has seeded companies with $600B+ in combined portfolio value. In this talk from Network State Conference 2023, Garry discusses SF’s many problems (drugs, cleanliness, education, crime) and noted that only some are due to elected officials. He recommends building parallel systems—particularly in media and academia—to replace the dysfunctional-and-unelected parts of the legacy system, thereby complementing voting by building as a civic duty.

  • Animoca (Yat Siu): Yat Siu’s Animoca manages 600+ portfolio companies with billions in assets. He views internet communities as more like peer-to-peer networks than traditional hub-and-spoke companies, and wants to build the (productive) GDP of network states as opposed to simply boosting their (financial) market cap.

  • Maelstrom (Arthur Hayes). Arthur Hayes is the self-made billionaire cofounder of BitMEX and Maelstrom, and a well-known writer. In this fireside, he discusses his new stem cell clinic, on the 80-year cycle forecasted in the Fourth Turning, and why he advises you to get your Bitcoin and get out.

  • 1517 Fund (Michael Gibson and Danielle Strachman). Michael and Danielle are cofounders of the Thiel Fellowship. They spoke about shorting the higher education bubble through VC, and returning $219M on just $18M invested.

  • Pronomos (Patri Friedman). Patri created the seasteading movement and is now focused on new cities. Through his Thiel-backed fund Pronomos, he’s an early investor in Prospera and Alpha City.

• Startup Societies (Popups and Permanents)

  • Infinita (Niklas Anzinger). Infinita is a longevity network state, an L2 built on top of Próspera’s L1. It has Minicircle gene therapy, and it’s hosting the new Rejuvenation Olympics.

  • Prospera (Erick Brimen, Lonis Hamaili). In talks from 2024-2025, Erick and Lonis present Prospera’s physical plant and its governance-as-a-service model, now with 300+ companies and 2000+ paying Prosperians.

  • Culdesac (Ryan Johnson). Ryan is the cofounder of Culdesac Tempe, a car-free, mixed-use community in Arizona. The city offers residents a variety of mobility options like light rail, ride sharing, electric bikes, and autonomous vehicles, with integrated retail and residential spaces to promote walkability.

  • Edge City (Janine Leger, Timour Kosters). In talks from 2024-2025, Janine and Timour describe the origins of Edge City and how it’s now held seven pop-ups across four continents, with 10k+ attendees and $1M+ in grants, and multiple permanent sites on the way.

  • Esmeralda (Devon Zuegel). Devon spoke about Edge Esmeralda, a pop-up city inspired by the Chautauqua movement.

  • Crecimiento (Juan Benet). Juan Benet’s talk outlines his work on Crecimiento, and how Argentina might become a global crypto leader by fostering hundreds of tech startups.

  • Zu Georgia (Veronica Schrenk). Veronica’s talk covers how Zuzalu evolved from a single gathering into a decentralized movement, with spin-off experiments like ZuVillage Georgia pushing forward new ideas.

  • Zu Thailand (Nicole Sun). Nicole helped organize Zuzalu and then built ZuThailand, a pop-up city experiment inspired by the first Zuzalu event.

  • Oz City (Olly Kovalieva). Olly created Oz City, a popup for AI and web3 builders, with seventy founders building together in Argentina before Devconnect.

  • Nuanu (Sergey Solonin). Sergey built Nuanu, a creative community in Bali focused on art, entrepreneurship, and co-living.

  • Threefold (Florian Fournier). Florian presented Threefold as a foundation for building sovereign digital communities.

  • Arc City (James of Arc). James is building Arc, the first L2 at Network School. The aim is to gather a group to eventually build their own charter city.

  • Forma (Farhaj Mayan). Farhaj created Solana Economic Zones in Kazakhstan and Georgia. Kazakhstan in particular has now launched a national crypto reserve and announced a crypto city.

  • Zuitzerland (Isla Munro-Hochmayr). Isla founded Zuitzerland, an Ethereum-centric popup focused on d/acc. Their token economy is based on Switzerland’s 700-year governance history.

  • Liberland (Vít Jedlička). Vít is a Czech-born politician and the president of Liberland. He shares his experience of trying to build a country in unclaimed land between Serbia and Croatia.

  • Ipe City (Jean Hansen). Jean Hansen is the founder of Ipé City, a popup city for techno-optimists in Brazil. He discusses their recent agreement to build a special economic zone in Florianopolis.

  • Alpha City (Bradford Cross). Bradford is CEO of AlphaCity and managing partner at Pronomos. He gives an overview of the startup cities they’re architecting in Africa.

  • Bitcoin Sranam (Maya Parbhoe). Maya Parbhoe of Suriname talks about why it’s smart to work with small countries, and how she’s been working to make Bitcoin the national currency of Suriname.

  • Fractal NYC (Alexander Grintsvayg). Grin is the founder of Fractal Boston, which began in NYC. It’s a community of friends living/working together, with 1000+ in NYC, and now expanding to Vancouver, Porto, and Geneva.

  • Wagon Box (Paul McNiel). Paul McNiel is the founder of the Wagon Box, a 20 acre property in the Wyoming mountains, that hosts events and retreats with a Christian/classical culture focus.

  • NOMAD (Zach Milburn). Zach has built NOMAD, a worldwide network of villages for remote workers. He’s also architected a unique modular unit at nomad.homes that can be built and shipped anywhere.

  • Vibecamp (Brooke Bowman). Brooke organizes VibeCamp, a volunteer-driven event that transforms online connections into co-created in-person communities.

  • Charter Cities (Mark Lutter). Mark explains the idea of charter cities, highlighting their role in economic development, historical examples, and the ongoing efforts of the Charter Cities Institute to foster new city projects worldwide.

  • Plumia (Sondre Rasch). Sondre’s Plumia is an aspiring internet nation with a social safety net and a digital passport.

  • Aaron Renn (Christian Network States). Aaron Renn, founder of American Reformer, speaks about how Christians can build startup societies and network states to congregate with others that share their values.

  • Cover (Alexis Rivas). Alexis Rivas of Cover talks about hyperdeflating the cost of homes via rapid modular construction.

• Coins

  • Ethereum (Vitalik Buterin, Founder). In this fireside, Vitalik discusses the progress of Zuzalu, a family of Ethereum-aligned popup cities, the idea of d/acc, and the contrast between geographically central startup societies (“embassies”) vs geographically remote cities (“monasteries”).

  • Solana (Anatoly Yakovenko and Raj Gokal, Cofounders). Anatoly explains how Solana is building a parallel, decentralized financial system that outperforms traditional finance in efficiency, cost, and composability. Raj highlights how the Solana stack empowers the creation of network states by enabling communities to build and govern themselves.

  • Solana Foundation (Akshay BD, CMO). Akshay explains how he scaled Solana globally in the physical world, drawing on his experience at Uber.

  • Base (Xen Baynham-Herd). Xen Baynham-Herd, lead of Base Global Growth, describes Coinbase’s progress towards a Base Network State.

  • Telegram TON (Veronika Kapustina, CEO TON Strategy). Veronika Kapustina, CEO of the new Telegram TON Strategy Co, outlines TON’s plans for a global superapp that can create physical communities and fund space travel.

  • Zcash (Zooko Wilcox, Founder and Josh Swihart, Electric Coin Company). Zooko is the cofounder of Zcash, and explains what principles allowed Zcash to last for a decade. Josh Swihart is the CEO of Electric Coin Company, which helps develop Zcash. He discusses Zcash’s huge week prior to the conference, with ZEC hitting a “god candle”, with enormous energy finally flowing into unstoppable private money.

  • Eigenlayer (Sreeram Kannan, Founder). Sreeram Kannan, cofounder of EigenCloud, spoke about how verifiable AI enables smart governance.

• Companies

  • Binance (Richard Teng, CEO). Richard Teng is the CEO of Binance. In this fireside chat with Balaji, he discusses why the Internet becomes the world’s largest capital market and why small countries love cryptocurrency.

  • Coinbase (Brian Armstrong, CEO). Brian Armstrong, CEO and cofounder of Coinbase, talks to Balaji about their joint history of success, and tells the audience that anyone working on real cryptocommunities and network states should build them on Base and reach out to Coinbase Ventures.

  • Replit (Amjad Masad, CEO). Amjad Masad is cofounder and CEO of Replit. In this fireside, Amjad and Balaji talk about their shared interest in educating the developers of the developing world, the history and future of Replit, and how the physical world is becoming more programmable.

  • Gemini (Cameron and Tyler Winklevoss, Founders). In this talk from 2023, Tyler and Cameron Winklevoss discuss the failures of the SEC, and the successes of red states and foreign states on crypto regulations.

  • Kraken (Jesse Powell, Founder). Jesse Powell is cofounder and chairman of Kraken, a multibillion-dollar crypto exchange. He discusses parallels between the rise of early crypto and the rise of network states with Balaji.

  • Farcaster (Dan Romero, Founder). Dan gives an overview of Farcaster’s decentralized media platform, and offers thoughts on how network states can be built on Farcaster’s open protocol.

  • Catena (Sean Neville, Founder of Catena and Circle). Sean is cofounder of Circle and Catena. In this chat, Sean and Balaji discuss how they worked together to launch USDC, the second largest stablecoin in the world, and now fully legally recognized by major governments.

  • Synthesis (Chrisman Frank). Chrisman Frank speaks about building a parallel educational system with AI tutoring.

  • Research Hub (Patrick Joyce). Patrick Joyce of Research Hub talks about decentralizing science and creating incentives for distributed replication.

  • Henley Global (Dominic Volek). Henley Global shares how to build a portfolio of global citizenships, and how migration trends highlight second citizenships as essential tools for mobility and security.

• Writers

  • Noah Smith (Noahpinion). Noah Smith is the founder of the popular Noahpinion newsletter, with 400k+ subscribers. In this talk, he describes his idea for building a New Hanseatic League, a network of states. See also his recent Substack post on the topic.

  • Tomas Pueyo (Uncharted Territories). Tomas Pueyo runs a popular newsletter called Uncharted Territories with 100k+ subscribers. Here, he speaks about the pending end of the Western nation state.

  • Glenn Greenwald. Famous independent writer Glenn Greenwald speaks on digital privacy, internet censorship, and the decentralized technology that could deliver us a free and open internet.

  • Niall Ferguson. Bestselling author and historian Niall Ferguson reflects on the changing world order in the internet age, debating the question of whether states that have waged wars against gold and oil can effectively wage war against Bitcoin.

  • Ayaan Hirsi-Ali. Author Ayaan Hirsi-Ali shares her journey leaving Somalia to seek asylum in the Netherlands, and talks about why building new communities outside traditional systems is essential for freedom.

  • Tyler Cowen (Marginal Revolution). Tyler talks about Emergent Ventures, Marginal Revolution University, and radically slashing the overhead associated with academic grants.

  • Alana Newhouse (Tablet Mag). In this 2023 talk, Alana introduces the idea of brokenism as the true American political axis. Her idea is that the real debate isn’t between the left and right, but between those still invested in Western institutions, and those who think they’re broken and want to build anew.

  • Ashley Rindsberg (Gray Lady Winked). Ashley Rindsberg’s book details how the New York Times Company has faked the news for more than a century, from Stalin’s USSR through Castro’s Cuba all the way to the present day.

  • Bruno Macaes (World Builders). Bruno Macaes is former Minister of European Affairs for Portugal and a bestselling author. In this talk, he notes that geopolitical power is “God Mode” in the video game sense, the ability to change game variables. He defines a superpower as one that can run such a video game, and relates this idea to the concept of a network state.

  • Kathleen Tyson (Multicurrency Mercantilism). Kathleen says the alternative to the dollar actually already exists: it’s the dollar and all other currencies. She presents a series of graphs that show the multi-currency world is already here, with the dollar down ~50% vs gold.

  • Avik Roy (FREEOPP). Avik Roy, founder of FREOPP, examines how repeated expert failures have shaped public policy and explains how network states can harness these lessons to create more resilient societies.

  • Parag Khanna (AlphaGeo). Parag Khanna speaks about the age of global mobility and digital nomadism.

  • Murtaza Hussain (Drop Site). Murtaza Hussein is a writer who covers surveillance, privacy, Bitcoin, and decentralized media. He sees network states as inevitable, given that nation states are now lumbering like empires before them, and given that networks in particular can guarantee inalienable rights.

  • Pascal-Emmanuel Gobry (Catholic Network State). Pascal-Emmanuel Gobry, founder of PolicySphere, spoke about the Catholic Church as the original network state.

  • Rajeev Mantri (A New Idea of India). In this 2024 talk, the author of A New Idea of India assesses India’s rapid upward trajectory with technologies like UPI, and previews the next 25 years.

  • Michel Bauwens (P2P Foundation). Michel Bauwens is the founder of the P2P Foundation. He speaks about how web3 can be used to regenerate local communities and strengthen the digital commons.

  • Hive Mind (Garrett Jones). Garrett Jones, economist and author of Hive Mind, explains why a nation’s collective intelligence drives long-run prosperity more than individual intelligence.

• Creators

  • Bryan Johnson (Blueprint) (2024 fireside, 2024 talk, 2025 talk). Bryan Johnson, founder of Blueprint, is an anti-aging and longevity pioneer. Balaji sits down with Bryan in 2024 to compare how their two distinct paths somehow led them both to have a very similar conclusions. Later, in 2025, they flesh out a proposal for a longevity-focused network state.

  • Pieter Levels (NomadList). Levels is a self-taught dev who has built and launched 40+ startups, including highly successful projects like Nomad List. In this fireside, Pieter explains how he runs multiple companies as a solo founder, why finding your tribe matters, and what the future holds for digital nomads.

  • Andrew Huberman (Huberman Lab). Huberman discusses what the ideal Huberman community materialized into the physical world might look like, and why that’s better than just building a device.

  • Nuseir Yassin (Nas Daily). The founder of Nas Daily has 10M+ followers worldwide, and joined Balaji at the 2025 Network State Conference to discuss content creation and community building in today’s social media environment.

  • Ranveer Allahbadia (The Ranveer Show). Ranveer is the founder of India’s largest podcast, with 10M+ followers worldwide. He joined Balaji at the 2025 Network State Conference to discuss how he built a global media following from nothing, survived being cancelled, and is refocusing on community.

  • Rudyard Lynch (WhatIfAltHist). Rudyard (aka Whatifalthist) has 730k+ followers on YouTube. In this 2024 chat with Balaji, he discusses the sheer scale of the internet, notes that it’s as significant as any shift in human history, and talk about why that’s likely to rework the state.

  • Beff Jezos (e/acc). In this 2023 talk, the cofounder of the now-successful effective acceleration (e/acc) movement outlines the alliance between AI acceleration and crypto decentralization.

  • Punk6529 (NFT Network States). Punk6529, a well-known NFT investor with 400k+ followers, drops virtually by to give three quick ideas on network states.

  • Molson Hart (Can we Build Hardware if China Wins?). In this 2024 talk, Molson of Viahart asks the hard questions about how to build hardware in the world where China wins.

  • Farb Nivi (Minicircle). Farb Nivi explores his personal health journey, his successful experiment with Minicircle, and why radical longevity research could reshape the future of health.

  • Codie Sanchez (Blue Collar Network States). In this 2023 talk, Codie Sanchez talks about making the network state accessible to everyday people and blue collar workers in particular, to build the largest possible political coalition.

Wow! OK, that’s sovereign governments, billion dollar funds, billion dollar coins, billion dollar companies, creators with millions of followers, famous public intellectuals, and dozens of startup societies…all of whom are now interested in the broad idea of bringing online communities into the physical world.

Of course, our short recap of each talk doesn’t fully convey the energy of the event. So if you want to see the full videos, go look at the Network State Conference playlists for 2025, 2024, and 2023.

From URL to IRL

Now let’s recap the recap.

Clearly, quite a lot of successful people now have an interest in startup societies. But one thing I want to stress is that anyone can now start a startup society, with minimal resources, including you. The point of having all these prominent folks at the conference is just to establish that there is now social, political, and financial support for you to materialize your ideal community7 in the physical world.

And there’s also now a process: begin with a popup, and get your online friends in the same place at the same time for an extended duration. If that goes well, the next step is to crowdfund a permanent startup community. And from there, the sky’s the limit, because you’re bootstrapping from the cloud.

Ultimately, the goal of the network state movement is to help create 1000+ friendly internet communities around the world that anyone can choose from, from vegan villages to Catholic cities to biotech boroughs. To allow you to find or found your ideal society in the physical world. We think of this as the third kind of thing: after internet companies and internet currencies, we finally have internet communities.

The next startup is a popup.

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This year’s speakers include Vitalik Buterin, Bryan Johnson, Ben Horowitz, Brian Armstrong, Amjad Masad, Ranveer Allahbadia, Arthur Hayes, Nas Daily, Noah Smith, Andrew Huberman, and the governments of Singapore, Dubai, Abu Dhabi, and El Salvador.

Our event is right after Token2049 and Solana APEX, where I’ll also be making guest appearances. So, if you’re in Singapore for this week’s cryptocurrency gatherings you should certainly come to the Network State Conference.1

Because the next step after cryptocurrencies is cryptocommunities.

From Cryptocurrencies to Cryptocommunities

Network states are becoming real.

We wrote our book in 2022, held our first conference in 2023, and opened our school in 2024. Now, we have a movement. From tiny startups to global organizations, many different actors are now opening up physical popups, starting startup societies, materializing internet communities, and negotiating special economic zones.

This year’s conference documents that movement. We have Vitalik Buterin on Ethereum network-state inspired popups like Zuzalu and Etherlaken. We have Brian Armstrong and Xen Baynham-Herd of Coinbase on Basecamp and the Base Network State. We have Akshay BD and Farhaj Mahan from Solana on Forma and the new Solana Economic Zones. We have Veronika Kapustina, CEO of Telegram’s new TON Strategy Co, on the path to the Telegram Network State. And we have Bryan Johnson speaking about longevity and the Don’t Die Network State.

So: Ethereum, Coinbase, Solana, Telegram, and Don’t Die — all important online movements with billions of dollars and millions of followers — are materializing their cloud communities into the physical world. And they’ll be speaking about it at the Network State Conference.

Nation States + Network States

But wait, there’s more. Because the concept of the network state is also about win/win cooperation between nation states and digital networks. After all, many countries (particularly small states, and those from the ascending world) want global technologists to bring capital, talent, and economic development to their jurisdictions.

Towards that end, we have talks by representatives of the governments of El Salvador, Dubai, Abu Dhabi, and Singapore. Stacy Herbert will speak about El Salvador’s Bitcoin office, its AI law, and its digital nomad programs. Rashid Mohammed will talk about Expo City, a startup city built in Dubai, while Wai-Lum Kwok will discuss Abu Dhabi Global Markets (ADGM)’s pro-crypto regulation. And Jacqueline Poh, chief of Singapore’s $40B JTC development arm, will speak about building the physical infrastructure and innovation parks that enable Singapore’s rapid economic growth.

The Network State Ecosystem

And there’s still more.

• Billion dollar funds. We have heads of billion dollar funds, including Ben Horowitz of Andreessen Horowitz, Olaf Carlson-Wee of Polychain, Avlok Kohli of AngelList, and Haseeb Qureshi of Dragonfly.

• Billion dollar companies. We have fireside chats with founders of multi-billion dollar companies, including Amjad Masad of Replit, Arthur Hayes of Bitmex, and Yat Siu of Animoca.

• Billion dollar coins. We have major crypto projects like Dan Romero of Farcaster, Sreeram Kannan of Eigenlayer, Circle cofounder Sean Neville, and Zcash cofounder Zooko Wilcox.

• Million follower creators. We have creators with millions of followers, including Ranveer Allahbadia of Beer Biceps, Nuseir Yasin of Nas Daily, and Andrew Huberman.

• Public intellectuals. We have talks from Noah Smith of Noahpinion, Thiel Fellowship and 1517 Fund cofounders Michael Gibson and Danielle Strachman, seasteading inventor and Pronomos founder Patri Friedman, Pascal Emmanuel-Gobry of PolicySphere, Murtaza Hussein of Drop Site, Parag Khanna of AlphaGeo, Avik Roy of the Foundation for Research on Equal Opportunity, and Kathleen Tyson of Multicurrency Mercantilism.

• And startup societies. And, of course, we have founders of startup societies2 like Farhaj Mayan of Forma, Niklas Anzinger of Infinita, Timour Kosters of Edge City, Aaron Renn of American Reformer, Alexander Grinspan of Fractal Boston, Maya Parbhoe of Bitcoin Sranan, Paul McNiel of Wagon Box, Adam Miller of MIDAO, Bradford Cross of Alpha City, Olly Kovalieva of Oz City, Vit Jedlicka of Liberland, Lonis Hamaili of Prospera, Jean Hansen of Ipe City, and James of Arc’s ârc.com.

I could say more…but need I say more?3

The point is that many of the most successful founders, creators, and investors in the world are now interested in the idea of bringing online communities into the physical world. Moreover, writers, policymakers, and intellectuals from around the world (and across the ideological spectrum!) are aligning around the concept of fusing networks with states, with ideas ranging from pro-tech regulations to special innovation zones. And all this capital and talent going towards the area means that you too4 can join a startup society that suits you — or found one yourself.

Because that’s the next step. We’ve started internet companies, we’ve started internet currencies, and now we’re starting internet communities.5 Come to the Network State Conference to be there at the start.

Here are ten thoughts on AI that I personally find economically useful. Let’s go.

1. First: there is no AGI, there are many AGIs. That is: we empirically observe polytheistic AI (many strong models) rather than monotheistic AI (a single all-powerful model). We have many models from many factions that have all converged on similar capabilities, rather than a huge lead between the best model and the rest. So we should expect a balance of power between various human/AI fusions rather than a single dominant AGI that will turn us all into paperclips/pillars of salt.

2. Next, AI moves all costs to prompting and verifying. Basically, today’s AI only does tasks middle-to-middle, not end-to-end. So all the business expenditure migrates towards the edges of prompting and verifying, even as AI speeds up the middle.

3. AI is amplified intelligence, not artificial intelligence. Today’s AI is not truly agentic because it’s not truly independent of you. The current crop of agents can’t set complex goals, or properly verify outputs. You have to spend a lot of effort on prompting, verifying, and system integrating. That just means the smarter you are, the smarter the AI is. It’s really amplified intelligence, more than agentic intelligence.

4. AI doesn’t take your job, it lets you do any job. Because it allows you to be a passable UX designer, a decent SFX animator, and so on. But it doesn’t necessarily mean you can do that job well, as a specialist is often needed for polish.

5. AI doesn’t take your job, it takes the job of the previous AI. For example: Midjourney took Stable Diffusion’s job, and GPT-4 took GPT-3’s job. Once you have a slot in your workflow for AI image generation, AI code generation, or the like, you just allocate that spend to the latest model. Hence, AI takes the job of the previous AI.

6. AI is better for visuals than verbals. That is, AI is better for the frontend than the backend, and better for images/video than for text. The reason is that user interfaces and images can easily be verified by human eye, whereas huge walls of AI-generated text or code are expensive for humans to verify. See discussion with Andrej Karpathy here and here.

   

7. Killer AI is already here, and it’s called drones. And every country is pursuing it. So it’s not the image generators and chatbots one needs to worry about.

8. AI is probabilistic while crypto is deterministic. So crypto can constrain AI. For example, AI can break captchas, but it can’t fake onchain balances. And it can solve some equations, but not cryptographic equations. Thus, crypto is roughly what AI can’t do. See also these talks (1, 2) on how AI makes everything fake, but crypto makes it real again.

   

9. AI is empirically decentralizing rather than centralizing. Right now, AI is arguably having a decentralizing effect, because there are (a) so many AI companies and (b) there is so much more a small team can do with the right tooling, and (c) because so many high quality open source models are coming.

10. The optimal amount of AI is not 100%. After all: 0% AI is slow, but 100% AI is slop. So the optimal amount of AI is actually between 0-100%. Yes, the exact figure varies by situation, but just the idea that 0% and 100% are both suboptimal is useful. It's the Laffer Curve, but for AI:

    

Finally, here’s an a16z podcast with Martin Casado and Erik Torenberg where we go through all these ideas in depth!

Today’s AI is Constrained AI

Putting it all together, fundamentally, this is a model of constrained AI rather than omnipotent AI.

• AI is economically constrained, because every API call is expensive and because there are so many competing models.

• AI is mathematically constrained, because it (provably) can’t solve chaotic, turbulent, or cryptographic equations.

• AI is practically constrained, because it has to be prompted and verified, and because it does things middle-to-middle rather than end-to-end.

• AI is physically constrained, because it currently requires humans to sense context and type that in via prompts, rather than gathering all that for itself.

To be clear, it’s possible that these limitations are overcome in the future. It’s possible someone could unify the probabilistic System 1 thinking of AIs with the deterministic/logical System 2 thinking that computers have historically been very good at. But that’s an open research problem.

Some of these ideas previously appeared on X and YouTube. See comments here, here, and here. And the talks here, here, and here.

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Let me explain why.

1. First, right now, trillions of dollars worth of digital gold is secured onchain. Bitcoin is now valued everywhere there is an internet connection. And no matter what political faction you're in, everyone agrees on the raw fact of who owns what amount of BTC.

2. Next, right now, the full legalization of stablecoins means that every other asset goes onchain. Because if there is a legal status for onchain currency, of course there's a legal path for onchain stocks, onchain bonds, and every other type of financial asset.

3. So, that's a lot right there. But there's actually a next step. As you can see from the video below, this door can also be secured with an onchain smart lock. That means the door to your house can be secured by crypto. So can the door to your car.

   From Hideyoshi Moriya: My home also can be unlocked with Ethereum, by verifying a NFT (ENS) ownership. In this example, the system verifies if I have an ownership of piyo.eth @ensdomains.
   

4. Indeed, any door can be secured in this way. The door to a plane, to a train, to a boat, to a building. Any door can be secured onchain.

5. But this is really more than the keys to your car door. It's really the keys to your car itself. The digital signature starts the engine. And that means any piece of capital equipment, from cranes to drones can be similarly secured.

6. That includes the humanoid robots, the sidewalk robots, the self-driving cars, and just about anything that's controlled electronically. Which is almost everything.

7. There are exceptions. The food on your plate, the shirt on your back, those can't and won't be secured onchain. But that's actually a negligible fraction of value in the world.

8. For everything else, for 99%+ of what's valuable, for every financial asset and every capital asset, we will secure it onchain.

9. And the reason we'll have to do that is that the blockchain is the only truly secure backend. The Pentagon gets repeatedly hacked, as do many web2 services, but scaled public blockchains do not.

10. So: even the control plane for the drones goes onchain. The blockchain is the basis by which we can build a code-based order on the Internet, a new kind of global economic union that allows anyone with an internet connection to access world-class monetary policy and contractual equality.

All property becomes cryptography.

This post originally appeared on X. See comments here.

We’re launching a new fellowship for founders and creators, open to anyone from any country. You can apply online in ten minutes. If accepted, you will receive $100k in funding for a new or existing venture. Our main requirement is that you relocate to the Network School campus near Singapore with other fellows for one year to lock in.

If that already sounds amazing, go to ns.com/fellowship/apply. Then read on for details on who should (and should not!) apply, what the process is like, and why we’re launching this.

(1) Who should apply

You should apply if you’re a global tech founder, AI-first creator, or community builder.

Our ideal founder recognizes that the Internet is rising, that Asia is rising, and that technology has now fully decentralized1 out of Silicon Valley. We welcome applicants from any country, so long as you have English language fluency. As for the specific area2, what you’re working on matters less than how intensely you’re working on it. Some of our founders will be early in their careers (like recent high school grads or newly minted PhDs), while others will have more experience (like open source developers, research scientists, early stage startup alumni, or engineering professors). But we’re flexible, so long as you’re technical.

Our AI-first creator category is newer and deserves a bit more explanation. In short, we believe 20th century media is over. And we think every niche filled by the formerly mainstream media — Hollywood, newspapers, magazines, broadcast television, and the like — is up for grabs as never before, with production shifting from traditional venues to the global Internet. So, we’re looking for filmmakers, artists, and storytellers who want to make tasteful3 use of AI to hyperdeflate production costs and write new stories for the 21st century. We’re open to “traditional” creators too4, but we think the economic leverage from AI will be substantial5, so we want creators who think about AI as an integral part6 of their workflow.

Our community builder category is likewise new and also merits explanation. Briefly, we think the third kind of “thing” after tech companies and cryptocurrencies will be startup societies. That means intentional communities, pop-up cities, and network states, where digital tribes assemble offline in person. I’ve written about this at length in The Network State, but see this video and dashboard to see why we we think startup societies will be a megatrend.

About you

OK, so that’s the type of person we’re looking for professionally — a founder or creator. But what are you like personally?

• You’re Internet First, in that you broadly believe in the open web, decentralization, cryptocurrency, and encryption.

• You’re classically liberal, centrist, or otherwise politically pragmatic7 — rather than ultranationalist or socialist.

• You’d be in tech even if markets crashed for a decade, so long as you had time to study, learn, and explore.

• You’re excited to relocate to our solarpunk campus near Singapore for a year to level up among others of like mind.

• And you’re likely what we call dark talent — undiscovered greatness from the middle of nowhere8, whether that’s India or Indiana, Eastern Europe or the Middle East — who just needs a shot to prove yourself. And this is your shot.

So: you should apply9 for the Network School Fellowship if you’re looking for a sunny, green, and calm environment to build your dream amidst a community of builders. We’ve created a peaceful place with minimal distraction where funding, coffee, food, gym, office space, laundry, cleaning, and all the rest is provided so you can focus on work.

Now, let’s focus on the application.

(2) How to apply

Because we’re open to the whole world, we expect many to apply. So, we have a simple multi-stage process for obtaining a Network School Fellowship.

• Form. First, fill out the form at ns.com/fellowship/apply. We’ll review to see if you have either potential (as demonstrated by test scores and academic accomplishment) or results (as demonstrated by tech portfolio or startup traction). We’ll also administer a short screening test and ask for references.

• Zoom. For those we deem competitive in the first round, we’ll do a structured video interview where we get to know you and ask a number of interactive questions. We seek people with high integrity and high agency, a combination that’s hard to assess through forms alone.

• Room. Finally, we ask candidates who make it to the third round to fly out10 to our Network School campus near Singapore11 for an in-person, proctored, pencil and paper objective examination similar to the IIT JEE, the GaoKao, or the SAT. This offline component allows us to AI-proof the online talent search, thereby confirming your skills. During your trip you’ll also meet other Network Schoolers, see the facilities, and determine if you’re ready to build.

• Boom. Then, if you’re accepted, you’ll relocate to Network School for one year to build. We’ll either fund12 your existing company or set up a new one. Existing companies will be backed in their current jurisdictions, while new companies will be incorporated by default in Singapore.13

So that’s the idea: a global startup draft, like the NBA draft, where we source talent from around the world and colocate it in person. We’re starting with 100 global founders in our first batch, and plan to scale up over time if things go well.

But why are we doing this?

(3) Why we’re doing this

We believe the old path for finding global tech talent — which went through Stanford14, Silicon Valley, San Francisco, California, and ultimately America — is ending. So we’re going to need a new path, based on pure global meritocracy. And we think the Network School Fellowship could be a starting point for this new path.

To motivate this, let’s talk about (a) what the path for tech talent used to look like, (b) why it’s now broken, and (c) how we plan to replace it.

The old path for tech talent

Let’s break this up into the American and global paths.

The American path once started with a smart young kid in the middle of (say) Indiana like Scott McNealy. He’d take the SAT, get a great score, attend a top engineering school at a reasonable price, come to Stanford for his graduate degree, found a Silicon Valley tech company, scale it up, and eventually go public.

The global path once started with a smart young kid in the middle of (say) India like Vinod Khosla. He’d take the IIT-JEE, get a great score, attend a top engineering school at a reasonable price, come to Stanford for his graduate degree, found a Silicon Valley tech company, scale it up, go public, and eventually become a US citizen.15

Now, if you know anything about those two men, you’d know that they cofounded a little multibillion dollar company called Sun Microsystems. That is: they came from very different places, but thanks to the magic of global meritocracy, thanks to international capitalism, they could build something great together that pushed tech forward and benefited the world.

The old path for tech talent is broken

Yet their story is much less possible in today’s US. I won’t rehash every headline, but today’s Scott McNealy might well be blocked from matriculating by DEI, and today’s Vinod Khosla might well be blocked from immigrating on an H-1B. And that’s really just the start of it. Every single piece of the old path for tech talent is now either fully broken or under assault. To review:

• Stanford. With anti-merit admissions, unaffordable tuition, student visa denials, grade inflation, ideological zealotry, AI fakery, lack of reproducibility, and budget cuts, US academia (including Stanford, Berkeley, MIT, etc) is in steep decline.

• Silicon Valley. Still great people here, but the proverbial garage startup may need $250k just for compliance. High cost, high regulation, and high ideological conformity now means fewer crazy ideas — and much more consensus (and hence fundable, but perhaps not exceptional) work.

• San Francisco. Even more extraordinary cost, rampant crime, out-of-control filth, anti-tech laws, and ideological anti-tech sentiment that’s escalated all the way to ritual destruction of self-driving cars and violent attacks on founders.16

• California. A bankrupt state that can’t control fires, stop theft, or build public infrastructure — but that will still raise taxes and impose anti-tech regulations.17

• America. Now institutionally hostile to skilled immigration, foreign investors, student visas, exports, imports, free trade, and foreigners in general, with unpredictable corporate law.

In short: the combination of surging anti-capitalism and anti-internationalism means it’s going to be much harder for global tech talent to come to Silicon Valley to build international tech companies. That path is now closing.

Fortunately, we still have the Internet.

The new path for tech talent

Remember, there’s no silicon being mined out of the hills of Silicon Valley. There’s no natural resource keeping tech there. So in theory, given that you just need a laptop to build things on the Internet, we should be able to materialize the global tech community anywhere. But in practice, someone needs to actually do that.

And constructive proofs are always more satisfying than existence proofs. So, rather than simply assert that a better path exists, we must build it. And from a practical standpoint, we must also recognize that we can’t replace the old path for global tech talent in one fell swoop. After all, literally millions traveled that path, and will continue to do so for some time, even if it’s breaking. So we’ll have to start small, with perhaps just one hundred builders, to prove a new path for tech talent.

And thus the Network School Fellowship.

In a sense, our fellowship just does the “obvious” thing. It starts with the observation that tech has already decentralized out of Silicon Valley, and it gives a new coordinating point for global tech talent to assemble.

We put the first node of the Network School in the new Singapore-Johor Special Economic Zone because (a) thousands of millionaires have moved to Singapore, (b) >50% of the Earth’s population is within a short plane flight, (c) ~50% of GDP is now within Asia, (d) crypto has already decentralized to Asia, (e) AI is in the middle of similarly decentralizing, and (f) the zone has plenty of visas for global talent and a stated goal of recruiting 20,000 skilled workers.

In other words: we have capital here to fund tech companies, visas for tech talent, and the will to build. And with that will, we’ve already built our initial facilities and seeded the community. Which means we have everything set up for you.

And all we need is you. So, apply for the Network School Fellowship at ns.com.

• Early American history and the settling of the Wild West

• The fall and rise of modern China, India, Russia, and Eastern Europe

• The creation of modern Singapore and Dubai

• Biographies of political figures from Deng Xiaoping to Robert Moses

• The decline of Argentina and South Africa

• The case-control studies of East/West Germany, North/South Korea, and Taiwan/PRC

• Edge cases like San Marino, Northern Cyprus, Transnistria

• The technology-fueled ascendance of El Salvador and Bhutan

• National turnarounds like the Meiji Restoration and Boluan Fanzheng

• The unification of France, Italy, Germany, India, America, and China

• Ancient history from Gobekli Tepe to the collapse of Rome

• The history of tech companies on the English and Chinese Internet

The general theme is building, collapse, and rebirth — but at the scale of cities and countries, not just companies. This is the next step for technology, because heads of network like Elon, Satya, and Zuck are now on par with heads of state like Trump, Modi, and Xi.

Reading

Here’s a draft reading list.

• Macrohistory: Foundation, The Lessons of History, Unqualified Reservations, A Short History of Nearly Everything, The Selfish Gene, Albion's Seed, War and Peace and War, Stalin's War, Energy and Civilization, Who We Are and How We Got Here, The Ancient City, The Fourth Turning, The Grey Lady Winked

• New Countries: Imagined Communities, Invisible Countries, The Origins of Political Order, How to Hide an Empire, The House of Government

• Political Case Studies: A New Idea of India, China's Political Model, Seeing Like a State, Tomorrow the World, From Third World to First, When Money Dies, Deng Xiaoping and the Transformation of China, Collapse: The Fall of the Soviet Union

• Regulation: Where is My Flying Car?, Three Felonies a Day, Reputation and Power, The Power Broker

• Rebuilding: The Knowledge: How to Rebuild Our World From Scratch, How Innovation Works: And Why It Flourishes in Freedom, How to Invent Everything: A Survival Guide for the Stranded Time Traveler, A Connecticut Yankee in King Arthur's Court, Principles for a Changing World Order

• Self-Improvement: Atomic Habits, Tools For Titans, The Almanack of Naval Ravikant

• Tech: Zero To One, Hard Thing about Hard Things, High Growth Handbook, AI Superpowers

• Crypto: The Bitcoin Standard, Broken Money, The Sovereign Individual, The Truth Machine, Daemon

• Startup Societies: Communistic Societies of the United States, The Significance of the Frontier in American History, The Network State

So, the general idea is to begin with macrohistorical context, zoom in to the details of how societies rise and fall, and then move to the specifics of how you’d (a) first build up yourself and then (b) build up your new society.

Speakers

We’ll also have in-person and remote speakers of the quality we’ve had at the Network State Conference 2023 and 2024, and at Network School itself. Our past speakers include world-famous founders and investors like:

• Vitalik Buterin (Zuzalu, Ethereum)

• Naval Ravikant (Angellist)

• Bryan Johnson (Don't Die)

• Brian Armstrong (Coinbase)

• Pieter Levels (Nomads.com)

• Ayaan Hirsi Ali (Author and activist)

• Ranveer Allahbadia

• Raj Gokal (Solana)

• Zooko Wilcox (Zcash)

• Olaf Carlson-Wee (Polychain)

• Jesse Pollak (Coinbase Base)

• Niall Ferguson (Author and historian)

• Dan Romero (Farcaster)

• Glenn Greenwald

• Amjad Masad (Replit)

• Garry Tan (YCombinator)

• Codie Sanchez (Author & investor)

• Alana Newhouse (Tablet)

• Richard Sutton (The Bitter Lesson)

• Ryan Petersen (Flexport)

So: the topics, the reading, and the speakers give a common vocabulary for Network Schoolers on why we should build new societies and how others have done so in the past. With that foundation, we will add more content over time.

The first Network School went amazingly well, as you can see from the video above! More than 4,000 applications came in from 80+ countries for 128 slots, showing global demand for our vision of a startup society. So after the quarter ended, we took a beat to scale up our capacity.

And now we’re back.

Network School v2 reopens on March 1, 2025 on an island near Singapore with double the capacity for a year-long term. Our goal is nothing less than bootstrapping a startup society capable of bootstrapping other startup societies.

That means we’re seeking frontiersmen. We’re seeking dark talent. We’re seeking people who want to create win-and-help-win societies, focused on both individual and collective self-improvement. We’re seeking remote workers, digital nomads, online creators, personal trainers, event planners, self-improvers and technologists of all stripes. And we’re specifically seeking those who want to help our nascent community learn technology, earn cryptocurrency, burn calories, and have fun.

You should come if you want to build up yourself while also building a cloud community, formed from scratch from the global Internet. If that sounds awesome to you, go apply at ns.com.

Then read more below.

Stages of Network School

We’re building the Network School in stages.

• Startup society (v1). First, we ran an experimental Network School cohort for 128 people in Q4 2024. For most attendees, it was a smashing success, but we did learn some lessons that we’re addressing in our v2 curriculum.

• Society-as-a-service (v2). Now, we’re beginning a year-long Network School for 256 members starting on March 1. The most important difference from v1 is that we now know we have enough demand to build a permanent cloud community. So our #1 criteria for admission is finding pioneers1 who want to build with us over the long run.

• Society from scratch (v3). In parallel with running v2, we are building a permanent Network School campus nearby to house thousands of technologists from all around the world to learn technologies, burn calories, earn currencies, and have fun.

• Scale the school (v4). As we build the permanent campus, we’re using prefab construction to create a portable template that we can open source and recreate anywhere in the world. Think of it like clone-stamping a Hilton or Starbucks, all around the world, except with the blueprints in the public domain.

So, by the end of stage 4, if all goes well, we’ll have a distributed network of Network School (NS) nodes around the world:

Start your own society (v5). But that’s not the final stage. Many Network Schoolers will attend with the intent of eventually starting their own societies, using the social, digital, and physical templates we develop at Network School. We intend to fund the best. And when those networks are overlaid on the same map, we’ll get a community of friendly startup societies that looks like this:

So, that’s how we’ll bootstrap a startup society that helps bootstrap other startup societies. Now let’s review Network School v1, and what we plan for v2 and v3.

The Startup Society (v1)

More than a decade ago, I created a visualization of cloud formations, shown below. The lower right corner refers to the theoretical concept of a cloud community: a startup society, materialized from the cloud, without the baggage of the old world.

The idea was to build an Internet First community, which every member joins of their own free will. A city in the cloud, the 21st century version of the city on a hill.

The first Network School was an experiment towards making that vision a reality. I knew we could bring thousands together for the Network State Conferences in 2023 and 2024, but that was only one day. Could we bring together 100+ people for almost 100 days?

Answer: yes! We could, and we did.

As the video at the top of this post shows, we pulled together accommodation, gym, coworking, auditorium, cafe, laundry, wifi, office pods, and hangout spaces for a 128+ person community, along with spaces for self-organized events. Some of it we built, some of it we rented, and some of it we refurbished to create a whole that was greater than the sum of the parts. Our overall retention was very high, with the vast majority of members staying through their booked period.

What specifically went well in v1, and what could we improve? Well, we set out to make it easy to learn technology, burn calories, earn cryptocurrency, and have fun, while also building our cloud community. And the parts we really nailed were burning calories, having fun, and building community. Here’s a video with members working out together:

Given that Network Schoolers didn’t know each other before the cohort, and came in entirely through the Internet, I do think it’s awesome that we were able to build a cloud community and thereby establish the fundamental question we set out to test in v1. Here’s a little gif of everyone having fun, including the Christmas Party towards the end of the cohort:

That said, we didn’t get everything right in v1, and in v2 we want to improve the learning and earning experience. Basically, in v1 we’d set out to do daily tutorials and bounties. But we’d also set out to build a real community, with men and women from different stages of life, with different skills, and different time commitments. These two goals conflicted. If we made the tutorials/bounties too easy, then it turned off the hardcore engineers. Yet if we made them too hard, it turned off the casuals who just wanted to drop in and have fun.

To be clear: we did have guest lectures where members learned from world-class founders and investors like Vitalik Buterin (Ethereum), Bryan Johnson (Don’t Die), Ryan Petersen (Flexport), Olaf Carson-Wee (Polychain), Haseeb Qureshi (Dragonfly), Eli-Ben Sasson (Zcash/Starkware), Jesse Pollak (Coinbase Base), and Peak XV / Sequoia India (Shailesh Lakhani). And as expected, many members earned remotely, worked on their companies, or even built startups together.

But we encountered the Karpathy bimodality: either you’re learning just for fun by watching guest lectures, or you’re heads down with pen and paper studying a specific subject.2 So, we’re fixing this in the next version by staging our curriculum for different skill levels and focusing it on building a new society.

And that brings us to v2.

Society-as-a-Service (v2)

As mentioned, the second version of the Network School opens on March 1, 2025 with capacity for 256 members and a year-long duration. This group will be the seed for a permanent campus we’re building nearby, which will house 1024+ members.

So, you should apply if you want to bootstrap a startup society that itself bootstraps startup societies. And the next version of the Network School is more explicitly oriented around this goal of society building.

Because that’s actually how many great universities were first founded. For example, Harvard was started with just a single building and a single instructor, to train future leaders of the Massachusetts Bay Colony.3 And the land grant colleges were built to teach frontiersmen how to run farms, dig mines, and erect buildings.4

Similarly, our v2 curriculum is oriented around the idea that the Network School is a mix of town and gown, both a startup society in its own right and a school that trains others to build startup societies. With that in mind, here’s what we’re planning for curriculum progression:

• Lectures and reading. First, we’ll have guest lectures on startup societies with no prerequisites that the whole community can attend. These will be both in-person and remote speakers of the quality we’ve invited to Network State Conference 2023 and 2024. In addition, we’ll have a reading list and regular book club for discussion. You can see our draft curriculum here.

• Workshops and hackathons. Next, we’ll organize workshops for two tracks of Network Schoolers: power users and programmers. Power users will learn how to use (and combine) the constantly shifting list of online tools, particularly in AI and crypto. And programmers will get hackathons on specific APIs and tools like Solana, Ollama, and Midjourney, with the goal of building something for their GitHub or Replit portfolios.

• Courses and credentials. Over time, we’ll roll out AI-generated custom exams and cryptocredentials for particular courses that help build our society. The AI exams will come from turning public tech job postings into lists of skills and then exams, while the cryptocredentials will be NFT certificates awarded by proctors who conduct offline pencil-and-paper tests of these skills. But it’ll take us time to develop these.

• Departments and placements. Eventually we want to organize STEM and humanities departments on an “Internet First” basis, with continuous education integrated with job placement. That means taking a software-centric approach to every discipline. For example, civil engineering would be centered around simulations, art would begin with AI generation and NFT monetization, and history would be combined with data science.

With all that said, I want to make four points that you should keep in mind before you apply.

First: Harvard wasn’t built in a day. Indeed, it was a single classroom entity at first with less than a dozen students! It took years of effort, many intermediate steps, and thousands of people to build it into a global university. Similarly, it will take time to go from guest lectures and reading lists to full-blown departments. So you should come only if you want to build the next Harvard, not simply attend it.

Second: the Network School itself is just a facilitator for bringing together great people. After all, you attend a conference for the talks, but mainly the community. You attend a college for the courses, but mainly the community. And similarly, you should come to the Network School for the content, but mainly the community, as you can see in this video:

Third: we want to pursue minimum necessary innovation in terms of new content creation, because there’s a tremendous amount of free online courseware that simply hasn’t been indexed and organized. A non-obvious point is that this rebundling5 of online courses is valuable in its own right, given the sea of information online. To navigate this ocean, we’ll focus on content that helps build startup societies. This criterion allows us to filter6 the vast Internet to determine what we want to teach and learn, and in what order.

Fourth: the Network School core team will organize as much as we can on a “centralized” basis, but the community will always be larger than the core team. So, you should come if you also want to teach and learn from other community members on a “decentralized” basis. These types of community-organized events were quite popular in v1.7

In short, you should apply to Network School v2 if you want to join a tech community. Think of it like moving to early Massachusetts with a bunch of positive-sum people while the construction of Harvard is in process.

How the Cloud Bootstraps the Land

Oh, one more thing about Network School v2. I’ve talked about the practical details of how we’re building the campus, and what to expect. But do we have something we want to prove in v2, like we did in v1?

Yes. At an individual level, v2 is similar to v1 in that it’s about allowing members to learn, burn, earn, and have fun. But at a collective level, if the purpose of v1 was to prove we could instantiate a cloud community, the focus of v2 is to build a paid waitlist that establishes the demand to build ever-more-ambitious cloud communities.

That requires a bit of explanation.

Remember how Elon memed the Model 3 into existence? He created a paid waitlist where 400k Tesla fans put up $1000 and waited literally years for the product. They did this because they wanted an electric car, because they believed in Elon, and because they knew how ridiculously hard it was to build something in the physical world. They took a calculated risk with Elon, and many of them also bought TSLA stock, and boy did he deliver for them.

That’s how we plan to build the Network School:

Elon’s waitlist established provable demand, and allowed him to negotiate with vendors to make the Model 3 a reality. Similarly, the Network School waitlist establishes provable demand that allows us8 to fund the land to make the Network School campus — and all future startup societies — a reality.

Society From Scratch (v3)

That brings us to our plans for Network School v3-v5. As noted above, we seek to build a campus from scratch (v3), open source the blueprints to scale it around the world (v4), and along the way encourage our attendees to start their own societies (v5).

Returning to that original visual, you can see how Network School v1-v5 form a progression, with gradually increasing scale and duration:

We’re already underway with the v3 campus, and we expect people who come to v2 to be ready to move there once residential units open up. Please note that this is a major construction project, and it may take a year or more to build v3, so like the patient Tesla waitlisters you should come with a flexible mindset.

One way to think about it: with normal real estate, you just rent an apartment and move in. But with the Massachusetts Bay Colony, the pioneers built their cabins from scratch by chopping wood. The Network School is of course much closer to moving in than chopping wood, but there is some expectation that you help9 build the community — by holding events, recruiting new members, engaging existing members, and scouting future sites — while the physical campus is being built.

The Internet Frontier

Finally: I really like the facilities we’ve built, and use them quite a lot myself, but before you apply you should realize what we’re doing is frontier, not fancy. We are optimizing for editability, not luxury. So, while the Network School core team will attempt to handle as many issues as possible, you shouldn’t treat your stay as a luxury resort where the staff is at your beck and call, but as a startup society which we’re building together.

Another way of putting it: there are tech companies, tech currencies, and now tech communities. You know what an early stage startup looks like, and the milestones it hits before it becomes Google. You know what an early stage cryptocurrency looks like, and the milestones it hits before it becomes Bitcoin. Now we’re establishing what an early stage startup society looks like, and the milestones it hits before becoming something bigger.

Because the Internet now allows us to build societies from scratch, to go not just founder mode but founding father mode. And the closer you are to being a high-agency, low-maintenance technologist who just wants to work, work out, and build awesome things all day — while also hanging out with others with the same growth mindset — the more you’ll like founding Network School with us.

If that describes you, please do apply at ns.com.

That’s right. Through the power of Bitcoin, we now have a beautiful island near Singapore where we’re building the Network School. We’re starting with a 90-day popup that runs from Sep 23 to Dec 23, right after the Network State Conference. Rent is only $1000/month with roommates or $2000/month solo. And we have plenty of day passes for visitors.

So, go apply online at ns.com! Then read more below.

The Dark Talent

As motivation, I’ve always wanted to expand equality of opportunity around the world. Because my father was born in a desperately poor country, but with the right opportunity he was able to make something of himself. Like dark matter, he was dark talent.1 And for more than a decade I’ve been thinking about how to give others who are similarly situated the chance to make something of themselves.2 That is: I’ve been thinking about how to empower the dark talent of the world.

US universities used to fill this role, even imperfectly, and I loved Stanford when I taught there years ago.3 But the data shows they’ve declined in recent days. And they’re just not affordable or accessible to most of the world. So, it’s time for a new approach. And thanks to Saraswati and Satoshi, I have the resources to endow a new Internet-first institution: the Network School.4

The purpose of the Network School is to articulate a vision of peace, trade, internationalism, and technology…even as the rest of the world talks about war, trade war, nationalism, and statism. To revitalize democracy for the internet era, with digital polities and verifiable votes. To train the next generation to be not just leaders of companies, but inspirations for their communities. And to pursue truth, health, and wealth by leveling up our attendees personally, physically, and professionally.

Let me now describe in more detail how the Network School works, who it’s for, and how to apply.

How the Network School Works

The Network School is for people of all ages, not just the youth. And it’s meant to be lifelong rather than one-off, with both a structured and and an unstructured component. The structured part is about continuous daily self-improvement: learning skills, burning calories, and earning currency. Meanwhile, the unstructured part is about having fun and hanging out with people of similar values.

For short: learn, burn, earn, and fun.

Learn

The first part of the Network School is about learning technologies and humanities.

As motivation, the existing model of US undergraduate education is broken. You pay $100k+ for a four year degree, and then budget nothing for maintenance over the course of your life. It’s like paying $100k+ for a new car and budgeting nothing for maintenance.

By contrast, the Network School is about continuous education. It’s for remote workers, engineers, creators and digital nomads who want to integrate learning into their lives, rather than stopping everything to be a full-time student.

Here’s how that works. We set up mini-classrooms where you can drop in to see the problem of the day.5 You solve that problem and a proctor awards you a cryptocredential, a free non-transferable NFT sent to your crypto wallet that establishes “proof-of-learn.” Often your solution will involve putting code on GitHub/Replit (to show you understand a concept), or posting content to your social media profile (to show you understand a new AI tool). And over time, these cryptocredentials actually build up a cryptoresume proving what you know.

Our initial material focuses on founding tech communities, as distinct from tech companies. As such it touches on everything from crypto, AI, and social media to history, politics, and filmmaking. It should be useful even if you’re just growing a traditional company or building a following. Over time, of course, every branch of the sciences and humanities becomes relevant when building a community. So if this initial experiment works, we can expand branch-by-branch to build a new kind of university.

But we’re intentionally starting with something simple. Our learning is about continuous education, about solving the problem-of-the-day.

Burn

The second part of the Network School is about burning calories.

Longevity is important, but 20th century communities just aren’t physically set up to maximize physical fitness. Quite the contrary: the default mode of Western society is sedentary and sugary. Those who want to escape this need to roll their own nutrition and workout program, which takes time, money, and energy.

We’re changing that. I’ve teamed up with my friend Bryan Johnson to set up Blueprint-inspired food and fitness for the entire Network School community. Bryan will be on campus to set up the program, and then his designates will maintain it on a daily basis. Like many of you, I’ve been both fit and fat at various times, so this is a product I want to use myself.

Every member of the Network School gets a daily workout slot with a semi-personal trainer, much like a group fitness class. You run and lift in the morning at your chosen time, getting a proof-of-workout from your trainer. Your group holds you accountable for showing up. Then you get a box with your Blueprint-optimized healthy meals and head to work. The whole point is to provide willpower-as-a-service, where the community6 provides the discipline.

We’re starting with the basics of running, lifting, eating, and sleeping properly. The initial goal is to hit the limits of your genetics. But if all goes well, the biotech founders that come to the Network School will eventually help us all surpass our genetic limits, to live much longer than we otherwise would.

But again, we’re starting small! And so the “burning calories” part is about lifelong health and the workout-of-the-day.

Earn

The third part of the Network School is about earning currency.

We’ll have crypto prizes of the day for open source projects, AI content creation, and microtasks. There will be $1000 bounties every day for the duration of the program, similar to the various prizes I’ve posted on Twitter and Farcaster. And community members will post their own prizes.

Next, in keeping with the overall theme of self-improvement, we’ll have office hours to help with your job, your career, your visa status, and your funding. We’re much more invested in you than a typical college career center because our interests are aligned: the more you earn, and the stronger you are financially, the more you’ll eventually have to reinvest in the community.

Finally, we’ll have visitor hours with famous visiting technologists. As my friend Sriram noticed, when investors come through Singapore I typically do a podcast with them. Many will also visit the Network School to meet attendees, invest in them, or hire them. Others will give remote talks. And you can see the quality of visitors from the speakers in our conference and podcast.

So, earning is about constant career development and the prize-of-the-day.

Fun

All work and no play makes Jack a dull boy, of course. So the fourth part of the Network School is about fun.

This is the unstructured component. It’s most of what you’re here for. It’s just about assembling great people in one place: positive-sum people who believe in technological progress, internationalism, and capitalism. It’s your internet friends, coming from URL to IRL. Stanford introduced the concept of residential education, but this takes it to the next level.

In fact, our initial location is very similar to Stanford. It’s beautiful and sunny, and less than an hour from a major city (Singapore) with an international airport (Changi). That means you can be heads down during the week, head into the city on the weekends for fun, and get to just about anywhere in Asia within the same day. This is convenient for the >50% of the world that lives within the Valeriepieris circle.

We’ll do some group outings too, but most of the fun will be up to you.

Who The Network School Is For

Who is the Network School for? There are four lenses on this: demographical, ideological, professional, and personal.

Demographically

As mentioned, our focus is the dark talent. The more respect you have for legacy institutions, and the more respect they have for you, the less suitable you’ll be as an applicant.

So: the Network School is for Indian engineers and African founders, for makers from the Midwest and the Middle East, for Chinese liberals and Latin American libertarians, for Southeast Asia’s rising technologists and Europe’s remaining capitalists.

It’s for everyone who doesn’t feel part of the establishment. But it’s definitely not only for tech, because a community does not run on tech alone.

Ideologically

Ideologically, the Network School is for people who admire Western values, but who also recognize that Asia is in ascendance, and that the next world order is more properly centered around the Internet — around neutral code — than around either declining Western institutions or a rising Chinese state.

For example, the Network School is for those who understand that Bitcoin succeeds the Federal Reserve, that encryption is the only true protection against unreasonable search and seizure, that AI can deliver better opinions than any Delaware magistrate, and that democracy can be rejuvenated with cryptography. It is for those who believe in technology, harmony, internationalism, and capitalism. It’s for those who want Silicon Valley without San Francisco. And for those who want to found, fund, and find not just new companies and currencies — but new cities and new communities.

Professionally

Our ideal applicant is capable of remote work, or has enough savings to support themselves while at the Network School. For our initial cohort, we’re seeking three major groups of people in particular:

1. Writers, artists, influencers, and filmmakers

2. Trainers, athletes, coaches, and clinicians

3. Founders, engineers, designers, and investors

These are, roughly, the demographics focused on learning, burning, and earning respectively. Of course, if you fall outside those categories but still think you have something to contribute, you should still apply to the Network School.

Personally

I should mention that the Network School is a “product” that I built for the young version of myself — the aspiring young engineer. This is the community I want to live in: a technocapitalist college town, a Stanford 2.0 that’s globally affordable and genuinely meritocratic.

So, I’ll be on campus full time. Bryan Johnson and I are supervising the setup of everything from bench press to French press. And we’ll eventually be recruiting faculty in the form of content creators, fitness influencers, and angel investors for the learn, burn, and earn portions of our program respectively. But all that in due time.

Applying to the Network School

Ok, so how do you apply to the Network School?

Just register at ns.com/apply, where we’ve set up a simple Luma page. That initial application takes a few minutes. Then, if you pass review, we’ll send a second application where you pay rent. As mentioned, our monthly rent is $1000 (with roommates) and $2000 (solo). We also have daily and weekly rates too, but short-term visitors still need to apply.

The rent gets you an air-conditioned room on a beautiful island, with internet, gym, and access to all courses and community services. You’ll still need to handle your flights and pay for your food, but we think the overall package is extremely affordable. And so the Network School could be an amazing option for individuals or small teams looking to save money, get fit, and level up while living in paradise.

I’m looking forward to seeing you there! Just fill out the application at ns.com/apply.

FAQ

Join the discussion on your forum of choice:

• Substack Comments

• Substack Notes

• Twitter/X

• Farcaster

We’ll answer questions and update the FAQ.

As Elon, Dalio, and Jamie Dimon all recognize, the Western world is headed for a sovereign debt crisis. Just like the establishment was hiding the president’s senility, they’re also hiding the true state of the economy. But let’s calibrate with the ten charts below, and then you can judge for yourself.

1. More emergency loans than 2008

2. More borrowing than COVID

3. More interest than defense

4. More devaluation of the dollar

5. More treasury dumping by China

6. More gold buying by BRICs

7. More dedollarization than ever

8. Less sanction efficacy than ever

9. Peacetime debt approaching WW2

10. True debt of 175T, more than any empire in history

11. The US dollar is needed less, just when the US needs to borrow more

12. BONUS: Can AI fix this?

Note: this post and the followups got 4M+ collective views on X.
See here for the discussion: 1, 2, 3, 4, 5, 6.

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1) More emergency loans than 2008

First, did you know the Fed made more emergency loans in 2023 than during the financial crisis of 2008? The banking system is on life support thanks to the US government first selling billions in bonds to financial institutions and then devaluing them with surprise rate hikes.

Just look at this graph from the Fed. The blue bump below on the left is the lending from the global financial crisis of 2008 — you know, that little old thing! The purple bump is COVID. And the giant orange/aquamarine monster on the right is the 2023 banking crisis. See how much higher it is than even 2008?!?

2) More borrowing than COVID

Second, did you know the US is borrowing more under the "Biden boom" than it did during COVID? Set aside whether a coronavirus should have been treated as a financial crisis. At least the COVID borrowing was at ~0% rates. But today the US government is borrowing historical sums of money in peacetime…and at 5% rates! This is the act of a desperate man maxing out his credit cards to pay his bills.

3) More interest than defense

Third, did you know that all this borrowing has made interest payments on the national debt the second largest government expense? More than defense, or Medicare, or anything else other than Social Security. Billions of tax dollars (and printed dollars) now go towards payments to bondholders. And even still, anyone who bought US Treasuries (or other bonds) got annihilated over the past few years. For all the warfare and all the welfare, it was buy now pay later.

And as you can see from the graph, the time to pay has come:

4) More devaluation of the dollar

Fourth, did you know that the dollar has lost at least 25% of its value in just four years? This one you probably knew from just your lived experience of inflation. But Larry Summers estimates that purchasing power has been eroded even more radically than this, with annual numbers hitting 18% if you include the enormous spike in loan payments due to rate hikes. Compounded over four years, that’d be easily more than 25% of the dollar's value.

Yet even 25% in four years is quite a lot:

5) More treasury dumping by China

Next, did you know that China (the single largest foreign buyer of US Treasuries) has been dumping US paper at an accelerating clip? This is a bit technical, but China is an “outside investor” in the US kind of like a new venture capitalist investing in your tech company is an outside investor. Even by buying just 5% of your equity (or in this case, debt), they set the price for everyone else. And show that there’s robust outside demand, by people who don't have to buy.

But now that outside demand is crashing:

6) More gold buying by BRICS

But isn’t the dollar a store of value? What are other countries saving in if not US Treasuries? Well, China is a bellwether for much of the non-US world. And those countries have begun stacking historical quantities of gold, even as Western countries have been selling gold.

Take a look:

7) More de-dollarization than ever

Ok, what about the dollar as medium of exchange? Well, China — which is the #1 trade partner of most countries in the world now — has just flipped to majority CNY for cross-border foreign exchange deals:

8) Less sanction efficiency than ever

Ok, but can’t the dollar still be used as a sanctions weapon? Don’t countries need access to the US financial system? Actually, no. All the sanctions on Russia actually ended up hurting Europe more than Russia. Europe needed Russia’s oil and gas, but Russia had other customers.

So according to the World Bank (not a Russian source!), Russia just flipped Japan to become the fourth largest global economy in GDP-by-PPP:

9) Peacetime debt approaching WW2

All right, but what about the US military? Can’t it ultimately go to war to protect the dollar? Well, that’s a much longer conversation, but see the graph below. Today the US is ostensibly in “peacetime."

And yet it has comparable debt to WW2:

This means the US has neither the money nor the manufacturing base for a sustained military campaign against a peer rival like China. You can’t fight your factory — especially when you’re out of money.

10) True debt more than any empire in history

Finally, maybe the single most important number is the $175.3T figure. That’s actually the true debt of the USA, when you take all the entitlements into account, like Social Security and Medicare. And that number is itself rapidly increasing. Don’t take it from me, take it from the Feb 2024 Financial Report of the United States Government.

That $175.3T lines up with the ~$200T number that Druckenmiller has been using for the all-in liabilities of the US government when you take everything into account. And of course, at this point we are in monopoly money territory, because:

• The entire fedguv only collected ~$2T last year

• That number is itself juiced by deficit spending

• The dollar is down ~25% in real terms since 2020

• And the "177T" in asset value plummets if liquidated

• ...or if there is a financial crisis, or both

So, that 175T debt is unpayable. And the US government doesn't have nearly enough to pay for what it owes. It's made promises to everyone, from allies to retirees, that it simply can't keep. To hang on to power amidst that web of broken obligations, it is going to get nasty on a level beyond which most can really comprehend.

See this post for more:

The US dollar is needed less, just when the US needs to borrow more

I really haven’t even gotten started. There are many more graphs I could show, many more videos from investors around the world from bonds to real estate who seeing what's happening. But: if you’re intellectually honest, you realize that the dollar’s position is rapidly eroding. It simply isn’t the indispensable asset it was. To summarize:

• China doesn’t need the dollar to trade because they are using CNY instead of USD.

• BRICS doesn’t need the dollar to save because they are buying gold instead of US bonds.

• Russia doesn’t need the dollar to live because they are the fourth largest economy after being shut out of the US economy.

• Yet the US needs as much of the world as possible to accept the dollar, as it’s borrowing at levels beyond COVID, beyond WW2, beyond any empire in history.

So, what comes next? I have some ideas, and you have some ideas. But first we need to align on what’s happening.

BONUS: Will AI solve this?

A popular line of thinking is that the economic gains from AI is gonna solve this problem. How do you respond to that?

I love the optimism. But let's do the math. As of late July 2024, here are the market caps of the top tech stocks:

AAPL: 3.4T
MSFT: 3.3T
NVDA: 3T
GOOG: 2.25T
AMZN: 1.67T
META: 1.25T
TSLA: 0.78T

So, the combined market cap of the Magnificent is "only" $15.65T. That's less than 10% of the $175.3T owed by DC! So, even if AI produces another Magnificent 7, there's no way to grow out of this. And by the way, it takes years to grow a trillion dollar company, years during which the US will just accumulate more debt at an accelerating clip. Everyone isn’t going to get what they’re owed.

A debt crisis is coming.

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Because California Democrats do not hold competitive multiparty elections. No matter how the people vote, a Democrat always wins. The real election is thus actually a selection, where candidates are chosen1 before the primary in a smoke-filled room by the Party. And around the time one-party control was consolidated in the early 2010s, governance started to dramatically worsen, and California's growth rate suddenly leveled off:

Now more than one million citizens have fled2 the once-Golden state for other locales, voting with their feet because they’ve been stripped of the ability to substantively vote with their ballot.

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ONE PARTY "DEMOCRACY"

California illustrates the gap between deed and word. Consider that Democrats managed to (a) build a one-party state that (b) a million people fled while (c) holding faux “elections” that a Party member always won whilst also (d) endlessly proclaiming their regime democratic!

This unmistakably resembles China. They've also (a) built a one-party state which (b) millions of people fled that (c) holds faux “elections" where a Communist Party member always wins while (d) endlessly proclaiming their regime democratic.34

There are other similarities, too.

Democrats5 ruthlessly censor internet speech, just like Communists.6 Democrats7 use the state as a battering ram against tech companies, just like Communists.8 Democrats9 tax citizens and hand the resulting funds to Party affiliates, just like10 Communists. Democrats11 encourage loyalists to move to contested territories to strengthen political control, just like12 Communists. Democrats13 funded gain-of function research, just like Communists. And most ominously, Democrats14 are now persecuting their political opponents15 on trumped up charges — just like16 Communists.

This is no small thing. When Communists talk about "communism", what they mean is rule by the Communist Party. And when Democrats talk about “democracy”, what they mean is rule by the Democrat Party. California is their desired end state — where blues never lose.

Now, let’s handle the objections.

FOR CHOICE...BUT AGAINST DEMOCRATIC CHOICE

The first objection is that Republicans do it too. Look at all the red trifectas, as per this quoted tweet!17 But this argument fails on three counts.

1. First, when Republicans overturned Roe, Democrats affirmed reproductive choice at the state level.18 They didn’t just copy Republicans — they did something different. So if Democrats actually believed in democratic choice, they would affirm competitive multiparty elections in their states even if Republicans pursued the opposite policy. They aren’t doing that. Which means Democrats genuinely believe in reproductive choice, but not democratic choice.

2. Second, Democrat control of blue states is much stronger than Republican control of red states. For example, even within a “Republican stronghold” like Texas, Austin is a deep blue city. There is no equivalent of red cities within blue states.19 This alone means blues have significant political power within red territory, but not vice versa.

3. Third, Democrat control of national institutions — both elected and unelected — is overwhelming. As the graphs show, Democrats control academia20, media21, US government agencies22, and even 70%+ of GDP23. In the language of diversity, Republicans are vastly underrepresented. They’re not even close to 50/50.

So: Democrats have more control at the national level, more control within red states, and total control within their own blue states — yet have not used that control to restore democratic choice.

Actions speak louder than words.

NO COMPETITION = FAUX ELECTION

The second objection is that no really — Republicans do it too! They have one-party states, so Democrats are justified in having the same thing. You can’t expect Democrats to enable other parties to not just run, but win. That’s not in their political interest. And it’ll weaken the Democrat Party!

And now we get to the nub of the issue. Communists also have one-party states. Does it then follow that Democrats should have them too?

Because the whole theory of why democracy is supposed to be superior to communism is that it provides real alternatives, real feedback. Just like capitalism provides choice in the market, democracy provides choice in the electorate.24 So if you actually believed in democracy, you’d believe alternation of power strengthens society in a way one-party control never would. And you’d hold competitive multiparty elections even if the other guy didn’t, because it makes your society stronger.

This gives the game away. We know Democrats do not believe in democracy, because they’ve ended competitive multiparty elections in the states they control. Unless other parties are routinely taking political power, it is not a democracy.

VOTE BLUE, NO MATTER WHO

The last objection is around motive: ok, but why would Democrats destroy democracy?

It’s simple: once blues gain total control, they begin funneling tax dollars to Democrat affiliates. This is how you get a $100B train in California where no train is built but Democrat unions get paid25. And this is how the homeless industrial complex makes money26, by getting people addicted to drugs and then getting paid by the size of the problem:

This is also how BLM burned down black businesses while lining blue pockets27, and why student loan relief goes to Democrat voters28, and in general why so much public money produces so little today in the way of public goods29.

This, in short, is the blue business model. The purpose of the blue political machine is to fleece Americans while enriching Democrat loyalists.

However, they can only pull off this scam with total one-party control. Outside eyes would stop the gravy train. And that's how you get “vote blue, no matter who.”30

"Vote blue no matter who" came out of the mouths of Democratic presidential candidates31. It's a straightforward rejection of democracy as ideology in favor of Democrat tribalism. All that matters is that blue tribe gains power, so blues can get paid.

Of course, not all blues get paid! Only the connected ones do, political consultants and union bosses and key interest groups and the like. Many blues pull the lever without getting the cheddar. They fall for the marketing.

After all, remember how much blue people pretended to care about black people in 2020, and how little they spoke about them afterwards? “Democracy” serves a similar role for the Party in 2024. It's just a marketing slogan, and can be discarded like BLM once it’s no longer useful.

Look how they pumped and dumped Ibram Kendi32. After the election, the Party can easily flip from declaiming for democracy to decrying populism, as it has before.

THE FUTURE

In short, if Democrats actually believed in competitive multiparty elections, they'd pursue them regardless of what others did. All their rhetoric revolves around democracy as stated principle, but in blue states where they have total power they've ended it in practice. The obvious reason for this is graft and tribalism: vote blue, no matter who.

It is only a matter of time before Democrats scale what they've done in blue cities and states to the federal level. That's certainly the goal. And it returns us to the original question.

Given that blues now unapologetically reject competitive multiparty elections at the state level in favor of faux contests that their Party always wins...given that they've created electorally unaccountable governments that steal billions from their citizens...given that California and China have both built one-party states...what might the future of blue governance look like?

It sure ain't multiparty democracy.
What it looks like is an exercise for the reader.

Appendix: The Mechanics

Many Democrats believe that if their company is all white, they’re doing something wrong. But if their state is all blue, they’re doing something right. Even though the far left is also far white.33

Specifically, partisan blues are not working to address the erosion of democratic norms and checks-and-balances within Democrat-controlled states. They are unbothered about total one-party control in states they control, and certainly aren’t looking to see how gerrymandering, redistricting, and the like are stifling democratic voice.

Yet if they were looking…here are a few specific examples of how California Democrats changed the laws to keep themselves in power.

1. Redistricting: The California Citizens Redistricting Commission creates boundaries that favor Democrats. ProPublica actually called out the extent of their partisan redistricting.

2. Cracking and packing. Relatedly, here’s how gerrymandering works in practice in California. As CalMatters notes, “packing is concentrating blocs of voters to limit their power to as few districts as possible” and “cracking is spreading like-minded voters among several districts so that their influence is diluted.”

3. Migrants. This is a huge topic with much denial, but in 2013 Pew found that “among Latino immigrants who are not U.S. citizens or legal permanent residents (and therefore likely unauthorized immigrants), some 31% identify as Democrats and just 4% as Republicans.” So, California Democrats encouraged illegal migration with various programs for the “undocumented” as they have a +27 point advantage among this group. Some of those programs include AB60, Medi-Cal, and CalEITC:

   

These examples can be multiplied. Laws were changed to benefit Democrats. And taxpayer funds were appropriated from Americans to give to Democrat affiliates. The obvious point is to get money and win votes for Democrats. It’s the blue business model, the blue political machine.

In other words: one-party Democrat rule in California did not happen by accident. The Party acquired control, and used its political capital to gain more power and lock out the competition. Its actions reveal that the Party does not care about competitive multiparty elections — namely democracy. It cares about remaining in power.

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20

Academia is blue.

21

Legacy media is blue.

22

US government agencies are blue.

23

70%+ of GDP is blue too.

Gil Duran’s fake quote was just hit with a community note. Here’s the link to 3:19:51 of the original video, so you can see for yourself.1

Sure, the lie got around the world — but the truth now gets its boots on. Because everyone who liked, replied, or reposted his tweet just got a notification informing them of the actual context.

The New Republic is in crisis

This is shaping up to be another Shattered Glass-scale disaster for The New Republic, at a time when they can least afford it.

• They faked a quote

• They hid the replies pointing out the fake

• Then they stealth edited their article multiple times, showing guilty conscience (v1, v2, v3)

• And their author omitted his conflict of interest

• Now they're getting community noted

• And their owner separately got bilked out of $34M (!?)

The New Republic editor is @mtomasky, their CEO is @MichaelCaruso, and their editor-in-chief who lost the $34M is Win McCormack (whose public email for contact is info@winmccormack.com). Maybe you can ask them why they've decided to let Gil Duran endanger their entire publication? Libel is not a profit-maximizing activity.

The original piece is below.

How Gil Duran Committed Ethics Cleansing

Years ago, the New Republic published a series of false stories that were so egregiously fake that a movie was made about it called Shattered Glass.

Now it’s happening again.

A “journalist” named Gil Duran just committed a act of ethics cleansing. He posted a fake quote, monetized the traffic, and then stealth edited (v1, v2, v3) his lies days later without running any correction — hoping you wouldn’t see the change!

This is so egregiously unethical that even people who dislike me saw immediately that it was literally libelous:

Fortunately, we have Twitter. Gil Duran faked around — but you found out. So read this piece, then fact check his fake quote with a Community Note.

The Details

Here’s what happened.

A Democrat operative named Gil Duran — who was apparently fired from the San Francisco Examiner after making up stories in similar fashion about Michelle Tandler — recently posted a fake headline complete with a fake disclosure, and then consciously hid the replies that pointed out his lies. His libel got many views on Twitter and spread to Hacker News, Reddit, and Threads. Then the New Republic stealth edited the fake quote in his article…multiple times (v1, v2, v3)…after they’d monetized the traffic…without publishing a retraction!

A genuinely insane series of events. Let’s take it in turn, starting with the fake quote.

I. THE FAKE QUOTE

In the fake quote, Duran claimed I’d called for “ethnic cleansing”. But as you can see at 3:19:51, I actually said that largely Asian technologists — like myself! — are being ethnically cleansed out of San Francisco by a Democrat establishment that has legalized crime, including brutal attacks on Asians. To address this, I called for Democrats to be pushed out of power in the city via non-violent political warfare.

Now, you may not agree with my point of view. You may think random murders of immigrant engineers like Hanako Abe by Democrat-released criminals are just part of living in a big city. But you have to admit the New Republic completely inverted the meaning of what I said. In fact, Duran’s lie was so egregious that even people like Glen Weyl who strenuously disagree with me noted the libelous misrepresentation warranted an immediate correction!

After this, the New Republic knew they were dead to rights. So first they stealth edited the headline. Then, later, they stealth edited the body copy. Here’s the v1, v2, and v3. Obviously, the multiple stealth edits betray mens rea — guilty conscience.

They knew they’d faked around and been found out.

II. THE FAKE DISCLOSURE

But the fakery actually goes deeper than that.

As mentioned, the author of the article is a guy named Gil Duran. Duran spends his time fruitlessly attacking just about anyone in tech who’s critical of California Democrats, from Elon Musk to Garry Tan. And in his disclosures under these articles, he says only that he’s a “journalist”:

But in reality, Duran is a lifelong Democrat operative! He’s been paid by just about every major California Democrat —including Kamala Harris, Jerry Brown, Tom Steyer, Dianne Feinstein, and Antonio Villaraigosa — to help them gain and maintain power. He’s thus one of the people most responsible for the descent of California into feces, needles, and bankruptcy. That’s why he endlessly attacks anyone who criticizes California Democrats. And — very consequentially — in those New Republic articles he conspicuously omits any disclosure that he’s ever been paid by California Democrats.

He does brag about it when he’s soliciting consulting money, though:

I mean, to understand what’s going on visually, Gil Duran was once paid by just about every California Democrat, and now spends his time attacking just about every California Technologist:

That’s three indisputable propositions:

• Gil Duran received past payments from California Democrats

• Gil Duran attacks current critics of far left California Democrats

• And Gil Duran didn’t disclose those past payments in his recent attacks

The question then arises: is Gil Duran currently being paid by California Democrats to astroturf attacks on their critics? Did one of his patrons like Tom Steyer get tired of these tech guys speaking up — and order a hit? Someone should find out.

Regardless: Duran is a Democrat when he wants to collect consulting fees and a “journalist” when he wants to lie to the public.

III. THE FAKE DISCOURSE

After Duran posted his fake quote, several people pointed out he was making it up. He hid all these replies, because he knew he was lying. All he cared about was maximizing the traffic! See for yourself:

Then, a few days later, after The New Republic realized they might have a libel suit on their hands, they stealth edited (v1, v2, v3) the headline and then the article.

But hiding the replies fits Duran’s MO. He’s all about faking the discourse in the name of “framing” the discourse. He even admits to it on his blog: to not reply to critics, to block rather than engage. He calls Elon a Nazi, he calls Substack Nazi, and he attacks everyone in tech from Michelle Tandler to California Forever.

Why? Because he wants California Democrat Forever. He wants a one-party state in the name of democracy. His entire life’s work is about ending democracy in the Golden State, in the actual sense of competitive multiparty elections, as you can see here:

Duran even admits this too! He proudly writes about turning San Francisco into a one-party state where "no Republican has been elected in decades.” Whatever this is, it ain’t democracy:

And that’s where the rubber hits the road.

Democrats like Duran hate democracy. They’re about as “democratic” as the Democratic People’s Republic of North Korea. They built a one-party state by driving Republicans out of California and into a permanent minority through a conscious multi-decade strategy. They gained total political power only to bankrupt the Golden State, steal millions for toilets and billions for trains, and literally cover its beautiful cities in feces and trash.

Their only possible remaining competition within California comes from tech. And that is why they hate us.

IV. THE REALITY OF THE SITUATION

Just to recap, here’s the level of fakery we’re dealing with:

• The New Republic has faked stories before

• Duran also faked a story before on Michelle Tandler

• Duran was apparently terminated from the SF Examiner for that fake

• Duran calls everyone from Elon to Substack “Nazis”

• Duran faked his disclosures, hiding his highly relevant past payments from California Democrats in articles that attack critics of those self-same California Democrats

• Duran faked the quote on ethnic cleansing

• Duran even hid the replies pointing out he’d faked the quote!

• Then, days later, the New Republic stealth edited the article multiple times (v1, v2, v3) without publishing a correction.

I mean, come on.

This is the pathetic state of California Democrats, journalists, and legacy media. They’ll make things up to cling to power. This is why tech must check their power. Fortunately, with social media we can rebut their lies. So if you want to help, add a Community Note to Gil Duran’s libelous post. Point out how the New Republic silently changed (v1, v2, v3) their false headline without running a correction.

They faked around.
Make them find out.

That’s weird. Why is the US government issuing Treasuries at emergency rates when the official narrative is that everything is fine? And why is the Wall Street Journal acknowledging something extremely strange is going on…and that it could end badly? Here are their words, emphasis mine:

Rapid growth in markets from tech stocks to mortgage bonds has ended badly in the past. Treasurys are considered the safest and easiest-to-trade securities on Wall Street, and many worry that any instability there could rapidly spread. 

They’re understating it. When they say “ended badly”, they mean crisis.

• 2000 was the dotcom crash (“tech stocks”)

• 2008 was the financial crisis (“mortgage bonds”)

• 202X is the sovereign debt crisis

Moreover, in this one little quote WSJ also acknowledges that (a) there’s risk in the supposed “risk-free asset”, that (b) instability in the Treasury market is not only possible, but it could spread, and that (c) “many” worry about this. All this has of course been obvious for some time. But now with WSJ (and BlackRock!) starting to admit the debt is out of control, and that the “safest asset in the world” might actually end up being the riskiest asset in the world…normie finance guys have license to act.

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II. The Big One

Thing is though…I hesitate to accept some of these parallels. What’s the right precedent for what’s coming? You can use the financial crisis progression of 2000 and 2008 and 202X, as WSJ implicitly did. But you can also put the events of 2001, 2008, and 2020 into a different crisis progression, as Summers did:

The COVID-19 crisis is the third major shock to the global system in the 21st century, following the 2001 terror attacks and the 2008 financial crisis.

We can organize these two different progressions in tabular form as follows, where WSJ’s is the middle row and Summers is the middle column:

Note first that 2001, 2008, and 2020 were each preceded by an “ignorable” event. The 1993 WTC bombings came before 9/11, the 2000 dotcom crash came before 2008, and the 2009 H1N1 pandemic came before COVID-19. Each of these were dots you could connect in retrospect, previews of the future for those who could extrapolate. But the magnitudes were wildly different. The world was changed by 2001, 2008, and 2020 in a way it just wasn’t by each of the predecessor events. (You could quantify this by sheer news coverage.)

Note next that as you go across, things get more severe. I’ve used the labels ignorable, decadal, and civilizational. An ignorable event is a news story that even someone who lived through at the time might not have registered. A decadal event is something that shaped the decade. And a civilizational event? We haven’t had one of those in a while.

It’s going across — from ignorable, to decadal, to civilizational — that concerns me. I don’t know if we’ll see a nuclear 9/11, or a pandemic that’s much worse than COVID-19.1 But I do think, like Ray Dalio, Stanley Druckenmiller, and Larry Fink that we are headed for sovereign debt crisis.

And so comparing 2008 to what is coming may give a false sense of security. What if the coming sovereign debt crisis is to the mortgage crisis as COVID-19 was to H1N1? What if it’s just so much bigger that it’s like comparing a small war to a world war?

Because that’s Dalio’s thesis. That a sovereign debt crisis will mean a changing world order.

III. What about the assets, huh?

Ok, ok. Let’s not get ahead of ourselves. If I represent the “it’s happening” faction, it’s always worth hearing the rebuttal is from the “nothing ever happens” faction.

Here I am saying the economy isn’t real, it’s propped up by record debt, and they will fake it till they break it. That would indeed be a happening. And lo, here comes occasional Twitter sparring partner Brent Donnelly, to explain why nothing will happen.

Checkmate, right?

IV. All It Takes Is All You Got

I actually really loved this response so much.

First, the debt didn't matter.
Now, it still doesn't matter...
Because the state can take all your assets to pay it!

Here's that graph Brent cites again:

Below is the same graph with titles and labels. See how it says balance sheet of households and nonprofit organizations? So that $177T number isn't really about government assets. It's everything every American household (and nonprofit, hedge fund, PE fund, and personal trust) owns.2

And now we're getting down to brass tacks.

See, Keynesianism is like Communism in that it sees no real difference between household and government assets. They recognize no moral limit on how much they can take from the population via inflation and seizure, only practical limits.

If you doubt this, ask a Keynesian if they would accept any hard limit on the money supply or upper bound on the tax rate. They won’t. And this is why they print trillions yet keep proposing “wealth taxes.” The implication is that every dollar can be diluted and every possession can be confiscated, if only the state can finagle some legal basis for it. Ideally via a 1000-page omnibus bill rammed through in the early hours over protest. The point being: your household assets will be taken to pay for what this failed state owes.

And how much does it owe? Well for that we can go to a recent analysis of the Feb 2024 Financial Report of the United States Government. Here's the table where the US government itself admits that even $37T is an underestimate of the debt. When you include the "social insurance" of Social Security and Medicare it's another $78.4T line item:

But wait, there's more!

Later in the doc Treasury itself admits even *this* is a sharp underestimate of what the US owes in terms of Social Security and Medicare because it's not accounting for future payouts decades from now. Once it does, what does the number get to? Here's the direct quote from them: "The total...sums to $175.3 trillion in PV terms. This need can be satisfied only through increased borrowing, higher taxes, reduced program spending, or some combination."

That $175.3T lines up with the ~$200T number that Druckenmiller has been using for the all-in liabilities of the US government when you take everything into account. And of course, at this point we are in monopoly money territory, because:

• The entire fedguv only collected $1.86T last year

• That number is itself juiced by deficit spending

• The dollar is down ~25% in real terms since 20203

• And the "177T" in asset value plummets if liquidated

• ...or if there is a financial crisis, or both

So: no, the US government doesn't have nearly enough to pay for what it owes. It's made promises to everyone, from allies to retirees, that it simply can't keep. To hang on to power amidst that web of broken obligations, it is going to get nasty on a level beyond which most can really comprehend.

I appreciate, however, that we are starting to glimpse the endgame. When a bankrupt state collapses, it's like a black hole. It sucks everything it can into its gaping maw. Everything it can possibly seize, will be seized. Everything it can possibly print, will be printed.

All your assets become its assets.
All it takes...is all you got.

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Republicans are becoming the men’s party. They are repositioning to present themselves as the party of strong men and the women that love them.

This is both obvious and non-obvious.

Obvious because the Republicans have been attacked for decades as the party of “rich straight white men”, so of course they’re the men’s party! Non-obvious because this actually means a distinct shift in emphasis relative to the recent past. Let us count the ways.

1) First, the Republicans are no longer the party of “white men”, but anti-anti-white men. It’s a big tent; you just need to extend the common courtesy of not attacking white conservatives and libertarians on the basis of race.

2) Second, it’s not just the party of men. Because married men, married women, and single men all vote Republican. As of 2022, only single women vote >50% Democrat; the state is their surrogate provider and protector.

3) Third, it’s now the party of strength. That could be actual physical strength in its Bryan Johnsonian or BAPian variations. It could be financial strength like Thiel or technological strength like Elon. It could be prowess with arms like Erik Prince or prowess with words like Vivek. Or it could simply be the moral strength to assert that the X and Y chromosomes exist.

4) Fourth, it’s not really the “multiracial working class party” that Sohrab Ahmari has been talking about. The Republicans certainly are more multiracial and arguably more working class than the past…but that’s because they’ve pulled in men from those groups who respect strength and are repelled by victimology.

A Republican today could well be a working class carpenter, but wants to get wealthier some day, and maybe run their own business. And they might be nonwhite, but they don’t define themselves by their race nor make a habit of attacking white people as white.

In other words, they don’t define themselves by their victimization but by their aspiration. Democrats are the party of victims, Republicans are the party of men.

5) Fifth, modern Republicans are ultra-libertarian. It’s about individual ownership of firearms, redecentralization of power to the states, deregulation, Bitcoin, and anti-institutionalism. There is some continuity with Reaganism, but far less emphasis on military service and far less trust in centralized authority. Much more sigma male than company man.

6) Perhaps the single biggest thing about redefining the Republicans as primarily the men’s party is that it ensures they are always competitive. No matter what happens demographically, the percentage of men is flat at roughly 50% — and everyone has strong men they admire and respect. That gives all-weather traction and global appeal.

So, that draws the political battle lines. On one side, strong men of many ethnicities and the women that love them. On the other side…the opposite of that.

Postscript

What should we do with weak people? Help them become strong.

I thought this was obvious too, but the question makes me realize it’s not. I guess folks expect a cartoon villain answer like “let the weak die, it’s their problem” or even “the strong do what they will, the weak do what they must.”

But helping others become strong is the right strategy. It’s really just the teach-a-man-to-fish proverb. You can reconceptualize it as enlightened self interest, as win-and-help-win. Essentially you want to help people in your tribe level up. That helps you and it helps them. It could mean benching with them, as per the image above. It could mean investing in them, taking shared risk and shared reward. Or it could be training them as an apprentice. Or some combination of the above.

The point is that you win and they win. By strengthening others, you strengthen your community, and thus indirectly yourself.

Note that this isn’t pure kumbaya. It’s almost like arms control — you can’t help just anyone become strong. Democrats certainly aren’t hiring or promoting Republicans; they don’t help people outside their tribe. So the win-and-help-win strategy only works with people who (a) admit they’re weak in a given area, (b) have the humility and self-discipline to become strong, and most importantly (c) share your values.

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We’re now about 18 months into the AI revolution. One thing that was uncertain in late 2022 was whether prompt engineering would be around to stay, or whether better AI would quickly obviate it.

I now think it’s around to stay and I have an explanation that makes sense to me, at least: prompt engineering is just a subset of software engineering.

That is, prompts are tiny programs written in natural language. But the API isn’t specified and varies between models. So guessing the right “function calls” with clever use of vocabulary is a huge part of the game. On the other hand, even if you don’t guess *exactly* the right words to use, the model will often do what you mean.

This is different from how we normally think of an API, which is both more legible and more fragile. The exact words to make an API do what you want are written down, but if you don’t say those exact words it won’t do what you want.

Even given this difference, the concept of prompts as tiny programs using hidden APIs helps explain the bizarre magic associated with specific phrases. I’m reminded of Quake3’s fast inverse square root, which has a famously obscure incantation in C that just so happened to deliver a 4X speedup.

More code now looks like that, and it makes sense. C is how you talk to machines and English is how you talk to humans. So, just like you write part of a large application in C for performance, you’ll also write part of it in English for dealing with unstructured data.

You can go further with this analogy. Once you think of prompts as code, you can probably generate model-aware syntax highlighters for favored keywords. You can maybe automatically generate API-like docs from a model for the most common use cases.

And you can think of every new model you add to your codebase as roughly analogous to adding a new programming language — because just as it takes time for someone to ramp up on the idioms of Rust, they’ll need to play around with the latest Mistral to get the hang of how to talk to it.

Anyway — this is all probably obvious to folks spending 100% of their time in the field, and is similar to some of the things Karpathy has posted about, but at least for me it was a useful articulation of why prompts are around to stay: prompts are tiny programs.

Postscript

The (now routine!) presence of a prompt in the middle of a pipeline that achieves state-of-the-art (as in this study) is what “prompted” this post.

The first reaction with prompts is that really relying on them in your codebase as much as you do source code will be kind of hacky and fragile…but it’s fine *if* the output of that part of the code can tolerate statistical noise.

To reduce the noise a bit, we probably want something like pip’s version freezing for prompts, where the exact model and version number is always included alongside the prompt in some form.

The DSPy library from this tweet is one way of using prompts in programs more robustly, by abstracting away the low-level strings and turning them into explicit function calls. Pretty interesting.

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Ninety years ago, FDR and his fellow travelers rode the 20th century arc of centralization. The chokepoints of then-new technologies for mass media and mass production allowed them to gain control over the population, recruit top talent for their "Brain Trust", and seize the gold after a series of epic legal battles.

Those gold clause cases are forgotten today, but received as much contemporary coverage as 9/11 or the Moon Landing. They were the most important issue in the country, receiving far more coverage than seemingly comparable Supreme Court decisions like Roe vs Wade. Why?

The reason is that the transition from a gold-backed to fiat-backed system was comparable to a soft communist revolution, as the *visible* seizure of gold laid the groundwork for the *invisible* seizure of wealth via money printing.

And the classically trained judges at that time fully understood this. Justice McReynolds' then-famous dissent denounced the ruling in the harshest terms, noting that the "Constitution is gone" and the "dollar...may be 30c tomorrow, 10c the next day, and 1c the day following".

McReynolds was right. While the court was forced into a grudging institutional surrender by FDR's threat of court-packing[2], the gold clause case affected every economic decision-maker in the country, as it amounted to the US government explicitly defaulting on its bonds by seizing the assets of its citizens, laying the groundwork for the century of monetary debasement to come.

Now all of that is unwinding. FDR's team could ride the wave of centralizing technology that built giant states around the world. But today, technology favors *decentralization* — personal computers, end-to-end encryption, mobile phones, and of course cryptocurrency.

Thus, top talent isn't being pulled into a government Brain Trust. It's being brain drained *out* of the US establishment. And as a consequence the epic legal battles are, on balance, going our way.

It's not just the DC Circuit case. The ideological conflict between decentralization and centralization is reflected in the 3-2 vote for the Bitcoin ETF approval itself. Read Peirce's brilliant pro-liberty approval, Crenshaw's dour denial, and Gensler's reluctant approval.

You'll see echos of the gold clause case, but in reverse. This time, it is the centralized state that is being forced into a grudging institutional surrender. And a surrender it is, as Crenshaw's dissent makes clear:

"...there is no primary regulator for the bitcoin spot markets. Spot bitcoin ETPs will be participating in an unregulated, fragmented, continuously traded, global free-for-all. Even if there were a primary regulator for this market, much of it could be beyond the reach of U.S. regulation..."

Let that sink in! This is what the US establishment truly fears: not Bitcoin as "fraud", but Bitcoin as freedom. They want to rule not just you but the world, so they're scared of the prospect of "a global free-for-all..beyond the reach of US regulation". And they know that any spot ETF will bid up the price of self-custodied Bitcoin outside their control, as Satoshi intended.

So: since FDR's seizure of gold, our lives have revolved around the centralized state rather than the decentralized market. The state has had control for so long we've forgotten what freedom is like. But now gold is slipping out of their hands, and back into yours.

And history is running in reverse.

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In the dystopian novel 1984, the protagonist realizes that a senior English Socialist Party member can turn the telescreens off.

They have that power.

So too in the dystopian reality of 2024. Today, we’re realizing that a senior American Democrat Party member can turn the homeless encampments off.

They too have that power.

In fiction, the Party member was O’Brien. But in our reality, the Party member is Newsom. That’s Gavin Newsom: former mayor of San Francisco, current governor of California, and possible future President of the United States of America if Biden is firmly escorted off the stage.

As we’ll detail, Newsom recently pulled off an under-reported diplomatic coup by not only getting a rare in-person meeting with Xi Jinping, not only getting Chinese state-run media to sing his praises, but apparently getting1 Xi to come out in person to the Nov 11-17 APEC Summit in his home city of San Francisco, California.

In advance of Xi’s visit, Newsom just held up a hand and rolled up SF’s seemingly permanent homeless encampments. He spent the political capital to do this, overriding all the Democrats paid by the city to feed drugs to addicts. Of course, Newsom could have done this at any time2 to the homeless industrial complex, but why now? Because their local business model is temporarily less important than his global power model: the question of how to hold onto power for his Party when his country is in decline.

If Newsom pulls it off, we may soon see rapprochement between the farthest culturally left party in the world (the ultra-woke American Democrats) and the farthest culturally right party in the world (the ultra-nationalist Chinese Communists). That is, after the last few years of kicking and screaming, the declining Democrats may actually settle for a power-sharing agreement with the Communists to become their allies — and perhaps eventually their clients. At least, that’s certainly what Chinese state-run media seems to think of Newsom’s visit!

• Xinhua: “Welcome more Newsoms to come”

• China Today: “Newsom said he is willing to push California…to be China's long-term, stable and strong partner”

• CGTN: “Newsom's visit…strengthen the relationship between China and the US”

• Also CGTN: “California governor says China's success to benefit the world”

I mean, “Welcome more Newsoms to come”?!?

As for Newsom himself, he marketed the visit in terms of “combating xenophobia” and “solving the climate crisis” — appealing to Democrat moral values to forestall an online mob — but he also managed to squeak in “economic development & tourism” and then more firmly state that “divorce is not an option”… all of which is really quite different from the current administration’s push to “slow China’s innovation rate” and to decouple/derisk.

I mean, look…I’m not a warmonger. I’m on record as saying that a US/China war would be disastrous for the world. And so in that limited sense, yes, detente between the US and China is preferable to World War 3. But Newsom and Xi aren’t universally known for putting the best interests of their people at heart. So we should ask questions.

First, to say the least, this is a dramatic tonal change from the last few years of US/China relations. When’s the last time you heard an American politician say that "China’s success [will] benefit the world!” or Chinese state-run media say that they welcome more visits?

Something has changed. And while it might not be formally announced for some time, it’s not too early to start thinking about what a Democrat/Communist pact might look like, of the kind that Xinhua seems to already be foreshadowing. Maybe something like this?

Oh, wait. That’s the good version, full of cooperation on “dealing with the spread of infectious diseases.” Only a cynic would point out how the last big US/China collaboration on infectious diseases ended up…and only such a cynic would say that the bad version of a Democrat/Communist pact might look something like this:

That’s more like it: content moderation with Chinese characteristics! It’s just part of what we’ve been vectoring towards for years. Looked at the right way, this last decade was essentially about copying China without admitting it, from the Atlantic pushing for China-style censorship to NYT calling for China-style industrial policy.3

All of that is precedent for what a Democrat/Communist pact might look like. Think about how Hollywood came to rely on Chinese money, preaching civil rights while practicing selective censorship…but at country scale. A Democrat/Communist pact could be a return to Obama-era Chimerica, but on different terms, where China becomes at least an equal partner and perhaps eventually the unofficial driver.

With that said — yes, the silver lining of such a rapprochement is that we could avoid WW3. But it’s a monkey’s paw outcome, because detente would allow Democrats and Communists to focus on their many other enemies within and without — from American conservatives to Chinese liberals, from India to the Internet. And so the implications for everyone that isn’t a Democrat or Communist are ominous.

Now, I fully grant that Chinese state media “welcoming more Newsoms to come” isn’t yet an official announcement of more Newsoms to come. I further grant that Newsom announcing that he wants to be “China's long-term, stable and strong partner” does not yet mean that he is China’s long-term, stable, and strong partner.

But you gotta admit, it is suggestive.

So, this is a speculative post about (a) why a Democrat/Communist pact is possible and (b) what the implications would be for each faction if it goes through. It’s just a scenario, of course, but there are enough signals in this direction for it to be worth contemplating.

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Why a Democrat/Communist Pact is Possible

First, a Brief History

To understand where we might go, we need to understand where we’ve already been. From 1972 (when Nixon went to China) and 1978 (when Deng turned China capitalist), until 2015 (when Trump escalated with China), the US and China were basically at peace.

Neither Democrat nor Republican leadership cared much about low-wage jobs being sent to China over this period, because (a) these were initially at the bottom of the value chain, (b) environmental and labor regulations made them infeasible in the US anyway, (c) victory in the Cold War meant China would eventually convert to democracy, (d) the rightist value of free trade and the leftist value of cosmopolitanism meant that it’d be both expensive and immoral to favor Americans, and finally and most importantly (e) China was perceived as a submissive third-world sweatshop that wasn’t capable of posing a real threat to the global hyperpower.

As a consequence, the American public didn’t care about China until 2020, when media coverage suddenly shifted sentiment.

A more detailed timeline lets us see why this shift happened in 2020.

• 1991: When Krauthammer writes “The Unipolar Moment”, China gets only the briefest of mentions and isn’t taken seriously as a threat.

• 2000-2010s: the US continued ignoring China to fight in the Middle East. During this period, the US actually bombed Uighurs in Afghanistan and put Chinese Uighur militants in Guantanamo.

• 2011: After the financial crisis, NYT even proposed selling Taiwan to China for $1T in debt forgiveness, signaling how little the US cared.

• 2015: Trump saw an opportunity with blue collar Republicans harmed by offshoring, pushed China to the forefront (“China, China, China”), and was mocked as a racist for doing so. During the Trump years, Russia was the primary antagonist rather than China.

• 2019: Obama releases American Factory, a movie promoting peace and trade with China as an implicit rebuke to Trumpism. But in the same year, China defeats what they saw as US-backed democracy activists in Hong Kong, escalating negative sentiment within China towards the US and vice versa.

• Mid 2020: This is the flip. Once COVID goes pandemic, the US establishment fully flips to copying China while also attacking China. This happened most obviously on lockdowns, but also on speech controls, “industrial policy”, and even mimetic rivalry on Taiwan.4

• 2021-2022

  • After the election, the regime completely u-turns on China, adopting many Trumpian positions, reversing Obama-era trade policies, and attempting to stop China’s rise.

  • They also allowed people to speak about the lab leak theory — before the election it was politically useful to blame Trump alone, but after the election it was politically useful to acknowledge China may have been responsible.

  • All of this anti-China turn was wrapped in cynically patriotic rhetoric — just a few months after tearing down George Washington and declaring America systemically racist, Democrats suddenly repositioned themselves as super-patriots to the right of Republicans on China.

• 2022-2023

  • Hot war with Russia and trade war with China both escalate. Inflation is acknowledged as dangerous after it was denied, and Treasury really wants foreign buyers (especially China) to resume buying declining US bonds.

  • Then some Democrats start to realize they’re losing in Ukraine, have a new front opening in Israel, aren’t actually able to build a domestic version of TSMC, and can’t possibly produce enough shells, ships, or conscripts to fight a real war with China.

  • Meanwhile, China ships the Huawei Mate 60 Pro (showing that US sanctions don’t work), supports Putin publicly (showing that they aren’t deterred by US sanctions), and imposes Micron sanctions (showing that they can also sanction the US).

Now center left pundits have begun acknowledging that Pax Americana is over, that the US is economically in dire straits, that it can’t really fight two wars let alone three, that it faces military and financial limits — and that it might not actually be able to take China in a fight.

That’s likely why a procession of senior Democrats has been going to China, from Blinken (June) to Yellen (July) to Raimondo (August) to Schumer (October), to get a deal of some kind. They’ve all been snubbed in various deniable ways…until Newsom somehow managed to get not just a smiling handshake from the normally impassive Xi, but a stunning in-person visit by Xi to his home turf of San Francisco.

Why?

The Five Why’s of Why We See Xi

Why do we see Xi meeting with Newsom and then flying out to San Francisco for an in-person meeting at an eminently skippable summit in the middle of the chilliest period for American/Chinese relations in decades? Toyota has something called the Five Why’s, which we can use here.

• Why are SF’s streets suddenly clean? Because Xi is coming.

• And why is Xi coming? Because Newsom likely got him to come, as the trip wasn’t confirmed before Newsom’s meeting.

• And how did Newsom do that, when so many others failed? He may have promised him something.

• And how could he promise anything, given that he’s only a governor? Xi must think Newsom could be the next president.5

• And what could Newsom promise? Probably detente between Democrats and Communists, as explicitly discussed in all these Chinese articles.

Again, the context that’s been underreported is that everyone else from the Democrats has been trying something like this, but all of them failed. Blinken, Yellen, Raimondo, and Schumer were all rebuffed, while the Chinese “welcome more Newsoms to come.”

So, no one else among the Democrats was seemingly able to pull off a deal whose hazy outlines already resemble at least Nixon-Mao if not Molotov-Ribbentrop. Because after all the recent water under the bridge, a Newsom-led Democrat/Communist rapprochement would be an epochal shift. It’d be a ruthlessly pragmatic move in which a younger Democrat finally acknowledges that their party is no longer a total overdog capable of waging simultaneous wars against tech, Trump, Russia, and China — and must make peace with at least one rival tribe.

A Separate Peace With China

Here’s the thing: after losing in Afghanistan and now Ukraine, losing control of Twitter and now Treasuries, and losing support in first the Middle East and then the middle of their party, Democrats are besieged on all sides. Moreover, an election year is coming up — and while they are prosecuting Trump and persecuting Elon, it really isn’t great optics to jail all the Republican candidates as insurrectionists.

So, the Democrats need to make peace with some rival tribe to retain power. Would that mean reaching out to their domestic Republican rivals, their “fellow Americans”? Hell no! Democrats won’t hire Republicans and 95% of Democrats won’t marry them either. So they certainly won’t ally with Republicans in any except the most cynical of ways — to get them to pay the bills and die for empire.

After all, in 2023, the entire point of being a Democrat is the holy war against the Republicans — the racist, sexist, homophobic, transphobes responsible for every form of oppression, the straight white males (and white-adjacents) who need to be politically dispossessed to defend democracy. This has been the constant message from media and academia for decades now, and the result is BLM/Hamas.

Smarter Republicans do understand how much Democrat hatred is directed at them in the name of stopping hate, but the dumber ones think Democrats are somehow “with them” against China, that politics stops at the water’s edge, and that war with China would somehow unify America — even though neither the war in Iraq nor the war on COVID accomplished anything but division, and even though every social graph shows that it’s not one country but two parties.

The particularly dumb Republicans see the “bipartisan” votes on China and think they’ve finally shamed the Democrats into seeing the light and acting as fellow Americans, perhaps by telling LeBron repeatedly that Uighur Lives Matter. In reality, what Democrats actually want is to be part of the most powerful state in the world. From 1978 to 2019, that was obviously the USA. But after they won their tussle with Trump for the Presidency, Democrats started to get threatened by China…which is why they’ve been unsuccessfully fighting them for the last four years.

So, yes, as of right this minute Democrats are willing to use Republican votes against China. But like Ted Kennedy or FDR before him, an ambitious Democrat like Gavin Newsom may believe that a Democrat/Communist detente might just generate more power than a Democrat/Republican confrontation.

After all, US manufacturing and the US military ain’t what it used to be. China is #1 in steel, #1 in trade, #1 in high speed rail, and #1 in shipbuilding. Meanwhile, the US is struggling to produce enough weapons for just Ukraine and Israel, let alone a war with China. And it estimates that it’d lose more troops in one week fighting China than in one decade in the war on terror.

By contrast, a Democrat/Communist pact may mean China resumes buying Treasuries, ships goods to lower inflation, filters Democrat-designated “misinformation” on TikTok, and intercedes with Iran and Russia — all of which could produce domestic and foreign policy gains that help keep Democrats in power. It’d be a Chinese bailout6 of American Democrats, when their numbers otherwise look extremely grim.

And that’s why Newsom may be willing to negotiate a separate peace7 with Xi between Democrats and Communists, leaving Republicans out in the cold. Again, this is barely an inference at this point; China “welcome[s] more Newsoms to come” and Newsom wants to be“China's long-term, stable and strong partner”. Newsom says “divorce is not an option”, and we haven’t seen Xi smile like that in a long time.

But how could Democrats and Communists ever collaborate?

The Farthest Left and the Furthest Right

One might argue a Democrat/Communist pact doesn’t make any ideological sense. As detailed in this chapter on The Global Flippening, American Democrats are the farthest left party in the world on the cultural axis, while the Chinese Communists are the farthest right. We’re talking about ultra-wokes flying the progress flag on the White House and Han nationalists purging “sissy men” from public life. How could they possibly get along?

But if you remember 1972, Nixon’s Republicans were on the right and Mao’s ChiComs were on the left. And if you go back to 1939, Hitler’s Nazis were on the far right while Stalin’s Soviets were on the far left.

These pairs of regimes didn’t like each other, but their deals focused on mutual enemies. The secret part of the Molotov-Ribbentrop pact allowed the Soviets and Nazis to carve up Poland between themselves in 1939, while the secret terms of the Shanghai Communique allowed the Americans and Chinese to table Taiwan and (de facto) team up on the Soviets after 1972.

While one of those deals did blow up within years as the Nazis and Soviets began fighting each other, the other one lasted for decades as the Chinese and Americans continued trading with each other.

Moreover, the secret part of Molotov-Ribbentrop where they agree to divide up Eastern Europe wasn’t fully revealed till after the collapse of the USSR in 1992. The secret part of the Shanghai Communique where Nixon agreed to concede on Taiwan wasn’t revealed till 2003.

So we might not know all the details of what Newsom and Xi are discussing for a while. But we can make an educated guess by asking a related question, which is: what are the shared interests and mutual enemies of both Chinese Communists and American Democrats?

A Shared Interest in the Most Powerful State

The shared interest part is easy: Democrats and Communists both love the state, and the Democrat base is more friendly to China than the Republican base. So a new G2 under Newsom/Xi has enough Democrat support from both elites and base to reshape the “international community.”

Democrats love the state

If Republicans want to be part of the most powerful nation, Democrats want to be part of the most powerful state.

That is: Democrats are wired differently from Republicans. While Republicans want to be part of a tight-knit community that organically scales from baseball and hot dogs to aircraft carriers and world domination, Democrats are fine with simply becoming senior administrators of a multi-cultural, multi-ethnic, and even multi-national global empire.

For example, Republicans complain that the US is focusing more on the Russo-Ukrainian border than the Texas-Mexico border. But that’s because Republicans sincerely think of the US as a country populated by people with shared culture. Democrats by contrast think of the US as an empire, governed by enlightened bureaucrats, and recognize that the actual border of democracy is indeed in Ukraine. For a Democrat, the internal migration from Mexico to Texas is of no more moral concern than the internal migration from New Mexico to Texas. All of these are just provinces of the American Empire. And if you expand the borders of the empire, sure, you may dilute the founding nation, which would anger Republicans — but you expand the reach of the state, which would favor Democrats.

So, while Republicans would find the idea alien, it’s not that big a deal for Democrats to work out a power-sharing deal with Communists to manage a global empire. Again, that’s been part of the playbook since FDR and Ted Kennedy.

Young Democrats less negative on China

Also, if the Republican base leans Russia, the Democrat base likes China more.

Some Republicans have a soft spot for Russia, which they see as surviving communism to rebuild the Russian Orthodox Church. Democrats by contrast hate Russians, because (a) they’re mostly white Orthodox Christians, (b) they blame them for Russiagate, and (c) the Russians refuse to submit to the American state.

These sympathies are reversed when it comes to China.8 Republicans now see the Chinese as the most threatening outgroup; while not acknowledged, China is what unenlightened generations would have called the “Yellow Peril.” But the TikTok Democrat has much more sympathy for China. After all, the CCP is non-white, non-Western, and calls themselves communists…so can they really be that bad? Or so the logic goes.

So, while the Republican base would hate the idea, it’s also not that big a deal for the Democrat base to go along with Democrat elites on China detente. Basically: young Dems like TikTok, don’t want to fight a war, and think that because China calls themselves “communist” that the CCP is on the left. Woke for Chinese nationalism is like LGBTQ for Hamas, an easily papered-over paradox.

A Mutual Enemy in Decentralized Networks and Independent Nations

We’ve spoken of shared interests. But who’d be the mutual enemies of any Democrat/Communist detente?

• Chinese liberals. The CCP doesn’t like Chinese liberals. They’ll want American Democrats to stop funding perceived color revolutions like Hong Kong, and to give them a free hand in their sphere of influence like the US has historically given other regimes. The US is already looking the other way on activists like Joshua Wong, so this could plausibly happen.

• American conservatives. US Democrats don’t like American conservatives. They’ll probably want Chinese Communists to give them more control over TikTok, to ship them goods to reduce inflation, and to buy Treasuries to maybe kick the can for a bit longer, all of which could boost them against Republicans. Personally, I’m skeptical as to whether even a Democrat/Communist pact to keep buying Treasuries could forestall the level of economic reckoning to come…but maybe we see both a crash and a pact, wherein a relatively functional Communist regime ships hard goods to help Democrats maintain domestic power. It may not be too different from how the Chinese support dysfunctional regimes in Africa.

• The Internet. Both Democrats and Communists hate an uncensored, uncontrolled internet. They want to regulate AI, regulate crypto, regulate everything. And neither of them likes their troublesome domestic tech CEOs, whether Jack Ma or Elon Musk.

Other groups would have more mixed outcomes.

• Europe. They’re both neutral/positive towards Western Europe, which has basically taken itself off the map anyway by deindustrializing itself in the fight against Russia.

• India. On India, while Democrats have been making noises of support and the Chinese have recently been polite, they could both flip on a dime to neutral/negative from neutral/positive if Democrats and Communists align with each other. However, there’s too much economic growth in India to flip to fully negative.

Finally, Democrats and Communists would need to settle conflict zones.

• Taiwan. There might be some kind of grudging trade on Taiwan, where the US and China agree on the status quo. If China achieves a cultural victory in Taiwan, by getting the less-US-aligned parties to win, maybe they also agree to keep shipping chips. This may be how the world averts war.

• Ukraine. We’re already seeing the US backing off on Ukraine; perhaps they’ll ask China to restrain Russia from doing anything else.

• Israel. Neither of them is particularly fond of the Israelis. On Israel, the Democrat base is fighting Biden, while the Chinese are leaning towards Palestine. But one major ask might be for the Chinese to get Iran to back off from supporting Hamas and attacking US forces, perhaps in the shared interests of maintaining a reliable flow of oil.

I recognize of course that all of this is speculative. You’re not supposed to think about this kind of thing until it’s officially announced. Even with Chinese state media “welcoming more Newsoms to come”, even with Newsom announcing that he wants to be “China's long-term, stable and strong partner”, we are not yet in that future where more Newsoms have come and Newsom is China’s long-term, stable, and strong partner.

But we could be.

Ever seen those superhero movies where Batman hunts down the villain and leaves him hogtied in cables for the police to mop up? That’s what happened with Sam Bankman-Fried. The internet hunted down the fraud, collected indisputable evidence, and delivered him gift-wrapped to the government. Then everyone from Elon to India yelled online for a full month till the state finally, grudgingly picked him up.

Now that he’s been convicted, we’ve been treated to a bizarre rewriting of history in which obviously the system worked because it was shamed by Twitter1 into pursuing an obvious crook. And yes, it was Twitter that drove the government to act. How do we know? Because the entire case was broken on crypto Twitter, from beginning to end!

• It was Ian Allison revealing that SBF had no money, not Dan Primack asking whether SBF could cure world hunger

• It was Erik Voorhees playing hardball with SBF on Bankless, not Joe Weisenthal throwing him softballs on Odd Lots

• It was David Z. Morris calling FTX a crime, not David Yaffe-Bellany claiming SBF was a philanthropist

• It was Crypto Twitter proving SBF was a fraud, not NYT Dealbook clapping for that fraud

• And it was Twitter posting about SBF’s donations to Democrat politicians, even as those same politicians were welcoming him to Congress

NYT, Congress, Bloomberg, Axios — all these establishment organs failed where Coindesk, Bankless, and Crypto Twitter succeeded. Not a single corporate journalist, politician, regulator, or policeman thought to investigate SBF until Erik Voorhees smelled a rat and Ian Allison found the rat. In fact, even the least self-aware corporate journalist in modern history admitted that citizen journalists “outshine traditional media on coverage of FTX implosion.”

So: yes, the only reason SBF was even exposed, let alone convicted was because of people posting on Twitter. Twitter is important! That’s why the regime didn’t want Trump to post on there, doesn’t want you to post on there, and doesn’t want Elon to let you post on there. As far back as the Arab Spring, it was clear that Twitter could topple regimes. And in this case, it toppled the regime’s #2 donor, “one of the people who is among the most responsible for [Biden] being in office.” Needless to say, this was not an outcome any establishment figure sought before the events of Nov 2022.

Ok. With that out of the way, let’s do the long version, just to make sure the actual history of this wretched episode is properly recorded somewhere.

THE LONG VERSION

AN F ON SBF

No, the system did not work.

If you get the last question right on a test after failing everything else, you get an F. And that’s what happened here. The system we pay trillions of dollars for failed in almost every respect but the very last. The politicians failed, the journalists failed, and the regulators failed. The criminal justice system eventually succeeded, but only after failing everywhere else — and then too only after the Internet built the entire case for them.

Why do we say the system failed?

• Let me know when the politicians SBF helped elect with stolen funds2 tender their resignations, starting with Biden.

• Let me know when the journos who flacked for SBF publish lengthy retractions.

• Let me know when the regulators who attacked Bitcoin ETFs while meeting with SBF admit they’re incapable of regulation.

• And let me know when the state admits they only pursued the case after the Internet assembled unambiguous evidence of his guilt, slicing through his many deceptions.

Obviously, none of this will ever happen. SBF’s stolen money helped swing elections across the country. These actions will never be unwound, which means SBF in essence took one for the team — and the bad guys got away with it again.

Point: the entire sordid SBF saga isn’t some great triumph for the US establishment! It’s as much an indictment of them as it is of him. Fortunately, we do have the internet. And as we’ll detail, it was that decentralized network that really caught SBF — not the centralized state.

Let’s take a quick trip down memory lane, shall we?

POLITICIANS FAILED

Recall that SBF was the #2 donor to Democrats after Soros himself. It’s admitted that he was one of the people most responsible for putting Joe Biden in the White House, with what is now admitted to be stolen money. Democrats like Maxine Waters praised him for being “candid” and “welcomed” him to testify to Congress even after his fraud was public, and literally blew him kisses at Congressional hearings.

In fact, Waters — the sitting Chair of House Financial Services — was “surprised” that SBF was arrested before he had the prestigious opportunity to make his case before Congress. Why was she surprised? Perhaps because SBF had been working closely with her and others on capturing the regulatory state, through a bill that would have criminalized decentralized finance but benefited SBF’s personal finances.

So, the politicians failed in their nominal job of passing laws that are in the best interests of the public. SBF legally bribed them into pushing legislation that would favor his centralized business over everyone else’s, much like what’s now happened in AI. And Bankman-Fried would have succeeded too, but for those nosy kids on the Internet.

JOURNALISTS FAILED

Next, remember that SBF was the toast of the town in mainstream media. Corporate journalists like NYT’s David Yaffe-Bellany tirelessly flacked for SBF before, during, and even after his monstrous swindle came into public view. In fact, the New York Times not only platformed SBF after millions knew he’d stolen billions, they even gave him a loud round of applause!

The contrast to other crypto coverage couldn’t be starker. For years, the media’s message was that Bitcoin was a fraud, but Bankman-Fried was a friend. He showered stolen money on NGOs and media outlets like Semafor and ProPublica3, and in return they anointed him “JP Morgan of crypto.”

So, the journalists completely failed in their nominal job of informing the public. SBF played the "dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us”, and made sure the journos believed he was their ideological tribesman. Thus they wrote nice things about him, and would have continued to — again, if not for those nosy kids on the Internet.

REGULATORS FAILED

Also remember that the regulators failed. Gary Gensler met with SBF privately, an audience given to very few, all while attacking countless other projects publicly in cases they’ve now lost. The meeting mentions “conditional no action relief”, which in regulatorese translates to “we will not pursue enforcement against FTX.”

So, the regulators also failed in their nominal job of (a) flagging bad projects and (b) passing good projects. Instead they spent their time meeting with SBF while attacking Bitcoin ETFs. And why? Probably because SBF pushed for more regulatory power and greased the hands of the right politicians. So the regulators granted him special favors like private meetings, and Congress steered crypto regulation to his preferences — all of which he would have gotten away with, if not for those nosy kids on the Internet.

THE INTERNET SUCCEEDED

And what exactly did those nosy kids on the Internet do? Well, they blew the case wide open.

It started with crypto investor Nick Tomaino tweeting that FTX was suspect in both its trading activity and its policy advocacy. It continued with crypto CEO Erik Voorhees politely confronting SBF on the Bankless crypto podcast. And it culminated in crypto outlet Coindesk publishing an article by Ian Allison on SBF’s shenanigans that blew the fraud wide open.

Again: none of this was driven by legacy media, politicians, regulators, or police — which is why even WaPo admitted that citizen journalists “outshine traditional media on coverage of FTX implosion.”

SATOSHI > SBF

After Coindesk’s revelations, things moved quickly. Binance CEO Changpeng Zhao sold his stake, SBF claimed assets were fine, and the community immediately tested his claims. And this is the decentralized “fact check” that actually did him in. You see, because of Satoshi’s invention, Samuel Bankman-Fried couldn’t continue the fraud by minting fake funds on his centralized server, as he did for his trading firm. Once millions of people found that they couldn’t move their money to a decentralized blockchain, the illusion collapsed, and so did his exchange.

This truly cannot be emphasized enough: no legacy journalist, politician, regulator, or policeman caught Bankman-Fried’s fraud! Only the blockchain did. Up to the very end, SBF was saying that “FTX is fine, assets are fine”. But because of what the blockchain represents, millions of people around the world were able to independently fact check him by testing their ability to withdraw and then viewing the results on chain. SBF could deceive a failed State, but he met his match in the decentralized Network. He couldn’t enable withdrawals because he wasn’t good for the money.

In short: the Network succeeded where the State failed. It was Crypto Twitter that asked the hard questions, that did the actual citizen journalism, that found the unambiguous smoking gun proof in the form of insufficient onchain balances, and that published that proof on the internet. It was the Network that was able to come to a firm decentralized consensus that he didn’t have the money, even while State loyalists kept portraying SBF as a “billionaire”. All the police did from that point on was a slow, grudging mop-up.

THE CRIMINAL JUSTICE SYSTEM SUCCEEDED, ONLY AFTER THEY FAILED

As mentioned, the internet had cryptographic proof that SBF was a criminal on a historical scale by Nov 11, 2022 when FTX paused withdrawals and its onchain balance of BTC dropped from 20,000 to 1. SBF and his cronies lied to the public continuously during this period about having plenty of funds, but the reason he couldn’t enable withdrawals is because he couldn’t lie to the Bitcoin blockchain.

Millions of witnesses could independently confirm the fact that SBF had stolen their money by monitoring the Bitcoin and Ethereum blockchains. Like Batman, internet volunteers had delivered SBF to the police hogtied and with indisputable evidence stapled to his chest.

And then…nothing. For weeks, SBF went on his Good Morning America tour. He got fawning coverage from Yaffe-Bellany at the New York Times, which even other journos were appalled by at the time. He got to make his case at Dealbook to a rousing round of applause. He was “welcome” to testify before Congress by the chair of House Financial Services, a privilege that (to say the least) isn’t typically how white collar prosecutions begin. And he was left free to roam around, tweet, and otherwise spread uncertainty for weeks.

Why?

We need to drill into this point because one of the core lies being circulated online right now is that of course the state is completely trustworthy, and only a paranoid lunatic would think it was internally conflicted about arresting SBF during this period. To address this, we’ll need to first discuss (a) trust in the police, then (b) the timeline of the pickup, and finally (c) the tension in the party.

ABOLISH THE POLICE, THEN TRUST THE POLICE

The first question is: should we have simply assumed it’d all turn out fine? No. Remember, Democrats spent much of 2020 screaming about abolishing the police. Then, with SBF suddenly they pivoted4 to “lol, can’t believe you didn’t trust the police!”

But we don’t trust the police. Because the SBF case didn’t happen in a vacuum. Faith has legitimately been lost in America’s once-admirable legal system.

After all, thanks to Soros prosecutors, crime is de facto legal in major American cities. Hard drugs are sold in public. Supermarkets and trains are looted in broad daylight. Car windows are smashed, and everything is grabbed. Mobs block roads and swarm passerby at BLM/Hamas meetups. And the police do nothing.

Meanwhile, as the prosecution of actual crimes winds down, the prosecution of political crimes ramps up. The Republican Douglas Mackey is spending almost as much time in jail for tweeting a joke as the Democrat Colinford Mattis is for firebombing a police car. We’re in the era of show trials, where the Russiagate charges are slowly admitted to be false and the Hunter Biden allegations are gradually acknowledged to be true — but only after the elections when it doesn’t matter anymore.

None of this is justice. So, no, we don’t trust the police. And the fact that the criminal justice system eventually, grudgingly got the right outcome after massive international public pressure on an obvious fraud who stole ten billion dollars in broad daylight is not something to brag about. It’s like the (NSFW) Chris Rock clip: this is the bare minimum of what the state is supposed to do! It doesn’t get a cookie.

JUSTICE DELAYED IS JUSTICE DENIED

Now to the second point: could SBF have been picked up faster? Because for weeks after millions of people could publicly prove he’d stolen their money, SBF was invited to speak at NYT’s conferences, testify before America’s Congress, and generally arouse significant uncertainty in whether justice would ever be served.

Countless state apologists took to Twitter to claim that this was simply the fastest it could be done, and the poor unwashed masses just didn’t understand legal procedures. Against this we’ll make just three points.

1. Alexey Pertsev was jailed without charges in days

First, a genuine freedom fighter like Tornado Cash founder Alexey Pertsev was picked up within two days of OFAC summarily inventing a controversial new interpretation of an existing law. He was held without charges for writing code. And that kind of swift action isn’t an isolated case. In 2020, the FBI arrived at NASCAR to investigate a fake noose within 24 hours. And in 2012, after Hillary Clinton condemned him for making a movie, Nakoula Basseley Nakoula was taken in within 48 hours.

So we know the state can move fast when it wants to.

2. A prosecutor from the same office recommended filing a criminal complaint to quickly get Republicans prior to an indictment — so why couldn’t they have done that for SBF?

Second, was it really impossible for prosecutors to file a criminal “complaint” to bring SBF quickly into custody, after which they’d get a full grand jury indictment? Because that’s exactly what this former prosecutor from the same office that prosecuted SBF recommended as a strategy when they wanted to prosecute Republicans: the use of a criminal complaint to make an arrest quickly.

A criminal complaint, by contrast, is frequently used when prosecutors need to make an arrest quickly. This may happen, for example, when federal agents learn that a crime is about to occur, or has just occurred, and must act immediately.  In this situation, prosecutors do not have the time to go through the grand jury process.  Instead, prosecutors file a written document called a criminal complaint, together with an affidavit signed by an agent familiar with the case.  A judge or magistrate judge will review the complaint and affidavit, and issue an arrest warrant if he or she finds probable cause. Once an arrest is made on a criminal complaint, federal law requires that the defendant must be charged by an indictment (or by a criminal information, if it’s a misdemeanor case or the defendant agrees to waive indictment) within 30 days.

I mean, I’m not a lawyer, but this makes sense. Are we to imagine that the government has intentionally tied its hands for weeks in every such situation? Or can they move fast on other white collar cases when they want to, such as when it’s time to get Trump?

3. The state can put millions of innocent people under indefinite house arrest, but it couldn’t put SBF under legal arrest?

Third…let’s stop kidding around here. Are we truly to believe that a government that can invent justifications to surveil you without warrants or seize your assets without charges couldn’t hold SBF before trial? I mean, are you telling me that a state that put hundreds of millions of people under house arrest couldn’t5 quickly get SBF under legal arrest?

In reality, where there’s a will there’s a way. The American state can violate any law when it so wills, as shown by its routine use of civil forfeiture, warrantless surveillance, undeclared warfare, and extraordinary rendition. And it can likewise claim to be hamstrung by statute when it wants to proceed slowly.

And boy, did it proceed slowly! The fact that it took an entire month between Nov 11, 2022 (when it was clear SBF had stolen billions from customers) and Dec 12, 2022 (when SBF was finally arrested), with so much of the establishment rushing to platform SBF along the way (like Congress and New York Times) is what rightfully aroused the general public’s suspicion.

And to paraphrase an old proverb, “Caesar must be above suspicion.”

AN EMBARRASSMENT TO THE PARTY

So, we’ve established that (a) there was good reason not to trust the police and (b) there was also good reason to question the snail’s pace of prosecution. Why did the prosecution actually proceed, though?

Explanation 1: Standard Operating Procedure

You can believe Twitter’s school of fish, which switched memorylessly from abolish-the-police to trust-the-police. Their story is that the weeks in which SBF roamed free were just a yawner, just always how it is. After all, dontchaknow that it takes months to “build a case” (though Crypto Twitter built the case for them, starting with the Coindesk piece), that the authorities were moving at the “speed of light” (though Pertsev was jailed without charges in days), and that it was just totally normal for the New York Times to platform a cryptographically provable crook (though that self-same organization advocated deplatforming for years).

If you believe that, you’ll probably also believe that Russiagate was real (until it was admitted to be fake), that inflation was fake (until it was admitted to be real), that Rittenhouse was guilty (until he was determined to be innocent), and so on.

In other words, if you believe that it’s completely normal for a freedom fighter to be instantly held without charges while a known crook is left free to roam and then granted bail under circumstances even NYT found questionable, you’re a member of BlueAnon, the small fraction of the world that follows the party line of American Democrats much as an earlier generation toed the party line of Soviet Communists.

Nothing we say will get through to you.

Explanation 2: Intra-Democrat Civil War

But for the rest of the world — the Republicans, the Independents, the Bitcoiners, the Ethereans, the Indians, the Chinese, and all the others around the globe that Samuel Bankman-Fried defrauded — there’s a more parsimonious hypothesis: a quiet intra-Democrat civil war.

Because on Nov 15, 2022 it was admitted that senior Party members were watching the case closely:

…the fate of S.B.F. is being closely tracked at the highest levels of the Democratic Party, including by senior elected officials who are curious about what Sam’s fall means for the party and their pocketbooks. S.B.F., after all, was widely seen not only as a once-in-a-generation party donor, à la George Soros, but also as a unique political force, willing to push the envelope and take expensive risks (some would say too far). The optics for the left are awful, of course, as are the potential legal ramifications for Democratic organizations and betrayed S.B.F. aides if bankruptcy courts, class actions, or prosecutors try to claw the money back. Anxiety is running high.

If you read all the contemporary pieces from that outlet (like this, this, this, and this), a picture emerges of an intra-Democrat civil war kicked off by the SBF revelations, between those whose careers would be negatively impacted if SBF was prosecuted (like David Yaffe-Bellany and Maxine Waters) and those whose careers would be positively advanced (like the prosecutors who finally reeled him in). One journalist who covered SBF even admitted people texting that they were “sorry for his loss”!

This shouldn’t be too implausible, as we’re in the middle of another Democrat civil war right now, between Israel and Palestine supporters. We went through yet another one a few years ago, between Biden and Bernie supporters. The cleavages on SBF don’t exactly line up with those other fracases, but they approximately do: the institutionalists wanted to control crypto and thus were friends with SBF, while the leftists wanted to destroy crypto and thus distrusted SBF.

These factions were in rough balance prior to the revelations of fraud, but once he became toxic the left seized the opportunity to push out SBF-aligned people. Yes, there was a bizarre attempt6 to make SBF into a tragic figure, as David Morris contemporaneously observed, but ultimately — despite all his “good work” in helping party members get elected with stolen funds — SBF became just too embarrassing for the party to protect.

Again, if you read all the stories about the “SBF Pandemic”, the “SBF Blast Radius”, and the “SBF Legal Meteor” it appears to have taken a few weeks for all the people he’d funded with stolen money to sync up with each other and get their stories straight — in no small part to defend against the possibility of clawbacks. But ultimately the anti-SBF faction won out. He was an embarrassment to the Party, and he had to go.

WHAT HAVE WE LEARNED?

OK, that was long, but someone had to write it. Now the question is: what did we learn? I actually think there are a few takehomes.

• We learned that Crypto Twitter broke the case wide open, exposing Bankman-Fried in the first place, causing a massive liability for the Democrat Party, and ultimately compelling the regime to action on their #2 donor.

• We learned that contemporaneous accounts acknowledged that citizen journalism had outperformed legacy media on this case, and indeed that the New York Times and Congress seemed to be involved in covering up the crime.

• We learned that regulators are incapable of distinguishing good projects from bad; they were contemplating no action on SBF, while taking no action on approving Bitcoin ETFs.

• And we learned that no legacy journalist, politician, regulator, or policeman flagged SBF before his stolen money swung elections across the country, elections that will never be unwound. The investors who put money into FTX lost their shirts, but the politicians who took money out of FTX will keep their seats.

Look, I get why people want to claim that the “system worked.” After years of abolishing the police, after years of rampant crime in blue cities and completely politicized law enforcement…it’s refreshing to see one case that seems to get the right result.

But don’t take your eye off the ball. The only reason we’re here is that the Network succeeded where the State failed. No legacy journalist, politician, regulator, or policeman figured out that SBF was a criminal. But the Internet did.

In more detail, this event is for people interested in founding, funding, and finding new communities. You’ll hear about startup societies, network states, digital nomadism, competitive government, legalizing innovation, and internet first institutions. After you watch presentations by startup society founders from around the world, you can invest in them, and then find the community that fits you.

The event is in Singapore in September, right after Token2049 and Solana Breakpoint. In-person tickets are only $99 and remote attendance is free. We look forward to seeing you there!

About Last Year’s Conference

The Network State Conference in Amsterdam on Oct 30, 2023 was a huge hit, with thousands of in-person attendees and hundreds of thousands more watching the livestream across platforms. You can watch all videos here, and read the 2023 conference announcement here.

And tickets are only $99, meaning that the only real cost is your time! So stop reading right now. Go reserve your seat at thenetworkstate.com/conference, book your flight to the Netherlands, and pick from one of Amsterdam’s many fine hotels. We already have 1000+ attendees, but by the time you read this there may still be a few spots left.

Ok, done? Now here’s why you should come.

This isn’t just another tech conference. Those are fine, but I wouldn’t see any point in organizing another just for the sake of it.

No, this is a meeting of all the people building the parallel establishment. That’s more than parallel money. It’s parallel media, parallel education, parallel science, parallel construction, and even parallel cities. It’s a gathering of the aspiring Satoshis creating Internet First alternatives to the current system and the aspiring Satyas seeking to reform it from within. And it’s a venue for all those who want to found, fund, and find new communities of like mind.

Let me explain.

The Limits of Technology

Technology is hitting the limits of what it can do solely with technology.

Because the traditional vehicle of the last few decades — the startup company — assumes a stable political environment that is no longer in evidence. For example, our literature on competition assumes founders are facing corporate rivals, not captured regulators. Our investment modeling assumes that some companies die over time from bankruptcy, not that many companies die at once from a failed banking system. And our theory around international expansion assumes that countries actually want economic growth, not that they’ll fight it with trade barriers, product bans, and regulations.

Even more fundamentally, if you’re in the West, you can no longer assume the power will be on, the roads will be open, the fires will be put out, or the crime will be put down. You can no longer assume your bank account will be there tomorrow, your passport will remain valid tomorrow, or that your speech will remain free tomorrow. You can’t just start a space company, or even a taxi company, without worrying about the politics of it all.

At a fundamental level, the political environment we grew up with is transforming from constant to variable. So the model of ignoring politics to focus on technology is no longer applicable. That model worked in its day, but today innovating in tech requires somehow gaining the ability to innovate in politics, without getting entangled with DC. We can’t assume Western institutions are going to keep basic infrastructure — like banking, law enforcement, or even electricity — working anymore. So what do we do next?

Internet Values

There are three main responses to the decline of Western institutions.

1. Establishment. Deny that anything much is broken. And for those “minor” problems that do exist, trust existing institutions to fix them.

2. Dissident. Prepare for collapse by tweeting, praying, prepping, holding Bitcoin, and/or moving to the safest place you can. Hope for the triumph of your favorite ideology, without much of a plan.

3. Communist. Capitulate to our new Chinese overlords. Join the Greater East Asia Co-Prosperity Sphere 2.0, willingly or grudgingly.

The first option is common among the establishment. The second option is common among Western dissidents of all stripes. And the third option is quite popular outside the West, where many countries large and small are already running China’s OS in lieu of Washington’s model. Now, I don’t like any of these options! So I propose a fourth:

4. Technologist. Build parallel societies and parallel institutions, based on Internet values, starting now.

Why “Internet values”? Well, the solution to the collapse of Western institutions won’t be found entirely within the West. The decline would have been arrested long ago if it were that simple. Some new idea is needed, some new blood, some new energy. And the most obvious source is the Internet.

After all, Musk used the Internet to uncensor speech, when the politicians were powerless. Kalanick used the Internet to deregulate taxis, when they’d been captured by corrupt regulators. Snowden used the Internet to expose the NSA, when they’d evaded democratic accountability by lying to Congress. And Satoshi used the Internet to build Bitcoin, as an alternative to a central banking cartel that no one ever voted for or could even vote against.

The Internet has thus succeeded where the Western political process has failed.

Moreover, the Internet is the basis for an entirely new global political coalition. It won’t be based on “Western values”, for the simple fact that (a) too many in the West itself reject those values, (b) most population, time, and even capital is increasingly on the Internet rather than in the West itself, (c) a huge proportion of technical talent nowadays actually comes from a background of Eastern values, and (d) the premises that underpin our most successful new institutions like Bitcoin are in fact Internet values like open source and peer-to-peer — not classical Western (or Eastern) values per se.

I mean, if you think about it, when you attend a tech conference in India or Dubai or Japan, invoking “Western values” doesn’t really make sense. Yet when people use this phrase they are gesturing at something real: the common culture the global tech community shares, namely Internet values.

The concept of building our new institutions on Internet values makes everything clear. Only by drawing on the global Internet can we summon the requisite capital, talent, and moral authority necessary to compete with powerful-but-failing Western institutions. This is both completely obvious — Twitter and Bitcoin are of course Internet First global networks! — and yet quite non-obvious.

The Parallel Establishment

OK, so if we’ve set ourselves the immense task of building alternatives to declining Western institutions on the basis of Internet values…how exactly do we go about it? That’s the focus of the Network State Conference. The good news is that we’ve already made quite a bit of progress here, even if it hasn’t been recognized as such.

At a high level we’re building the parallel establishment, which can be divided into physical parallel societies and digital parallel services.

• The Parallel Societies. The physical parallel societies are the most novel part of the Network State Conference. They’re startup cities like Culdesac and Prospera, local communities like the Neighborhood NY and SF, and digital organizations like Vibecamp and Metacartel. These all have in-person components, ranging from meetups to buildings to full real estate developments. As these communities get larger, they’re setting up budgets for public goods, appointing their equivalents of mayors and governors, and in general engaging in de novo political innovation on a fully opt-in, Internet First basis.

• The Parallel Services. The digital parallel services are more familiar, but we’re thinking about them in a new way. You can conceptualize many crypto protocols and tech companies as fixing individually failing Western institutions. For example, Ethereum and Solana are building parallel financial systems, Synthesis and Replit are providing parallel education, and Farcaster and Substack are developing parallel media ecosystems.

The Parallel Societies and the Parallel Services combine in interesting ways. Suppose you found a new startup society like Culdesac on the basis of car-free living (see below), which is an innovation in parallel transportation. You could import a parallel educational service (like Synthesis) to improve your K-12 education, or a parallel medical service (like Biograph) to complement your societal innovation in transportation.

By proving this out at small scale, and working out all the bugs before attracting large numbers of residents, we aren’t (a) blindly trusting the Western establishment, (b) passively waiting for the revolution, or (c) grudgingly capitulating to China, but (d) actively building the Internet-values-based future of society.

If that feels like something you’re interested in, you should come to Amsterdam on October 30 and check it out for yourself. Go get tickets and see the full program at thenetworkstate.com/conference.

I’m not really interested in the endless primary battle between Trump and DeSantis for the Republican nomination. But I am interested in this recent salvo by Trump-supporter Laura Loomer — mainly because I anticipate many more things like it, where group A blames group B for economic losses caused by the Fed.

Check it out:

Loomer is accusing Florida’s state government, and by extension DeSantis, of somehow being derelict in the management of these insurance companies. And the thing is, it’s quite likely that many insurance companies are indeed underwater.

But if so, that’s the fault of the Fed, not Florida.

Why? Well, one of the insurance companies named below is American Coastal. And Weiss Ratings reports they put 77% of their portfolio into safe, investment-grade bonds. Problem is, thanks to the Fed, bonds are no longer safe.

See, many financial institutions bought supposedly safe bonds from the government in 2021. But then that same government did a massive surprise devaluation of all of the bonds it had just sold — screwing over its biggest customers, from banks to insurance companies, causing the largest losses in bond history, and saddling institutions what Stanford researchers estimate to be literally trillions in unrealized losses.

These bond losses remain “unrealized” so long as people don’t come looking for their money. But when they do — like during a bank run when banks must pay out, or during hurricane season when insurance companies must fork over cash — then bad assets are sold and losses become “realized.”

And then we all “realize” that the poor dumb institutions that bought US government bonds in 2021 are actually insolvent — unless the Fed prints to paper over a bond crisis the Fed itself caused. Which it will do, over and over again, until the crisis devalues the dollar itself.

Anyway, this is what happened in March 2023 when five huge banks died in quick succession, followed by a quick print called BTFP to cover up the Fed’s failure. Bond losses are why Roubini is saying “most” banks are insolvent and why Bank of America alone has $100B in unrealized losses. A similar phenomenon in Europe1 is why Germany’s central bank apparently has negative equity and pensioners face massive losses.

And this is all just the tip of the iceberg.

Jerome Powell and Janet Yellen are bond villains. They destroyed every institution that trusted their words in 2021. They said inflation was transitory and that they’d keep rates low even as late as November 2021. They sold billions in bonds on that false pretense. Then the Fed executed a surprise rate hike, devaluing all the bonds the government had just sold, and turning Treasuries into the new toxic waste.

I discussed all this here and here, even mentioning insurance companies as bust months ago. The thing to understand is that this financial hurricane won’t be limited to Florida.

FAQ

Why didn’t bond buyers hedge?

I hear this question a lot. I’m a little surprised that I hear it, because if you know enough to mention hedging duration risk…then you should know that the situation of the last few years was impossible for the system as a whole to hedge.

But here’s a reasonable version of the question:

The short answer

The short answer is that if one bank has an issue it’s a bank problem, but when hundreds of banks have an issue it’s a central bank problem. And the Fed and FDIC and others have known for a while that literally hundreds of banks (and other bond-buyers, like insurance companies) have this problem — which should tell you that it wasn’t trivial to “manage duration risk” of this magnitude.

The long answer

“Nobody hedged.” And why would they? Because hedging is expensive, and in 2021 the Fed kept saying inflation was transitory, as explained in the clip below.2

Thing is, hedging is like buying an insurance policy. And you might well buy car insurance. But do you go through life buying personal insurance policies for plane crashes? You don’t, because (a) you don’t consider that a probable event and (b) the cost isn’t worth the benefit and (c) you’d be dead anyway. And that’s how people in 2021 thought about the idea of hedging a massive surprise rate hike to 5%.

In more detail:

1. Hedging isn’t free. Many people seem to think hedging is magic, and somehow delivers a risk-free return. But hedging is actually expensive and gives up scarce margin.

2. Hedging isn’t possible for extreme outcomes. For example, you can hedge a move from 1% to say 1.1%, but not 1% to 5% — especially within a single year! Something so dramatic changes the fundamental nature of the asset class.

3. Hedging gets combinatorial. You can hedge bonds on many different parameters. Interest rates are just one parameter. Another might be the probability of sovereign default. A third could be inflation. A fourth might be exchange rate risk if you’re working from a foreign jurisdiction. And so on and so forth, and that’s just for bonds. It quickly gets combinatorial and you can’t hedge every possibility without giving up all your margin.

4. Hedging was said by the authorities to be unnecessary. Back in 2021, we’d all just had 10+ years of low/zero rates and a strong public commitment from the Fed to keep rates low indefinitely. This message was reiterated all the way through November 2021, until the sudden reversal.

5. Hedging was low status. Really, hedging wasn’t just held to be unnecessary. The Treasury and Fed said inflation was “not to worry” about, and many journalists called it a baseless conspiracy theory in 2021, so it was low status to hedge!

6. Hedging just shifts the risk to someone else. It doesn’t fix the systemic devaluation the Fed and Treasury caused. You’re just playing hot potato. Someone is stuck holding these horrible bonds.

7. Hedging is impossible if you’ve marked the devalued bond as hold-to-maturity. This is technical, but bankers that were surprised by the Fed’s rate hikes in 2022 tried surprising their depositors and investors by hiding their losses in their balance sheets with what I call “hide-to-maturity” accounting, essentially pretending that the loss didn’t happen. But once they did this, they couldn’t easily hedge the asset as it was no longer available for sale.

8. Hedging is impossible if the rulebook makes you buy bonds. The entire Western financial system is premised on long-term US government bonds, especially Treasuries, as having the “risk-free rate of return” and being the safest asset around. And many rulebooks encourage (or require) financial institutions to buy these so-called high quality liquid assets. So they were told to buy massive amounts of assets that the Fed then devalued.

   

9. Hedging deals with duration risk, not devaluation policy. Rates aren’t an organic market phenomenon, they’re set directly by the Fed. So even the term “duration risk” isn’t right — it’s really devaluation policy. Remember, rate hikes weren’t a lightning bolt from the blue that no one knew about, they were a surprise attack from the Fed. Look at Powell’s own comments from 2012 on page 193 of this pdf — he knew rate hikes would cause massive losses.

Put all that together. Most banks nowadays3 are run by risk-averse committees of NPCs. You think that in mid-2021 the banks were going to spend a big chunk of their margin hedging a massive rate hike, an event that hadn’t happened for 10 years, a risk that the Treasury and Fed said vociferously wouldn’t4 happen? No, all these lemmings were led off a cliff because they trusted Treasury and followed the Fed.

In short: all the mid-2023 commentary about hedging duration risk is 20/20 hindsight. It’s like asking five years from now “why didn’t you hedge debasement risk”, as if “everyone knew” that de-dollarization is happening and that you should hedge into gold, Bitcoin, or a non-US-controlled fiat currency.

Inflation wasn’t an establishment-approved thing to hedge in 2021, and de-dollarization isn’t an establishment-approved thing to hedge in 2023.

The visual answer

Powell often talks about a “soft landing”, which implies he’s the pilot of the economy. Hedging is like fastening your seatbelt against expected turbulence. And that’s a good practice much of the time. But if the pilot is crashing the plane, which is what Powell is doing, then no amount of seatbelt fastening will save you.

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On a totally different note…I tweet whenever I feel like it, but I’m trying to figure out the right cadence to send the newsletter. Some days I’ll have multiple posts, and other days maybe none. I also want to have digest-style posts every few days of all the podcasts and other things I’m doing.

Maybe the answer is to send at most one email per day, but tweet every post as I do them. What do you think? Also comment below and at balajis.com/chat.