"How do we go about founding alternatives to the ultimate inherited institutions, namely cities and states?"
He makes the case that founding an institution is superior to inhering one, because the heirs lacked the ability to invent the institution from scratch – or reinvent it in the face of a crisis. And while the tech companies on the West Coast of the U.S. were already successful forks of the legacy institutions in the East, cities and states were the final boss. The ultimate forking challenge.
I am fascinated with balajis.com's ideas of startup cities and network states, but we also need to further improve the existing forks. The tech companies of the West are certainly an improvement over the East, but they come with and created their own set of problems. We need to address those as well.
What we really want are not new institutions, but continuous progress. And the prerequisite for progress is human involvement.
A new institution might be an improvement, but it is usually just one step up on the progress ladder. Then it entrenches itself and slowly turns into the next legacy institution. We need to break out of that cycle and let go of the steady-state logic of institutions altogether.
Instead, we need to focus on human involvement first, before we consider how we organize ourselves in groups. Specifically, we need to address two things:
- Optimizing for emergence. We need to get people involved before there is any form of organization.
- Organizing ourselves in open, participative crypto networks.
This means to not just innovate on legacy institutions, but to innovate on the very idea of the institution itself.
Something interesting happens in the moment a new institution is founded. Its primary objective shifts from outside contribution to self-preservation. It is a shift from outward focus to inward focus. Not dying becomes more important to the institution than fulfilling the function or purpose it was founded for in the first place. It can also be understood as a form of the principle-agent problem, where the agent is the institution and the principle the original reason for founding the institution.
This focus on self-preservation obviously has its reasons. You can't help anyone when you are dead. But over time it leads to the new institution entrenching itself and slowly turning into a new legacy institution.
This is what already happened with the big tech companies like GAFAM on the West Coast. While they started as underdogs, they rose to become the dominant players in their markets in an incredibly short time. And while most legacy institutions of the East are still alive, GAFAM arguably constitutes a new and more powerful set of legacy institutions.
Today, these companies get more and more into the crossfire of policymakers and the public at large. This is partly a pushback from the older legacy institutions in the East. But there is also valid criticism and there are problems that need to be addressed. Privacy rights, working conditions, influence on elections. Just to name a few.
It might seem counter-intuitive to paint tech companies as stagnant and inert legacy institutions. After all, they do innovate a lot. But innovating is not the same as reinventing yourself. They tend to innovate in the service of self-preservation. This seems to hold true for founder run companies like Facebook as well as companies now run by their heirs, e.g. Amazon, Microsoft, or Apple. They innovate, but they hardly reinvent themselves.
The problem of institutions and Big Tech specifically is not just an inability to reinvent themselves. The more powerful they become, the harder it becomes for others to innovate in their space and even in related spaces. E.g. tech companies buying up promising startups is less about innovation but rather a defensive move. And it stifles innovation overall.
Tech startups that try to compete with big tech companies use the same playbook as their bigger competitors: A combination of a) lower capital requirements and b) code as a new form of leverage. That's why they don't have an edge in the same way the West Coast had an edge over the East Coast.
If we want to build better alternatives to existing closed institutions, we cannot use the same playbook. To successfully fork existing tech institutions, we need a new paradigm shift. And this time we might as well do it right and move away from closed institutions altogether to a new paradigm based on open networks.
Human Involvement as Prerequisite for Progress
What we ultimately want are not new institutions but progress. Progress everywhere, from everyone, on all levels. Institutions are simply a tool that might or might not help us to achieve that.
A new institution is usually founded based on one main idea. One key improvement or hypothesis. That means there is usually just one instant of real, significant progress. That's not a lot. While modern organizations are rarely static, but emphasize continuous learning, autonomous teams or even No Rules Rules, this learning is usually aimed at supporting the institution's core idea. Take OKRs for example. OKRs encourage learning and autonomy, but they also set a pretty narrow path for moving forward. Not much room for open exploration. I think we can do better.
Instead of focusing solely on founding new institutions, we should optimize for human involvement. Human involvement first, organization second. Human involvement is the most important prerequisite for progress on all levels. When human involvement is present, organization can emerge. Not the other way round.
That begs a question. What keeps people from getting involved? There are probably countless reasons, but a few general ones besides capital might be access, skills, knowledge, fear, and its close cousin VUCA. All these reasons create a gap between the status quo and the state of being involved. The bigger the gap, the more energy or effort is required to get involved. When innovating on our institutions, our goal should therefore be to make this gap smaller for everyone so that more people can get involved.
This is actually how the tech companies were able to fork the East Coast institutions in the first place. Founding something became possible at relatively low cost, which made the involvement gap smaller. This simple fact created the whole VC and tech startup ecosystem as a new paradigm and new status quo.
Moving forward, we need to further narrow that gap to make it ever more easy for people to get involved. And this time, we need to let go of our institutional focus and put the individual first instead. We don't just want to make it easier to found an institution. First and foremost, we want to make it easier to get involved regardless of institutions. Individual first, institution second.
Open Networks and Open Work
Choosing to organize ourselves in open, participative crypto networks over closed, hierarchical institutions solves two problems:
- Networks keep the problems around institutional self-preservation in check. And the potential for forking serves as a kind of internal impeachment mechanism.
- Networks don't face the inheritance problem to the same degree, because they are open and permissionless. People working on networks do that based on merit, not heritage.
But if we really want to optimize for human involvement, crypto networks alone are not enough. We need to focus on their emergent nature. Or to put it another way, how do we get someone involved when a suitable network for his or her skills, interests and domain knowledge does not exist, yet? How do we get people involved before there is a network?
We need to design for this emergent nature. Instead of only joining existing crypto networks, an individual's journey to network participation might look like this:
- Individual involvement
- Community formation
- Institutionalization (network emerges)
This will not just make progress the default everywhere and for everyone. Focusing on the individual and the community first will also help us tackle more complex problems.