"The Network State" by Balaji Srinivasan

Review by Borodutch

Full disclosure: Balaji has invested in a company that I cofounded. You must take my biases into account when reading this review.

"The Network State" is a book that became an instant cult classic among the web3 community on the same shelf as "Proof of Stake" by Vitalik. However, not many people complete it, and I think I found the reason why. But first, my review in one "gm":

gm, the network state is about starting decentralized nations

Then in one short cast:

the network state is 3/4 rant on us establishment and 1/4 futuristic tale about how this can be fixed with newly available tech that is rooted in social science and historical data

Then in my non-screenshot essay:

First, we must note that Balaji lives in the US, and his political views and exposure are limited by this bubble, at least unconsciously. Hence, the author presents a deep analysis of issues happening in his home country as one of the reasons why creating network states is crucial.

On one of the last pages, Balaji highlights that the US government in-fighting looks silly from the outside. I cannot agree more, as a person who spent at most 1.5 years in the United States and lived most of his life in Russia and Canada. I'm looking at all the issues discussed as an outsider. I find it almost immoral that the spread of unscientific misinformation and the lack of accessible medical care prevail there, for instance.

The first three-quarters of the manuscript outlining the issues falls short for non-US readers. See, we don't quite care about the eternal fight between the republicans and democrats — they both are conservative compared to the rest of the democratized world. When European subreddits, for example, send the memes like "oh, it's the US again," everybody instantly recognizes the joke — except, probably, "Americans" (meaning the US residents).

Similar things happen to "The Network State" — you get that vibe that the issues outlined are specific to a relatively small portion of the population (~4% of the world).

  • No, you don't need to fight "NYT"; you must hold people responsible for misinformation and hate speech accountable.
  • No, you don't need to fight "Fed"; you must hold people responsible for the 2008 crisis accountable.
  • No, you don't need to fight "Awokening"; you must hold people legislating economic discrimination accountable.

"Accountability on the level of the rich" is what the US lacks, not "The Network State." Implementing such a practice has helped multiple countries (primarily the nordic ones) dig themselves out of economic, political and social graves. History clearly shows that it is doable and achievable within 1-2 generations. Balaji gives many examples supporting his opinion but never presents any counter-evidence, which is plentiful.

I'll follow suit and say that until the US fixes its judiciary system and breaks down the armour the rich have against the law — the network state is improbable to happen there. Want examples?

  • Trump has infinite "get out of jail" cards, which you might have already noticed.
  • Musk doesn't suffer any consequences whatsoever, never mind his constant public market manipulations; a slap on the wrist is not enough.
  • Remember how Epstein didn't kill himself?
  • What about all these offshore accounts papers that led to numerous law actions and resignments in other countries?

The issues Balaji carefully outlines in the first parts of the book are essential only in the context of the US but get irrelevant when looking at the world from the view of the ISS. However, this does not mean that there are no issues that the potential network states won't solve. Neither does it mean that we don't need network states. We, indeed, must be building them.

Here's what I would want to see Balaji do to improve the first and the most significant part of "The Network State":

  1. Take a global view of the issues the network states would solve; issues relevant in the US are highly isolated and do not translate to the rest of the world. Let's talk EU, Sweden, Norway, New Zealand, Australia, Africa, etc.
  2. Present counter-evidence to the claims in the book. One should not seek evidence for their opinions but base their opinions on the evidence present. Maybe some of the points from the book turn out to be false when looking at the data. Lex is constantly hinting at this in the 8-hour podcast with the book author.

The changes above would instantly make the book more readable for the global audience. After all, crypto doesn't live in the US. It lives around the globe, as Balaji keeps pointing out.

Second, I think the "tri-power" concept presented in the book also falls short of reality, and the author makes an oversimplification mistake. No, neither NYT nor CCP nor Bitcoin governs the world. Yes, the US might be the "policing force" of the world keeping international trade safe, but it "governs" the world the same way your local police station decides how much tax you pay this year. It doesn't, it can enforce the agreement between you and the government, but it cannot press the deal onto you.

CCP, on the other hand, keeps their citizens in an iron fist and is heavily investing in Africa to gain influence there. However, we all know how reputable the communist regimes are in providing the world with the state of their affairs. Remember how no one expected the Soviet Union to fail until it did? We might be a few years away from the collapse or a few dozen years — we'll never know due to the CCP secrecy. Nevertheless, the foreign power of the CCP presented by Balaji is overstated, in my opinion.

Now, the last part — BTC — is it powerful? Being an avid fan and advocate of crypto myself, I wouldn't jump the gun here and call BTC the winner. Crypto is a highly diverse space with thousands of coins, each with advantages and disadvantages. The future isn't BTC, just like the future has never been "Gold" or "Silver." The future is chaotic — and there is beauty in the chaos. Trying to mould futuristic predictions using today's categories will almost always fall short of reality.

What am I getting at here? I'm trying to say that the world doesn't revolve around NYT/CCP/BTC. There are many other aspects — some as big as the three "leviathans" the author discusses. And these other aspects might affect how the network states will be shaped way more than the ones from the manuscript, at least because the US will never recognize a sovereign "state" within its borders. It has enough trouble keeping order with indigenous land they don't govern. Seriously, the US looks like swiss cheese. It's not a "solid" and "undivided" landmass of a country.

So what would I like to see from the future editions of "The Network State"?

  1. Discuss more leviathans. Don't simplify the whole world to a non-representative portion of the world population.
  2. Try picking the best candidates for the bootstrap network state recognition. Who can it be? Citi-states? Third-world countries? Democratic nordic states?

Overall, again, the view of the world in the book is limited by the United States. And it is ok and understandable. After all, Balaji does live in the United States, and I can understand how the only thing you can focus on while writing is whatever people say around you. And people always talk about NYT/CCP/BTC in the social bubble created by some groups.

Third, the network state itself — what do I think about the idea? I think it's rad, but it will not look like Balaji described, and maybe not happen in our lifetimes. Here's why:

  • The states would not give up their land in any way — either on paper or physically (e.g. "it's my house, and officially FDA doesn't govern here"). But we might see existing countries after the civil war or in complete socio-economical shambles turn into network states (e.g. plenty of "broken" states in Africa).
  • There is no more land (and no one will create substantially more) on our planet. Even worse: the land will be less and less due to climate change. The "frontier" the author talks about wouldn't be on Earth but in space and on other planets. The network state concept will be necessary when humanity becomes interplanetary species.
  • Humans are social and irrational. They can create network states but will not be able to govern them well. We lack artificial intelligence on the government level to keep everyone in check. However, when AI and robotics advance, the network state concept will become feasible, especially with all the complexity of people being "netizens" of multiple network states.

When I was reading the last quarter of the book called "The Network State," which finally was about the network state, it felt like I was reading a technical manual or a dull book on economics that they teach in an MBA program. Even though readers can find the author's passion when he talks about "those damn leftists spoiling my beloved country," it almost feels like Balaji (and everyone who proofread the book) was extremely exhausted by the time it came to discussing the main topic.

The last part feels very repetitive, has a lot of blank spots, and raises brows with various assumptions that the author makes for the concept to work. However, this is the best "manual" to the network state we have so far. It reads more like the Ethereum Yellow Paper than an entertaining non-fiction book. It was probably intentional, but it drops the ball right before dumping it into the basket regarding reader involvement.

What would I want to see in the next version of "The Network State"?

  1. Make the part on the network state concept less dull; it must be read fluently for the general audience to recognize the importance of the topic.
  2. Look deeper into various examples of how existing states almost got to the network state stage. I know the author is against reforming existing states, but what if he misses data right under his nose? There are notes of such action in the book, but Balaji cuts them short too soon.
  3. Think of assumptions that the author makes. Try to find counter-evidence and counter-arguments. Try to check if the assumptions make sense. Try to find ways around the assumptions.
  4. Try thinking more on the topic of AI governance. In my opinion, this is one of the most critical steps to get to the network state reality.

This part is quite funky to me due to my experience reading various futurists and analyzing their predictions. I found that when a person tries to predict the future within the existing categories, they always fall short. Unfortunately, I saw the same issue with the network state concept described by Balaji.

So what's the verdict? This is one of my longer reviews because the book touches on many curious concepts. When reading, feel free to skip most of the book up to "Why now?" which starts discussing the network state. The majority of the points discussed before are repeated here. Then, if you're curious about the author's opinion on the state of the US, feel free to read the previous three-quarters of the book.

Overall, the concept is novel — and we must write and read about more novel ideas! I liked the book, partially because it makes you think about the US (especially when fact-checking the cherry-picked data by the author) and somewhat because the network state sounds like something from the future.

However, when you remove the lengthy opinionated rant on how "the leftists ruin America" (which is really "the rich, being the establishment, ruin America," but the author politely ignores the difference) — you're left with a decent essay on a novel idea.