Balaji Srinivasan just wrapped up the Network State conference with a wonderful recap piece Popups are the new startups:
…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.
The escape hatch (and the manifestation of internet communities) is just one way to look at Network States.
In their current focus of serving primarily (remote) tech workers, they are an evolution of digital nomadism. Seen from this lens the “why now” is clear. It’s not crypto, it’s Zoom.
Now that remote work is a possibility, network states can exist without the immediate pressure to create jobs like industrial or mining towns.
They are also an attempt to make a more efficient market where it previously didn't exist. Sure, global mobility is not new but the customer was always the corporation, not the country. And the corporations themselves didn't have a vibrant, competitive market for location arbitrage.
Network states accelerate competition in this market and directly appeal to small companies (even or especially single-person companies). If a basic commercial feedback loop can be established, competition should take care of quality.
From there we can turn our attention to the nature of this competition. It’s that next stage of how network states will compete against each other that I want to talk about.
How will they acquire residents?
DIRECT SALES & INTERNET-NATIVE METHODS
Early members have to trust that leadership and other people there are not crazy so direct sales (amplified by other narrative building efforts like content marketing) is the only option at the start.
However, this is also the least scalable channel. The Keith Rabois-led move to Miami showed this can be pretty impactful at the start but may taper off over time as narrative shifts.
The less explored approach would be to use traditional web 2.0 acquisition methods such as rewards and referral incentives.
But a coupon won't really help to move your family so some amount of innovation needs to happen here to make it viable.
Which leads us to…
CRYPTO-NATIVE ACQUISITION
It’s convenient (and not accidental) that network state projects are so closely tied to crypto communities. Crypto participants tend to work more remotely and the technology itself supports efficient permissionless innovation in money and governance.
This would allow new states or network societies to operate efficiently at much smaller scales without layers of regulators, lawyers and financiers. Instead, you’ll need developers, designers and auditors but they also happen to be the target demographic.
Becoming a protocol, not just a company, opens new doors. In particular:
Issuance vehicles (e.g., Bittensor);
Points systems & airdrops;
“Sovereign funds” and Strategies.
Growth strategies built around ownership, wealth and enterprise may be more promising than traditional internet acquisition models. They also have powerful analogs in the original settlement stories of America and other countries.
Is this the core pseudo-secret of network states? Crypto is really there for acquisition, not for governance.
The application of crypto farming to physical locations (for lack of a better word location farming could present the most scalable way for network states to reach >10,000 participants).
P.S. Allow me to touch on a small aspect of network societies that doesn't sit well with me which is interest-based niches. Cities like London and New York allow you to have changing and broad interests, hobbies and communities. The startup-product analogy would be that they are “trying to do too much”.
The solution would be to focus a network society on a single unifying theme or interest and I think that can work for some niches. But the worst instance of this idea is network societies tied to religious communities. These are incompatible with the idea of code-based governance and risk devolving into religious cults. It’s important to niche down as a bootstrapping / GTM strategy but the idea that people outside of a single religion aren't welcome will lead to very difficult power dynamics.
Ultimately, I think the optionality of London and New York is a feature, not a bug.