AMA with Patri Friedman


#1

We had an AMA with Patri Friedman, the founder of the Seasteading Institute and the son of the famed economist Milton Friedman. We talked about a whole host of topics such as seasteading, government, and governance in cryptocurrencies. Here are some of the highlights.

The country “shopping experience”
What motivated Patri to pursue seasteading wasn’t a love of oceans but his dissatisfaction with the country “shopping experience.” Just like you can go on Amazon and browse a variety of similar products before selecting the one you like based on your preferences and needs, why doesn’t optionality exist in choosing the country you live in? He believes this “shopping experience” is what is lacking in governments today and uses the example of the Industrial Revolution to show what a positive “shopping experience” would look like. The Industrial Revolution in the 1700s saw many small, competing jurisdictions in Europe where people could switch between countries. Patri argues this led to innovations such as insurance and stock market that improved the welfare of those citizens.

Innovation in Government is a people problem, not a tech problem (surprise, surprise)
Seasteading struggles to take off not because of technological feasibility but because of two factors: they:

  1. Rely on the active cooperation of potential host countries, which is painfully hard to get.
  2. The “Avatar Effect”: People don’t like losing opportunities to new members of a tribe, such as immigrants. What’s interesting is that Satoshi anticipated this.

Not everything should be decentralized
Talking about governance models in cryptocurrencies, Patri says he’s intrigued by delegated proof of stake [which EOS uses and has been heavily criticized for] because it mimics another form of real-world governance called liquid democracy. In both, voters can delegate their vote to someone else who is [in theory] more knowledgeable about the issue they’re voting on.

He also talks about the expensiveness of decentralization and that not everything should be decentralized. He argues that the things that should be decentralized are the things where gatekeepers are causing problems such as Twitter censoring certain points of view [or Governments that inflate or seize money]. We talk more about where decentralization is needed here.

What was the most interesting part of the conversation for you?


#2

When Patri was talking about “shopping experience” of countries, it reminded me of my parents. They knew the culture and education system in South Korea was pretty narrow. They moved to Argentina so that my brother and I could have a better teenage years and have a more creative and free spirit experience. They were right! If my parents listened to Patri, they would have agreed with him. We need a better “shopping experience” for people to go to different countries and live there if their current country is not providing what they need and want.


#3

One of the most promising prospects of seasteading is the ability to quickly iterate. Just like the “many small, competing jurisdictions in Europe” in the 18th century, you can set up even smaller living experiments and societal A/B tests and rapidly make adjustments. The US if sometimes described as an experiment. It has been running for nearly 250 years. Adjustments are glacial, generations come and go, the results are hard to measure. Seasteading is an opportunity to test new ways of human organization. To experiment with new ideas and build communities from first principles and see what works. Many such experiments could run simultaneously and reports and trials could be compared along the way. The results may be surprising!


#4

Kudos to the TruStory team for hosting another thought-provoking AMA session.

The discussion with Patri pushed my thinking in several ways:

  1. I appreciate Patri’s approach to bring a “startup vector” to governance, pushing us to be more critical of current governance systems, especially when it is something we tend to take for granted. The popular narrative around capitalism is that “it’s not perfect, but it sure is a lot better than communism or [insert another system]” and I think there’s a similar attitude with democracy, so I liked that he references decades of public choice research to argue that Democracy has very known flaws (i.e., tendencies to pass bad laws or laws that benefit concentrated interests at the expense of many ‘dispersed’ interests).

So, tying to this work with Seasteading and Charter Cities, I can appreciate that he’s really trying to get to the root of the problem; that instead of addressing any particular law/legislation, he’s trying to get to the system. And what’s exciting about a large cross-section of crypto is this politically-driven ethos/vision of exactly that - looking at governance in a ‘non-romantic’ way, like a service to be evaluated, critiqued and improved upon.

I find this aspect of crypto - the potential to change governance systems (and the nature of the firm) super exciting and why the space, beyond the cutting edge technology, has something even more potent: a powerful story.

  1. He made an interesting point when he said that, over time (presumably once crypto goes more mainstream), people will ‘get used to’ having their governance systems evolve at the speed of crypto and they’re going to wonder why their ‘analog’ government, for lack of a better term, is moving so slowly or just underperforming.

This point made me think of two things. Recently, I had heard a similar point being made about C-level Executives and Instagram. That they go home, their kids are using Instagram, they get on Instagram and the user experience (UX/UI) is so exceptional, they start to wonder why their company website isn’t up to par. And hopefully, a similar level of exposure happens with crypto-governance.

  1. That said, as I listen to the discussion, I found myself itching for some distinctions in governance. Because as @preethi points out how the term “decentralization” is so over-used as to become almost meaningless, I think “governance” (in crypto) is coming dangerously close to achieving the same status.

Here are a couple of threads on governance i’m seeing, in this AMA, and in the larger crypto space:

a. On one level, there’s governance experiments with the goal of finding a better system that Democracy. Patri references Liquid Democracy as an untested candidate. Personally, I think this is crypto’s “ceiling” (to use a sports reference), if crypto can produce a “better” Democracy, crypto would have reached its potential as a truly revolutionary technology. I think a many things need to happen before, but the most important being wider adoption and real - uses of blockchain/cryptocurrency.

b. On a more micro level, I think there’s “governance” of specific crypto platforms. The challenges at this level are being faced right now as developers of different protocols (i.e., Ethereum, Cosmos, Bitcoin, etc) have to come to consensus on how they’re going to make decisions and even the process for making decisions needs to be clarified. The decisions here are around software upgrades, recovering ‘stuck’ funds, or forking (exiting as Patri puts it).

I agree with Patri that the option to EXIT is key with governance systems. On the other hand, I believe most crypto teams want to avoid “contentious hard forks” (exiting) because it lowers their network effects, so this appears to present an interesting challenge: How do we prevent forks (should we?), while also preserving the essential feature of exiting?

Ultimately, I think the “two” governances described above are related and may converge, but as of today (Dec, 2018), to my mind, they’re different. The former is governance on a societal level (voting certain legislation into law, policies that affect broad spectrums), the latter has a more technocratic flavor - it’s inaccessible to most people who do not have a technical background (probably rightfully so, the details of protocol engineering should be left to those with expertise.) Eventually, I’d love to see these two threads of governance converge.

There was another take-away about “value-capture” but i’ll stop here for now, this post is getting a bit long. Really enjoyed the discussion!


#5

This is the million dollar question. Because it seems that the laws of nature and life defy things from being decentralized forever. The best systems/networks “win” because of network effects and then inevitably get bigger and bigger. So even the systems we’re complaining about today started out small. But because of network effects they grew, but eventually grew too big and now are too slow to innovate.

How can we build a really good system without the power of network effects?


#6

When we question the authority of institutions, we should not forget institutions do contribute in keeping people and culture together.

Now assume I like being in India, my wife USA and my son Europe, there is no common ground for us to argue on who is correct. Also one major point which I am not sure if it was covered in the AMA was the responsibility of individuals in institution is also very important as compared to rights.

Hope our goal at Trustory is not to become anti-institution.


#7

I liked the discussion about forks and exits. Crypto gives you the ability to fork something and make it your own with code, where you can build a product/structure/governance that is more efficient than its predecessor. It brings the idea of crypto/blockchain leaving no room for rent seekers. You can innovate with blockchain and remove the hidden unnecessary middlemen. Rent seekers are not native to blockchain platforms and you can cut them out. A decent example of this is WAX vs EOS. WAX cloned EOS since it’s open source, cut out the block producers used for EOS, and went directly to Amazon to host. Now WAX handles more transactions than EOS. Granted, using Amazon ruins the decentralized aspect, but still.


#8

I don’t think that Trustory is anti-institution, but imo we are pro-efficiency and pro-honesty.

One of blockchain’s most important features is that we can now create self-regulating systems that replace old and inefficient institutions with code. In Patri’s system everyone has skin in the game and everyone can participate within that system to make it better.

You’re right that in today’s system few individuals have enormous responsibilities in institutions, but I think that that is just the thing Patri wants to get rid of. You don’t want to place too much responsibilities in the hands of a few if there’s a system that can handle responsibilities better.

@paulapivat explained it great:


#9

Fascinating! Didn’t know this about WAX.

You said “WAX handles more transactions than EOS”… can you share where you found this claim?


#10

Yeah, it’s crazy! I saw this tweet a few weeks ago. I copied the blockchain activity matrix from that day.

Note, if you go to blockchain activity matrix today, the ratings are different. Very curious about all this :thinking:


#11

@HelloRena Yeah, EOS is dominating based on the current charts. How are these EOS numbers so different just after a few weeks? Did EOS really grow over 10x in a few weeks?! Seems fishy…


#12

Wow, what a thought-provoking AMA , really intrigued with all the views mentioned by Patri. The below few are the ones which really got me fascinated.

Challenges facing while building startup cities:- Although he spoke quite a few, one thing that caught me up was about AVATAR effect, which mainly implies a small group of people against the ideology of foreigners overtaking the motherland which directly lead to fight against them in unity with minimum resources

Normal democracy , Liquid democracy - Normal democracy - It’s basically a system the support law Normally people are not we very responsible or excited to participate in the process as they fell their choice and effort taken has almost no effect on outcome individually Vs in the liquid democracy people are more responsible and give importance to process as their single vote is going to delegate further in process and will have a compounded effect overall.

Delegate proof of work with liquid democracy - In democracy Instead of casting voting once every two years, we can delegate the work to someone else’s and then delegate it further to collect it in total in the end, also we can split the vote based on a particular issue and thus we have a very dynamic systems.

Decentralization - Decentralization is highly expensive. Considering the history of money with different countries, Money is something that gets taken over by gatekeepers who then the extra value for there benefits, which is why it’s worth paying the cost associated with decentralization for this process in order to get an honest coin with public ledger which records it’s a transaction and is globally publicly available to verify. Mainly have an application of Decentralization only where gatekeeper and causing issues and problems.


#13

“How can we built a really good system without the power of network effects?”

In trying to answer this question, I’d draw on a simple framework that sheds light on platforms (i’m assuming the system in question here is a platform). A platform’s ‘stack’, based on Sangeet Choudary’s work (Choudary, 2015, “Platform Scale”), contains three layers: 1. a network-community, 2. infrastructure, 3. data.

To address your question directly, I suppose it’s possible to have a system that focuses more on infrastructure and data, less on network-community. An example would be Wordpress; they provide infrastructure for publishers.

A counter to Wordpress would be a platform like Medium that has all three ingredients; a simpler plug-and-play infrastructure, but also tools for writers to build their own following/community (in fact Medium tends to focus on building a community around ideas, over better publishing tools). The outcome is that writers find it easier to get discovered on Medium than hosting their own Wordpress site. Finally, Medium leverages their data to curate content for readers.

Choudary argues that all three ingredients are needed for building effective systems/platforms.

While strong network effects may not be needed, I would tend to agree with Choudary that at a baseline, intentionality around building community is essential. I suspect that as systems / platform evolves, there will be multiple shifts in emphasis over the life of the system (i.e., between network-community, infrastructure and data).

This kind of ties back to Gwern Branwen’s “Bitcoin is worse is better” essay. Bitcoin survives and thrives despite ‘ugly’ technology because a strong community / network had been cultivated. I’m not so sure the reverse would have been true.


#14

agree 100%. Hard to build a good platform without network / community. The definition of network effects is that an increased numbers of people or participants improve the value of a good or service. The best platforms win because they harness this benefit of network effects :slight_smile:


#15

Agreed, interesting point when he said protocols could be forked and copied, where all users switch to the new network except leave out the developer reward.

He asked where are the incentives to create features in the network? Traditionally, companies make money not on day one, but Years 20-25.

So with crypto companies, you might be able to capture value for years 1-5 by staying ahead of the curve and building unique features, but you can’t after it is forked.

I can see this as a good thing for 2 reasons: 1) more opportunity for / a new way of freelance+decentralized working: developers move in groups from project to project based on expertise in 3-5 year time horizons; 2) traditional company life cycle is significantly shortened (e.g., currently 25 years to < 5 years): so the "next facebook" last for ~5-10 years and then a significant portion of users+developers start switching to a new network.

^probably not for the blockchain layer, but the interfaces on top


#16

I found the discussion to be very interesting; most intriguing is his idea about having a startup approach to governance. I think it’s very logical; however, I haven’t heard anyone explain it as he did.

Also, the book the recommended, Eliezer Yudkowsky, Inadequate Equilibria, is beneficial read. Here’s the link for anyone interested https://equilibriabook.com/

-Astra Rai


#17

I was wondering about PF’s statement regarding country shopping. I understand no country is perfect and will never be. But there are many countries which allow you to invest(put in money in various ways) and thus get a right to live/work there. Some have even adopted a middle approach - for eg like Estonia where you can have an e-citizenship and thus get the right to run operations. Every individual’s requirements are different and I guess most people are not really interested in the laws and governance system. On the other hand they want a better and safe life with coverage of basic amenities and they are getting it, if they can afford it.

PF also touches on the cost of maintaining the decentralized databases and the effect it has on each transaction. Any ideas or framework, how we can measure and estimte
this cost?