Balance of power

Special thanks to Gabriel Alfour, Audrey Tang and Ahmed Gatnash
for feedback and review.

Many of us are afraid ofBig Business. We like the
products and services that companies provide, but dislike
trillion-dollarmonopolisticwalledgardens,
video games that turn intoquasi-gambling,and companiesmanipulating
entire governmentsfor profit.

Many of us are afraid ofBig Government. We like
police and courts, public order, and various services, but we dislike
governments arbitrarily pickingwinnersandlosers,restricting what people cansayorreador think, violating human rights or starting wars.

Finally, many of us are afraid of the third corner of the triangle:Big Mob. We like independentcivil society,
charities and Wikipedia, but we dislikemobs
lynching people, cancel culture, and things like theFrench
Revolutionor theTaiping
Rebellion.

Basically, we like progress - whether in technology, economy or
culture - but we fear the three historically most powerful generators of
such progress.

A common response to this conundrum is the idea ofbalance of
power. If we need powerful forces in society, then they should
be balanced - either each force balanced within itself (eg. competition
between companies), or between each other, or ideally both.

Historically, much of this balance would come automatically: there
are natural diseconomies of scale that arise as a result of distance, or
the need to coordinate very large numbers of people to do global-scale
tasks. In this century, however, this is an assumption that no longer
holds true: all of the above forces are getting much stronger at the
same time, and can no longer avoid frequently interacting.

In this post, I will expand on this theme, and suggest some
strategies for preserving this increasingly delicate feature of the
world going forward.

In a previous post, I described this emerging world, where "Big X
is here to stay for all X", as "the
dense jungle".

There is a good reason to fear government: a government has a lot of
guns, and it can use those guns to hurt you. A government has the power
to ruin you that far exceeds anything Mark Zuckerberg or cryptocurrency
sellers could do even if they wanted to. For this reason, centuries of
liberal political theory have focused on the problem of "taming the
leviathan" - getting the benefits of government providing law and order,
without the downsides of a king being able to do whatever he wants to
his subjects.

Much of that theory can be summarized in one sentence:the
government should act like a game, not like a player. That is:
as much as possible, the government should be a reliableplaying
fieldthat productively resolves disputes between people on its
territory, and not an agent that actively pushes its own goals.

There are different versions of this ideal:

Even outside of governments traditionally considered "liberal", a
similar idea applies. There has been a recent finding that,among
governments classified as authoritarian, the ones that consistently
deliver less economic growth arethe ones that are
"personalistic", as compared to those that are "institutionalized".

It is not always possible to avoid the government having
characteristics of a player, particularly because of the possibility of
external conflict: if a player goes to war against a game, the player
wins. But even when the possibility of the government becoming a player
is needed, it is often tightly controlled: see the Roman custom ofelecting a
dictator, who would have great power for a short term, but then
return to normal once the emergency ends.

One succinct way to split up criticism of corporations is as
follows:

The first issue (corporations being evil) happens because
corporations are just very good optimization machines, and as they get
more powerful (both in capability and in size), their goal of maximizing
profit diverges more and more from the goal of their users and wider
society. You can often see this pattern in industries that start out
organic and hobbyist, but then become more and more profit-oriented -
and at the same time in conflict with their users' interests - over
time. Like, say:

Left: percent of coins directly allocated to insiders in newly
launched cryptocurrencies, ~2009-21. Right: THC concentration in
marijuana, ~1970-2020.

You also see the same pattern in video games: a space that originally
focused on fun and fulfillment now increasingly focuses on built-in slot
machine mechanisms to maximally extract money from players. Even major
prediction markets have started to show a worrying tendency to focus not
on pro-social goals like making better news media orimproving
governance, but on sports betting.

Those examples come more from increases in capability, coupled with
competitive pressure. There is a different set of examples that come
from increases in size. In general, as a corporation gets larger, it
gains more ability to benefit from bending its surrounding environment
(including economy, politics and culture) to its will. A company that is
10x larger will benefit 10x more from bending its environment to a
particular degree, and so it will perform such actions at all more often
than a smaller company - and when it does, it will do so with 10x the
resources.

Mathematically, this is the same argument as why monopolistsprice above marginal
costand increase their profit at the expense of societal deadweight
loss: in that case, the "environment" is the market price, and
monopolists are "bending the environment" by restricting the quantity
they sell. How much bending you can do is proportional to your market
share. But expressed in these more general terms, it's a powerful
argument that applies in a wide variety of situations (eg. corporate
lobbying,De
Beers stylecultural manipulation campaigns...).

The second issue (corporations being lame) involves corporations
being boring and sterile and risk-averse, and creating outcomes that are
homogeneous on very large scales - both within individual corporations
and between them.

Architectural monoculture is one archetypal form of corporate
lameness

The word "soulless" is interesting because it has a connotation that
is halfway between "evil" and "lame". "Soulless" feels like a natural
way to describe corporations addicting people for clicks or creating
cartels to raise prices or polluting rivers, but italsofeels
like a natural way to describe corporations making every city in the
world look exactly the same, or making ten Hollywood movies that are
exact replicas of each other, or...

I would argue that these two types of soullessness both come from two
factors:commonality of motive, andcommonality
of agency. Corporations are all highly motivated by the profit
motive, and many powerful actors with the same strong motivation will
inevitably pull in the same direction, without strong countervailing
forces to pull in other directions.

Commonality of agency comes from a company being large, which gives
it added incentive to shape its environment. One $1 billion company will
do much more environment-shaping than a hundred $10 million companies.
It also creates more homogeneity: Starbucks addsfarmore to
any "feeling of urban homogeneity" than a hundred of its 100x-smaller
competitors put together.

Investors can amplify both dynamics. While a (non-sociopathic)
startup founder would be happier if their company grows to $1b and helps
the world than if it grows to $50b and breaks it ($49b of yachts and
planes are NOT worth the world hating you), investors are much further
removed from non-financial consequences of their decisions. As the
market becomes competitive, investors willing to seek out the $50b get
higher returns, and the ones who are content to only take $1b get lower
(if not negative) returns and have a hard time attracting capital.
Additionally, investors who have shares in many portfolio companies can
often passively encourage those companies to operate at least partially
like amerged
collective super-agent. An important limiting factor to both
dynamics is thelimitto investors' ability to surveil what is
going on inside their portfolio companies and "hold people
accountable".

Meanwhile, market competition addresses commonality of agency, but it
only addresses commonality of motive to the extent that the different
competitors have different, not-just-profit-seeking, motives. Often,
they do: companies frequently sacrifice on profits in the name of
releasing innovations openly to the public, or upholding deeply held
values, or aesthetics. But this is not guaranteed.

If commonality of motive and commonality of agency create
soullessness, then what is "soul"? I would argue thatthe
definition of "soul" here is nothing other than pluralism: in
this context, it is the set of things in corporations that is not
homogeneous between them.

When people talk positively about "civil society" - the part of
society that is not profit-motivated and is not government - they always
talk about it as being made up of a huge number of independent
institutions that are all doing different things. When I ask AI to
explain "civil society" to me, it gives these kinds of examples:

When people talk negatively aboutpopulism, they tend to
envision the opposite: a single charismatic leader who is able to arouse
millions of people to directly listen to them and join in a giant mob
all pursuing one single goal. Populism is about the "common people", but
more specifically it is about a fiction that the common people areunited- and often, united in support of a leader and in
opposition to a hated outgroup.

When people do criticize civil society, the argument is invariably
that it's failing at its mission to be "a huge number of independent
institutions that are all doing different things", and is instead
driving some emergent common agenda, eg. "The
Cathedral".

In all of the cases above, we talked about balance of power within
each of the three big "forces". But we can also have balance of power
between forces. A major example is the balance of power between
government and business.

Capitalist democracy can be described as a theory of balance of power
between Big Government and Big Business: entrepreneurs both get legal
tools to challenge aggressive government action, and get a concentration
of capital with which they can act independently, but at the same time
governments can regulate corporations.

Palladium-ism lionizes
billionaires, but specifically when they go off and do unconventional
crazy things in pursuit of their own detailed visions, rather than
directly seeking profit (see eg.[1][2][3]). In
this way one can view Palladium-ism as an attempt to thread the needle
and get the best parts of capitalism without the worst.

Although both were crucial in setting the conditions to enable
it, ultimately Starship was created neither by profit motive nor by
government mandate.

My own views toward philanthropy are similar to Palladium-ism in some
ways. I have said many things thatstridently
supportbillionairephilanthropy,
and Iwantmoreof
it. But the type of it that I want is the type that counterbalances
other forces in society. Markets are often not willing to fund public
goods, governments are often not willing to fund things that are not yet
elite consensus, or things whose beneficiaries are not concentrated in
any single countries. Some things are in both categories at the same
time, and so get passed over by both. Wealthy individuals can fill the
gap.

But there is a way in which billionaire philanthropy can become
harmful: when it stops being a counterbalance to government, and instead
takes over the government. This has happened in Silicon Valley in the
last few years: powerful tech CEOs and VCs have become much less
libertarian and supportive of "exit",
and more engaged in directly pushing the government to align with their
preferred ends - and in exchange, making the world's most powerful
governmentseven morepowerful.

I much prefer the thing on the left (2013) to the thing on the
right (2025), because the thing on the left is an expression of balance
of power, whereas the thing on the right represents two extremely
powerful factions whoshouldbe balancing each other
instead merging together.

You can also have balance of power between the other two forces in
the triangle. The Enlightenment-era idea of theFourth Estatewas
precisely about civil society as a check on government power (meanwhile,
even in the absence of any censorship, lots of power goes in the other
direction: the government funds schools and universities and can do a
lot to shape the content of especially the former). The media reports on
business, meanwhile successful business figures frequently fund the
media. These mechanics are all healthy and add robustness to society, as
long as one direction of flow does not overpower the others.

If there is one argument that explains both the rise of America in
the 20ᵗʰ century and the rise of China in the 21st, it's a simple one:
economies of scale. This is something that people in both places often
bring up as a criticism of places like Europe: there are many small and
medium-sized countries with different cultures and languages and
institutions, and so it's difficult to create businesses that operate
across the continent. Meanwhile, in a large homogeneous country, you can
easily scale to hundreds of millions of people.

Economies of scale are a big deal. And at the level ofhumanity, we want economies of scale because they are by far
the most effective way to make progress. But economies of scale are a
double edged sword: if I have 2x the resources that you do, I will be
able to make more than 2x the progress. Hence, next year, I will have
eg. 2.02x the resources that you do. Hence, eventually, the most
powerful actor controls everything.

Left: proportional growth. Small differences at the start become
small differences at the end. Right: growth with economies of scale.
Small differences at the start become very large differences over
time.

Historically, there have been two pressures counterbalancing
economies of scale, and preventing this kind of effect:

If the cheetah is ahead of the turtle, the first effect makes the
cheetah go slower, and the second effect acts like a rubber hand pulling
the turtle forward closer to the cheetah. But recently, a few key forces
are affecting this balance:

Basically, economies of scale are going up, and whilediffusion
of ideasis probably higher than before due to internet
communication,diffusion of controlis lower than before.

The conundrum: how do we have a flourishing civilization in
the 21ˢᵗ century, with rapid progress, without extreme concentration of
power?

The solution: mandate more diffusion.

What does "mandate more diffusion" mean? First, a few government
policy examples:

We can also come up with other ideas in this direction: for example,
we could imagine governments making mechanisms inspired by theEU
carbon border adjustment mechanism, but charging the tax on
(domestic or foreign) products in proportion to some measure of how
proprietary a product is: if you share the technology with us, including
by open-sourcing it, the tax drops to zero. Another idea that should be
brought back isHarberger
taxes on intellectual property.

But there is also a more "chaotic" strategy that we should use much
more:adversarial
interoperability.

[Adversarial interoperability is] when you create a new product or
service that plugs into the existing oneswithout the
permissionof the companies that make them. Think of third-party
printer ink, alternative app stores, or independent repair shops that
use compatible parts from rival manufacturers to fix your car or your
phone or your tractor.

Basically, interact with technology platforms, social media websites,
businesses and countries in ways that let you benefit from the value
that they are creating, without their permission.

In general, much value capture in web2 is at the level of the user
interface, and so if you can make alternative interfaces that are still
interoperable with the platform and its other users using the existing
interface, then you can remain part of the network, but opt out of its
value capture.

Sci-Hub, a tool of mandatory
diffusion that has arguably done a lot to improve fairness and open
access in science.

A third strategy to increase diffusion is to get back to Glen Weyl
and Audrey Tang'sideas
on Plurality. They describe these ideas as being about enabling
"cooperation across difference" - ways to have better discussions, and
collaboration, between people who disagree or have different goals, and
gain the efficiencies of being part of a larger group, without having
the downsides of being a larger group that is then a single
goal-directed agent. Ideas like this can enable open-source communities,
collections of countries, and other groups that are not actors to have
higher levels of diffusion between each other, allowing them to share
more economies of scale and remain competitive with more internally
organized centralized behemoths.

Note that this is all structurally similar toPiketty's r >
gconcept and his desire to solve it with a global wealth tax (and
on the other end, stronger public services). The key difference is that
instead of focusing on "wealth", we are going one step upstream and
focusing on thegeneratorsof unbounded wealth concentration -
diffusing not dollars, but the means of production.

I would argue that this approach is better because it more directly
targets the dangerous thing (extreme growth coupled with exclusion), and
if done well it can even be efficiency-increasing. It also has the
advantage that it does not limit itself to targeting one type of power.
While a global wealth tax may prevent concentration of power among
billionaires, it would do nothing against powerful dictatorial
governments or other transnational entities, and it would perhaps leave
us even more defenseless against them. A global decentralized strategy
of forcing technological diffusion - telling people "either you grow
with us, and share access to your secret sauce and your network on a
reasonable schedule, or you grow entirely alone, and we shut you out" -
would address power concentration in a different way.

A theoretical risk of pluralism is thevulnerable world
hypothesis: the possibility that we live in a world where as
technology advances, a growing number of actors will be able to cause
catastrophic harm to everyone. The less coordinated the world is, the
more likely it is that one of them will end up wanting to do this. The
only solution, according to some, is toconcentrate power more.
This post argued for concentrating power less.

d/acc ([1][2])
is a complementary strategy that makes concentrating power less safer.
It involves building defensive technology that keeps pace with offense,
in a way that is open and available to everyone, reducing the need to
concentrate out of fear over security.

Slave morality says: you are not allowed to be
powerful.

Master morality says: you are commanded to be
powerful.

A synthesis morality focused on balance of power might say:
you are not allowed to behegemonic, but you are encouraged to
beimpactful, and toempower others.

This is another way of phrasing the "power to" vs "power over"
distinction, which has existed for centuries.

One way to have power to without power over is to have high diffusion
toward the outside world. Another way to have power to without power
over is to build something which minimizes its ability to be used as a
lever of power.

In Ethereum, one good example of this is the decentralized staking
pool Lido. Lidohas
about 24%of the total ETH staked supply today, but people are much
less scared of it than of they would be of almost anything else having
24% of the stake. This is because Lido is not a single actor: it is an
internally decentralized DAO with several dozen operators, and a "dual
governance" design that gives staked ETH holders the ability to veto
decisions. Lido deserves credit for putting significant effort in this
direction. At the same time, of course, the Ethereum community has been
insistent that even with these safeguards, Lido should not controlallof Ethereum's stake - and today it's very far from
that.

More projects should explicitly think about not just a "business
model" - how they bring in resources to support the work that they are
doing - but also a "decentralization model" - how they avoid
concentrating power in themselves, and therisks
associated with having such power. There are some cases where
decentralization is easy: relatively few mind the dominance of the
English language, or much less that of open protocols like TCP, IP and
HTTP. In other cases, decentralization is hard because the use casedemandsintentionality and ability to act in some situations.
Figuring out how to get the upsides of flexibility without the downsides
will be an important challenge for a long time to come.