197 - Software Eating the State with Sammuel Hammond

as technology accelerates and crypto is very fast and AI is even faster governance isn't going to be able to keep up hence where we end up which is just technology just wins and that makes you optimistic Sam uh it makes me welcome to bankless where we explore the frontier of Internet money and internet Finance this is how to get started how to get better how to front run the opportunity this is Ryan Shan Adams I'm here with David Hoff and we're

here to help you become more bankless guys the bankless journey takes us to some interesting places and this is certainly one of them in today's episode the topic today is software eating the nation state Technologies like crypto and AI are about to fundamentally restructure Society from the bottom up we certainly believe that at bang list and Economist and writer Sam Hammond is our guest today and he's predicting how Society will be reorganized under this new paradigm and how those in power will respond what will the nation states have to say about it a few topics we get into

today number one we talk about crypto it's under attack in the US and Sam has a framework to help us understand why number two we talk about America it was once prot Tech Pro internet now it's anti- crypto and anti- AI what changed number three we talk about AI how is the world responding to this new technology how can AI further unlock crypto and number four we end with Sam's predictions that are concrete very concrete for the next two decades which Sam says will be weird including what

happens to the US and what happens to countries that Embrace internet Technologies from the firmware level up themes of this episode technology and freedom and how we balance those and David of course those are themes we often express on Bank list David why is this episode significant to you we always say in the intro we're here to front R the opportunity and this is one of those I I would say classic bankless episodes where it's definitely this knowledge is extremely valuable for being prepared for the future but also you're going to listen to it and

tomorrow is going to be totally the same like they're not going to be able to do anything that's totally front running the opportunity but the world will be significantly different in the future and it will be different in a very specific and unique and directional ways and episodes like this I think help map out the Contours of what that future chaotic world looks like so while tomorrow will be unimpacted for you Bank list listener understanding how crazy the future is early as possible will still nevertheless help you prep for it

I think this episode with Sam where we navigate Concepts like technology and the state in the year 2023 versus technology and the state in the year 2040 and how those change over time and the role that AI has to do with this are all very we should be knowing these things more or less we should be fluent in these conversations uh because as AI does progress in capabilities and consumer products as it's at your fingertips bankless listener uh the realities that Sam is illustrating here

on this episode today will become more and more relevant speaking of being fluent there was a term used in today's episode uh Sam used it called eak that stands for Effective accelerationism if you've not heard it before it's a term you might be hearing in the future as well it's this idea of techno optimism of welcoming the future it's a movement that wants to accelerate our technical progress as a species and not slow it down all right guys let's get right to the episode with Sam but before before we do we want to thank the sponsors that made this possible including bankless

Nation we are incredibly excited to introduce you to Sam Hammond he is an economist for the foundation for American innovation which is a think tank that advises policies in DC and if you go to their website their slogan reads build Tech promote freedom I think freedom and Tech these are two things we definitely like on Bank lists and we're also very much tied up with and concerned with the project of how to protect them in a world where it seems like software is starting to eat the nation state and the nation state is

maybe feeling a little bit threatened that is the topic for today I'm sure we'll touch on AI crypto economics polarization and how politics really works Sam welcome to banglas thanks for having me Sam I know your uh primary subject matter is not crypto uh yet this is a crypto podcast though Bank list listeners know we have had some recent flings with AI and we touch on economics sociology politics basically all of these things are crypto adjacent but since this is I guess officially a crypto podcast I feel compelled to ask

this question as we begin Sam what is your take on crypto geez um if I pull back a bit um you know I think there's a bigger take on uh crypto as a an example of a counter counter economics or using technology to advance Freedom um sometimes under the the label agorist right um and and I think it I think you know you know there's crypto Summers crypto Winters but the the general idea that we can use a technology to advance social change is I think a correct one and

obviously something that's much more powerful than than lobbying you know or or you know writing manifestos here or there um technology is this interesting exception to the rule where if you can invent a better way of doing things you don't necessarily need permission to put it out into the into the into the world and that technology can lead to dramatic social changes right like there's a famous book that argues that the invention of the Stirrup it was what led to feudalism right this one small invention led to the the ability for horseback you

know Knights to to uh control land and and so on and so forth and so like inventing Technologies to advance freedom is a great idea crypto is an awesome application of that into the monetary realm um and I think really it's been just looking for its killer app and so that I'm also interested in crypto as a potential solution to a lot of the issues that AI is creating and and and in that sense you know you know AI creating the conditions to give cry uh blockchain a kind of functional use case you know we think about this in

terms of uh data content Provence and tracking deep fakes and so on and so forth um and so I think these two movements the sort of people working in Ai and the people working in crypto have a lot to learn from each other and potentially collaborate on solutions that combine those those two Fields you know think about like genuinely smart contracts know you know if we had if we had smart contracts that were running little AI agents inside them yeah absolutely and and I think this theme that we'll return to throughout this episode is maybe a major one which is

Technology's ability to impact social change and when social change happens there are winners and losers in uh the outcomes of that social change and I I think one thing that maybe AI has a parallel with crypto today is uh crypto very much feels like it's under nation state attack I don't know Sam if if you've heard about Elizabeth Warren's anti- crypto Army we've got um privacy developers in jail uh the developers of tornado cach uh for instance we've got Gary gendler regulator at the SEC he

thinks everything is uh under his control everything that tokenized uh that's tokenized is his I I guess I have a a question for you that that that is General maybe you can help us make sense of this why does it seem like the nation state is attacking crypto is it all in our head or is this related to the idea that you opened with this idea that technology impacts social change and and restructures societies and some people don't like that change and are resisting it is that what we're experience

experiencing in crypto some of that resistance yeah I mean we'll get into this later but liberal democracy as we understand it in the modern nation state is a product of a particular technological equilibrium like institutions are adapted to the state of technology and therefore you know it's one thing if you're inventing a better mouse trap but if You' invent new firmware to run the economy on um you pose a direct threat to the Sovereign so to speak and so I think it's not surprising sort of political Theory 101 that if you pose a direct threat to the

Sovereign The Sovereign is going to hit back and in some ways it's it's sort of like a huge endorsement to crypto like the more the more there is this attention from the Gary genders of the world the more you should think that you know there's some there's there there you know where smoke where there's smoke there's fire um that this actually poses a sort of challenge to their regulatory oversight um and it's also interesting gensler's also had a foray into AI now where he's brought up AI it's a

potential systemic risk to financial markets um he's done the AI pivot as well hasn't he Sam yeah are we all yeah Sam Sam if I wanted to like um reinterpret what you said uh you're I think what the the meaning I got out of that is that the state lags technology as in like technology moves forward and then the state has to like catch up to it right there's there's some sort of equilibrium of about the inventions that humans produce and then the state naturally responds to that new

equilibrium they are not they are not promoting they are not the Pinnacle of of society right they have to catch up and uh establish new governance over the system um and so one thing I I see as like a big friction between State and the state and then also Ai and crypto crypto and AI paired is that crypto is just so fast if you exist in this industry we move so quickly we go in fouryear Cycles but if you were four uh looking at crypto four years ago it's

and the state is always lagging technology there seems to be just a friction that is produced between that Gap do you see that that friction as well oh absolutely I mean we're talking about exponential Technologies running up up against linear or even sublinear institutions um there's going to be a natural thing that you know they fall out of Step Congress is only just now getting its hands around social media um and arguably not even that um so it does pose sort of you know Peter teal has this like indefinite optimism definite

optimism indefinite pessimism definite pessimism technology provides forms of indefinite optimism right we can just imagine a better world with with technology but for people in incumbent positions in government or other institutions even incumbent corporations that could be disrupted by technology there's a there's the there's a sense in which there's like an ominousness to to new technology that they have to do something about by default um because it poses a threat to to existing ways of of

doing business and I don't think this is any different like nation states you not only do they act slowly but you know think about our administrative bureaucracies like relative to Other Nation States they act even slower right we have if you want a new regulation you go go through multi-year notice and comment periods where the public and really by the public we mean lobbyists get a chance to give their two cents and then that has to go through inter agency review process and that whole thing gets challenged in court you know the New York can't even introduce congestion pricing without being sued for for multiple years um and and so the and so

ironically that slowness actually creates a demand for alternative modes right alternative modalities you know if you can exit the system so to speak and accelerate through a different track through an alternative economic Arrangement through alternative you know um alternative distribution channels um then you can just like enun the entire system and that's and that's fundamentally why I think there's been this Crackdown both on you know social media and New Media from sort of

incumbent media groups and now and now also from the incumbent Financial interests crack down on crypto it's not necessarily that they see the technology is inherently bad it's that it's moving quicker than they can keep up with and so their solution is to try to slow things down so that they can catch up rather than just letting things rip So you you're saying their solution is to slow things down although sometimes it feels like um they're they're doing more than slowing things down Sam that they're trying to actually uh stop things they're trying to shut them down they're trying to ban them they're

trying to make them illegal and the thing that has surprised me I guess a little bit is you said that you know technology can often bring a political threat to to The Sovereign and yet I would assume that in some societies uh that political threat would be more severe than others for for instance America at least American values as purported on paper in like you know its best light and we don't often live up to these uh to these values is a uh nation state and a society that is supposed to Value technology it's supposed to Value

Freedom these are supposed to be enshrined in our values and so the push back from uh the US on crypto in particular has been a little drawing for me I guess maybe some might say that's naive like Ryan you should have anticipated that but it just feels very much in conflict with the the values that we put in the the American white paper um you know I'm wondering if you could reflect on that and then I I'm hoping we can dig into these words like freedom and technology and what they actually mean and why they're important yeah I mean if you look back

at history other transformative Technologies take the take the printing press right printing press early 1500s it really doesn't start to diffuse though until the next Century in the early 1600s that's when you start to see every little Township every little you know Shire in England having their own printing press um and actually up until that point uh the UK parl had an ecclesiastical licensing regime if you wanted to print a book in England you had to get the licensing board's permission and it was a bunch of priests that you know made sure it didn't offend

anybody um and that was consistent with the church of England and so forth uh once printing reached a kind of point of criticality where it was so diffused across the countryside um enforcement completely broke down you know the licensing board collapsed there was this explosion of new Publications you know the non-conform the Presbyterians the new Puritans all these all these minority religious groups that uh finally had a chance to speak it was it was very it's very reminiscent actually of like what what the internet did um uh

and what happened out of that was there was you know the Civil War there were also the broads broader Wars of religion in Europe and at the other end we get Modern Nation States in particular we get the founding of the American Republic and in some ways the American Republic was not just sort of a Founder country but it was also the first sort of printing press native country right the founders of the United States were sort of post printing post printing Revolution and designing the society around that reality um and so and so you know one hopes that we can

undergo you know absorb these new technologies consistent with our existing institutional setup but then that brings in people likei sasin and others who sort of take this as inspiration that we need to found new institutions to be native to the internet age to the to the crypto age the AI age um and that that's going to be that's like going to be a running tension I think through the century like what what institutions are able to evolve with technology and and where do we need to just displace and start over it so that's a really interesting framing of the US which is like a um one

of the first societies built on a post uh printing press set of protocols and and I guess what you're referring to Sam is maybe some Protections in the Constitution you know sort of uh the ement of of freedom of speech and First Amendment type protections is that what you mean yeah absolutely and also just um the milu like it was a republic of letters like The Federalist Papers this these were like early this was like 17th century uset well it's um very interesting because now we have these post printing press societies and and America is you

know now you close to 250 uh years old but we don't have any societies that have been built that have built on the uh Native protocol of the internet maybe that gets into what some of BAGI is is basically saying is that our existing institutions are sort of fraying around the edges and uh maybe that's what you're saying as well Sam like the governments of the world haven't been able to adopt to a technology fast enough so the the protocols aren't like internet native Tech native type

protocols is there something to that oh usually I mean um you know take Social Security numbers you know the nine-digit number that was created in 1935 right it's no Wonder our system is so full of fraud um the IRS the IRS was the IRS IND individual Master file which basically runs the entire tax system uh dates to the Kennedy administration and is written in assembly um you know we had uh we had during the pandemic this explosion in in unemployment roles and

people were lining up around the blocks because literally like the websites would go down at 9:00 p.m. uh you know the amazing thing about the internet is it doesn't have to have business hours um but yet but had to in this case because our systems just so outdated so like purely on a on a technical sort of institutional firmware level um we have this in growing Chasm between sort of what you could describe as like the the ux the ux experience between the public and private sector right um now we get we get annoyed if our Uber doesn't

arrive in three minutes uh when that barely existed five 10 years ago um and and yet we you know are sort of like masochists about like government inefficiency where we just have come to expect it as part for the course but but obviously the DMV line is uh Eternal and inherent yeah and I'm sure the DMV these days is better than it was in the 70s but you know again this is sort of linear improvements against exponential improvements in the background um and the more these things get out of Step the more the more we will not have sort

of a gentle transition the more there will be just things breaking Sam there was a a passage in one of your articles that we were reading to Pro for this podcast I want to read because it's about the the continuity of the printing press into the internet and how these similar technologies have shaped the Contour of nation states so your passage reads for Generations it was an implicit Assumption of US foreign policy that economic liberalization and free trade would push autocratic regimes to democratize information technologies

that give voice to the voiceless were key to this Grand strategy a kind of glass nost in a bottle this is why the Department of Defense invested so heavily in the early internet and while why our International Development agencies promoted internet access abroad as one US Aid report puts it Connecting People transforming Nations the idea that technology can precipitate a regime change is thus not foreign to us political establishment they just assumed our relative openness would keep those Dynamics from playing out at home

and so this kind of could puts a specific light on the United States as a country of you know doing the things that are in line with American values promoting these Technologies of the printing press and the internet to spread uh to spread freedom but as kind of Ryan opened up with this podcast uh we don't seem like we're getting that same kind of treatment with crypto and we're also kind of not getting that same kind of treatment what we're seeing is with AI as well and so I'm wondering Sam like why why is crypto and AI is why is it different from the internet when the

American um establishment way back when was so apt to promote the internet like what what changed I don't think anything changed I think I think there's always been a deep hypocrisy in how we approach this geopolitically um similar to like how you know rean talked a big game about free trade well while uh and budget you know and cutting the budget while you know running bigger deficits and actually doing his own defense industrial policy so we've always we've always sort of said one thing and done another and the same the same is true in the internet like the internet um yes we

promote it over abroad we try to you know uh you know we use it to help the dissidents in Iran rise up against uh the the the Sha or whatever um but when that those same Trends play out at home our establishment treats it as a problem right they treat it as you know this growing um cancer of disinformation um and and it's it's something that's like so you once you sort of like stepped back and looked at it it's it's so obviously cynical right

where we have most recently the New York Times rushing to publish a headline about uh Israel blowing up a hospital with no verification right like spreading major disinformation to a massive audience and like just wiping their hands of impunity meanwhile like if if one random person tweets something that's false on on Twitter it's like this indicts the entire concept of social media um so I I think even in the realm of the internet there is sort of a a you know be careful

what you wish for dynamic where as the internet was being developed we had all these high flutin values around openness and transparency and connecting people and really that t That Tune I think BAGI is also documented this quite extensively the kind of techlash really set in uh post 2015 2016 when we saw how the internet was also giving you know making it possible for Outsiders like Trump to to um you know kind of hack the political game and suddenly you know the the same people who are writing articles about how uh the Obama campaign is like

harnessing Facebook to like reach likely voters is is basically taking the exact same story and saying but like switching the veilance and all of a sudden it's like you know populists are using social media to destroy democracy um so I don't think it's I don't think actually there's a disconnect between how we talk about the how the elite talks about the internet and and these other Technologies I think I think what really changed was 2016 re making them wake up and realize that that this isn't going the way they planned and in some ways the technology

as sort of a an asset an Institutional asset that dis dissolves corruption in the same way that the printing press allowed us to speak up against like the corrupt church and so forth is coming for them and that makes them very uncomfortable and so that's where you start to see you know new new attempts to try to regulate social media um and to sort of create a kind of corporatist framework so that the government can do via Facebook and and Twitter and these other platforms things that would be illegal for it to do itself um and so crypto and AI are just the next

iteration in in that in that exact same Trend so basically our Elites like when technology drives social change they just don't like when that technology and social change uh is used against them diminishes their power in some way I so but I want to um make sure we hone on the case hone in on the case because I do think you're right uh in the US and in other places around the world there's this um Tech backlash uh and I think whenever there's kind of a you know a backlash or there's some momentum for an idea um we have a tendency to get into

polarized extremes and I'm wondering if if you think that there is the right word for for this and the right approaches is balance uh let me give you kind of two Extremes in sort of the social fabric of of the US and the narratives that are that are playing out one is uh and the question is really what about tech is is technology good is it bad or is it neutral right and I I want to ask your take specifically about that Sam and maybe there's there's two counterpoints here one is kind of the the Mark Andre I don't know if you saw his recent techno Optimist Manifesto and

have thoughts on that but effective accelerationism is a related topic uh and this is very like a a prot te type of of movement um Mark andreon starts with with this he says Lies We are being lied to we are told that technology takes our jobs reduces our wages increases inequality threatens our health ruins the environment degrades our society crups our children threatens our future and is ever on the verge of Ruin every ruining everything we're told to be pessimistic angry bitter resentful

and he flips this and he says the truth is our civilization was built on technology our civilization was built on technology without technology we are nothing this is our Manifest Destiny this is uh quite the the the passionate Manifesto Call to Arms for Mark Andre is just that is very much putting forth the idea that Tech is good and then also we have I I think uh you know many in the political establishment but even among kind of the the the tech thinkers like the elowsky of the world which is basically

this idea that AI specifically but in general um Tech is dangerous AI specifically like we're going to kill ourselves it invokes ideas of Oppenheimer and Prometheus and you know Frankenstein's monster and Humanity could create this uh this this Leviathan thing that could destroy us all and we have to be very careful and we need our our parents our managers our our governments to really oversee this for us is there some balance to be found in those two worldviews or how would you answer that question of is Tech good is

it bad or is it neutral yeah I would describe myself as a techno realist rather than either Optimist or pessimist and I think that that's what we need today especially with AI um technology is always double-edged especially technologies that affect like what it very it means to be human right the kind of things that touch on The Human Condition like sort of attempts to build build for a transhumanist man uh what could go wrong um so I think it's always complicated

like I've done a lot of writing on how technology influenced the development of Institutions and the ex you know the exact same technology that we thought you know spreading the internet abroad would lead to Freedom led to the Arab Spring right if we were having Internet safety discussions Circa 2010 we would have been talking about you know child Online safety or identity theft we wouldn't have been talking about how you know social media would lead to mass mobilizations that would topple governments in Cairo and Tunisia and and and China was watching that the entire time and responded by by using

the same technology not to open up their society but to build an unprecedented digital surveillance State a panopticon um so technology it's not even fair to say it's neutral it's just it's a it's it's a fact of the matter and how we adapt to it is really the open question um what values do we approach it with and how do we balance the sort of ways that technology shapes the cost structure of Institutions uh in a way that preserves the things that we value

like like like an open Society like Freedom like privacy those things don't just happen automatically they happen because humans with their agency have designed things that way so Sam maybe we could steal man the argument a little bit so if what you say is is true that technology is a a double-edged sword then uh why not slow it down maybe The Regulators are right let's slow things down to figure out what the use cases are and you know gradually inject it into our society is that is that a good approach are they maybe the good guys in

this story if if technology is a double-edged sword if there's harm as well as benefit well there are cases right like you'd be hard pressed to find somebody who's like so so EAC that that the person who develops the First open- Source uh pathogen synthesis platform form you know should just rush and put that out on huging face like there are there are issues there right and part of this you know part of my message is the more we can restrain ourselves voluntarily from from rushing in to to

that sort of having like the George hot's kind of chaotic neutral sort of mentality um the more the more we can also push off inviting a backlash right um you know often technologies that empower the individual paradoxically lead to a Hobs and crack down on that very technology if they're not introduced in a in a reasonable way and and this isn't something that Regulators can do um reg regulation is a very blunt instrument and also the the whole notion of slowing down like the

this AI pause letter for instance you know it was worth the the pixels it was written on right because nothing paused and even with all the text CEOs of those companies agreeing that there are existential risks nothing paused why did nothing pause because it's not because we're in in a kind of prisoners dilemma we're in a kind of competitive arms race and at this point with the technology like AI in particular we should shift from shift the frame from how do we stop it to how do we brace for impact because I do

think it's going to be incredibly disruptive in in good and bad ways like we just talked about the printing press the printing press came out all right but it also led to the bloodiest Wars of religion that Europe has ever seen where like a third of the population died that wasn't that's not great but it's also something that We Can't Stop it's something you have to you have to go through right what does bracing for impact look like to you if regulation is such a blunt instrument and we desire something a little bit more precise and a little bit more effective how how do we do that

um well this sort of gets into my Ai and Leviathan Series where I where I talk about these Dynamics um the the way I've been putting it is we kind of have to get to Estonia like people have often said you know getting to Denmark is is the end goal we need to get to Estonia why Estonia well Estonia we were just talking about sort of America as a printing press native country uh Estonia is a is a internet native country you know after the fall of the Soviet Union they have Bas basically a blank slate and they also had this enduring threat of Russia on

their border um and the the civil servants in Estonia in the mid 90s were very young they had kind of had a hacker ethic and they they built the first and to this day most sophisticated e government in the world um you know they actually pioneered an early version of blockchain it wasn't called blockchain it's called xroad but their entire government is basically built on a blockchain um it's a distributed uh data exchange layer where if if the Department of Education blows up one day your files aren't lost because they're distributed all around and the whole the

whole process enables it unlocks like all this kinds of all kinds of automation right because if you are born you file a birth certificate your child will is automatically enrolled in school when they turn five or six uh because the system is just able to do that automatically and so they're both able to fortify their institutions against in this case the threat of Cyber attack from Russia but also build in the process a sort of government as a platform where they could open up government to API through API for private actors the you know ebanking all