How Blockchain is Unleashing a Governance Revolution with Cedric Warny

Transcript

[Music] welcome to the green pill. network podcast if you're just joining us we are building a coordination a network Society of thousands of hackers dreamers and doers who are focused on using crypto to bring positive digital systems to the world this podcast features the people who are doing it and it's published every Tuesday and Thursday if you want to learn more visit our website at Green pill. Network where you can download the green pill book for free join the Discord and become a member of your local green pill. Network chapter my guest today on the show is Cedric wary Cedric is a machine learning scientist and engineer currently working at tional a self-driving car company where he develops ml technology to perceive objects in the environment and

predict their behavior before that he was a research scientist at Amazon working on natural language and understanding and conversational AI um and I invited him on the podcast today to talk about elanar Ostrom and governance work in the Commons so basically Cedric has authored this really interesting post called governance revolution in which he argues that the current thinking on governance is too pessimistic and that we're actually in the middle of a revolution in how governance could happen that has been has been evolving for a long time but because of the new tools enabled by blockchain technology enable us to to manage the Commons in a new way so I quite enjoyed this episode on governance

Revolution with Cedric warney and I think that you are going to as well enjoy coordination Valle da is an open Global Collective working to finance and democratize the governance of synthetic biology Technologies to protect the future of our planet research and progress into synthetic biology is critically constrained by the world of nation state regulations and bureaucracy from middleman but the potential that synthetic biology has for the world is massive it can produce a world in total harmony with nature we can grow stuff using cells like software it's awesome and the best part is we no longer have to pull car out of the ground to grow and maintain civilization don't you think we should be funding this Valley da does and that's what they're here to do to try and make the solar Punk World

of Tomorrow a reality today so join Valley Dow right now and save the planet at Valley dow. bio hey Cedric how's it going Hey Kevin uh I'm all right how are you doing pretty good thanks I'm excited to get into elanar ostrom's work in this beautiful governance post that you wrote together so why don't you te us off yeah so um maybe I can talk about the the blog post which is like the combination of some research I did last year and um basically I argue in the blog post that we are the outset of a governance Revolution and so first I explain what I mean by innovation in the domain of

governance so I give a few examples and then I explore theoretically and historically what kind of environment Fosters uh you know a high rate of innovation in governance and then I look at some deep trends that I identify uh you know going on in the world right now or that have been going on in the world for you know the past maybe couple decades that will create such an environment that has high innovation in governance and then I identify three main Avenues where I expect a lot of innovation in governance in the future so we'll have a link to

this post it's entitled governance revolution in the show notes right here why don't you take us down those three a three main Avenues yeah maybe I can take a first a step back and talk about why I think we're at the outset of a governance Revolution and eventually I'm hoping we can bring L austrom into the picture here but um I I like to make a comparison uh with the outset of the Industrial Revolution um and um you know there's this famous British Economist Thomas malus who at the end of the 18th century so in the late 1700s uh wrote this famous book where he was all doom and gloom about the future

of humanity where he was identifying that um there was population growth and it was an exponential growth but the the resources to supply that population was only inreasing linearly and so he was forecasting some kind of catastrophe sometime in the 19 19th century and of course that didn't happen and the pr I make with Thomas montis is that there's a lot of talk these days about you know political gridlock uh the rise of nationalism and just an ambient pessimism about the the future of of governance and I I argue that we are in the same way that Thomas

B was misguided the pessimists today are also misguided because there's a lot of innovation that is about to happen um so maybe I can give a few examples what of what I mean by governance Innovation because it it it very is very intuitive what we mean by technological and scientific innovation but governance Innovation uh may be a bit confusing for a lot of people and so maybe I can give a few examples of what I mean by that and then go over the kind of deep Trends or the the the environments that tend to F Foster governance Innovation so examples that I go over in in my research um are for instance secret balloting so if you

if you look at uh the history of Democracy in America at the very beginning there was open balloting so people physically were in a crowd and were showing colors identifying who they were voting with for and so that identified who you're voting for and it it was problematic at the time and so the idea of secret balloting which is like fairly obvious to us was actually had to be invented it was an idea that someone had at some point I think it came from Germany um so that's an example of what I mean by governance Innovation another one that I go over is public debt for instance or like Central Banking and combining Central Banking with

privileged lending and so that was a type of innovation in governance which mostly originated in in Great Britain and it was probably Central factor in Britain taking over the world essentially let me just play that back real quick so B so basically you're saying that the pessimists um are are wrong because we're on the cusp of all these different uh Revolutions in governance which are just a continuation of of things like secret ballots from back in the day and Central Bank lending and so um the modern internet we about to innovate all these different new mechanisms that are that are sort of extensions of that long lineage of governance Revolution did I play that

back correctly yeah so the examples I give are just a few examples of what I mean by Innovation uh but they're not the the kinds of innovation that expect in the future obviously uh other examples would be like joint stock companies and limited liability all I'm trying to say here is that there is such a thing as innovation in govern governance uh I think a lot of people think politics is like this fixed thing and we have democracy and we have these systems and nothing was ever going to change anymore because we've reached a pinnacle of how to organize ourselves and I want to push back against that idea um you know another example I go over is something like mandatory vaccinations I see that as a type of

governance Innovation uh whether or not you're in favor of that it's a it's a different debate but it's it's a type of innovation and so the next thing that I want to look at is what is the kind of environment that tends to Foster innovation in governance and so to me looking at history the key factor that identify is the availability of exit options and so I go over a few historical examples where I found that there was a lot of exit options and as a result there was some kind of e florescence in governance Innovation and so I can I am happy to go over those the

two main examples I go over is Classical Greece and the other one is Renaissance Italy and so I show how those two environments um having a lot of exit options generated a lot of innovation and then what I do is I go over the Deep trends that I happening today and how that is fostering uh you know more exit options more um uh mobility and why that is going to lead to more uh Innovation essentially well one thing I want to pinch and zoom on there that I think is quite interesting is that in a world in which we're talking about us it using network States as a way of creating more exit options do we see the same sort of

innovation that we saw in in those examples in the internet because now Network states are allowing for exit options I don't know if you have a comment on that yeah yeah so that's one of the Avenues of innovation that I go over and actually history again is a good guide here because if if you look at the example of Classical Greece one of the key uh features of that environment was uh it was a set of a thousand independent city states that were all in the same area and uh they were all independent and like very small entities and so you can be seen as like a similar situation The Envision by the

network state which is like BAGI Shin's idea of like how governance in the future could happen but there's something similar of course different but similar that has happened in the past and it can be instructive to go back and look at that and so um in terms of you can argue that classical gree was a governance revolution of some sort some call it a mini Enlightenment uh there was some amount of scientific and technological Revolution but it was mostly governance Revolution so between like uh 800 BC and about 300 BC you you you find that per capita consumption in classical gree doubled

which is like unheard of in premodern societies and the population you know was multiplied by 10 or 15 or something like that um through a variety of means just natural population growth but also colonization of virgin territories by a lot of Greek cities uh there was a lot of migration so a lot of Mobility so that plays into the theme of exit options and so for instance a quarter of the population of Athens was foreign born and foreigners had a lot of Rights in Athens and so this this environment of intense competition basically favored the

spreading of useful memes um and it it it lowered transaction costs it led to high investment um in literacy NY military training uh and a lot of Innovations like I know federalism um standard coinage uh there was some level of social insurance uh some innovation in Market regulations in electoral processes so all these things are types of governance innovations that really um you know expanded a lot in that kind of environment and a similar thing happened in in Renaissance Italy we don't we

don't have to go over the details of Renaissance Italy but I think those are great examples of what happens when exit options uh increase well one thing I'd like to pinch in zoom on is that I'm hearing a couple things that are sort of anathema to the standard Cipher Punk uh cyer Punk governance ideas so basically things like uh Central Bank uh Central central banks managing the central banks via the fed or mandatory vaccinations um and and and I just want to highlight that because I think in the crypto space um the cipher Punk ideology is much more prominent than the solar Punk ideology I consider solar punks um a which this podcast is is one of them

to be more focused on sustainability pro-social type things where safer punks are more focused on things like privacy and sovereignty and things of that nature and so um I'm wondering you know if you if we play forward web 3 what do you think are going to H what are there going to be are we going to re-evolve coercive things like like uh like federal banks and uh and mandatory vaccinations and I'm I'm wondering if you could just respond to the cyppher punk that's sitting on my shoulder and is is back those things as quote unquote Innovations of governance yeah I just want to be clear that when I mentioned those as types of in examples of innovation not necessarily an endorsement it was just examples of ways different ways of doing

things and you know me being in the adjacent to the crypto space I am highly critical of uh Central Banking model uh and I don't necessarily expect or at least I hope uh that that model is not going to Triumph in the future mandatory vaccination that's I am not qualified to aine on that uh but there's interesting stories of you know mandatory vaccination for I forgot when the disease was but anyways it was oh small pox small pox so there's a in terms of vator vaccination in the

late uh 19th century 20th century there's some crazy stories of mandatory vaccinations in the US in particular in Massachusetts where uh you know government ases would like break into people's houses and literally handcuff people and vaccinate them against small pox so I think that's probably going a little too far uh but is an example of you know doing things differently well you know uh being about halfway through the episode I'm wondering if we could maybe pinch in zoom on how this relates to ostram and her methodology for for managing the common so it sounds like your ideas are kind of a superset of that um and you studied some of Lin aom's work so would love to go there

next the way I would frame uh Lin austrom into this is that in a world where there is more exit options um because people have become more mobile uh and goods and services are becoming more and more deterritorialized um and where cities as opposed to nation states are becoming the more preeminent political units and where identity is no longer stuck in a government database in the form of like identity cards uh but in forms of public cryptographic Keys uh the mobility and the exit options are

much higher and so the kinds of future uh experimentation that I forese see our first layered governance which is similar to bag's idea of network States uh so we can go over that maybe later uh the second big Avenue of exploration that I foresee is proprietary governance um and the third one that I foresee is what I call State reinforced self-governance and that's where I think the work of L asran uh comes in and the the the big picture idea is that um if if you have exit options um meaning you

can move to a different place or uh that has a different uh you know regulary environment or you can move your assets to a different uh jurisdiction uh the the epistemic quality of your voice increases and a lot of people see those two things as substitutes but I argue that they're compliments a lot of the time and the way they're compliments is that when you have an option to exit a system by even V for instance voting with your feet or moving your assets in a different jurisdiction um the the this is a choice that is guaranteed to pay off you you know exactly what the outcome is going

to be so it makes sense to invest in informing yourself about what the outcome would be whereas voice has not that guaranteed payoff when you vote on something um your your vote most of the time doesn't actually matter that much and so it doesn't make sense to invest in informing yourself that much but when both excident voice overlap um then it makes sense to invest in informing yourself and so the example I like to give is with the appearance of Bitcoin and blockchain on the scene um you have an exit option in terms of what to do with your assets or your

money or your savings and so it makes sense to uh educate yourself about what money is or what is a good monetary policy and uh in in that process your voice on the topic of monetary policy becomes uh way better like the epistemic quality of your voice increases and so this ties to Le aom's work um because she the way I would frame her her work is she pushes back against a pessimism um that is related to some kind of helplessness um that people have uh

regarding politics and in particular she looks at the domain of the CPR common pool resources and what she shows is that um people can solve their problems uh you don't need necessarily an external Savior and a lot of what I would call bad philosophy in in that domain um is captured by this famous paper by G Harden in 1968 um about the tragedy of the commons where he argues that if you have a common resource like uh Meadows where uh Farmers nearby farmers can let

their animals graze you'll almost inevitably end up in a situation of overg grazing or over consumption and depletion of the common resource and and that's what's known as the as the tragedy of the commons and this is what I mean by a philosophy of helplessness and and and some kind of pessimism and I think that has permeated a lot of design chist and um in the form of uh Game Theory tragedy of the commons um you know impossibility theorems like you know arrows impossibility theorem from from the 1950s and trolleyology the thought

experiments where you uh have access you you're managing a trolley and you have to decide life and death for different people all these uh stances I think have one thing in common which is an assumption in fixity of knowledge fixity of choices and what alrm argues in her work is that choices are not fixed knowledge can be created and we can solve our problems whereas people who subscribe to these bad philosophies typically end up with a similar solution which Len a would call a legal sensualism so that's the idea that you appeal to an all-wise external enforcer

usually via litigation to solve your problems essentially and she she pushes back against that essentially so it feels like reading between the wies there's a lot of opportunity to take ly ostrom's principles for managing the commons and bring them into the digital age and counter some of this negativity on on governance that people see yes and what I like about her work is that um she uses a lot of different tools uh not just modeling you know economics is heavy on modeling which is a common criticism of Economics but she uses not only modeling also econometrics and anthropology and field work and that's what I really like about

her work and lots of uh you know down to the ground um field work and I think the best way to talk about her work is through some of her case studies uh so I'm I'm happy to do that if you think that would be useful yeah let's go into a couple of case studies I think that'll really ground it for the listener first maybe I can talk about the two main push backs she has uh and then pick a specific example of a case study so the main push backs she has is first against centralization and the second one is against technocracy in a way so uh by centralization

is what I meant by legal centralism where we tend to um appeal to an all-wise external enforcer and in the case of the tragedy of the commons it would be nationalization of the commons essentially um and technocracy the push back she has there is that uh people tend to think that external experts by looking and analyzing a system um from outside uh can tweak the rules and design in incentives such that the problem goes away essentially without them being deeply embedded in the system and so she she pushes back against that and she's done a lot of field work in Forest management and irrigation systems

for instance uh in Forest management she looked at uh places like um Nepal uh Thailand uh India and uh what she shows is that in a lot of cases not all the cases but a lot of cases when you switch from Market provision of forest Management Services to uh nationalize public provision of the services often the quality actually goes down in a similar story for irrigation systems uh she I don't think she made she carried those studies herself but uh people affiliated with her her research program have and her own research and in her

book governing the commons she spends a lot of time on a specific case study in the 1950s in the Los Angeles metropolitan area where she looked at groundwater systems and uh I think that's a good illustration so maybe we can dive a little deeper into into that situation so in uh you know the LA metropolitan area is a semiarid region and water is uh water supply is a very uh important uh governance issue and the main supply of water in the 1950s came

from groundwater essentially you had a few Big Basins in the El metropolitan area and the problem was that you had the land owners that were sitting on top of those groundwater basins and then you had had what's called appropriators which were pumping water uh from the groundwater Basin so both the land owners on top the it's called overlying land owners and appropriators an example of an appropriator would be a a water company that is supplying a nearby town for instance um and maybe an example of an overlying landowner would be a farmer that happens to have

property on top of the Basin and everyone was pumping from those basins and those basins there were three main basins uh one was Inland and one was clearly uh adjacent to the ocean and another one was kind of in between those uh the the coasts and Inland and the reason I'm mentioning that is because uh those different Basin face different problems and the the problems they were facing is accessing what's called a safe yield where you pump too much water ESS entally and so the the level goes down and you you risk depletion of the resource and also if you're nearby the ocean if you punt too much and the level

of water goes down uh then you will have ocean like salt water from the ocean seep in and then you would salinate your Basin which would be which would have terrible consequences because you wouldn't have drinking drinkable water anymore um and so this is the situation the problem the tragedy of the come is that the were're facing so the common wisdom would say are we're doomed unless the government the central government intervenes and what anrom shows is that people were able to solve these problems and I think that's powerful uh in a in a world in which we're trying to there is no Global government that's going to sort of Lord over the entire internet if

we can find bottoms up ways of solving these common problems then that's huge yes exactly and so I think it's interesting to go over some of the specific solutions they implemented for these for this situation and it illustrates uh why she's being optimistic and um and I think the the theme of your podcast which is regenerative cryptoeconomics um I I think plays into that optimistic vision of the world where we can ourselves Sol our problems we don't need like an external Savior and so the way they they fix their problem is through a variety of tools and the

first thing they they had to do is measure like provide generate data about the the current situation how much water are we actually pumping out of those groundwater Basin um and that will set the picture uh for the for any negot future negotiation and so that's the first thing they did and they I think they funded partly themselves so the the the overlying land owners the appropriators there was the it was also partly funded by the state of California I believe uh so the Geological Survey that would establish how much water is being pumped and what's the safe

yield um so they did that so that leverages uh some government institution and I think that's a theme that we'll see is recurring in in ly aam is the the the con cep of what she calls generalized governance uh government facilities and uh what I like about that term is the term facility and it's a style of government that lrom espouses so it's the idea that solutions to your problem should not be driven by the top but they should be facilitated by the top and driven by the bottom and this story I think illustrates it's this so

the the facility in this case was uh a Geological Survey um and then um they had to once they knew what the safe yield was and they realized they were uh they were in overdraft meaning they were pumping more than the safe yield they had to pet back and so the question becomes who cuts back essentially because obviously everyone prefers the other people to cut back and not themselves and uh the interesting situation is that there was a conflict of legal doctrines um for who has a right pump water there's the the classic repairing rights Doctrine where if you happen to

have heresy on top of this groundwater resource then you you have a right to use it there's another doctrine of appropriative rights so if you're appropriating the water uh to let's say Supply a town nearby town with water that's um an allowed use um and then there's the prescription prescriptive rights Doctrine where if you happen to if you're not a overlying land owner if you're not an appropriator but you happen to have been using this resource for a long time you have prescriptive rights to that resource there were a lot of legal Doctrine um you know conflicts and they negotiated among

themselves and decided uh um solution of mutual prescription so everyone has prescribed water use against everyone essentially and so that leads to a proportional cutback uh in water use essentially so then they went to court um to uh enforce that voluntary agreement so that's a second example of a generalized facility provided by the government where you coming with a voluntary agreement and then it's enforced uh by the government the third example of uh of a govern facility is

for the salination problem so some of the basins were having saltwater seeping into their basins and so what they did is they created a new District uh that encompassed multiple basins and there was no existing political District to deal with that so they had to create a new District which is the type of facility provided by the government and this District would be responsible for um creating a a a water barrier so they would inject water between the ocean and the ground Basin as a barrier against salination and so for that they had to you know bring water to inject so they

had to buy purchase water from like Southern California um and they leveraged uh government institutions to do that like one to purchase the water and another one to inject the water and to funel that they created this special district that was uh raising money through a pump tax and so all these examples are examples of people solving problems on their own by leveraging uh generalized institutional facilities provided by the government and uh it it illustrates lrm's concept of polycentric governance at towards the end of her life uh you know if she had

to summarize her philosophy she would use the term polycentric governance and what polycentric mean means here is that you have different levels of governance you have the level of a single Basin where you know the the overlying land owners the appropriators get together um into an association um then they have a water Master which monitors uh the level of pumping of each party and then you have this Regional District special district that encompasses multiple basins and then you have the courts that enforce a voluntary agreement and then you they

also had to pass some legislation at the state level so you have all these different centers of governance they're not necessarily hierarchically organized but kind of overlapping jurisdictions and that's what she meant by polycentric governance and so to conclude this is I think the lesson of Lee nostrom is that people have the power to solve their problems essentially if you have a situation of a CPR where people are incentivized to pump water as much as possible and destroy their resource people are smart they'll invent Solutions choices on their own leveraging uh you know generalized

institutional facilities and so it's a it's a very optimistic view of the future yeah I mean I it it seems like it I feel like the word polycentric is something that we're increasingly Hearing in the pluralism space and in in the public good space in in web 3 and so uh might be too reductionist but that's maybe a good way to sum this up yep yeah I agree well uh we only have 10 minutes left so I guess we've got to start moving into into wrapping up I'm wondering you know if you're if you're maximally successful if this governance Revolution happens what do you think the world looks like in five or 10 years um that's uh that's a tough one um I think success for me I mean there's

nothing personal this is not like a a a company that I'm pitching or anything is mostly talking about ideas what I'm hoping for the future is more experimentation um and so I I would like to see more experimentation in layered governance um so that's uh an idea similar to what bellagi is pitching the world right now with the network State um I want to see more innovation in proprietary governance what I mean by proprietary governance is experimentation in different types of

ownership uh so for instance in America there's a lot of incentive towards what's known as fractionated ownership um like typical example is common interest developments of which the M most popular form is HOAs and I think there's a way to innovate on top of that for instance if you look at the commercial real estate market uh it's very uncommon for companies and private outfits to own the land on which their offices are and it it's actually also fairly rare to own

their own offices they mostly lease them and so I think that's one space Innovation space where expect a lot of innovation um where in terms of residential real estate we don't see that much we see mostly people owning the land on which their houses are um but this is mostly an artifact of policy it's not an artifact of culture I think a lot of people believe there's this thing in American culture where people want to own their house and own their land and I think that's an artifact of policy not not a deeply embedded thing in culture uh there's policy reasons for why people

want to own a house and own land and I think in the future if we manage to uh remove those biases in legislation and regulation we will see a ton of innovation and different ways of um organizing the way we live um so that's one uh area of innovation that I expect to see to go back towards layered governance uh there's this movement uh of special economic zones which has been going on for I don't know about 60 70 years now I think the first special economic zone happening in Ireland in the in the

50s and the the The Innovation I expect there is a lot more sczs uh special economic zones and then alliances between sczs so for instance you may have heard of Charter cities and Charter cities is like a subtype of special economic zone essentially and if you want to use crypto terminology you you could Define an secz as an as a hard Fork uh of the background governance so a hard Fork is typically when you uh remove constraints or remove rules uh an equivalent soft fork in in that

space would be a common interest development so in HOA is just adding rules on top of the background rules whereas an scz is removing rules it's hard Fork ver soft Fork so I expect a lot more soft fors from background governance and so these the special economic zones could be the source of what I would call a su layer of governance which is similar to uh bag's notion of a network State um the difference is mostly in how this happens so the way I imagine that to happen is sczs hard forking from the background governance and then creating a second layer of governance and I think the the example

of Estonia illustrate what that would look like Estonia is famous for um you know digitalizing what they say they claim 99% of their administrative public services are digitalized and they have good reasons to do that one reason is that they they're concerned that Russia maybe might decide one day to invade them and so they want to be able to boot up their country in a completely virtual way uh and so they have actually backup servers in several other countries besides Estonia uh where they back up their data and so if they were to you know being they if they were happen to be invaded they could theoretically boot

up their government systems and become a purely virtual country which is an interesting idea and so imagine applying that to an alliance or a coalition of cities that are in secs so they have room for maneuver in terms of governance because they've hard fored from the the background governments so they could create alliances at that second layer and so you could imagine a world where belong where you belong to a community in in a similar way that you're a a Google employee when you're a Google employee and you fly into Berlin and Google has an office in Berlin your badge works you

know it's like you don't need your American driver's license to walk in you have a badge and it works in New York he works in Berlin uh you walk in and you have access to familiar infrastructure whether that's you know monitors or a kitchen or uh laptops I don't know whatever infrastructure Google has I imagine that but for a country essentially country or public services and so I think that's a future that is possible and that could be really interesting well quite a beautiful Vision I'm wondering if

there's anything that I didn't ask the want to tell us about Cedric I think we covered a good amount so I think uh maybe one thing that I would like to emphasize is that a world where there is this layered governance depends heavily on what what I've called the deterritorialization of goods and services and I think providing a few examples of that Trend could be helpful um so for instance I think the supply chain in general is becoming way more abstract you order things on Amazon and they land on your doorstep whether you live in the US or in Europe or many other countries it's

the same kind of abstract supply chain um you've seen a boost in T Health for instance uh in the co 19 pandemic has helped boost that um you have movements like uh online schooling of which a good example is the school synthesis which is is a spin-off of the school that Elon Musk you know created at at Star Base in Texas for his kids and his employees kids the the founder of that basically generalizes the school and made it open to the public uh and it's like an online first school for for kids uh which is highly successful uh there's a big

movement towards moving towards online arbitration services to uh you know settle disputes um banking of course uh especially with crypto is being deterritorialized um even socialization uh is happening now online first so for instance I belong to a network called inter intellect where it's like a bunch of people from all over the world that organize salons we have conversations about various topics and um there's also this thing you might have seen on Twitter called teapot uh it stands for this part of Twitter it's like a bunch of people who during the

pandemic physically started hanging out online on Twitter um and so they made friends online first and then they met uh in real life uh via events like Vibe Camp maybe you ever heard of vibe Camp of course yeah and so this an example of you know the all these things are becoming more and more virtual and so if you combine this trend with cities becoming the preeminent political unit um I think you will see really interesting Dynamics in the future where cities are no longer mainly job markets but they're mainly consumption bundles

and so you're no longer uh cities are will no longer be like an phenomenon of economic agglomeration but a phenomenon of ofinity based agglomeration um and and then you could see this this virtual layer develop more and more so I think that's really interesting and inspiring for the future yeah well what a beautiful place to end on Cedric thanks so much for appearing on the green pill podcast and there'll be links in the show notes if you're listening check out Cesc on Twitter and then also his governance Revolution post which I found to be a really great read and I think your listeners the listeners will too thanks so much Cedric thank [Music]

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