“The Sovereign Individual” Book Review: Takeaways, Quotes, and Critique

“The transition from one stage of economic life to another has always involved a revolution. We think that the Information Revolution is likely to be the most far reaching of all. It will reorganize life more thoroughly than either the Agricultural Revolution or the Industrial Revolution. And its impact will be felt in a fraction of the time. Fasten your seat belts.”

AUTHOR NOTE: If you’re interested in these ideas, check out Roote—my online school for world-class systems thinkers.

The goal of this article is to review/summarize The Sovereign Individual, a book written in 1996 by James Dale Davidson and William Rees-Mogg. At a high level, The Sovereign Individual (SI) tries to predict the effects of the Information Revolution. The authors explore this by using a “history doesn’t repeat itself, but it rhymes” approach. i.e. They analyze the Industrial Revolution and then try to map that onto the Information Revolution.

Though the authors don’t use this language, I think it’s helpful to think about these kinds of books in the “mapping” sense. They analyze the Industrial Revolution through various lenses, then “map” those onto the Information Revolution. The highest level lens is one of “Institutions”. These Institutions “survive” (in a competitive environment with other Institutions) by leveraging Capital (often through means of Violence) and by leveraging Information (often through Myths). I like to think of this from an evolutionary perspective, where there’s both coopetition across institutions (like nation-states competing with religion) and within institutions (like nation-states competing with each other).

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SI looks at the institutional transition during the Industrial Revolution (Religion → Nation-State) and Information Revolution (Nation-State → Sovereign Individual).

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Industrial Revolution Transition from Church → Nation-State

Capital/Violence

“The nation-state facilitated systematic, territorially-based predation.”

Meta-note: I personally find these “violence-based” claims/lenses fascinating. Many of the books that think about “root-causes” (like money) deal with violence. e.g. In Debt, the author discusses violence as the base governing system for debt. (What do you do if someone doesn’t pay? If you can exert violence, then you can jail them.)

Information/Myths

“Particularly wide gap between perceived myths and reality”

Pre-Industrial Revolution, the church had a monopoly on information because books were expensive to create. The printing press broke this monopoly.

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With that monopoly broken, the word of god could be undermined, creating competition (amongst Catholic and Protestant religions). Luther’s works accounted for no less than 1/3 of all German-language books sold between 1518–1525.

Once the mechanism for Information propagation changed, so too did the Myths. Previously burdensome religious myths were updated to align with new mercantilist culture. Status from reputation-based chivalry changed to status from financially-based wealth.

Together in aggregate: The printing press allowed for info-based competition within the dominant institution—religion (Catholic vs. Protestant). The Gunpowder Revolution further transitioned power from Religion to Nation-State. The final stages of the Industrial Revolution (steam-based engines, factories, etc.) solidified the Nation-State as the primary Institution. But its time is coming to a close.

Information Revolution Transition from Nation-State → Sovereign Individual

Capital/Violence

Meta-note: When thinking within an Institution, it’s helpful to think about the incentives of the agents that make up that institution. In the example above, we think about citizens within a nation-state, whether their incentive set is more similar to an employee or customer, and what they gain from “being part of” the nation-state.

This transition away from extortion will remove (tax-based) resources from the nation-state (see the Panama Papers as an example of modern-day nation-state tax evasion). The authors then predict that:

“Nation-states will experience a sharp drop in revenue…but retain the unfunded liabilities and inflated expectations and social spending inherited from the industrial era…tax consumers will be the losers.”

This difference between expectations and reality is the source of both snake person angst (see Premium Mediocre) and traditionally middle income folks in developed countries. The authors claim that return for “slider-speed bats” (ordinary performance) is bound to fall. (I love the analogy “slider-speed bats” for power law distribution. It says: you can be pretty good at something like hitting 80mph slider pitches. But you won’t make it to the MLB.) The authors also connect this with the transition from “exploitation” to “discrimination” as the primary form of redistribution in the information age.

It may have been half-credible to suppose that a barely literate auto worker had been somehow “exploited” in the production of a car by the owners. The crucial role of conceptual capital was less obvious than in the Information Age, which clearly involves mental work…In fact, far from assuming that the workers created all value, as Marxists and socialists did throughout the 19th and 20th centuries, the obvious and growing trend away from unskilled employment gave rise to a spreading worry about the opposite problem — whether unskilled laborers still had any economic contribution left to make.

The authors predict a transition to “Competitive Territorial Clubs” (instead of nation-states). These clubs would compete across various axes: protection, taxes, etc. Public goods would not go away (if a club didn’t have them, their “citizen customers” would leave). Sovereign Individuals would be the customers within these clubs—individuals who can go wherever they’d like with their time/money/physical location, paying taxes to the First Bank of Nowhere.

Information/Myths

The primary myths of the late-stage Industrial Revolution (nationalism and fascism) came from an absence of myths tied directly to capitalism.

“The freedom that capitalism provided to people to create their own identities proved scary to those who were not ready to make use of it. They yearned for the the security of a solid identity and were drawn towards the simplicities of the nationalist and fascist propaganda.”

In the transition away from the nation-state (and perhaps further away from religion), people will still search for collective morality, a sense of purpose/direction, and a coherent sense of the world order. The authors think these “Competitive Territorial Clubs” will impose exacting moral standards for residence. They think this new morality will focus on:

  • Productivity and the correctness of earnings being retained by those who generate them.
  • Efficiency in investment.
  • Character and trustworthiness.
  • The evil of violence.

Finally, they believe that, in the age of “voluntary” taxation, recipients of charity will need to appeal to private individuals (not big government), and will need to appear morally deserving.

Information

The authors also predict how information will change in our new age:

  • Narrow-casting will replace broadcasting”. (Filter bubbles!)
  • “The very glut of information now available puts a premium on brevity. Brevity leads to abbreviation. Abbreviation leaves out what is unfamiliar.” (Clickbait!)

Increasing information doesn’t necessarily mean increased coherence. The authors state it brilliantly:

“The Age of Information has not yet become the Age of Understanding.”

Trump is indicative of the nation-state’s final days. As the authors write:

“A system that routinely submits control over the largest, most deadly enterprises on earth to the winner of popularity contests between charismatic demagogues is bound to suffer for it in the long run.”

Critique

Missing GAFA Aggregators in Institutional Co-Evolution

Missing Ecosystem Geo-Hubs

Missing The Macro Goal

  • Money has diminishing returns on happiness (after 50k/year, you don’t get happier). So hoarding/accumulating doesn’t make you happier, it just gives you more power.
  • They just completely ignore talking about “the goal”. i.e. If you’re writing a book about the upcoming intense transition for humanity, shouldn’t you also be thinking about how to make that transition good for humanity? They don’t think about the macro goal at all, or how one would go about achieving it. Instead, they just take a hyper self-focused view (likely in line with their libertarian bent) and think about individuals can exploit this opportunity. (See douglas rushkoff’s “Survival of the Richest”.)

Focusing on Systems, Ignoring Identity

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Head of Community and Long-Term Societal Impact at MIT Media Lab’s DCI. Shaping our exponential, fragile, and abundant context for good. Relentlessly curious.

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