Crypto Beyond Capitalism: Part 4
This is the fourth installment of a long form essay — or short book — outlining my macro perspective on how the emerging crypto ecosystem fits within the greater context of biological, cultural, and economic evolution. I intend to publish each installment weekly, over a period of 3–4 weeks. Afterward, I’ll release the content in its entirety, with additional notes and research materials, in e-book form.
“The ultimate test of man’s conscience may be his willingness to sacrifice something today for future generations whose words of thanks will not be heard.”
― Gaylord Nelson
Evolution’s core logic pits the qualitative behavior of organisms against the clock of universal entropy. Therefore the problems threatening survival — and their solutions — exist along two fundamental dimensions: time and quality.
Humans aren’t unique in this respect. Consider the central plight of our ancestral cousins, the chimpanzees: to survive they must defend against predators while avoiding starvation and raising their young. Free from immediate predatory threat, they spend nearly all their time finding and eating enough edible vegetation to sustain themselves. Take a moment to let that sink in. Unlike most humans, our closest evolutionary relatives spend the majority of their waking hours balancing the qualitative relationship between their immediate survival needs and their actions. In other words, they don’t have much spare time in which to ponder the future. This behavioral tradeoff between time and quality of action reverberates all the way down to the anatomical level. For example, chimps require an extended gastrointestinal tract (more digestion time) to compensate for their low quality diet, which in turn requires an abdominal cavity much larger than our own. The evolutionary tension between time and quality is inescapable. It’s reflected within each layer of our physical and psychological being; it shapes our very bones.
To navigate this tension between time and quality, a species must balance the immediate needs of its individuals against the discovery of cooperative behaviors that reduce the group’s exposure to untimely death, unnecessary suffering, and extinction. Thus the highest quality actions are those that further one’s own interests in a manner that also furthers the interests of the extended community over time. Such actions amount to increasingly positive-sum (win-win) games, but their discovery is neither guaranteed nor free. Unlocking latent collective potential requires the individual to sacrifice their time and voluntarily assume the risks of exploration: failure and exploitation. From the short-term perspective of an individual, this sacrificial behavior makes little immediate sense despite its potentially transformative upside over larger time horizons. So how did we cut this Gordian knot?
Evolutionary game theorists attempt to answer this question by modeling the strategic tradeoffs made by members of a species as they play repeated games within their environment. There exist many such games, and and even more strategies by which to play them, but the ultimate goal is always survival; survival embodies the high strategic quality of behavior as measured by persistence through time. With our large brains and social orientation, primates have adapted to play these games with one another. Nowhere is this more prominently displayed than in humans, who have (thus far) navigated the coherent balance between collective agency and individual autonomy with remarkable success. And in order to continuously re-converge upon this ideal balance, we’ve developed systems of representation, communication, and coordination unparalleled throughout the biological realm.
We embody those systems of convergence in our cultural evolution, and bridge the gap between individual and collective incentives by encoding the essence of positive sum behaviors deep within the mythological substructure of our value systems. Consider the concept of courageous sacrifice, as depicted cross-culturally throughout human mythologies. When enough individuals within a community assume the irrational yet heroic risks of courageous sacrifice, the results increasingly free the attention of a community from basic questions of survival and facilitate the discovery of even greater reservoirs of untapped potential. This pattern then repeats, resulting in positive feedback loops which accelerate the Cycle of Coherent Intensification. Despite our modern skepticism, these symmetries between mythology, religion, and game theoretically optimal behavior are most likely the norm, not the exception. We extracted substantial mileage from mythology and religion, yet eventually these narrative portrayals of the human condition fell from favor as we began to explicitly articulate hypotheses concerning the rules of the physical systems and economic games in which we’re embedded. And as we articulated our hypotheses, we breathlessly encoded their characteristics into our institutions and technologies. In doing so, humanity shattered the biological barriers limiting most other life-forms and entered a phase of development dominated by culture and technology.
But the power of cultural and technological articulation has a catch. Our deep seated evolutionary concerns over predator evasion and starvation — which served our many ancestors well across billions of years — resulted in the prioritization of local concerns across relatively short timespans. To paraphrase: if it’s not an immediate threat, it’s probably not that important. Furthermore, we began to verbally declare and technologically externalize our value systems long before we understood the evolutionary or game theoretical concerns involved. For example, Smith’s work predating that of Darwin has consequences we’ve only begun to unpack. We therefore built many incorrect assumptions concerning human economic behavior into the foundations of our socio-economic structures, foremost amongst them the idea of human as rational actor. Yet despite their limitations and incomplete nature, abstractions like the concept of rationality and the technology of money dramatically increased our near-term scaling capacity. Using these frameworks we increasingly systematized our interactions and unlocked the power to create complex economic networks at previously unimaginable scales. Today, however, the rudimentary elements of these assumptions have begun to adversely impact a growing proportion of human behavior, and signal a need to rethink our prior assumptions.
The dimensions of time and quality governing biological evolution also govern the capitalistic paradigm. They’re visible in the form of deeply enculturated institutional and technological norms limiting the set of acceptable economic games within the domain of all playable economic games. But as the Cycle of Coherent Intensification demonstrates, all paradigms of socioeconomic coordination are self-limiting insofar as their prior successes stoke flames of complexity that transcend the coherent capacity of the paradigm’s own structures. Through such a lens we may observe that the theoretical, cultural, and institutional roots of capitalism remain firmly planted within a technological landscape we no longer inhabit. In fact, both our technological and social adaptive landscapes have shifted dramatically. By connecting the individual members of the collective human organism via instantaneous and largely unrestricted flows of information exchange, we’ve unleashed entirely novel, fundamentally complex, and increasingly volatile patterns of human behavior. Unfortunately for us, we don’t understand the implications of these new patterns in the least.
Furthermore this connectivity maps poorly to institutional technologies that originated within and adapted to previous evolutionary and cultural landscapes. The majority of systems we inhabit today arose in response to the scaling constraints of geographically centralized and heavily stratified hierarchies. Along numerous dimensions, our institutions have become dangerously anachronistic given the pace and impact of our technological development. Much like a crustacean shedding its carapace in preparation for a burst of new growth, humanity must shed the mineralized structural limitations of our outdated, inertia-driven, and over-centralized systems. Only by making this courageous sacrifice can we adapt to the new set of constraints imposed by our densely-connected technological landscape. Only then might we constructively harness the inflating reservoirs of human potential that strain chaotically against our ill-fitting systemic shell.
If a novel set of systems were up to the task, what traits would they display? What paradigmatic shift could cohere the evolution and growth of our globally interconnected yet heterogenous landscape of human behaviors and values, while also increasing individual autonomy? The macro logic of evolutionary game theory suggests that this emerging category of systems must open the door to previously inconceivable levels of positive-sum interactions. It would need to transcend the rigidly mineralized institutions and structures governing the games we play with one another along the primary dimensions of quality and time. It would need to fundamentally alter incentive landscapes, and re-attach massive swaths of devalued human behavior — abstracted out of formal systems by millennia of socioeconomic centralization and prior adaptation — to the long-tailed autocatalytic engine of the contemporary information economy. Of course this would occur in ways that made little or no sense within the dominant economic and conceptual frameworks of the era. These changes would appear at first either absurdly improbable, or merely absurd.
More Signals, More Trust, More Wealth. Distributed.
In the complex domain, expertise doesn’t concentrate: under organic reality, things work in a distributed way, as Hayek has convincingly demonstrated. But Hayek used the notion of distributed knowledge. Well, it looks like we do not even need that thing called knowledge for things to work well. Nor do we need individual rationality. All we need is structure.
— Nassim Nicholas Taleb, Bitcoin
In many ways the eruption of cryptocurrencies upon the global financial stage appears absurd, but it’s informative to step outside the price-driven speculative chaos and frame current developments within their larger evolutionary perspective. That perspective is the growing number of collective action problems threatening humanity’s long-term viability: climate management, political hyper-polarization, health care provision, accelerating wealth inequality, increasingly multipolar international relations, and natural resource utilization. The increasingly volatile nature of these issues underscores the limitations of the current institutional and technological toolsets used to represent, store, negotiate, coordinate, and communicate values at species scale. Somewhat ironically, technologies designed to empower and connect humanity — products of the industrial, scientific, and information revolutions — also gave rise to a set of problems whose solutions exceed the reach of the centralized paradigms from which they emerged. So what are the main limitations of the current paradigm, and how might we navigate them while maintaining minimal levels of unnecessary suffering?
Luckily this isn’t the first time we’ve seen these types of problems. Rather, the increasing levels of perceptible volatility within our political, financial, and technological systems demarcate a completion of the prior Cycle of Coherent Intensification. Given that we live within an explosion of complexity — and potential — driven by technological innovation, we must now rise to the challenge of creating new tools capable of establishing and maintaining higher degrees of collective agency while preserving individual autonomy. This is the primary concern of the early 21st century: to regain coherence as a globally-interconnected species. As argued in the last section, to reach the next plateau of stable complexity we must mend the growing schism between contemporary reality and the structural limitations of institutions designed within a world that no longer exists.
To do so we must overcome many issues stemming from the combination of our accelerating pace of technological change and the radical connectivity of our information landscape. Like sparks cast off a grindstone in a room full of fireworks, these incongruences increasingly threaten our coherence as our inertia grinds the institutional structures and technologies of pre-information age society against contemporary levels of complexity. Foremost amongst these incongruent interfaces is our inability to establish coherent collective values (culture) at the scale necessary to solve cross-cultural and transnational collective action problems. And as one might expect, accumulating failures drive national and global political realities toward the tailspin of populism, spurring a degradation of behavioral quality throughout society. Unfortunately, as our top-down institutions decohere, they substantially increase the existential risk profile of humanity itself.
To understand how technologies like cryptocurrencies and cryptoeconomic primitives help us solve these coherence issues — and furthermore how they fit into the larger evolutionary patterns already discussed — we must unpack Distributed Valerism’s two core properties:
- An increased granularity of concretely representable behavioral signals, and their inclusion within the monetary domain.
- An evolution of the rules and incentive landscapes constraining the set of viable economic games in which the above signals are used to represent, store, negotiate, and transact value.
These two properties map to the previously discussed concepts of evolutionary quality and time, respectively. Furthermore, I’ll later make the case that in combination these properties create a type of positive feedback known as an autocatalytic loop — an accelerating process in which each sub-process generates outputs that, when used as one another’s inputs, improve the quality and intensity of the system over time. I believe that the dynamics of this loop establish expanded boundary conditions for human interactions that increase the probability of a heterogenous (albeit densely connected) society successfully navigating the issues listed above. But before we explore their interaction in detail, we must further define and address each property in relative isolation.
Let’s first discuss the importance of representative granularity. Earlier we discussed how humanity increasingly abstracted monetary representation over the course of history. We then discussed in broad strokes how this process has perhaps proceeded too far, and might benefit from a more concrete mapping between behavioral realities and the symbols we use to represent their value. But to make the scenario more concrete, let’s examine a relatable example that demonstrates the types of problems to which over-abstraction leads: the Twitter verification seal.
In theory, the verification seal is intended to signal the authenticity of a public figure’s Twitter account. The presence of the seal indicates that the account actually belongs to a specific person — usually a public figure. This lends credibility to the account, and deters those who wish to exploit the public figure’s reputational halo for their own personal gain. So far, so good. A person’s physical identity is about as close to a fact as it gets, and we possess relatively low-cost tools for maintaining the relationship between a Twitter account and a public figure’s identity. But let’s say that now, given political dynamics, Twitter also begins to use this symbol to represent the perceived quality or ideological acceptability of the public figure’s content. Questions of censorship aside, what effects does this have?
By conflating — or overloading — multiple signals within one symbol, we lose the ability to differentiate between real and fake accounts for anyone whose tweets fall somewhere between ideologically unacceptable and the threshold required for an outright ban. We’ve destroyed useful information. But it’s even worse than that. By removing authenticity of identity for those whom Twitter deems ideologically fringe, they’ve re-introduced an incentive to exploit the target’s reputational halo. This makes the authenticity of more controversial content less clear, and reduces users’ ability to discriminate between sources of controversial content — potentially increasing polarization. As if this wasn’t bad enough, there’s an even worse side effect of overloading the verification seal: it produces extreme moral hazard within Twitter itself. By masking a centrally-defined signal of quality behind a signal of authenticity, Twitter introduced a vector by which its employees can exert asymmetric power over users without bearing any immediate costs.
That overloading just one symbol can alter Twitter’s social impact this dramatically stands as a testament to the dangers of symbolic over-abstraction. Now recall earlier in this essay when we listed a fractional subset of the many behavioral values symbolized by money as we presently use it — money as a symbol of faith in government, of interpersonal trust, of military strength, etc. Money is infinitely more overloaded than Twitter’s verification seal, and that truth carries with it very real implications. As alluded to in Taleb’s preceding quote, these implications play themselves out in a deeply structural manner. Like the invisible constraints of The Matrix, they shape the contours of behavioral reality. And because we’re constantly immersed within them — as fish in water — we rarely stop to consider their wide-ranging implications.
So let’s pause for a moment and do so. In the Hayekian model of economic reality to which Taleb refers, we may think of the economy as a giant distributed computer. Within this distributed computer, every monetary transaction acts as a computation, and each computation establishes a small point of consensus reality at a given moment in time. One point alone is useless, but when many market participants create such points — each leaving behind breadcrumbs of consensus reality — the computer produces a continuously evolving pointillist image. We then use this emergent map of our economic actuality, comprised of individual price signals, to coordinate human behavior at otherwise incomprehensible scales. Taleb stresses that the structural forces guiding this emergent behavior outweigh the impact of individual knowledge. And yes, to the extent we’re measuring the relative importance between market structure and individual knowledge this holds true: variable individual knowledge holds less value outside the connective tissue of the market. It is not true, however, to say that an individual’s unique knowledge or perspective is meaningless, valueless, or without quality, given the structural existence of a market. Furthermore, once market-computers exist, their structural evolution and capacity to incorporate variable dimensions of information constrain the nature and quality of the images they generate. The resolution at which each market participant may contribute information therefore carries with it significant implications for the market as a whole.
Why does market resolution matter? Consider again the pointillist image of the marketplace in light of civilization’s use of money as a placeholder for behavioral quality. We may view the reduction of representative resolution in exchange for the stable growth of large social hierarchies as the collective sacrifice of a diverse behavioral palette in return for a single symbolic color. Of course it’s unlikely that we needed every color; after all, with sufficient procedural knowledge it’s possible to reproduce the palette by combining only primary colors. Also, over-preservation has historically imposed destabilizing costs. But a monochromatic depiction of reality has its limitations, which we may probe using the following thought experiment. Consider a monochromatic version of a stoplight, with its red, green, and yellow bulbs each replaced by a blue bulb. Given its diminished expressivity, installing this stoplight would likely increase the risk of accidents. But it wouldn’t become entirely ineffective — the re-designed traffic signal would remain useful to the degree drivers could infer its intent from the position of the lit bulb. Fundamentally, though, some degree of quality perishes alongside the reduction of its chromatic dimension from three to one.
Taken at face value this monochromatic scheme seems contrived. Why use only one color with many at our disposal? It’s a fair point. But what if — hypothetically — the use of red, green, and yellow lights resulted in the collapse of a society? In that case, using only blue lights remains the best option — at least until it becomes possible to incorporate more colors without introducing side-effects that undermine the local improvement. And to the extent that the physical world constrains the viability of our systems, this is the world in which we live. The majority of systems upon which we rely to understand, navigate, and manage our societies remain sensitive to the addition of complexity, and can collapse far more easily than we realize. But as demonstrated by the Cycle of Coherent Intensification, the evolutionary coin also has a flip-side: we must coherently incorporate novel complexity, or the world we’ve constructed begins to disintegrate. History records humanity’s relative ability to balance this complexity over time, and those alive today bear the Sisyphean burden of this eternal balancing act. As our human birthright we assume responsibility for the consequences of success or failure. Each generation must find a new equilibrium between the wisdom of the past and its attendant shortcomings. We must successfully navigate novel complexity in order to further our moral development and facilitate survival. This evolutionary tension of moral dimension frames Distributed Valerism’s first property, and guides its principal inquiry: what is the proper dimension at which to symbolically encode behavioral value? In recent history the answer has been one dimension per nation state. But like monochromatic traffic lights, this situation has its drawbacks.
For example, nations create and manage their own currencies via central banks. Those who manage central banks hypothesize about how to pull the handful of monetary levers over which they preside, and those who specialize in monetary policy speculate as to how sequences of lever pulls will ripple outward into the world’s most complex system: its economy. If this seems a bit silly and superstitious, it’s because it is a bit silly and superstitious. It’s yet another form of overconfidence in the human capacity to comprehend and centrally manage complex systems. Yes, it’s probably better than divining economic policy from pig entrails or the flight paths of birds, but not by as wide a margin as its advocates would have you believe. And as one might expect, the arrogance of those who pull centralized levers not only blinds them to the limitations of doing so, but also convinces them that the arrow of causality runs in reverse. Like Skinner’s rats — or Twitter’s employees — they truly believe in the power of their centralized actions to control circumstances far beyond their sphere of understanding. But it’s become increasingly clear that our economies don’t thrive because of adjustments to centralized monetary policy; they thrive in spite of them. Economies survive and grow across generations because the values of freedom and competence, set against the formidable headwinds of chaotically churning policy, will generate wealth given even basic monetary structure.
Conversely, one currency per person is probably overkill. The underlying dimensionality of behavioral value simply isn’t that diverse. If it were, we’d never agree about anything. And though at times that may seem the case, humans agree more often than not. We possess core values rooted in a shared evolutionary past, but our tribes often diverge to the extent historical factors and current realities shape the moral perception of specific behaviors. Historically, moral disagreement within large social hierarchies accelerated the separation of high-dimensional behavioral management from low-dimensional monetary representation. We enshrined our management of morality and social norms within the slow-moving domains of politics and religion, and began to optimize money for its expedience. But perhaps by increasing its capacity to concretely incorporate moral signals, money might surpass the capacity of centralized political systems to cohere acceptable consensus morality within and between diverse populations. Might this be possible while also improving money’s capacity to facilitate the basic structural needs of an economy? After all, in its low-dimensional form money’s distributed coordination of economic behavior has demonstrated itself superior to centralized economic planning.
But due to historical inertia, we rarely draw such comparisons. We learn from the catastrophes of centrally planned economies, yet fail to realize that over-centralized institutions of political governance also lead to catastrophe — particularly when survival depends upon grappling with accelerating moral complexity. This paradox owes itself to an asymmetry of optics. We may easily capture and distribute images of mass-starvation that resonate viscerally, but it remains difficult to articulate and track the diffuse tendrils of morally-suspect policies as they infect centralized systems by way of corrupt individuals. Unfortunately those contaminated tendrils increase our existential risk, and can eventually metastasize in terminal form. In essence, people starve due to economic over-centralization long before civilizations collapse due to political over-centralization. But over time, internal collapse becomes the primary concern of civilizations that sufficiently alleviate factors like starvation. This is now the case throughout the developed world, as our 18th century prototypes of decentralized governance — constitutional republics — begin to buckle under the weight of accelerating complexity. So how to prevent such collapse? First, we must disabuse ourselves of the notion that we’ve discovered, once and for all, the ideal dimension at which to measure morality and balance the relationship between monetary and political systems. Pragmatically speaking, it’s impossible to answer such questions with finality, as institutions must evolve alongside reality itself. Survival acts as our sword of Damocles, and suggests that now is the time to subject our monetary and political tools to experimentation: to meet today’s challenges of representation without introducing untenable levels of structural baggage, we must further decentralize.
Cryptocurrencies and cryptoeconomic primitives lead in this direction. Their increased representative granularity facilitates the emergence and evolution of a pattern I call moral meshworks — or simply moral meshes. Moral meshes are heterogenous cryptoeconomic networks that re-integrate low-dimensional economic and high-dimensional moral signals, long separated due to the prohibitive costs of their union. This new connective tissue holds the potential to increase the dimension of behavioral values communicated between the political and monetary domains without introducing destabilizing levels of friction and enforcement costs. Such meshes respond to complexity in an anti-fragile manner, and increase the adaptive capacity of the political and economic systems we use to establish moral consensus.
We require this increased capacity because current institutional limitations derive from their prior source of strength: rational centralization. Participants within rationally centralized systems must first converge upon solutions that generalize across individual preferences and needs, then enforce compliance hierarchically. But when rationally constructed systems become over-centralized relative to the complexity of their constituencies, satisfaction decreases and enforcement costs increase. In other words, when the resolution of institutional structure becomes too coarse to contain behavioral reality, it becomes fragile and unenforceable. The opposite also holds: without some degree of centralization, there can exist no consensus reality, and the collective organism loses its capacity to act with intent. If a collective organism — a nation state, for example — forfeits its capacity to act with coherent intent, extinction soon follows. For these reasons, it’s as much a pipe dream to believe in mesh-driven crypto anarchy as it is to believe in the capacity of the state to centrally manage a complex system. Still, our increasing political and economic volatility indicates that we’re over-centralized, and that the introduction of decentralized structure by way of moral meshes promises substantial upside.
At first these meshes will occupy the periphery of the economic domain as a highly diffuse experimental network of tokenized value systems, each with their own individuated perspectives concerning value. But like any evolutionary system, it will converge over time as diffuse patterns of exploration uncover dimensions along which the largest reservoirs of untapped economic potential reside. As this process of convergent discovery and pruning evolves, it will increasingly incorporate larger hierarchical structures within its meshwork, thus reducing overall network fragility. Like Adam Smith in his time, we may catch shadowy glimpses of these patterns taking shape. Unlike Smith, we may observe in real time how this ecosystem unfolds as its pioneers expand the frontier. Billions of dollars in long-tail equity are already on the line as crypto entrepreneurs subject themselves to the ruthless forces of evolution: parasitism, predation, mimicry, and an ecosystem dominated by the centralized competitors they seek to replace — competitors who won’t cede territory willingly or peaceably. Thus the cryptoeconomic ecosystem grows stronger by the day; and as this moral mesh evolves, it increasingly adds color to the monochromatic palette of our present economic structure.
But increasing the monetary domain’s moral resolution — its quality of representation — is only half the picture. In addition to the intensification of signal resolution, we’re witnessing an intensification in our capacity to coordinate the economic games we play with one another across time. It’s to this idea we’ll turn next week, where we will unpack the second core principle of Distributed Valerism: the transformation of humanity’s economic relationship with time itself.
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