This Book Predicted the Future — Here’s What It Got Right
The Sovereign Individual was published almost three decades ago. It's predictions about the digital economy and future of the nation state are becoming manifest. What's it mean for the future?
We are living in the midst of one of the greatest transitions in human civilization.
Compared to previous eras in history, we’re able to access more information and connect with more people than ever before. The limits of geography no longer constrain how we do business, the type of people we meet, and the way we govern ourselves.
Because of this, many people are finding themselves more aligned with individual identities rather than their country of origin. They are forming digital communities aligned with their preferred identities and those communities are mobilizing to take political action in the physical world.
This has profound implications for all of us moving forward. Such a shift calls into question the state of democracy in an increasingly digital world. When political factions can form irrespective of physical borders and the bulk of commercial transactions can happen in a transnational cybereconomy, what is the point of having a government, a military, and the state itself?
The events we are seeing transpire in our world today are not happening spontaneously. Whether it’s the proclamation of personal identities or the growing gap between the rich and the poor, these issues are coming to the surface because of a much larger transition underway. Advances in technology have made the existing order — and the norms that govern it — obsolete.
More than two decades ago, James Dale Davidson and Lord William Rees-Mogg published a book predicting what a transition to the Information Age might look like. They made assertions about the impact it would have on the economy and the world around us.
This essay is going to dive into some of the predictions made in their book, The Sovereign Individual. The thesis of the book is that individual sovereignty will emerge out of the Information Age, challenging the role of centrally organized nation-states and their utility in the world order moving forward. If their thesis is correct, the current zeitgeist is a reaction to a much larger transformation underway.
The transition to the Information Age will create a new type of world order led by sovereign individuals.
Originally published in 1997, The Sovereign Individual is a speculative analysis of how the world could change in the new millennium. Davidson and Rees-Mogg study other key transitions in history to assess the impact the shift from the Industrial Age to the Information Age could have during our lifetime.
Their predictions lie on the foundational premise that:
“Microprocessing will subvert and destroy the nation-state, creating new forms of social organization in the process.” (15)
They argue this is possible because:
“Microprocessing reduces the size that groups must attain in order to be effective in the use and control of violence.” (23)
It’s not so much that technology has advanced but how that technology is changing the rules of the game. Governments, international relations, militaries, and economies are all structured around beliefs and values shaped during the Industrial Age. New technologies challenge existing norms and undermine the logic upon which those norms are built.
The result is the emergence of a new type of order shaped by individuals rather than governments. Because they are no longer bound by rules governing physical territories, individuals can exert power and influence as never seen before.
Those who have the means to do so will relish in their newfound sovereignty. Everyone else will struggle to adapt as the chasm between the Haves and Have Nots continues to grow.
Now that more than two decades have passed, we can evaluate the validity of the claims made by Davidson and Rees-Mogg. Here’s what The Sovereign Individual has gotten right about the transition to the Information Age.
They predicted that a new cybereconomy would emerge. It certainly has.
One of the most profound claims made in the book is that the internet would lead to the emergence of a digital economy that is independent of the physical world. The book argues:
“An entirely new realm of economic activity that is not hostage to physical violence will emerge in cyberspace.” (16–17)
This prediction has come to fruition. Content delivered by digital platforms like Netflix provides economic value without the exchange of a physical good or service. Meanwhile, ecommerce platforms like Amazon have changed how we buy things. Instead of driving to a physical store, almost anything you want can be delivered to your door in just a few clicks.
This is possible without the use of physical violence. Historically, economies were built around different methods of coercion. That’s because assets — like farmland or factories — could be conquered and seized. The Information Age has changed this. You don’t need to defend valuable economic assets with a sword anymore.
That’s because the cybereconomy isn’t powered by fuel or food. Instead it’s powered by data. Major companies can increase their economic value, peacefully, by using proprietary algorithms to harvest data. While defending against cybercrime to protect that data is certainly essential, defending Google’s headquarters from a literal physical attack is completely irrational.
This diminished role of coercion changes role of government, and it’s monopoly on the use of force. If the government doesn’t need to defend anything in the digital economy that a company can’t defend for itself, what’ the point of it?
That cybereconomy will come with its own form of digital money.
Engaging in economic activity online also diminishes the value of fiat money controlled by a government. The book speculates that new forms of digital money would emerge as a result.
This is proving to be true. The creation of Bitcoin in 2009 and the recent proliferation of cryptocurrencies validate this assertion. But more than that, the emergence of digital money outside the purview of the government changes how individuals exist within an economy:
“Individuals will be able to use cybercurrencies and thus declare their monetary independence.” (24)
It’s not just about the utility of “cybermoney” in transactions but what that money represents. When an individual can transact in a non-national currency, they exist outside of the control of the nation-state. Just as the move to a cybereconomy diminishes the value of military protection of assets, the use of cybermoney reduces the role a government plays in maintaining the value of that money.
The core thesis of the book is about individuals ascertaining their individual sovereignty over centralized institutions. Thanks to recent innovations with crypto and decentralized finance, individuals are finding it increasingly possible to do just that.
The move to a digital world changes how assets are acquired enabling more individuals to build wealth.
The shift to a cybereconomy isn’t just about buying and selling things online. It entails an entirely new way of organizing the economy around non-physical assets like data.
For the digital economy to work, you wouldn’t just need a digital form of money, but a new way of owning property too. The book suggests that:
“The advent of the cybereconomy will bring competition on new terms to the provision of sovereignty services…a proliferation of jurisdictions will mean proliferating experimentation in new ways of enforcing contracts and otherwise securing the safety of persons and property.” (19)
Individuals who are no longer bound by physical geography can live and engage in commercial transactions wherever they are located. This changes how property ownership is validated and records are kept.
Blockchain technology is making it possible for individuals to own assets wherever they are. Smart contracts built on certain blockchain networks, like Ethereum, enable individuals to prove ownership and trade their assets on public exchanges.
When you compare this to existing methods for procuring assets you can see how blockchain diminishes the role of centralized authority. Whether you are buying a home or shares of a company, the existing process requires you to go through some sort of broker. Blockchain eliminates middlemen like that.
It further reduces the role centralized institutions play in validating property ownership. Public ledgers can maintain records better than your local county clerk. When the government is no longer the primary record keeper it changes how property records are maintained — and how taxes are assessed.
Blockchain and decentralized financial applications reduce the barriers to entry for asset ownership. Anyone, anywhere can acquire assets and build wealth outside of the eye of a central government.
Value in the digital economy is determined by freedom, not just wealth.
The idea of what it means to be wealthy is also changing. Two decades ago it would have been unconscionable to believe that you were more than your job or the amount of money you had in your bank account. The book surmised that:
“In the future, one of the milestones by which you measure your financial success will be not just how many zeroes you can add to your net worth, but whether you can structure your affairs in a way that enables you to realize full individual autonomy and independence.” (18)
New financial movements like FIRE have emerged to challenge what it means to be wealthy. Authors like Tim Ferriss popularized the idea of “mini-retirements” upending the idea that one had to wait until the end of a working career to reap the benefits of travel. And the shift to remote work and digital nomadism demonstrates that workers value freedom above all else.
Freedom is a central value of individual sovereignty. It’s the ability to use your time and money as leverage to design a life outside the confines of a traditional career.
This move changes how society is structured. In the past, communities were organized around their collective economic value rather than personal freedom. Now personal freedom matters more.
This has important economic implications. When people stop chasing money their economic value in society diminishes. Minimalists are probably Target’s least favorite customer segment. And workers who succeed in retiring early are able to shield themselves from income taxes.
The mindset around freedom changes how companies generate profit and how countries collect taxes. While this isn’t inherently a bad thing, it’s certainly a departure from how things used to be done.
Freedom diminishes the role the government plays as a tax collector and service provider.
With an economy no longer bound to the limits of geography and workers existing for their own personal well-being, there is greater choice than ever before to choose where to reside. The book predicts that:
“You will no longer be obliged to live in a high-tax jurisdiction in order to earn high income.” (21)
While many people doubted the feasibility of this in a pre-COVID world, geographic arbitrage is now the new norm.
On the one hand, remote work capabilities have made it possible for individuals to work from wherever they have an internet connection. This has led to a significant migration of workers from high-cost-of-living cities to newly dubbed “Zoom towns.”
But it’s not just workers who are relocating. For years large businesses have avoided paying taxes by earning revenue through overseas subsidiaries. It’s not just that businesses don’t pay their fair share of taxes, it’s that they leverage loopholes so they don’t actually have to.
As more people and businesses move to low-cost areas, it challenges the fundamental premise of the government’s utility. It makes it harder for the government to collect taxes and puts it in a position to take extraordinary efforts to make up the difference. The book argues:
“When the state finds itself unable to meet its committed expenditures by raising tax revenues, it will resort to other, more desperate measures. Among them is printing money.” (24)
This prediction came true in the immediate aftermath of the COVID-19 pandemic. The government printed money and distributed it to individual citizens in the form of stimulus checks and to businesses in the form of forgivable loans.
Aside from maintaining a monopoly on the use of force, another key function of the government is to maintain the tax base. The government faces myriad challenges impacting its ability to collect taxes. If the government doesn’t print money, it will resort to other methods to maintain its own sovereignty:
“Western governments will seek to suppress the cybereconomy by totalitarian means.” (25)
Suppression is beginning to happen right now as it pertains to crypto. Recent actions by the SEC are an attempt to limit the shift to individual sovereignty. Particularly the ability to own assets and shield both assets and income from taxes.
The less money the government brings in through taxes, the harder it will be to provide services for its citizens. When it no longer provides value commensurate with the cost of being a citizen, the government will face a challenge to its existence.
The rise of individual sovereignty undermines the collective values we share.
Aside from the economic imperatives raised by The Sovereign Individual, the book looks at the impact greater individualization will have on society writ large. It argues:
“As technology revolutionizes the tools we use, it also antiquates our laws, reshapes our morals, and alters our perceptions.” (23)
This is undoubtedly happening. Our values have shifted to become more accommodating of minority opinions. Those opinions are not only impacting the way we participate in the economy but how we show up in civil society.
One of the challenges to the transition to greater individual sovereignty is that it emerges in an intersectional society. No one can agree on shared values anymore because individual identities are organized around competing hierarchies. While individuals can agree on a collective identity, they can’t necessarily agree on individual ones.
The book articulated the consequence of this:
”Others will fear for their jobs or be shy of other retribution for speaking up.” (359)
Today this is manifesting in the form of cancel culture and the deplatforming of critics. Skeptical inquiry is no longer accepted by civil society.
Political parties have been hijacked by ideologies representing individual identities rather than shared identities. This calls into question of the electoral process and democratic values. If a government can no longer protect its citizens, collect and distribute taxes, and provide a mutually agreed-upon process to elect officials, what is the point of the government at all?
Final takeaway.
Individual sovereignty will benefit those who know how to leverage it.
The book is clearly written from a libertarian viewpoint and celebrates the notion that individuals will be able to protect their assets, avoid taxes, and build wealth like never before.
This isn’t evil or selfish. Rather, it’s reflective of the realization that a centralized government doesn’t provide the economic value it once did.
Wealthy elites aren’t just hoarding their money because they are evil. They’re protecting their wealth from the fraud, waste, and abuse that will inevitably happen at the hands of Uncle Sam.
Because of this, the transition to the Information Age is going to increase the divide between the Haves and the Have Nots. In the process, it’s going to undermine the role of government as a mediator that brings different groups of people with competing agendas together.
What we are experiencing in the world today is reflective of this transition. The emergence of new technology, financial instruments, and the migration of people are not unique phenomena happening in a vacuum. Rather, these events are all part of a larger transition underway.
The book is The Sovereign Individual: Mastering the Transition to the Information Age. It was written more than two decades ago and paints a fairly accurate portrait of how the future has unfolded due to advances in technology.
Understanding the role of sovereignty and how the world is re-organizing around the sovereignty of individuals — rather than nation-states — will help better prepare you to navigate the transition that is underway.