How I Invest with David Weisburd
E141: Balaji Srinivasan: The Rise of Network States and the Fall of Nation-States
Tue, 25 Feb 2025
In this episode of How I Invest, I chat with Balaji Srinivasan—former CTO of Coinbase, General Partner at Andreessen Horowitz (a16z), and bestselling author of The Network State. Balaji shares his vision for how the internet could ultimately succeed America, the rise of network states, and the implications of Bitcoin's exponential growth. We discuss the future of digital governance, crypto democracy, and how decentralized technologies are reshaping global power structures. Whether you're a crypto investor, a technology enthusiast, or someone curious about the future of governance, this episode is packed with thought-provoking insights.
Chapter 1: How could the internet succeed America?
You know, just like Rome succeeded Greece and Britain succeeded Rome and America succeeded Britain, I think the internet eventually succeeds America. If you think about Bitcoin, it's definitely appreciated more where the dollar is depreciated more against Bitcoin. It's on the order of last I calculated about 8% a month for the last 10 years.
What that means is since inception, the smart money has been exiting the dollar for Bitcoin The biology fund, techno capital for techno radicals. So investors, Neville, Brian Armstrong, and Emily Choi of Coinbase, Mark Anderson, Chris Dixon of ASIC and Z, David Sachs, Gary Tan, Toby Luckey. Here's some problems.
High inflation, privacy violations, lack of shared consensus, costly energy, election controversy, security breaches, loss of manufacturing capability, too many other things to name, right? You can just keep doubling down on that, try to reform that system, right? Or you can build a better one.
Apology, Srinivasan. Apology, you are the former CTO of Coinbase, a general partner at A16Z, the co-founder of Earn, the co-founder of Council, the co-founder of Teleport. I'm getting tired going through all your background, but alongside being a VC and a co-founder, you're also Wall Street Journal bestselling author of The Network State, which I did actually read over the Christmas break.
So welcome.
Great to be here. And that's the network state, by the way, behind me on my shoulder over there. Um, so you can kind of see it.
And you're working on the version two of the book. Tell me about that.
You know, I got the first version of the network state out July 4th, 2022 auspicious day, of course, for starting new countries. Um, And just as a pure Kindle book, and I basically became a book publisher and had to figure out all the Kindle formats and so on and so forth. And it's actually, it hit number two globally on Amazon. And I tweeted that out at that time. You know what number one was?
It's one of the most popular categories on Amazon. It's billionaire romance. I was competing for the number one spot with the, I think it's like the most eligible billionaire. That book, I think is, so it was a bestseller, but it really is sort of, I feel it's catalyzed a movement.
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Chapter 2: What is The Network State and how is it relevant today?
It's as if, okay, yeah, it's got 500 million users, but it's like saying Pepsi got to 500 million people drinking it. It's fine and it's great, but it's not like something of massive importance. Everybody else can ignore it. It's just like people poking and liking each other online. That's what it was thought of in the early 2010s.
And yet at that time, in the early 2010s, the Arab Spring had happened. You know, Twitter and Facebook had helped cause revolutions abroad. Clearly, they were of political importance. But if you had said in 2011 that 10 years from now, the most important political issue in the world for at least a few days will be whether the president of the United States of America is able to tweet.
No one would have believed you. Even those people who had seen the Arab Spring and so on catalyzed by these intranet things, even those people who knew that these were massively valuable companies with hundreds of millions of users that were highly engaged, it was a limit of imagination where they couldn't project out that all politics would become social media in the 2010s.
And my view is that we have something very similar happening where in 2021, If you take Bitcoin, every bank and government knows about it. We have hundreds of millions of holders worldwide. There's many billion-dollar companies that have been started either on Bitcoin directly or around it and so on.
And you have El Salvador that has actually changed its laws to make Bitcoin the national currency of a legacy state.
And yet, despite all that, if I was to say that there's a scenario 10 years from now where the United States government and every government needs to hold Bitcoin in order to remain solvent, just like the president of the United States of America would need to hold Twitter to remain in power, that would seem like a crazy extrapolation from where we are.
But that's what it means, in my view, to take the internet seriously. I think if in the 2010s, all politics became social media, I think in the 2020s, all politics becomes crypto tribalism. Let me pause here.
Is that because crypto is essentially diluting power from everybody? So it's not as noticeable. It's not necessarily taking from Republicans or Democrats. It's diluting everybody. Managing a venture capital firm is complex. Fundraising, reporting, compliance, it all adds up. But what if there was a smarter way? Juniper Square is transforming the private market's investing experience.
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Chapter 3: How can historical examples guide the creation of network states?
You just kind of enter this community and it's only salad and fresh fruit and fresh veggies and meat if you're into that. But there's no processed foods. There's no sugar. You have to get in the car and drive outside of it to go and eat unhealthy. So your defaults are set to a good level, right? Yeah.
And that's like one of several creative solutions to try to have a corporate virtue as opposed to corporate vice. Okay.
And that's because the community is not optimizing on profit maximization. They're optimizing on other values.
Or more precisely, that profit maximization is now aligned with the individual's values. It's a little bit like, you know, there's junk food, but now guess what? There's health food and there's companies that make money on health food.
And there's, you know, there's now like results-based gyms, which don't make money on the subscription, but make money if you actually achieve your fitness goals, right? So it's a little bit like, you know, you've probably managed a Salesforce, right? And not Salesforce the company, but a Salesforce like a, right? Yeah. And, uh, they will do what you incentivize them to do, right?
They're saying is coin operated, right? You set up incentives and they will run to those incentives. It's almost like a really powerful stallion and you point in a direction and it's going to run in that direction. If you point it off the cliff or if you didn't realize that there was a bump in the road in the future, well, that's kind of your fault in that sense.
You can do things where you incentivize sales people with equity, but really what you want to do is just constantly monitor the incentives and change the incentives. And so capital is this very powerful maximizing function, but it can't set the objective itself. And then some creativity comes out of, okay, well, we made a lot of money off of junk food.
Can we make a lot of money off of health food? Well, probably we can. We just need to hit the right cultural moment. Anyway, so that's just like one subroutine of a subroutine of what I'm trying to do here. But really what it is, is all those problems I listed, I think they're internet for solutions to many of them. There are ways that, and one way of thinking about that
if there's hope, it comes from tech. Okay. That's the one thing that's working. Why did I say this one thing is working? Well, you have, you know, drug addiction and you have failing life expectancy and you have, you know, military issues overseas and you have inflation and you have everything that the state is touching, which is real estate, it's healthcare, it's education.
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