Patchwork 2: profit strategies for our new corporate overlords

I fear Chapter 1, after promising an absence of grim, dumped a can of it down your shirt. I apologize for this, dear readers, and also for the awful, incendiary closing cliffhanger. (But fear not. We will answer the question.) UR has never been an easy ride, but I really don’t mean to abuse the customer in this way. If nothing else, it repels the good and attracts the bad.

But unfortunately for those who are bored with these warm, gaseous exhalations, I’ve come to the conclusion that it is simply not possible to get into the meat of a UR post without a fresh introduction to the anti-democratic, and frankly authoritarian, philosophy of government for which we are so notorious. (You do know that just reading this blog makes you a bad person, don’t you?) Unless you are a hardened longtime reader, UR is just off your political map, and anyone can click on a blog for the first time. Besides, one can never be too deprogrammed.

Most people, when they take a whack at designing a government (an engineering task at which all God’s chilluns just naturally excel), tend to ask themselves: what should the government do? Of course this is the wrong question. The right question is: what will the government do?

(A great example of asking the right question, but still getting the wrong answer, is Federalist No. 10 by James Madison. It is almost funny to read Madison’s bogus remedies for the well-known ills of democracy, such as national size being an infallible nostrum against political parties—not unlike perusing some medieval pharmacopoeia which prescribes dried wolf dick for breast cancer.)

For example, most democratic citizens are firm believers in the concept of limited government. In the all-curing magic black bag of democracy, limited government is the first-line ointment. Apparently a government can prevent itself and its successors indefinite from doing bad things, just by writing a note to itself that says “don’t do bad things.”

Swallowing the red pill, departing the Matrix and donning our alien-detecting Ray-Bans, we realize at once that no government can limit itself. Limited government is a perpetual-motion machine: a product axiomatically fraudulent by definition. In any human organization, final authority rests with some person or persons, not with any rule, process or procedure.

This is not to say that there is no distinction between Washington and Pyongyang. What we call the “rule of law” is a good thing. But if you have an efficient engine, there is no point in marketing it as an infinitely efficient engine. The noble ideal of “limited government” or “rule of law” is a piece of political camouflage, behind which lurks a useful and effective, but certainly imperfect and not even slightly divine, corporate design: that of judicial supremacy. In a sentence: juridical supremacy is judicial supremacy.

Judicial supremacy is a management design in which ultimate sovereign authority rests with committees of arbitrators who are experts in proper government procedure. The design certainly has its merits. If implemented well, for example, it can reduce personal graft among employees to negligible levels. Hardly a high standard, but I am happy to be governed by a regime which has achieved it. But ultimately, judicial supremacy can become arbitrarily evil—all it takes is arbitrarily evil judges.

Is judicial supremacy, for example, superior to military supremacy? This is like asking if a rowboat is better than a sailboat. For some purposes it is, for some it isn’t. In peacetime you would probably rather have the former. If you want to win a war you probably want the latter.

Neither, however, can be said to be in any sense predictable by design. A judicial kritocracy or a military dictatorship may deliver good government, or bad government. Either can be nice or nasty. In the end, the words “judge” and “general” are just words. It is not at all difficult to imagine a process of political evolution by which they swap meanings.

(Herr Teufelsdröckh’s philosophy of Clothes has never said more. Can a General command, in a Black Robe? or Justice be laid down, in Camo?—most assuredly; and the Devil too, in either! But more of him in short. Under the Clothes is a Man—who is he? How got he here? What does he at his Desk? None of these having much to do with your Design.)

Is it possible to design a structure of government which will be stable and predictable? Hopefully, of course, stably and predictably benign? History affords no evidence of it. But history affords no evidence of semiconductors, either. There is always room for something new.

The key is that word should. When you say your government “should do X,” or “should not do Y,” you are speaking in the hieratic language of democracy. You are postulating some ethereal and benign higher sovereign, which can enforce promises made by the mere government to whose whims you would otherwise be subject. In reality, while your government can certainly promise to do X or not to do Y, there is no power that can hold it to this promise. Or if there is, it is that power which is your real government. Your whining should be addressed to it.

The neocameralist1 structure of Patchwork realms, which are sovereign joint-stock companies, creates a different kind of should. This is the profitable should. We can say that a realm should do X rather than Y, because X is more profitable than Y. Since sovereign means sovereign, nothing can compel the realm to do X and not Y. But, with an anonymous capital structure, we can expect administrators to be generally responsible and not make obvious stupid mistakes.

Another way to say this is that a realm is financially responsible. The general observation here is that, to paraphrase Tolstoy, financially responsible organizations are all alike. By definition, they do not waste money. By definition, their irresponsible counterparts do, and by definition there are an infinite number of ways to waste money. Think of a rope: a financially responsible organization is a tight rope. It only has one shape. But if there is slack in the rope, it can flap around in all kinds of crazy ways.

It is immediately clear that the neocameralist should, the tight rope, is far inferior to the ethereal should, the magic leash of God. (Typically these days arriving in the form of vox populi, vox Dei. Or, as a cynic might put it: vox populi, vox praeceptoris.)

Given the choice between financial responsibility and moral responsibility, I will take the latter every time. If it were possible to write a set of rules on paper and require one’s children and one’s children’s children to comply with this bible, all sorts of eternal principles for good government and healthy living could be set out.

But we cannot construct a political structure that will enforce moral responsibility. We can construct a political structure that will enforce financial responsibility. Thus neocameralism. We might say that financial responsibility is the raw material of moral responsibility. The two are not by any means identical, but they are surprisingly similar, and the gap seems bridgeable.

When we use the profitable should, therefore, we are in the corporate strategy department. We ask: how should a Patchwork realm, or any financially responsible government, be designed to maximize the return on its capital?

For our overall realm design, let’s simplify the Anglo-American corporate model slightly. We’ll have direct shareholder sovereignty, with no board of directors. The board layer strikes me as a bit of an anachronism, and it is certainly one place stuff can go wrong. Deleted. And I also dislike the term CEO, which seems a bit vainglorious for a sovereign organization. A softer word with a pleasant Quaker feel is delegate, although we will compromise on a capital. And we can call the logical holder of each share its proprietor.

Therefore: a Patchwork realm is governed by a Delegate, who is the proxy of the proprietors, and can be replaced by a majority of them at any time and for any reason. The Delegate exercises undivided sovereign authority, as in divine-right monarchy. I.e., in English: total power. (The Delegate is always Jewish.)

This fragile-looking design can succeed at the sovereign layer because, and only because, modern encryption technology makes it feasible. The proprietors use a secret-sharing scheme to control a root key that must regularly reauthorize the Delegate, and thus in turn the command hierarchy of the security forces, in a pyramid leading down to cryptographic locks on individual weapons.2 If the Delegate turns on the proprietors, they may have to wait a day to authorize the replacement, and another day or two before the new Delegate can organize the forces needed to have her predecessor captured and shot. Fiduciary responsibility has its price.

That modern cryptography was not available to the Most Serene Republic of Venice does not mean they wouldn’t have used it if they’d had it. Since we have it, we can use it. Since the algorithms date to the 1970s, it’s not surprising that history has no record of cryptographic organizational structures at the sovereign level. Since the neocameralist design for a sovereign corporation depends on them, it’s not surprising that history shows us nothing of the kind. While as a reactionary I believe that the legal and political structures of old Europe, so often defamed as “feudal,” are a treasure trove of sovereign organization and if restored in toto tomorrow would prove on balance a vast human boon, it is a slight overstatement to assume that everything old is beautiful and sweet, and anything new must suck.

For simplicity, our realm will do its books in gold.3 The spectacle of a sovereign corporation that maintains accounts in its own scrip is a fascinating one, at least from a financial perspective, and we cannot write it off quite so casually as yet another 20th-century monstrosity. It is not impossible that fiat currency can be made to turn a buck. It is unlikely that the proprietors will want their dividends in it, however.

And who are the proprietors? Anyone. They are anonymous shareholders. It may be desirable, though, for a realm to enjoin its residents from holding its shares. It is not normally necessary for a company to refrain from serving its shareholders as customers, but a sovereign realm is not a normal company. A resident shareholder has a conflict of interest, because he may have an opportunity to use the power of his share to promote policies that reward him directly but are not in the interests of his non-resident fellows. The effect is small, but better to rule it out.4

We’ll also assume—assumption to be justified below—that realms exist in a competitive market in which residents can easily take their business elsewhere if they don’t like the service.

Given this setup, let’s say you’re the Delegate. Your patch is the city of San Francisco, and your realm is its new corporate overlord—Friscorp. Friscorp is yours. Not that you own it, of course, just that the owners have hired you to run it.

First, let’s enumerate the basic principles of sovereign corporate management.

Principle one: the proprietors’ sovereignty is absolute. Securing it against all enemies, foreign and domestic, is the primary fiduciary responsibility of the Delegate. Lose the patch and the realm is worthless, and so are the shares. Everything else, even profit, comes after security.

Principle two: a realm is a business, not a charity. Its goal is to maximize its discounted return on investment. If Delegate and proprietors alike somehow manage to forget this, in the long run their realm will deteriorate, develop red-giant syndrome, and become gigantic, corrupt and foul. It may even turn into a democracy.

Principle three: except in cases where it conflicts with the first or second principles, “Don’t be evil” is always good business. Think of your realm as a hotel. As Mark Twain once put it: “All saints can do miracles, but few of them can keep hotel.” And while many hotelkeepers can do miracles, few indeed are saints. But all are nice to the customers—at least, the 99.999% of customers who feel no need to start torching the drapery.

While our test case, San Francisco, is hardly representative of the average stitch of Earth’s skin, it will probably be harder to manage than most—being both urban, and urbane. So how, as Delegate of Friscorp, would you run your town? Let’s start by assuming a steady-state system, ducking as usual the problem of getting from here to there.

There are two basic tasks of a realm: managing the residents, and surviving in the big bad world. Let’s take these one at a time.

Any hominid, hominoid, or other bipedal ape present on Friscorp’s patch is a resident. The basic idea of a realm is that the proprietors profit by providing the residents with a pleasant place to live, be happy, and of course be productive. Basically, if you’re not nice to the hominids, they’ll leave, the proprietors won’t have a business, and you won’t have a job.

It is difficult for those of us who grew up under democracy to juxtapose this fact, which is an incentive rather than a constraint, with the fact that as Delegate of Friscorp, you exercise undivided sovereignty over San Francisco. You have no constraint. Your residents are as ants in your kitchen. No combination of them can possibly oppose you. Not even if they all come together in one big angry mob, screaming, jumping up and down, waving their little signs and throwing rocks and gravel. All will be massacred by your invincible robot armies. Pour la canaille: Faut la mitraille!5

And even without any such cause for complaint, if it would be profitable to just spray the whole city down, exterminating the current crop of worthless bipeds and replacing them with a more upscale crowd, you will. And if you don’t, your proprietors will fire you and hire a new Delegate with a clue. Terrifying! At least from the San Franciscans’ perspective.

But we can nip this grimness right here: it won’t be profitable. Why exterminate, when you can enslave? (It won’t be profitable to enslave, either. But see further.) Once again, Patchwork residents do not rely on imaginary constraints to feel secure in the icy, lethal jaws of a sovereign state which could slaughter them all. They rely on real incentives. While the incentives may not be 100% reliable, they at least exist.

A realm signs a formal contract, or covenant, with all responsible residents. The deal is this: the resident agrees not to misbehave, and the realm agrees not to mistreat him. Definitions of each are set down in great detail. In case of conflict, the realm appoints an arbitrator to hear the case. All cases can be appealed up to the Delegate, who has the power not only to interpret the covenant but also—being sovereign—to suspend it.

This process is called “law.” It is not a novelty. A realm may adopt and/or modify any of the old Continental, British or American systems of law. If a common-law system is adopted, precedent should be rolled back to 1900 at the latest, and probably more like 1800. The democratic era has corrupted everything, law being no exception.

The covenant has two sides, but the sides are not equal. The realm, having sovereign power, can compel the resident to comply with all promises. Since San Francisco is not an Islamic state, it does not ask its residents to agree that their hand will be cut off if they steal. But it could. And San Francisco, likewise, can promise not to cut off its residents’ hands until it is blue in the face—but, since it is a sovereign state, no one can enforce this promise against it.

For exactly this reason, however, San Francisco must guard its reputation. It does this by living up to its promises, as much as possible. If it is forced by unexpected, understandable circumstances to invoke force majeure, people will probably understand. If it breaks its own promises all the time and for no good reason, amputating hands willy-nilly after swearing up and down that life and limb are sacred, it will not be viewed as a safe place to live, and no one will want to live there. Congratulations on your new burned-out ruin. The views, at least, remain spectacular. Your replacement can probably find a way to salvage some tiny fraction of his employers’ capital by turning the place into some kind of eco-park.

To live in or even just visit San Francisco, a hominid must either sign the covenant, or be a dependent of some guardian who has signed the covenant. I.e., your hominid must either be responsible, or have someone who is responsible for it. San Francisco is a city, not a zoo. The signer of the covenant, the responsible party, is the subject.

In the covenant, the realm promises to protect the subject’s person, property and dependents. It indemnifies the subject against crime, and pays unrecoverable tort claims. There is no such thing as perfect security, and bad things can happen to anyone anywhere, but Friscorp considers all disturbances of the peace to be its problem and its fault.

And most important, Friscorp guarantees your right to depart from the city with person, property and dependents, unless of course you are fleeing legal proceedings. (And maybe even if you are—of course, you would have to find another patch willing to take you.)

In return, the subject promises not to disturb the peace of San Francisco, or permit his or her dependents to do so. (I favor the ancient Roman design, in which the guardian is responsible for the actions of his dependents, and holds the authority of patria potestas over them. Authority and responsibility, as usual, being unified. Not quite a fractal or hierarchical sovereignty, but close. Friscorp has no business case for interfering in its subjects’ family lives.)

Residents of a Patchwork realm have no security or privacy against the realm. There is no possible conflict in the matter: not being malignant, the government is not a threat to its residents, and since it is sovereign they are not a threat to it. This absence of conflict allows the government to enforce a much higher level of peaceful interaction between residents.

All residents, even temporary visitors, carry an ID card with RFID response. All are genotyped and iris-scanned. Public places and transportation systems track everyone. Security cameras are ubiquitous. Every car knows where it is and who is sitting in it, and tells the authorities both. Residents cannot use this data to snoop into each others’ lives, but Friscorp can use it to monitor society at an almost arbitrarily detailed level.

In return, residents experience a complete absence of crime—at least at the level of present-day Japan, and ideally much lower. (San Francisco has no need of Yakuza.) Residents also experience a complete lack of security theater—to board a plane, they walk right on. Friscorp has no reason to tolerate the presence of dangerous or unidentified hominids at large in its city, any more than it would tolerate leopards on the loose.

Strong identification and tracking of residents also mitigates one of the most obvious problems with the Patchwork approach, the inconvenience of constantly crossing borders in a world of small sovereignties. What does a resident do if she lives in San Francisco and wants to drive to Berkeley, which is a different country? Is there a checkpoint on the Bay Bridge?

Not at all. She just drives to Berkeley. Her car knows who is in it, and the authorities of both SF and Berkeley know where it is. If she is for some reason not authorized to enter Berkeley, all sorts of alarms will flash. If she persists, she will be of course detained. Having a scalpel, Patchwork feels no need to whack anyone with a club.

One way to see internal security in a Patchwork realm is as a compromise between two sorts of Orwellianism. In the sense that the realm is (effectively) omniscient and omnipotent, it would fit most peoples’ definition of “Orwellian.”

In return for its Orwellian powers of observation and action, however, Friscorp has no interest at all in the other half of Orwellianism: the psychological manipulation of public opinion as a device for regime stabilization. The realm cares what its residents do. It does not care what they think. It is difficult to express the importance of this freedom to those who have found a way to live without it.

There is one problem, though, which is the problem I mentioned in Chapter 1: the problem of adults who are not productive members of society. In our little Newspeak we call them wards of the realm. A ward is any resident who is not capable of earning a living, is not accepted as a dependent by any guardian, and is not wanted by any other patch.

The initial conversion of our present, democratic, and of course completely dysfunctional San Francisco into the realm of Friscorp will produce quite a few wards. At least relative to the number we would expect to emerge in a healthy society. But there will always be black sheep, and there will always be wards.

As Delegate of San Francisco, what should you do with these people? I think the answer is clear: alternative energy. Since wards are liabilities, there is no business case for retaining them in their present, ambulatory form. Therefore, the most profitable disposition for this dubious form of capital is to convert them into biodiesel, which can help power the Muni buses.

Okay, just kidding. This is the sort of naive Randian thinking which appeals instantly to a geek like me, but of course has nothing to do with real life. The trouble with the biodiesel solution is that no one would want to live in a city whose public transportation was fueled, even just partly, by the distilled remains of its late underclass.

However, it helps us describe the problem we are trying to solve. Our goal, in short, is a humane alternative to genocide. That is: the ideal solution achieves the same result as mass murder (the removal of undesirable elements from society), but without any of the moral stigma. Perfection cannot be achieved on both these counts, but we can get closer than most might think.

The best humane alternative to genocide I can think of is not to liquidate the wards—either metaphorically or literally—but to virtualize them. A virtualized human is in permanent solitary confinement, waxed like a bee larva into a cell which is sealed except for emergencies. This would drive him insane, except that the cell contains an immersive virtual-reality interface which allows him to experience a rich, fulfilling life in a completely imaginary world.6

The virtual worlds of today are already exciting enough to distract many away from their real lives. They will only get better. Nor is productive employment precluded in this scenario—for example, wards can perform manual labor through telepresence. As members of society, however, they might as well not exist. And because cells are sealed and need no guards, virtualization should be much cheaper than present-day imprisonment.

I like virtualization because it can be made to scale. I don’t think there is any scenario under which San Francisco is burdened with more than a few thousand wards. Many other regions of the earth, however, contain large numbers of human beings whose existence may well prove an unequivocal liability to the owners of any ground on which they would reside. If so, they can be virtualized, creating giant human Wachowski honeycombs of former bezonians, whose shantytowns can be cleared and redeveloped as villas for retired oil-company executives.

Of course, virtualization is a drastic alternative and itself unlikely to happen. Charity is just too popular these days. Before anyone becomes a ward of the realm, any person or organization is free to adopt him as a dependent as a matter of mutual agreement. His new guardian is (a) responsible for his actions, and (b) free to tell him what to do: the ideal relationship for any attempt at rehabilitation. (It’s basically what the Salvation Army does now, I believe.) If all else fails, there’s always the honeycomb.

I think this problem gives a flavor of the kind of thinking we would expect in an entrepreneurial sovereign. The result is quite foreign to the democratic philosophy of government, obviously, and it takes some imagination to picture. But I seriously doubt that many who had a chance to live in this future would have much interest in restoring the past.

Libertarians in particular may have a great deal of trouble understanding how an authoritarian, omnipotent and omniscient sovereign can be expected to create a free society. The fundamental diagnosis of libertarianism—that today’s democratic governments are much larger and much more intrusive than they should be—is obviously correct. The remedy proposed, however, does not have anything like a track record of success.

In fact, I believe the libertarian opposition to sovereignty, dating back to Locke, is a major cause of modern big government. Our present establishments, not to mention our tax rates, dwarf any divine-right monarchy in history. The attempt to limit the state, if it has any result, tends to result in an additional layer of complexity which weakens it and makes it more inefficient. This inefficiency gives it both the need and the excuse to expand.

So we may ask: why does the post office suck? Not because it is sovereign, but because it is not financially responsible. Its freedom to be wasteful and inefficient is what gives it that familiar Aeroflot feel. (The bankrupt airlines, such as United, feel more like Aeroflot every year.) When we postulate a sovereign authority which is financially responsible, like a Patchwork realm, we have no reason to expect it to display these pathologies of government. In particular, we cannot expect it to waste resources in order to pointlessly annoy its residents, a form of inefficiency in which democratic regimes seem to positively revel.

The sight of a financially responsible sovereign, even the thought-experiment of one, is a good lesson for libertarians, because it reminds us what a healthy government actually is. Today’s democratic megastates are to healthy sovereigns as liver cancer is to liver. If you find liver cells invading every other organ and crushing them all into goo, it is only natural to think that the cure might be a drug that was lethal to liver cells. But you actually need a liver. You need to kill the cancer, not the liver.

1. Neocameralism, a Moldbuggian neologism for the State as profitable corporation, is a reference to the cameralism of Frederick the Great. Neocameralism is discussed further in Chapter 3.
2. If, given the realities of firearms construction, this strains credulity, consider instead the possibility of cryptographically locked robot armies.
3. Or, more likely, in Bitcoin, but Patchwork was written before Bitcoin’s January 2009 release. Incidentally, it’s worth noting that the monetary theory underlying Bitcoin was first published in 2006 under the pseudonym “John Law” by Moldbug himself.
4. For a contrary view, developed along the same lines as Patchwork but emphasizing the value of citizen-shareholders and the resulting multi-generational continuity, see “Completing the Groundwork of a Feudal Hierarchy of Sovereign Corporations” and “Evolving a Feudal Stack of Sovereign Corporations.” (Fortunately, the joint-stock design is flexible enough to admit both possibilities.)
5. “For the mob: Use grapeshot.” The quote is usually attributed to Arthur Wellesley, 1st Duke of Wellington, though Carlyle attributes it to Victor-François, 2nd duc de Broglie.
6. This virtual option (while obviously a bit trolly) addresses a real problem, which Moldbug discusses further in “The dire problem and the virtual option” and “Sam Altman is not a blithering idiot.”