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Fernando Gutierrez

On How to Start a Country

After listening to the Tim Ferris podcast fantastic episode with Balaji Srinivasan, I subscribed to Balaji’s new newsletter, 1729. I had been following him on Twitter for a long time but wanted to know more of what he is doing.

The first issue I’ve got is as compelling as his conversation with Tim Ferris was. He explores why one would want to start a new country and the traditional ways to do so. He discards them all and proposes a new option.

Cloud Countries

His new path, the cloud country, starts online with the creation of a community. Those citizens would then begin to increase their commitment and create physical space for CloudCountry wherever they are. They would use their own cryptocurrency and have their own laws. It would be a distributed country of like-minded people embedded in other countries.

While the idea is appealing, it fails at the external recognition level. He acknowledges that there needs to be some social acceptance to refer to something as a country. Most people consider a country whatever the UN says is a country.

There is no stated way to force the countries where Cloudcountriers live to recognize that those small pieces of land would now belong to CloudCountry.

Why would established countries relinquish sovereignty and accept all the complexity this setup would create? If the traditional methods to start a country fail at that stage, why would a distributed NewCountry succeed when faced with the same obstacle?

Mr. Lee’s Greater Hong Kong

In his dystopian masterpiece Snow Crash, Neil Stephenson describes something that resembles cloud countries.

After a worldwide economic collapse, countries have sold most of their territory to private enterprises. Everything is managed by these enterprises, with governments playing a minor role in specific places. Because of government created hyperinflation, of course, most of the money is now private, electronic, and encrypted.

Some of these enterprises, like Mr. Lee’s Greater Hong Kong, control many enclaves around the world. An anarcho-capitalist version of cloud countries.

Roadmap Paved with Money

Today, Stephenson’s dystopian future doesn’t look as dystopian as it did when it was published almost 30 years ago. Despite that, there could be a way to create a CloudCountry and get it recognized without a full-blown collapse like in Snow Crash.

Not every country would accept an arrangement with CloudCountry and recognize its sovereignty. However, some would, if the economic terms were good enough. It wouldn’t be the first time in history that a country sells a territory. In the past, only countries would trade territories, but we’re in a different world now. Moreover, it doesn’t even need to be a complete sale, and temporal agreements could also make sense.

The arrangement would need to compensate OldCountry for the accumulated investment on each piece of land relinquished and for the services it would still provide to Cloudcountriers that live there. In exchange for monetary compensation, it would need to recognize that those citizens would now obey a different set of laws while in the territory of CloudCountry, including taxation. The agreement would be very complex and include review methods over time.

There are already countries that recognize a different legal system for specific populations and areas within their borders. Indigenous peoples come to mind, but there is no reason why a different set of humans couldn’t do it.

Again, this would not work everywhere. However, if CloudCountry managed to get arrangements with a few old countries, that would redefine what a country is. With time, others would follow. Widespread recognition would be unavoidable.

It would start with a limited number of bigger enclaves. Then move to something more widespread and distributed that would be closer to what Balaji Srinivasan describes.

Layered Future

I can imagine a future in which there are two types of countries. The traditional ones would provide the land and the basic infrastructure for people to live —the physical layer. The new cloud ones would rent or buy space to host their citizens —the human, legal, and economic layers.

Not very different to department stores renting space to brands that hire their personnel, set prices, and return policies within their territory.

While all these may sound wild, I can’t see how the current system of stale land-based countries survives long term. The internet and cryptocurrency decentralization forces, paired with the monetary hole that most countries keep digging for themselves, will trigger changes.