By Craig Calcaterra and Wulf Kaal
Abstract
Chapter 1 of the book explores the historical foundations of decentralized structures, starting with early hominids through Imperial China and the American Revolution. The primary goal of the chapter is to witness the central-decentral dichotomy in its evolutionary context to understand more fully their effects on organizations. The chapter evaluates the stabilizing effect of decentralization in context and contrasts it with the greater temporary effectiveness of centralization. History shows how dynamic societies have always been. This dynamic perspective illustrates what freedom and power humanity has to reorganize social networks.
The book can be accessed here:
and here:
https://www.degruyter.com/view/title/569051
Chapter 1. Historical sketches of centralization vs. decentralization
Each advance in information technology has led to an improvement in humanity’s ability to organize.
It is easy to observe the effect of these advances when power is centralized: you follow the choices of the central leader. Most recorded history is about centralized hierarchies. The “Great Man” version of historiography records the history of the decisions of kings and queens. It’s a popular perspective for historians, because it is easier than explaining how the more important story is the litany of changes in “little people’s lives”. The psychological state of Henry VIII is endlessly debated, even though changes in barrel makers’ techniques and their trade organization better explain why we live the way we do today. The individual is easier to recognize and relate to than abstract decentralized trends that often are unnoticed even to the people living through them.
Advances in organization mean we can cooperate more efficiently in our use of energy, making us more materially wealthy. The progress of information technology coincides with the progress of human power over their environment. The more efficient our system of communication, the larger the group that can be organized, the more powerful and efficient the group.
Groups cooperate most efficiently when there are clear rules for cooperation. Hierarchies are the most efficient pattern for creating a control structure in a group. They are used in large and small scales from an army to an emergency phone tree in an elementary school. They form naturally when power structures emerge as people differentiate themselves into more and less powerful members of a group. If competition exists, for instance, then people come to be arranged in a hierarchy. If the competition continues long enough, if there is enough organizing energy, the natural end result is a complete tree structure.[1]
As a hierarchy organically arranges itself, redistributing power and wealth via competition, an exponential pattern of power centralization emerges. This is referred to as the Matthew principle, where “the rich get richer and the poor get poorer”.[2] Essentially, someone who is more powerful is better able to secure more of any power available. They’re more aware of whatever power is available, they have better connections and resources for accumulating power, and they’re better practiced at acquiring it. As the hierarchy becomes more entrenched, this exponentially distributed power structure crushes those at the bottom, leaving minimal power and wealth for the vast majority of people. The discontent of the majority is the first destabilizing force of a centralized organization.
At the same time the very success of the hierarchy may lead its power relations to become more rigid. This rigidity can become brittle when power relations become entrenched with secular laws. Under a codified system of logic-based rules, the letter of the law tends to override the spirit of the law. Rigid hierarchies are unstable and inevitably fall, eroded from internal corruption or novel external challenges that the hierarchy is not flexible enough to adapt to. These are the second and third factors that explain why centralized organizations are unstable. Rigid competitive hierarchies with secular laws face internal corruption as members’ optimal strategy is to push the rules to the limit. From the outside, any change in the problems the group faces can find the hierarchy unready to face the new challenge.
This explains the sequence of revolutions throughout history. Both the extreme power inequality and the rigidity of centralized hierarchies historically have inevitably led to collapse. Rigidly centralized organizations are seen as unstable on a historical scale, compared with decentralized organizations.
Ancient Egypt and Imperial China were relatively stable for millennia despite strong political hierarchies. What distinguished these civilizations from the many others that rose and fell around them? Their stability was due to protocol decentralization.
Humanity’s ability to organize in more sophisticated networks has advanced alongside improvements in information technology. Information technology progressed from the beginnings of symbolic language (ideas and beliefs, mysticism, ideas about ideas) and proto-writing (probably before homo sapiens evolved), then written symbols (Sumeria & Egypt, ca. 5000 years ago), then mass printing (especially in China, which used stone rubbings in 200 BC and relatively durable clay moveable type in 1100 AD; later in Germany with the improved metal moveable type in 1440 by the goldsmith Gutenberg). The introduction of electronic information technology with the telegraph brought humanity to the contemporary era, with global light-speed information communication (Europe, America, and Asia were connected before 1870).
In broad terms, information technology is broken into three components: information storage, information processing, and information transmission. Memory, computation, and communication. These three components are not clearly separated. For example, how you store information in memory determines how efficiently and effectively you can process and transmit information. Your means of processing determines how and what you store in memory. How information is stored determines how it can be transmitted and shared. How you store and share information determines how it can be filtered and processed.
Developments in information technology accompanied the rise and eventual downfall of empires. In Imperial China the fantastic success of the hierarchy in fostering economic cooperation gradually made its bureaucracy more rigid. China invented the printing press and used it to centralize power — politically with uniform edicts and economically with the first printed money. Eventually, the hierarchy couldn’t respond to internal corruption and external threats such as Mongolian, Manchurian, and Western imperial invaders.
Europe started its own printing presses a few centuries later. Instead of using the press to centralize power like the Chinese Empire did, Europe’s use of the printing press greatly decentralized knowledge. The resulting cultural transformation led to the collapse of the centralized powers. The highly hierarchical Catholic Church lost its hegemony in Europe in the face of the Protestant Reformation, which may be attributed to the dissemination of bibles to the public. Eventually the entire European aristocracy collapsed and was replaced by greater power decentralization with democracy. But the decentralized organization of scientists, which has thrived since the advent of the printing press, has been remarkably stable, unified by an adherence to the value of objectively verifiable truth.
In this chapter we explore these ideas starting with early hominids through Imperial China and the American Revolution. The primary goal is to witness the central-decentral dichotomy in its evolutionary context to understand more fully their effects on organizations. We will witness the stabilizing effect of decentralization in context and the greater temporary effectiveness of centralization. The “unstoppable power of decentralization” is threatened by unregulated competition for profits, but can be maintained in the most extreme circumstances by a secure and meaningful reputational system. Analyzing modern Western democracies, the largest DAOs ever assembled, shows networks of members with diverse values can be united with protocol centralization, and its destabilizing effect can be ameliorated by power-decentralization through dynamic design of governance. In the long run, organizations are held together by their transcendental values.
A secondary goal of the chapter is to combat our historical myopia. There is a natural inclination to accept the fallacy of Uniformitarianism, the idea that the institutions and cultures we have today are natural and have always been this way, and will always be this way. History teaches us how dynamic societies have always been. Revolutions demark the regular switch between the forces of centralization and decentralization in power, different legal protocols, and different ideals. This dynamic perspective helps us better understand what freedom and power we have to reorganize our social networks.
From Hominids to Imperial China
Prehistory of information technology
Centralization and decentralization are two qualities of power. A simplified, cartoon model of centralized power would be a static org chart at a corporation. This hierarchical pyramid structure leads to fewer and fewer leaders at each level with an ultimate leader at the top.
Such powerful centralization was not universal throughout history. Anthropological theories argue the origin of kingship, but the very tentative consensus from the archaeological record indicates the type of absolute rulers attended by a bureaucracy enforcing their rule did not exist much before 5000 years ago. The Tomb U-j at Abydos about 3320 B.C. identifies the first ruler of Dynasty 0 as (possibly) the pharaoh Menes who unified Upper and Lower Egypt. There were certainly smaller kingdoms before that, but we have no earlier evidence of large bureaucracies. Before Menes, local leaders exerted more or less power over tribes since before the existence of homo sapiens. Pack hierarchies are evident in many species of social animal.
Before large scale kingship, the decentralized collection of warlords exercised far less centralized power, and humanity’s relatively weaker ability to organize meant we controlled measurably less energy.[3] Technological evolution in symbolic language, and later, writing, were crucial ingredients necessary for the development of the strong centralization that attends kingship. The theory of behavioral modernity posits the idea that homo sapiens made advances in information technology on the mental level with improved language 500,000 years ago, leading to sophisticated human organization around 50,000 years ago.[4] The theory claims abstract language led to improved abstract thinking, planning depth, and symbolic behavior such as art. With these new information technology tools (transmission, storage, and processing of information), people were capable of more complex cooperation, leading to more sophisticated societies, which eventually led to the first political hierarchies.
These early societies which emerged 50,000 years ago are what we would crudely refer to as cavemen. They are distinguished from earlier groups of hominids inasmuch as they left a record of organized coordination that is maintained continuously throughout generations. These cavemen invented tally sticks and cave paintings. Besides words and ideas themselves, these tools are the most primitive information storage technology known. The Lebombo bone, dated to 40,000 BC, is the first known example of a tally stick. Tally sticks were used even into the 20th century in illiterate communities in Europe and Asia, to record economic transactions and ownership using notches on a piece of wood. The Chauvet cave holds the earliest picture drawings that have been found, dated to 30,000 BC. They record information on local animals and the earliest known religious objects.
Particularly important is the symbolic thought necessary for abstracting the notions of gods and sacrifice and worship that would lead to the centralization of thought and coordination of action necessary to unify large populations beyond local kinship groups. Such universal spiritual beliefs give people the harmony required to create institutional order and eventually practical secular laws.
In fact, sacralized law has been shown to generate more stable and successful institutions than secular beliefs. Sosis explains “religious communes are more likely than secular communes to survive at every stage of their life course.”[5] One mechanism proposed to explain the discrepancy is costly-signaling theory. The idea is that sacrificing to a religion signals commitment to the group which solves the free-rider problem. This falls under the field of evolutionary psychology of religion, which is obviously quite contentious. There is a more basic mechanism which explains the success of spiritual values for unifying groups.
From an abstract perspective, transcendental values are more stable unifiers than formal secular rules. The Folk Theories of Game Theory (see Chapter 4) illustrate the obvious point that it is not possible to construct a perfect secular constitution, i.e., a complete set of static rules, that will account for all positive and negative behaviors to permanently govern a group profitably. The Folk theories demonstrate that however the rules are written, strategies exist which follow the rules, yet profit the individual at the expense of the group. (See, for example, the Nobles vs. Peasants game in Section 4.2.3.) When a law is written down rigorously, specifying precisely what is acceptable and not acceptable, people are obligated by competition to find the most efficient behavior possible within those rules. Such behavior is often located right on the boundary of what is permissible. This erodes stability as excessive effort is then required on policing the laws. On the other hand, a transcendental value by definition is not rigorously formalizable. When people organize around an eternally unobtainable ideal without clear boundaries, they are less likely to probe the boundaries of what is acceptable.
A more traditional spiritual tradition explains a very simple and practical method for uniting disparate members in a large stable community. An ascetic Orthodox monastery on Mount Athos in Greece has a continuous tradition from at least 800 AD. How have they managed to unite devotees from different cultures? They’ve maintained an open policy for new members (any Orthodox male is accepted regardless of national origin) yet they have survived for 1200 years during numerous wars and changes in government. This cenobitic (communal but hierarchical) monastic order’s solution is: pray together, work together, and eat together.[6]
We will borrow this strategy as a plan for harmonizing decentralized autonomous organizations (DAOs) using blockchain and other P2P internet technology in Chapter 4.3. An ideal DAO has an open membership policy for any anonymous person from any culture on the planet. How can they maintain harmony? They must share a transcendental value, work toward a common purpose (even if it’s simply profit), and share fairly in the spoils of the work.
Protocol centralization in the law
The earliest historical evidence of law is found in Egypt. Their system was closer to our sense of holding to the spirit of the law instead of the letter of the law. The remarkable stability of Egyptian society, for more than 3000 years, testifies to how successful prioritizing transcendental values is over formal rules.
The Ancient Egyptians had a strong sense of nationalism, believing that Egyptians were the best people because they had the best model of behavior deriving from the best possible spiritual ideals. (This is naturally mirrored in nearly every national identity; the Chinese and Romans are two other exemplars of such attitudes, arguably because they have had the most successful empires.) The Ancient Egyptian term Maat encompasses this collection of ideals, meaning roughly truth, balance, order, harmony, law, morality, and justice. Maat is also the goddess who upholds and polices society according to these ideals. She also regulates the stars, the seasons, and even the other gods.
Though Ancient Egypt was politically centralized in the sense that the pharaoh was the supreme hierarch, it was protocol decentralized in the sense that people were not held to explicit formal rules and a legal constitution. The application of the law was vague and applied by autonomous priest-judges who were bound by their creative interpretation of Maat, instead of precedent and formal rules. Though the Egyptians had developed writing on papyrus by 2600 BC, and therefore had the technology to implement formal permanent rules, they avoided this type of protocol centralization and enjoyed the longest period of stability of any empire in history.
Experiments with letter-of-the-law, protocol-centralized legal systems were far less stable in nearby Mesopotamia. Around 2900 BC, cuneiform writing which represented syllables was invented. This was a great leap in information storage and transmission, using abstract symbols pressed into clay (pictogram systems are about 3 centuries older).
We don’t have a record of formally prescribed laws until about 600 years later when King Urukagina’s code was first set down in 2300 BC, five centuries before the famous Code of Hammurabi. The stone cone on which the Urukagina code is printed is the perfect symbol of protocol centralization. The cone begins by criticizing previous rulers “since time immemorial, since life began”[7] for undermining the original divinely-decreed code. Urukagina’s laws are reforms of previous failed Mesopotamian kings’ style of centralized government, which led to abuses of those at the bottom of the hierarchy. The reforms revoked the centralized control of many industries: “He removed the head boatman in charge of the boats. He removed the head shepherd in charge of the asses and sheep. He removed the head fisherman from the fishing places. He removed the silo supervisor from control over the grain taxes of the guda-priests…. He removed the palace official in charge of collecting the tax.” The code ends with the first legal recognition of basic equality and freedom: King Urukagina “freed the inhabitants of Lagash from usury, tax debt, hunger, theft, murder, and seizure” of their property and persons. “Widows and orphans were no longer at the mercy of the powerful.”
Urukagina’s rule lasted only eight years before he lost his brittle centralized kingdom, whose laws were set in stone. The next evidence we have of a legal code comes 300 years later, the Code of Ur-Nammu. This gives the first evidence of a legal text containing formal logic. For example, Law #32 reads:
32. IF a man had let an arable field to another man for cultivation AND he did NOT cultivate it, turning it into wasteland, THEN he shall measure out three kur of barley PER iku of field.[8]
This law holds all the mental technology needed to build today’s digital computer-programmed legal smart contracts on blockchains. The formal theoretical pattern is the logical conditional IF (violation) THEN (punishment). Moreover, this law uses the logical operators, AND and NOT. By serially chaining these three functions together, the most complex business logic possible, for organizing any imaginable business arrangement, can be contained in a single legal contract. With the final addition of the mathematics of addition (three) and division (PER) at the end of the law, the people of Ur demonstrated all the logical sophistication required to use our modern smart contracts four millennia later.
These experiments in protocol centralization continued in the West with periodic revolution every century, culminating in the development of Roman law from 450 BC to 529 AD. The use of Latin phrases in contemporary courtrooms in the West attests to the influence of the system of Roman law until the present day. However, the regular changes in the languages and nations using these laws in the intervening centuries display their failure to maintain stability alone.
China and Europe
Psychological centralization in China and decentralization in Europe
The primary staple crops of Europe and China have influenced their respective cultural centralization. People in Europe farm primarily wheat and live in lands which couldn’t support the same population density of China, where they farm primarily rice.
Wheat crops require individuals to harness animal and machine power. People work the land alone, behind an ox and plow. The basic European unit of society separated into individual family farms with large distances between neighbors, because wheat requires less than half the energy to cultivate compared with rice.
Rice farming requires intensive use of the land. Periodically through the year a large number of people are required to unite to cooperate in the planting and harvesting. As opposed to wheat, which is nourished by rainfall and sunshine, rice requires manual transplantation and regularly maintained irrigation. These major tasks are done by hand without the use of animals or machinery. It requires many people working closely together. It requires the community to come together for the job at a moment’s notice, whenever the weather and the crop dictate. You need to rely on your neighbor. Communal harmony is essential for survival.[9] Value and protocol centralization attends these communal forces. Asian communities tend to be more geographically, protocol, and value centralized than European communities.
Another contributor to the cultural bifurcation between East and West is language. European languages tend to be highly analytic. The many Chinese languages include some of the most synthetic languages on Earth — especially Mandarin, the dominant language of China. An analytic language separates each variation on an idea into various words. For example, there are literally hundreds of different words and phrases that parse the idea of “big” in English.[10] Synthetic languages unite several ideas with the same word. For example, the Chinese word ma can stand for hundreds of diverse meanings for which English has completely different words, such as horse, mother, toad, hemp, wipe, scold, dragonfly, ant, grasshopper, agate, etc., etc., etc. Still, the English language is far more analytic and separating than that difference conveys, because each word in English can take on many different meanings depending on the tone used when speaking — anger, joy, disgust, sarcasm, etc. At the opposite end of the spectrum, Mandarin is a tonal language, meaning you must control your tone to speak the word. This means there is less possibility to inflect the meaning of the word with how you say a word. For instance, the Chinese famously do not use sarcasm. Word order in English is extremely important for generating new meanings. A common exercise for teaching adverbs in elementary school is to pick any basic sentence and insert the word “only” in different places in the sentence. Try it on the sentence, “She told him that she loved him.”
The psychological ramifications are that it is easier to draw distinctions in an analytic language like English, whereas it is more natural to come to consensus using a synthetic language like Mandarin. It is natural for English speakers to have a more contentious culture, while Mandarin is more likely to evolve with a culture which encourages harmony.
Both the farming systems and the languages reflect the personal differences observed between European and Chinese societies. Europeans tend to prize individuality, while Chinese value group harmony. This is naturally also reflected in their styles of government.
Europeans have built systems that encourage an atmosphere where people can stably and predictably confront each other in debate; they set up arenas for conflict with pre-assigned end points, after which participants are forced to consensus, following the vote of the majority under democracy, or the will of the judge or king under monarchy.
Chinese systems of government encourage group harmony. Conflict is diffused through slower processes of group consensus through clan hierarchical judgments. Adherence to the authority of family hierarchy prevents conflicts from escalating as judgments from any level higher than the parties involved resolve the issue. The most contentious issues may move to higher levels if a judgment is deemed unfair at a particular level. But even unfair judgments do not cause much conflict, because their system of Rule by Virtue leaves the lessons of any particular judgment vague and doesn’t create precedent. Whereas under the analytic European systems of justice, any particular conflict can create a precedent, multiplying the formal rules.
These cultural differences are reflected in some aspects of the greater power or political centralization in China and decentralization in Europe. Europeans instituted decentralized contentious democracies, first in Classical Greece and later in modern Europe and America. China’s Imperial hierarchy under Confucian ideals has been the most stable centralized organization of the past 2000 years.
Part of the reason we draw this distinction between the cultures and languages in China and Europe is to highlight how diverse global networks can be. The challenge of designing governance in networks uniting groups with broadly different sets of values requires us to consciously address these differences.
Another reason to study these differences is to be aware of the potential for different governance mechanisms when organizing a group.
Protocol decentralization in China
Comparing Europe and China over the course of 3000 years is an important example for the decentralized to centralized thesis. But we must be conscious that anything said about large societies over the course of millennia is plainly a contentious generalization.
Inasmuch as a society organizes itself in a rigid centralized hierarchy, it is initially very efficient and effective at addressing its problems, which leads to a temporary stability as the society adheres more to the hierarchy. At best, however, the hierarchy has always failed after a few centuries, usually much sooner, and the resulting chaos leaves fertile ground for reorganizing the old order. Successors may reorganize the conquered society completely along the conquerors’ system. Or, more commonly, the succeeding power adjusts the existing hierarchy of a region slightly and partially repopulates it — especially at the top. This is revolution. We use a word that evokes cycles, because the hierarchy periodically collapses into chaos then naturally reemerges.
Chinese society has been much more stable in the course of the last 2200 years, compared with Europe. Like Ancient Egypt before it, China has had many political revolutions as the heads of state succeeded each other. But the habits and culture of peasants has been much more stable in both Egypt and China than in countries with more protocol-centralized legal systems. Egypt and China had legal systems where society informally supported moral precepts more than explicitly-defined, unchanging legalistic precedent. This is referred to as Rule of Virtue versus Rule of Law. Professional and social positions were clearly hierarchical, with some roles being seen as higher or lower in status, but most roles weren’t organized into tightly-defined power relationships. For example, judges would personally investigate a crime, getting to know a community and the principals of a case intimately. A judgment would be enforced by the community, not police. And the judgment would not be bound legally by any precedent; it held sway depending on the perceived virtue of the judge and his decision.[11] This led to the ideal man stereotype of judges, which Western audiences might recognize in Kung Fu movies, such as Crouching Tiger, Hidden Dragon. A judge was always a man of universal learning, typically a doctor and pharmacist, a martial arts expert and a scholar of ancient poetry.
Even today, China is much more protocol decentralized than the West. China has a less rigid hierarchical organization with less uniform rules than the West. The People’s Republic of China (PRC) does not have an enforced constitution with a clearly defined nationwide power structure.[12] Even though the Chinese Communist Party (CCP) inhabits a parallel bureaucracy in most every school, hospital and other institution in the land, its power structure is not explicitly and formally defined. For an empire and society often seen as monolithic and autocratic, the roles in government are much more locally heterogeneous than in the West, where the roles of mayor and councilmember are duplicated much more faithfully throughout a country.
It is often claimed that China is relatively culturally homogenous. While it is true that there is a very strong impulse toward unity and harmony, the reason this has been necessary for millennia is because of China’s cultural diversity. Though Han Chinese have been a culturally, economically, and politically dominant majority for roughly 3,000 years, there are many dialects of their language (Mandarin) and many other languages to go with the 56 ethnicities the CCP officially recognizes. These ethnicities display obvious diversity in their speech, clothing, traditions, and genetics. Craig lived in the Chinese province of Zhejiang, where he experienced the truth of the saying “the language of your hometown is not understood 30 km away”.
The highest office in China is the president (currently Xi Jinping). This ceremonial role’s only formal power is to nominate the head of the legislative body, the premier of the State Council.[13] The actual power of the president is making speeches.
Periodically, the president will make a speech about, for example, the new Five-Year Plan. This speech will be almost entirely abstract, speaking in generalities and slogans about which direction the nation should move toward. For example, the primary policy of the 2016–2020 Five-Year Plan was “Everyone is an entrepreneur, creativity of the masses”, 大众创业，万众创新. Then the political bureaucracy interprets the speech at the local level and attempts to implement reforms or initiatives reflecting the slogans. Each locality scrambles to keep their initiatives in line with what other territories are doing, out of respect for nationwide harmony. But there are no formal rules dictating specifically how a province should implement these reforms.
This loose power structure is arguably the consequence of the revolution(s) that rocked the nation during the 20th century response to the Century of Humiliation[14]. It has been suggested that the lack of rigid hierarchy is a consequence of the relatively recent chaos of revolution. But many societies have responded to chaos with rapid adoption of stronger hierarchical organization, such as 20th century fascist governments in the West. A better explanation is that Chinese society has a very long tradition of social decentralization. This is reflected on the individual level, where mainland Chinese citizens are quite autonomous and responsible for most of their personal development and daily choices.[15] However, compared with individuals in the West, the Chinese strive more to fit in with expected normal social behavior.
Chinese history traces continuous legal thought from at least 1000 BC, with two major perspectives which have influenced China to the present. Confucius’ Rule of Virtue philosophy is more protocol decentralized. Shang Yang’s Rule of Law philosophy is more normative and protocol centralized.[16]
Both Confucius and Shang Yang lived and taught during a time of chaos before the Qin and Han dynasties unified China politically (Confucius 551–479 BC, Shang Yang d. 338 BC). The political chaos of the Spring and Autumn period and the Warring States period that they lived through led both thinkers to advocate a strong politically-centralized hierarchy, but they diverged in their prescriptions for less and more protocol centralization, legally. Confucius (and especially his follower Mencius) argued people were basically good, and so administrators should rule from the spirit of the law and should lead by example, displaying the highest virtues in order to bring long-term harmony. Shang Yang (and especially his follower Han Fei) argued the Legalist school of thought (or Fajia), which is founded from the position that people are basically evil, so the letter of the law should be paramount to constrain their base instincts.[17]
The Qin state would eventually unify China for the first time in 221 BC. The Qin state’s decline, reorganization, subsequent triumph, precipitous fall, and rebirth is an excellent example of the strengths and weaknesses of organizing society along different points in the (de)centralization spectrum. The Stanford Encyclopedia of Philosophy archive’s entry on the history of Legalism in China[18] reads as an apology for our central thesis: Centralization is a powerful mechanism for rapidly building an efficient organization for solving a specific problem (e.g., war in pre-unified China). The more effective and efficient the architecture is at solving the problem, the more rigid the hierarchy becomes, and the more unforgiving it is for anyone on the outside. But rigid architectures are unstable and fail when met with novel challenges. More decentralized organizations are more stable.
As a thumbnail sketch of the whole of Chinese history:
After centuries of warring kingdoms in the region of what later came to be known as China, the previously chaotically unorganized people had come to be partially unified by the cultural and economic communication war unintentionally provides. They were also united in their weariness from war. This meant China was fertile ground for the centralizing effects of Qin Shi Huang’s initiatives standardizing language and writing, currency, weights and measures, engineering standards for transport (roads, carts, canals) and construction, history and education (burning most books and burying scholars), etc.
Around 350 BC the weak Qin state, furthest inland from the ocean, reorganized along centralized principles. King Qin Shi Huang, following the Legalism school of thought, built the most powerful military China had ever seen.[19] Qin Shi Huang conquered all the other kingdoms by 221 BC, becoming the most powerful emperor in the world. Under Legalism, the Qin Empire hierarchy was extremely rigid, and equality before the law had a particularly hierarchical connotation: “The ruler creates the law; the ministers abide by the law; and subjects are punished by the law. All […] are subject to law.”[20]
After the Qin Emperor died, the brittle hierarchy immediately collapsed, 15 years after unification. Once unity was reestablished under the succeeding Han dynasty, their rulers quite consciously abandoned the centralizing legal policies. Valuing stability over efficiency, they adhered to the Law-of-Virtue Confucian school of thought with greater protocol decentralization.
This philosophy of protocol decentralization with clan-hierarchy-determined Chinese politics, made China the most stable empire since Ancient Egypt, with brief interruptions of protocol centralization whenever they needed to restore the state’s waning economic and military power, under Zhuge Liang (181–234), Su Chuo (498–546), the Tang Code (624), Wang Anshi (1021–1086) and Zhang Juzheng (1525–1582), and the Qing Code (1644).
Finally, again under Mao Zedong in 1949, the Chinese government explicitly followed Shang Yang’s philosophy of protocol centralization. In that year, after the Century of Humiliation, the Communist Revolution removed the Kuomintang government and quickly centralized their institutions following the example of the Qin success and strengthened their military to expel all foreign invaders and reunite the nation. This centralized hierarchy was extremely successful at the military goal it was designed for, but completely failed at solving other important problems once the military threat was gone. Like the Qin emperor he emulated, the supreme leader of the communist military hierarchy, Mao Zedong, ruled from the revolution until his death in 1976. During this time the hierarchy instituted reforms which resulted in catastrophic failures, such as the Cultural Revolution and the Great Leap Forward, under which more than 30 million people perished. In 1978 Deng Xiao Ping assumed power and reformed the economy, under the Boluan Fanzheng period, literally meaning “eliminating chaos and returning to normal”. That is, China attempted to return to the previous, stabilizing philosophy of protocol decentralization of the Chinese Imperial Period, with greater market freedoms and a Rule of Virtue justice system.
Since 1978 societies and culture have hardly been stable most anywhere on the globe. Creating a stable government in the rapidly changing economy of China during this period seems nearly impossible. Therefore, it is natural that China would swing precipitously between centralized and decentralized initiatives. The most visible initiatives are naturally centralized. The most troubling recent examples are the Great Firewall of China and the Social Credit System, as obstacles to transparency and individual autonomy. We will return to this in Chapter 3, when we discuss the consequences of applying new IT tools to creating centralized reputational systems, in the section on Orwellian nightmares.
What lesson do we take from Imperial Chinese history for our present goal of implementing new advances in information technology? Where should we decide to draw the lines of power? Should our governance processes recognize that we are all basically evil in our hearts and that the beasts within us need to be controlled? If Shang Yang and Hobbes are right, we should give control to an impersonal hierarchy, within which we only have limited and local control. Or should we instead speak to our good side? Should we follow Confucius, believing we are all basically good at heart? Then we should tap into our better natures and encourage productive cooperation, by empowering each individual with greater freedom. Anyone who has spent an hour on a playground knows the answer is obviously both. Our governance system must prevent rapacious greed with concrete punishments. But it should also encourage and enable harmonious cooperation and individual autonomy. The lesson of Imperial China, and Pharaonic Egypt before it, is that decentralization of power, individual autonomy, gives long-term stability when there are unifying ideals that the society can believe in.
Political centralization in China and Europe
In this section we argue that China enjoyed greater uniformity in their values than Europe did, which allowed them to institute clan social organization with less legal/protocol centralization. Europe’s greater value diversity required they institute corporate organization with a more rigid hierarchical structure with more legal centralization. For stability, Europe needed to relieve the pressure elsewhere.
There were great expressions of political centralization around the year 1100 A.D. with medieval aristocracy. At this time the High Middle Ages in Europe were organized around the philosophy of the “Great Chain of Being” with God at the top, served by the king, then the lords and clergy, followed by knights, then their peasants and livestock at the bottom.
Contemporaneously, Imperial China during the Song dynasty was organized around hierarchical Confucianism. From an abstract point of view, the aristocratic organization of Imperial China under the “Mandate of Heaven” was remarkably similar to medieval Europe under the “Great Chain of Being”. But the civil bureaucracy of the Song dynasty controlled many times as many subjects. In the year 1100 the population of the Holy Roman Empire was roughly 10 million, while Imperial China governed 90 million.
The organizational successes of both empires can be directly attributed to advances in information technology. But the fact that the Song dynasty eclipsed Europe’s High Middle Ages is often directly attributed to China’s unique adoption of transparency and meritocracy. The Chinese civil service examinations, which were open to all, regardless of social standing, led to a literate meritocratic bureaucracy as opposed to Europe’s easily corruptible system of power inheritance. China’s bureaucracy stored, processed, and transmitted unprecedented governmental information leading to a flourishing economy which grew exponentially for centuries. The meritocratic system stabilized the society as its people enjoyed strong social mobility and individual autonomy.
The meritocracy also empowered generations of talented scholars and inventors who put China centuries ahead of any other country technologically. Other Song advances in information technology include woodblock and ceramic movable type printing (invented by Bi Sheng 毕升, 990–1051). Printing allowed the dissemination of rules across great distances and populations. Thanks to these innovations, the world’s first banknote was seen in the Song dynasty, and paper money was first employed extensively. These advances led to much greater centralization, as the Song Imperial government dominated the right to print specie. We may assume it is natural to establish monopoly power on the right to print money. However, compare this with the history of printed banknotes which were individually issued by each bank in many times and places, especially whenever there was less centralization of power, including 19th century America.
In both Europe and Asia at this time, the centralized hierarchy expressed itself in the merchant class in the larger cities. Merchants organized into the most sophisticated guild system the world had ever seen, with clear ranking of more and less important professions, from scholars and doctors down to actors and prostitutes.[21]
As mentioned in the previous section, China was relatively decentralized in protocol through most of its history, with a Rule of Virtue legal system. This is reflected in its dominant clan structure. The major social and economic institutions of China revolved around kinship-oriented clans. You are a member of a Chinese clan if you claim to share family lineage with some common original male ancestor progenitor of the clan. Chinese clans had a less rigid system of legal enforcement, sanctions and rewards, than their European contemporaries. Clan members were compelled to cooperate and behave well, due to moral and familial obligation, more than mere adherence to clearly stipulated laws.
In Europe there was much more protocol centralization than in China. Clans were not as dominant in personal economic life. Instead the greater focus on individuality gave a need for impersonal legal regulation and equality before the law. This led to a Rule of Law system with citywide charters and constitutions with formal rules and punishments. Instead of clans, Europe’s major civic institutions were corporations, with many different purposes. These corporations could be anything from religious groups to entire independent cities. “[B]etween 1143 and 1475, in Germany alone, for example, 190 cities adopted one of the twenty different law codes”.[22]
China was more protocol decentralized than Europe for much of its history, but it was more politically centralized, as Imperial China ruled over a much greater population than Europe. And Europe’s protocol centralization was fragmented between many different kingdoms and city states, which seems natural considering the greater emphasis on individuality expressing itself in Europe than in China. And so, Europe is seen as more politically decentralized compared with China during the High Medieval period, though this can also be explained by their inferior information technology, meaning they were incapable of organizing anywhere near to the quantity of citizens China commanded in the same period.
Despite the differences in protocol and political centralization, the general cultural centralization that the new information technology of the time afforded led to much more sophisticated engineering projects, such as cathedrals and pagodas. Centralized economic development, especially in China, multiplied the population the regions could sustain.
But centralization doesn’t last. As leaders pass on their powers and duties, corruption sets in. As law moves from the sacred, to rituals, to institutions, people are more free to test the legal limits. No dynasty lasts more than a few centuries before it is overturned from corruption born within or by foreign invasion from without. Without a transcendental spiritual/philosophical principle to unify a society, the rules erode as exceptions to the routine are found which improve function temporarily, yet violate the founding principles of the culture. Such violations split the population.
The very economic success that centralization affords leads societies to encounter foreign cultures, goods, and technologies. These alien experiences challenge the institutions that allowed the foreign adventure. Institutions that have been hollowed out by time and have not been revitalized by contact with the ideals from their origins are incapable of responding to exotic challenges.
Stagnant centralized institutions become irrelevant and incapable of useful response during chaotic periods, while decentralized structures thrive, such as loose labor affiliations, or black markets, or clans. Decentralized organizations naturally respond to “information at the edge”. They are energized when leaders are attacked. Decentralized rebellions are strengthened by the loss of their leaders, who become martyrs. Decentralized organizations form around transcendental ideas, not on codified laws, and so respond well in times of chaos and remain stable in the long term.
In general, the lesson of clans versus corporations is that when a group has more unity in their values, then they can have less rigidity in their legal protocols. So greater value centralization allows greater protocol decentralization which leads to greater long-term stability. But when there is more diversity in a group’s values a corporation structure emerges with more rigid legal stipulations — letter of the law becomes more important. This is because the group needs to fairly apply the law in more diverse situations to keep group cohesion. In this case a corporation is less stable in the long term. Stability needs to be sought elsewhere with other structures.
The next section explores a decentralized political organization which survived more than 300 years against adversaries with incalculably more resources. This illustrates that a decentralized organization cannot be conquered by attacking it from the outside. When you do, the group merely decentralizes further. Members become more autonomous and more devoted to the principles upon which the organization was founded. Decentralized organizations can only be destabilized by changing the entire game, by recasting the environment under which they pursue their goals in order to sap the power of their values.
The Apaches vs. Bitcoin
The Starfish and the Spider,[23] by Ori Brafman and Rod Beckstrom is the most insightful book we’ve read on decentralized organization. Its central thesis is illustrated by the story of the Apache Native American Indian tribe.[24] Their conclusion suggests that Bitcoin won’t work.
This story was related by Thomas Nevins, who studied and lived with the Apaches. In the late 1600s the Apaches settled into their current territory in the mountains near the border of Arizona and New Mexico. The Spanish had been continuously expanding their territory in the Americas since Christopher Columbus first explored the area in the early 1500s. The Spanish were attempting to settle the area in New Mexico, but their northward expansion failed for the first time when encountering the Apaches. (Their second northward incursion failed when they encountered the Comanches, who were also politically decentralized.)
For more than 200 years the small band of Apaches resisted succeeding empires, to remain self-sovereign. These people commanded a tiny fraction of the material wealth of their adversaries, but the Apaches were successful because of their political decentralization.
In the course of a few decades, the Spanish Empire, beginning with Columbus in the Caribbean, conquered tribes and empires throughout the entire Western hemisphere of the planet. Cortés conquered the Aztec empire in present-day Mexico and Central America in 1519–1521. Later the Pizarros conquered the Incan empire which spanned extensive and diverse terrain in South America. Compared with the small Apache tribe, living in a relatively small area in the mountains of present-day Arizona and New Mexico, the Aztec and Incan empires had vast wealth and a complex effective hierarchy. Yet the Apaches succeeded for centuries where other groups, large and small, were rapidly defeated.
The crucial difference between the Apaches and other networks the Spanish Empire conquered was that the Apache’s political organization was not centered around a chief. The Spanish conquistadors Cortés and Pizarro captured and killed the Aztec and Incan emperors, Moctezuma and Atahualpa. By controlling the leaders, the Spanish efficiently took control of the centralized hierarchies of the empires.
Beginning in the 1680s the Spanish built a series of presidios (fortified residential compounds) in the area and instituted plans for assimilating the natives of the region under their hierarchical feudal order. The Spanish plan, that was successful in many other regions, was to convert the locals religiously to Catholicism and economically to small-scale farming, and bring them all under the political control of the Spanish crown. These initiatives were relatively successful with other tribes, even nomadic tribes of similar size and distribution, but failed with the Apaches, most of whom resisted the loss of their sovereignty. When the Spanish attempted to coerce the Apaches, the violence backfired. The Apaches almost casually defeated the Spanish with routine raids on their centralized holdings. After two decades of failure, the Spanish Empire had abandoned most of its presidios in Apache territory.
“Part of the reason the Spanish had such difficulty in establishing control and dominion over Apaches had to do with the dispersed, decentralized nature of Apache social organization.”[25] The Apaches had no static, official rulers, which made it impossible for the Spanish to replay their strategy of killing or controlling the leader of each new territory they invaded. The Apaches had no rigid power hierarchy to manipulate. The Apache had spiritual leaders, called nant’án. But the nant’án led by example, not coercion. The members of the tribe continuously made choices whether to follow a suggestion from a nant’án based on his personal strength and reputation. When the Spanish would kill (or capture and coerce) a leader, the tribe would not be mollified or lose its organization. In fact, killing a nant’án would strengthen the cohesion of the group as they had a new example to learn from, whether the nant’án lived and died according to Apache ideals.
Any loss would only further decentralize the Apache people. Whenever a village was raided, that encouraged the Apache to become more nomadic. The subgroups became smaller, so they were more difficult to locate and attack. They decentralized geographically across terrain large armies found difficult to negotiate.
After the Mexican Revolution in 1821 the Mexicans adopted a similar strategy to the Spanish, and so they similarly failed against the Apache. As a definitive sign of their desperation, the Mexicans put bounties on the scalps of Apache men, women, and children.
We may witness this pattern at various locations in different times throughout history. A materially superior centralized society will discover the limits of its power in conflict with politically and geographically decentralized groups. The Roman Empire’s borders were in “barbarian” lands. Afghanistan is the Graveyard of Empires. The U.S. is only the most recent empire to find their global dominance ends when it meets decentralized territory. Before that, the Soviet invasions of Afghanistan in 1929 and 1979–89 failed. The British failed in 1839–1842. Since the Arabs met their first major setback when they failed to conquer Afghanistan in the 8th century, no centralized authority, foreign or domestic, has been able to bring the decentralized network of Afghani tribes into uniform control.
When a superior army fails to dominate a weaker enemy, the causes invariably include the unfamiliar terrain and geographical decentralization of the enemy. But that is not the primary characteristic that determines the outcome. The U.S. policy of resettlement on reservation land can be analyzed for each of the tribes to determine how organizational style effects military success. History never simplifies down to singular causes, such as political centralization, but some trends are more evident than others. The more sedentary tribes, who relied on agriculture and were geographically more centralized around fertile locations, were more quickly conquered than the nomadic plains tribes who were widely dispersed. The nomadic plains tribes, however, were all geographically dispersed. What distinguished the tribes who were more successful against the U.S. military? Political decentralization. Those with strong chieftains were more quickly settled on reservations. The last groups to submit to U.S. sovereignty were the most politically decentralized, the Comanche and the Apache.
With all these historical examples, what insights do we have for what stops a decentralized organization? Surprisingly, it was not until the 20th century that the United States finally succeeded in permanently converting the Apaches’ way of life from nomadic to sedentary and asserting sovereignty. How did it happen?
After the Mexican American War, the United States annexed the Apache territory in 1848. The centralized U. S. military predictably copied the Spanish and Mexican strategies for negotiating with the Apaches. They built garrisons and instituted a policy of gradual but coercive acculturation and resettlement. And predictably, despite their overwhelming material superiority, the U.S. army failed to conquer or pacify the Apache people.
Starting in 1873 the U.S. government instituted its reservation policy where the Apaches were coerced toward settling on reservation land where they were more safe from reprisal, and they were promised rations. By 1878 most Western Apaches were conditionally settled, but this didn’t last. Poor conditions led to revolts throughout the 1880s.
The resettlement effort was only successful with the Apaches once the U.S. military struck upon an unprecedented strategy. In 1916 the U.S. government gave the Apaches cows.
As Nevins explained, the introduction of the cattle created “a zero-sum battle over resources between lineages”.[26] The valuable assets created the internal competition necessary to generate a hierarchy of power over disbursement of resources and property. Whereas formerly, the nant’án would only lead by example, now the nant’án could lead by punishing or rewarding tribal members materially. Members of the network jockeyed for power. A politically centralized hierarchy emerged in tribal councils. Bureaucratic rules were instituted in geographically centralized reservations. And the U.S. government finally had a structure they could manipulate and control.
The profit motive came to dominate the Apache incentive structure, undermining the ideology that kept the group decentralized.
Brafman and Beckstrom argue the Apache history demonstrates that decentralized organizations are unstoppable, they cannot be conquered. Three successive empires repeatedly failed in their missions to destroy Apache society. A decentralized organization cannot be controlled by a centralized authority. But you might hope to convert them to a centralized organization by finding the proper incentives; then you can manipulate the centralized power structure. As is being demonstrated again today in fighting terrorist organizations around the world, attacking a decentralized organization only makes them more decentralized and more powerful as enemies. “The values are the organization”. A decentralized organization’s power is their ideology; it keeps them together; it drives them; it inspires new recruits — unlike centralized organizations whose rigid hierarchies are maintained by universal motivations such as fear of ostracization or competition for profits.
The thesis of The Starfish and the Spider is that the best way to convert a decentralized organization to a centralized organization is to introduce the profit motive. They go on to suggest that the greatest danger Wikipedia faces is the potential to earn money, which would trigger the inevitable centralizing effect of internal competition. They discuss other examples, such as how book sales corrupted and undermined the power of the Alcoholics Anonymous decentralized network, sapping its energy, so that now there are numerous decentralized offshoots. Brafman and Beckstrom proclaim that decentralized organizations cannot avoid centralizing when concern for profits overrides the group’s moral ideals.
The Starfish and the Spider was written in 2006, predating the first published Bitcoin block by three years. They couldn’t be aware of the new advances in information technology that allowed new types of decentralized information control. We will explore these tools in Chapter 2. But despite ten years of success in Bitcoin’s politically decentralized operation, there are hints that Brafman and Beckstrom are not entirely wrong. The thesis that money destroys decentralized projects by giving a focal point for internal competition is still prescient even in the face of Bitcoin. Slowly, Bitcoin hashing power has become more concentrated in mining pools, until today the majority of power resides in the single country of China. The CCP’s strong economic controls could mean that Bitcoin’s claim to decentralization is theoretically and perhaps even technically compromised.
In fact, almost every blockchain project we’re aware of is suffering under the centralizing force of competition for equity control and profit. It’s rarely possible for people to work idealistically toward the goals of the group and blithely watch the rewards be split unfairly with rent seekers at the top. Humans’ sense of fairness is powerful and deep seated.[27] Good ideas will fail to be implemented unless the reward structure is balanced. Unconscious of these forces, these Web3 projects predictably move towards centralization.
Every contemporary Web3 decentralized organization we are aware of has critical flaws in its governance structure. The best run contemporary for-profit decentralized organizations, blockchains, rely on extremely primitive communication, such as informal email lists (cf., BIPs and EIPs). The networks which are still progressing, such as Ethereum, rely on benevolent dictators with a cult of personality or centralized foundations with salaried members seeking profit. There are few sophisticated governance procedures which can predictably survive the deaths of the current leaders. There are very rarely any ratified statements of principles, much less an enforceable constitution that governs any such attempt at forming a genuine DAO.
How can a decentralized organization come to consensus on governance? How can a modern Web3 project agree on technology upgrades without centralizing their decision-making process? There is another architectural design, besides the new cryptographic and information technology tools, that can keep a group politically decentralized even when profits are on the line, in valuable blockchain networks like Bitcoin. There is a much older incentive structure which has historically proved capable of maintaining a large decentralized network of economically self-interested autonomous group members. Brafman and Beckstrom (and perhaps also Satoshi Nakamoto and Vitalik Buterin) apparently had not considered the Maghribis.
The Maghribis were a decentralized trade organization entirely devoted to profit. These Jewish merchants from the early 11th century had none of the information technology that enables Bitcoin. Yet they remained decentralized because their organization prized something more valuable than money.
Maghribi traders’ solution
The Maghribis were a decentralized group of Jewish traders in Northwestern Africa (in modern-day Tunisia and especially Egypt) around 1000 AD. The Maghribis traded across great distances along the Silk Road on trips that would regularly last months at a time. They managed to solve the business contract challenges of the Principal-Agent Problem[28], asymmetric information due to time and distance separation, and limited legal contract enforceability, without any of the digital technological advantages we enjoy today.
The situation was that a merchant would send an agent out with goods and cash to trade along the dangerous Silk Road. After being gone for months and far from any control or oversight from their associates, there is a natural incentive for the agent to simply keep the profits and leave, or to return and falsely report they were stolen.
Less dramatically, it would be easy for an agent to skim without detection. The markets of the Silk Road had great volatility in their prices between distant locations and times. The little communication was highly unreliable. Even if the principal had independent communication with the distant merchant their agent was engaging, a fraction of the profits could be stolen and shared between the agent and the foreign merchant. Unforeseen costs could be invented.
In point of fact, the records show that such embezzlement was rare. Instead, a strong sense of trust pervaded. So what mechanism protected the principals from their agents’ asymmetric information? The answer was not a strong centralized government.
The Maghribis lived under the rule of the Muslim Fatimid caliphate, who controlled Northern Africa, Sicily and the broad fertile Eurasian plains, known as the Levant. The Fatimids had notably liberal trade policies to encourage business. Migration and the flow of goods had very low customs friction due to competitive ports. Tariffs were rare and temporary. The official legal channels for the Maghribis were slow and not to be relied upon in case a dispute arose. The Maghribis couldn’t create their own politically-enforced legal system. They were not capable of forming a strong centralized legal or political hierarchy, partly because any centralization of Jewish power would be seen as a threat to the primacy of the caliphate.
A system of ethics founded in their common religion helps explain the motivation for why merchants did not steal. And the social connection of a family-and-friend network of cooperation is also undeniably important in preventing theft. However, the trading distances and durations involved and the value of the temptations were extreme. In fact, the Maghribi network included people who lived in different countries and were part of independent Jewish communities with no family ties. The Maghribis lived throughout the Mediterranean, but they never worked with any other Jewish traders, even if the others lived and worked nearby, unless they were also part of the Maghribi professional network. Ethics and social sanctions are not enough to explain the long and powerful cooperation that sustained the Maghribis across vast distances.
The business challenges were further multiplied by the various complex tasks entrusted to the agents. The agents had to be excellent navigators, shippers, bargainers, bureaucrats, and soldiers. They had to choose the most efficient routes. They needed to hire transport caravans and boats, longshoremen to load and unload boats, and storage. The agents used their personal network of information on buyers and sellers to find the best prices, goods, and terms. These changed unpredictably, and the principals certainly didn’t give precise instructions on what price to pay for what goods months before the agents arrived at their destinations. The bureaucracy of customs and tariffs and local taxes needed to be negotiated, and the agents chose their routes depending on which ports were cheaper or safer or had less traffic based on experience and rumors. Finally, they were required to deal with the hazards of travel, including weather, warlords, and bandits. If all of these tasks were achieved, the agents would be entrusted with increasingly more complex jobs, including relaying market information and overseeing businesses in various locales.
How can you incentivize honesty and fair dealing under these circumstances? The agents were even officially in charge of bribing various officials along the route. Why didn’t they skim for themselves?
This question is particularly relevant to today’s concern with decentralizing business 1000 years later in the 21st century. We’re building economic networks which hope to incorporate anonymous members from different cultures across the globe, without being able to rely on any local legal enforcement, without constructing any centralized control structure. How did the Maghribis solve this puzzle? How did they solve their information asymmetry problems? How did they motivate long-term, good-faith cooperation?
The Maghribis’ solution was reputation.
The story we tell in this section was first detailed in Avner Greif’s deep exploration of the Cairo geniza.[29] A geniza is a hidden room in a synagogue intended to temporarily hold sacred texts. It is forbidden in Orthodox Judaism to dispose carelessly of any writing holding the name of God. The genizot held worn out copies of bibles and religious commentary temporarily, before they were properly buried in a cemetery. Since business communication amongst the Maghribi regularly opened with religious invocations, they were often stored in a geniza. (The extensive Cairo geniza also held proof that the Maghribis used double-entry bookkeeping, predating its famous use in medieval Florence by centuries.)
Reputation gives the proper incentive to create stable, long-term business relationships where both parties act in good faith. The promise of many future contracts incentivizes an agent to honor the deal to the best of their ability. Loss of reputation would ruin a career. The entire network devoted considerable attention and energy to policing their reputation.
The Cairo geniza records show that when one particular agent, Abun ben Zedaka in Jerusalem, was merely accused of embezzlement, principals from as far away as Sicily immediately canceled their contracts with the agent. When a principal was slow to remunerate an agent because of natural fluctuations in liquidity, they would fret about the damage it would do to their reputation. In fact, records show that the reputational system was so strong that agents who were the victims of theft along the journey would regularly rise above any contractual obligations, making their principals whole from their own funds in order to protect and further their reputation.
Moreover, personal letters show the system was relied upon to the point that most deals were engaged without any formal contract. This makes sense because no instructions could detail the list of minutiae the agents were expected to perform.
Further, principals in the network would entrust their money and assets to members who had no ability to repay in case of loss. There was a type of reputation-verification system for unseasoned traders, called the commenda. The commenda relationship had reputable, older, wealthier members certifying younger agents as trustworthy and skilled — agents who were willing and able to bear the difficulties of the journey but didn’t yet own the personal resources necessary to refund their principals in case of loss.
Reputation is extremely valuable for encouraging more efficient business deals. Reputation gives the purchaser the confidence to invest the money and/or assets in the venture, without spending the extra effort of investigating the agent before, during, and after the journey. Honesty would be a bad strategy for the agent if the contract was anonymous and the resolution didn’t affect future contracts. In this imagined scenario, from a game theory perspective, the game would be a single-stage zero-sum game. (Game theory applied to the design of decentralized organizations will be discussed in more detail in Chapter 4.) In this case the best strategy would be for the agent to steal all the wealth entrusted to him.
By adding reputation to the game, it becomes a repeated game, and the rest of the community becomes relevant. Reputation is a future-oriented commodity, which pays off profits with the promise of future contracts. Now the game is a repeated game which is positive-sum. The best strategy changes to incentivize honesty as the promise of voluminous future business overrides the potential for a one-time payout of stealing the principal’s wealth.
The positive-sum nature of the game arises, because reputation itself becomes a valuable commodity that can be created during a business deal. Reputation can be more valuable than present profits. One agent, whose writings are preserved in the Cairo geniza, sent a letter insulting his principal, “Had I listened to what people say, I never would have entered into a partnership with you….”[30] Then the agent goes on to explain, nevertheless, he is giving his principal more profits than was contractually obligated. The agent had sold two loads of pepper, one for the principal when it was safe, as was instructed, and the other for himself. He gambled the price would surge if ships demanding pepper arrived before he needed to leave. The gamble paid off and the second load was sold at a much higher price. “But brother, I would not like to take the profit for myself. Therefore, I transferred the entire sale to our partnership.” The agent forwent his personal profit, despite the fact he had no intention of ever doing business with that particular principal again, for the sake of protecting and building his reputation in the larger network.
Meaningful, well-policed reputation makes business dealings more efficient for two more reasons: freedom of choice of business partners within the network and contracts of short duration are preferred.
First, reputation allows business dealings with any member of the network, regardless of personal acquaintance. This requires the network to be closed, however, with a size limited by the ability to police reputation using the information technology available.
In 11th century North Africa, information technology consisted of slow transmission of handwritten letters. However, we can associate one historical IT advance with the advent of the Maghribi’s reputational system. The Fatimid Empire’s encouragement of trade provided cheaper and more secure information transmission. There were regular shipping and caravan links between various trade centers protected by the Fatimids. The Maghribi sent letters to their business associates through other traders and through private business professional letter carriers. “The traders sent several copies of the same letter to insure that at least one would reach its destination.”[31] This improvement in bandwidth (if not latency) improved broadcast security in the network, allowing a trustworthy reputational system to evolve.
With the information technology available today, we have networks on the scale of Bitcoin — open to anyone on the planet willing to join and follow the rules. The accounting necessary for policing reputation can be achieved for minute behaviors thanks to contemporary information processing. For the Maghribis, their network was limited to Jews experienced in Muslim culture, and did not accept Italian Jews, for instance, since accepting members from other cultures using other languages would have multiplied the difficulty of policing their reputational system. Today, such barriers are overcome by the universal logical structure of computer programs.
Second, reputation allows contracts of any duration. Actually, shorter contracts are preferable, since punishment against a cheating member’s reputation can occur more quickly. Also, shorter contracts allow more rapid accounting and disbursement of assets. This makes business more efficient as it frees resources for further use. Contracts with quick turnaround would be dangerous to the economy, as short-term thinking would lead to more competitive and less profitable collaboration, were it not for the focus on the long-term value of reputation.
Third, maintaining a reputation system is a costly overhead for the network, but it provides a catalyst for business. When meaningful reputation is part of the system, people are willing to cooperate without performing the extra due-diligence analysis on the agent and the other circumstances of the game. The opportunity to build reputation means both the agent and the principal are incentivized to act as partners to help each other profit, for the promise of future frictionless business opportunities. The parties are willing to go above and beyond the stipulations of the contract to build and protect reputation.
Finally, a focus on reputation instead of immediately fungible cash rewards encourages decentralized organization because it disperses power, and it does so fairly. Anyone with equivalent talent is equally acceptable in an anonymous business contract, so anyone available can be given opportunities. Those who already have jobs are not available, so the exponential concentration of power from the “rich-get-richer” effect is diminished. And meritocracy is encouraged by fair accounting and rewards.
Reputation may be enough to keep a homogenous group like the Maghribis together, despite the differentiating effect of competition for profit. But their coordination was devoted to the singular goal of a narrow type of trade. How can we maintain the power of decentralization when competing hierarchical structures are temporarily more effective?
The U.S. Constitution’s dynamic hybrid solution
The struggle between centralization and decentralization is at the core of American history. –Anthony Gregory
The decades leading to the foundation of the United States of America is a prime lesson in the strengths and weaknesses of centralization and decentralization. The choices of governance structures among the centralized British monarchy, the decentralized Articles of Confederation, and in the later hybrid centralized-decentralized U.S. Constitution, illustrate the power of dynamic design for making an effective and stable decentralized organization with integrated centralized elements.
The American Revolution was fought between the decentralized colonial rebels and the centralized British Empire. The British Empire itself had a long unstable history of internal revolt against its own centralized hierarchy. The British Empire had previously decentralized from its medieval feudal monarchy by dispersing power through Parliament. During the preceding centuries, the monarchy lost power in a series of revolts that redistributed power amongst property owners, the aristocracy (House of Lords) and the knights (House of Commons). Parliament’s power rivaled and often dominated the executive monarchy. As power tends to do under the differentiating process of competition, without conscious protection, a hierarchy emerged as well in Parliament amongst political factions.
By the time of the American Revolution, the landowning members of the Thirteen Colonies felt the legislative branch hierarchy had become too tyrannical under the reign of King George III. The information technology of the time meant the center of the British executive hierarchy was too distant to responsively govern the hierarchy that included the American colonies. The transatlantic voyage of ink and parchment letters gave latency from 6 to 18 weeks, one way. The printing press could store a broadsheet of information within a few hours and transmission on the order of 3 days throughout the colonies. More importantly, the press could disseminate unlimited numbers of copies, which was a major democratizing force, decentralizing the control of information. The colonists complained they had no representatives in Parliament. Information at the edge was not making its way up the hierarchy.
13 of the 23 British colonies in North America chose to break off from the hierarchy in 1776, with the ratification of the Declaration of Independence. These 13 contiguous territories had similar cultures (Christian, mostly Protestant), administrative organization, and political concerns with Britain, so it was easier for the Thirteen Colonies to communicate with each other, compared with the other nearby British territories. (One of the articles in the Articles of Confederation allowed a specific open seat for Canada to automatically become the 14th member of the rebellion, but this clause was never exercised.)
During the 7 years of rebellion, the Thirteen Colonies remained decentralized. The Continental Congress was their legislative body organized under the political rules called the Articles of Confederation. These Articles were consciously authored to limit the authority of its weak central government which had no chief executive. This made the war effort difficult because it meant the organization was very inefficient at marshalling resources. Recognizing the value of executive power during war, the colonies appointed George Washington the Commander in Chief of the Continental Army. However, the autonomous members of the rebellion could not be coerced to participate, to draft soldiers, to provide money or any other war materiel. Washington constantly and bitterly complained about this throughout the war.
The war produced the competitive circumstances that differentiate leaders in rank and powers, and a military hierarchy organically emerged and gained power throughout the war. Wary of the danger of centralizing power, however, the several states retained independent control of their local militias, and were in charge of appointing leaders in the Continental Army up to the rank of colonel.
Nevertheless, the decentralized rebel organization, which enjoyed the support of only 40% of the population in the colonies (15% loyal to the crown, 45% neutral), eventually defeated the most powerful centralized organization in the world, the British Empire, which would soon after become the largest empire in all history.
After their success, the Rebels knew future war was inevitable. In fact their capitol was burned to the ground by Britain in 1812. Recognizing the weakness and inefficiency of their decentralized response to the threat of war, the Thirteen Colonies renamed themselves the United States of America and redrafted their political and legal rules. This Constitution gave more power to the central government and set up a hierarchical executive branch with a central leader. Conscious of the historical instability of a centralized hierarchy, however, and desperate to preserve the individual freedoms they had fought for, the Constitution was drafted to include a dynamic design for decentralizing power.
The United States’ government has been remarkably stable. Despite many evident failings, including full civil war, the Constitution has ruled over the nation with the most diverse group of citizens ever assembled, over an enormous geography, with great success. The U.S. Constitution is the oldest protocol-centralizing document of any major contemporary country. This stability is particularly notable given its rigid, Rule-of-Law legal system (as opposed to the Rule-of-Virtue legal systems of Egypt and China).
The Constitution’s success is due to the harmonious marriage of centralized and decentralized organizing principles. A separation of powers into legislative, executive, and judicial branches keeps power from concentrating in a single chief executive monarch. Yet temporary hierarchies within each branch make them efficient and effective. Dynamic system design, including predictable transfers of power by term limits and flattening of power through democratic elections, further decentralizes political power in the organization.
Democracy itself decentralizes power. However, to bring unity to a large population with diverse values, the United States has rigid protocol-centralization from a Rule-of-Law legal system. Statutory law, explicitly and formally clarifying the limits of acceptable behavior, gives a level of fairness and transparency which helps unify a large, diverse group of people, as it did 5000 years ago to bring diverse tribes together in Mesopotamia.
However, these explicit rules lead to instability in the short-term day-to-day workings of the nation and in the long-term multi-generational history of the country. The founders consciously grappled with these problems and built several stabilizing protocols into the Constitution.
The U.S. Constitution institutes dynamic governance for long-term stability. This includes short-term and long-term protocols. An appeals process stabilizes short-term cooperation (judicial). Long-term stabilization comes from the ability to amend rules — including how the amendments themselves are made (legislative). For even longer-term stabilization, transcendental values were consciously specified to guide such higher-order legislative and judicial rulemaking. In particular, the founders highlighted the vague notions of freedom, equality, and good will (liberté, egalité, fraternité).
The second system that stabilizes the organization with dynamic design is the separation of powers into the triumvirate of legislative, executive, and judicial branches. Montesquieu’s radical system[32] creates a dynamic design through a system of checks and balances. Power is balanced by splitting it between the three branches. Power is checked, because each branch depends on the other to act, so that each branch has cyclic power over the others. The legislative branch crafts the plans that the executive branch is tasked with carrying out. The executive branch executes the plans and pushes cases to the judicial branch for resolution. Resolution means the judicial branch dictates what has happened. Given these judicial pronouncements, the legislative branch is then tasked with developing new plans to respond to what has happened. In computer science terms, the legislative branch updates the software. Then the executive branch executes the software. The judicial branch determines the state of the system. The executive branch gives information transmission, the legislative branch provides information processing, the judicial branch gives information storage.[33]
The separation of powers was consciously designed to prevent the system from naturally devolving into a complete centralized hierarchy, despotism according to Montesquieu, or tyranny according to Madison.[34] In the cyclical system, the powers of each branch derive from the others. The natural human competitive impulse is harnessed to prevent any branch from usurping power not enumerated in the Constitution, the checks and balances to prevent centralization of power. “Ambition must be made to counteract ambition.”[35] This decentralization stabilizes the effect of the rigid legal protocol centralization, and the centralized hierarchy inherent in each separate branch.
Dynamic design further stabilizes the system with the following mechanisms. First, the power hierarchy is never permanently completed, because the leaders, particularly the executive leader, are not permanently in charge. The president has term limits. Second is democracy: the means by which the new central and legislative leaders are chosen is by polling the electorate. The members at the very bottom of the hierarchy equally share ultimate authority.[36] This formally ties the top of the political hierarchy to the bottom. The power structure is therefore cyclic. This stabilizes the system by flattening the ultimate power distribution and adding dynamism to the structure, to counteract the natural impulse toward becoming a static, rigid power hierarchy. Finally, the explicit mechanisms by which the very rules we follow can be changed are again split among the three branches. The legislative branch writes the rules; the executive branch decides how to institute those rules; the judicial branch reviews those rules. Thus, decentralization further stabilizes the process.
Both power decentralization and protocol decentralization are promoted using dynamic design in these several ways. This ameliorates the destabilizing effects of formal rigorous laws with effective centralized hierarchies in each branch, particularly the complex executive branch. This gives the benefits of both centralization and decentralization in political power and legal protocol.
However, the system is obviously not without flaws, especially because it is run by humans.[37] The process described above is merely the design of the system. People are very clever. Given enough time, we will find workarounds for the rules to any game. No matter how carefully rules are designed, we can subvert the intentions of its authors, while still following the rules to the letter. That is reflected by a mathematical fact called the Folk Theorems of Game Theory (see Chapter 4). When it comes to games that really matter, games where money and property and power are at stake, people are canny and avaricious. In practice, this game was subverted on many levels before the ink on the Constitution’s ratification was dry.
As an uncontentious example, consider how the executive branch predictably oversteps its bounds. In fact, this natural circumstance is why the whole system was designed, to prevent the power hierarchy from centralizing around an individual. Predictably, the executive branch has become the most powerful, commanding far more resources than the other branches combined. But the system was designed to prevent this, partly by furnishing the legislative branch with the power to set the budget.
During a crisis, the executive branch is naturally tasked with identifying the problem, for example recognizing the need to go to war. The power of the executive is limited by the requirement that the President petition the legislative branch for authorization, funding, and instructions for how to execute the war. The legislature is supposedly the only branch with the power to declare war, and it is supposedly required to be periodically repetitioned for funding the war effort. But the executive branch has periodically overstepped its powers, such as suspending habeas corpus or violating the 4th amendment rights with citizen surveillance. When the executive branch is given more centralizing power during a crisis, or simply takes it, the mechanism for removing that power when the threat is over has rarely been followed. Large permanent standing armies were inconceivable when the Constitution was designed.
Secondly, the system has been propped up by the external centralizing force of constantly increasing power. The United States increased in territory until 1959 and continues to advance its influence through business, foreign policy, technological development, and culture. Rapid westward expansion for more than a century to its current political territory was rationalized by the idea of Manifest Destiny. When there was a temporary time American power was seen as stagnating instead of growing in the 1970s, it was seen as a general national crisis. Today a major national concern is that a new generation is predicted to be relatively less wealthy than their parents, despite the fact that their material wealth is expanding, measured in absolute terms of energy use, due to technological advances. Not all of the U.S. government’s stability is due to the clever design of its rules.
The United States government is a decentralized organization, a DAO. Norway is a DAO — the best DAO according to the democracy index.[38] Mauritius, Uruguay, and South Korea are also DAOs. Every functioning democracy is more akin to a DAO than to a centralized corporation. To prove this, simply answer the question, “who owns the U.S.”? A cynical answer might be something along the lines of “the military industrial complex” or “the corporations”. The US DAO has been operating continuously for more than 200 years, so naturally there is corruptive rust that builds in such an immense machine. Those answers hold more than a little truth. But the best answer to who owns the power in the US is truly more along the lines of “the people”.
There have been problems with our systems of democratic governance that were identified while they were being built (the Federalist Papers) and immediately after (deToqueville’s Democracy in America) and the criticisms have multiplied ever since. Many of these criticisms are correct. Many of the flaws were unavoidable due to the nature of the culture of the people the system needs to govern. Many of the flaws were unavoidable due to the nature of the technologies that were available at the time (voting, communication, recording). So, the systems adopted were flawed. Systems are always flawed and so need constant analysis and criticism. Many flaws are due to inevitable corruption in any static system — even the dynamic system of tripartite checks and balances is relatively static in the second order, since the design itself has been relatively fixed for two hundred years. We see a dissolution of clarity as the branches overstep their established bounds: executives usurping legislative power with line-item vetoes and military actions without Congressional authorization; judges usurping legislative power by “legislating from the bench” and lawyers usurping executive power by using the inefficiency of the courts to coerce opponents with the threat of frivolous suits; and legislators preventing the executive from making judicial appointments.
Many of these violations are easily explained by party factionalism, which was a basic concern of the Founders, especially Madison. Duverger’s Law claims a plurality voting system (whoever gets the most votes — the plurality — wins) leads inevitably to two-party factions. In Federalist 10, Madison argues the threat of factionalism (political parties) in a democracy naturally leads to a Tyranny of the Majority emerging, and that this can only be prevented in two ways. First by giving individuals further autonomy, decentralizing interests and breaking up majorities by encouraging the natural diversity of humanity. Second by filtering power to wiser individuals through representative democracy. Wisdom was to be measured in proportion to their devotion to encouraging individual autonomy. 21st century technology can encourage both of these solutions using decentralized accounting for reputation.
Despite the corruption any system inevitably collects, the U.S. Constitution’s design is a major reason for the success and stable governance of the nation for two centuries of unpredictable history, during which its population has grown almost 100-fold. The dynamic design of the separated powers gives it stability through power decentralization.
New systems that are emerging due to advances in information technology face even greater challenges than the fledgling 18th century republic of former colonies, the 11th century Maghribi traders, or the clans of Imperial China. Today, far larger global networks of people are forming, open to members with diverse values and backgrounds, commanding more power. Automated systems processing information at light speed can now communicate globally and store voluminous details on minute transactions. These tools are expected to be harnessed to govern ever more sophisticated business arrangements in ever more complex technological situations with ever more detailed information. How do we build governance systems which remain stable in such dynamic environments? Protocol centralization is necessary to display objective fairness, but this leads to instability. Lessons on decentralized dynamic design from the 17th century, reputational systems over distant trade routes on the Silk Road in the 11th century, and justice decentralization and transcendental value adherence in Ancient China and Egypt help us to understand how these networks are stabilized. What else made it possible to create our current global networks? What else is needed to revitalize our democratic systems and build the successful networks of the future?
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[1] This natural evolution of a complex organized structure is the basis for the confusion trapping many conspiracy theorists. We are not saying there are no conspiracies, in fact the list of genuine conspiracies includes every historical revolution (see also https://en.wikipedia.org/wiki/Contract_killing#Notable_cases Retrieved 8/11/20). However there is no need to explain events by positing the existence of extremely powerful actors who control history. Power organizes naturally to make history without guidance. “The main thing that I learned about conspiracy theory, is that conspiracy theorists believe in a conspiracy because that is more comforting. The truth of the world is that it is actually chaotic. The truth is that it is not The Iluminati, or The Jewish Banking Conspiracy, or the Gray Alien Theory. The truth is far more frightening. Nobody is in control. The world is rudderless.” ―Alan Moore
[2] This principle is named after the passage in the New Testament Book of Matthew: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.” Matthew 25:29, King James Version. The same principle leads to Zipf’s law, Price’s law, exponential growth, unrestricted population growth, compound interest, or economies of scale.
[3] For an innovative perspective on the historical progress of humanity’s technological ability to harness energy, see Vaclav Smil, Energy and Civilization: A History, The MIT Press (2017)
[4] The dating is still controversial, and some researchers argue these individual behaviors may be more than 400,000 years old. Francesco D’Errico, “The Invisible Frontier: A Multiple Species Model for the Origin of Behavioral Modernity”, Evolutionary Anthropology, 12 (4), pp. 188–202, 2003. It is argued that the effects are more consistently visible in the archaeological record after a watershed moment around 50,000 years ago when people were first able to organize in stable groups of a size large enough to maintain complex traditions. Adam Powell, et al., “Late Pleistocene Demography and the Appearance of Modern Human Behavior”, Science 324, 1298, 2009. Available online at http://doc.rero.ch/record/210393/files/PAL_E4401.pdf (Retrieved 6/22/20)
[5] Richard Sosis, “Religion and Intragroup Cooperation: Preliminary Results of a Comparative Analysis of Utopian Communities” (PDF). Cross-Cultural Research. SAGE Publishing. 34 (1), 2000.Available online at https://pdfs.semanticscholar.org/450a/edd9d7e55e9237ee092b0a86b3af986b46bf.pdf Retrieved5/18/2020
[6] Graham Speake , Mount Athos: Renewal in Paradise, Yale University Press, 2002.
[7] Jerrold S. Cooper, Clay Cones La 9.1 Presargonic Inscriptions, The American Oriental Society, New Haven, Connecticut, (1986)
[8] Ibid. Capitalization mine.
[9] For a more nuanced assessment of the differences than the oversimplification presented here, see Shihu Hu and Zhiguo Yuan, Commentary: ‘Large-scale psychological differences within China explained by rice vs. wheat agriculture’, Frontiers in Psychology, 6:489 (2015).
[10] There are 14 pages of synonyms at https://www.thesaurus.com/browse/big/14 (Retrieved 8/15/20).
[11] In medieval China, society and the economy were largely structured by kinship-based clans. Rules were different for each clan, but it has been estimated that less than 20% of rules listed any punishment, and these were likely recommendations. See p. 11 of Avner Greif & Guido Tabellini, “The Clan and the Corporation: Sustaining Cooperation in China and Europe”, Journal of Comparative Economics, Vol.45 (1), pp. 1–35 (2017). This is not to say that there were no rigid precepts or clearly defined rules. The Tang Code (624) was an extremely detailed, logically rigorous legal system that helped guide justice throughout the imperial period, culminating in the Qing Code of 1644.
[12] “The Constitution of the People’s Republic of China is nominally the supreme law of the People’s Republic of China. … Though technically the “supreme legal authority” and “fundamental law of the state”, the ruling Communist Party of China has a documented history of violating many of the constitution’s provisions and censoring calls for greater adherence to it. Furthermore, claims of violations of constitutional rights cannot be used in Chinese courts, and the National People’s Congress Constitution and Law Committee, the legislative committee responsible for constitutional review, has never ruled a law or regulation unconstitutional.” https://en.wikipedia.org/wiki/Constitution_of_the_People%27s_Republic_of_China Retrieved 5/22/2020.
[13] “In modern Chinese politics, the paramount leader (最高领导人, Zuìgāo Lǐngdǎorén) is an informal term for the most prominent political leader … [it] is not, however, a formal position nor an office unto itself. The term gained prominence during the era of Deng Xiaoping (1978–1989), when he was able to wield political power without necessarily holding any official or formally significant party or government positions at any given time.” https://en.wikipedia.org/wiki/Paramount_leader Retrieved 5/22/2020.
[14] “The century of humiliation (百年耻辱) is the term used in China to describe the period of intervention and perceived subjugation of the Chinese Empire by Western powers, Russia and Japan between 1839 and 1949.” https://en.wikipedia.org/wiki/Century_of_humiliation Retrieved 5/22/2020.
[15] On the other hand, lifelong choices that non-Chinese often judge to be personal rights are not afforded to citizens, as evidenced by the One Child Policy.
[16] Zhang Xiangming, “On two ancient Chinese administrative ideas: Rule of Virtue and Rule by Law,” Culture Mandala: The Bulletin of the Centre for E ast-West Cultural and Economic Studies: Vol. 5: Iss. 1, Article 7, (2002).
Available at: http://epublications.bond.edu.au/cm/vol5/iss1/7 Retrieved 5/22/2020.
[17] As opposed to the more philosophical Analects of Confucius, the Han Feizi Legalist text reads similar to Machiavelli’s The Prince, as practical advice to a ruler for how to administrate effectively. Also compare the pessimistic vision of humanity with Hobbes’ philosophy.
[18] https://plato.stanford.edu/archives/win2014/entries/chinese-legalism/#EpiLegChiHis (Retrieved 5/31/2020).
[19] Preserved for posterity in Xian province. https://en.wikipedia.org/wiki/Mausoleum_of_the_First_Qin_Emperor (Retrieved 8/8/20).
[20] Jianfu Chen, Chinese Law: Context and Transformation, Martinus Nijhoff Publishers, (2008).
[21] Ebrey, Walthall, Palais, (2006). East Asia: A Cultural, Social, and Political History. Boston: Houghton Mifflin Company, p. 157.
[22] Greif (2017), p. 12.
[23] Starfish are decentralized organisms. Their nervous systems don’t have a centralized hierarchical structure. This makes them slow, but practically immortal — if you chop one in half, you get two starfish. They’re stable and can handle adversity. Spiders have a centralized nervous system, with a brain, so they can make decisions quickly. But you can kill them with a blow to the head.
[24] Though this is not the name these tribes ever use to refer to themselves. The word Apache is probably derived from the Zuni word for “enemy”. The Apaches themselves had different demonyms in their own dialects, including n nee, n dee, dene, and dine.
[25] Thomas J. Nevins, Introduction to The Apache Indians: In Search of the Missing Tribe, by Helge Ingstad, University of Nebraska Press, 2004, p. xxiv.
[26] The Starfish and the Spider, p 148.
[27] A sense of fairness is also strong among primates and other animals, as is demonstrated by the famous cucumber experiment. Two monkeys in side-by-side cages are rewarded for performing the trivial task of returning a rock to the experimenter. One monkey receives a slice of cucumber. When it watches the other monkey receive a grape, it protests the unfairness vehemently. “Thus far, passive and active protest against unfavorable outcomes has been documented in monkeys, apes, dogs, and birds. It is thought that these species compare their outcomes with those of others so as to judge the merit of their partnerships.” –Sarah F. Brosnan and Frans B. M. de Waal, “Evolution of responses to (un)fairness”, Science, Vol 346, Issue 6207, 17 October (2014)
[28] In the Principal-Agent problem coordination revolves around those who delegate authority (principals) and those who are acting on behalf of others (agents). Because of natural human shortcomings, bounded rationality, incomplete foresight, and information asymmetries between principal and agent, it is impossible for principals to contract for every possible action or inaction of the agent in order to induce the agent to act in the best interest of the principal. For an overview of the relevant literature see, Shieffer, Andre & Vishny, Robert W, “A Survey of Corporate Governance”, Journal of Finance, 52(2), pp 737–783 (1997).
[29] Avner Greif, Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders, The Journal of Economic History, Vol. 49, №4, pp. 857–882 (1989).
[30] Greif, Reputation and Coalitions, p. 871
[31] Greif, private communication. June, 2020.
[32] Montesquieu, The Spirit of the Law, Book XI, 1748, building on ideas from John Locke, Two Treatises of Government, 1689, who took ideas from much earlier democracies. The first well-documented democracies were in Greece. In the 6th century BC, Athenian democracies split power in the same way with a legislative branch, the ekklesia (which is the etymological root of the word ecclesiastic), the executive branch, boule (a council of representatives from the ten Athenian tribes), and the judicial body, dikasteria, (whose jurors were selected by lottery).
[33] This triumvirate of control reflects the psychological experience of an animal moving through its environment. Information processing is our experience of thought (legislative), information storage is our experience of perception (judicial), information communication is our experience of action (executive). The act of these processes working harmoniously together is life. (Incidentally, this is the foundation for building strong AI.) “It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. But what is government itself, but the greatest of all reflections on human nature?” –James Madison, Federalist №51 (6 February 1788)
[34] “There would be an end of everything, were the same man, or the same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the causes of individuals.” –Montesquieu, The Spirit of the Law, Book XI, 1748.
“The accumulation of all powers, Legislative, Executive, and Judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.” –James Madison, Federalist №47 (30 January 1788)
[35] James Madison, Federalist №51 (6 February 1788)
[36] “…the people are the only legitimate fountain of power” –James Madison, Federalist №49 (2 February 1788)
[37] “If men were angels, no government would be necessary…. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.” –James Madison, Federalist №51 (6 February 1788) Every engineer will tell you building a machine for any task is easy, until humans are expected to use it.
