The Sovereign Individual
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The Sovereign Individual

Mastering the Transition to the Information Age

James Dale Davidson, Lord William Rees-Mogg

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eBook - ePub

The Sovereign Individual

Mastering the Transition to the Information Age

James Dale Davidson, Lord William Rees-Mogg

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Two renowned investment advisors and authors of the bestseller The Great Reckoning bring to light both currents of disaster and the potential for prosperity and renewal in the face of radical changes in human history as we move into the next century. The Sovereign Individual details strategies necessary for adapting financially to the next phase of Western civilization.Few observers of the late twentieth century have their fingers so presciently on the pulse of the global political and economic realignment ushering in the new millennium as do James Dale Davidson and Lord William Rees-Mogg. Their bold prediction of disaster on Wall Street in Blood in the Streets was borne out by Black Tuesday. In their ensuing bestsellar, The Great Reckoning, published just weeks before the coup attempt against Gorbachev, they analyzed the pending collapse of the Soviet Union and foretold the civil war in Yugoslavia and other events that have proved to be among the most searing developments of the past few years.In The Sovereign Individual, Davidson and Rees-Mogg explore the greatest economic and political transition in centuries -- the shift from an industrial to an information-based society. This transition, which they have termed "the fourth stage of human society, " will liberate individuals as never before, irrevocably altering the power of government. This outstanding book will replace false hopes and fictions with new understanding and clarified values.

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CHAPTER 1 THE TRANSITION OF THE YEAR 2000 The Fourth Stage of Human Society

“It feels like something big is about to happen: graphs show us the yearly growth of populations, atmospheric concentrations of carbon dioxide, Net addresses, and Mbytes per dollar. They all soar up to an asymptote just beyond the turn of the century: The Singularity. The end of everything we know. The beginning of something we may never understand.”1


The coming of the year 2000 has haunted the Western imagination for the past thousand years. Ever since the world failed to end at the turn of the first millennium after Christ, theologians, evangelists, poets, seers, and now, even computer programmers have looked to the end of this decade with an expectation that it would bring something momentous. No less an authority than Isaac Newton speculated that the world would end with the year 2000. Michel de Nostradamus, whose prophecies have been read by every generation since they were first published in 1568, forecast the coming of the Third Antichrist in July 1999.2 Swiss psychologist Carl Jung, connoisseur of the “collective unconscious,” envisioned the birth of a New Age in 1997. Such forecasts may easily be ridiculed. And so can the sober forecasts of economists, such as Dr. Edward Yardeni of Deutsche Bank Securities, who expects computer malfunctions on the millennial midnight to “disrupt the entire global economy.”3 But whether you view the Y2K computer problem as groundless hysteria ginned up by computer programmers and Information Technology consultants to stir up business, or as a mysterious instance of technology unfolding in concert with the prophetic imagination, there is no denying that circumstances at the eve of the millennium excite more than the usual morbid doubt about where the world is tending.
A sense of disquiet about the future has begun to color the optimism so characteristic of Western societies for the past 250 years. People everywhere are hesitant and worried. You see it in their faces. Hear it in their conversation. See it reflected in polls and registered in the ballot box. Just as an invisible, physical change of ions in the atmosphere signals that a thunderstorm is imminent even before the clouds darken and lightning strikes, so now, in the twilight of the millennium, premonitions of change are in the air. One person after another, each in his own way, senses that time is running out on a dying way of life. As the decade expires, a murderous century expires with it, and also a glorious millennium of human accomplishment. All draw to a close with the year 2000.
“For there is nothing covered that shall not be revealed, neither hid that shall not be known.”
—MATTHEW 10:26
We believe that the modern phase of Western civilization will end with it. This book tells why. Like many earlier works, it is an attempt to see into a glass darkly, to sketch out the vague shapes and dimensions of a future that is still to be. In that sense, we mean our work to be apocalyptic—in the original meaning of the word. Apokalypsis means “unveiling” in Greek. We believe that a new stage in history—the Information Age—is about to be “unveiled.”
“We are watching the beginnings of a new logical space, an instantaneous electronic everywhereness, which we may all access, enter into, and experience. We have, in short, the beginnings of a new kind of community. The virtual community becomes the model for a secular Kingdom of Heaven; as Jesus said there were many mansions in his Father’s Kingdom, so there are many virtual communities, each reflecting their own needs and desires.”


The theme of this book is the new revolution of power which is liberating individuals at the expense of the twentieth-century nation-state. Innovations that alter the logic of violence in unprecedented ways are transforming the boundaries within which the future must lie. If our deductions are correct, you stand at the threshold of the most sweeping revolution in history. Faster than all but a few now imagine, microprocessing will subvert and destroy the nation-state, creating new forms of social organization in the process. This will be far from an easy transformation.
The challenge it will pose will be all the greater because it will happen with incredible speed compared with anything seen in the past. Through all of human history from its earliest beginnings until now, there have been only three basic stages of economic life: (1) hunting-and-gathering societies; (2) agricultural societies; and (3) industrial societies. Now, looming over the horizon, is something entirely new, the fourth stage of social organization: information societies.
Each of the previous stages of society has corresponded with distinctly different phases in the evolution and control of violence. As we explain in detail, information societies promise to dramatically reduce the returns to violence, in part because they transcend locality. The virtual reality of cyberspace, what novelist William Gibson characterized as a “consensual hallucination,” will be as far beyond the reach of bullies as imagination can take it. In the new millennium, the advantage of controlling violence on a large scale will be far lower than it has been at any time since before the French Revolution. This will have profound consequences. One of these will be rising crime. When the payoff for organizing violence at a large scale tumbles, the payoff from violence at a smaller scale is likely to jump. Violence will become more random and localized. Organized crime will grow in scope. We explain why.
Another logical implication of falling returns to violence is the eclipse of politics, which is the stage for crime on the largest scale. There is much evidence that adherence to the civic myths of the twentieth-century nation-state is rapidly eroding. The death of Communism is merely the most striking example. As we explore in detail, the collapse of morality and growing corruption among leaders of Western governments are not random developments. They are evidence that the potential of the nation-state is exhausted. Even many of its leaders no longer believe the platitudes they mouth. Nor are they believed by others.

History Repeats Itself

This is a situation with striking parallels in the past. Whenever technological change has divorced the old forms from the new moving forces of the economy, moral standards shift, and people begin to treat those in command of the old institutions with growing disdain. This widespread revulsion often comes into evidence well before people develop a new coherent ideology of change. So it was in the late fifteenth century, when the medieval Church was the predominant institution of feudalism. Notwithstanding popular belief in “the sacredness of the sacerdotal office,” both the higher and lower ranks of clergy were held in the utmost contempt—not unlike the popular attitude toward politicians and bureaucrats today.5
We believe that much can be learned by analogy between the situation at the end of the fifteenth century, when life had become thoroughly saturated by organized religion, and the situation today, when the world has become saturated with politics. The costs of supporting institutionalized religion at the end of the fifteenth century had reached a historic extreme, much as the costs of supporting government have reached a senile extreme today.
We know what happened to organized religion in the wake of the Gunpowder Revolution. Technological developments created strong incentives to downsize religious institutions and lower their costs. A similar technological revolution is destined to downsize radically the nation-state early in the new millennium.
“Today, after more than a century of electric technology, we have extended our central nervous system itself in a global embrace, abolishing both space and time as far as our planet is concerned”6

The Information Revolution

As the breakdown of large systems accelerates, systematic compulsion will recede as a factor shaping economic life and the distribution of income. Efficiency will become more important than the dictates of power in the organization of social institutions. This means that provinces and even cities that can effectively uphold property rights and provide for the administration of justice, while consuming few resources, will be viable sovereignties in the Information Age, as they generally have not been during the last five centuries. An entirely new realm of economic activity that is not hostage to physical violence will emerge in cyberspace. The most obvious benefits will flow to the “cognitive elite,” who will increasingly operate outside political boundaries. They are already equally at home in Frankfurt, London, New York, Buenos Aires, Los Angeles, Tokyo, and Hong Kong. Incomes will become more unequal within jurisdictions and more equal between them.
The Sovereign Individual explores the social and financial consequences of this revolutionary change. Our desire is to help you to take advantage of the opportunities of the new age and avoid being destroyed by its impact. If only half of what we expect to see happens, you face change of a magnitude with few precedents in history.
The transformation of the year 2000 will not only revolutionize the character of the world economy, it will do so more rapidly than any previous phase change. Unlike the Agricultural Revolution, the Information Revolution will not take millennia to do its work. Unlike the Industrial Revolution, its impact will not be spread over centuries. The Information Revolution will happen within a lifetime.
What is more, it will happen almost everywhere at once. Technical and economic innovations will no longer be confined to small portions of the globe. The transformation will be all but universal. And it will involve a break with the past so profound that it will almost bring to life the magical domain of the gods as imagined by the early agricultural peoples like the ancient Greeks. To a greater degree than most would now be willing to concede, it will prove difficult or impossible to preserve many contemporary institutions in the new millennium. When information societies take shape they will be as different from industrial societies as the Greece of Aeschylus was from the world of the cave dwellers.


“I know of no more encouraging fact than the unquestionable ability of man to elevate his life by conscious endeavor.”
The coming transformation is both good news and bad. The good news is that the Information Revolution will liberate individuals as never before. For the first time, those who can educate and motivate themselves will be almost entirely free to invent their own work and realize the full benefits of their own productivity. Genius will be unleashed, freed from both the oppression of government and the drags of racial and ethnic prejudice. In the Information Society, no one who is truly able will be detained by the ill-formed opinions of others. It will not matter what most of the people on earth might think of your race, your looks, your age, your sexual proclivities, or the way you wear your hair. In the cybereconomy, they will never see you. The ugly, the fat, the old, the disabled will vie with the young and beautiful on equal terms in utterly color-blind anonymity on the new frontiers of cyberspace.

Ideas Become Wealth

Merit, wherever it arises, will be rewarded as never before. In an environment where the greatest source of wealth will be the ideas you have in your head rather than physical capital alone, anyone who thinks clearly will potentially be rich. The Information Age will be the age of upward mobility. It will afford far more equal opportunity for the billions of humans in parts of the world that never shared fully in the prosperity of industrial society. The brightest, most successful and ambitious of these will emerge as truly Sovereign Individuals.
At first, only a handful will achieve full financial sovereignty. But this does not negate the advantages of financial independence. The fact that not everyone attains an equally vast fortune does not mean that it is futile or meaningless to become rich. There are 25,000 millionaires for every billionaire. If you are a millionaire and not a billionaire, that does not make you poor. Equally, in the future, one of the milestones by which you measure your financial success will be not just now many zeroes you can add to your net worth, but whether you can structure your affairs in a way that enables you to realize full individual autonomy and independence. The more clever you are, the less propulsion you will require to achieve financial escape velocity. Persons of even quite modest means will soar, as the gravitational pull of politics on the global economy weakens. Unprecedented financial independence will be a reachable goal in your lifetime or that of your children.
At the highest plateau of productivity, these Sovereign Individuals will compete and interact on terms that echo the relations among the gods in Greek myth. The elusive Mount Olympus of the next millennium will be in cyberspace—a realm without physical existence that will nonetheless develop what promises to be the world’s largest economy by the second decade of the new millennium. By 2025, the cybereconomy will have many millions of participants. Some of them will be as rich as Bill Gates, worth tens of billions of dollars each. The cyberpoor may be those with an income of less than $200,000 a year. There will be no cyberwelfare. No cybertaxes and no cybergovernment. The cybereconomy, rather than China, could well be the greatest economic phenomenon of the next thirty years.
The good news is that politicians will no more be able to dominate, suppress, and regulate the greater part of commerce in this new realm than the legislators of the ancient Greek city-states could have trimmed the beard of Zeus. That is good news for the rich. And even better news for the not so rich. The obstacles and burdens that politics imposes are more obstacles to becoming rich than to being rich. The benefits of declining returns to violence and devolving jurisdictions will create scope for every energetic and ambitious person to benefit from the death of politics. Even the consumers of government services will benefit as entrepreneurs extend the benefits of competition. Heretofore, competition between jurisdictions has usually meant competition by means of violence to enforce the rule of a predominant group. Consequently, much of the ingenuity of interjurisdictional competition was channeled into military endeavor. But the advent of the cybereconomy will bring competition on new terms to provision of sovereignty services. A proliferation of jurisdictions will mean proliferating experimentation in new ways of enforcing contracts and otherwise securing the safety of persons and property. The liberation of a large part of the global economy from political control will oblige whatever remains of government as we have known it to operate on more nearly market terms. Governments will ultimately have little choice but to treat populations in territories they serve more like customers, and less in the way that organized criminals treat the victims of a shakedown racket.

Beyond Politics

What mythology described as the province of the gods will become a viable option for the individual—a life outside the reach of kings and councils. First in scores, then in hundreds, and ultimately in the millions, individuals will escape the shackles of politics. As they do, they will transform the character of governments, shrinking the realm of compulsion and widening the scope of private control over resources.
The emergence of the sovereign individual will demonstrate yet again the strange prophetic power of myth. Conceiving little of the laws of nature, the early agricultural peoples imagined that “powers we should call supernatural” were widely distributed. These powers were sometimes employed by men, sometimes by “incarnate human gods” who looked like men and interacted with them in what Sir James George Frazer described in The Golden Bough as “a great democracy.”7
When the ancients imagined the children of Zeus living among them they were inspired by a deep belief in magic. They shared with other primitive agricultural peoples an awe of nature, and a superstitious conviction that nature’s works were set in motion by individual volition, by magic. In that sense, there was nothing self-consciously prophetic about their view of nature and their gods. They were far from anticipating microtechnology. They could not have imagined its impact in altering the marginal productivity of individuals thousands of years later. They certainly could not have foreseen how it would shift the balance between power and efficiency and thus revolutionize the way that asset...

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