Disruption is something that many toss around. But what is it exactly and, more importantly, why does it occur?
For most, it is the old "I know it when I see it". In a lot of instances, this is sufficient.
However, in this era of advancing technology, it is important to understand how disruption takes place. Why do companies succumb to this when they have enormous power, money, and political influence? Is it because the leaders are stupid?
Actually, there is a fundamental reason why disruption takes place. It leads to industries being decimated. Large entities that were major economic drivers end up as fossils, a footnote in history.
There is one entity that has stood: governments.
It is time to put them on the list of entities that will be disrupted.
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Government Disruption: Crypto, AI, and Blockchain
Before getting into why governments will be disrupted, let's look into the basics of disruption. This is the first step which clarifies why governments will be powerless to withstand the onslaught that will befall them.
Most are aware that disruption occurs because there is a new innovation (technology, product, system) that arrives on the scene. This almost always comes from an outside source, since incumbants tend to lack the desire to innovation.
For a period of time, the new innovation operates on the fringes. It is laughed at because things are spotty. Early iterations do not work very well, exemplifying the gap between the old and new. This provides even greater assurance to the incumbants.
The challenges comes when the fringe starts to expand. With more advancement, the newcomer is attracting more people. A shift is starting away from the old. At some point, the incumbants realize something is happening.
Here is where they kick into action. The problem is it is usually a feeble attempt. Disruption is at hand and there is nothing that can be done about it.
Why?
Once companies try to fend off the disruption, someting basic is realize. Inertia is the standard for these entities. That means acting in ways to avoid the impact of the threat is impossible.
But again why?
Here is the key: these entities are to the point where stakeholder interests are not aligned.
In other words, everyone starts to protect the eggs in their basket. Whether it is management, workers, unions, suppliers, or sharesholders, everyone has a view, many which contradict the others. Hence, the status quo becomes the default.
Complete Disruption
The world is being completely disrupted which is a major problem for governments.
At the core, the issue resides in the fact that our governments were created at a time where society was physical in nature. Everything we did was based upon something we could touch.
Over the last half century, the move into the digital (non-physical) was pronounced. It is only accelerating. This means we have a basic disconnect between the two.
Blockchain is an important component in this discussion. While it is still in the early phases, it sets the stage for disruption. One area where it is likely to have major impact is in governance. This is the forte of governments. What happens when there is competition?
Of course, governments are going to try to stamp it out. Here is where the stakeholder interest is misaligned. Governments excel at have different interest groups within them. The bureaucrats differ from the politicians. We see security agencies opposed members of the political scene. Lobbyists operate closely with different factions, ensuring corporate interests are protected.
This is taking place in a world which is global in nature.
WIth the digital world, imaginary lines in the dirt mean nothing. That is the basis from which our governments were formed. They used geography as the foundation of existence. If you were born on a certain side of the line, then you were under the governance of that entity.
Many assert that globalism is dying. This is not the case because it applies to something much larger than goods or services created by companies.
Cryptocurrency Is Global
Built on top of blockchains, we have the basic premise that cryptocurrency is global. Bitcoin is an example of a network that is outside the control of governments and central banks. It is a monetary system that is international the second someone accesses a wallet. This can be done from anywhere.
With the building of decentralized finance, we are looking at an entire financial system, complete with a multitude of layers providing products and services, that is permissionless along with being worldwide. This is the default of the digital world.
Hence, anything tied to cryptocurrency is global in nature. This is in direct opposition to our forms of government.
Peer-to-peer (P2P) systems are a nightmare for governments. When nodes are interacting directly, without an intermediary, there is really no way to control it. This was realized during the early file sharing days. As the volume increased, it became impossible to stop. While a Napstar (centralized entity) could be shut down, the direct sharing between nodes could not.
The same is true for any cryptocurrency is that not company backed and operates directly on a blockchain.
This is huge. A significant amount of power came from governments ability to to control those entities which were in charge of the money. Once that is broken, many things can start to unwind.
For example, taxation becames increasing difficult as technology advances. Peer-to-peer transactions are going to grow in nature. With systems developing globally, very little is taking place locally. This is a huge issue for our present forms of government.
The Crushing Blow: AI
Ai is the game changer.
We are already seeing steps by governments to control AI. While this looks like something that it might attain, it is vital to remember governments are not on the same side. The United States and China are opposed to each other, with each trying to assert itself in the AI realm.
Basically, each is trying to dominate.
The challenge here is AI is not coming from governments. It is centered with Big Tech yet rapidly spreading.
Here is where we get the irony of it allun . As mentioned, things go global. However, with AI systems advancing, the ability to run more locally occurs. At some point, we are going to see AI operating on the edge. This means that smartphones as opposed to supercomputers will be running the calculations and providing the services.
That means we are looking at billions of nodes operating in a direct fashion with AI capabilities.
We are looking at tens of billions of agents, many tied to a digital wallet. They will be able to transact without government oversight or interruption. Trillions of dollars worth of economic activity will be operation in the digital space, associated with no country.
Data centers will be operating deep in our oceans. We will also have them in space. There might be a race to see which heavenly body gets one first: Mars or the moon.
Perhaps some DAO pays SpaceX to transport the servers there.
We are looking at humans being removed from the equation in many ways. This means the governance system, which was designed by humans, for humans, is becoming non-relevant. Automation is rapidlly expanding. Governments want to regulate and control DAOs, something that is impossible.
If something is truly autonomous, governments cannot regulate it.
This is going to affect every area of society. There will be many things disrupted before governments but they are on the list.
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Hope governments are that open minded to succumb to the disruption, and I don't mean the elected ones but the deep state. The guys that have been working there their whole lives and it's nearly impossible to fire. Even Milei in Argentina has no plan to let go of those. Most of the positions in government have been either stuck in guarantees or union assurance or other types of assurance.
But is true that there is a change for small government and even a change to more privacy to the individual. But Germany, Canada, México, France, Spain, Korea, Japan and even the UK are all pretty set on left wing "big government" policies.
And most of the people there seem to want a government to protect them and assist them on their every need. So for the people to be optimistic to accept AI and the government themselves to let AI handle things in the government, well it's a nightmare since AI don't vote.
If all, they will use the AI Flag to hire a bunch more of bureaucrats to try to regulate it.
Great article!