The Sovereign Individual: Radical Bible of Tech's 'Cognitive Elite'

This little newsletter, which takes on powerful billionaires, is brought to you by 381 paid subscribers. If you can, please join the fray and become a paid subscriber today – because your support matters.

The Point: In 1997, an influential book predicted the rise of “cybercurrency,” the decline of nation-states, and the ascendance of a “cognitive elite” who would eventually rule the world. To fully understand Silicon Valley’s project to destroy democracy, read The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State. (In 1999, it was rebranded as The Sovereign Individual: Mastering the Transition to the Information Age, but I think the original title is more honest and revealing.)

The Back Story: In a recent Financial Times op-ed, Palantir billionaire Peter Thiel used the word apokalypsis to describe Trump’s reelection. He helpfully explained that the term – the root of “apocalypse” – originally meant “unveiling” in Greek.

This reminded me of something I had read elsewhere, but I couldn’t quite put my finger on it. But then I found it on page 12 of The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson and Lord William Rees-Mogg:

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.

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 of history—the age of the Sovereign Individual—is about to be unveiled.

Balaji Srinivasan, the would-be leader of the Network State cult that seeks to break existing nations into smaller territories, likes to talk about “history running in reverse.” He took the phrase from page 19 of The Sovereign Individual, which has a section headlined “History in Reverse”:

The process by which the nation-state grew over the past five centuries will be put into reverse by the new logic of the Information Age. Local centers of power will reassert themselves as the state devolves into fragmented, overlapping sovereignties … The nation-state will devolve like an unwieldy conglomerate.

Srinivasan also describes two main ways to create network states: Voice, and Exit. The Voice method entails using wealth and technology to take over existing governments. The Exit method involves leaving democratic societies and forming new sovereign countries on private land.

These concepts appear on page 320 of The Sovereign Individual in a section titled “Entry, Exit and Voice,” which describes citizenship as a relationship between a corporation and a consumer. (The chapter’s title: “The Twilight of Democracy.”)

In addition, it's clear that Srinivasan's book, The Network State: How to Start Your Own Country, largely mimics The Sovereign Individual's elliptical, grandiose, and nonlinear style.

The Book of Ecclesiastes informs us “there is nothing new under the sun.” This is especially true in Silicon Valley, where old ideas often get repackaged as innovations. Authoritarianism, fascism, and feudalism are old hat. But today’s tech titans seem to think that pursuing these ideologies qualifies as some new invention. If you scratch the surface, however, they are just rehashing old fallacies and ideas.

That’s why it’s vital to understand The Sovereign Individual. This consciously grim and apocalyptic book is a key scripture of tech authoritarian politics. It had a profound effect on Peter Thiel. In 2014, when asked by Forbes to name the most influential book he’d ever read, Thiel gave this answer:

The Sovereign Individual (Touchstone, 1997), by James Dale Davidson and Lord William Rees-Mogg, is an unusual book that I read at a singular moment, just before starting PayPal. A lot of thinking about technology oscillates between two extremes: It’s either a big historical force acting over the long term or it’s a matter of short-term trends to bet on. The Sovereign Individual is different because it takes foresight seriously: If you think hard, you can understand and make plans for a future lasting 10, 20 years or more–and that’s how you have to think to be successful.

Of course, PayPal began as Confinity, a digital payments startup that merged in 2000 with X.com, an online financial services company co-founded by Elon Musk. After the merger, the company focused entirely on digital payments and rebranded as PayPal. (Full disclosure: I had an X.com account!)

In 2020, Thiel wrote the preface to an updated version of The Sovereign Individual. An excerpt:

In truth, the great conflict over our megapolitical future is only just beginning. On the dimension of technology, the conflict has two poles: AI and crypto. Artificial Intelligence holds out the prospect of finally solving what economists call the “calculation problem”: AI could theoretically make it possible to centrally control an entire economy. It is no coincidence that AI is the favorite technology of the Communist Party of China. Strong cryptography, at the other pole, holds out the prospect of a decentralized and individualized world. If AI is communist, crypto is libertarian. The future may lie somewhere between these two extreme poles. But we know the actions we take today will determine the overall outcome. Reading The Sovereign Individual in 2020 is a way to think carefully about the future that your own actions will help to create. It is an opportunity not to be wasted.

This framing of technology as either enabling totalitarian control or radical libertarianism reveals much about Thiel's worldview. But who were the original authors whose apocalyptic vision so captivated one of Silicon Valley's most influential figures? Behind this influential text stand two men with their own revealing backgrounds and agendas.

William Rees-Mogg was an Oxford-educated journalist who wrote for the Financial Times, edited the Times of London, and served on the board of governors of the BBC. In 1981, Queen Elizabeth II bestowed upon him the honor of Knight Bachelor. (His son, Jacob Rees-Mogg, was a conservative member of Parliament and served as Minister of State for Brexit Opportunities and Government Efficiency under Prime Minister Boris Johnson.)

James Dale Davidson wrote a newsletter called Strategic Investment. He distinguished himself as a key promoter of conspiracy theories about the suicide death of Vince Foster, a Clinton White House official. In 2010, he was one of the initial investors in the far-right propaganda outlet Newsmax, according to his Wikipedia page.

An anti-democratic vision of the future

Analysis: The Sovereign Individual has profoundly shaped the thinking of some powerful tech elites. The overtly prophetic book makes numerous predictions about the future, and several core themes emerge that continue to influence Silicon Valley's approach to politics, economics, and social organization. These key arguments reveal a terrifyingly anti-democratic vision dressed in the language of technological inevitability.

While it is not possible to capture every crucial detail in one post, here are my top 8 takeaways from the book:

1. Nation-States will decline

• Governments will lose their monopoly on violence and taxation as individuals gain more autonomy via technology.
• The ability to hide wealth digitally will allow people to evade high taxes, forcing governments to compete for citizens by offering better services.
• Traditional nation-states will become less relevant and collapse in violence and chaos. Smaller, corporate-governed entities that treat people as consumers rather than citizens will rise to take their place.

Quote from book: “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.”

2. A ‘Cognitive Elite’ will rise

• Wealthy and skilled individuals – the so-called “Cognitive Elite” – will use encryption, digital currencies, and jurisdictional arbitrage to escape democracy, law, and regulation.
• The wealthiest individuals will start by migrating to low-tax regions, depriving democratic governments of tax revenue.
• Personal “sovereignty” will be enhanced through self-reliance, digital mobility, and global entrepreneurship.

Quote from book: “The most obvious benefits will flow to the 'cognitive elite,' who will increasingly operate outside political boundaries.”

3.  Cryptography and Digital Currencies will dominate

• Encryption will allow individuals to hide their wealth and privacy from governments.
• “Cybercurrency” will disrupt traditional financial systems by enabling peer-to-peer transactions without government oversight.

Quote from book: “A more advanced stage will mark the transition to true cybercommerce. Not only will transactions occur over the Net, but they will migrate outside the jurisdiction of nation-states. Payment will be rendered in cybercurrency. Profits will be booked in cyberbanks. Investments will be made in cyberbrokerages. Many transactions will not be subject to taxation. At this stage, cybercommerce will begin to have significant megapolitical consequences of the kind we have already outlined. The powers of governments over traditional areas of the economy will be transformed by the new logic of the Net. Extraterritorial regulatory power will collapse. Jurisdictions will devolve. The structure of firms will change, and so will the nature of work and employment.”

4. The Social Welfare state will collapse.

• As governments lose tax revenue due to digital innovations that evade taxation, social welfare programs will become unsustainable.
• Citizens will be forced to rely on personal responsibility, private enterprise, and decentralized solutions for healthcare, education, and security.
• Governments will operate like businesses and those who can afford their protection will be mere customers rather than citizens.

Quote from book: “With the passage of the Industrial Age, the megapolitical conditions that democracy satisfied are rapidly ceasing to exist. Therefore, it is doubtful that mass democracy and the welfare state will survive long in the new megapolitical conditions of the Information Age.”

5. Economic inequality will skyrocket

• The transition will create a divide between early adopters of the new digital economy and those who do not adapt.
• “Cognitive elites” will thrive, but the majority of people – those dependent on traditional employment or government aid – will struggle.
• However, the authors claim this transition will increase personal freedom (for the elites, anyhow) and reduce government power (which they see as a good thing).

Quote from book: “In short, human nature, the origin of species, and their development by natural selection are elements to be considered in understanding the continuing evolution of human society. In the present case we are considering the likely human response to new circumstances occasioned by information technology. Particularly, we are focusing on the reaction to the advent of the cybereconomy and its many consequences, including the emergence of economic inequality more pronounced than anything seen in the past.”

6. The transition will be disruptive and violent

• Governments will resist losing control, leading to authoritarian measures and political upheaval.
• Cybercrime, digital warfare, and new forms of economic conflict will arise as old power structures weaken.
• Violence and organized crime will rise. Elites will rely on private security forces for protection.

Quote from book: “Violence will become more random and localized. Organized crime will grow in scope.”

Note: This is interesting because the Tech Elites spend a lot of time whining about crime, which is mostly at historical lows, especially in places like San Francisco. Yet their prophetic text predicted a large rise in crime and violence…

7. Work and wealth creation will change dramatically

• Traditional jobs will disappear, replaced by decentralized, digital, and gig-based work models.
• Innovation and entrepreneurship will be the main drivers of wealth, and those who master digital tools will gain a competitive edge.
• Education and career planning will shift towards self-directed learning and specialized skill acquisition.

Quote from book: “To an increasing degree, individuals capable of creating significant economic value will be able to retain most of the value they create for themselves. Support staff that previously absorbed a large part of the revenue generated by the principal income creators in an enterprise will be replaced by low-cost automated agents and information systems … ‘Good jobs’ will be a thing of the past.”

8. Democracy will die

• Democracy as we know it will not survive in its current form.
• Small and “efficient” and specialized corporate governance models may replace large, bureaucratic nation-states.
• Political loyalty will be less about nationality and more about choosing jurisdictions that align with economic status and personal values.

Quote from book: “Now that information technology is displacing mass production, it is logical to expect the twilight of mass democracy. The crucial megapolitical imperative that made mass democracy triumph during the Industrial Age has disappeared. It is therefore only a matter of time until mass democracy goes the way of its fraternal twin, Communism.”

Toward Tech Dystopia

You will probably need a nice walk outside after reading all of that. And there's plenty I left out, like the book's strange obsession with genetics (surprise, surprise).

Conclusion: The authors clearly understood the degree to which technology would disrupt society in the 21st century, but most readers of science fiction already knew this. And, like many a science fiction writer, Davidson and Rees-Mogg imagined the future as dystopia – at least for the majority of people on the planet.

They also had pretty big misses. For example, they presumed that global cooling, rather than global warming, would be a bigger environmental worry. In addition, they failed to anticipate China's growing strength. Thiel acknowledges the oversight but suggests that the authors may deserve partial credit: “[I]t can seem like China’s Politburo must have been keen readers of The Sovereign Individual.”

It's hard to imagine higher praise.

I write about some pretty dark stuff in this newsletter, and some of it might seem a bit conspiratorial to new readers. That's why it's important to understand that my work is largely a survey of what these powerful tech billionaires have been reading, thinking and saying for many years. They have been very loud and proud about this stuff, but very few people have taken them seriously. Given our current predicament, I believe we must remedy this oversight with great urgency.

If we can understand what they believe, we can understand where they want to take us. We must expose the structure of their ideology and increase public awareness of the horrifying vision they seek to thrust upon the people of the world.

People often ask what can be done. As a writer, my role is to learn and inform. But my journalism draws from my political experience, where I built a reputation for incisive analysis and ruthless strategy. The story here is ancient and simple: A handful of wealthy elites aims to rule the world for their own benefit while condemning most of humanity to misery. History teaches us that such tyranny rarely ends well for the tyrants.

But fighting tech fascism requires an organized movement of many people who initially work to inform and activate others. If you’re interested in doing your part, read The Sovereign Individual and help expose the ideas of this radical tech Bible, which may play an increasingly central role in our lives.

Musical Interlude

One of my coping mechanisms is to listen to lots of music. Lately, my playlist has been heavy on David Bowie. I am not the first person to note that the world has really gone downhill since Bowie's death in January 2016. Anyhow, here's a lighthearted tune from 1997, when our dial-up modems were screeching, the future seemed bright, and none of us had heard of a strange new book called The Sovereign Individual.

'Peter Thiel talks about a currency that cannot be stopped (1999)'

Now that you know about the book, listen to this: