Episode 29: Why Regimes Collapse with Timur Kuran - The Network State Podcast

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Today, I am happy to welcome Timur Kuran to the Network State Podcast and Professor Kuran is author of Private Truths, Public Lies, and I've cited him many times over the years for people who want to understand the 2016 election, people who want to understand distributed consensus, Sudan's consensus to understand the fall of the Soviet Union, to been a fan for a long time. And you know, that's how I came across Professor Kuran's account. And then I was tickled to see he followed me on X and I wonder how you came across my accounts. I don't think I've asked you this. I came across your account because people I follow and forwarded your very interesting tweets and I can't remember exactly what they were, but this

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was when I it's must have been around 2017 or 18, as soon after I joined Twitter and that's how we discovered you. Excellent. Well, so you know, I, I want you to give a quick, we can talk about the kinds of things, you know, topics you're interested in. I'm always interested in like how people are interested in each other's intellectual currents because I, I do talk a lot about tech, but I talk a lot about politics and, you know, the future and history and, and pieces like that. So there may be strands that appeal to you or what have you. I wanted to go through your work though, because I think private truths, public lies is something which has just started to break down in the US, not just started

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like last six months or so. We've seen an enormous preference cascade and maybe you can describe summarize the book and talk about what motivated it and then how how you apply it in other places. Certainly. Well, let me start with the definition of preference falsification. It's the misrepresentation of 1's wants under perceived social pressures. It involves of course, self censorship, hiding one's actual preference from the from the public. But also, and this very important, the SECond component is extremely important. It involves pretending to like someone, something that one

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actually dislikes. And 11 engages in preference falsification to avoid social sanctions, to avoid ostracism, to avoid being called names, to avoid being associated with disreputable groups, to win favours. Now there are many negative consequences that preference falsification has. One of it is one is that it distorts collective decisions. Let's imagine a department, an academic department, that is trying to decide whether to

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continue using standardized tests in admitting PhD students. Now thousands of departments across the United States that faced exactly this question, thissue, because there were people who argued that standardized tests discriminate against marginalized communities. So they brought the matter to a department meetings. Now imagine a department where the majority, even a very clear majority, a large majority, believes that there's a great deal of valuable information and standardized tests.

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Even if you don't use standardized tests exclusively, do you look at other things as well? There's a great deal of valuable information in them. But these same people are afraid of being labeled as racist, as misogynist, sensitive, etcetera. And the people who are pushing hard for eliminating standardized tests are quite powerful. They may falsify their they may falsify their preferences and just to avoid the wrath of the promoters of eliminating standardized tests.

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And as a result, the department might eliminate eliminate standardized tests, even though a clear majority believes is a bad decision. Now, preference falsification is accompanied by what I call knowledge falsification, which is that you in the process of trying to project to the public a preference that you don't actually, that you don't actually have. You conceal what you know, and you pretend that claims made by others that you believe to be false are actually true. So in the process you distort

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knowledge. If you are pretending that if if you believe that standardized tests are valuable, but you're pretending that they're not, you cannot publicly talk about all the virtues of standardized testing. You have to say things to be convincing you to the people who want to eliminate standardized tests or want to want to want to retain, want to prevent their reinstatement. You have to pretend that you accept all the arguments made by the opponents of standardized tests.

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So one thing that I remember, you know, from your book that I thought was interesting was, you know, in my in my head, I was comparing it to a method actor. Because sometimes these people who are forced to mouth all of these falsehoods from long enough time find themselves quasi believing the falsehood or rationalizing it to themselves. And the external lie sort of shapes the internal narrative, at least partially. It does. I mean, there are some people who actually come to believe their lies preference falsification in a wide array of contexts. It's becoming habitual. It's like the Vaclav Havel thing about workers of the world. Unite, right? Yes, and they start they, they, they get used to the notion that

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whatever slogans they're supposed to parrot, they they will just parrot them. They know it's futile to question them, to inquire into their veracity, whether they mean anything. So they simply accept the world view that is presented to them, and they start start believing them. That's a very shallow belief, though. It can because it doesn't have much depth, because it doesn't involve actual evidence, because it doesn't involve a study of the mechanisms that might be driving certain, certain outcomes. It's quite, quite shallow. So it's it's actually, it can

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be, it can be changed quite rAPIdly. But you're absolutely right that, that some people will come to believe the slogans that they are they are parroting. At the same time, there are people that will there are people in society. This was certainly the case in Eastern Europe before the fall of the Berlin Wall. There were people who did not believe the lies that they were being told. They did not believe that central planning was was provided a better economic system than a market based economy and but they had to conceal their knowledge or many of them concealed their their

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knowledge. The reasons they believed that market system would be more efficient and they had to, they had to in order to advance at at work, in order to be retain acceptance in their communities, they have to pretend to accept the party's ideology. So that process distorts public knowledge, and it affects what affects the ability of others to see the world correctly. Couple of things on that. I think a lot of people, not certainly not you, but many people don't understand just how crazy, crazily taboo capitalism

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was in communist countries. Like in Maoist China, you know, people were executed for, you know, having some grain held back rather than throwing it all into the common pool. The Xiao Gang thing, which may be apocryphal about the villagers who asked do I own the teeth in your head? And they said, no, the teeth in your head belonged to the collective. And they signed a contract amongst themselves and hid it in the roof the of a Hut. Because, you know, the split of property and private property rights were so taboo that these were capitalist running dogs and reactionary. So like capitalism was punishable by death, right? And part of what justified that is that so much blood had been spilled, you know, against the

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evil capitalists. What, you want to let them back in these selfish, crazy capitalists? Are you a traitor? So it got mixed up with nationalism and you had this crazy level of taboo again, something that we don't think of as being taboo. And then another piece of it is in the in like the Soviet Union especially. And, you know, I'm less familiar with exactly how to play on in China, but there are only two kinds of people who are capitalists, which were a, these sort of intellectuals who could see beyond their own society and whisper about it in psalms dot literature and so on and so forth. And then B, the black marketeer would cut you for a tomato. And who live down to all of the regime's stereotypes about capitalism, right?

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And because they were selfish, they were greedy, they were fraudulent. They, they were, they just cared about money. They didn't care about the people and so, so forth. So it's a little bit like the, you know, if guns are outlawed, only outlaws have guns kind of thing, where if truths are outlawed, only outlaws have truths. And that's a SECondary effect of the, you know, public lies, private truths kind of thing, right? Because it pushes the truth to the margins. And the people who voice them tend to be either intellectual or disreputable. I'd love to know your thoughts on that. Yeah, No, no, this, this, this absolutely true, but also makes it, let's pursue your, your example. Under central planning, even even the heads of enterprises that were, that were given quotas to fulfill, quote

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production quotas to fulfill their quotas, they had to use black markets. So they all knew that these markets work. They all had personal knowledge that these free markets worked. They pretended the many, many communist leaders pretended that they were implementing central planning when they knew very well that the only way to approximate their their goals involved using. Shadow prices. Quasi capitalism.

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Exactly that shadow process is so and that all this was going on, but they maintained a facade of commitment to simplifying students were were taught in in schools and in universities. They were they were taught that central planning works and it's it's so much more ethical. It's so more efficient than than capitalism, yes. It's similar to in the US system using your university diplomas a proxy, socially acceptable proxy for like IQ or SAT scores or something like that, sort of like a proxy score, like a shadow price, right? And the because, you know, the College Board and SAT tests are colleges can administer them, but private employers couldn't

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for a long time. But one one thought I have is so I you know, you're mathematical enough person to you know the difference between a vector and a scalar, I assume. OK, so one thought that I've had, which kind of builds off of your point just now about these individual administrators. They knew that the system was broken. One thing I observed, especially during the Biden administration was, you know, obviously people were lying about Biden being senile, but they were also faking employment statistics and they were faking inflation stats. And they're faking these different things in ways that they themselves.

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Like for example, Larry Summers put out a post said something like if you included shelter and like the, the rise in cost of loans and other kinds of things, actual inflation rates like in double digits or something along those lines, right. So he was, he was somebody who was expert enough to understand how this particular agency was faking their particular thing. And then David Sacks and I looked at some like employment datand we're like, why is it beating expectations so many months in a row? This like kind of weird. And it keeps getting revised downward afterwards. And now there's like some revelation that, oh, actually it was fake after all. And of course. But so the point is, though, that each of these kind of administrators was putting a thumb on the scales or faking things or whatever you want to call it in a way that it would

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be hard to figure out how they were doing it unless you had some domain expertise there. But then they were also seeing everybody else's fake numbers as if they were real, right? So you have like 50 piece of fake information out there and from 49 of them you have no internal information how it's being faked. For the 50th one, that administrator is faking it. So they think maybe the system is OK and then like it's only their piece, which is a little, you know, questionable or something like that. So they can't build an overall system map of how it's broken. Let me know your thoughts on that. Actually, there were many people who did sense that the entire system was increasingly built on lies. And that is one of the reasons why Trump, who is a very flawed

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man in many respects, received, has received so much support in several 3 elections in a row, winning, winning two of them. Because many people outside of the Washington bubble, outside of the centers of major influence of major power in the United States, they have sensed that it's not just one number that is fake, that there are many, many numbers that are fake. And they can imagine, they can imagine that if the if the press is has been systematically hiding the explanation for

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Kovid, if it, if it, if it refused to for a long time allow genuine debate on Kovic. It must be happening in a lot of other areas, so. I want to I want to show you something that may get your reaction to this. So you know, this a post I wrote. It's about two years ago, too fake to tell, you know, like too big to fail, right. So because you know, Sachs and I, you know, Saxon made this off and tweet hard jobs for today. I don't know where they're finding all these jobs. All I see are layoffs. And it got four and a half million views. So clearly like this just struck a nerve because nobody they wouldn't have gotten so mad if it didn't hadn't actually been like fake in some way, right?

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And so, you know, and, and trust in medias you, you know, as we were just talking about half of Americans now I believe news organizations literally mislead them. But it's one thing to kind of have an overall suspicion and then it's like another thing to have a specific suspicion. And one of the things that I was just doing, so I was thinking about a bunch of issues where it's clear the information was false. And there's a, there's a whole spectrum between like, you know, maliciously faked and, you know, true. And some of them include like Bernanke talking about the great moderation, how it means to retain macroeconomic volatility before the finance crisis. That was just like, you know, incorrect, right? Because obviously, you know, volatility was coming back with

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a vengeance. Cheney saying deficits don't matter. Bush and Clinton blew up the mortgage bubble. Bernanke saying we might see a mild recession. The ratings agency in 2008 called subprime mortgage AAA before the collapse global economy S&P got retaliated against for down grading things. So this a really interesting one where the guys who put out true information where they're down grading U.S. debt, they got retaliated against right then Bernanke said QE is a money printing. Powell saying it was Greenspan saying the US can never default because it could just print money erroneous projections of unemployment rates. So this like this scrap that I don't remember from almost 10 years ago that showed. By the way, I didn't know that unemployment rates and growth rates were systematically being

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tampered with, but the But that information reminded me of a thesis that was written under my supervision a number of years ago by a Chinese student who studied Chinese growth numbers and official growth numbers that are issued quarterly. And what she found was a systematic pattern whereby the numbers were inflated when they were announced and before the next quarterly announcement. The previous quarters numbers

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were systematically reduced. Yeah, exactly. Making the new number new exaggerated number look even better. Yeah, exactly so. Path that this was so the grass systematic process, yeah. So This Us had a few jobs, fewer jobs past your initially reported 2024 admission and now 2025 just a few months ago now that the new admin is there. And of course the, you know, other people would say that these guys are, you know, but the Biden administration claimed to have added 400K jobs from July through September in order to win re election. New data suggests none of those jobs ever existed. The overestimate number of jobs. And so point is that there's

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basically a very severe dispute over, of course, Trump in his own way has a reality TV of many things in particular like, you know. a lot of the stuff around trade and tariffs and so on and so forth is, is incorrect. But anyway, my point, here's my, my thinking on this. And I'd love your thoughts because this gets, I think, a deep overlap of, of where we think about things. So if you go through all these things, all these different economic stats, that's 20 years of economic fakery. But it's not all just lies. Some of it is error. Some of it is very material revision. Some of it is spin, like quantitative easing isn't printing debt ceiling doesn't matter, It was tribalism. Some of it's like pseudoscience. The a mortgage-backed SECurities arguably outright flawed, and then transitory inflation in

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2021 was all of the above. It was error, it was revision, it was spin, it was tribalism, it was pseudoscience. And eventually it was outright fraud because everybody who bought treasuries in 2021 bought them on the false pretense that rates were going to be low forever. And they weren't, They were hiked radically in the next few months, right? So the, the reason I say this when you have the centralized authority that you, you have some local information and you can compare it to what the centralized authorities putting out and you can see that based on your local information, it doesn't match up with what they're saying, right? You know you're mugged by reality, but what are you going to believe them or your lying eyes, right? You've got local sensor data, right? You can DIF it and you can say

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that centralized authority is false. And I know what is true in this local area, right? But you it's hard to form a system perspective because can they actually truly be lying about everything? Well, are they lying about whether it rained in Panama like The Weather Channel or something like that? Can you really go and check that for yourself? Can they be lying about everything? Now you need to have some decision rule to figure out what is true and what is false. And that's really expensive because it's essentially reinventing the centralized institution again. And that leads to the, you know, the concept of Gentleman Amnesia by Michael Kreiden. No. OK, so he has this concept which is which you'll like. He basically says, you know, there's this great physicist

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that he, Murray gentleman, famous noble, noble laureate and basically Michael Kreiden said, if when you go and you read the paper on any subject, you know, they reverse cause and effect, they get everything wrong. You know, they're just like, they just just get it wrong. And because you have local knowledge and then you flip the page and you read about Japan or you read about steel and you forget that they just completely messed up the area that, you know, you read those other stories and you have amnesia. And, and his friend called it Gelman amnesia, where any time they wrote a story about physics, Marty Gelman woulDeFind out all the errors and so on about it. Then he'd flip the page to read about Japan or Koreas if it was true, right. And the way I think about this is if you imagine, let's say the

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New York Times or legacy media as like or the US government is like a centralized institution, a hub in the center, right? Then you're a spoke over here and you, you have, let's say, local knowledge on, on Duke, on academia, right? And I might have local knowledge on biotech and somebody else's local knowledge on Japan or something like that. But how is the Japanese person supposed to know about what's happening at Duke better than NYT? He would just go to NYT to figure out that information because he couldn't talk to you directly until social media. And now we can route around, right? Go ahead. Well, social media then changes things because you get influencers and you you have influencers that you trust and you trust them because people

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you you you trust are following them are are re retweeting them. And when you yourself follow them, you find out that generally what they say turns out to be turns out to be true or. Or at least at least it comports with one's worldview even, right? And then, then the tricky part though is of course, social media itself is not a panacea because you have, you have lots of people who are posting fake stuff on social media just for clout or what have you, right? And so eventually what I came to the conclusion is that, you know, the thing about Bitcoin, the thing about cryptocurrency and one of the reasons, like I was interested in your work beforehand, but then I matched it up with my interest in cryptocurrency is have you heard

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that there's a, there's a great book on Bitcoin? Just the title alone, it's actually pretty good. It's called the truth Machine. OK. and the reason is that. I read it no. OK, right. So you heard of it. So The thing is, whether you're Democrat or Republican, Indian or Pakistani, Chinese, Japanese, you know, British or French, everybody agrees on who holds what amount of Bitcoin, which is this incredible thing to have consensus on. Not a trivial truth, a trillion dollar truth, a $2 trillion truth, right? People will fight, you know, over $1,000,000, a billion dollars, a little on trillions of dollars. And the same algorithms that allowed us to get consensus because they made it very expensive, extremely expensive and challenging to fake the state of the Bitcoin blockchain. The same algorithms can get you

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consensus not just over who owns what Bitcoin, but who holds what amount of stocks, what amount of bonds, what amount of any kind of property. And that actually then extends and this something you may not be aware of. It extends off chain because have you ever used a smart lock? You know, smart lock like for a door. Yes, I have, yeah. Like like a lock that you can open with your phone, for example, right or anything but a key card at a hotel, yes. So the same technology that's used to SECure electronic, you know, like like digital stuff on chain can be used to digitally unlock and lock doors, right. So that means that all capital equipment, all property, every, every door to a room, every door to a train, a car, a tank, a plane, every everything that makes a drone fly or a robot animate everything that every

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machine in a factory, every camera, all of that can actually also be gated by cryptography the same crypto as as as Bitcoin. It doesn't, to be clear, it doesn't cover the shirt on your back, doesn't cover the food on your plate. OK, there's still, you know, personal property that it wouldn't cover. What that means is we can get to consensus on who owns what piece of property for all capital equipment and all capital. And we can actually extend it further because these are like armored cars for information. So when people are trading on, for example, temperature data, right, there's oracles that sort of take the temperature data to the blockchain and then you have smart contracts on that basis, like you can do insurance contracts on that basis. So this to me struck me as something where it has implications for how we like fix

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a society that's been affected by public lives for a long time. We develop shadow statistics on inflation, on temperature, on this, on that. We make them tradable one at a time on chain. We have contracts on the basis we allow them to be posted synonymously. There's very script graphic techniques that allow you to do that. And then we eventually start getting a picture of what is actually true and false in society by kind of editing around the edges, right. And we started with really the monetary system, which should be the most valuable piece. And then we can extend that to other kinds of facts. So I know that's maybe a little technical, but that is how I, I've been thinking about, you know, you, you pose a problem, which is a recurrence of this public lies kind of thing that cause the dysfunction, the

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centralized organs society. And here's a potential solution, which is decentralized cryptographic truth. Let me pause there. Talking about a method for extracting information, extracting true information in a context where people have incentives to lie, to falsify, right. So I'm I'm not really familiar with the with the methods that you have suggested, but perhaps I I can talk about other methods. Like Bayesian truth ceramic. Similar methods that are used to predict to measure private opinion in an environment where private opinion the distribution of private preferences differs

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from public opinion, which is the distribution of public preferences. So talk about that, I'm very interested. Go ahead. If there's a lot of preference of falsification, you know these two are going to going to differ dramatically. Now, one way of the that scholars have abused is the ethnographic studies. Jim Scott, who died recently, the Yale political scientist he was, he was an expert at this. He wrote a book called Weapons of the Week, which and to collect his data. He just lived among rural Malays

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to develop their trust, to have them reveal their their SECrets. And he discovered that all sorts of things that they told the state, that they told the tax collectors and so on were not, were not true. And so that's that's one way. And that and many of their, their, the preferences that they projected publicly to and to authorities, the people outside of their immediate circle were not were not. So that's one thing you can do and also conduct surveys that offer anonymity in very repressive climates. These of course, let me go back to ethnographic studies, of course, that's it.

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It's very expensive to do. It's very time incentive in time intensive surveys that offer anonymity in repressive environments. It's difficult to be convincing. Yes, so, so so I mean, the thing about it is. Go ahead. Yeah, repressive regimes know that there's a great deal of preference falsification and knowledge falsification because of their repression and they but they have an interest in knowing where the truth, sentiment, opposition are, what the what the truth is. So they all all offer anonymity to censor certain groups to. So, so basically I don't know this.

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So they actually do their own private polling. Yes they do their their own private polling. This was this was done in all communist in Eastern Europe. The Soviets did this in I. Did not do that. They they did this in. How do they, how do they conduct that? Was it like how many thought criminals are there in your district? Do you estimate, comrade? Do they do it like an indirectness thing so that the person who said I think there's lots of saboteurs here could be off the hook or they literally ask it directly with an anonymous service? They they did everything. The one I'm quite familiar with is the anonymous polling they conducted in Leipzig for over 40 years now. How they convinced in the 1950s,

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how they convinced a group of students, college students at at Leipzig to believe that the that the check marks they were going to they they put on pieces of paper that did not include their their names. How that these would not be used somehow to punish them if they were giving the wrong answers, I don't know. But once the system got got established and students it at Leipzig learned that there were no reprisals, they this information became valuable and the information not that there was no preference falsification

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at all in these surveys, but over time changes were were meaningful. So that's interesting. So, so, so when the time Series Approach where they can at least detect trends up and down, you know, if they weren't sure about the absolute level. Yes, they, they could, they could detect these trends and they, they leading up to 1985 to 89, you see a dramatic increase in, in opposition to the Communist Party in, in the belief that communism was not an efficient system, that dramatic reforms were needed.

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So the, the communist leaders were aware that there was growing discontent in the, in the population. So that's one thing you can do. Of course, it's very difficult to establish as a system and develop the trust of a certain community. Google searches are it can be revealing. People often will if there's there might be no public enthusiasm for a particular candidate. But Google searches can can reveal that there's actually a lot of enthusiasm, hidden

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enthusiasm for a candidate. There's social circle of appalling this. This involves asking people not about their own preferences, but the preferences of people in their of their the preferences of their acquaintances or in their in their communities. Yes. That's so that's, so I'm feeling with Bayesian truth serum, which is 1 variant on this and this also kind of relevant to prediction markets. But basically I think this a patented technique or something like that. But there's, there's like maybe some unpatented version of it's coming on patent. But the idea was very similar to what you just said, which is you ask people, let's say, for example, let's say drug use like marijuana or something.

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You ask people straight up, do they use marijuana? And then you also give them an incentive of guessing what percentage of people actually use marijuana in the population. And the closer they are, the more money they get. And it's like drops off symmetrically or whatever on either side. So if it's like. You reward them partly for how well they can predict the actual distribution. Yes, that's exactly that's right. So, and under certain assumptions, of course, your people have to be smart enough to know that they can go by predicting the distribution. They're off the hook themselves, right? Because they're just, you know, trying to predict all those other people are misbehaving, right? So this similar to prediction markets where you are, you know,

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trying to estimate whether something is going to happen or not. And sometimes a prediction market is really like a verification market where you're trying to see whether sentiment will, you know, hit a particular range, you know, and you know, I, I think a lot of your concepts are good things for people in crypto think about. Actually, there's another piece because your other set of books on Islamic finance, I often think about that with respect to Bitcoin maximalism. Do you know what Bitcoin maximalism is? No. Basically, you know, Islamic finance wants no debt, right? And you know, actually, you know, Christianity also, no.

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Interest based steps. Sorry, sorry, no interest based debt, Correct. You're right. I remember precise Christianity also had prohibitions on usury, on high debt rates. And you know, the Soviet Union had prohibitions on a different economic thing, which is profit and what Bitcoin maximalism is. It basically says Bitcoin is the only coin, there should be no other coins. It essentially has a prohibition, let's call it equity issuance, right? The any, any, any new coin which is created is sort of taboo in the same way that interest was under Christianity or Islam and profit was under communism and issuance of new assets is under Bitcoin maximalism. And there's a similar sense in

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which it has a somewhat distorting effect on the economy, which is to say that Bitcoin maximalism is so anti finance that it's very hard to do decentralized finance on the Bitcoin blockchain. So it's moved to other chains like Ethereum and Solana. Now one of the pros of this that they basically think everything outside of Bitcoin is a scam. And so they're OK with everything that is not Bitcoin being pushed off of the Bitcoin chain. They want a very simple economy. They want gold and only that. They don't want to need tricks. They want it to be simple. And this actually, I would argue in part also related to our previous point, which is it's a reaction against, let's say, an administration with all the lies of the Soviet Union or made the Biden administration or

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all the past kind of things. There's a tribal reaction to that, which is just mass distrust in the centralized power and just wants total simplicity, total verifiability, what I can touch and feel with my hands. But that also means less civilizational complexity, maybe a dark ages or less economic scale because there's no trust anymore. Everybody goes back to what they can touch and feel with their hands, sort of a tribal kind of order, right? So there. So almost like phase one is publicized private truths and Phase 2 is this extremely simple financial system like Bitcoin maximalism or post Soviet economics, where there's such low trust that scale is inhibited. Let me know your thoughts. Scale is inhibited and the going back to the thislamic case, the reason the Middle East

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fell behind economically is that it could not scale up. It had economic institutions that were quite well suited to the Middle Ages when the scale of production, the scale of commerce was was quite small. Huge problem was when the West developed the institutions for mass production and mass communications, mass transportation, etcetera, and it developed the technologies that would make mass production and so on and so on profitable. The Middle East found itself at that point, and the Middle East wasn't the only region in the

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world. There were other other places that as well that had been more advanced economically than than Europe that found themselves unable to compete through small scale operations, small scale enterprises with the huge enterprises backed by a huge amount of capital. That the that the Europeans were presenting. So, you know, The thing is, you know more of this history, you know more of this issue than I do. But the Abbasids and the Omians did manage fairly large scale, right? The state, the state did right? And certainly the modern. You didn't have private

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enterprises, large private enterprises. I see. That's interesting. So the, that, so, you know, it's, it's some of the comparative stuff, you know, I've, I've been, I need to learn more about, you know, the basically Middle Eastern economics and so on and so forth. Have you, have you seen, have you read Fukuyama's Origins of Political Order? Yes, I know. I know. Several of Fukuyama's books, yeah. OK, so there's one thing in that stuck with me and I'm going to just paraphrase and, you know, like like summarize a very big and complicated thing. And something that stuck to me was kind of the concept of, and maybe we can relate this to the Europe and Middle Eastern thing. In China, you have the state above the law.

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And india, for many, you know, many centuries, you had the law above the state. And what that meant was in China, they took the pragmatic attitude that was kind of actually in a sense pragmatic or, or unlimited a government, whatever you want to call it that like your chair could just turn into a CCP agent or an agent of the emperor if if the state so desired. Because what could really hold back the state law is just a piece of paper, but the state has, you know, the guns, it has the troops, it has the people. And so really it just has root access to everything. And so state above law is a strong state, weak law. india, it was the opposite where the kings were actually relatively weak because Dharma, they believed in Dharmand karma. And so somebody could quote the

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Vedas or the scriptures against them and they would be like, OK, I don't want to, you know, not be reincarnated. I'm going to step lightly. And Dharmic law, you know, was, was actually pretty strong, right? But the state was relatively weak. And I think about that also in the modern context in some ways in terms of China versus crypto, where the modern China is strong state weak law, where XI can just order lockdowns or seize funds, take Jack Moss companies and so on so forth. But the Internet is sort of law above state. We have Bitcoin, you have cryptocurrency and that can constrain states. And if they want to seize your funds, they can't, right? You now move from people's belief in reincarnation, which is a human belief, something

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that's harder than that, which is like their inability to, you know, solve certain kinds of math problems to take the money on chain. and then the kind of European and Middle Eastern world are yet different kinds of structures, right? Where Europe you can argue the law equal the state for a long time, you know, rather than the state above law or law equal state that you know that they were arguably they were considered connected and in the Middle East. Maybe you can give some remarks on that. I think like my very rough impression is see, there's been various stages absent that you may have. It's also before the modern era, you didn't have as much fundamentalist Islam and that like the whole say Kitab Wahhabi as thing is actually a late 20th century phenomenon because Mubarak and others right were very SECular and they laughed at the idea that everybody was going to be veiled that they laughed at the idea of the tar

43:22
hub is going to be a big thing. But then yet again, you have now today Riyadh and, and the UAE are actually very modern, despite having people in traditional dress and so on. So I don't pretend to fully understand the full Middle East. I'm actually pretty bullish on it in recent years because there's been a lot of pro tech pro, you know, pro capitalist sentiment there. There's Kareem and other kinds of things. Maybe you can help give me a lens because, you know, I spend more time there. I spend more time in Dubai and I'm, you know, I'm, I'm bullish on the region, but I, but I, I don't know everything about it. So, you know, maybe you've got some thoughts. So I happen to be also optimistic with regard to the long run. The last book I wrote on the on the subjects called Freedoms Delayed, not Freedoms Denied.

44:10
I believe that the institutions necessary for the Middle East to achieve the right balance between the power of the state and power of our society, that potential is there. I don't think there's any quick fix. I don't think that in a region where you don't have a single democracy at the moment for where religious freedoms are quite, quite weak, I don't think that we're going to see a Jeffersonian democracy anytime soon. I think that the region is quite troubled at the moment. But I do agree with you that the region is not completely a basket case. It's not hopeless.

45:01
It's not condemned forever to very repressive, very repressive regimes and it will not it would not remain forever economically underdeveloped. Let me point out it just taking off from some of the points you made the during the Umayyad and Abbasid times, roughly the 8th century to the 13th century, the Middle East had strong states in the sense that salt they had strong say states in a, in a, in a, in this, in this sense

45:46
that they could deny property rights. OK, they could, if the Sultan, if the Sultan wants to expropriate something, was powerful enough to do that. They were able to. Their ability to tax was far greater than than the taxation capacity of European countries. In that sense they were, they were strong. They were shallow states in the sense that they did not provide many social services. Social services were were provided by through private non government organizations that we can get get into that if you if you want.

46:31
What is the big problem in the Middle East in with regard to modernization was apart from the fact that it couldn't scale up in commerce and production is that it's civil society didn't develop you didn't get a value didn't get pressures from below that constrained the state. This what Europe? No Magna Carta esque development. No Magna Carta esque developments over a long period. And it wasn't just the, the Magna Carta, it was overtime you had merchants got organized,

47:16
gills got organized, various religions got, got organized. And they started putting pressure on the, the state. They, they, they obtained seats at, at society's bargaining table. And that's the rise of the rise of parliaments and the, and the, the seats given to merchants and so on. That is, that is a process that takes 1000 years. And we don't see a counterpart of that in the Middle East until the 19th century. Yeah. So it's interesting because

48:01
basically the, you know, you're of Turkish descent, right? And so like that, you know, that whole area, that's where the Byzantine concept of Byzantine politics and so on comes from, right? But that always struck me as something where you did have lots of groups maneuvering against each other, but you would not call that civil society. You would consider that something different. Or am I, you know? Mistaken you had you had conflicts among elites. But as distinct from civil society. Distinct from civil society, there there was constant angling among the elites, people in the sultan's circle for better

48:48
position people, you know, there was a lot of backstabbing going on. There was, there was constant renegotiation among among elites, but you didn't have you didn't have groups from below gain again a place at the bargaining table. They were never part of the negotiations. I see. That's interesting. Even the reforms of that started in Egypt and Turkey in the in the 19th century that came from above. It's, it's interesting because I, I have to, I have to kind of sit and think about that for a bit because, you know, there's like 1 school of thought that

49:33
says, you know, change comes from the masses, another school of thought that says it's actually always just elite versus counter elite. There's a third school of thought that says if you become a leader of the masses, then you are almost by definition a counter elite. And you know, so on and so forth. Right. And so I'm not disagreeing with you. I'm just, I'm just, you know, I have to, I have to think about that for a little bit. The I think the other thing is in your definition of civil society there that there's sort of a positive reason for, let's say, merchants to group together that didn't necessarily have a necessarily political reason like farmers or what have you. They could, they could be building together, you know, they could be trading together and so and so forth, and they'd

50:18
get to know each other socially. Building their capital and labor. Yeah, exactly. So, so, so they had, they had some organic reason to be together that wasn't just fighting the government or whatever, right. And so because of that, there was like, you know, they, they actually, we're not simply always part of the power struggle there. They were also part of, they were like a organic structure that emerged just by its own. Maybe that's maybe that's a useful distinction. You know, one thing actually, maybe you can say something. I know there's a digression as well. But modern Turkey, I don't fully understand it because on the one hand, it has these crazy rates of inflation in their hand. Like, you know, whenever I fly through Ankara or something like that seems pretty nice.

51:03
And you know, like when I'm going around Turkey, it's like, at least the Istanbul area seems pretty nice and they've got the bear actor drones and so on and so forth. And so I can't really, I'm just rationally ignorant about Turkey because I don't understand it. But maybe you have some thoughts on it? This this connects with a point I made earlier that there is a huge potential in the Middle East. Turkey is right now, Turkey right now has an authoritarian system, but as a very dynamic economy and it has large groups of people who are quite alienated from the system. And when I say the system, it's

51:54
not just the political system and the party in power, Adwan's party, but also the dominant religion, which islam. Islam has not had a liberal schism. All of the schisms that have taken place in Islam over the past 200 years have been have been radical schisms. Groups. ISIS's is an example of Qaeda is another example. The Muslim Brotherhood is another example. They are groups that oppose the oppose the mainstream variant of Islam in a particular geographic area for being too

52:46
relaxed and they they want to they they promote a more puritanical, stricter form of Islam, of course. Can I argue, can I argue with you a little bit without, without risk, Yes. So there, you know, you can, one thought is that the, there's, there's Sunni Islam, Shiite Islam, and then socialist Islam, right? In the sense of wokeness. The woke version of Islam is in a sense of liberalizing. You could in some sense radicalize, in some sense liberalizing.

53:31
But it's to the left on some dimensions of Sunni Islam #1 arguably it's with them on other kinds of things. So it's almost like a third school, right? That hasn't been kind of thought of. Except that it's not organized. You don't have. You don't. Have Protestantism. But Protestantism has, you know, is organized. There are hundreds of Protestant churches. They all have, have their, they all own, they all own property, they have legal standing and so on. You don't have a recognized liberal Islam or OK when I'll say woke Islam, Yes. Yeah, so, so let me give a

54:16
fourth. So let's say Sunni Islam, Shiite Islam, socialist Islam, or woke Islam. And then the 4th, which is SECular Islam, which I know sounds oxymoronic, but I, when I'm in the Middle East, I see a lot of people there, especially in Dubai and, and increasingly Riyadh, who are, maybe they're in, you know, traditional attire, but they're very sophisticated tech, finance capitalist people, men and women. And they have great conferences And they are like, I don't get any sense of like they're, they're exactly like the, you know, Arab and Muslim people that I've worked with in tech outside the Middle East, right. And so like, that's, that's very different than I think Saudi was pre MBS. And you know, I don't know, I don't have enough track record

55:02
or net record. I, I don't have enough game film on what Dubai was like 20 years ago. But it basically feels like like San Francisco, honestly, in terms of or like what San Francisco used to be in terms of being plural and pro tech. And you know, they still have the cult of prayer and so on and so forth. And they still have traditional dress. Go ahead. Yeah, yeah, yeah. No. One of the things that has happened in the Middle East, and this happening below the radar screen of most people, is that religiosity is declining dramatically. That's exactly what I'm saying. So I'm. Not would you? Yes. Reforms didn't occur out of the blue. They're not happening just because, you know, he's trying to push society.

55:47
He sees the trends. He sees that youth are less religious. He sees that people are fed up with with the Wahhabis they are wealthy enough to have access to information coming from outside of Saudi Arabia. They're all out on social media and so on. He is extremely clever. He's trying to get ahead, get ahead of the curve and be the leader of the modernizers in. Turkey religiosity is that is that was that a backlash to ISIS and the craziness or is it like. Backlash to Wahhabism and it's and it's a consequence of higher education which has happened in Saudi Arabia the literacy rate a century ago was less than 1% and now there's universal literacy

56:36
women go to a school in fact more women I I believe this true for Saudi Arabias well are in are in college than than men and they are this making and making a difference and you have you have a growing number of atheists and deists in places like Saudi Arabia. The numbers are huge in Turkey we're talking about 20 thirty 40% who are nominally Muslims still but they don't actually consider themselves Muslims. They don't believe in organized Islam. Iran is another case in point.

57:23
Religiosity is falling dramatically. And this I, I think the this is what creates a huge potential for change, including change in interpreting the religion. Now, this not to say that. Yeah, please. Yeah, there's going to see. Well, the reason I ask is there's a there's an interesting quote from a senior person in Dubai, right on. Like let me see if I can play it for you. Yeah. So this Sheikh Abdullah bin Sayed right? Done this quote from like a few years ago.

58:08
There's so many quotes, you'll have to show it to me, yeah. Yeah, it's, it's a very good quote where he basically said that Europe is going to produce way more fundamentalist than the Middle East because they they get it right like that, say the Middle East actually understands it and so and so forth, right. You you mean that you mean Muslim fundamentalists in Europe? Is that what he's? Yes, that's. What? That's what he was saying. So here, let me let me show you this. Let me paste this on. Let me see if I can. I'm not sure if this will if you just play that video. and let me say this in English so you can understand what I'm saying. I have translation. No, I know you have translation,

58:56
but I just want to make sure you get it right. There will come a day that we will see far more radical extremists and terrorists coming out of Europe because of the lack of decision making, trying to be politically correct or assuming that they know the Middle East and they know Islam and they know the others far better than we do. And I'm I'm sorry, but that's pure ignorance. So can you hear me? Yes, Did you see that? Yes, yes, no, I I did, I did see it. I, I, it won't surprise me if a lot of fundamentalists emerge in

59:41
Europe at the same time, there are a lot of Muslims in Europe who are quite tolerant, who are, who are not Islamists. You just don't hear about. So of course, of course, if you look at the United Kingdom or the Netherlands or France, the ones you hear about are the are the violent ones, are the ones no. No, I'm totally with you on that. Cathedral so there there is So one possible one possibility is for liberal Islam to emerge in Western Europe or in North America and then spread to the

60:32
Middle East. So that's a part, that's a part where at least what I'm observing is that you have more like, for lack of term, tech libertarian, SECular, you know, people in Dubai and Riyadh and, and that seems to, that's like hugely on the upswing. Anyway. I, I, I, I throw that out there because I feel that's something which is not part of the public perception about the Middle East that they're doing startups and they're doing tech and it's not, it's not all war. and somehow actually maybe you have a thought on this actually, what was your do do you think Turkey, as you know, is it doing poorly economically?

61:20
Is it doing well? It's very hard for me to say. By the way, it wasn't on a car that I stopped through. I think it was Istanbul. Yeah, it makes more sense. Sorry, I got that wrong. Do you have? Do you have a view on whether? Istanbul is a big global hub, so yeah, yeah. Yeah, that's right. So that's that's. So the Turkey is ahead of the curve. Expect to many, many Arab countries because it started reforming its institutions earlier. it start started started the process in the early even early auditor came several generations after the process started. The process involved involved

62:08
abandoning Islamic institutions, which were the basis of the economy and replacing that and borrowing European institutions. This started in the in the 19th century of Turkey. In Saudi Arabia. It's the process started in the 1930s. So you have and SECularism. Saudi Arabia has not had a period official SECularism was the Middle East was SECularizing in the in the late Ottoman Empire and then it had a period of assertive and very aggressive and to an extent

62:54
repressive SECularism in the between 1923 and 1950. So there is there a lot of there's a lot of experience with SECularism there and SECularism has SECularism is SECond. The SECular period is remembered for many achievements which which helps Now the reason I'm bullish on the economies of the region is that they have all complete.

63:42
They've all moved away from Islamic institutions and adopted all of the institutions that enable capital accumulation large scale, forming of large profit making companies, the formation of large NGOs that have flexibility. And if the region starts liberalizing in one area, the starting point might be religion, it might be intellectual life, it might be it might be politics. Liberalism will will will spread.

64:28
And all of the institutions necessary for a liberal order have already been already been adopted and religious opposition to them is minimal if not a non existent. You can. Under classical Islamic law, you could not establish a corporation. There's no such thing as a fictitious individual that would be recognized in courts. Islamic law. Classical Islamic law is extremely individualistic. Only natural individuals are recognized. That's no longer the case everywhere. Commerce is conducted under rules that allow enterprises,

65:16
large corporations, large corporations, every place you find stock markets where shares are shared, trade and everything. These are things that were in that are incompatible with classical Islamic law. Well, you know, it's interesting because one, one thing that I can't shake is the feeling that maybe is different 2530 years ago, but I have a feeling that the West has become in some ways more fundamentalist than at least the parts of the Middle East that I see. And here's why I say that. I think, for example, what is the modern thing on corporate law, right? It would be AI agents and AI

66:04
personhood and so on and so forth, right? That would be like the modern updating just like there was that sort of, you know, kind of use your imagination fiction of a corporate person. It's less fictional. An AI that can trade on your behalf, maybe have even have some liability. It has a crypto wallet, so it has some bank account. It can be fined even you know what have you. I have a feeling that there's going to be strong forces that resist AI personhood in the West. I can I can feel a developing anti tech backlash that'll probably happen next year's, but I I I think there'll be less of that overseas, maybe not specifically in the Middle East, but it somehow I think it maybe it's the West is unfortunately declining with the rise of the

66:50
Internet, but the Asiand the east is rising with the Internet. And so because of that, the West will correlate the phone and AI and all this kind of stuff to their decline and the east will not they will correlate it have the opposite conclusion. I'll be more friendly to these new constructs. Did did the did the ban on corporate personnel, was that related to like the ban on iconography or basically the iconoclasm? No, this was the concept of a corporation was developed by in the Roman Empire in the in what is now was Istanbul Justinian's codes of the 6th century. It contained the concept of the corporation.

67:39
The West borrowed that concept at a time when states were in Europe were quite weak in the aftermath of the fall of the West Roman Empire. Islam arose about a century later and developed very strong states. The states state did not want competition from corporations. What were the communities likely to benefit from the corporation and gain strength for by incorporating? They were the old tribes. Islam's Islam is not just the religion, but it was also a political project. It tried to replace universal Muslim Brotherhood with

68:26
tribalism. And so even though many concepts were borrowed from Roman law and from Persian law, the concept of a corporation was deliberately ruled out through by making Islamic law extremely individualistic. That was the reason why there's no concept of corporation. And so the and the reason why the concept of the corporation was not, even though it was always known why it was not brought into Islamic law. In later centuries after Europeans started using the corporation for various reasons,

69:15
not just to add to organize universities and to make guilds more efficient, but also to make commerce more efficient anDeFinance more into banks were established as corporations. Starting in the 16th, 17th century, trading companies started getting organised as corporations. Why didn't the why didn't Islamic law Islamic law seeing the advantages of the corporation in the West, why didn't it undergo reforms at that point?

70:02
Well, one of the reasons was that there wasn't much pressure from below for establishing corporations. Commerce was what was in the hands of optimistic enterprises and small enterprises don't see not only small but short lived enterprises. They don't see a reason to incorporate. There wasn't a constituency that demanded the corporation. The corporate corporate laws in the Middle Middle East arose in the or were put in place at the beginning of the 20th century.

70:49
Again, from above by people who understood that unless you gave society the tools to establish corporations, the Middle East would would continue to be colonized and it would be ruled by Europeans. Because our cooperation tools, that's really interesting they're. They're tools of cooperation a large scale. Yes, that's right. You can't if, if with a small partnership of 2-3 individuals, you can have the individuals, you can have all the individuals come to court. You can't do that with a large scale organization. You can't have every shareholder holder of Microsoft say if there's a court case involving Microsoft, you can't have all of

71:37
them come to come to court, right? Right. Right. Yeah, I understand being able to act on someone else's behalf. And actually, you know, a Meta Organism like a company and, you know, every single person who was part of Coca-Cola in 1950 is basically being swapped out and replaced with, in a sense they're like an immortal person because every cell can be swapped out. The CEO can be swapped out, but so can every person. And in theory, you could have a corporation where every single person swapped out and then they were swapped back in. If that's ever happened, maybe you know, so like, I don't know, like a change of control or something. But the OK in itself lives on. And I find very interesting this this notion that you could add that AI can have legal personality.

72:22
Legal. Legal. So, yeah, so this something that I think a lot about because you know, somebody like I've talked about this, others, some people have treated this, but the next step after corporate personhood and double entry accounting is AI agency and triple entry accounting, which is what the blockchain is. Because it's not just the debit and the credit, there's also universal Ledger that accounts for it. And AI and crypto go together because like crypto and the blockchain, that's the kind of money that's kind of property that AIS can natively interact with. Now how you you want to have what they do be bounded, but could an AI be a corporate SECretary? It probably could. Could it do your books for you? Probably could Anything that's relatively routine and

73:07
straightforward and not exceptionally time or rule varying. It can't do markets, it can't do politics yet because there's a very time varying demands, but the relatively routine kinds of things, it could do that so. What kind of liability will it have? I'm sure this the. The limit, the liability will be limited by how much crypto is on it's person it's AI person, which is funny. So OK, I want to, I want to just quickly wrap up. This actually pretty, pretty awesome. I think we connected your, your books to actually cutting edge technology. We're public lives, prior truths and in terms of preference falsification and in relating that to not just contemporary

73:52
events but also decentralized cryptographic truth and then the concept of personhood and corporate personhood and how those held back in some ways kind of leads to yeah plus crypto and then also other aspects of determining whether or not people are telling the truth related to prediction markets. So I recommend your work for people who are interested in how older social system systems function and dysfunction and how if you're interested in the sidle implications of new technologies that there's a lot to learn and digest from your work. And so I've been a big fan for a long time. So thank you very much, Timur, for coming on the pot. Well, well, thank you very much for the opportunity and I

74:38
greatly enjoyed the conversation and learned a lot in the process. And you mentioned the number of concepts that I was unfamiliar with and I will go and try to educate myself about them. Great. Awesome. Looking forward to it. And let's talk more. OK, bye. Bye, take care.