Dataism, reality, and decentralization.

If reality is but data, we need better data-processing institutions

I recently re-read Yuval Harari’s masterpiece, Homo Deus, focusing in particular on the last chapter, ‘The Data Religion’, also called Dataism. Despite being a book about anthropology and technology in general, I think some of the ideas developed can serve as a good framework for the innovation crypto has been producing, and for its potential to positively benefit our society.

Dataism, according to the author, can be summarized like this:

Dataism says that the universe consists of data flows, and the value of any phenomenon or entity is determined by its contribution to data processing.

Dataism sees any organism, natural or artificial, and even political, religious, economic, and cultural system as an algorithm whose goal is to process the growing data flow which composes our reality. If we are essentially machines that need to process data, then natural selection will favor those organisms/machines that process data faster and more accurately.

This idea that everything is just data and information reminds me of another excellent book, The Case Against Reality in which Donald Hoffman claims that reality is in fact just a flux of atoms/data that we see in certain patterns and shapes, such as an apple, a chair, a car because this helped us navigate reality and survive, the same as icons can help users navigate their data in their computers or smartphones.

That is what evolution has done. It has endowed us with senses that hide the truth and display the simple icons we need to survive long enough to raise offspring. […] These icons are useful, in part, because they hide the complex truth about objective reality. […] Perception is not a window on objective reality. It is an interface that hides objective reality behind a veil of helpful icons.

According to Dataism, not only human beings and animals can be thought of as computers processing data, but even political, economic, religious, and cultural systems can.

According to Dataism, King Lear and the flu virus are just two patterns of data flow that can be analysed using the same basic concepts and tools. This idea is extremely attractive. It gives all scientists a common language, builds bridges over academic rifts and easily exports insights across disciplinary borders.

This other idea of a unitary discipline that could interpret different phenomena and connect disciplines is shared by another great book, Complexity: The Emerging Science at the Edge of Order and Chaos by Mitchell Waldrop:

But they all share the vision of an underlying unity, a common theoretical framework for complexity that would illuminate nature and humankind alike. [...] They believe that they are forging the first rigorous alternative to the kind of linear, reductionist thinking that has dominated science since the time of Newton—and that has now gone about as far as it can go in addressing the problems of our modern world.

If the reality is in fact just a continuous flow of data, if organisms and institutions are computers whose goal is to process data, then the consequence is that organisms and systems that process data faster and more effectively should be able to prevail.

Speaking of this competition between systems, Harari writes:

According to this view, free-market capitalism and state-controlled communism aren’t competing ideologies, ethical creeds or political institutions. At bottom, they are competing data-processing systems. Capitalism uses distributed processing, whereas communism relies on centralised processing.

This idea of centralized and decentralized systems to process information immediately draws a bridge with blockchain and crypto networks. Blockchain's core idea is to replace centralized gate-keepers of data and value with a distributed, peer-to-peer network, permissionless and censorship-resistant. Distributed systems would be stronger than centralized ones because they don’t rely on a single point of failure as the latter. Taking Harari’s example, capitalism is stronger because it doesn’t rely on a single entity to process data (set prices, demand/offer, etc..) as States do within a communist entity. If the State had to collapse or were unable to perform tasks properly, the system would also collapse as there wouldn’t be any other entity able to replace it. On the contrary, a distributed system like capitalism can rely upon multiple entities to process data, so it wouldn’t be affected by the failure of one, or even a few, of them.

Similarly, political systems like democracies or dictatorships compete to process other data flows, once again assuming different approaches. Democracies are decentralized systems, which empower single citizens with governance (input) and several institutions to create a balance of power and policies (outcomes), while dictatorship recreates that centralized monopoly of all state functions.

What’s interesting about Dataism, according to Harari’s words, is that competing systems can be more or less suitable for specific times and conditions. For instance, decentralized systems like democracy and capitalism have proven superior in the past thirty years. However, nothing guarantees that this will remain the same in the future. In fact, we are seeing many signs of failure of the current distributed systems in processing the huge flows of data we are exposed to in recent years. The financial crisis, or the 2019 Covid pandemic, could be seen as examples of data flowing too quickly compared to the ability of decentralized systems to process them.

This implies that as data-processing conditions change again in the twenty-first century, democracy might decline and even disappear. As both the volume and speed of data increase, venerable institutions like elections, parties and parliaments might become obsolete – not because they are unethical, but because they don’t process data efficiently enough.

It is becoming clear that governments and accountable democratic institutions as they are configured today cannot keep up with the pace of data flows and thus meet the needs of their citizens without the private/tech sector’s aid. While some will lament this fact, the private sector is taking on important missions of government because it has the specialized talent and means to do so. However, these private companies’ interest is often divergent from the overall public, pursuing profit for a few shareholders rather than public goods and positive externalities for society. Moreover, they lack serious mechanisms of accountability and shared governance. Harari writes:

Cyberspace is now crucial to our daily lives, our economy and our security. Yet the critical choices between alternative web designs weren’t taken through a democratic political process, even though they involved traditional political issues such as sovereignty, borders, privacy and security. Did you ever vote about the shape of cyberspace?

To sum up, we should have decentralized systems that can keep up, or even stay ahead of, the massive data flows, while at the same time empowering its users and ensuring some core principles like accountability, co-ownership of public goods, and governance. This sounds a lot like web3 and crypto networks, which are natively generated by a powerful and innovative tech stack while at the same time recreating the equality and fairness typical of democracies and empowering people by ensuring ownership and governance rights. Rather than relying on traditional institutions like States and agencies trying to catch up with tech innovation to protect and empower citizens, or producing a dystopia where few massive tech corporations run the world without any other input (again, risk of centralization), we could try to follow a third way where participation and governance arise directly from and within the Internet, and citizens are given the means (governance power) and incentives (economic ownership) to actively participate and shape these networks policies. Crypto networks and web3 can combine governance, participation, and accountability typical of the liberal democracies, with the speed and efficiency of the Internet, thus (perhaps) solving the coordination problem and producing public goods effectively.