The transition from the Industrial Age to the Information Age is resulting in a sea change between protection and extortion. As the world gets increasingly complex the result is a diminishing ability to extort while at the same time tools of protection are getting cheaper and more powerful. The arbitrary walls are coming down.

SPECIALIZATION

I was sitting in trial today observing Bill Rounds, co-author with me of How To Vanish.com, as he was questioning a witness. This particular case is an example of complex business litigation that has been up and down the appellate ladder many times. The subject matter is fairly esoteric and even worse the law is unsettled. While unrelated to the case, the plaintiff is a world renown surgeon.

During questioning by Bill’s opposing counsel a funny scene happened. Bill stood up and the judge remarked, “Sustained.” The court reporter stopped and asked, “Was there an objection?” The judge replied, “No, but Mr. Rounds stood up and the coming objection is sustained.”

INCREASING COMPLEXITY

Those 5-8 seconds in the court transcript are but the faintest traces of an incredibly complex thinking process that the two attorneys and judge understood and applied which was backed by hundreds of pages of code and cases. Yet, I am almost sure that neither the surgeon nor the jury even knew there was a virtual ping-pong match being played.

But for the attorneys and judge the surgeon’s work is equally incomprehensible. And the work of engineers, architects, computer scientists, etc. are equally indecipherable to those outside the circle. Such is the modern world that is multiplying in complexity.

Everywhere complexity is increasing from the tadpole in the pond to the manmade computer operating system. But manmade complexity that is beneficial for humanity takes work. Bridges do not design and build themselves. As humanity has progressed so likewise has the economy from hunting and gathering to plows and silos to railroads, satellites and spaceships.

But all this time there have been malefactors and nefarious individuals that seek to destroy and wield violence like a dagger focused on the economy’s heart seeking coercion instead of consent. After all, the power to destroy and inflict pain, while immoral, is power nonetheless. A power wielded by those sadists who enjoy terrorizing innocents.

PROTECTION AND EXTORTION

The irony of government is that it attempts to provide protection through extortion. And like the blackmailer or extortioner the government’s ability to tax depends on the same vulnerabilities as extortion or the Godfather’s offer that can not be refused. As the Industrial Age progressed so likewise the nation-state rose because the assets created were larger and thus the need for protection was greater. After all, the capitalists either paid off those who could leverage violence against them for extortion or paid a military force capable of defending with brute force any attempted shakedown.

But the relentless advance of technology is blunting the sharp edge of violence’s dagger. Protection is being made easier to provide while extortion is being made more difficult to carry out profitably.

Why is this? A basic mathematical law: multiplying is easier than dividing. A simple example is that 3*3*7*11*13 is much easier to solve than reducing 9,009 to its prime components.

Or another example would be encryption. I like the open-source Truecrypt and in June 2003 the US National Security Agency reviewed and analyzed the design and strength of AES-256 encryption finding it sufficient to protect classified information up to the Top Secret level.

In effect, with this free tool I can spend ten seconds encrypting a text file that can take years of focused processing power to decrypt. And just for fun perhaps it only reads “Haha if someone wasted the resources to decrypt this!” But why transmit sensitive personal or business information without such protections? After all, recently 30,000 Hotmail passwords were compromised in a security breach and posted on the Internet. An ounce of prevention using free encryption software can be worth a pound of cure repairing a stolen identity.

PROTECTION IN THE INFORMATION AGE

During the Industrial Age the leverage violence could exert was much greater and is being greatly reduced in the Information Age. Thus the scale is tipping in favor of protection and away from extortion with its attendant allocation of scarce resources through bureaucracy. The digital infrastructure is allowing the previously unseen but highly complex range of systems to be perceived; Facebook is a prime example.

Then that perception is being harnessed in extremely productive ways through multiplication; as a result the economy is following economic law and moving away from inflexible command and control systems towards spontaneous adaptive mechanisms. But government systems still dragoon resources from higher-value complex uses to lower-value primitive uses. As Frederic Lane wrote on page 383-384 of Venice, A Maritime Republic:

Every economic enterprise needs and pays for protection, protection against the destruction or armed seizure of its capital and the forceful disruption of its labor. In highly organized societies the production of this utility, protection, is one of the functions of a special association or enterprise called government. Indeed, one of the most distinctive characteristics of government is their attempt to create law and order by using force themselves and by controlling through various means the use of force by others.

From machines to microchips, factory to laptop, mass production to small teams or even the lone entrepreneur the gigantic institutions of the Industrial Age are being reduced to smaller and smaller parts. As the Information Age advances the risk of violence decreases because as the scale of an operation declines so likewise does its potential for sabotage or blackmail and the increased location independence afforded by the Internet multiplies the inherent safety an asset or individual enjoys. Despite Sulter’s proclamation at 2:08, “I want this country to realize that we stand on the edge of oblivion. I want everyone to remember *why* they need us!” But we, humanity, do not need them even if they think they can clean up some oil.

CONCLUSION

For those who rely on coercion instead of consent the transition to the Information Age is being particularly harsh to their immoral business models. They are now opposing both natural and economic law. The financial elite and political elite of America and Europe are now beginning to infight. This is resulting in the State losing legitimacy in the eyes of the masses.

While the time frame is likely far into the future, first the European Union will collapse and later the United States. But this is not uncharted territory but instead a trend of the nation-state collapsing under its own weight which started with the Berlin Wall and Russia. To avoid being collateral damage I elucidated several tips in chapter six of The Great Credit Contraction.

My next book, which I have co-authored with Bill Rounds, is currently with the publisher and hopefully will be available within a couple months. It will magnify the suggestions from chapter six and I think many will find it tremendously useful. As an old Chinese proverb says, “Of all the thirty-six ways to get out of trouble, the best way is – leave.”

DISCLOSURES: Long physical gold, silver and platinum with no interest in the problematic SLV, Streettracks Gold ETF Trust Shares or the platinum ETFs.