One of my most vivid memories from active duty is standing in the
middle of the command center on my billion dollar warship, watching a Somali
pirate take a piss in grainy infrared. It was around 4AM, I was sipping coffee
in dark room lit by a few dozen radar screens, and counting his sleeping
colleagues that my team would need to detain at first light.
Through its command of high tech violence, the U.S. Navy can influence
anything on, under, above, or near the sea. As a Surface Warfare Officer, my
job was the day-to-day maintenance of American hegemony, that power that has
ensured free trade and capitalism dominates the global economy. Our closest
competitor, China, is at best decades behind.
At the same time, in Iraq and Afghanistan my brothers and sisters
were struggling against an enemy who could leverage the power of low tech
distributed violence, enabled by the AK-47 and the improvised explosive device.
America had forgotten the lessons of Vietnam and was re-learning them in the
streets of Fallujah, the Somali pirates were just the latest group to tap into
The Navy was a practical education in global economics,
distributed systems, and high stakes game theory. It taught me that civilization
is shaped by the powers that master commerce. Today, that power is the carrier
strike group. Tomorrow it will be a Bitcoin node.
Everything you hear about the Navy is true. Sailors like to drink
when they hit a port and we aren’t overly picky. Yet about halfway through my
first deployment I had developed a taste for Newcastle, thanks to the
English-style pubs my fellow officers managed to find in every port from Bahrain
to Hong Kong. I was literally following in the staggering footsteps of Royal
Navy officers who carried the British Empire around the world centuries before.
The Brits were never known for their cuisine however, and fortunately most nights
ended with a late night stop at McDonalds. In 10,000 years, archeologists will probably
use the Super Value Menu as their Rosetta Stone to unlock the mysteries of 21st
Brits do pubs, Americans do burgers, and it’s no accident that you
can find both in every major port around the world. For a few centuries, the ships
flying the Union Jack let that tiny island mold the entire world in its image. And
they weren’t the first. Spanish galleons ensured that Catholic missionaries sailed
to the Americas, and Aztec gold sailed them back. The lesson is simple –
control of the commons means control of the commerce, and there is no greater
commons than the high seas.
Naval power lies in its connection to trade. An army can take and
hold important resources, but its reach is limited by the constraints of
geography. A fleet on the other hand can establish blockades, occupy choke
points, and interdict smugglers around the world. It can rapidly project power
across time and space, linger indefinitely, and retreat without cost. The
British used these tools to build their empire. McDonalds, Apple, Hollywood,
and the rest of American-style capitalism ride in the wake of carrier strike
On the opposite end of the economic spectrum, the pirates got
started as disgruntled fishermen. Somalia’s government collapsed in 1991 and the
coast guard packed up and went home, leaving the rich local fisheries open for
foreign factory trawlers. The stocks were decimated, and the local economies
that relied on them collapsed.
In response to this, a few enterprising fishermen realized that
while they didn’t have fish, there were plenty of guns around. They built a
naval militia and would board trawlers to demand payment for the stolen fish. Their
plan worked far better than expected, ransom money began pouring in, and the
pirates expanded their operations to the narrow commercial shipping packed with
ships heading to Europe, Asia, and the Middle East.
Best of all, no one really cared.
The Gulf of Aden runs from the southern tip of the Red Sea to the western
Indian Ocean. It connects oil from the Persian Gulf and electronics from Asia
to ports on the Black Sea, the Mediterranean, and Europe’s Atlantic seaboard. A
few million dollar insurance payouts is a drop in the ocean against a quarter
of all global trade. Voyage insurance premiums didn’t even move until the media
picked up the story, and Lloyd’s of London realized they could make a quick
buck on the attention.
On top of this, the U.S. Navy isn’t built for small scale
operations. Pirates might get press coverage, but the Pentagon cares a lot more
about Chinese submarines and Russian bombers.
The real problems started when other groups began to capitalize on
Somalia’s collapse. Al Qaeda’s East African offshoot Al Shabbab was building a
foothold in anarchy, and started pressuring the pirates for tribute to boost
their own revenue. Ten million dollars of ransom money might not mean much to
the global economy, but it will buy a lot of guns for the holy war.
Forget nukes. The AK-47 was the most important weapon of the 20th
century and shows no signs of giving up that crown in the 21st. It is rugged,
user-friendly, and will kill you just as dead as a stealth bomber.
The reason is straightforward – death is a fixed cost for the
individual. Complex weapon systems are expensive to build and difficult to
operate. A single bomb might cost $25,000, but that doesn’t include the plane
that carries it, the larger plane that refuels that plane, the pilots that fly
them, the maintenance crews that repair them, the HR department that manages
training, payroll, and career advancement. The list keeps going. The U.S.
military is extremely capable but not very flexible, and everything costs an
arm and a leg.
Rifles on the other hand are cheap, effective, and highly distributed.
Anyone with standard issue human equipment can learn to operate one in an
afternoon, and basic infantry tactics aren’t rocket science. The AK-47 is to
warfare what the iPhone is to computers – user friendly power in the hands of
the people. This kind of scalability allowed rice farmers and goat herders to
defeat the world’s two most powerful militaries in the 1970s and 1980s. Vietnam
and Russia’s war in Afghanistan are classic studies of low-end disruption.
AK = RSA
Cheap and scalable can defeat large and centralized when the
conditions are right. Diffe and Hellman took Kalashnikov’s ideas to information
Prior to asymmetric cryptography, the business of secure
communications was a massive headache. Key management for large organizations was
so complex that it was only practical for massive bureaucracies with an
existential need for secrecy. This excluded everyone outside of the military
and intelligence services. Even when you have those kinds of resources,
security is never guaranteed, just ask Admiral Yamamoto.
RSA changed everything. The simple idea that certain math problems
are hard to solve but easy to check (think a jigsaw puzzle) meant that anyone with
a computer could communicate securely at a trivial cost.
Of course, a motivated adversary can still hack your laptop if
they really want to, most likely by applying a wrench to your skull until you provide
your private keys. That wrench-wielder however needs to be motivated,
compensated, and willing and able to keep a secret. They are certainly a threat
to any one individual, but at scale the dynamics change. One whistle-blower or
viral video and the political benefit of this type of coercion can be swamped
Cypherpunks have been building tools for individual liberty,
freedom to communicate, and the right to privacy for decades, but the rest of
the world moved faster. Netscape and Oracle built the new digital commons, Google
and Facebook mastered it. They poured in capital until their product could
dominate network choke points, and now any would-be competitor is better off
joining their regime than competing. As long as commercial power was in the
hands of centralized entities, the digital commons would function much like the
maritime commons – dominated by monopolists who had the up-front capital to win
The problem for incumbents is that the terrain isn’t fixed. Digital
scarcity is a tectonic shift for the architecture of the internet, and a
potential threat to business models that make their money curating infinite
Digital commons are like the sea. They move ideas across borders
seamlessly, and expose us to the best (and the worst) that the world has to
offer. With the rise of Bitcoin, real economic value is beginning to run
through these pipes as well. No one can occupy any one position for long. Choke
points spring up, flourish briefly, and die out as traffic finds a better
Unlike at sea however, the balance of power in the digital realm is
shifting to individuals. The power of asymmetric cryptography is similar to asymmetric
warfare. State cyber security organizations are incredibly capable and well
funded, but like the militaries of the 20th century they cannot match the scale
of new technologies with their inherent centralization.
Alfred Thayer Mahan was the naval equivalent of Sun Tzu, and he developed
the core idea that the goal of any navy should be to control of the commons. Control
of the commons means controlling commerce, and the gears of commerce move the
Satoshi built all of humanity a weapon to take that power for