The Sovereign Individual Was Right (Eventually)
Part 23 of 25 in the The Philosophy of Future Inevitability series.
In 1997, James Dale Davidson and Lord William Rees-Mogg published The Sovereign Individual.
The book predicted that digital technology would undermine the nation-state. That borders would become meaningless for the productive. That individuals would exit state control and become sovereign over their own affairs.
The book was mocked as libertarian fantasy. It's now looking prescient.
The thesis seemed absurd at the time. The nation-state appeared permanent. Borders were real. Citizenship was meaningful. The idea that individuals could simply... leave the system felt like sci-fi.
Twenty-seven years later, digital nomads are common. Crypto exists. Investment citizenship is standard among the wealthy. Remote work is normalized. Small states compete for high earners with tax packages. The prediction wasn't wrong. It was early.
The Core Thesis
The argument, simplified:
- The nation-state emerged because industrial technology required concentration. Factories. Railroads. Armies. Power scaled with physical resources.
- Digital technology doesn't require concentration. Ideas. Code. Information. Power scales with knowledge, not territory.
- When power doesn't require territory, territorial control loses leverage. Productive individuals can leave. States must compete for residents rather than extracting from captives.
- The future belongs to those who can operate outside state control. The sovereign individuals.
In 1997, this seemed premature. In 2024, it seems obvious.
The mechanism is straightforward. Nation-states extract resources from their populations through taxation. This works when populations are geographically captive—you can't move your factory, so we can tax it. You can't relocate your farm, so we can tax it. Your assets are physical and fixed, so we control them.
Digital assets aren't fixed. Code can be anywhere. Capital moves at the speed of data transfer. Knowledge workers can operate from any location with internet. The geographic monopoly that made taxation enforceable is breaking down.
States still have coercion—police, military, legal systems. But coercion only works within territorial boundaries. If productive individuals can generate value from outside your territory, your coercive power over them diminishes.
This doesn't mean states disappear. It means the relationship changes. States can't just extract—they have to offer value to retain productive residents. Tax rates become competitive. Services become competitive. States become... products in a marketplace.
The sovereign individual thesis is that this transition fundamentally alters power. From states controlling individuals to individuals choosing states. From geographic imprisonment to geographic optionality.
What They Got Right
Digital nomads exist. Thousands of people work from anywhere, paying taxes nowhere in particular, belonging to no single nation.
The digital nomad isn't a tourist. They're productive workers who've decoupled income from location. They earn USD or EUR salaries while living in Thailand, Portugal, or Mexico. Their value generation happens online. Their physical location is chosen for quality of life and tax efficiency, not employment necessity.
Crypto creates exit. Bitcoin demonstrated that money can exist outside state control. Whether you think it's good or bad, it's real. States can't stop it.
Not just Bitcoin—the entire crypto ecosystem. Decentralized exchanges, stablecoins, DeFi protocols. The technology has demonstrated that financial systems can operate without state permission. States can regulate on-ramps and off-ramps, but they can't control the core protocols. The exit from state-controlled money exists.
Remote work scaled. COVID proved that knowledge work doesn't require co-location. The productive can live anywhere. They're starting to choose based on tax and lifestyle.
Before 2020, remote work was a fringe benefit. After 2020, it's standard for knowledge workers. Companies discovered that productivity doesn't require office presence. Workers discovered that they don't need to live in expensive cities near headquarters. The constraint that bound knowledge workers to specific locations dissolved.
Small states compete. Estonia. Singapore. Dubai. Portugal. All offering packages to attract high-earning remote workers. The competition they predicted is happening.
Estonia offers e-Residency—digital identity and business infrastructure for non-citizens. Portugal offers tax breaks for remote workers. Dubai offers zero income tax and business-friendly regulation. These aren't edge cases—they're deliberate strategies to attract mobile capital and talent.
The competition is explicit. States are marketing themselves to high earners. "Come here, keep more of your income, enjoy better weather, lower cost of living." The product is citizenship-lite or residency with benefits. The market is global.
Citizenship is becoming a product. Investment citizenship. Digital residency. Tax optimization. The wealthy already shop for favorable jurisdictions.
Caribbean nations offer citizenship for $100-200k investment. Malta and Cyprus sold EU passports (until EU pressure stopped them). The ultra-wealthy structure their affairs through multiple jurisdictions—residence in one, citizenship in another, assets in a third. They're not evading law—they're optimizing across legal frameworks. And the frameworks compete for their business.
AI Accelerates This
AI makes the thesis even stronger.
Knowledge work is increasingly AI-augmented. The productive individual with AI can output more than teams could before. Leverage increases.
Location becomes even less relevant. The AI doesn't care where you are. Your productivity is the same from Bali or Berlin.
States need tax revenue. Productive individuals generate it. But productive individuals can leave. The negotiating position shifts.
AI capability is portable. It's not tied to infrastructure or territory. You can take it with you.
The sovereign individual thesis wasn't wrong. It was early.
Here's the AI acceleration mechanism: Before AI, the solo knowledge worker had limits. You could only do so much. Complex projects required teams. Teams required coordination. Coordination often required co-location or at least shared time zones.
AI removes the team requirement for many tasks. The AI-augmented individual can handle work that previously needed three people. Writing, analysis, coding, research—domains where AI provides massive leverage to the solo operator.
This means more people can operate location-independently. Not just software developers and designers—now writers, analysts, consultants, strategists. Anyone whose work is primarily cognitive can potentially do it from anywhere.
And the productivity gap between the AI-fluent individual and the traditional team is growing. One person with AI fluency can outproduce five people without it. That one person is now incredibly valuable. And mobile.
States that want to tax that productivity have to compete for that person. High taxes drive them elsewhere. Poor services drive them elsewhere. They have options. The state's leverage decreases as the individual's portability increases.
AI is the accelerant on the sovereign individual fire. What was true for a small elite (developers, traders, consultants) is becoming true for a larger class of knowledge workers. The mobile productive individual is becoming common, not exceptional.
The Exit Dynamic
States maintain control through two mechanisms:
Violence. Physical enforcement. Police. Military. This only works within territorial boundaries.
Loyalty. Cultural connection. Patriotism. Family. This erodes with globalization.
When productive people can work from anywhere, violence becomes less effective. You can't tax someone who isn't there.
When productive people are connected globally, loyalty becomes weaker. Their identity isn't tied to one territory.
The remaining leverage: citizenship status, which controls movement. But citizenship is becoming purchasable. The exit is open for those who can afford it.
Let's be explicit about the violence mechanism. States enforce tax compliance through legal punishment—fines, asset seizure, imprisonment. This requires physical presence within the state's jurisdiction. You have to be there for the state to enforce against you.
If you're not there, enforcement becomes expensive. Extradition treaties exist but are cumbersome. International asset seizure is possible but complex. For most tax disputes, the cost of international enforcement exceeds the revenue recovered.
This creates a practical threshold: if you generate enough value to make exit worthwhile, you're also valuable enough that the state would rather compete for your presence than pursue you internationally.
The loyalty mechanism is subtler. Most people don't leave their country even when it's economically rational. Family ties. Cultural identity. Language. Friend networks. The sense of "home." These are powerful retention mechanisms.
But they're weakening. Global culture through internet. English as universal language. Friend networks that are increasingly digital. Second and third-generation immigrants with weak cultural ties to parents' homeland. Loyalty becomes negotiable.
The combination—weak violence projection outside borders, weakening cultural loyalty—shifts the balance of power. States that want to retain productive individuals have to make staying attractive. They can't just rely on enforcement and belonging.
Who Benefits
The sovereign individual future benefits:
High earners. Those with portable skills who can command premium compensation globally.
Software engineers, designers, consultants, traders, writers—people whose work product is digital and whose clients are global. They can earn top-tier compensation while living in lower-cost jurisdictions. The arbitrage is massive.
Capital holders. Money moves faster than people. It's already effectively sovereign.
The ultra-wealthy have been sovereign for decades. Their assets are distributed across jurisdictions. Their residency is strategic. They pay advisors to optimize tax exposure across legal frameworks. They're not evading—they're using the system's complexity to their advantage. Capital has been mobile since international banking became normal.
Network builders. Those whose value is in relationships and reputation, not territorial position.
Influencers, thought leaders, community builders—people whose value comes from who knows them, not where they are. Their network is digital. Their reach is global. Their location is irrelevant to their value proposition. They can be anywhere and maintain the same earning power.
Tech adopters. Those who can leverage AI and digital tools for productivity.
The AI-augmented worker is a newer category but growing fast. They don't need to be technical—they need to be tool-fluent. The person who can orchestrate AI tools to produce high-value output can do it from anywhere. Their productivity is independent of location, and their value is high enough to justify mobility.
This is not most people. Most people are tied to place. Their work requires presence. Their skills aren't portable. Their capital is negligible.
The plumber can't work remotely. The teacher needs students physically present. The nurse needs to be at the hospital. The retail worker needs to be at the store. Their work is inherently local. Their leverage for exit is zero.
The sovereign individual thesis is true and unequal.
This is the uncomfortable part. The thesis describes a bifurcation. A mobile, high-leverage class that can choose their jurisdiction. And an immobile, location-bound class that can't. The benefits of globalization and digitalization accrue asymmetrically. Some people get sovereignty. Most people don't.
The State Fights Back
States aren't surrendering quietly.
Exit taxes. Citizenship-based taxation (the US is almost alone in this). Global minimum tax proposals. Increased surveillance. Financial controls.
The OECD pushes for coordination. If all states agree to similar rules, there's nowhere to exit to.
This is the counter-play. Remove exit options rather than compete for residents.
It might work. Coordination is hard, but stakes are high. States facing revenue collapse will find motivation.
The battle between sovereign individuals and coordinating states is just beginning.
The exit tax is the clearest example. The US taxes you on renouncing citizenship—a "fuck you" fee for leaving. Other countries are considering similar mechanisms. The idea: if you made your wealth here, you owe us for leaving.
Citizenship-based taxation (taxing citizens on worldwide income regardless of residence) is the US's unique weapon. An American citizen living in Singapore, earning money through a Singapore company, still owes US taxes. This is unusual—most countries use residence-based taxation. But it's effective at preventing easy exit.
The global minimum tax—pushed by OECD and G20—aims to eliminate tax competition. If every country has at least a 15% corporate rate, you can't gain much by relocating. The arbitrage shrinks. The exit becomes less attractive.
Financial surveillance is expanding. FATCA requires foreign banks to report US account holders. CRS (Common Reporting Standard) does similar globally. The goal: make it impossible to hide assets across borders. If they can see your money everywhere, they can tax it everywhere.
These are defensive moves. States trying to prevent the sovereign individual future by coordinating to eliminate exits. It's an arms race: mobile individuals finding new jurisdictions and structures, states trying to close the loopholes and coordinate enforcement.
Who wins this depends on whether states can actually coordinate. History suggests this is hard—defection is profitable. If 99 countries agree to minimum tax and one defects, the defector captures all the mobile capital. The incentive to defect is high. But the pressure to coordinate is also high. The outcome isn't determined.
The Middle Class Trap
Here's the dark part:
The wealthy have already exited. They structure affairs through trusts, foundations, jurisdictions. They're effectively sovereign now.
The poor have nothing to exit with. They're tied to place by necessity.
The middle class is trapped. Enough income to attract state attention. Not enough wealth to structure around it. Mobile in theory, immobile in practice.
The sovereign individual future might be the worst for the middle. Competing for resources against those who've exited the system, while bearing the full weight of states trying to maintain revenue from whoever's left.
Let's be specific about the trap. A senior software engineer earning $200k/year is high-income but not wealthy. They pay significant taxes—maybe 35-40% effective rate in a high-tax country. That's $70-80k/year.
They could move to Dubai or Portugal and cut their tax bill in half. Save $35-40k/year. Over a career, that's life-changing money.
But: they have kids in local schools. A partner with a local job. Aging parents nearby. A social network built over decades. The friction costs of exit are high. The financial benefit is real but the human cost is also real.
The ultra-wealthy don't face this trade-off. They can afford international schools for kids. Their partner doesn't need to work or can work remotely. They can fly back to see parents regularly. They can maintain global friend networks. Their wealth buys frictionless mobility.
The poor don't face this trade-off either—they can't afford to move internationally anyway.
The middle-class professional is the one who faces the full trade-off. Enough income that the tax savings matter. Not enough wealth to make mobility frictionless. They're the ones caught between the hammer of rising tax burden (as states try to maintain revenue) and the anvil of reduced services (as mobile wealthy leave).
The sovereign individual future creates a new class structure. Not rich and poor. Sovereigns and subjects. Those with exit options and those without. The middle class gets bifurcated—the upper middle with portable skills becomes sovereign, the lower middle with location-bound work becomes subject. The division isn't wealth. It's mobility.
What This Means
If you can, prepare. Portable skills. Location independence. Financial knowledge. The option to exit, even if you never use it.
Develop skills that travel. Anything digital, anything creative, anything knowledge-based that doesn't require physical presence. Learn enough about tax structures and international mobility to understand your options. Build savings that give you runway to relocate if needed.
The goal isn't necessarily to leave. The goal is optionality. Having exit options changes your relationship with your state. You're not captive—you're choosing to stay. That choice position is valuable even if you never exercise it.
If you can't, organize. The non-sovereign majority will need collective action. Political power to ensure states work for those who remain.
If you're location-bound—teachers, healthcare workers, tradespeople, service workers—your leverage is collective, not individual. You need states to provide value: infrastructure, education, healthcare, security. The sovereign individuals can exit if states fail them. You can't. So you need political organization to ensure states serve residents, not just compete for mobile elites.
This isn't radical. It's practical. The sovereign individual future makes politics more important for the non-mobile, not less. If the wealthy can leave, the remaining population needs to organize to ensure they're not abandoned.
Either way, understand. The twentieth-century nation-state is not the end of history. It was an adaptation to industrial technology. Digital technology is creating something new.
Davidson and Rees-Mogg got the direction right. The speed is increasing. AI is accelerating.
The sovereign individual was right. The question is whether that's good or bad.
The answer depends on where you sit. If you're high-skill, mobile, comfortable with digital tools—it's probably good. You get optionality, leverage, freedom from state overreach.
If you're location-bound, community-rooted, dependent on local services—it might be bad. You're competing for state resources against a declining tax base as mobile wealth leaves.
The prediction was accurate. The implications are complicated. We're living through the transition now. Choose your position carefully.
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