Tech overreach

THE Network School, which has been in the news for all the wrong reasons of late, bills itself as a startup society located in a hotel-turned-campus hosting a co-living and co-working space in Johor’s half-empty Forest City.

Its business licence has been revoked, but the questions over how it came to operate in Malaysia are still relevant, as is the question of what value its operations have brought to the economy, already acknowledged as an important semiconductor hub and a pivotal link in the global technology supply chain.

With no Israelis carrying dual citizenship found working and living in Forest City, the scrutiny should be over how an organisation like this, with stated aims on sovereignty, was allowed to operate in Malaysia, because today it is Network School, tomorrow what will it be?

With an eye on making the country more business-friendly, has there been proper oversight and due diligence? Or perhaps, there is a lack of expertise in understanding what the Network School’s stated aims are?

Essentially, the Network School is founder Balaji Srinivasan’s experiment in creating a “network state” built around Web3 technology through a gradual process that culminates in sovereignty over physical territory, for want of a better way to describe his plans.

The plans did not come to fruition in Malaysia, and he announced on X that the Network School has signed a memorandum of understanding with Kazakhstan to set up operations in the country after failing to get a meeting with Prime Minister Datuk Seri Anwar Ibrahim.

The blueprint for this digital-first state is found in Balaji’s self-published tome, The Network State: How to Start a New Country, which is also available free online and is, by the way, a Wall Street Journal bestseller endorsed by no less a cryptocurrency luminary than Vitalik Buterin, co-founder of the ethereum blockchain platform.

Balaji is no doubt a brilliant guy and a technopreneur who has led successful ventures and investments, and he should know that governments are committing political suicide by ceding sovereignty over territory.

The book’s thesis centres around people, unhappy over government policy or politics, taking their business and wealth to another country and, in due course, crowdfunding blocs of territory and somehow gaining diplomatic recognition from governments.

A tall order, really.

The reality is that these territories are never really sovereign or independent in a practical sense, since they will be surrounded by a much larger territory with control over natural resources, and what is worse, this sovereign enclave will still be leaching off the civil infrastructure of the larger territory.

The entitlement this entails is unbelievable!

It starts with communities such as the one in Forest City, with social contracts forged through a blockchain platform, gathering like-minded individuals to live and work under a regimented schedule that includes guest lectures from venture capitalists, technopreneurs and scientists, exercise sessions with nutritious meals touted to enhance lifespan, earning cryptocurrency for projects under the Network School umbrella, and leisure activities that include beach volleyball and outings to Singapore.

It reads like a multinational company’s middle managers’ retreat, except that, over time, this experiment aims to be permanent.

Incidentally, Malaysia can claim to be the first country to host such a community.

The question is academic now whether the government of the day would consent to recognising a portion of Forest City as a sovereign territory governed by the rules of its blockchain platform.

For this techno-utopia to work anywhere in the world where there is a surrender of territory, it will need to be located in a country where the central government’s writ is weak, and where the rule of law is also weak, which is the antithesis of where Balaji would want to locate this network state.

Even without the formation of a network state with sovereignty, the much-touted investments into the economy have not materialised in a measurable way.

Turning a hotel into a campus does not count, even if Balaji claims to have invested more than RM100mil to make it startup-friendly.

How many jobs have been created? How many factories making state-of-the-art semiconductor components have been built? He has even claimed that the government misses out on a further RM500mil in investments, while there are even those who say that the government’s investigations will scare away talent and investment.

Well, Malaysia will continue to attract investment because of its first-rate infrastructure, stable policy commitments and the rule of law. No half-baked techno-utopia government.

It is great for him that he has found a new location in Kazakhstan to build a campus that will become “a haven for global techno-optimism”.

As for Malaysia, the rush to become a competitive hub for business and investment should not come at the expense of due diligence, even when welcoming technopreneurs with credentials like Balaji, who promised much but have yet to deliver.

His aims and Malaysia’s aims are not the same.