The Sovereign Datacenter
In this blog, we’ve walked through how VC is strategizing to establish sovereignty, its own nation-state, the real deal, and what that demands of them. From earlier posts, we understand that VCs need recognition of sovereignty by “sanctuary” countries, they need an environment free of taxes and regulation, they need their own economic system (crypto) and they need weapons, which they are currently building out in the form of a “startup military” helmed by a16z, Founder’s Fund, Lux Capital, and the CIA’s venture capitalist fund, In-Q-Tel.
But another serious plank of tech sovereignty… is that of technology infrastructure itself. I think some of the moves that we are seeing in the market from VCs, such as the maneuvering between OpenAI and Microsoft, and the re-appearance of Oracle on the scene managing AI workloads in collaboration with Nvidia, have the whiff of this underlying issue.
New types of applications — AI applications which require massive amounts of data processing and massive data stores, metaverse apps which require a much more immersive (graphics, sound, haptics) experience — necessitate new infrastructure plays which support that.
Therefore, if we have a new breed or generation of applications we are looking at perhaps an opening for a shift in the IaaS market; since AWS definitively won early in Web 2.0, the IaaS game has been the slow rubbing of tectonic plates for long years now, with one notable exception in a16z’s IaaS play, Digital Ocean, pretty remarkable for its viability and execution in what is basically the final, or first, level of computing, the IaaS.
Last time, Amazon had caught seriously sleeping, Oracle and Microsoft and, well, everyone, when ec2 came online. It was a full KO from day one. There was a lot of bleeding out among the competition, public and ugly. There are a number of stories about the early days of AWS and the engineering brutality they experienced, very serious workplace abuse. Databases have always been, a bloodsport.
Since then, many of the “clouds” these companies started, matured, and are now much more viable than they were when Amazon mopped the fucking floor with all of them for the past decade. Most of these companies had NOTHING for YEARS on offer besides vaporware as AWS bloomed into the incredibly rich, fully featured, generative, healthy and viable substrate on which much of our infrastructure resides. A masterpiece.
With Amazon Bedrock, its new platform for building and scaling AI apps, including access to LLMs, Amazon is of course positioned beautifully to continue to fucking crush this game. Nice work folks.
However, an opening yet occurs — not guaranteed to be a paradigm shift, but may allow the possibility for some interesting new developments, of which the Oracle / Nvidia collaboration on AI workloads is one. Specialized workloads become a ground of competition.
Yet!!! There are other motives for changes in IaaS beyond simply what is the “best” technically or most programmable. As a venture capitalist, you are going to want as much of that infrastructure pie as you can get, and you do NOT want all of your money and data going into infrastructure that you do not own. That is money out the door that could be going back into the conspiracy itself. Data that is leaving the system. Retention of own data is a significant goal and one that escalates into the quest for sovereignty.
A top venture capital priority is securing themselves from asset seizure from the US government. (And yes, they see taxation as a form of asset seizure). This anxiety comes up again and again and again, particularly in the context of what could happen in the event that the American economy catastrophically collapses. VCs see America as a fallen state and they feel the need to disentangle themselves from the sinking ship. They fear both being constrained by the “hostile” regulatory and legal system during this economic fall, and they fear that America will go after them for money to prop it up, considering how much wealth is concentrated there.
This fear has featured prominently in The Network State (as ghostwritten by Marc Andreessen), which offers our most in-depth look at the venture capital plans to “go their own way”. VC envisions a desperate US government that will turn to asset seizure from venture capital and their companies and luminaries in the event of a collapsing economy. A16z suggests as a solution, that perhaps there be a constitutional amendment guaranteeing the freedom of one to hold crypto currency. So that holding crypto would be a constitutional right. Ultimately of course, sovereignty allows us to move behind the issue of the American regulatory system entirely and is far more probable.
The venture capital anxiety about having their shit taken by nation-states, demonstrates how crypto, as implemented by VC, has NOT proved to be anywhere near as asset seizure-resistant as advertised. Consider that a16z is touting anonymity, freedom from “the system”, and asset-seizure resistance as a benefit…. while launching an economic war in the background to secure actual asset seizure resistance, which can only be gained through sovereignty. AKA, only the VC sovereign can seize assets.
To the point of crypto NOT living up to supposed “core, hardened technical principles”of anonymity, freedom from governments, as a non-seizable asset, self-sovereignty, etc., there’s a bit of reporting out in WSJ that highlights just how vulnerable the cryto ecosystem actually is to nation-state level threats:
“Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous. Law-enforcement agencies, working with cryptocurrency exchanges and blockchain-analytics companies, have compiled data gleaned from earlier investigations, including the Silk Road case, to map the flow of cryptocurrency transactions across criminal networks worldwide.
In the past two years, the U.S. has seized more than $10 billion worth of digital currency through successful prosecutions, according to the Internal Revenue Service—in essence, by following the money. Instead of subpoenas to banks or other financial institutions, investigators can look to the blockchain for an instant snapshot of the money trail…
Blockchain analytics provide law-enforcement investigators with an important piece of the blockchain puzzle—mapping the flow of cryptocurrency belonging to specific people and groups. Greater regulatory scrutiny of cryptocurrency exchanges has also helped. Exchanges have stepped up systems to identify the parties they do business with—under so-called know-your-customer requirements—and are more responsive to law-enforcement inquiries.”
Much of this comes as regulatory bodies are now starting to catch up to what is happening and examine and intervene in what is happening in crypto. The halcyon days of scrutiny-free, small-fish crypto wheeling and dealing by the underbelly of the industry, are coming to a close, and the reality of what crypto and its financial ecosystem mean, is setting in at the level of nation-state awareness.
It is within this environment that venture capitalists are looking to secure sovereignty, and in response to this threat.
As long as VCs don’t have sovereign technical infrastructure, it is incredibly vulnerable, in particular, to the American government but to governments around the world. This brings us into the broader question of what it means to establish technical sovereignty, and what pieces of that are required.
As we noted, most of the startup economy is built out on AWS, the far and away and above winner of the cloud computing wars from the last bubble. For venture capitalists like a16z, reliance on Amazon means reliance on the US, as Amazon is very much an America company and will remain so, having no ambitions to leave, having no reason too, and also, Amazon is not a fascist state.
Now, raids on datacenters have been extremely rare, due to the co-location of data which makes it impractical to isolate hardware for seizure and shut down. But if there was a massive battle between the crypto VCs and the regulatory bodies of America, there is no reason that wouldn’t change.
You are vulnerable where your datacenter are, period.
As a VC starting a new financial criminal empire, the concern about raids and subpoenas and seizures and audits and inspections is high. They are designing for the realization of crimes; they see those crimes come to fruition on the horizon, and they are planning for THAT scenario: breakaway.
They might seem paranoid, but they are thinking about super material and existential threats to their ability to pull all of this off. If you are planning to flee America to evade taxation on trillions of crypto assets, you are extremely, extremely worried about asset seizure.
Their anxieties have having little to do with the threats in this moment and having a lot to do with VC planning an escalation path that brings it into a potentially serious face-off with America and other western countries. They are PREPARING for the crime and ANTICIPATING this level of conflict between the rising VC state, America and other heavily regulated jurisdictions. When these things start to become more out in the open, and when the real fight breaks out to get venture capital and startup money out of the country into VC sovereignty, we are in uncharted territories.
VC is not necessarily expecting a smooth exit, and at the least, will be prepared for a high level of resistance and even for the worst case scenarios. Remember, they’ve spent 10 years building out a complex network of underground bunkers in locales all over the world. Possible future sites of sovereign datacenters?
Conflict with America, and potential investigation for financial crime, increases the risks of raids on datacenters and opens that to a much wider vulnerability. In this situation, VCs and crypto startups have no escape route and the location of their data confers sovereignty over it, in these cases both to Amazon and to the US and other jurisdictions where there are datacenters, within the deep network of global infrastructure that holds up all of this bullshit we see before us.
A16z DOES actually have a generally admired and viable IaaS, Digital Ocean. But those datacenters are still subject to rule of law. In order to get actual data sovereignty, you have to own the land.
The venture capital plans are to set up archipelagos of land that they have “crowdfunded” between them, to operate as a distributed nation and eventually to then create some kind of re-converged capital. They need technical infrastructure within its own jurisdiction or within the jurisdiction of a “sanctuary” country who has agreed not to, or who lack the means to, execute on raids, seizures, etc. of datacenter and technical infrastructure.
What happens next? I don’t know! This brings up more questions than answers, though perhaps there is a simpler solution that I am not seeing. Building out sovereign datacenters that are globally competitive, or even uphold the personal technical infrastructure of the “tech nation”, would be a monumental effort, but it also seems required by the situation.
VC does not want to answer to ANYONE about its data, datacenters, technical infrastructure. This is a true challenge and one of the largest they will face. You are not a sovereign if any other nation-state holds the land your data is sitting on and has jurisdiction over your data.
I do think that a VC sovereign technical infrastructure, would offer a potentially massive market opportunity as well; holding sovereignty over their data, and thus the customer is by proxy, under the jurisdiction of the tech nation-state, which has consistently asserted a belief in 0 regulation. With sovereign infrastructure, VC is able to provide a criminal harbor and to restore, for profit, these properties of crypto that were purported but have failed under the republic: freedom from asset seizure, supeona, raids, audits, taxation, and so on. The establishment of sovereign datacenters and a GLOBAL network of sovereign datacenters, in fact extends some of the benefits that VC seeks for itself, to a potential customer base as well as to its own functions (I.e. Hosting startup software). If VC will not be compelled to cooperate in any way with any entity outside of itself and its customers, that gives its customers a significant security in itself, nor will the VC nation impose taxation, and so on.
I’m not sure how it all fits together, but with Oracle Cloud and Larry Ellison back on the scene alongside a16z, my interest is absolutely piqued in potential future infrastructure collaborations. With Larry Ellison and the interests he represents on board, you have some EXTREMELY LEGENDARY FUCKING EXPERIENCE building global datacenters, Larry is the GOAT, Larry Ellison is the founder of Oracle, the monster database company that absolutely changed the face of global computing forever, the first to do it. Oracle is the bedrock on which the technology industry was built. Larry Ellison is the original tech billionaire, he was one of the first to seriously invest in life extension research, and he is looking not a day older than when I first set eyes upon him 10 years ago.
So now that he is popping up alongside our little a16z + PayPal Mafia conspiracy more and more (he’s in deep with Elon on Tesla, makes sense, they are global scale hardware luminaries) , that brings with some extremely serious heft in the market, legendary execution of large scale, physical infrastructure projects. Which is just what they need for this. With Digital Ocean, the PayPal Mafia + a16z conspiracy got some really important and needed experience in the IaaS space, and that’s vital here because that is an exercise in VC technical sovereignty in and of itself — after all, IaaS came out of tech giants, not out of startups. And that has gone very well for them. Without that competency in infrastructure, their visions over the next few decades would be compromised.
This is just as much of a core pillar of sovereignty than any that more readily come to mind.
I do NOT expect a global network of sovereign datacenters to just appear overnight. Though it wouldn’t surprise me if such projects are already well underway. Regardless, this will unfold over time. My goal in this post is to flesh out the problem space of what VC needs in order to leave and in order to be independent and sovereign. When we look at money, workers, land, resources, we also need to be thinking about technical infrastructure and what sovereign infrastructure looks like and how it will be built.
I’m so excited!!! My biggest job when I worked in tech was in databases. I have to admit that Larry Ellison is a personal hero of mine and I cannot be relied upon to appropriately critique him, where in other matters I am reliable to only the facts. Nonetheless on a professional basis, I obviously don’t love to see him consorting with my enemies but I am used to this. Kanye West is one of my favorite artists, a fellow bipolar one superstar, and even HE has posted nice things about a16z on social media. Devastating stuff but hearts break every day, why not mine?
At any rate, we can expect that the infrastructure, the data, itself, will be changing, morphing, as the venture capitalists are themselves changing and morphing.
This is an incredibly serious project, this exercise in nation-building. It is the game of games, that we have played, and our side has lost for all of time. It seems we will lose yet once more.