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Decentralization, centralization, and new frontiers

In this recent post by Naval Ravikant, he argues that innovation seems to like two things: decentralization and a frontier. He starts by giving the examples of more decentralized states (i.e. smaller federal governments) and the Wild West. The American frontier was, as you know, wild. But it was also a place of great innovation.

Naval then goes on to talk about the pendulum that tends to swing between centralization and decentralization. And in the world of technology, the last decade has been one of centralization (big companies). But this pendulum is much broader. Cities, as we have talked about before on this blog, are constantly in tension between centralizing and decentralizing forces.

COVID was a powerful decentralizing force for cities. Everything was closed and we were all supposed to stay home. And so most/all of the benefits of centralizing in a city were suddenly, yet temporarily, turned off. Many people naturally decentralized. But when the dust finally settles, I highly doubt it will be as dramatic as most people initially thought.

We know that cities and urban density encourage innovation. That’s why “unicorns” tend to overwhelmingly originate in big cities. But here’s the thing: this is a form of centralization. The fact that cities even exist in the first place tells us that their centralizing forces are winning out over the decentralizing ones.

So how do we reconcile this with Naval’s argument that new frontiers and decentralization are actually what are needed for innovation? I agree wholeheartedly that one of the key innovations with crypto, for example, is that it is decentralized and permissionless. But what does this ultimately mean for cities and our built form?

Does it encourage a similar sort of decentralization to happen? Or is the irony that decentralized technologies actually still thrive in centralized urban places? We may all be online buying NFTs, but we still want to get together in person to show them off and exchange ideas.

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