April 01, 2022 - 10 min read
There is an emergent trend of individuals opting out of jobs tied to physical offices and opting for remote work instead. For knowledge workers, a shift toward remote work has changed the power balance which previously existed between workers and employers. This will eventually result in fierce competition between governments for these workers and the economic dynamism they and their companies can bring.
With remote work becoming more ubiquitous by the day, we are beginning to see a shift from location dependent to location independent individuals, and around the world they’re starting to wonder if they might be able to save more money or live a better lifestyle if they simply moved locations. They could be seeking a cheaper cost of living, better weather, or a lifestyle more uniquely suited for them but which wouldn’t have suitable employment options for them prior to knowledge workers’ collective exiting of physical workplaces. Of course, all of this was put into hyperdrive via pandemic shutdowns and safety precautions coupled with the right technology making the shift feasible in the first place.
Since their work is done online, their residency in one locale or another would certainly be a net gain for the city they choose. Local residents won’t need to fear being crowded out of local labor markets, and politicians should therefore meet less resistance in the form of political headwinds by courting foreign workers and companies.
After all, steady increases in tax revenues from highly productive and educated residents, innovation and service sector investments, and infrastructure developments are more likely the result of a boost in local productivity and a wealthy tax base of residents. This emerging class of skilled, location independent workers is evidence of a new phenomenon we’ll call Sovereign Individualism.
Sovereign individualism is loosely characterized by people whose work and education no longer fit into standardized roles set forth by traditional financial, educational, or political infrastructures. Instead, sovereign individuals leverage technology, in particular e-commerce and digital assets, to exercise increasing levels of autonomy over where they choose to live and locate their companies, and even which currencies to accept payments in. This of course will increasingly include crypto assets as more jurisdictions move to regulate digital assets as legal tender.
The term the sovereign individual was first popularized in a 1997 book by the same name, written by co-authors James Dale Davidson and Lord WIlliam Rees-Mogg. In their book, the authors analyze the transition from industrialist to information-based economies, including digital currencies, the degradation of governmental power, and the liberation of individuals in their ability to interact globally, picking up their value and leaving if conditions are not favorable enough.
As sovereign individuals realize they can prioritize lifestyle, tax incentives, cost of living, and other personal needs into their residency decisions, they’ll increasingly leverage these attributes to seek out locations which offer advantages in whichever lifestyle aspects the SIs decide to prioritize. If these SIs form strong enough networks, the incentives could be aligned to create competition for their talent and productivity.
The phrase ‘vote with your feet’ comes to mind as a pithy summary of the new power dynamics SIs have introduced. Perhaps an example can be found in San Francisco where many remote tech workers seem to be increasingly selling real estate and migrating out of the city, though there may be several confounding factors exacerbating local trends. After all, San Francisco’s weather, culture, architecture, and landscape cannot be beat if one can afford the costs of living and doing business there.
Now, contrast the above sentiment with the changes seen in 2021’s survey:
So, remote workers will be seeking places which offer a lower cost of living, less burdensome tax policies, or even regulatory sandboxes which offer legal protections for innovative startups and cutting-edge tech companies. Thus, municipalities and nation-states will increasingly be forced to adapt their policies specifically to attract this class of sovereign individuals, or suffer the opportunity cost and unseen consequences of neighboring governments attracting these workers and the accompanying economic and social benefits first.
Following the logic of game theory, the SI class appears poised to favorably influence immigration and residency policies for skilled workers across the world through sheer market forces. Sovereign individuals can simply go where they are treated best, or wherever allows for a lifestyle which best suits them personally. This tilts the gameboard in favor of individuals by creating competition for their talent. However, concerns that this new sovereignty will not be ubiquitously shared, but rather limited to those who are fortunate enough to work remotely.
Regulatory sandboxes are analogous to the phrase’s use in software development, in which a testing environment is generated to isolate and validate lines of code before being implemented for official use. An early form of sandbox implementation was the introduction of Special Economic Zones in China such as Shenzhen and Shanghai which allowed for private businesses to operate with fewer restrictions than previous policies would permit.
Putting moral debates about bifurcated economic policies aside, the SEZs attracted nearly half of all foreign investment into China since the late 1970’s, demonstrating that the right incentives can draw so much capital into a handful of areas offering the right conditions for growth. The same will be true for regulatory sandboxes with regards to Fintech and the rise of the SI remote-working class.
In the case of Fintech, regulatory sandboxes provide startups in the private sector to innovate without fear of fines or regulatory liability, particularly punitive measures being retroactively enforced. The goal, of course, is to provide controlled spaces to run real-world experiments, as in the case of crypto assets and other disruptive technologies.
The creation of supervised, flexible regulatory sandboxes therefore welcomes tech innovators and Fintech startups to establish roots within a given jurisdiction. In the U.S., look no further than Austin or Miami for notable examples, though the Tampa Bay area is also ramping up efforts to attract high-skilled workers and innovative companies.
The UK and Singapore have arguably been the fastest movers in rolling out regulatory sandboxes, though Japan, Korea, and Taiwan have also made progress on this front. The way these sandboxes tend to work varies from country to country, but they tend to follow a recognizable script. First, companies apply to a sandbox agency, citing specific regulations companies want waived, and explain how doing so will benefit society and promote innovation.
The agency would then review the application with any relevant regulatory agencies to come to a decision. Successful applicants are usually permitted regulatory exemptions for a specified time period with annual or bi-annual reporting, and extension applications provided where appropriate.
Just a few recent illustrations of regulatory sandboxes and their relevant nuances will be listed, but should not be considered exhaustive, by any means:
Regulatory sandboxes will serve as focal points for high-tech operations and capital flows so long as their policies remain favorable, and putting together teams of local and remote talent is not hindered by labor pools, cost of living, or overly-cumbersome work visa processes.
However, there are other aspects to take into consideration aside from local tax policies or incentives for business entities, especially for sovereign individuals intending to work remotely. This leads to what Balaji Srinivasan has called “the location stack.”
Following two years of COVID-related work disruptions combined with technologies like crypto assets, video-conferencing software, and remote-work project-management tools, the old maps containing start-up hotspots and high-skilled labor are being redrawn in real time. The disaggregation of SI’s personal location with that of their company headquarters and co-workers is already well underway.
When deciding on where to set up their operations, there are a number of factors to consider in addition to regulatory sandboxes, for instance:
To elaborate further regarding work visas, there are several notable examples worth mentioning. First, Taiwan offers an Employment Gold Card which combines work and residence permits with 1 to 3-year visas, and can be applied for online. Applicants must simply prove their salary is above a certain threshold and pass criminal background checks and health screenings.
Portugal offers a D7 Visa for foreign nationals wishing to reside in the country for longer stays using their own sources of income, like remote work. This offers a perfect opportunity for sovereign individuals and remote workers to visit Portugal without having to take time off from work, maximizing mobility and productivity in one fell swoop.
Canada also has an immigration program aimed at attracting skilled foreign talent called Express Entry. Applicants may use a combination of education and vocational experience with proof of enough funding to settle, unless they’ve already secured a job offer from a Canadian employer. Assessments are made on applications and scored on a points-based system, placing applicants into the “Express Entry pool” where the highest-ranking candidates are invited to apply for permanent residency in Canada.
Dubai offers a one year work visa, enrolling successful candidates into a program which includes UAE medical insurance and standard services that residents benefit from. Barbados offers what they call a 12-month Welcome Stamp aimed at remote workers. Anguilla, Antigua and Barbuda, Bermuda, Mauritius, and Mexico all have similar visas aimed at skilled workers not intending to enter local labor markets.
It seems many of the common narratives ignore the importance of sovereign individuals and their collective bargaining power. This new sovereign class will likely connect and form remote, distributed networks first, slowly gravitating towards one another over time in the physical world and coalescing around tech hubs which best cater to their needs.
Despite the freedoms that this remote-worker phenomenon has provided SIs, they will inevitably want to form networks and position themselves to ‘shop around’ and even use leverage to gain favorable terms for immigration and taxation policies.
Perhaps we have already witnessed the birth of these network states in the forms of various blockchain ecosystems and their accompanying tribes. As sovereign individualism takes hold in the minds of sovereign individuals, expect to witness increasing competition amongst localities to attract these individuals, and a clamor amongst the youth to share in the accompanying benefits of the SI lifestyle.
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