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An American's Nation-Building Experiment in a Chinese Ghost City Ends in Failure

动察 Beating

Read this article in 28 Minutes

Cyberspace is everywhere, but it is not a place where the body can live.

Original Title: "An American's Nation-Building Experiment in a Chinese Abandoned Building Ends in Failure"
Original Author: Beatingsenseless

In February 1996, John Perry Barlow signed the "Declaration of the Independence of Cyberspace" in Davos. He told the "governments of the industrial world" that cyberspace was beyond their sovereignty. Then he wrote, "Cyberspace is everywhere, yet it is nowhere in particular."

Relationships in the network do not have to be determined by lineage, military, or real estate. A person can speak, transact, and associate in front of a screen, whether they are in Beijing, New York, or Bangalore, it doesn't matter much.

Thirty years have passed, and the Internet age has not overturned this statement but has instead made more and more people start thinking about the latter part of the statement.

The strangest change in the Internet age in recent years is that it has started bringing people back together. Digital nomad communities, Hacker Houses, temporary cities, one by one moving out of social media, becoming a plane ticket, a lease agreement, co-living, and an identity card.

Balaji Srinivasan is the person who has taken this the most seriously. The path he described in his book "The Network State" is called "Cloud First, Land Last," gathering a community first in the cloud, mobilizing connections and capital, then buying or renting dispersed nodes in reality, and finally, as he says, seeking diplomatic recognition.

In 2024, he took the first step on this path by establishing a school called the Network School, located in the forest city at the southern end of Malaysia. On July 21, 2026, the Iskandar Puteri City Council revoked its business license, and it ceased operations effective from the 22nd.

Genes, Attention, Money, and then People

If you look at what Balaji was doing in the twenty years before, you will understand why he started Network School.

He grew up on Long Island in New York; his parents were doctors who immigrated from Tamil Nadu to the United States. He studied Electrical Engineering at Stanford from undergraduate to Ph.D., then obtained a Master's in Chemical Engineering, and co-founded Counsyl, which conducted carrier screening for genetic disorders. Families preparing for pregnancy would receive a report showing the risk and probability of familial hereditary diseases. This report transformed research and expert terms that were previously locked in a laboratory into a document that couples could take home and discuss at the dinner table.

He once worked on a project called Earn, which allowed strangers to pay for a reply with cryptocurrency, giving a price tag to someone's time for the first time. In 2018, Coinbase acquired Earn, with Balaji becoming Coinbase's CTO, during which he oversaw the launch of the stablecoin USDC. Additionally, he had previously worked as a GP at a16z.

You see, these seemingly disparate experiences are actually part of the same narrative. It transformed something that was previously explained, preserved, and verified by large institutions into records that individuals can read, carry, and transact. Genetic risk is like this, attention is like this, and money is like this. Following this thread further, the next thing that can be packaged and taken away is the individual themselves, along with their work, credit, and social relationships.

So, he himself moved first. He settled in Singapore, and in March of this year, he posted a widely circulated message on social media, essentially stating that libertarianism can only function with Lee Kuan Yew-style order.

Someone Has to Stand at the Door

The idea of moving people along with their property was not something Balaji came up with out of the blue; it has a clear line of thoughtful evolution.

In 1997, former editor of The Times of London William Rees-Mogg and American investment writer James Davidson co-authored a book called "The Sovereign Individual," predicting that information technology would cause nation-states to shrink, individuals would transition from citizens to customers, and casually described a form of encrypted, anonymous digital currency that could transact on a borderless market. Twelve years later, Bitcoin was born, aligning closely with the book’s vision, leading some to believe that Satoshi Nakamoto drew inspiration from this book.

Peter Thiel said this book had a more profound impact on him than any other. In 2009, he wrote that famous essay stating he no longer believed freedom and democracy could be compatible and listed cyberspace, outer space, and seaborne homesteads as frontiers where freedom could potentially regenerate.

Thiel asked, how does one leave a disappointing system? Balaji continues to ponder this question by asking, what comes after leaving.

In "The Virtual State," there is a term, Recognized Founder. A movement advocating for personal freedom, when put into a playbook, begins by establishing a leader.

Balaji articulates his reasons for this clearly. The ability to exit has never been evenly distributed. While some can switch passports, time zones, and lives, others are pinned down by family, debt, and professional licenses. Friends, clients, reputation, and assets are often tied to the past, and no one can disentangle themselves. Therefore, exit cannot be individualized; someone must take the lead, pull together the scattered people and money, and pave the way for those who cannot move. This leader is the Recognized Founder.

This character is actually a bit like Zhang Beihai in "The Three-Body Problem," the space force political commissar who didn't believe that humans could win, spent decades pretending to be loyal, hijacked a starship before the final battle, and escaped into deep space with thousands of people. The novel gave him a tragic air and also left a thorn. The "Natural Selection" was not his, it was a ship built by all of humanity together. The person preparing to exit for everyone, never solely used things that belonged to himself.

Vitalik Buterin, the Ethereum founder, also saw this thorn. After reading "The Network State," he acknowledged that Balaji took ethics and communal living more seriously than most self-centered libertarians and then posed two questions. Why must there be a recognized founder? The new community is using resources from the surrounding society, so whose account is this? The former question casts doubt on the power in the hands of the leader; the latter question is about that spaceship of Zhang Beihai.

In the spring of 2023, Vitalik organized a temporary city called Zuzalu by the bay in Montenegro, where around two hundred people stayed for two months, discussing encryption, longevity, and governance. This time, there was nominally no recognized founder, and everything relied on member self-organization. After two months, activities such as meals, workouts, and events went relatively smoothly. Over a year later, upon his own review, Vitalik admitted that two of the most challenging issues had always been unresolved, namely governance and membership, especially the latter. And regardless of his personal willingness, the outside world referred to this place as "Vitalik's temporary city" from start to finish.

After circling back, the problem returns to the starting point. Regardless of how warm the term "community" is, there still needs to be someone at the door deciding who enters and who doesn't. The only difference is whether this person is written into the charter in black and white or is just assumed by reality.

The Network School is Balaji's answer.

How to Screen for a Community with an Application Form

In August 2024, Balaji announced the establishment of the Network School, with the first phase running from September 23 to December 23. Rent for a shared room was $1,000 per month, and for a single room was $2,000. The four daily activities were summed up in four words: Learn, Burn, Earn, Fun. Learn technology, exercise, earn together, live together.

He referred to the recruitment targets as "Dark Talent," borrowing the term "dark matter," meaning talent that has not yet been noticed by old institutions. This term resonated with many people. Education, company names, and big cities still allocate work and life for people in advance. Many capable individuals never encounter a true opportunity throughout their whole lives.

However, upon closer inspection, you will find that Network School did not eliminate the threshold; it simply changed its appearance. Some early applicants paid a deposit of up to $2,000 before the school's location was even announced. The application form not only inquired about technical background but also asked you to rate a list of unrelated things, including Bitcoin maximalism, military technology, Dubai, Marxism, Jordan Peterson, and Israel. The first round received over 4,000 applications from 80+ countries, but there were only 128 spots available.

The elevator for a side event in Xuhui District

Today, individuals, couples, families, and teams can all apply to join Network School, whether for a month or a year, with shared rooms now ranging from $1,500 to $3,000 per month. Fellowship is another application option. Founders and creators from any country can apply for a $100,000 grant with a one-year membership, and the webpage lists a string of celebrity investors' names.

In his 2025 retrospective, Balaji admitted that attending classes and making money were somewhat contradictory for everyone. The curriculum was too basic, leaving senior engineers feeling like their time was being wasted; if the course were more challenging, those mainly looking to connect with others couldn't keep up. A single course couldn't meet the needs of these two types of people simultaneously. In the end, the smoothest-running activities turned out to be fitness, playing, eating together, and living together.

A member who stayed for a month in 2025 recalled that the school was located in a hotel in a forest city, with a gym on the rooftop, the thirteenth floor used for dining and events, and the coworking space a kilometer away. At the same time, there were over a hundred people, with the most Indian faces followed by Americans, and males accounting for about 80%; most activities were optional, often organized by the members themselves.

The Program Itself Is a Punishment

In early July, an anonymous Instagram account challenged the school, claiming that there were Israelis in Network School using third-country passports to enter Malaysia. At this time, Johor State, where Network School was located, was approaching an election, and Malaysia does not recognize Israel, as the two countries have no diplomatic relations. This accusation quickly became a political issue.

On July 14, the Ministry of Home Affairs intervened. The next day, the Immigration Department checked 266 foreign nationals from 40 countries, and all their documents were valid.

On the 16th, Balaji posted a lengthy response, and the entire article essentially revolved around three actions: proclaiming innocence, settling scores, and laying it all out on the table.

He said the allegations were baseless. The officials who visited him were polite and professional, but he cited an old saying in the U.S. legal community, "The process is the punishment." Even if nothing is ultimately found, the fact of being investigated is already a punishment. Time, reputation, morale—all are drained away in the process.

He meticulously calculated the consequences. Billions of ringgit in actual money, the livelihoods of dozens of locals, even the surrounding property prices were driven up by this project. After tallying up the accounts, he decided to put on the brakes. The planned expansion of 500 million ringgit that was in the pipeline, as well as the global scholarship program jointly operated with the Replit founder, were all put on hold.

Then he came clean. He expressed his desire to meet with Prime Minister Anwar, to sign a memorandum of understanding—a written acknowledgment that he and his friends were welcomed here. He said they didn't want money, just a meeting. He said top executives from global tech giants and the largest venture capital funds were all watching to see how Malaysia would handle this situation.

On the other side, officials from the City Council visited two premises and found that one had no operating license at all, while the other held an office license but was actually conducting classes inside. As a result, a cease-and-desist order was issued on the 18th, and the licenses were officially revoked on the 21st. State Minister Wong Hafiz expressed support for this action, stating that no one is above the law. He also took the opportunity to request the Ministry of Finance to reexamine all the official approvals previously granted to this company.

The Ghost City was already waiting for them

Many would assume this is yet another story of a rebellious tech community crossing a red line in a conservative country. But the reality is quite the opposite—Malaysia is not conservative at all; it can even be considered one of the most diligent countries in the world in attracting this group of people.

First, let's take a look at the Forest City development. Located at the southernmost tip of Johor, bordering the Second Link between Malaysia and Singapore, this reclaimed land was a joint venture between Country Garden and a Johor state-owned company, with the Chinese holding a 60% stake. Launched in 2016 with then-Prime Minister Najib Razak personally presiding over the event, he declared it a duty-free island. The project had an estimated total investment of around $100 billion and aimed to accommodate nearly a million residents.

This city was primarily targeted at Chinese buyers. Sales galleries were set up in dozens of cities across China, with 60% of buyers coming from China, attracted by the duty-free policy, proximity to Singapore, and the allure of overseas property ownership.

But things took a turn later on. In China, in 2017, the gates for foreign exchange conversion tightened, with an annual limit of $50,000 per person explicitly prohibiting the use of funds for purchasing overseas properties, leading to the closure of showrooms one after another domestically. In Malaysia, following the 2018 election upset, Najib, who had once stood at the Forest City podium, was ousted, and the new Prime Minister Mahathir declared that homes in this city would not be sold to foreigners and those wishing to reside there should not expect to obtain visas. While this statement did not become an official law later on, the market understood the message. Those who wanted to come couldn't, and those who had bought properties were unsure if they could live there. A city prepared for a million people now hangs on the edge of the straits.

When the BBC visited in 2023, the project was only about 15% complete, with less than 1% of the planned residents moving in. At night, the tall buildings were dark, resembling a ghost town. This city, designed for millions, became the largest inventory item of the entire exodus era.

Still frame from "The Great Gatsby" movie | Image Source: Douban

In contrast, Malaysia doubled down. In 2024, the government designated the Forest City as the country's first special financial zone, specifically targeting enterprises and remote workers in the fintech industry. Looking further back, there was the KL20 plan aimed at benchmarking global tech hubs, the digital nomad visa, and an economic zone jointly developed by Johor and Singapore. Balaji later said that he chose to establish the Network School here because he was attracted by these policies.

A nation eager to clear inventory and a community eager to find an address found a perfect match in an empty city. The nation offered policies and incentives, while the community provided people and funds, celebrating the honeymoon period without scrutinizing the contract. The nation thought it was attracting investors, while the community thought it had found a foundation. The enthusiasm of investment attraction and the rigor of enforcement have always been two sides of the same coin. Its welcoming gesture signifies its need for you, not its familiarity with you.

There is also a complex matter at play. Count the layers of power stacked on this land reclaimed from the sea. A city built by Chinese developers, state-owned enterprises from Johor holding shares, federal government introducing special zone policies, the Sultan exercising traditional authority, capital overflow from across the strait in Singapore, and now a community claiming to be a digital nation all squeezing into this space. In medieval Europe, such areas with overlapping sovereignties were called borderlands, where residents enjoyed low taxes, high freedom, and unstable regulations. Balaji chose the Forest City precisely because it is a 21st-century borderland with numerous loopholes and low prices. However, a confrontation of any layer of power in the borderland could bring everything to a standstill.

A Cow Growing Wings

In "Sovereign Individual," there was a metaphor that said how the state treats taxpayers is akin to how a farmer treats cows, keeping them on the farm to milk them, but soon the "cows will grow wings."

Many people like this statement, treating it as an enjoyable read. However, on the next page, it actually describes how a desperate farmer will take desperate measures to contain the escaping herd, using covert and forceful means to restrict access to the liberating technologies.

Wings represent the trend, fences symbolize reality, and both sentences are prophecies, with one fulfilling before the other. July in Johor demonstrated how fences would be erected.

After the fence was erected, there was actually a precedent in history.

In 2013, Honduras passed a law allowing the establishment of semi-autonomous cities. The U.S. company Próspera actually built one on an island, with its own regulations and a written commitment of no changes for fifty years. In 2022, there was a political shift, and the new Congress unanimously repealed this law, with the president stating it was to reclaim sovereignty. Próspera did not move and instead sued the country in the World Bank's arbitration court, seeking nearly $11 billion in damages, which is roughly two-thirds of Honduras's entire annual budget. Honduras's response was to withdraw from this arbitration mechanism. The lawsuit has yet to be resolved to this day.

Looking at the experiments mentioned earlier together: Zuzalu, which took the lightest approach, dissolved upon maturity; Próspera, which delved the deepest, is embroiled in an endless lawsuit; and Network School, which fell somewhere in between, was ousted with a license. Their commonality is that once they land, they are within reach of sovereignty.

After enduring this ordeal, Balaji presented what could be called a set of wings. Capital can be reallocated, and people can move to other countries. This move is not effective against anyone. To a city that has been vacant for a decade and is hoping to recoup its investment, this is a threat with every word. But to a government that has just publicly stated, "No one is above the law," being seen bending to money in public, with a much greater cost than losing an investment, especially during an election month.

On July 22, the shutdown order for Network School took effect. The rooftop gym, the thirteen-story restaurant, and that one-kilometer stretch of road are now empty. In the evening forest city, there is yet another dimly lit window.

Thirty years ago, Barlow said that cyberspace is everywhere, but it is not a physical dwelling place. Now, the first half of the sentence has returned to a website that can still be accessed, while the second half is left to the buildings that have darkened in the forest city.