It is so incredibly naive about how the world would actually work. It basically presumes that you can pass the duties of government to private corporations. Here are just a few of the obvious failure points:
- It presumes that Ring and ADT (the private security companies) are relatively equal in strength. Otherwise war (or just refusing to participate) might be cheaper. What if it is suicidal for ADT to attack Ring for one subscriber?
- It presumes that the investigation will be fair given that information may not be shared and that the Walter character is able to be investigated by an outside company.
- Relevant to point one, it presumes that one company getting larger will not end up dominating the market. Once a company is large enough, it can start ignoring the smaller companies so everyone needs to subscribe to the big one. This is a failure point of decentralized legal systems (e.g., Medieval Iceland) across history.
- It assumes that anybody involved cares about a fair arbitrator. What if they are unfair? What is the recourse?
- In the end, the other key point is that you need a regulated market to enforce all of these contracts. Who is regulating the market? Because if it is the government then you don't need the companies.
- Relevant to point 5, just refusing to pay is a hard thing to counter in this set-up. What if Ring decides that it is good for its marketing not to allow Walter to be punished? Don't we end up in a war?
- Finally, this is a recipe for fragmentation. The whole idea of personal loyalty, reputation, and interpersonal connections is how the middle ages worked. It's going to struggle if it meets a unified state. It's also a terrible idea for a large country (like the United States). It isn't an accident that decentralized law shows up in Iceland. By 1700, the population was only 50,000 (which is smaller than a small US city) which makes a fragmented personal relationship society much more viable (the whole country is one large town).