On this episode, we're joined by Patri Friedman of Pronomos Capital to discuss the more practical facets of building a charter city. What are the building blocks of a viable charter city project? At what milestone can a charter city be deemed successful, and what common mistakes can a nascent city stumble upon?
Friedman himself is in favour of corporate governance, but also expands on and compares alternative methods of administration and explores the pitfalls that could lead to the undesired discontent or even rebellion of a charter city, what he creatively calls the 'Avatar Effect' - after the events between the colonists and native inhabitants of James Cameron's fictional movie series. Freidman warns that while no system is perfect, the key is not to enact drastic or sweeping changes that could leave sizable portions of the city's population unhappy, which would lead to a quick undoing.
At what point does a charter city earn its title? The consensus varies as the industry evolves, however, Patri suggests that at least 10% of the legislation needs to diverge from that of the host state, in favor of more dynamic development within the charter city. The clearest success story today is Prospera in Honduras, which meets the criteria of not just substantial legislative self-determination, but sound legal standing for its existence that is enshrined in the host country's constitution. He is clear, however, that a charter city's goal is neither independence nor sovereignty from the host state.
So what are the goals? Higher earnings, a better state of life, and economic contribution to the greater state, directly through the addition of resources or indirectly through the migration of skill and talent. A charter city should spur the development of various industries, like Endeavor in Kenya which is now responsible for a sizable portion of the country's coffee cultivation.
Patri argues that the attributes of a charter city are not easily transplanted onto existing settlements as it could displace and disenfranchise those who already live there. But perhaps some of those very attributes are just what the micro-states of the Caribbean need in some capacity to breathe new life into their stalled socio-economic engines.
On this episode, we're joined by Patri Friedman of Pronomos Capital to discuss the more practical facets of building a charter city. What are the building blocks of a viable charter city project? At what milestone can a charter city be deemed successful, and what common mistakes can a nascent city stumble upon?
Friedman himself is in favour of corporate governance, but also expands on and compares alternative methods of administration and explores the pitfalls that could lead to the undesired discontent or even rebellion of a charter city, what he creatively calls the 'Avatar Effect' - after the events between the colonists and native inhabitants of James Cameron's fictional movie series. Freidman warns that while no system is perfect, the key is not to enact drastic or sweeping changes that could leave sizable portions of the city's population unhappy, which would lead to a quick undoing.
At what point does a charter city earn its title? The consensus varies as the industry evolves, however, Patri suggests that at least 10% of the legislation needs to diverge from that of the host state, in favor of more dynamic development within the charter city. The clearest success story today is Prospera in Honduras, which meets the criteria of not just substantial legislative self-determination, but sound legal standing for its existence that is enshrined in the host country's constitution. He is clear, however, that a charter city's goal is neither independence nor sovereignty from the host state.
So what are the goals? Higher earnings, a better state of life, and economic contribution to the greater state, directly through the addition of resources or indirectly through the migration of skill and talent. A charter city should spur the development of various industries, like Endeavor in Kenya which is now responsible for a sizable portion of the country's coffee cultivation.
Patri argues that the attributes of a charter city are not easily transplanted onto existing settlements as it could displace and disenfranchise those who already live there. But perhaps some of those very attributes are just what the micro-states of the Caribbean need in some capacity to breathe new life into their stalled socio-economic engines.
Rasheed: Hi everyone. And welcome back to the show. Today I am joined by Patri Friedman, the founder of Pronomos Capital, and a leading global figure in the charter cities movement. I am very much looking forward to talking with Patri about charter cities and the impact they can have on the developing world.
Thank you, Patri, for joining me on the podcast today.
Patri: Thank you for having me.
Rasheed: I want to start right with the distinction between seasteading and charter cities. I'm curious if there's a different kind of person who is more attracted to seasteading concepts as opposed to land-based charter cities.
Patri: Yeah, for sure. One example is people who are just really into the ocean, to blue technology, to things like that. Another one is, I think that's seasteading people doing like DIY communities in the U. S. and other countries, there's like a pioneer personality that's really excited to do a lot of things themselves.
I want to build my own water system. I want to build my own power system and we always call this kind of the high road versus the low road in seasteading and I think there's a bit more like low road people because it's just easier for people to imagine like getting a barge and doing their own aquaculture and things like that whereas a charter city the comparisons are most often made to Singapore, Dubai, Hong Kong and so people think high road there more often.
Rasheed: People who are very into tea studying, is it primarily just the U. S. city practical interest or is it also a political calling as well?
Patri: When I started, for me it was all about political calling, but over the years it's changed somewhat and now it's a mix. I feel like the more serious people in the space, there are some ocean builders who do have significant political motivation, but there are a number of others, the Arktide people, who are much more concerned about developing the blue economy.
Rasheed: What do you think is the biggest hindrance to seasteading becoming a lot more popular activity? It seems to be still very, very niche.
Patri: Yeah, it's cost. It's just pure cost, in my opinion, cost and difficulty. It's, they say, a boat is a hole in the water that you pour money into, and I think seasteading makes a much better meme, but captures the attention, and we've got things like Bioshock and Waterworld like it's really exciting, but at the end of the day, oil platforms are funded by having, they might have a million in revenue a day, and I feel like more people should be working on cruise ships.
So there's something about cruise ships where there's this gap between a carnival cruise line that travels a fixed route as part of a large company with significant economies of scale. And it's quite affordable, say a hundred bucks a day or less. And then the one condo cruise ship we have The World, the cheapest apartment was like a million and a half and 250k a year in OpEx has an entire logistics team to deal with the fact that it doesn't hit the same port again for at least two years as it travels around the world. They still, it launched more than 15 years ago now, and they still haven't sold out. The bank sold it to the owners of the units and lost a lot of money at it.
And this is something I'd really like to see more work done on is like, what exactly are the differences? Is there a possibility to do a residential seastead that travels a fixed loop? Maybe the Caribbean, it's a very natural place for it and gets those costs down to less than a hundred bucks a day.
That could work. Or alternately something like a medical tourism cruise ship. Now, the key legally is that you need to be mobile and you have to have an itinerary that has more than one country. Somebody was just not getting this on Twitter this week, which is if you're a fixed platform, then you're considered resource extraction and you're regulated by the coastal state out to 200 to 350 nautical miles.
Whereas if you're a moving vessel, you are regulated by the coastal state out to 12 and then by the flagging state beyond that, but then they used to have trips to nowhere in the U. S. like gambling and booze cruises and the U. S. changed the laws. I think it's primarily the Jones Act. These laws make it so that if you only go to U. S. ports, then you're Canada's. You have to be U. S. flagged, U. S. labor laws, U. S. everything. So something like L.A. or San Diego to Tijuana, something like that, some short fixed loop that hits two countries. You could do Miami to an even number of Caribbean islands for medical purposes for sure. Maybe for residential.
There might be something there. Somebody with business competence needs to dig in.
Rasheed: You were working on a medical cruise ship project, I believe, at some point. Are you still doing that?
Patri: No, that was for a little while in 2011. Basically, my partner, James, and I were running the Seasoning Soup. We're like, what this needs next.
There's a nonprofit. That's great. We did this for three years. Now what it needs next is a business. And that looked like the best business to us. But then Honduras announced their ZEDE program. We were like, wow, that's a really high level of autonomy we could build on land. So we pivoted to that. I started one of the first companies there.
Rasheed: What is the boundary between Special Economic Zone and Charter City?
Patri: I think of it as the depth of the reforms. Typical reforms in Special Economic Zone might be tax breaks, tariffs, labor laws, things like that. They're very shallow. Whereas a Charter City, I look at something like Dubai Financial Center and I say it has a different body of law.
I'm a programmer. A lot of my thinking is software metaphors for government. But it's like the difference between a patch. We have this whole code base and we have a patch. And the patch is one percent the size of the code base versus being, "Hey, here we actually like a quarter or more of the code base is totally different".
We're importing different core libraries. That's a charter city.
Rasheed: What's your base model for thinking about charter cities? A lot of people use Hong Kong as an example, but that doesn't really seem very appropriate to me.
Patri: The ways in which Hong Kong fits are that it was a city, it was chartered, it was run by the UK, and it got to have very different laws than England did, like many of the UK's other foreign territories.
So it had really different laws than England, it had really different laws than China, and it made use of those laws and its geographic position to get incredibly wealthy. It's actually more fitting with Paul Romer's original model of charter cities, which hasn't worked at all, where it would be like a developed country would run the city.
And it was actually like that with the UK running it. It's just that in the modern era, developed countries don't want to be running cities in the global south, maybe unless you're China. And even then they like plausible deniability. And countries don't want other countries having such a strong foothold there.
Hong Kong was created in a different era, and it was that model. The ways in which it is nowadays not a charter city, really. Actually I don't know that I would say that, one country, two systems. It does have really significant legal differences from China, but I would say it's becoming less of a charter city every year as it gets more integrated into China.
And to be fair, I don't know. For a while, for a couple of decades, China was liberalizing economically and moving towards being more like Hong Kong as well. Yeah, but I would say it counts.
Rasheed: But the point where it was ran by a different country, so it had an important culture, important administration, all those things, that's not the kind of model that any current charter city proponent is talking about.
Patri: Right.
Rasheed: What then is the kind of example?
Patri: Well, except Romer in 2009. That is what he was talking about.
Rasheed: Besides Romer, at least now, that's not what you were talking about, for example.
Patri: Yeah, nobody's talking about that. It's just a no go.
Rasheed: So what then is the kind of model you try to explain to someone? Hey, do we have any examples that you can say, hey, look at this one?
Patri: I mean, I think the main example is Honduras Prospera as an actual charter city. The other state-run model is the Dubai International Financial Center, it was created by the host country. They created an area with very different laws. So Prospera is under the Honduran ZEDE program. They follow the Honduran constitution and treaties.
They follow its criminal law, but they get wide latitude to write almost all commercial law, which is, for those not familiar with the differences, just think everything's not a crime, which means everything from lawsuits, contracts, labor law, medical regulations, stock markets, and currencies, like zoning and building codes, it's really the vast majority of the law.
So they're operating on the Caribbean island of Roatán under this Honduran program, and I consider them the only modern charter city. There are two other zones in Honduras. Both operate successfully, but neither of them wants to become a Hong Kong, whereas Prospera does. So while du jour, they have similar rights, I think of them in a different category.
Maybe I should be counting them too.
Rasheed: I don't usually hear people talking about Bonifacio Global City in Manila. And that to me is one of the best examples of a charter city in a category by a different name, of course, I just lived there in the Philippines, and it's now the second largest business district in the Philippines entirely has over a few million people per day as workers and 30 years ago, it was a failed military base of the U.S.
Patri: What are the legal differences?
Rasheed: Bonifacio Global City, or BGC, is actually partly owned by a private conglomerate. So it's privately developed. It's co-owned by the government, a statutory board of the government, and also these private developers, mostly Ayala Corporation. And they essentially design the rules.
It has different kinds of policing criteria, different tax requirements, and so on. And it's obviously developed in a very particular way. It looks like Singapore if you see it from the skyscrapers.
Patri: But in like the code base, right? You know what I mean? I mean, something like different tax, different policing. I would still put that on the 1 percent patch level of reform. Does it have different commercial law or what percentage of the regulations of the Philippines do you think are different there, if you had to make a wild guess?
Rasheed: I would say not a very high percent is different in that sense. But see it's tricky because in the Philippines they have this separate thing called PEZA, which is the Philippine Economic Zone Authority.
So the PEZA has a lot of liberty in signing different commercial laws, which let's say non PEZA corporations don't have access to it, including even immigration. They have easier immigration criteria for foreign nationals, for example. In the Philippines, there are over 400 PEZA-type organizations, and many of them are inside BGC, for example.
That actually is a big difference between how non PEZA corporations and PEZA corporations work in BGC in the Philippines. So there is actually a very substantial difference in that sense. And it's essentially, it's a megacity at this point. I don't hear many conversations in terms of the Charter City world about BGC.
Patri: Yeah, I think that's why. There are what? 3,000 to 7,000 Special Economic Zones, depending on how you measure them. If we don't set a very tight filter on what we mean, then we're going to be talking about those thousands and thousands of SEZs. And so for me, it's something like, I don't know, 10 percent or more of the law is written locally by the jurisdiction or its operator, something on that order. Although I say that, projects in the U.S., something that has a U.S. state level, is about 10%? It's certainly more than 10 percent of taxes at the U.S. state level. Is it more than 10 percent of regulations if you have like city, county, or state? I'm actually not sure.
Because people are always asking me about things in the U. S., and I'm like, no. The percentage of the legal stack that we control is just so much lower. And look, if that was the best that I could get in the world towards my long term goal of making new countries, then sure, I'd do it. But it's not the best.
There are a number of countries willing to do, make an agreement like the Honduran program and partner with us more deeply.
Rasheed: Yeah, I suspect, although I'd be curious as well, I should go and do a proper analysis that I think the PEZA laws in the Philippines are definitely more than 10 percent different compared to standard Philippine non-PEZA laws, but that'll be a different comparison to do, but that being said, even in Prospera, for example, Prospera, still very early stages, it's a charter city, primarily on paper.
I've been there too, as things are going on, but at what point do you say that a chart essentially becomes a successful example of a model?
Patri: I would look at economic and population metrics. Does its economy grow faster? Do people there earn more money? And things like what percentage of the country's exports were grown in charter cities.
The stats on the Endeavor project in Kenya are crazy. They're growing a large percentage of the country's coffee, which is awesome. One of our projects with the work that's furthest along in Africa, where we think that we can employ 10 percent or more of the country and completely address their trade gap with agricultural exports.
So are people making more money? And, are people moving there?
Rasheed: This is a question I've been thinking about a lot more. Why not put effort into reforming a microstate instead of starting a new, separate, Charter City?
Patri: I call it the Avatar Effect. In the movie Avatar, if you've seen it, the idea that this corporation was taking their land made the aliens so angry that they beat back, like, helicopter gunships with, like, bows and arrows and dinosaurs.
You can look at the Romer experience in Madagascar with Daewoo, where the opposition put out that the president was selling their country to foreigners. There were riots. I think his administration was kicked out. People get very protective over their homeland. When you put it that way, it's not too surprising.
We probably should. And so to me, all of our projects so far have started on empty land, although that won't always be the case as we get to larger tracts of land and greater impact on a country, but the idea that you're starting with empty land or close to it, and people are opting in and can easily opt-out is really important for philosophically, practically, and optics, like all of the above.
And so it's just anything where you're trying to take over an existing polity, it's so contentious and it probably should be. Those people didn't sign up for that. This is where I think that look- I'm a libertarian. I used to wish that the U.S. would become libertarian. And now I'm like if I could wave a magic wand and make the U.S. libertarian, like that would be wrong. That would be morally wrong. That is not the system these people have chosen to live in. They could have voted for it and they didn't. So I think that you should not force change systems on top of people. I look at this as part of the problem with communism. Is it a bad idea to try out some new political system?
No. Is it a bad idea to try out communism specifically? No, if you try it out with a small group of people who have opted into it. It's just like medical trials. It's fine to test new medicine on volunteers who have been appropriately warned. You don't test a new medication on hundreds of millions of people at once.
And that's basically what happened in Russia and China and other places in Asia mainly is that they forced this new untested thing on tons of people and then said they couldn't leave. And so we got a hundred million plus people dying. So I'm really opposed to anything that forces change on people takes over a polity and I'm in this long term to start new countries.
Charter cities are this amazing minimum viable product halfway point that I'm very happy about, but people sometimes ask me like, are the charter cities going to become sovereign? I'm like, no, that screws it up for the entire industry. That wasn't the deal. When we do make a sovereign country, it needs to be explicit.
From the beginning, the land it's getting should be empty or there should be a very high percentage of support from the people who are there. There needs to be a clear process and data that if there is someone there, they want it and that nobody's being forced into any change. Add options. I feel pretty strongly about this one.
Rasheed: But you're using the term forced, but I believe that term, in the sense of this. If in the U.S. you have people that run for elections, they have agendas, and they have views about things, they lobby, they have advertisements, they do all the things to get elected, and then they pass laws. Now, in a smaller country, with a similar idea, people can get elected with a particular view or a particular agenda, and people vote them in power, and then they pass laws.
However, sometimes you have some local people who will want certain things done and they can go and get elected, backed by some various groups that share that same ideology and therefore they get elected and go and change laws in a particular direction that's predetermined based on the election campaign.
Now in a small country, that's actually quite easy to do. In a large country, it's not easy to do.
Patri: Yeah. I appreciate your pushback and these things aren't black and white, but if you bring in lobbying money and whatever celebrities into a small country and you get 60 percent or 70 percent of the people on your side for really dramatic reforms that the minority hate I think you're just setting yourself up for disaster. Having there be a set of people, even if you change laws, like using the process, they're going to correctly perceive that you influence that process with money or whatever external forces you have to bear and they're gonna be really unhappy. I'd much rather that if two thirds of the people want it, then maybe you do something where it's half the country is one way and half the country is the other way.
I don't know. Maybe the value is so high that there's some price that you can give to the rest of the people, so they're happy to leave. I don't think so. That's their homeland. I think it's a really bad idea to dramatically change the nature of somebody's homeland or kick them out of it. Maybe you do it by city, and maybe you're like "Okay, any city or county that votes at more than 90%"? The original Honduras law had a plebiscite where I think it was 90%.
Rasheed: Yeah, because that's why I'm saying, because Roatán is essentially just a small Caribbean island. It's not like unique in that sense. And in other Caribbean countries, you can either let's say St. Kitts that has 70, 000 people in it, you can have very clear consensus on many things. And there is examples, of course, even the Caribbean or any country. Some people win the election and the other people don't agree with it, but that's how it works. So I'm not sure it's actually that much of a contentious idea in that sense.
Patri: I think it really depends how big the change is and how strongly does the minority oppose it.
Rasheed: Culture is one of those questions that kind of gets pushed aside very often when it comes to cities, at least in some conversations. That to me is a big worry because if you don't have the correct kind of cultural institutions, reforms don't work. So how do you think about building a particular kind of culture that sticks in the very early time?
Patri: Yeah, we think about culture less because it's just less legible and like the weak version meaning like more defensible version of my claim is something like institutions and laws matter enough that even without changing the culture if you bring in really different laws and honest courts you can make a significant difference without changing culture.
I focus on that. I would say just defending that it can work, but there is this cultural effect of the vast majority of people in a country are not moving to the charter city. It's a small number of people who find that appealing. And so by setting an initial culture with the founders, the company, the early residents, and then in my opinion, that should be broadcast.
In the branding or advertising, make it clear like what kind of place it is, what kind of people it's for. I think that you can end up with a culture that has some significant differences from the national culture on Charter City. That said, significant differences, but it's still, it's still people coming from the same background.
So it's going to limit the impact and be something to the degree that the country's culture is harmful to economic growth. It's going to be something that you're not going to be able to completely change and you're just going to have to deal with it as part of the price of hopefully helping make these people more productive and richer. You can't just turn them into clones of other people.
So I think that's okay. It's really hard to answer because the question of building and maintaining and growing a culture over time is just so much more an art than a science. The one thing I'll say is that what we look for when investing in founding teams is first and foremost being an entrepreneur, being a good founder.
And then the other two things are real estate development and community building. And a lot of that community building one is about whether you can create a culture and instill it and adapt when the culture you want is not the same as what your community wants. That's a whole kind of specialized skill set that I think is really important for these projects.
Rasheed: How do you think a charter city should be governed? I feel like in the context of one of the major objections that even Paul Romer had to the way prosperous govern is essentially the aristocracy in many ways that governs Prospera. And he was not in favor of that, or is not in favor of that. How do you think that should be governed in a Charter City?
It should be open to elections or essentially an aristocracy?
Patri: I don't at all agree that non democratic or non the way we do democracies means aristocracy. First off, big picture, my goal in all of this is to create a competitive market for governance, to let lots of different people with different ideas about how to run a city try it.
And so we can find out rather than having this be some theoretical topic or my personal belief or preference, the whole point of this is to try a bunch of things and actually see in practice in operating societies what works. That's what I'm all about. Now, personally, I'm a big fan of corporate governance.
That's what produces most of the wealth of the world. And corporate governance meaning holding weighted voting. So having some full time operational team that's monitored, whether it's a board of directors or the people directly, where it is a democracy in the sense that it's all governed by voting.
It's just that the votes are multiplied by how much skin in the game you have, by how much stock you have. This is the way that most crypto networks work, token weighted voting. It's really the same as corporate share voting. I think it's a great system because those with the most interest, with the most skin in the game, get the most votes.
So, I don't know. I think it's interesting that people don't think of that as democracy. I would just think of it as like a different version of democracy. It's like a weighted democracy. And we can argue about what it should be weighted by, but if you look practically rather than philosophically, I think there's a lot of great things to that weighting.
But it could be something else. It could be some things are done, maybe like goals are set by population votes or polls or surveys. And then the implementation plan is done by the operators. You could have a Robin Hanson, futarchy type thing where you have your shared goals and then different people propose different plans to achieve them.
And you bet on which plan will work the best. And then you do that one. There's an infinite number of ways, but to start with, to keep things simple, what I mainly invest in is the corporate democracy model.
Rasheed: Are you surprised that there is not that much, let's call it political heterogeneity, in many of the strongest proponents of charter cities?
Because intrinsically it's not libertarian, but it seems that libertarians primarily the ones who propose it.
Patri: I think it's a few different things. I think it's the way that it's, like, it's surface proteins are coded. And this is partly just me. I created the whole sector.
In the early 2000s, starting with seasteading and was libertarian. It was very libertarian, my branding and who my funders were. And that was a strong effect. I also think alternative governance is going to appeal the most to the people who are not going to get power or not going to have their vision enacted because they're not mainstream.
So like in the U.S. if you're a Republican or Democrat, sometimes your party has the presidency, sometimes you have control of Congress. If you're a libertarian, it's like never gonna happen, never has happened, never even close. And I think that alternative governance should draw from all of the different minority viewpoints that are not well served by our one size fits all national rules for 350 million people, all of that junk.
So that may just be it. Minorities plus founder effect of libertarianism, but the nice thing about that, the founder effect is that the further we go and the bigger the movement gets, the more that decreases and the more heterogeneity we have. And there's definitely a growing number of people coming at it from more of a, I like the Virginia postural axis here, the stasis versus dynamism, as opposed to left versus right. So people who are very much on the dynamism end of the axis, who are on the political left, there's definitely a lot of interest there.
Rasheed: So you've invested in several of these projects that are starting up. Which one is the most successful so far, if you have a view on it?
Patri: It's Prospera, it's not even close. They've raised maybe 120 million and I don't think everyone else put together has not raised half that much. And they started operating four years ago, maybe more now.
Rasheed: Do you think that it is still more useful to have a focus on, let's say, Africa, as opposed to Latin America, when it comes to trying to create new Charter Cities.
Patri: Yeah, we're pretty all in on Africa, and I think for Latin America, one of the ways that we look at it is if you look at what happened in Honduras, where the conservatives who created the program and ran the country for 14 years were also corrupt and in bed with the narcotraffickers, and they got voted out, and a Marxist got voted in, who literally restored ties with Venezuela, sees it as a model to emulate, etc.
You just don't get that. I think it's like our belief in the space that the Marxist strain of leftism, which there's nothing wrong with left wing politics, but Marxist politics are a different beast. They're much more extreme and less practical and seem to do a lot of harm wherever they appear. It's not a thing, I would say, mainly outside Latin America.
Even in Asia these days, it's largely changed. And so in Africa, there's left and right parties, there's different politics, but you don't get the same hateful, extreme leftism of Marxism that you get. And so it's just a different political playing field, and one that's, I don't know, like much more sensible.
And then the fact that the country is still urbanizing, the continent still urbanizing, has such a young population, there's 20 or 30 million people a year moving to cities already, so you don't have to advertise. It's not let me try to convince people to come and move here. They're moving. I just got to be better than the alternative city.
I think it has a lot of headroom in terms of what the level of productivity is versus what it could be for a whole host of different reasons. Lots of untapped resources. It's further from large powerful countries. It's not within the direct sphere of influence, whereas in Latin America, you're very much in the American sphere of influence.
And that hasn't really been a problem. What we found that charter city projects in Latin America are going to tend to make countries safer and more resilient, reduce crime and reduce emigration. And so Western powers actually see a lot of benefit in charter cities because we're a solution to the migration crisis.
Let's bring functional institutions and good laws to these countries so people can have economic opportunity in their homeland and not have to leave. So it's a great value proposition, but it's still the case that you're very limited by having this . Now you've got two key partners instead of one.
You've got the host country you're working with and you've got the local great power. And it's simpler in a place like Africa that's pluralistic with influence from different countries, different continents even. That's just some of the reasons. But when you just look at what an African startup can do with a million dollars versus a western one. It's tough. It's, it's tough to compete. Like they can go out and build, actually build something substantial, physical, like move dirt because the capital costs are so much lower. So it's our primary focus.
Rasheed: Is there a particular country in Africa or a group of countries that you're primarily interested in?
I know Tanzania gets a lot of attention these days.
Patri: Zanzibar has passed maybe the main charter city law in the world now after Honduras. We have companies in Nigeria and Malawi, but generally see a lot of potential over the region. Nothing to announce yet. Stay tuned. Follow our Twitter @PronomosVC.
Rasheed: Let's say if there are people who work in policy in small countries, and they're thinking about charter city in their own jurisdiction, what are the, I guess you say, main criteria you would say? What are the sufficient criteria to say, okay, maybe a chart is worth trying is in this location?
What would those be?
Patri: The biggest thing is the host country. That's your key partner and it's a long term partnership. Look at Hong Kong going back to China after being run by the UK for so long, like a city can be there for centuries. I think that's the primary thing. And then secondarily would be the first, do we trust this country?
Do we share enough of a vision and values that we can build something for the longterm together and something that will persist across different administrations? So that's the first thing. And the second is, can we make it economically viable? Generally charter cities are for economic development, for making jobs and better jobs.
It doesn't have to be. There's occasionally talk to countries about other reasons, but it has to work economically. We have to be able to find whether it's resources to export and process or whatever the economy is going to be, there has to be potential for something that we have the skills and knowledge to develop, that the people have the right education and training and mindset for or some subset of them that makes money.
Rasheed: At what point would you say, okay, this is not going to work? likely going to work in this location? I ask that because Prosper in particular is still going, they're still very adamant they will get going even after laws got repealed and so on. So there has to be something, some other level of criteria where you think about, okay, let's actually not waste all the money here, let's go somewhere else.
What do you think about that?
Patri: Yeah, it doesn't apply in Prospera because they repealed the regulations, but they didn't repeal the constitution, the constitutional amendments, because they didn't have the votes. And even if they had, Prospera's grandfathered in, and we have the initiative right now there with the lawsuit.
I don't think it would make any sense for Prospera to leave when they're winning because of how the program was set up. That's the thing. If a country is so interested in this that they pass a constitutional amendment and put in investor protections, then you can invest heavily and you should be pretty dogged about it unless you get strong signs that for some reason those legal protections are not going to hold up.
But no one else in the world is at that point. Even in Zanzibar, it's legislation. It's not in their constitution. Same thing with the countries that we're working with in Africa. And so, you know, it's a risk reward decision like anything else. If there's not the compatibility of vision with the country, if they don't have the legal stability or aren't willing to make the necessary investor protections.
Yeah, I think it shouldn't take a lot of opposition to move on. We can work with any country in the world. You know, there's 180 or whatever. If five countries, say three or four more countries pass charter city, like legislative, that's great. That's a great start for the industry that can grow for years.
So I think that we should be pretty selective. If the opposition party won't talk to you and isn't excited about it also, then to me, it's a no go. Maybe with some exceptions. I don't know. I want to pitch to Milei, for example, in Argentina, based on the Honduran example, that, hey, if you have the votes, which I don't think he does this term, but maybe he does next term after being successful, if you have the votes to make a program as strong as Honduras did and put in the constitution with investor protection treaties, this is potentially a way to protect some of the people and some of the economy of Argentina against potential future return to crappy Peronist government trying to run the country into the ground.
Rasheed: What is the, one of the most interesting concepts that you think people don't know enough about?
Patri: You mean like within charter cities?
Rasheed: Or it could be more general.
Patri: Oh man, it's a world full of interesting concepts. How about some of the laws? I was just telling my son yesterday about Gell-Mann amnesia, where my son was noticing that the newspaper coverage of polling and elections, which he's fascinated with and has become an expert on, noticing that it's really bad. And he hadn't thought, this is the Gell-Mann Amnesia, that rather than just updating, here's how accurate I think they are in this topic, actually, there's no reason to think that there are any better or worse on that than anything else.
So if this is the first time that you've looked at coverage of an area you know a lot about, you should actually be assuming that all coverage in the media is at that level of quality. I think that's important. There's, is it Say's Law, the law that the purpose of a system is what it does. But the idea is that often we think of the purpose of a system as what it was intended to do, which is, if you define that word, fine, but then we then have an expectation that the operation of that system in practice will produce the intended results.
And in most cases, it's very difficult to actually design a system over the long term with the right incentives and change that produces whatever your desired results are. And so the purpose of a system is what it does is correct people in saying, Hey, we should think of what it's trying to do. What it's most likely going to do as what it has been doing.
If it's been around for decades, and not what it was originally intended to do. If that's not manifesting in its operation, then what does it even mean to call it its purpose? We could call it like its original purpose, but we should not have any expectations that it'll keep doing that. Another one I really like is Gall's Law, which is that every working complex system evolved from a working simple system.
It's this idea that you can never build something complex and get it working all at once without having had something much simpler working first. In other words, as you get a bigger and bigger organization or more budget or whatever that you can make your minimum viable product, your first working iteration can be more and more complex.
No, actually, no matter what size you are, you have to get something working first and then add capability and get that working and add capability and get that working. So those are some of my favorite laws.
Rasheed: One last question. Of course, your father has this very famous book, "Legal Systems Very Different From Our Own", and it can't help but recall that when thinking about charter cities.
Do you think that your politics is even more radical than your father's?
Patri: I don't think so. I think I'm very much oriented pluralistically. He's letting me see if I can design a political system that is philosophically radical in that there are no agents or institutions that have rights that others don't, that are elevated.
This is what makes it an anarchist philosophy. Everyone's equal. And for me, I find that really intriguing and I'd like to try it, but we have so many ideas for different systems. I guess I would say I'm less radical in the direction I've chosen, it's not that I don't like these radical systems, it's that I'm tired of people debating this stuff in theory and having it be a philosophy and writing books about it.
My radicalism is radical build, radical no, we have to push dirt, stop talking, stop designing. We don't need more ideas for better policies. We don't even need more ideas for better political systems. We need a way to actually build these things. So there's a sense in which I'm like radically pragmatic, and like radically anti-theory in a way, and anti-philosophy.
But within that, if I succeed at this radical idea of making it so people can try out lots of different systems, I think I would then be interested in some pretty radical ones. I just don't see a point in worrying about those when there's no way to try them out.
Rasheed: Patri, thank you so much for coming on the podcast today.
This has been a very fun conversation.
Patri: Thanks so much for having me, Rasheed.
Rasheed: That's it for this episode. For updates about the podcast, please subscribe to our Substack blog found on cpsi.media. You can also read our newsletters and long-form content on Caribbean policy improvements.