🌆 Trends #0056 - Charter Cities

Why it matters

What separated East and West Germany? Zhuhai, Shenzhen, Shantou and Xiamen from China? What separates North and South Korea?

Governance.

Bad laws lead to poverty.

Problem

Poor governance works. For a few.

Benefits are concentrated. Costs dispersed.

Solution

Charter cities are new cities with better laws.

They go by many names: Special economic zones (Dubai Internet City), special administrative regions (Hong Kong) and countries (Singapore).

As Tyler Cowen says:

There are a lot more charter cities than we think. It's just that the successful ones stop looking like charter cities.

Players

Charter Cities

Nkwashi: A university-anchored city under construction in Zambia.
Próspera: A semi-autonomous zone on the island of Roatán. Built in partnership with Honduras.
Talent City: Located in Nigeria. It's meant to be "...free of complex socio-political or economically protectionist considerations."

Special Economic Zones

Shenzhen: Located near Hong Kong. China's first special economic zone.
Mariel - A port located near Havana.
Tanjung Lesung: Located in Indonesia. Focused on tourism.
China--Belarus Industrial Park: Focused on high-tech manufacturing.

Special Administrative Regions

Hong Kong: The former British Colony transferred to China in 1997.
Macau: A former Portuguese colony with a separate governing system from mainland China.
Sinuiju: A region of North Korea experimenting with a market economy.
Yogyakarta: The only recognized monarchy within the government of Indonesia.

Organizations

Charter Cities Institute : A nonprofit aimed at improving the ecosystem for charter cities.
Creator Towns: An initiative to grow small towns by leveraging the digital economy.
Plumia: Billed as the first country on the internet.
Bluebook Cities: A group aimed at building cloud-first cities. Also behind Praxis.

Predictions

Remote work will lower switching costs between cities. Where we work and live are being decoupled. We'll optimize for lifestyle and physical networks over offices.
Cities will compete for citizens. Miami's Mayor makes a show of it. Governance options lead to more competition between jurisdictions.
Relocation incentive programs will become more aggressive. See the remote work report with 25+ relocation incentive programs.

Opportunities

Fight as few battles as possible. Consider relocating before building a new city.
Decide what to test. How much political autonomy do you need to:
- Ban cars
- Lower taxes
- Legalize drugs
- Reform education
- Use ranked-choice voting
- Institute an open container law
- Legalize certain medical procedures
Start with problems, not policies. Don't fetishize charter cities or seasteading. Think from first-principles.
Cheaply try ideas. Test governance models in cruise ships, DAOs, virtual worlds and temporary autonomous zones like Black Rock City (Burning Man).

Key Lessons

Experiments have positive expected returns. Most fail but some have asymmetric upside. We need more than 195 experiments.
Environment matters. We've seen natural experiments where culture, geography and other variables are controlled. Governance tips the scale.
Evolution needs variation and selection to work. We need more governance options and the ability to vote with our feet.

Haters

"Lots of charter cities have failed."

"There are a lot more charter cities than we think. It's just that the successful ones stop looking like charter cities." The same goes for no-code tools like WordPress. We move goalposts.

"Charter cities will be unequal."

We don't need charter cities for that. "Economic development specializes functions, differentiates abilities, and makes men unequally valuable to their group." ---Will Durrant

"Charter cities will discriminate."

We don't need charter cities for that either. Teams behind relocation incentive programs run competitive screening processes to decide who receives thousands of dollars to relocate.

*"This will lead to *gentrification."

Most organizations focus on greenfield cities. Those who don't could argue that unshared upside, not gentrification, is the issue.

"East and West Germany. SEZs in China. The difference was a market economy. That's low-hanging fruit. Now what?"

I asked lots of people: *"What would you change about your city?" *Everyone had answers.

"What about seasteading?"

We covered it. Costs need to drop, political issues need resolutions, there's a quality of life question and practical things like wave breaks.