37. The 'Avatar' Effect: Charter City Do's and Don'ts - Patri Friedman

Send us Fan MailOn 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.