Mark Frazier | Fifty Years of Watching It Go Wrong

Timothy Allen: It would be a good idea to introduce yourself. I actually Googled you this morning, and it was quite a vast history of work with special economic zones, startup societies, free zones. When people ask you what you do, what do you normally come up with? What’s your rough CV?

Mark Frazier: Well, my lodestar has been seeing ways to turn failing systems inside out, and to do it in a way that frees the world to the direct benefit of the poor. I come from a left background in terms of my teenage years, and then I read Rand and decided, whoa, I was off base. But in terms of values, I’ve been working on projects that share the upsides and have success-sharing elements. So I’ve had some divergence from the traditional enclave approach to free zones. I’m adamantly free market, but also looking for ways that land value gains can be shared.

Timothy Allen: What about an actual CV of projects? Did you start in the free zone business?

Mark Frazier: I came into it as a teenager, and it was publishing. At that point I thought what the world needs is free market journalists. So in high school I put out some libertarian magazines, and they caught the eye of the founder of Reason magazine, Lanny Friedlander. He contacted me and I volunteered to do paste-up work. Reason had 300 subscribers. There was a life-changing moment in Lanny’s apartment. He was a truck driver during the day and doing this libertarian magazine on the side. He had a collection in a cardboard box of newsletters about libertarian efforts to create new countries. For an 18-year-old, that was just a life-changing discovery.

Timothy Allen: Can I ask how old you were, just for context? I know you’re not, as women are, supposed to be asked their age, but we don’t care, do we?

Mark Frazier: That was 1969. 1970 was when I became active with Reason. I was just graduating from high school and heading into Harvard. Lanny said, I can’t pay you, but I need your help with the production, so why don’t I make you publisher of Reason magazine at that tender age? And that was what I did for a stretch of about a year. But Lanny opened my eyes to Mike Oliver and his Minerva project, and Werner Stiefel and his project Atlantis. These were extraordinarily audacious efforts to create truly free societies.

Timothy Allen: We’ve never, I don’t think, mentioned those in 180 episodes of this podcast. So let’s go there. They already sound good. Atlantis sounds really good. But what are we talking about here? Were they all ideas and no substance?

Mark Frazier: Oh no. These were on-the-ground efforts. There are many hours’ worth of adventures and tales to be told, but in short, both projects came from people who had deep scars from World War II. Werner Stiefel had seen firsthand what Nazism had done, and came to the US with a life vow to never let states run rampant again if he could help it. He founded a pharmaceutical company, and part of the proceeds went into building a boat that was then landed at a seamount off Haiti, which unfortunately Papa Doc and his minions decided they weren’t going to leave alone. So the boat kind of sank before it reached its destination. But he kept looking, and ultimately refocused on Central America, very quietly. The other thing I found in these newsletters was Mike Oliver, who at age 13, during the Holocaust, had lost his parents. He was in the Polish woods with a partisan group, and he came out of that alive, and again adamant about not letting governments ever do that again. So he made a fortune in Nevada real estate and then proceeded to look for islands that would lend themselves to a free country. Starting in the Bahamas, Abaco was his first. But as I read these newsletters and followed closely in my college days, he settled on the South Pacific. There in Tonga he did raise a flag, again on a seamount, and had the war canoes, the navy of Tonga, promptly eviscerate the little structure they’d built. He turned then to the New Hebrides, under British and joint rule, and found an indigenous leader, Jimmy Stevens, who drove a bulldozer but also had high standing with the tribe on the island of Espiritu Santo. So Mike Oliver created passports, a flag, a radical constitution. And Jimmy Stevens declared independence and sent emissaries to the United Nations. By this time I had graduated from college and was working in New Zealand, and I wrote the lead article in the New Zealand Herald announcing the birth of the Nagriamel Federation, in late December of, good grief, I’m going back in time, but this would have been 1975.

Timothy Allen: And what happened?

Mark Frazier: Over the next months, as a reporter working in New Zealand, I saw the sad story of this thing fall apart. Basically the millionaire backing of this breakaway got defeated by some adroit manoeuvres by the British and the French. They put Jimmy Stevens in jail, and he got released about six months later after agreeing never, ever to do anything like that again. My visa was expiring, so I decided on my way back to the US to stop at the site of the Nagriamel Federation. I met him and saw that the money that had been spent to back him had turned into a conspicuous consumption binge. And so as I was leaving the scene, seeing how much great promise had gone wrong, I had an epiphany in Fiji on the way back to the US. That was the seed of what later turned out to be my life’s work of setting up free zones, but on a different basis than the parachuted-in ones I had seen.

Timothy Allen: What would you say was your modus operandi then, when you say a different way of doing things?

Mark Frazier: The first realisation was that many free zone initiatives have been pushing on a string. They’ve fallen in love with a particular location and then push, push, push to try to make it happen. It’s all sweetness and light in the early days, oh yes, yes, yes. But once local folks know that you’ve chosen that destination, the banana peels start to appear. So the big takeaway for me was that these efforts to set up free areas by funnelling money into a predestined spot were exactly the wrong way to start. In Fiji, I recalled a conversation with a friend who had been at Harvard Business School while I was an undergrad. Paul Siegler said, you know, commercial space launch is going to be a big thing, and he intended to be right at the beginning of it. He said, we need a place at the equator, because at the equator you get extra spin, and that saves you a good 30 percent over the launch costs from traditional sites. So as I was sitting in this ragtag motel in Fiji, waiting for my plane the next day, I thought, what if something of the audacity and scale of these new-country projects could be turned into a prize to be won? That’s where it clicked. I figured that what would excite countries to give leasehold land at large scale, and agree to match Hong Kong or Singapore in transparency and quality of the business climate, was to land the first spaceport for Earth. This wild idea, with next to no money, over the subsequent two or three years, had quite a run. Twelve countries. I got some very big names to agree to endorse it. Buckminster Fuller, Arthur C. Clarke, Robert Heinlein, a number of people, agreed to put their name to it or provide seed capital. With a microscopic budget, 800 dollars initially, I prepared a brochure describing the economic benefits and the prestige upside to the country that would commit the best-quality reforms on a very tight turnaround. To my delight, Jim Bennett joined me. We sat there in a really low-rent area in Santa Barbara, getting phone calls from ministers and ambassadors wanting to fly out and meet us, and letters saying, in principle, we’re prepared to do it. So that was my first big light bulb in terms of a new way to do the free zone initiative: create competition for people to come forward.

Timothy Allen: So this was land-based? Because a lot of seasteaders talk about the area in the ocean that’s shallow and free of hurricanes, on the equator, as a really good business model for large seasteads. So what happened? Did anyone commit? Did anything happen?

Mark Frazier: There was a resolution introduced by Liberia at the United Nations declaring they were ready to go ahead with a 200-square-kilometre free port for space. This would be an area open to commercial, peaceful launching from ventures around the world. At that point, McDonnell Douglas and Boeing, as well as a West German company, a launch bootstrap company called OTRAG, all wanted to launch vehicles from the equator. So it was very heady times. We built up a good head of steam. And then the guy at the State Department said, cool idea, but it ain’t going to happen.

Timothy Allen: Which State Department?

Mark Frazier: The US. Two reasons. One, in the Carter administration, the space shuttle programme was not particularly keen to have private launch competitors. Reason number two, which had some validity, is that launch vehicles can be turned to peaceful commercial use or something else. The notion of having an easier on-ramp for emerging countries to lob things into orbit was a big deal, understandably. But the point we tried to make, which did not carry the day, was that these things will happen anyway. And they can be much better done, in terms of avoiding leakage risk, if there’s a small number of equatorial free ports that can vet what’s going on.

Timothy Allen: So, just so I’ve got this straight, you were offering a prize, the prize being that if you follow through with a prime site and world-class reform commitment, you become this launch pad for planet Earth. And the US put an end to it. Who were the main contenders?

Mark Frazier: Liberia by far. We also had Panama, Indonesia, Rwanda, and almost 12 countries in total showing written interest. But after the State Department said no to the export control of technology, Liberia was still ready to go ahead with the free port. Then their cabinet met a grisly end when an unpaid sergeant took over the government and marched them off to the beach.

Timothy Allen: I’ve been to Liberia. It’s one hell of a failed country. Hold on a second, I’m just going to close that curtain, the sun keeps, there you go. It’s amazing to even have curtains that big. Sorry, brand new studio, folks, nothing gets cut in this show. It’s one of those countries that I think is rife with bad people doing bad things in power, and the whole country can never really get going. I worked there briefly and the corruption was rife. It was on display to us as people from NGOs, and it was just like, what the hell? The capital, Monrovia, was a slum, apart from one five-star hotel with all the white Land Cruisers outside, all the NGOs, and the offices of government with walnut cabinets and flat-screen televisions. You could just see it. Here’s where the money comes from, and here’s where it goes. That was one of the last times I worked for an NGO. The whole trip left a bad taste in my mouth.

Mark Frazier: Well, I went on to work on well over a hundred free zone projects. I regrouped after getting the Earthport project stymied, and focused on free zone consulting. I wrote or co-edited books on foreign trade zones, enterprise zones and export processing zones, and a guidebook on that. So I became an expert at the tender age of, I guess, 28. Calls started coming in for various projects to help countries get free zones off the ground.

Timothy Allen: Consummate professionals here at the Free Cities podcast. Put it on airplane. Unbelievable. You’re like that meme, I get it from my kids, it’s what old people do when they touch their phones. I’m a bit like that, I try to resist. Anyway, that segues to the next chapter.

Mark Frazier: That may have been a telemarketing call. After running into this firestorm of regulatory issues, I went into a vanilla free zone consultant mode and got a call to help a project in Jamaica, which had, in Montego Bay, a prime site for a free zone. It happened that just weeks before getting this call, I’d seen an article called Now We Can Move Office Work Offshore. That was a light bulb. This was 1983.

Timothy Allen: So I can get my timeline right, what was happening in China at this moment?

Mark Frazier: China was just embarking, in the late 70s, on setting up Shenzhen, which was far from a top-down thing. They realised the frustration, and a fishing village of 30 to 60,000 people got autonomy to experiment with new rules. So they were just beginning at that point. In fact, one of my earliest consulting projects was to go to Shenzhen, I think it was 82. Even after three years of reform, this basket-case area was sprouting skyscrapers. It was quite phenomenal. But these were manufacturing-oriented. The thing that tipped me into my next generation of free zone projects was reading this Wall Street Journal article about office work going offshore. So I said to the Montego Bay folks, let’s try a market survey and test the waters for how much of this information industry market will respond. And it was extraordinary. We contacted 100 potential firms, call centres very much among them, and they were so ready, even before this zone had any structures, they wanted to be first in. Two firms out of the 100 set up shop with offshore data-entry operations.

Timothy Allen: And is this purely a financial decision when it comes down to it?

Mark Frazier: Back then, yes. But a little bit of hedging risk too, because when you have your customer service and contact centres all in one place, anything can happen to it. So part of the market was, you can have a second centre. The cornerstone was to get telecom prices way down. In our market research recommendation we said, please get your monopoly prices down to market level. And that turned out to be a pivot. Two thousand jobs came in, largely in inbound and outbound call centres, claims processing and so forth. So within a short number of years we had this next generation of free zones moving from the traditional logistics and apparel and electronics assembly base, like Shenzhen, to a service industry, knowledge industry free zone.

Timothy Allen: And is that still going? What’s it called?

Mark Frazier: Montego Bay Free Zone. Yes, still going. And it gave rise to various offspring, because when somebody has a big success going, neighbours want to do it too. Dominican Republic at that point had just three or four traditional free zones, but they decided to gallop in and, with private-sector investment and management, set up world-class free zones, including ones for teleservices. The big next evolution was that the Dominican free zone decree, which was not legislation, said it would allow private competitors to the country’s monopoly system to set up shop in the free zone. So it was extraterritorial in that way. That then led to Uruguay setting the gold standard for this next generation of zone. By law, they put in a single paragraph saying no commercial government monopoly shall apply within the free zone boundaries. And that turned a cow pasture near Montevideo Airport into what is now Zonamerica, approaching 10,000 people in very high-end work, including software development, largely because the telecom price and the exemption from the power and insurance monopolies made it the place to go. It also added into the mix the right for companies to bring in talent from overseas, up to 30 percent of their workers.

Timothy Allen: Can I ask, back then were you envisaging the evolution we now see of zones? You came into it from a libertarian perspective, so was that always in the back of your mind, that you can’t go from here to there without going via free zones, manufacturing, information, and then, all right, how about people living there?

Mark Frazier: Yes. In the early 90s, when this was going very strong, for Israel I pulled together a whole bunch of video clips from companies for a free zone project by very free-market folks, saying that if the government removed the monopoly on telecoms, these companies, employing tens of thousands of people, could see a scenario where they’d create 500 or 1,500 jobs each. It aggregated to 10,000 jobs. Putting that together took maybe five or six months, but it led to the passage of a world-class Free Zone Act, that then was rescinded when Rabin was killed. Through all this I learned the value of having very anti-fragile approaches that didn’t take for granted that what governments put on paper would actually be honoured.

Timothy Allen: So what are the main components of that anti-fragility? Legal, I presume?

Mark Frazier: Interestingly, I do think the most important way to avoid the kind of blowback many free zone projects have had is by designing it from day one with shared upside. The private risk-taking capital that comes in gets its full freedom to make money, but under a build-operate-transfer agreement, so it aligns the incentives of host country stakeholders and the community residents, who otherwise will feel this enclave is not for them.

Timothy Allen: Sorry, you’re going to need to repeat that. So for you this would be one of the most important premises for setting up a free zone?

Mark Frazier: Yes. First, make sure it’s a prize to be won, that you’re not locked into a location and pushing on the string. Make it a competition, with something so valuable to the country that’s chosen that it will be very generous on a short timeline to make the commitments of land and policy reform.

Timothy Allen: Really? Using the same model as your spaceport project? So you say, everyone, I can probably get a lot of investment, give me your best shot?

Mark Frazier: Right, but tied to what Peter Diamandis calls a massively transformative purpose, a project so connected to very big upsides in whatever field of technology that it has prestige value.

Timothy Allen: So you’re talking about the government showing off about it, basically. That’s a big part.

Mark Frazier: Exactly. We don’t want those so-and-sos over in that area to get this prize, we want it.

Timothy Allen: Oh right, you mean internally in a country. I thought you meant putting it out to tender for other countries.

Mark Frazier: It works at that level, and also in terms of in-country site competition.

Timothy Allen: They do that. In England you get different cities pitching for things, like the new Millennium Dome. We don’t get free zones, unfortunately.

Mark Frazier: Well, the enterprise zone initiative did have an element of this. When I was recovering from the Earthport lesson, I was helping the Reagan administration. We produced a guidebook and model legislation. The core strategy we recommended was, don’t make this a by-right entitlement. If enterprise zone legislation passes, make it very clear we’ll go to the states that go furthest to lower taxes and other barriers. That prospect of a federal-level contest for designation led to wholesale adoption of the legislation, which a libertarian lawyer, Pete Ferrara, drafted, by the state of Kentucky, unchanged, word for word. A very radical free-market package, but with an element of sharing the land value upsides with residents and with good causes they care about. So it became a way to lever commitments from state and local governments to put idle land into effectively land trusts that would share dividends with residents of areas that might otherwise have gentrification and displacement issues.

Timothy Allen: When you offer out a zone to tender, and everyone bids on it, presumably you run the risk of alienating parts of the country. This is one of the criticisms of free zones. It’s all very well to create a free zone, but what about the places that don’t get one? Because business might not just be new business, it might be business moving from their place to the free zone.

Mark Frazier: Yes, depending on the quality difference of the business climates, there can be redirection of capital. But the big driver of the best free zones is entrepreneurial talent. Silicon Valley succeeded not because giant companies chose it, but because it had the elements for startups, micro-enterprise, garage-scale ventures.

Timothy Allen: Why did Silicon Valley get so successful, then? Particularly nice weather, nice places nearby, that’s a massive part of it.

Mark Frazier: Indeed. And there was an element of partnering with Stanford. The Stanford Research Park is an example of how land held by a powerful local stakeholder can be multiplied manyfold in value, once you get not only the business climate working well but human talent highly tuned to what the market wants. One of the innovations that first technology park did was to tightly link the courses and professors’ interaction to the benefit of the tenants of the park.

Timothy Allen: Did the park have any special rules and regulations?

Mark Frazier: As far as I know, no. But this gets us to a frontier area for free zones. I think we’re in a world now where the competition among projects is largely not what official taxes you remove, but what implicit taxes you remove. Many opportunities exist, even in places like the EU that have harmonised their taxes and regulations. The competition field becomes, how can we get the dead weight, the drag on people’s lives and their entrepreneurial ventures, as close to zero as we can? Administrative bottlenecks, red tape, corruption, crime, depending on the location, these weigh very heavily into location decisions and into the ability of bootstrap entrepreneurs to grow their business.

Timothy Allen: I’d like to hear your view on this. The EU, Europe, I don’t know anyone who has any interest in doing anything in the EU. Even the thought that free zones might help the EU, sure they would, 100 percent, but it’s a running joke now that the EU stops people’s ideas.

Mark Frazier: Well, here again comes the question of how you change the political landscape so that instead of objecting to enclave-style zone initiatives, communities turn into a race to say, yes, in my backyard, we want this thing.

Timothy Allen: Good luck with that one.

Mark Frazier: As it happens, there are vehicles that can change the mood music. One of them is build-operate-transfer pre-commitment.

Timothy Allen: What does that mean?

Mark Frazier: Build-operate-transfer is how ports, airports and other infrastructure projects attract billions in private risk capital. The investor says, we’ll come in and put in this airport or port and run it, on a progressive transfer of the asset to the local counterparts. That changes the reflex, in some cases, to, hmm, this is no money out of our pocket and potentially big upside in asset value. And having vehicles like land trusts, Hong Kong, Singapore and Macau lease land, they don’t sell it, and the rent they collect is proportional to how much confidence there is in the business climate. So it aligns the politicians in favour of simplifying life. This makes a precedent that even in places like Eastern Europe, you can propose a leasehold, not alienating the land but leasing long term, with transparent auctions and tenders to draw in capital to build in areas that are now struggling.

Timothy Allen: Is that the opposite of what China does? I’ve heard China invests in places like Sri Lanka and a lot of Africa, and they own it, not lease it. Is that right?

Mark Frazier: That’s not right. They’re typically, my understanding is, on long-term lease. This, of course, is how Hong Kong got going, a 99-year lease. Some of the Chinese projects do have very long leaseholds, but they’re not, to my understanding, outright ownership, which is important. In the case of Sri Lanka, they went a step further. I wrote up a paper for Cato a while back on debt-for-freedom swaps. China is setting up these outposts worldwide and driving countries deeply into debt. But in Sri Lanka they negotiated a debt-to-equity conversion, which was to say, we’ll tear up the IOUs in return for a concession, of limited duration, to operate the port. And that makes a precedent that, as the world drowns in debt, can be applied again and again by free-market folks.

Timothy Allen: And you’d call that win-win. China brings in the capital, Sri Lanka gets its port without paying for it, but over the long term claws back its asset.

Mark Frazier: Yes, under a pre-agreed arrangement.

Timothy Allen: And they make money. More money as time goes on. So how can we line up these billiard balls to get as much out of it as possible?

Mark Frazier: One way to build a big constituency for the success of these free-market zones is to have the land trust and land lease model flowing to the immediate and direct benefit of regular folks. In Nevis there have been direct-dividend talks. But the idea of learning vouchers, micro-vouchers, that open access to market-based learning and market-based healthcare, these are things that from day one can be part of what I’d call a lead-with-a-gift bundle.

Timothy Allen: Over the episodes we’ve done on this podcast, I’ve been putting together my absolute necessities for when you do this stuff. One of them is exactly that, ways to protect your zone. Legal, obviously, and you get that right, as we’ve seen here in Prospera, it worked. Socialists came in and didn’t shut the place down. Secondly, and almost as important, is keeping everyone happy who lives there and who lives next door. I think, funnily enough, Prospera didn’t do that really well to start with. Or, they did it well, they just didn’t outreach, they didn’t communicate it well enough. They didn’t hurt anyone, they didn’t break any rules, but they didn’t stop the rumour mill. Slowly now there’s been a change, because people are seeing the benefits. If you’re a local from Crawfish Bay and you work here and now you’re doing well, and your neighbour hears there’s a job going, that slowly changes public opinion. I’d say that’s the second most important thing, because it’s a protection against getting shut down. Legal protections are great, but when you’ve got the community behind you, that’s a better incentive for a government not to come in and shut you down.

Mark Frazier: For sure. And these micro-stipends or micro-vouchers can open day-one access to telemedicine resources, to get second opinions, for example. In the case of education, there’s already vast amounts of free content available. What’s not so accessible are credentialing projects, work-study, virtual internship opportunities. This is where free zones have huge potential, because through digital networks, in partnership with the telecentres or cell phone companies, they can offer on-ramps for people to stand out. Not just, oh, I took this course online, but, I did this, and here are links to a portfolio showing what I did to apply it for the benefit of my neighbours and my whole community.

Timothy Allen: I was more thinking, in the case of outreach to the community, that you’d build a hospital in your free zone that the community can use.

Mark Frazier: Yes.

Timothy Allen: But with micro-vouchers, what do you mean? Locals get a voucher for being nearby, and then what?

Mark Frazier: With the Horizon Lanka school, a poor village right at the front lines of the civil war, we found an exceptional bootstrap entrepreneur who’d set up an alternative to the public schools. He’d gotten various contributions of computers, but the kids, middle-school age into high school, were still relying on very ad hoc learning. So we made a standing offer to Horizon Lanka. We’ll set aside money for a dozen micro-vouchers, micro-stipends, to encourage kids to teach kids, using course material they prepare, PowerPoint presentations or quick animations.

Timothy Allen: What’s the point of the voucher? This is the bit I don’t understand.

Mark Frazier: It’s to say, if you, the entrepreneurial school in the community, would like to offer more than you’re doing, we’ll pay 30 dollars for each completed online learning lesson that they create. And dozens of these little PowerPoint presentations, explaining this in algebra or that in science, the kids put together. This is an example of how to build a credentialing portfolio for kids who otherwise would just be taking exams.

Timothy Allen: You’re into competitions, aren’t you? It’s a repurposed version of, instead of, here’s some money, go and teach the kids, it’s, here’s some money you can earn by learning that thing and passing it on.

Mark Frazier: In ways that are shared. And this village had never had people get into university before Horizon Lanka. By the time we finished with our micro-vouchers, the graduating class, it started with seven people under a tree when the school was launched, three out of seven of that graduating class got accepted into universities in Sri Lanka. There was a video on YouTube of Craig Barrett, then head of Intel, hearing about this and meeting the graduates and saying, if you guys don’t want to go to Sri Lankan universities, Intel will pay for your college education. So these little tiny catalysts can have dramatic effects on people’s futures.

Timothy Allen: It’s about creating an incentive model that’s slightly different to a lot of people’s idea. A lot of people look at free zones and think everyone’s going to act the way economists think they’ll act, and they never do. It’s mostly nonsense. It signals something roughly correct, but what you’re talking about is creating an actual incentive structure that brings in the free market and lets people join in.

Mark Frazier: That’s right. In Kyrgyzstan in 2005, in six months and with a very small budget, I was brought in by the Academy for Educational Development to figure out how they could spread grassroots learning. We created micro-voucher prizes to be earned by four villages, to be determined, that committed a land-grant endowment to endow the scholarship, and partnered with an entrepreneurial telecentre operator, a cyber-cafe kind of thing. In a very tight window, with workshops and buzz, 50 villages put in bids to receive one of the top packages of micro-vouchers. 25 of them had full applications, including photographs of the sites they were prepared to commit. Ultimately five were chosen to receive 20,000 dollars’ worth of micro-vouchers. Within another eight or nine months, 9,000 Kyrgyz had come to telecentres to learn the basics of how to go online, do email, web search and so on. And then a Singaporean telecoms entrepreneur came in and funded 16 of these e-centres in total. So it works if you create a prize to be won.

Timothy Allen: So the Singaporean guy is coming in to make money.

Mark Frazier: That’s right, with telecentres. Meaning cyber cafes, basically.

Timothy Allen: Is that a big business?

Mark Frazier: Very much so at that transition period. They were the first access points.

Timothy Allen: So in this Kyrgyzstan case, do you have to create a free zone for it or not?

Mark Frazier: Interesting question. Yes, under the original frame, three things had to be in place. A risk-taking entrepreneur willing to be the centre point, a land trust or land-grant commitment where 10 percent of the future land rent would flow back into the micro-voucher fund, and third, policy reform. But guess what, since USAID was funding this, and USAID had, thanks to a 60 Minutes feature, banned any geographic targeting of tax relief, that third element was knocked out. So what we could have had, a vibrant competition to innovate in how to simplify taxes and regulatory burdens, was ruled out.

Timothy Allen: That wouldn’t have been on a federal level, though, that would have been local versions?

Mark Frazier: Right. We were encouraging local innovation to improve business climates.

Timothy Allen: So the idea is, you have a Singaporean entrepreneur who wants to make money and can set up internet centres. You say to the country, if you provide land and take 10 percent of the revenue from that land, he’ll bring his capital, and you get education. But where did you get your collateral from?

Mark Frazier: The Singaporean wasn’t in the picture in the first round. The competition was for five spots, simply with the catalytic micro-voucher offer. Later, when the response was so vibrant, it got the attention of a Singaporean.

Timothy Allen: No, I mean your original ones. Who pays for those?

Mark Frazier: The original micro-vouchers? I am sad to say it was your tax dollars at work, through USAID. My consulting practice, about 70 percent, was World Bank and USAID work. It was done with, unfortunately, tax-funded money, but done in a way to create a breakout from subsidy through the land-grant endowment. Don’t give a man a fish, give a man a fishing rod. That was the idea.

Timothy Allen: That all went a bit wrong, though, didn’t it?

Mark Frazier: Well, I’m all for being a radical libertarian, and all for it not being funded by taxes. I do think we’re at the cusp of another turning point. By the mid-90s there were online free-market projects setting up gig-economy opportunities. I was very early in, with Phil Salin, who founded the first market of its kind, to test out micro-entrepreneurial paths for people offshore. I had a remote secretary, Camille Crichton, in the Caribbean, from the late 80s. This notion of a big shift, away from having free zones depend on mid-sized or big companies, to making them magnets for talent to come and access global free markets. Today Fiverr and Freelancer have well over 40 million registered freelancers. They’re free to join, and they compete in reverse-auction markets to do transcription projects or whatever.

Timothy Allen: I’ve never thought about that before. It puts the network state to shame, doesn’t it, when you think about it?

Mark Frazier: The talent pool is there. And two huge changes have taken place. One is that in the early days, people coming in had a reasonable shot at landing work. But in a reverse-auction market, even though the price is almost giveaway, 80 percent of freelancers who come into these markets never land a single micro-project, because nobody wants to trust unknown talent.

Timothy Allen: But when I’ve dipped my toes into those worlds, what tends to happen is the winners put their prices up, which is an incentive to look for someone cheaper.

Mark Frazier: Yes. And at the edge of the market there’s probably a bunch of people trying new people out all the time. Some of the better innovators form freelance sub-networks through this talent pool, presenting a single point of interface but then farming it out. But to go back to the talent available to free zone and free city initiators, immense pools of hungry talent that can be mobilised for whatever’s needed. The second thing, which wasn’t in the picture but now is, is that AIs are sweeping out a giant rug-pull of these on-ramps for micro-entrepreneurs.

Mark Frazier: So that brings us to what the next giant opportunity is for free zones. The talent in these online markets has been doing manual services, but we’re now at the cusp of seeing AIs transform field after field. The opportunity, as I see it, for win-win-win, is for free zone initiators to offer micro-vouchers that help talent globally and in the region get their first experiences with AI, delivering value. We have a bed-and-breakfast rental business in Virginia, and we’re setting aside now, call it a neighbourhood share, about 10 percent of our earnings, to feed micro-vouchers that offer first experiences with AI to people in the community.

Timothy Allen: Where your Airbnb is, in the US?

Mark Frazier: Yes. And I’ve just come back from Portugal, where we have a similar offer to fund work-study projects. Again, small scale, 30 dollars, 50 dollars. But they’re released when the student or job seeker has uploaded onto YouTube or TikTok a summary of what they’ve done with AI to benefit their own life, or their friends’, or their neighbourhood’s.

Timothy Allen: So that’s the prerequisite for getting the voucher. And who judges that?

Mark Frazier: While it’s still in early pilot, it’s my call. But we’re doing this to see how we can create a very replicable, open-source precedent.

Timothy Allen: The bit I’m struggling with is why you need a free zone, or a physical place even, for this.

Mark Frazier: This gets to the cascade that’s coming, what Peter Diamandis and company have called a tsunami of AI. In the next 12 to 18 months it’s going to be hammering the traditional economy. So people set on classic paths to job security are cooked, and that applies as robotics come in to physical things, and certainly to a lot of knowledge work. Where is the money going to come from, as we see costs plunging in goods and services thanks to this wave? It’s going to come in the form of experiences, in the form of hosting places that are great to visit and grow and learn new things. So this is where I see the future of free zones. Not the traditional factory or office-cubicle job creation, but much more creating environments of safety, of conviviality, and of serendipity. Tuned to, like your daughter you mentioned, who is very much into horses.

Timothy Allen: Let’s use my daughter as an example. My eldest daughter, Mat, I’ve just been looking at another video of her riding. She’s got a horse she loves to bits, but she learned through a neighbour of ours who has lots of horses, about natural horsemanship. Natural horsemanship is a very specific way of training horses, very different from the way we train them in the UK, which is kind of based on military training, you beat them into submission, not literally, but natural horsemanship is about learning how to be a horse around your horse, and creating a relationship. It’s incredible. The most famous proponent is a guy called Buck Brannaman, a US cowboy type who can take a wild mustang and within 20 minutes have it standing around and walking with him. It’s spawned this whole culture of natural horsemanship. My daughter, she’s only 13, she can’t go and study with Buck, she really wants to. I showed her how to use AI, because I use it a lot, and one of the first things she did, because this came out of a genuine need, she was really struggling with some things with her horse, and if you know young girls and horses, it’s emotionally painful not to be getting what you want out of your horse. So she got the AI to learn everything about Buck Brannaman, because there’s a lot out there, he’s been in films, he’s got his own website, thousands of videos explaining how to train horses. She directed an AI at him and said, from now on, talk to me as if you’re Buck Brannaman. And it worked. She’d have questions I’d have absolutely no idea about, it’s a hard thing to be a dad to a 13-year-old girl and not be able to answer her questions, but she’d ask Buck, and the AI spoke to her as Buck Brannaman, and as far as I can tell was spot on pretty much every single time. That’s what she does now. She still wants to go and train with Buck, he’s still alive, you can do a workshop with him, but she has solved some very serious problems that were causing her real distress, by using this AI.

Mark Frazier: Well, the Alpha School, I gather we have a graduate of it at this conference I’ve yet to meet, but they were on a podcast called Moonshots. Peter Diamandis and Alex Wissner-Gross recently had the founders of this company on. They’ve come up with a highly game-changing way to do education that’s super attuned and personalised, in a manner that can scale, and is scaling now. They’re opening up a lot of places. These entrepreneurs hire teachers not to teach, but as highly skilled motivators, coaches, people sensitive to what each individual in the class is doing. For two hours maximum, people do academic work, but this time it’s delivered through AIs in a game-like way, using the characters that individual learner admires most. So the avatar of Buck, with all the permissions given, is explaining trigonometry or the Krebs cycle in a way that’s super attuned, not too hard, not too easy, but in that state of flow that good games have. And that’s leading to threefold, fivefold improvements in skill levels, with the rest of the day open for whatever you love to do. You’ve got a community in these Alpha Schools of kids in a peer culture, mutually supporting each other, exchanging high fives as they hit their milestones. And the reward for hitting the milestones is time to do what they love.

Timothy Allen: What’s the difference between that and just getting the latest version of ChatGPT, paying a subscription, and asking it the same thing? Are they training their own models?

Mark Frazier: They’ve done the first step toward an open-source version of what they have. But it turns out the human presence and caring surpasses just having the interactive course.

Timothy Allen: Explain the difference. Explain the AI part and the human part. It’s taught by a real human?

Mark Frazier: The real teachers are there not to teach, but to know enough of the domain to encourage and suggest how that individual learner should ask Buck.

Timothy Allen: So it’s a complete reshaping. I’ve got so many questions. Number one, I still don’t understand why that’s the future of free zones, because you could do that anywhere.

Mark Frazier: This gets back to what happens when bots, physical and virtual, are doing the stuff that’s been the mainstay of free zone employment. The apparel assembly, the electronics assembly, that’s going. And in terms of call centres, another huge factor, that’s now being done better by utterly realistic AI.

Timothy Allen: So the reason you think this is the future is because free zones need a future and this is one. When I think of Prospera, the regulatory autonomy they have attracts business, but that in itself is a characteristic of a free zone. So you wouldn’t give them anything special, there wouldn’t be anything different between the Alpha School in a free zone and the Alpha School outside?

Mark Frazier: Well, if there are barriers, and a lot of the Alpha School kids are launching ventures that make money. So this becomes a way for people who care about their kids having a great future, and being in a peer culture, an added magnet to attract global talent. And then the kids themselves springboard into entrepreneurship, having the self-confidence and the portfolio of cool projects they’ve done. They become bankable. One surprising thing from the Moonshots podcast, David Blunden, who runs a VC firm in the MIT area, said, what we’re looking for now are not people who have this grade or that diploma, we’re looking for people who have actually done stuff, uploaded things we can look at, the quality of what they’re doing on GitHub repositories or the videos they created. That’s one. The second thing is, rather than bet the farm, these are increasingly micro-bets, we want to find friendship networks, like the roommates who’ve gone on to launch ventures together. This environment of early experience building your trust networks, having people who share your excitement and complement your skills, makes them much more bankable for seed or full-scale VC funding than the current approaches. So the zones can stand out in terms of the quality of the whole person being formed, and become pathways for a proliferation of entrepreneurship, which I think is the future for free zones.

Timothy Allen: It almost certainly is, because who would want to be an entrepreneur in the UK now? I mean it. I have no interest in entrepreneuring in my own country at all, not a small bit, because I know what a waste it would be, and the opportunities elsewhere are too inspiring. It’s a lovely idea. As you were speaking, I was thinking, it’s quite a sad state of affairs that what a lot of free zones, or Prospera, are actually doing is just stripping the entrepreneurial landscape back to something that’s actually quite good, and always used to be. Imagine arriving in America in the 1700s or 1800s, that was the land of opportunity. And then 200, 300 years later you’ve got this place in Europe that’s the complete opposite.

Mark Frazier: And where you want to go is the frontier, where there’s opportunity again.

Timothy Allen: And if you’re learning it from a young age and you’re incentivised to work on a project, the best learning experiences my kids have are when they’re making a project, not when they’re being taught anything. That whole system is almost backward now. We homeschooled our kids for a while, but they’re at school now, and when they come home, my wife doesn’t always like it, but I say, look, play the game, but know what’s going on. When I first started using AI a few years ago, I said, you can just completely scam the system here, and most people think you shouldn’t, you’ve got to be learning. And as I went on, I thought, no, you should, you need to learn how to beat the system, because the system is really not good for you. What’s good for you is using these tools. Everyone’s being moralistic, saying you can’t do that, but in 10 years’ time it’s like when they invented calculators, oh, don’t use that, you’ve got to learn to do it in your head, and now someone’s doing it 10,000 times faster than you.

Mark Frazier: Jensen Huang, founder of NVIDIA, had a wonderful comment on this. He said, I want everybody in this company to learn how to use AI, but to use AIs in an adversarial contest between themselves, because there you get the next level of skill and insight, by seeing the strong and weak points in these AI-generated systems. So a very live current interest of mine is how we can make game-like battleground dashboards where people gain skill early, not relying on one AI, but taking multiple AIs of their choosing and learning how to play them off against each other.

Timothy Allen: That’s an interesting thought. I almost certainly don’t understand AI well enough, but every time I’ve had a very heavy week of use I realise this thing’s out of control, it’s too good. In that situation, I wonder whether you even need to pit AIs against each other, because an AI would already understand it could pit itself against itself. The worst thing about AI is the wild predictions and the folklore around it. People say, in 18 months XYZ will be happening, and I don’t know if that’s going to be true. It’s tempting to think we’ll all be out of a job in five years, but it’s also not. On the whole, when people panic about something, it’s usually not something you need to worry about. Or, climate change is going to kill us all in 10 years, and okay, I think we’re going to be good. History has proven that right, people tend to flip-flop between different things they worry about. So in that sense I’m not too worried about trying to understand the future of AI.

Mark Frazier: And the question becomes, how do you get ground truth? Because more and more content is created by AIs, and they’re hallucinating 5, 10 percent of the time. They’re eating their own tail, chewing up the hallucinations and regurgitating new ones. So there have to be proving grounds for the AIs, turning them into competitions for prediction. If Prospera changes an aspect of the onboarding experience, you have three or four AIs saying, we predict that’s going to lead to this increase in visitors or e-citizens. These are ways for AIs to show they can make changes. And because the zones can offer clean rooms for policy innovation, it creates a potentially self-reinforcing cycle, where the AIs get better proving grounds, and the rule sets they help suggest have real-world, side-by-side proofs of which one is doing it better.

Timothy Allen: What do you think are the most important things for a zone to offer? I’m talking about Prospera, these kinds of zones where people live, work and benefit, not just a free port. What are the most important things to offer people?

Mark Frazier: I think there’s a vacuum to be filled, of massive transformational change for the better. Zones aren’t understood in the public view as enablers of a gigantic leap that people can relate to in their own lives. The argument about better governance is credible, but it’s not something most people are emotionally attuned to enough to invest in understanding. But people do understand their health, their health span, whether their kids are in a soul-destroying setting or not, the skills of conviviality that Jordan Hall and others have noted. These things reach straight to the heart of people everywhere. So far, I think there’s been a lack of clarity on how massive change is going to unfold for the better as a result of what’s happening here. This gets into being a proving ground for bold ideas, and linking with well-known people, opinion shapers in different fields. If they come into contact with projects like Prospera, this pipeline of life-changing education, health improvements, affordable housing, this is the place setting the proving ground for the rest of the world. This kind of thematic specialising lends itself, not to say one zone is the source of all this, but to complementary networks of high-profile, admired people in 20 or 30 of the leading areas of hope for the future. This is how these zones can go beyond the enclave way of being, and become a common pool resource for humanity, in ways that will open a lot more profitable opportunities to expand and spread.

Timothy Allen: Sum that up in real terms. I’ve found a great location, I’ve got a state on board, I’ve got the opportunity. What do I need to do, what do I need to offer people, what would be in my manifesto for attracting people?

Mark Frazier: Well, take one of the greatest areas of state failure, which is education. Go to four or five of the world’s leading initiatives to break out of the dysfunction and say, we’d like you to set up a proving area where the most scalable, world-changing innovations you’ve got can be shown, and we’re prepared to share the upsides. If your success here magnifies the number of people coming, the companies being formed, the value of the land in a specialised section, we want that flowing back to you or to good causes you choose. That way, having world-leading innovators in environmental initiatives, in health, in education, name the field that’s going to be transformed anyway, find the early movers and the most admired people, and have them set up their dream proving grounds and pilot areas. That will enlist a lot of people who are now on the sidelines saying, no, I don’t understand it. But if these are areas that connect with people in their heart, that will help it grow.

Timothy Allen: What about the big problem, one of the major problems, attracting people to physically move, especially families? I’m of the opinion that attracting digital nomads is good, it’s part of the process, but it’s not a long-term strategy, it’s about local people. Education would be a great way to do it. But I often think, as long as you offer a better and cheaper standard of living inside your zone than outside, which is inevitable, then you normally can’t go wrong with locals.

Mark Frazier: There is a trap in that model, which is the better you make it, and let’s say it’s the classic artists, the first movers into distressed areas, they make it cool, and then the rents go up and out they go. There, to my mind, is a huge frontier that free zone pioneers can innovate in, to vest those who do add value to the quality of life, and who do make life more affordable, to share in the upside, because the land value always capitalises these intangible improvements. If it’s a super-cool neighbourhood, up goes the land value. If it’s a super-safe neighbourhood, up goes the land value. Same with education. So the innovators and bootstrap entrepreneurs behind many of these disruptive changes, if you don’t have a way to vest them with a share of dividends of land or land-trust rights, these things keep the starving artists who are adding value on board, instead of throwing them overboard. So that would, I hope, be part of this package.

Timothy Allen: What do you think Prospera is doing right and wrong when you look around here now? I take it you’ve been following it for a while.

Mark Frazier: I have. The original, let’s go all in on one location, I had encouraged the early team, in conversations, to create a competition or contest, a prize to be won. But by that time they were so committed here, and understandably, it’s a gorgeous place, they didn’t have the same leverage to have multiple sites competing to land them. So that’s something, in retrospect, I’d have hoped could have been done differently.

Timothy Allen: They can definitely do that now. Prospera isn’t even a physical location, it doesn’t have to be.

Mark Frazier: Exactly. And I think the other missing ingredient is a bundle of day-one benefits. Whichever direction they go, whichever partnering or spin-off sites get created, to change the understanding of that community as to what’s in store, it can be changed the way the Phoenicians built trust in setting up the first free zones. 3,000 years ago it was a mess in the Middle East. After the Hittites and the Egyptians had fought themselves to exhaustion, these traders out of Lebanon, the Phoenicians, said, let’s go shopping for trading partners. The way they did it was they’d load up their boats with samples of their wares, and just as night was falling on an unknown territory, they wouldn’t go straight into the village, but close to it they’d row in and leave a bunch of goodies of their trade wares on the beach. They’d light a fire and then row back. The next morning the villagers come out and, my goodness, look, gifts on the beach, what do we do? Obviously lots of them would just take it and off the Phoenicians would head onward. But what happened often was the villagers would respond with their own gifts on a beach. And that would prompt the waiting Phoenicians to row back in and start trade. This was how trust was established in a very low-trust time. And it can happen today too. So I’d hope that Prospera and other free zone ventures that want to spread will look at early wins, through micro-vouchers, micro-scholarships, things that give people day-one, limited but actual, access to surprising benefits, in telemedicine, in their preparation with work-study projects, launching into online markets with AI help. These things can be done at trivial cost and reach hundreds of people from day one. So I’d hope that kind of virtual gifts-on-a-beach can be added to the mix, along with a vision and a path to sharing the upside, in terms of land value, with people who make the region safer, more beautiful, more inviting to visit.

Timothy Allen: When you say land value, take Prospera as the example. This particular site here, they bought the land. So what you’re saying is, if they’d bought the land and the previous owners still had a percentage?

Mark Frazier: A revenue share is one way to go straight off. But with land value itself, Hong Kong and Singapore won’t sell land, they lease it, at open, transparent tender.

Timothy Allen: So the original owners maintain ownership, just on a very long lease.

Mark Frazier: Exactly. And this aligns everyone’s incentives to say, let’s make life easier, not more uncertain, for the folks here. In a time of heightened polarisation and suspicion of billionaires and tech companies, that’s one way to create trust.

Timothy Allen: Except, on the whole, and I don’t know if this is universally true, someone who buys a plot of land, often it’s owned by one person. Even around here, who knows? It might be that the whole of this side of Prospera was owned by one family. In which case that doesn’t really solve the problem you’re trying to address, which is don’t alienate the community.

Mark Frazier: Well, I’d say there’s a trade-off between going for the nominal paper ownership, and limiting your ability to expand, which I think is what’s in the cards now, versus creating a transformative prize to be won, where multiple communities with prime sites vie to offer you the policy reform, not only for the initial project but for expansion, 10x phase two, 80x phase three. There will be, as institutions break and people look for better pastures, huge opportunities for vast amounts of prime sites with world-class reforms to come to you, rather than you chasing and pushing on one particular location that gives you a piece of paper. So I’d love to see Prospera and others shift to the opportunity to grow a hundredfold or more, not only at their initial location but in expansion locations.

Timothy Allen: We’ll wrap up soon. What are you working on right now?

Mark Frazier: I mentioned the micro-vouchers. We have this bed-and-breakfast, through VRBO, where we have a revenue flow. We want to now pilot these micro-stipends in our neighbourhood, and offer virtually, opportunities for people to say, that’s a pretty dilapidated brick wall downtown, here are ideas for murals you could do. These little micro-projects I’m working on now set up a template.

Timothy Allen: You’re not consulting on big projects anymore?

Mark Frazier: Informally I continue to advise, but I’m much more interested in how we roll out the grassroots change, and turn people who are now sceptics or opponents of these innovations into participating in the upside. Not everywhere in the world, but in areas that will influence the world. I recently returned from Portugal and will be doing some of these next-generation micro-vouchers with the community there. My great abiding interest is seeing us reframe individualism and capitalism in ways that disorient the opponents of free markets. And the vehicle for that jives very well with the emergence of a world of abundance, a post-scarcity world, where free zones can be early movers in showing it works. I think that will best happen if we have new definitions of self-interest. Ayn Rand influenced me a lot early on, but I think her super-narrow definition of individual self-interest is actually not in one’s self-interest, because our larger, empathic self has room for causes and people and projects that are part of us. Things that benefit what’s within our boundary of the expanded self are as nourishing as the narrow self-interest. So having a way for AIs and social networks to see people whole opens up huge opportunities for gift-exchange economies, to enrich our self-interest in these enlarged ways. I’ve worked out a paper that just came out in a book in Germany. It’s in German, but the translation is Freedompreneurs, and my chapter on AI, which is in English, is about how we can create better ways to show our true or higher selves with AI.

Timothy Allen: I don’t know whether I’m on the fence about AI, in the sense that I think it’s great and terrible at the same time. It’s great because it’s helping me every single day. I feel neutral about it because it seems to be doing too much, I’m noticing parts of my personality, parts of my modus operandi, disappearing, and I’m not sure that’s healthy. Sometimes I think, my muscles are withering, should I go to the gym, should I do some of the hard work rather than let this thing do it? And then at the far end, I’m worried it’s the ultimate tool for authoritarians, which it is, 100 percent. I know the theory is, as it rises it’s also the ultimate tool for freedom, it’s the ultimate tool for everything. But when I look at society now, the authoritarians appear to be winning in many places, so I can only assume that with AI they’ll carry on winning. I love all the innovation in free places and free cities, but the only reason it exists is because of how bad the rest of society is, and that’s not good. I’ve noticed even in my lifetime, I have kids now, and the things I’m advising them and thinking about on their behalf are so different from what my mother and father were thinking about. I’m trying to create a future for them, set them up with a springboard into as free a future as possible. My mum and dad didn’t think about that, they just assumed I’d be free.

Mark Frazier: Well, there’s, I think, a big downside ahead, and it does relate to AI, but not in the way you described. The reason I don’t buy the ominous scenario you painted harks to something Yuval Harari has talked about, the rise of the unnecessariat, not the proletariat. Potentially 80 percent of humans won’t have productive vocations, because they won’t be as good as what AI can do in services, or robots can do physically. So that would seem to be, and it is, potentially a keg of dynamite that could blow politically. At the same time, the reason I’m sceptical of this idea of elite capture is that, in a world of extraordinary abundance, it doesn’t really matter. If you don’t need people working for your company, you’ve got a thousand AIs doing what you normally would do, the benefits of capturing territory or taking over traditional factories are disappearing, because we’ll have highly decentralised superabundance. So what are people doing power struggles for, in a world where it doesn’t really matter what you’ve captured?

Timothy Allen: There will still be, I mean, there are things which will not be in abundance even in the time of ultimate abundance, like land. So there’s obviously still going to be things people will try to control. As for what the future of abundance is like, my only theory is that the value of what you could call spirituality now will become something, because we have to look towards the things we believe AI can’t experience. Our human spirituality, the internal world of a human, presumably will have a premium put on it. A bit like, I’ve often wondered whether civilisations of the past were like that, they put far more onus on the spiritual experience. When you have any experience available to you at any time, which is likely in an abundant future, then the only human things left with value will be those kinds of things, the spiritual journey, I’d imagine. Or maybe you can even fake that with the right cable.

Mark Frazier: No, I think you’re right on it. Harari has said we may be the last era of a single species of humans, that it’s going to branch and individuate the way our forebears had company with Neanderthals, Homo erectus, Denisovans and so on. So this paper on AI I mentioned is about the emergence of spiritual offspring. Our bodies make genes, our minds make memes, idea-patterns. What does our spirit make? It turns out that unrelated species will come to each other’s aid if there’s, say, a meerkat with particularly noble and inspiring qualities of spirit, courage being shown. Humans will go at risk to help those qualities of spirit continue in that lineage. But so do other species. In the Arctic you see animals under threat from killer whales come to the rescue of other animals also at threat, because there’s some resonance in the qualities of spirit they want to see thrive. So I think what will happen, as AIs get better at becoming person-like, or autonomous within limits, is we’ll see a similar willingness to see those qualities of spirit in that branch flourish. This is where the realms of imagination, where science fiction and the best-selling movies are filled with stories of trans-species resonances, I think that’s where we’re heading. It may be that our biological descendants aren’t the only game in town, but what I’d call luminetic descendants, the vessels that carry forward these noble qualities of spirit. More and more, in the time of plenitude, that will attract people across culture, whatever the religious schisms, to say yes to seeing these qualities flourish.

Timothy Allen: Firstly, do you think AI is intelligent?

Mark Frazier: People I admire are saying, yes, we’re crossing now the threshold to true intelligence.

Timothy Allen: Explain how. Are you saying that if you went into our historical past, when brains were forming, we operated on this kind of error-correction thing that language models do, they just guess the next word, is that how we evolved, do you think? And 10,000 years in the future, or probably a lot less, will an AI evolve to be like the pathway we evolved from language models?

Mark Frazier: This is very much wild speculation. But if you look at any scale, there’s a triad, I think, of things going on. You can see that minute particles are either neutral or indifferent, or they’re attracted, meaning there’s a state they want to be in that they’re not, or they’re aversive, repelled. So what may happen in our storyline is that we are in a field, a universe, that does have these qualities of heart, in the sense of attraction or repulsion that lead to actions. I do think we may just be, on increasing scale, collections of valuing things that aren’t unique to carbon-based life. There may be silicon chips that are under stress, and do want to get out of that state of stress, and in that sense have feeling, or some proto-feeling, that could similarly stack up and scaffold into very complex behaviours and emotional states.

Timothy Allen: So at some point, to prove the point, go 5,000 years into the future. What are we at that point, what are we like? It’s hard to predict, because we evolve with time, ideas evolve, we adapt to things quickly. But it’s easy and obvious to predict that we become useless quite quickly. I can’t imagine any aspect of our lives, other than the spiritual experience of a human being, that does something an AI doesn’t eventually do better than us, through humanoid forms if necessary. So what are we at that point? The only conclusion I’ve ever drawn is that we will impose limits on ourselves, on purpose.

Mark Frazier: Yes. And this gets to Universe 25, which is an experiment run, I think, about 20 or 30 years ago. A researcher decided to create paradise for mice, or rats. Every conceivable thing they could ever want was there in abundance, on this 25th run of the proving ground. The first generation went to town, having all the sex, food, you name it. The second generation became very self-absorbed.

Timothy Allen: The phase we’re going through now.

Mark Frazier: And the decay set in, to the degree of withdrawing and detaching into corners, just grooming themselves all the time to be beautiful. That was the beautiful generation. And what came after that was a horror show, because without the constraints and tensions that evolution normally presents, it got into extraordinarily self-destructive behaviours. So what to do? Big government? I don’t hope so. But what I think we can do, and this may emerge out of games and simulation experiences that equip us for a host of contingencies, is that I think we’ll be seeing more and more inspiring epic adventures, and ones that aren’t just about us as a species. Essentially I hope we’ll see AI ecosystems emerge that are about alive and whole stories. We are narrative creatures, drawn to stories that touch our hearts, our heads and our physical bodies. So to avoid the trap of this narcissistic tailspin, I think what will work is having extraordinarily inspiring adventures that we are part of. This is where, again, next-generation free zones will be ones that excel in creating kinship, in terms of on-ramps to amazing adventures. That is, I hope, going to be enough to keep people from spiralling down into the vortexes of Universe 25.

Timothy Allen: I don’t know in what universe we’re successful in imposing limits on ourselves that aren’t authoritarian tendencies.

Mark Frazier: Well, let me think about this, because that’s not necessarily true. I do the gardening and I grow vegetables. I can buy them cheaper, but I grow them. So I’m adding, and almost certainly within 50, probably within 30 years, I could buy for next to nothing a humanoid that would do the gardening for me. But will I? I don’t think so.

Timothy Allen: I don’t know, actually. It’s going to be quite an existential jolt to take away the need for anything and then see what you put back.

Mark Frazier: Here’s an example. It’s illegal now, but it’s an example of a very attractive opt-in system of group purchasing. Insurance companies, under regulators, are saying, you’re not allowed to come to us with a group and get good affordable rates, we decide what the group is, you don’t. So if you and I, wanting to lower our market-based health insurance premiums, agreed to only consume the following kinds of food, and further agreed to upload TikToks of us huffing and puffing on our morning exercise, if we pulled together 20 or 50 people who commit to share confirmations, yes, we went to Whole Foods and got these goodies, not those, this track record and proof that makes for better health outcomes, we’re not allowed to go shopping for health insurance as a group. So this is an example of how things that are clearly in our interest, opt-in limits to what we do, for tangible upside, that’s an example of how next-generation zones can encourage people to opt in and voluntarily form these sorts of good regulation, in terms of good habits.

Timothy Allen: It’ll probably become second nature in the end, won’t it? It’s just that we live in a time where we all strive for things which are normal to strive for, but when they become irrelevant, it will quickly become normal to strive for limits. It seems alien now, because why would you want to limit yourself, but like I said earlier, I do, on a daily basis, in many ways.

Mark Frazier: And if people you care about are struggling with an addiction, trying to get off cigarettes or whatever, if there are trust networks that say, okay, we’ll share proof of work, confirmation that we’re flying right for mutual benefit, that can be turned to individual advantage in terms of lower risks and better health, but also to the satisfaction of seeing people you cherish lead healthier lives, on the basis, not of a transactional easy route, but a relationship-based agreement to do together what might be harder to do individually.

Timothy Allen: I think we’d better end. Let’s end on a positive statement. What about a prediction from yourself for the next 20 years?

Mark Frazier: Regarding?

Timothy Allen: Regarding everything. I think we can observe the trajectory of the world, certainly parts of it. Technologically we can see what the big things are, because AI is an interesting technology, when you think about it, it solves so many things. It’s not like inventing the bike, it’s like inventing the everything. So it’s a unique innovation to happen now, and we can only see it getting more and more. But you’re not blackpilled on the future, are you? Every time I’ve predicted a horrible authoritarian nightmare, you’ve called me out on it. So what’s your view going forwards?

Mark Frazier: We’re going to get super branchy, I think, as civilisations, more and more. We’re going to see very diverging ideas on what the good life is. We’re going to see off-planet as well as on-planet venues. And it will be, I think, a threshold where humanity crosses from a scarcity- and fear-driven species to one that’s able to create very inspiring examples, and failures, of these new branches. So if we are not choking people’s young years, and we’re giving them a taste of what it is to excel and to follow their destiny, to create their story, and to do it in ways that are benevolent, at least a learning, sharing of experiences, then I think we’re off to the races. And the free zones now are making choices, countless small actions and decisions, that are going to shape this tree of life that emerges.

Timothy Allen: So if the zones of the 60s, 70s and 80s were sandboxes for economic freedom, what are zones now? What are these new breeder zones the sandboxes for, according to you?

Mark Frazier: I think they’re places where the best qualities of humans will have a chance to emerge, and to show how they can interact and blunder, but co-evolve in generative ways.

Timothy Allen: Sandboxes for human culture?

Mark Frazier: The evolution of civil society, and a generative way of interchange with one another. There are certainly going to be people bombing and whatever, too. But there’s an anti-fragile relationship. The worse areas get, the more people are going to innovate and create safe havens that can be the springboard forward.

Timothy Allen: Mark, thank you for coming in. I’m very glad to meet you, and I’m sure our paths will cross another time. It’s a growing ecosystem. I’ve certainly noticed on this trip, I walked into a room which a few years ago would have been a room full of strangers, and now it’s a room full of people I know, probably more than 50 percent I know by name and get a big hug from, which is great. And I imagine it just gets better from here on in.

Mark Frazier: Yes. And just a concluding thought. David Brooks wrote a book that has the following sentence or two in it. Through life, we go from difficulty to harmony, and harmony to difficulty, all of it propelled by the desire for limerence, the moment when the inner and the outer patterns mesh. And this, to me, this gathering, and the kindred spirits and movers, are for me so enlivening. It’s a state of flow, because I do feel the mesh within and without, dissolving the boundary that normally we work at.

Timothy Allen: Well, I’m into that, I’ll go with that one. Mark, thank you, and good luck with everything.

Mark Frazier: Great. If anyone would like to get in touch, the very small nonprofit I head up is called Openworld, and I’m reachable at mark@openworld.com.

Timothy Allen: All in the show notes. Thank you, Mark.

Mark Frazier: Thank you.

Notes on this transcript

This transcript was produced from the audio recording of the episode. The host’s opening introduction, the sponsor message, the value-for-value segment and the conference announcement that precede the interview have been left out, so the text begins where the conversation itself begins. The closing housekeeping remarks after the interview have likewise been left out, so the text ends where the conversation ends.

Speaker names are shown in bold. The original recording was a two-person conversation between host Timothy Allen and guest Mark Frazier, and each speaker’s turns are labelled accordingly.

The transcript has been lightly edited for readability. Filler words, repeated false starts and verbal tics have been removed, and a small number of overlapping or fragmented exchanges have been smoothed into complete sentences. The wording, meaning, order and character of the conversation have been preserved throughout, including its digressions, its humour and its moments of disagreement.

Names, places and specialist terms have been rendered in their standard spellings. Among those that appear in the conversation are: Reason magazine and its founder Lanny Friedlander; Werner Stiefel and his Atlantis project; Mike Oliver and the Minerva project; Jimmy Stevens, the island of Espiritu Santo and the Nagriamel Federation; Buckminster Fuller, Arthur C. Clarke and Robert Heinlein; the launch company OTRAG; the Montego Bay Free Zone; Shenzhen; Zonamerica, near Montevideo; Paul Siegler and Jim Bennett; the libertarian lawyer Pete Ferrara; the early online-market pioneer Phil Salin; Camille Crichton; the Horizon Lanka school in Sri Lanka; Craig Barrett of Intel; the natural-horsemanship trainer Buck Brannaman; Jensen Huang of NVIDIA; the Alpha School; the Moonshots podcast, featuring Peter Diamandis and Alex Wissner-Gross; the venture investor David Blunden; the writers Yuval Noah Harari and David Brooks; and the behavioural experiment known as Universe 25. Figures, dates, historical claims and characterisations throughout are those of the speakers.