Patri Friedman | 8 Hard Truths from 25 Years of Investing in Free Cities

Timothy Allen: I’ve got to ask you, because you’re a bit of a seasteading OG. What’s your opinion on it currently? What do you think about seasteading now?

Patri Friedman: I think there are certain niche use cases that it probably works for. One that I’ve heard recently, for example, is doing psychedelic therapy on ships flagged by countries where those psychedelics are legal.

It’s a little bit like the Dutch abortion boat, Women on Waves, which brought a Dutch-flagged vessel to countries where abortions were illegal. People could get on the boat, go to international waters and have an abortion.

Timothy Allen: That’s a real thing?

Patri Friedman: Yes. This was in the 80s or 90s, maybe. I covered it in my seasteading book that I wrote in the early 2000s.

It’s an example of the way the law of the sea works, where a ship is a bit like a floating embassy of a country. You register with a country, you fly the flag, you’re under their laws, and you’re out past 12 nautical miles. So it’s a way of bringing different legal systems to different geographic places. That’s incredibly powerful, and I think that’s something very unique about the legal environment of the ocean.

There are various things you could do with that, whether it’s psychedelic treatments or more general cutting-edge medical treatments like I do here in Próspera, where you and I are talking today. You could do them on a ship.

But more generally, the ocean is just very difficult and very expensive. I started working on the seasteading idea about 25 years ago. We haven’t had a lot of progress. Meanwhile, we have this whole charter cities and zones thing, which just seems much more tractable. It’s less romantic. It’s not as good as a meme. It’s not as fun. But it works a lot better in the real world as a way to improve governance and develop different rule sets.

For me, I love the fun and romance of seasteading. I think that meme quality is great. But as a practical way to get to use different rule sets and design different rule sets, which is what I’m all about, I think it’s much worse.

Timothy Allen: What about long term? Do you believe in it long term?

Patri Friedman: I’m not sure, but I do believe in space-steading long term.

One of the reasons I like the ocean is that it’s a different physical medium. It has literally different properties. That’s why a cruise ship is as big as a skyscraper. The cruise ship is like a skyscraper lying on its side, and it moves all around. It goes to different countries and does trans-oceanic voyages.

This medium, where buildings can move, is true on the ocean and mostly not true on land, although it’s always a funny video when it is. It’s even more true in space. You can move buildings even more easily in space. Obviously I don’t mean lifting out of the gravity well, but once you’re out of the gravity well and in space, you can move buildings around.

This is important because it means that instead of just voting with your feet, or voting with your wallet by leaving a badly run jurisdiction to go someplace better, you can vote with your building. You can vote with your house. You can vote with your factory, with your office headquarters.

When the physical infrastructure is able to move around, I call this dynamic geography, and rearrange itself, this puts incredible competitive pressure on the jurisdictions to do a good job.

On Earth, there is so much land and so much more we can do with that land. I’m not sure we’ll need the ocean for space. Obviously, it’s incredible for all kinds of ocean-specific things. But as far as places to build society, I don’t think we need the ocean. We’ve got lots more we can do on land.

But from a conceptual and future standpoint, I do think this dynamic geography thing is going to become real as we settle space.

Timothy Allen: The conclusion I drew coming from the Próspera model, the private governance model, is that seasteading, or the idea behind it, even cruise shipping, is a better way of doing the land-based version because you can move. As a meme, I think it is great. It is much more real for me because you can literally move the building.

However, it doesn’t go unnoticed that a lot of space projects use the ocean to train. I’m surprised you don’t think there’s a future in it before space. Do you honestly think people will make it to space before they make it out into the ocean to create communities? It seems like it’s a function of technology, and that’s the only limiting factor here. I get the feeling we get sea stuff before we get space stuff.

Patri Friedman: Possibly. I think it’s about economics. Both the ocean and, even more so, space are very difficult operating environments and very expensive. It doesn’t make sense to go there unless you’re getting something that makes it worthwhile.

We see potential in space with asteroid mining, for example. There are resources out there that might make it worth it to go and get them. On the ocean, the resources that are worth it to go out and get are mostly oil. And we’re doing that. There is some amount of permanent population for that, where the amount of value extracted in the expensive, difficult operating environment is made up for by the value of the resource. That’s why we’re doing it.

But unless somebody finds or creates some new resource that requires people to live out there, and is valuable enough that it pays for the costs of going out and being in that operating environment, I’m not sure how it would make economic sense.

Timothy Allen: Have you heard about these rare earth nodules at the bottom of the sea?

Patri Friedman: Yes.

Timothy Allen: Because if that’s true, it’s hard to say, but people seem to believe it is.

Patri Friedman: Sure. But why do you need a city on the ocean to extract those nodules? We get the oil without mostly having cities on the ocean.

Timothy Allen: True. I think that arises from the fact that, coming from a seasteading perspective, one of the ways to create a city, even on land, is to have a business model there and start with a business. So seasteaders would hope that would evolve into a city. I agree we don’t see oil rig cities. We see quite big oil rigs and hundreds of people living on them, but yes.

Patri Friedman: Hope is great. There is a lot of hope in this space, and that’s great. The people who don’t have the hope should get the hope. But once you have hope, you also have to consider practicality. We only have so much time and so many resources.

Hoping that an industry evolves in the direction you want is just not a very good bet.

Timothy Allen: Your theory would be that in space, if you’re mining an asteroid, you need a proper colony out there, whereas on the sea you don’t need a colony. So chances are that will happen at sea, but it won’t be in city format.

Patri Friedman: Right. You can think about the cost of transport versus the cost of staying out there. With an oil rig, they can resupply it. An oil rig makes so much money that you could resupply it by helicopter if you had to, although you’d prefer not to. You can resupply it. You can bring people there. You don’t need self-sufficiency because you can bring stuff there and import it to this environment where it would be hard to be self-sufficient because it’s so difficult and expensive.

But in space, the transport costs for material are so high. Not that a space colony is going to be fully self-sufficient. There will be some amount of high-value, low-weight things that are worth lifting into orbit to import there. But the costs of getting there are so much higher than the costs of getting somewhere on the ocean that the maths says a lot more needs to happen locally. You need to be a lot more self-sufficient.

Timothy Allen: Do you think the space memes are realistic at the moment? Elon seems to talk about it quite a lot, and I get mixed answers to that question. Some people say it’s a bit like AI, in five years everyone has lost their job. Other people say in 18 months or in five years it won’t make any difference. What do you think about the space prospect?

Patri Friedman: It does not look to me like we are close to being able to settle space, close as in within years. But launch costs are steadily decreasing and our launch velocity is increasing. It’s not 50 years away that we’re going to be able to settle space, but it’s also not going to happen in the next five years. It’s somewhere in between. It’s not an either-or.

Timothy Allen: On the topic of space, have you thought much about the governance models in space? Have you got a preferred version?

Patri Friedman: It’s interesting. I’ve been trying to figure out this tension in myself of being all about governance experimentation, yet hating to get pinned down to any particular governance model.

I think the reason is that I have a brain that’s very relentless about trying to take things to higher and higher levels of leverage and meta-ness. I see this huge problem in the world, which is that our governance is pretty crappy. There’s not very much competition. Our legal systems are bad. We don’t have good incentives for our governments, and as a result they don’t work very well.

I think that if we can try new things, we’re going to fix that. But I try to stay pretty agnostic about what new things to try.

The model I’m focused on these days, for a variety of reasons, both because I’m a libertarian, a free market person and an entrepreneur, and because I ran the first charter city investment fund, Pronomos Capital, for five years, is the for-profit corporation that is the government and sets the rules to try to attract people, businesses and GDP. That’s the Próspera model. That’s the model I feel inspired to put my time into.

But in terms of my work in general, I try to stay very agnostic. I say it’s my job to try to change the world so that people with ideas for different methods of governance can try them out. There are so many different ideas that I can’t track them, process them or read all the constitutions people send me. So I’m very hands-off on those details, so that I can laser-focus on changing the world so the people who are passionate about some particular model or some particular type of governance have a chance to put it into practice, and then we can see how it works.

Timothy Allen: Amen to that.

I was listening to your talk yesterday, and I’ve taken a screenshot here. You put that you’re currently writing up what you’ve learned from Fund 1. I thought it was an interesting list, especially the first one. Number one, lessons learned: founders tend to be in their 40s, not their 20s. That’s quite contentious.

The Free Cities and charter city space is a massive spectrum, and on one end you have a lot more youngsters. On the network state end, you find a lot more young people. The youngsters wouldn’t like to hear that. Can you validate 40s, not 20s?

Patri Friedman: I started out with the assumption that what we see in the Silicon Valley startup world, where I spent 25 years from around 1998 to 2023 in the California Bay Area, is that you have these hotshot 20-something founders who sometimes build these incredible companies and turn out to be amazing, badass geniuses. That’s who you’re looking for.

What I’ve seen in this space is that, and there’s data to contradict the Silicon Valley assumption actually, I’ve seen investment fund data that found it depends on the industry, but founders in their 30s and 40s actually succeed more often because they have more experience.

In this space specifically, what we’re doing is a startup on hard mode. And a startup is already hard mode. When you’re doing something that difficult, you really need an exceptional person with exceptional experience, because it’s just that hard. Every exceptional person was in their 20s once, but they didn’t have the exceptional experience then.

Another thing about this space specifically is that to do the charter city model, you need to be sitting down with heads of state and senior ministers, talking to them about how you’re going to do this win-win partnership to develop their country and bring jobs. That’s just much harder for someone in their 20s than someone in their 40s. And it probably should be.

That’s not to say that some 20-something founder won’t go and kick ass and make a charter city. It could definitely happen. But as far as placing my bets, I think we need really experienced people who have experience working with governments and regulators to tackle this super, super hard problem. It’s just that hard.

In Fund 2, I’ll invest in people of any age. But in terms of my recruitment efforts, what I’m looking for is incredible experienced founders because I think they’re the best bet. Of course, it’s also hard to get them because they’re the best bet for a lot of things. But I think the potential of this space is big enough that we should be trying harder to get those people.

Timothy Allen: It might also be because the charter city and Free City proposition is very long term, and often that’s a function of an older mind as well. The YOLO mentality of youngsters is great because it creates a lot of innovation, but I know charter cities that have been in production for five years and then fell apart in the fifth year.

That takes a lot of conservatism, really. It takes a lot of waiting and waiting for the right moment. You can’t be anxious to achieve, which is a characteristic I find in a lot of young founders.

Patri Friedman: Yes. Be hungry to achieve, but don’t be anxious to achieve. You have to have a chip on your shoulder to take on a big hard problem, but some things can’t be rushed. Rush what you can, but not everything can be rushed. Some of the most important things can’t be.

Timothy Allen: Also, when you’re young, sometimes you don’t have the time in your life to experience something long term. If you’re in your early 20s, you’ve not really done anything for a long time except be a teenager, and that’s not necessarily useful. But in your 40s, you’ve probably had a solid 10 years between 30 and 40 where you were hopefully working on something very long term. Most people do, I think, because people tend to get into their stride in their 20s and then often continue through. Although we’ll see how that changes with all this AI craziness and everything.

Patri Friedman: I agree. A lot is changing now.

Timothy Allen: It is. But the fatigue sets in whenever I start talking about AI now, because we could have a conversation about anything and you could preface it with, yes, but AI.

Patri Friedman: It’s weird. This is a really interesting time to be alive. I have this line that the 21st century started in 2020 with COVID. In theory, it had started in 2000, and there was all the tech and the dot-com stuff, and that’s all part of everything. But I think we didn’t realise it. This is the decade when, starting with COVID, we realised, wait, this is not the same as the 20th century. The world has changed. Things are different. Our tech is different in ways that are profoundly affecting society in all kinds of ways.

I really think that’s playing out. Here we are at the midpoint of this first decade of the 21st century, and now suddenly we have the rise of AI. So yes, this is a different time.

But it’s hard. I actually have an AI background. I did a master’s at Stanford in AI. I was the first person, as far as I know, who wrote an AI bot that beat online poker players, humans, for real money back in 2006.

Timothy Allen: Did you use it much?

Patri Friedman: A few months after I launched, the US made it all illegal.

Timothy Allen: But how did they know?

Patri Friedman: Regular story.

Timothy Allen: They made online poker illegal broadly?

Patri Friedman: Yes, not bots, online poker.

But that’s not what I’m passionate about. What I’m passionate about is improving governance, creating better societies, empowering people to create new types of self-governing communities. That’s what I’ve sunk my time into, and that’s what I’m going to continue to put my time into. But it’s tricky when everything is changing around you.

Timothy Allen: While we’re on the subject, are you an AI doomer?

Patri Friedman: Yes. I’m not a guaranteed doomer. I think there’s a significant risk of significantly bad things happening. People who think there is no risk are being unwise and short-sighted.

We are the apex predator of this planet. That’s why we get to take out the oil. That’s why we get to go to space. That’s why we get to live and breed and have eight billion of us. If you create something that is a new apex predator, that changes everything. It doesn’t mean it’s guaranteed to go terribly, but I think it’s extremely myopic to not see a huge threat in that.

But I don’t know how much it matters, because I don’t think there’s any stopping it.

Timothy Allen: Have you done any thought experiments into the future about what the point of Free Cities might be in the distant AI future?

Patri Friedman: Yes. It’s really tough. I have thought about this a bit. The short and medium term are easy. There are all kinds of ways to use AI to do better governance. We’re working with Alpha City, one of our portfolio companies, on AI-based regulators for a new 21st-century financial centre. There are a lot of ways to use it.

But in the long term, what are these ideas about? It’s about finding good systems of rules, experimenting and competing with them. But that’s partly a reaction to our human history, especially the last few thousand years, and the ways nation-states and laws work and have arisen.

If you transition to an economy where everything is happening with AI, digitally and online, and the physical world is less and less important, then online you do have easy creation of different rule sets that are opt-in. Every crypto network gets to define its own governance and experiment with it. The more of our stuff, the more value, is in the digital world, the less important the physical world becomes.

Now, the physical world still matters. It still matters a lot. It’s a choke point. But if someone else controls the physical world, if an AI controls the physical world, then what even is a Free City?

Timothy Allen: Exactly. Arguably, AIs gatekeeping the physical world is an inevitability when you think it through. Why wouldn’t they? The reason they might not is because there will be a pushback, an AI pushback to the authoritarian AI that wants to control everything. But it’s hard to predict what that would even look like or how that would play out.

Patri Friedman: Most of my hope is human augmentation. Humans using AIs to outperform, using AIs to make us smarter. Anything that keeps the human brain and human values at the core, driving things and owning things, is where the hope lies. Once it’s some AI fighting some other AI, we’ve already lost.

Timothy Allen: Also, the interesting predicament is the idea of abundance produced by AI. If you follow the timeline far enough, AIs create complete abundance. The price of everything, or the price of most things we’ve covered, trends to zero because it’s robots building new robots, building things, making things. That’s an interesting place to live. Complete abundance, extreme abundance.

You really have to self-reflect at that point: who am I, what am I? If you think about most of the things we do, it’s about scarcity. It’s about getting scarce things and incorporating scarce things into our life. Scarce life, scarce ideas. I love the thought experiments, but I haven’t got a clue whether it’s even going to happen that way.

Patri Friedman: Scarcity is a law of the universe. There will always be scarcity.

You can think about it as physical reality and how we manipulate physical reality to get what we want. We want energy. Okay, we can burn wood, make water mills, go get oil. The best possible technology is the way of manipulating physical reality to get the most for the least.

On a given planet, there are some best ways of getting the most for the least energy, clean water or whatever. Abundance is AI helping us move towards that efficient frontier faster. But physical limits still remain. There’s only so much fossil fuel. There’s only so much uranium. Okay, you make solar panels and surround the sun, but the sun only makes a fixed amount of energy. Okay, now you go to other stars, but that takes time and resources. So there will always be scarcity.

What’s much more realistic is that a lot of prices come down a lot. We get much better at manipulating reality to get what we want. Some degree of abundance, a degree of abundance that should be able to solve anyone being hungry or cold, but not that we can all have all the things we want. That’s impossible.

Timothy Allen: Do you think at that point AI will be governance as well?

Patri Friedman: AI will certainly play a big role in governance. But the question of who will control the world, I don’t have an answer to.

Timothy Allen: True. Me neither. But we can extrapolate what we think is happening. One of the obvious ones would be that AI becomes very intelligent, which it already is, and manifests a supreme intelligence that kind of knows better than we do. Normally I would think that’s an abhorrent idea, that someone knows what’s best for someone else. But in the case of AI, it may well be. At that point, the sensible thing to do might be to say, okay, let the AI decide then.

Patri Friedman: The issue there is: what are the AI’s goals and values? If I’m delegating something that thinks better than me but will do exactly what I want, wonderful. Of course I’d love to do that and take its advice. But something that thinks as well as I do, and I’m pretty stubborn and independent, and I don’t want to be governed. I want to set my own destiny. Something that thinks even better than me is going to at least implicitly have some goals and values.

I like Eliezer’s work on this, what he calls the alignment problem. The issue is whether you can trust that this thing that thinks better than you will do what’s in your best interests. So yes, I’m happy to delegate decisions to it, but I don’t want to delegate power and resources to it.

Timothy Allen: Do you think looking out for your fellow humans is an inherent property of a human?

Patri Friedman: Yes.

Timothy Allen: So would it not arise?

Patri Friedman: But it’s not necessarily an inherent property of a praying mantis or a black widow spider. Keep in mind, and I think this is one reason people get a lot of stuff about AI wrong, we evolved from monkeys. We’re mammals, we’re primates, and we’re specifically this tribal primate. Empathy, not wanting to hurt other people, valuing others of your species, all of that is not necessarily universal to life. It’s not even universal among different species on Earth. It’s much more of a primate thing.

Of course, all of our stories, everyone we know and all of our experiences are primate experiences. We live in this primate dream world because the praying mantises can’t invent the Tesla or SpaceX. We just step on them. All of our thoughts about what a mind is are based on this very certain type of mind, which I love, not surprisingly, because I am one. I want the universe to have lots more of these types of minds. But it’s just one type of mind.

What is a super-intelligent praying mantis going to do? Probably go slice a lot of things with those scythe arms.

Timothy Allen: Maybe. But there is a factor of evolution at work there. You can argue that a praying mantis, if it got super-intelligence, might not hack the head off its partner. Because arguably we are higher up in the evolutionary system than them, loosely speaking. I can’t prove it to you.

Patri Friedman: It would be nice. I can hope. I think there are certain rational values. Something that’s more intelligent is going to look at what it gains and loses. There are a lot of ways in which cooperation is game-theoretically beneficial. So I do think that you get some of those good things from the maths, from the physics of the universe as it applies to economics and cooperation and stability and respecting property rights and things like that.

I just think that most people’s intuition takes that way too far, because they expect everything to be like a primate.

Timothy Allen: So you don’t believe things like the golden rule are universal in an evolutionary sense? Sooner or later, you understand the golden rule, presumably, and then you push through that as well. Who knows what’s beyond things like do unto others as you would have them do unto you?

Patri Friedman: I don’t think there’s something in the game theory of the universe that says a newly dominant species should not wipe out the old dominant species.

Should you have cooperation and respect with others of a similar power level to yourself? Yes, I think that’s in the game theory of the universe. But should you not step on ants? No, that’s not in the game theory of the universe.

Timothy Allen: Let’s not black-pill ourselves. Let’s go back to your list of lessons learned, even though they don’t matter.

Patri Friedman: They might matter. There are also good futures.

Timothy Allen: Here’s a good one. I’ve got an opinion on this as well: build for locals, not nomads.

Patri Friedman: If you’re building a new city, there’s this idea that who are the people we can get to come to this new place? It’s the people who don’t live anywhere right now. But there are two problems with that.

The first is that people who are nomadic are not people who are settled in one place. Getting them to visit, great. Getting them to stay, well, that’s kind of contrary to that population.

The other issue is that when you’re small, it’s hard to compete with things that are really big. You want to compete locally, not globally, unless you think you can actually be the best in the world. This is a general principle for building companies. You want to find the niche where you have an advantage.

The thing about nomads is that if you’re trying to attract locals and be a better place to live in the country where you are, you’re competing with the rest of that country. If you’re trying to attract a nomad, you’re competing with the entire world. That’s really hard for a small new community with less infrastructure, fewer restaurants, fewer people, less of everything except the better rules. It’s really hard to compete for those people because they could live in Lisbon or Bali or San Francisco or London or whatever.

So I think it just makes a lot more sense to build for locals.

There are other reasons. The biggest stability and protection for these startup societies is the loyalty of the local population because you are making their lives better. That’s what protects you from changes in political party, from corrupt officials trying to get something from you, from all kinds of things. You are there making value and making people’s lives better visibly. They know it and everyone knows it, and then they are your best defenders.

Nomads are less useful to you defensively and much harder to compete for, whereas locals are much more beneficial and much easier to compete for. You’re in some developing country and you’re saying, okay, I’m going to make a village, a town, eventually a city that’s a better place to live than the rest of this country. That seems like a much more plausible win.

Timothy Allen: Arguably, Ciudad Morazán versus Próspera is a good example of this. Morazán, you don’t need to convince people to move to Morazán. They want to move there.

Patri Friedman: Yes, and they have more residents. Próspera is at, I think, fewer than 100 average full-time residents. Morazán is more.

Timothy Allen: I have had that same opinion for a while. But recently I’ve decided that nomads play a role.

Patri Friedman: Absolutely.

Timothy Allen: In a place like Próspera, invite everyone. Don’t say this is for one group. Invite everyone. The role they often play is publicity. They’re very good at publicising places. You can see a number of cities around the world that have been rejuvenated by Instagram pictures of people living there, working on the computer and doing all that kind of stuff.

Patri Friedman: I think they add a ton. It’s a good clarification. I mean specifically for trying to grow your permanent population. I’m saying that’s a tough market. But is it great to get nomads to come? Absolutely. To come to your conferences, bring ideas, be interesting people, come be occupants in your hotels. It’s great. They play all kinds of roles. I just think it’s dangerous to count on that as what’s going to be your permanent population.

Timothy Allen: What do you think the best business strategy with nomads is then? Little nodes around the world and places to stay, or is it something they all grow out of in the end anyway?

Patri Friedman: It’s not my focus. My focus is on building cities that write their own laws.

Timothy Allen: Fair enough. What does it say next? L1s and L2s are very different.

Patri Friedman: An L1 is something like Próspera. An L0 is something like Honduras, or one could argue my fund Pronomos, because Honduras is a layer above Próspera. Their constitution, treaties and criminal law govern. Pronomos is a layer above because we’re working with a bunch of layer ones and we want to invest in layer ones.

A layer one is something like Próspera, or our company Alpha City, and many others in the space that are trying to build this platform, this city that writes its own laws.

A layer two is a community. Maybe it’s a nomad community or a longevity community. A group of people who are probably too small to negotiate with a head of state and do everything it takes to build a city that writes its own laws, but who are hungry for those cities, who want them, who want the regulatory benefits, who want the freedoms.

They’re incredibly important. They’re customers for the L1s, and incredible customers for the L1s, because if you don’t have L2s, then the L1 is having to sell people individually to get them to move there. With the L2, it’s like, okay, now I can negotiate with a much smaller number of community leaders and understand them as customers. What does their community want? What would it take to get how many of them to move here? They’re almost like a representative for a larger number of people, and that makes everything work better.

Within the L2, an L2 can have its own unique culture and approach to things. It can build its own physical infrastructure within the L1 city that works how it wants it to. It can customise laws and regulations within the container. All of the L1s have the legal system they’re creating, but if you want to add things onto it that apply to your district or your people, you’re welcome to do so. These things are mostly voluntarist and contractual.

L2s are incredibly important. L1s are incredibly important too. We need them both. The issue, I think, is when people mix them up.

I’m often talking to L2 leaders who are like, so I should be starting a charter city, right? And it’s like, no. If you have enough people and enough experience that you can sit down with the head of state and convince him that you can impact this country enough to pass national legislation and raise the money to build a city, then please, we desperately need more L1 founders. Please do that. But that’s the case for very few L2 leaders and very few people in general.

I also think there’s a difference between the community organising spirit and the I-can-negotiate-with-a-head-of-state-and-raise-a-billion-dollars spirit. They’re both valuable and needed in this space, but in different places.

This slidiness, where L2s are like, I should be starting a charter city, rather than, I should be looking at the existing offerings and building up my community and locating inside them, leads to people, whether in how they present themselves, how they think of themselves or how they project plan, thinking they are trying to negotiate with governments for deals when they’re just not at a size, or don’t have the focus or skill set, where that makes sense.

So it’s all good unless you mix them up.

Timothy Allen: Talking of L1 founders, have you had much contact with, or do you know much about, Destiny, this project?

Patri Friedman: A little bit. Olivier and Roger are both investors in Pronomos, two of my larger investors. I’ve tracked the project a little bit over the years. It’s something they’ve been moving forward slowly on the side for a long time.

My professional opinion, and this is not just them, it’s everyone in the space, is that this stuff is already so hard. It doesn’t really work as a hobby project. You need an absolute badass person full time to do this really hard thing.

Their project didn’t have that for a long time. They had money, conviction and a vision, which is great. Now they actually have, it’s mainly Olivier now, become operational. They’re negotiating with Nevis and trying to do something. That’s great. I’m not deeply up to speed on it, but I’ve read a bit.

Timothy Allen: When I first saw it, I thought it was an incredible project. We’re a little bit starved of projects to talk about, but I haven’t ever spoken to anyone about it who wasn’t Olivier or Roger Ver, who is hard to speak to. It seems like, when you say you need to devote all your time to it, which I agree with, do you think Olivier is? Is that all he does now?

Patri Friedman: I haven’t caught up with him for a couple of years, so I don’t know.

Timothy Allen: Okay. Next one: need a pipeline of countries.

Patri Friedman: Commas. Birds fly, fish swim and deals fall through. This is the physics of the universe.

Because deals fall through, and note, asterisk, the larger the institution and the worse governed the entity you’re working with is, the more likely deals are to fall through or stall out. Because of this, I think having one about a country is not a wise idea. You’re going to work with them and it’s going to stall. Then what do you do?

Maybe you go back and work on your plans to convince them and build up more credibility. But really, the failure rate of these country negotiations and the degree of fit you need between your vision and the country, its leadership and its people, means you really want to be talking to a bunch of countries and finding the ones that are the best fit. You want to pursue multiple ones at the same time.

First, you want them competing against each other and feeling that they’re competing against each other. And when one stalls out, you put energy into the next one. If that stalls out, you put energy into the next one. You’ve got multiple balls in the air because these balls move very, very slowly. So I think it’s really important to have a pipeline of countries.

There’s an interesting question of whether you should then try to build one or build multiple at the same time. To me, building one makes the most sense. Like Balaji says, nail and then scale it.

But the approach we’re taking with Alpha City, with my business partner Bradford, is much more of, we’re going to try to do multiple of these at the same time, as many as we can, and have each of them learning and informing the others. We want to develop things that we can apply across the multiple projects.

For example, if countries have a similar constitution and treaties and you get similar zone law passed, that means you can actually set up the same regulatory system in multiple countries. It’s almost like having data centres in multiple places, redundant data centres. You could incorporate in one of our Alpha City jurisdictions and then click and say, actually I want it to move from this country in Africa to this other country in Africa, because it’s actually the same legal system.

There are definitely things you get by doing multiple at once, but it does make it more challenging.

Timothy Allen: Tipolis has discovered that. I remember a couple of years ago when the strategy became, right, we are no longer just pursuing one thing. It was something everyone talked about.

You’d better quantify what Alpha City is for people who don’t know.

Patri Friedman: Alpha City is our one incubated project in my charter city fund, Pronomos. My business partner, Bradford Cross, is the CEO. We’re working with multiple countries in Africa, mostly in West Africa, to spin up multiple charter cities that each have different target industries based on the country.

These range from agriculture, where there’s a huge lift available for all of Africa, to things like electric vehicle manufacturing, AI data centres using geothermal power, of which there’s a massive amount of untapped geothermal power. Cheap renewable energy, five to ten cents a kilowatt hour, maybe less, in Africa.

Timothy Allen: Do they require special zone status, things like that?

Patri Friedman: Yes, absolutely. It’s this charter city model where we work with countries to pass national legislation to create a zone where the city writes many of the laws and regulations that apply to it.

Timothy Allen: They sounded more industry-based.

Patri Friedman: People living there, especially.

Timothy Allen: What stage are those projects at?

Patri Friedman: This year we’re expecting to sign multiple land deals and raise enough money to start building.

Timothy Allen: Wow. So they’ll all be under the umbrella term Alpha City, even though they’re all very different?

Patri Friedman: The industry is a little different, but the software tooling, the governance platform, the regulations, a lot of the architecture, there are going to be a lot of things that are similar. Some industries, like agriculture, work everywhere. Some things, like AI data centres with geothermal, only work in specific places. So it’s a mix.

Timothy Allen: But the charters will be similar?

Patri Friedman: That’s right.

Timothy Allen: Identical or just similar?

Patri Friedman: Not identical. Every country is different. Even countries with pretty similar histories will have differences in their constitutions and treaties. So not identical, but similar.

Timothy Allen: Near enemies, LARPing and the cloud. That sounds like the title of a book. I liked this one, actually, because this is something we talk about a lot from our end of the spectrum. The LARPing end of the spectrum is the other end of the spectrum, not us, but we’re probably LARPers as well. Go on, you explain it.

Patri Friedman: A near enemy is like Scylla and Charybdis. It’s a trap. You can be trying to do one thing and end up doing something that’s similar, but actually does the opposite of what you want.

I have the most fun with this one, I would say, because it’s the most controversial. There’s so much LARPing and so much cloud in the space.

LARPing means live action role-playing. Some people may know Feynman’s cargo cult metaphor. It’s when you imitate the superficialities of something without actually doing it.

Starting a new country, if we go to the most fun, biggest version of the idea, is so fun, romantic, exciting and unbelievably hard that even if you seriously try to do it, as I have, you’re naturally going to find that it’s so much easier to play with it and to say and do things that get the fun idea out there and get attention than to actually make progress towards that insanely ambitious and difficult goal.

For everyone, and this applies to me just as much, I have to constantly watch out for this. It’s very easy to get sucked into performing the, I’m going to start my own country or society thing, rather than doing it, because the doing is so much harder, gets you less attention and is less rewarding, but it gets it done.

I’ve spent 25 years where this is the thing that’s been constant across those years as my mission, because I actually want these to exist in the world. I enjoy playing with them. I enjoy the LARPing. I’m planning to do more of it this year than I have before because it’s fun and gets the word out. But I also really, really want to get the stuff built. That’s the issue there.

On the cloud side, the reason I focus on the physical world is because it’s really hard to start new jurisdictions. This is the bottleneck and the limiting point. Things are much easier to do online, and as a result they work much better. The barrier to entry to start something new is low. Things are mainly opt-in. There’s low friction to switch between things. In the cloud, everything’s easier and everything works better.

When projects have some physical aspect and some digital aspect, they often find the digital aspect gets developed much more quickly and launched much more quickly. But for me, my North Star is physical territory with legal autonomy. Getting sucked into the digital world is absolutely not what I want.

I’m not saying everybody should have this focus. There are lots of people developing lots of great stuff in the cloud, and that’s great. But it doesn’t change the world in the way that I want. Things already work pretty well there. The pain point that I see, and the thing I want to fix, requires legal autonomy on physical territory.

Timothy Allen: So you wouldn’t pursue something seriously unless those two prerequisites were there: physical territory and a degree of autonomy.

Patri Friedman: That’s right. 100%. That’s me.

Timothy Allen: That’s great. I assumed you were more network state. You’re not.

Patri Friedman: I have not done a good job. I find myself saying this a lot in individual conversations, and more and more I need to do a much better job of getting the message out at scale.

Timothy Allen: Let’s practise. I’m Patri Friedman, and what I’m all about is physical territory with significant legal autonomy.

I think the problem probably lies in the fact that your peer group is the network state end, as far as I can tell at least. I only come across you in that world, I suppose.

Patri Friedman: And the startup villages world. Those are the two adjacent worlds. There’s the cloud-focused, cloud-first network state stuff, and there’s a lot of variety. There are network state projects that have no plans of ever doing physical autonomous territory, and there are ones that do. It varies a lot. But on average, they’re very cloud-oriented.

Then there’s the physical but non-autonomous, like I’m going to build a new city outside Austin, or I’m going to build some nomad villages in nomad destinations. Those are both adjacent. I talk to those people, but those are not me.

Timothy Allen: Do you think the network state is valid? Do you think it’s productive?

Patri Friedman: I definitely think it’s productive. I think people are really having trouble figuring out how to actuate it, how to break it down into bite-sized pieces and make value for people.

My own reading of network state, and my model of how I think about it, is that most of the parts of our civilisational operating system are old and were written pre-internet. We want to replace the civilisational OS with things that are internet-first, which doesn’t mean it’s in the cloud. Governance can be internet-first. If you have a legal system that’s open sourced and tracked on GitHub, and great government portals and digital identity and stuff, that’s internet-first.

So yes, we absolutely need to rewrite all parts of our civilisational OS, or most of them at least, to be internet-first. That’s great. But it’s hard to compete with a monopoly. If you wanted to replace education or healthcare, I’m an American, and if I found some amazing new education system, I’m still paying the same taxes for the same schools. So how do you actually compete with the state for these things you’re trying to replace? It’s tricky, but worth doing.

Timothy Allen: An interesting application of network state theory I came across recently was refugee communities or diasporas. The Tibetans was the example given. Why not create a Tibetan network state which has power? In a sense, they’re kind of landless.

Patri Friedman: Where does it get the power?

Timothy Allen: The power comes in the ability to leverage the network state to get things done. You could put services on it as well, just like the Próspera platform. Because it’s a nation without a nation, in a way. It’s become China or people living in northern India.

Patri Friedman: Right. But those people live somewhere. I live somewhere. They’re paying some government some amount of taxes and fees for some amount of services. So where do you get the money to give them more services? If you charge them for it, now they’re double paying and it has to be really, really good.

As a tool for organising them, absolutely. But I don’t really see the state part of it.

Timothy Allen: That would come. It would be great if it did. Once you have the organisational aspect, you have the leverage to possibly create some kind of getting what you want. It’s specifically for people who are disaffected.

In your hierarchy of wants, physical territory and autonomy, what would be the next one after that?

Patri Friedman: In order to work, I would say the economic engine. Because it doesn’t work without it. The number one reason people move is for jobs. Number two is family reunification, which pulling people to a new place is not great at. That’s another reason for building for locals.

The economic engine is the next piece.

Timothy Allen: So in Alpha City’s case, all your projects are based on an economic system.

Patri Friedman: Absolutely. You can’t do anything without it. If someone was like, here’s ten billion dollars, make a city for Syrian refugees, well, what happens when that ten billion runs out? Without an economic engine, which means making stuff people want out of the labour people have and the resources that are available, you don’t have a sustainable society.

I’m not talking about a theoretical thing. By economic engine, I mean people need to do work to make stuff that pays for their housing, clothing, food and healthcare. Otherwise, you don’t have a sustainable society.

Timothy Allen: Where are we now? Pop-ups. I’ve got an opinion on pop-ups. Pop-ups select for the rootless. They still have value. What does that mean? You didn’t actually go into these ones in the talk.

Patri Friedman: It’s a bit similar to nomads. If you’re doing a three-day conference, then you can attract people who have families and kids in school. I’m a single parent and that limits my travel a lot. I can’t go somewhere for a month unless I bring my kid with me, and then where does she go to school? What happens to her friends and everything?

So I think the pop-up thing is fascinating: let’s go someplace for a month or two or three. People have had some incredible experiences, and they’ve been great. But you’re selecting for people who can pick up and go to some random place in the world for a month plus. That is a very, very small subset of people who are very, very unusual. I don’t think they’re the best long-term settlers for a society.

Timothy Allen: But it’s still useful as an experiment.

Patri Friedman: Right, and to build buzz.

Timothy Allen: Aren’t pop-ups designed for that? I wasn’t aware, at least myself, that a pop-up was designed to get people to come and stay forever.

Patri Friedman: Why is there such an overlap between network state and city projects and pop-ups? They seem to be using them as, hey, we’re going to do our pop-up, gather a community, then dot dot dot, question mark, we’re going to build a city.

Timothy Allen: Well, they’re the LARPers, right?

Patri Friedman: Yes, exactly.

Timothy Allen: But LARPing is fun as well.

Patri Friedman: Sure. Pop-ups are fun.

Timothy Allen: Are they necessary, though? Is the LARPing necessary to keep sane, or would you eradicate it completely?

Patri Friedman: No. But know that you’re doing it. Play with it when it’s fun, but don’t let it infect your actual business plans, critical points and the things that you’re doing. But play with it.

Timothy Allen: Okay, two more. We’ll wrap it up in a sec. Entrepreneurial lift early, legal arbitrage later at scale. That one needs explaining.

Patri Friedman: Here’s the thing, and we saw some of this today. We have all this data that legal systems with more transparency, less corruption, more freedom and lower taxes to some degree result in higher GDP growth rates over time. Because of the maths of exponentials, and the fact that GDP growth is a compounding thing, you get things like Singapore or China in recent decades.

Over a 50-year time span, the amount of wealth you get by having a 7% versus 4% GDP growth rate is many, many times more. In the long term, this thing matters. I should add that a lot of people in this space, Octavio Sánchez for example, this incredible unsung hero of Honduras who created the ZEDE programme, mentioned this was a big part of his inspiration. Over the long term, it really matters.

But what I’ve seen in the space is people thinking that’s what’s going to bring businesses there and form an economy in the short term. That has absolutely not panned out and will not work.

Before you have an economic engine, it’s like when you have the engine firing and turning over, doing something to optimise its efficiency will get it much faster. The engine metaphor misses out on the compounding aspect, which is where the power comes from. But you increase the compounded growth rate of something that’s active and happening, and over time you get a massive increase.

But in order to create that economic engine at the very beginning, businesses aren’t going to move there because GDP is going to grow at 7% instead of 4%. You have to figure out what skills and resources the people and the country have, what industries they’re not in that you can help them get into. You have to go in there as a market analyst and then as a salesperson, doing business development to figure out those industries, find the companies, see what it would take to get them to move there, solve the problems blocking them, and actually get these anchor tenants and businesses to locate there. Or maybe even start them if they don’t exist, which is again a lot of entrepreneurial lift.

You have to hand-build that economy at the beginning. You can’t just create a great jurisdiction and have businesses come. Even though I fully believe and agree that over 50 years that lift is real and that we can make a bunch of Singapores over decades because of it, only if they get off the ground. Getting off the ground requires sales, customer focus and actually creating that economy.

Timothy Allen: Is specialising important at that point?

Patri Friedman: Yes, because these places are small. You’re looking at specific companies, specific types of businesses, then growing that to industry clusters. People interested in this should read about the history of Singapore, for example. Yes, that better legal system helps everything, but when you’re hand-putting together the economy, you can’t bring in everything. What are the exports? What are we going to specialise in and give to the world that will get us the stuff we want from the world?

When you’re small and you only have so many people, so much land or so much capital, you have to specialise. You should profoundly specialise.

Timothy Allen: Using your Alpha City projects as an example, what do you envisage they will look like in 50 years? Will they just turn into places? It sounds like they have personalities, each one of them: ag, tech, whatever. Is that just a strategy to establish, and then in the future you imagine they become something else?

Patri Friedman: I would just look at the world today and the cities today. Every great city has lots of great restaurants, great coffee shops and clubs, although a few of them don’t have great clubs. But their economies are driven by different things.

What powers San Francisco is different from what powers London. It’s different from what powers Bali. It’s different from what powers Lisbon. There’s some stuff that’s everywhere, some stuff that’s in many places, like a financial centre, and some stuff that’s much more specialised and only in a few places. I would expect the same thing.

Timothy Allen: Talking about that, what’s your opinion on Dubai right now? Obviously, there’s a lot of hyperbole around Dubai at the moment: it’s over, it’s this, it’s that. What’s your opinion on the long-term situation there? Do you think it’s been impacted badly?

Patri Friedman: I think it has been impacted significantly. I talked to someone here who was in Dubai when the bombs started falling, and he got out. He’s like, all right, I’m going to stay out. I don’t really have the expertise to know what the prospects are for how long the war is going to last, but I do think it’s having significant impact.

In general, I’m a huge fan of Dubai, and especially the UAE in general. It’s this country that has multiple competing jurisdictions within the same country. They’re pioneers and experts on zones. I often cite Dubai’s financial centre as a huge innovator in my space.

There seem to be countries that are run more like a startup, like Dubai, Singapore and Estonia. Now maybe I’m done listing them. There are not very many. Dubai clearly has incredible execution and administration talent, because they’re not living large on oil money like some other places. So yes, I’m a big fan. But war puts a damper on everything.

Timothy Allen: I wonder whether the impact is as bad as people think. Often when people panic, the best thing to do is wait a little bit, and then it really doesn’t matter.

Patri Friedman: Yes. We’ll see.

Timothy Allen: Last one, sorry to keep you here. Too much theory, stop wonking and build.

Patri Friedman: Too much theory. That goes along with LARPing. It’s a particular type of LARPing that’s about policies and constitutions. People think the bottleneck to making a new society is one more idea, one more policy, one more constitution.

We are drowning in those. That is not the issue. That’s not the bottleneck. The bottleneck is people actually going out and building these, figuring out what is the demand, who are the customers, and putting together the pieces to actually move dirt. That’s the bottleneck.

It’s not that someone hasn’t quite designed the exact best constitution or figured out the exact best healthcare policy. Which is not to say you shouldn’t design those things. If you are building a city, at some point in the actual building of an actual city that actual people are going to live in, you’re going to need to create those policies. You’re going to do that by trying to understand your customers and figure out what they want, see what tech is available and what you can give them. You absolutely want to do all of those things.

The mistake is doing those things way in advance without the customers, imagining what they’re going to want, or thinking that’s going to get you any closer to actually building it at that early step.

Timothy Allen: I never heard that term, wonking.

Patri Friedman: I made up the word. A wonk is a policy wonk, somebody who’s all about the different policies, and there’s a British word that I may be referring to.

Timothy Allen: Right. I like to end on a macro view. You’re a good person for that because I think you’re one of the best with the macro view in the space. What’s your view from up on high for the next, let’s say, 25 years?

Patri Friedman: Twenty-five years is a long time. I think this stuff’s going to work. It’s been a slow, dragged-out start, but we’re learning a lot, getting more and more attention and more and more people interested.

Próspera surviving the hostile administration in Honduras is important. The number one question I get asked is: won’t the government just change their mind and take it over? People aren’t familiar with the various legal stability protections that prevent that. Now we had not just a very hostile administration, but very early in a project. It was a year or two after Próspera opened the doors, so they were still too small to have made lots of jobs and to have the resources. And they survived anyway.

That’s an enormous testament to them and a demonstration of the power of these legal stability protections.

As my friend Joe McKinney is tracking, Google Trends searches for charter cities, startup societies and network states have doubled or tripled since July, in the last nine months. I’m seeing incredible growing interest. The space is really taking off. I feel like the engine of competition and learning has kicked off.

This stuff is going to happen. It’s going to spread and grow. Meanwhile, the world is going to be transforming, falling apart in some ways and getting improved in other ways around us. Over 25 years, who knows what that nets out to?

Timothy Allen: I 100% agree with you. We can’t underestimate the importance of what has just happened to Próspera. I’ve only been here four years, but during that time the number one issue was, give me a working example. And now we have a working example that basically faced the final boss of Free Cities, which is socialist governments, and won. It proved, as far as I’m concerned, the model and the legal protections, the community protections, everything about what was said played out in the way we hoped and imagined it would. It’s phenomenal. Anyway, Patri, thanks mate. We enjoyed it.

Patri Friedman: Thanks for having me.

Timothy Allen: Thanks for coming in. I’ll see you another time.