Economic Zones

What are startup cities for?

Why do startup cities do what they do? What motivations drive the founders? Why have these ideas gained so much traction in recent years?
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July 3, 2021

While the startup cities industry is still small, it is already quite heterogeneous. Each project has its own distinct set of goals, motivations, and scope. However, this diversity isn’t fully captured by the vocabulary we use right now.

 

To help myself create a mental map of the industry, I’ve grouped these motivations into 5 categories. I’ve also included examples of places that personify each motivation. (Some of those examples wouldn’t self-identify as"startup cities" but to me embody that spirit nonetheless.)

 

These motivations aren’t necessarily incompatible with each other. In fact, they're generally symbiotic, and I suspect most startup cities are motivated by many or all of them. The question is one of priority. Which of these goals is a project's main attractor for residents? Which are desirable but not central to the project's mission? The answers to those questions will determine the trade-offs each startup city will make.

 

I’m publishing this ontology for three reasons. I hope to:

·   Create shared vocabulary so builders can communicate clearly with their residents, investors, team, and other stakeholders.

·   Encourage builders to sharpen their focus on what they’re trying to do… and explicitly recognize what they’re not trying to do.

·   Receive feedback about this list so that I can sharpen my own mental model about how various projects in the space relate to one another. I write to learn!

 

So let’s have at it! Here are the different categories of answers I’ve heard to the question "What are startup cities for?": Economic opportunityCompetitive governanceLifestyleCommunity, and Technological experimentation.

 

A.     Economic opportunity: Unleash economic development, reducing poverty and unemployment. Improve infrastructure, labor law, commercial law, tax structure, bureaucratic efficiency, etc in order to support employers in starting and operating businesses.

 

    ·   The Shenzhen Special Economic Zone (SEZ) was the test bed for market-oriented reforms that the Chinese government introduced in the 1980s and 1990s, which lifted 800million people out of poverty. Shenzhen was able to innovate because the SEZ regime delegated almost all management authority to the provincial government, decoupling it from national policies.

 

     ·   Nkwashi's educational system will focus on growing Zambians to become software developers and digital designers, helping them access high-quality jobs.

 

     ·   Próspera is creating economic opportunity in Honduras by building better physical and legal infrastructure, and by diversifying the tourism-centric economy on Roatán, the Caribbean island where it’s located. Residents have access to high-quality remote jobs, fast wifi, dependable electricity, and potable water. Próspera has also streamlined processes such as registering a new business and hiring employees by building an entirely new legal, regulatory, and governance framework based on best practices from places like Dubai.

 

     ·   Dubai pioneered the model of Free Zones, areas that experiment with policies that spur job creation. This UAE city has since become the center of commerce for all of Africa; for example, business people from Cairo and Lagos will meet in Dubai to make a deal, because its laws are good for doing business and better-trusted than those of their home countries. This has made the UAE immensely prosperous, with the 7th highest GDP per capita in the world (graph of UAE total GDP below).

    ·   Uruguay’s Free Trade Zones have become one of the main drivers of the Uruguayan economy. 29% of Uruguay’s exports in 2017 were sent from one of these free zones.

B.     Competitive governance: Innovate on how governments deliver services to their residents, and in turn exert competitive pressure on other jurisdictions to push them to improve their services as well.

 

      ·   Estonia offers 99% of its public services online, and it has an e-residency program that provides foreigners access to Estonia’s transparent business environment. I personally know Argentinians who've chosen to start businesses via e-Estonia because they trust it more than their local government.

 

    ·   Próspera is introducing new democratic institutions to Honduras, providing citizens new avenues for democratic political participation. For example, Próspera has something called a "snap referendum": any council action can be vetoed by popular referendum within 14 days, giving residents more sovereignty over their community than any other jurisdiction in Honduras.

 

    ·   Ciudad Morazán has created a simplified version of Honduran law. Ithink of this as redesigning the law with "user experience" in mind, which is not legislators' typical framing when they write laws.

C.     Lifestyle: Offer a different quality of life than what’s otherwise available to a potential resident.

  

     ·   Gated communities are popular in Buenos Aires, a city where muggings and burglaries are common, because these private neighborhoods offer a safe place to raise a family.

     ·   Culdesac is building "the first car-free neighborhood built from scratch in the US" to provide Arizonans an alternative to the car-centric development in the rest of Tempe.

 

     ·   Ciudad Morazán is building a community that is safer and less polluted than other Honduran neighborhoods, where violent crime, littering, and poor sanitation are common.

 

 

D.     Community: A place for like-minded people to live together.

  

     ·   Chautauqua is a town in upstate NY that has a 9-week program each summer that offers sermons, lectures on a wide array of topics, operas, ballets, theatre, and beyond. This program attracts people with shared values and cultural preferences.

 

     ·   Praxis Society is "building a community founded on shared values, through online and in-person events. And simultaneously, [they are] also working on acquiring a beautiful piece of land and having everyone move there together."

E.     Technological & social experimentation: Create a space for experimentation with everything from life-extension, new forms of social structure, VTOLs, medical tourism, space travel, and beyond.

 

    ·   The Seasteading Institute's goal is to develop" open spaces for experimenting with new societies" in order to" allow the next generation of pioneers to peacefully test new ideas for how to live together".

    ·   Cloud cities are the idea of bringing a community together on the internet first, and then collectively bargaining for a country or city to compete to govern in a way that serves that community's goals and values. After the cloud community successfully negotiates with a host government, they migrate there en masse. Balaji describes it like this: "If you can get 100k people in the cloud, making $100k annually each, you can simultaneously negotiate with 50 governments to legalize self-driving cars. Cloud first, land last."

  

Are there other motivations or examples that you would add to this list? Let me know!

Thanks to Balaji SrinivasanBrian LuiDrydenBrownMark LutterMwiya MusokotwanePatri FriedmanSebastián BensusanSkye LawrenceTrey Goff, and Tyler Cowen for providing feedback on drafts of this post.

This article was originally posted on DevonZuegel.com. You can access the original post here:

https://devonzuegel.com/post/what-are-startup-cities-for