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Competitive Advantages of a Startup City-State?

October 11, 2011

We all know that current regulatory systems hamper progress and impede innovation.  An innovative society with rules based on common sense and an understanding of both the seen and the unseen would lead to much more rapid progress and volume of value creation.

But this general argument – even when boosted by empirical data about Hong Kong or Special Economic Zones – is not good enough to pitch developers or sign initial business partners (who need to be in some specific industry!).  To create a thousand nations, we need a thousand specific business models based around the specific competitive advantages of each nation’s unique regulatory offering.  We need ideas like:

So: imagine that you had the freedom to create any regulatory environment that the nations of the world would tolerate.  You can’t reverse-engineer the top selling pharmaceuticals, manufacture them w/o a patent, and sell them by mail to the United States.  You can’t develop world-smashing weapons for super-villains.  You can’t create the ultimate anonymous cash system along with an assassination market.  In other words, you can’t let your country’s local freedoms directly threaten the sovereignty of existing nations.  But you can do all the medical tourism, non-anonymous currencies, local IP-free industries, and R&D you want. For example, more reasonable licensing policies are clearly great for medical tourism (bring in skilled doctors from India and Thailand), but what else do they enable?

What key freedoms and protections would you create, and what immediate industries would they enable?  What business would you start if you moved there?  Respond here or on Reddit.

  1. Simon permalink
    December 1, 2011 3:31 pm

    How about a visa-free zone for artisans, located in the proximity of an affluent area (e.g., California)? People wanting sculptures, tribal art, furniture, textile art, glassware &c could take the ferry to the seastead where they could watch the goods being made to order and perhaps hang out with their favorite artisans.

  2. FiftySeven permalink
    November 30, 2011 5:29 am

    I would think of which areas are most heavily regulated by governments currently. A few have already mentioned medicine, which has a number of opportunities like organ markets, and new procedures and medicines that haven’t been approved my medical regulators in other countries.

    Insurance would be another opportunity. People from other nations could purchase insurance from companies in the start-up nation that otherwise would be unavailable. Unfettered by regulations, companies could seek new and innovative ways to evaluate and measure risk, allowing them to provide more attractive options like lower premiums to those with less risk and lower co-pays to those with higher risks.

  3. October 17, 2011 4:19 pm

    Manufacturing is a tentative possibility. People outsource to the developing world because the cost of labor is cheaper and there are fewer regulations; but it’s usually hard to monitor quality of far-away manufacturing. Lots of expensive trips, principal-agent problems. Instead, run your own factory and oversee it onsite, on a seastead near the US and an easy commute from a US city.

    Another thought, less of a moneymaker, is to do something in the ecological space. Some people would prefer to live in a community that’s completely sustainable, or sourced only from resources that don’t damage the environment. You can never get an entire city or town to be as “green” as you can get a seastead with a brand-new, self-designed system of government.

  4. Abelard Lindsey permalink
    October 13, 2011 10:10 pm

    The freedom that I would create is medical/morphological freedom. The freedom to pursue the development and commercialization of medical therapies to cure aging and increase cognitive and other capabilities. This is a freedom that is sorely lacking in most of the current nations today.

    I want to create a city-state by and for transhumanists.

  5. October 12, 2011 2:46 pm

    I would start with services there, like GSM network, which you can build fairly easily these days.

    Then things like LSD and MDMA psychotherapy, which worked really well before it was banned.

    Providing free speech hosting (maybe it’s easier in the US, but free speech is not as widespread as you may think).

    Providing safe banking haven and corporate registry, decentralized currencies, …

  6. Spaz permalink
    October 12, 2011 4:19 am

    One advantage would be the ability to more-rapidly deploy evolving governance methodologies/technologies. With such a small starting population, your governmental systems can change more quickly. In this period of human evolution, it will give the most agile nation (politically) the extreme advantage.

  7. twistedone151 permalink
    October 12, 2011 3:51 am

    Unfornunately, none of these are economically viable. Every one of these proposals would prove to be nothing but a money sink.

    • twistedone151 permalink
      October 12, 2011 4:06 am

      I’d also add that Hong Kong is a special case, as it was the product of a different era; and functions mostly to allow the Chinese government to reap economic benifits from the rest of the world, while keeping Western and reform ideas quarantined and vented, and keeping the bulk of the Chinese people as miserable peasants.

      • Z. Caceres permalink
        October 12, 2011 12:08 pm

        In fact, a plausible argument can be made (and has been made by the head of the World Economic Processing Zones Association) that the extent to which China has liberalized has been largely a function of experiments with their free zones. Free zones have been advocated even by ‘establishment’ institutions like the World Bank as areas for ‘special governance zones’ as a means of testing new reforms for the country at large.

    • Z. Caceres permalink
      October 12, 2011 12:10 pm

      How is it that you feel confident enough to proclaim the viability of these things from your desk-chair?

  8. Cynic permalink
    October 12, 2011 2:40 am

    If the location is isolated enough (such as out at sea) you could conduct research into communicable diseases without having to worry about expensive liabilities in the case of an incident. If there’s a breach, then the only folks you have to worry about are the people actually in the laboratory. No collateral damage! Put the whole lab on a platform that can be lowered and raised at will, and if something gets loose, sink it and let the sea decontaminate it for you. You don’t have to worry that anything you’re doing will actually kill anyone important.

    Incarceration is another growth industry these days. As traditional governments become more and more oppressive, they’re going to need more and more space to house their prisoners. Since a major expense of a prison is processing visitation, putting the prisoners in places that are far away from their families ensures that they won’t have to deal with that bother. Governments pay big money for those services.

    And of course these days everyone needs an unbiased source of news. The existing media outlets are usually tied up with one political faction or another. Something based somewhere neutral could build up a reputation for unbiased reporting. Once you’ve convinced them you’re sincere, you’ve got it made. Corporations and governments pay big money for access to that kind of clout.

  9. October 12, 2011 1:46 am

    the charter city will have to pay a fee to the geographic host. taxation is inevitable. though it could be pretty cheap compared to anywhere else, until the honduran government gets a bit jealous.

    i think the first thing that is required is clarity on the legallity of violent vs non-violent crimes. or victimless crimes. i don’t know enough about charter cities to know wether each charter city would be able to allow competing courts inside each zone, as opposed to each charter city offering a different court system.

    medical tourism is a good one. sex and drugs i think is the next likely contender. so like amsterdam basically. freedom of the press (iceland) would be good but i expect it would only aggravate the US. hmm… abortions. organic food.

    company formation could be good one.

    aha, banks. we will need bank accounts!!! i dunno it’s late. will follow this thread though.

  10. Mike1200874 permalink
    October 12, 2011 12:02 am

    I don’t understand why a start-up nation could not use an anonymous cash system, say like gold coins, for money? Nothing wrong with that and does not threaten any other system. And if you have IP-free local industries, that includes the worlds drugs, but the products just cannot be sold outside of your own jurisdiction to places that do have intellectual property protection, just like it is in the world now anyways.

    As for what I would personally like to see created, is a republic with zero taxes of any kind, where the very few administrative tasks are done by volunteers, who cannot change their job description or expand their sphere of influence, with private police forces, and courts that are run on fees not taxes.

    The economic freedom of individuals is the most important one, and includes a monetary system where the amount of money is based on something that is fairly fixed, and cannot be printed into existence. Monetary system based on gold is one such example.

    Once you have a nation where you keep all that you earn, your savings keep their value, and the government is basically non-existent and does not interfere with your personal life unless you harm others, that is a great base from which a magnificent, affluent society will bloom.

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