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[00:00:03] Mark Lutter: So we're trying to focus our research on, like, what are some, like, really concrete actionable things where if we have this information, also, our partners can make better decisions to help charter cities become more of a thing.

[00:00:17] Jarrad Hope: Hi, I'm Jared Hope, co-founder of Logos, a fully decentralized, privacy preserving and politically neutral technology stack. Today, we're talking to Mark Lutter, who's the founder of Charter Cities Institute and Braavos Cities. Thanks for joining us, Mark.

[00:00:29] Mark Lutter: Thanks for having me on.

[00:00:31] Jarrad Hope: So I guess, like before we get into Charter Cities themselves, I'd like to know a bit more about you and your journey and like your philosophical background, like, how did you get to this point where you decided to found Charter Cities Institute?

[00:00:46] Mark Lutter: Sure. So raised kind of, I guess grew up just outside the DC area. Both my parents were bureaucrats working for different parts of the alphabet soup. And kind of went to in high school was a good standard kind of normie lib. College went down the libertarian rabbit hole, right? Right. A lot of Mises, Rothbard, Hayek kind of went to the kind of libertarian organizations at the time I was involved with students for Liberty, went to the what is it, Mises Institute. They had a summer seminar, or I did IHS Institute for Humane Studies. After working a year for as a contractor in the federal government, which was I was a it was a cubicle farm in the basement. And everybody all the other contractors, their goal was to be a fed. And to me it was like, okay, so you can have like slightly better benefits and work in a cubicle farm in the basement. This is like not great. So I went to graduate school at George Mason. When I went, I was a kind of a hardcore libertarian. I consider myself much less of a hardcore libertarian now. So I think the main kind of shift was right. If you look at the hardcore libertarians, they believe. Right? The non-aggression principle, where everything is kind of logically deduced from aggression is bad. Therefore, right. Like these are aggression, those things are bad, these are non-aggression. These things are permissible,

[00:02:20] Mark Lutter: Which is like a decent first approximation. But like what really convinced me was reading Hayek Law, Legislation and Liberty, where it looks at law as kind of an emergent order, or it's not something you can logically deduce. It's something a kind of human developed system, not like top down created, but emergent system for dealing with human interactions that people interact with each other and then build up a set of norms, practices and eventually laws to deal with those interactions. And that kind of emergent system is, I think, more conducive to human flourishing and kind of a more, I don't know, accurate representation of, of the state of the world. Right. Like, how do you I mean, there's all types of, like, crazy libertarian thought experiments or like, if you shine a flashlight on them, are the photons from the flashlight violating their property rights? What if it's a really bright flashlight and it's shining into their bedroom and they can't sleep at night? Right. You can't deduce those a priority. It's kind of like, yes, if you're in a campsite, then people are going to be shining flashlights around. But if you live in a house, somebody's shining like a 10,000 watt fucking thing into your house, right? That's probably the violation. Anyway, so that was in graduate school and was kind of thinking, okay, well, governance matters. Governance tends to be one of the most important, if not the most important determinant for long term outcomes. But oftentimes it's difficult to change governance at a, at a national level. Right? There's a lot of kind of institutional stickiness involved. There's a lot of interest groups. So what levers exist for changing governance? And began to think about charter cities, right. With at a city level, it's easier, especially if there are new cities in kind of unoccupied or less occupied areas. It's possible to get deeper institutional reforms that can lead to more kind of experimentation, potentially more sustained economic growth, more technological innovation. So that's kind of been the, I guess, intellectual journey to get me where I am.

[00:04:31] Jarrad Hope: Yeah. Cool. Yeah. I mean, like, on the non-aggression principle. Yeah, there's definitely, like, the subjective issue, right? In being able to determine what is even aggression. And then there's also the normative issue where it's just like, you know, you're you're assuming that everyone has to operate under that particular principle. And what happens if someone doesn't. Right. You mentioned, like, with new cities and this finding an area where it's, like, unoccupied or like, maybe less populated. I guess, like one of the issues that I see with this is one of the questions I have is like, how do you then attract people to their right? Like, you know, let's assume that you build a city, right? And it has all the best infrastructure. Why is someone going going to move there?

[00:05:15] Mark Lutter: Yeah. I mean, I think you have to basically plug into existing migration patterns. So

[00:05:21] Mark Lutter: There's kind of two global migration patterns that are probably sufficient to for to justify new city development. One is in the global South there is rural to urban migration. So over the next 30 years there will be an additional 2.5 billion urban residents. Most of those are in Africa and Asia, like about 1 billion of them are in Africa, for example. So with 1 billion new urban residents, you need new urban spaces. And sometimes these will be greenfield cities in the middle of nowhere. Most of the time, this is just going to be like the expansion of an existing city. So right, we're working, for example, in Zanzibar Stone town, the capital city has, I think, seven, 800,000 people over the next 20 years, it's going to double in size. Right. And so these new residents need a place to live. And Stone town is a Unesco heritage site. So it's very it's very legally difficult to make the downtown area more dense. So you're basically ending up with a lot of sprawl, a lot of I mean, they're like kind of suburbs. They're much more they Americans might describe them as slums on the outside of, of Stone town, but. Right. These people need somewhere to live. They need jobs, they need education. So how do you create a framework where they can have more opportunity? So it's more of kind of like a satellite city model.

[00:06:41] Mark Lutter: The second sufficient migration to justify new city development is probably the global south, the global north. So a lot of people want to live in the US. They want to live in Europe, but the US and Europe are both getting a little bit more strict about border control. Right? And so you have a bunch of like, high skilled people and also a bunch of low skilled people who want to move. Like if you carve out an area that carve outs the wrong kind of terminology, but let's say, right, the EU partners with, I don't know, Morocco or Libya or Tunisia to develop a city where the migrants can go work in that city instead of going to Europe. Right. Like that, there would be sufficient demand to justify new city development there. Similarly, you can think about something in the Caribbean that would tap into people who want to be in the US. So I don't think, like there are some people in this space who, right, try to create something ex-nihilo and right, create a very strong value proposition to get people to be the first mover. My thinking is look at existing demographic migration patterns and then tap into those and create a value proposition where some percentage of people in that pattern will find your value proposition attractive.

[00:07:55] Jarrad Hope: Gotcha. Yeah. I mean, on the the sort of rural to urban migration patterns. I was just kind of reading about, say, slums and favelas and some of the causal factors behind that migration pattern. But, I mean, it sounds like, you know, a lot of one of the reasons for that without going too deep, is they are no longer able to make a living in the rural environment. And so they're almost they're going to a city to, to seek, you know, more job opportunities in some ways. But then if there is not the economic activity or that's available to, you know to absorb them or provide them a job then it just kind of compounds that particular issue. So I don't know how you, you think about that or if that's, you know, if that's how you view it. And then like, are we talking about slum upgrading at this point or you know, how or just building a completely new city for people who can afford to, to to live in that environment.

[00:08:57] Mark Lutter: Yeah. So like, historically, urbanization has been linked with economic growth, right?

[00:09:04] Mark Lutter: If you look, for example, economic history if you go back over 200 years, like the, the, the statistics tend to be pretty sparse. And one of the statistics they use to indicate level of economic development is urbanization. Right. Like pre-19th century, urbanization rates are kind of taken as hand in hand with levels of economic development. And historically, yeah, like you move to a city, you become more productive, you have a better life, your kids have a better life. There's a classic, like, New York story where it's either a kid from a small town or immigrant kid goes there with nothing but a dollar and the clothes on his back and makes it good and kind of all the good things. And this is also borne out in economic statistics. Right. The underlying logic is cities are large labor markets within a city. You're able to specialize more with more specialization, you can become more productive. And then good things happen, right? This is not true in some parts of the world, namely parts of sub-Saharan Africa. It's called urbanization without industrialization, where you're seeing very high rates of urbanization, but you're not seeing the the similar increases in productivity. So this is a very significant problem. I think the a way to to tackle it is to create conditions that can improve productivity. And this is kind of twofold. I think it's physical infrastructure and governance infrastructure, physical infrastructure. Right. Cities because they're labor markets, they're valuable If you're able to access the labor market, if you have a city that's extremely segregated, that doesn't have good public transportation, where you've got all of these different, like silos of people who don't really interact, you lose the benefits of that dense agglomeration of people.

[00:10:46] Mark Lutter: And so many cities in South Africa, for example, still have zoning and land use. That's very similar to what it was under the apartheid regime, where the apartheid regime was very explicit about, like keeping black South Africans away from white South Africans. Right. And they have not substantially changed the planning regime. So you still have large parts of the population that are very physically segregated from the more productive parts that I think are causing right. Less productivity than, than increases in their otherwise could be. So you need effective infrastructure for allow people to allow people to take advantage of the increased productivity from living in a city. Second you need governance, right? It needs to be easy to start a business and it needs to be easy to hire somebody needs to be easy to fire them. It needs to be easy to invest, to pay taxes, all of these things. And in many parts of the world, it's very difficult and complex to get relevant. Permits. Right. And so if you look at the world Bank doing business index list as of a few years ago, on average in sub-Saharan Africa, it took 33% of per capita income to incorporate a business. Right. If if Zuckerberg had to spend $20,000 just to incorporate Facebook or 15,000.

[00:12:03] Mark Lutter: Right. Maybe he does incorporate Facebook, right? That's a lot of money for a college kid. And so if you remove barriers to entry for job creation, for investment, for all those good things, then you get a lot more of it. And I think if you do that in areas that currently are seeing urbanization without the productivity increases, you create better legal environments, you create better physical infrastructure. I think you would see productivity increases following that. I think kind of second part of your question is, I don't know, kind of cities for higher income segments, right? There are a lot of cities being developed right now for higher income segments. Most new cities are focusing on on that just because it's an easier financial model, right. You can estimate the demand a little bit easier. Like I'm not opposed to that per se. Like I think people should do that and the market should serve people's needs. I don't really I'm not I don't get particularly excited by, like, wanting to build a new Monaco. Right. Monaco. It's it should exist. It's a retirement community for rich people, right? There's nothing wrong with it. It's just not what gets me up in the morning. What I find fascinating about cities is kind of the dynamic, the, like people living there, the energy, the the innovation. That typically comes from a younger, a hungrier population, often with a like some percentage of them not already super rich. And that's, that's kind of what interests me and excites me.

[00:13:35] Jarrad Hope: All right. Is that the excitement? Is that what caused you to to found Charter Cities Institute, or is that something you developed over, over time?

[00:13:45] Mark Lutter: Now, I think it's it's what caused me to to found CCI. That excitement, that interest in that kind of belief that right, charter cities were somewhat low hanging fruit and could be very high leveraged in terms of not just governance in the city itself, but governance reforms more broadly across the country, even across the region, that could lead to sustained economic development.

[00:14:09] Jarrad Hope: Right. And where would this sort of younger, hungrier population or this dynamic that you're looking for in a city be in the world?

[00:14:18] Mark Lutter: It really depends on the demographic patterns I mentioned previously.

[00:14:22] Mark Lutter: If you look at Africa, Africa, lots of countries in sub-Saharan Africa have an average age of like 19, 20, 21 years old. So those populations are by definition young and hungry. If you are doing kind of a city, let's say in the Caribbean, right? Like, again, it depends on who your target population are. If you look at the times when people move, people typically move most frequently when they're younger, right? You move when you go to college, you move when you graduate college, you might move one or time a handful of times in your 20s. By the time you're in your 30s, you settle down. You have kids, right? Moving is a big headache, right? Your professional network is all in one place. Maybe you own a house, which for most people is right, the single largest financial asset they will own. Right. Your job is there if you have a spouse, your spouse's job is there. So getting up and moving is quite difficult. So if you're starting right, like a city in the Caribbean by nature, I think a lot of the first movers will be people a little bit younger, a little bit earlier in their careers, a little bit more risk taking. And then you can also kind of. Right focus a little bit more on that, depending on how you brand the city what your promotional materials are, what your marketing materials are. Right. All those other elements that, that go into to the development.

[00:15:41] Jarrad Hope: Gotcha. Yeah. Okay. And I guess, like, I'm kind of curious from when you started CCI till now, what have been like the major impacts or contributions that CCI has done, and how has your thinking changed over that period of time?

[00:15:59] Mark Lutter: Yeah. So we've worked with a number of new city projects. For example, we drafted some of the regulations for Enyimba Economic City in Nigeria. We worked on a special economic zone law that was recently implemented in Malawi. And right now, one of the most exciting projects, we're working with the African School of Economics to set up a campus in, in Zanzibar. I mean, I think what's I guess two things have changed, right? The practical kind of on the ground things that have changed in what we've seen is just that, like these projects are really, really hard to take a very long time and just require like engagement of all of these different stakeholders. That can be very difficult to manage because they have different interests and oftentimes don't communicate. I think on a macro level, what has changed is when I started CCI seven years ago or so, all right, that was kind of peak Pax Americana. And now we're seeing a retreat of Pax Americana. And charter cities are like partially political projects, right? In the sense that they need political support. And in terms of how you think about framing charter cities, right, who you engage. It's a different conversation when you're kind of living in a world where there's an implicit American security guarantee

[00:17:23] Mark Lutter: Versus a world where there's greatly increased kind of global I don't know, instability might be too strong a word, but.

[00:17:34] Mark Lutter: Yeah. Uncertainty.

[00:17:35] Mark Lutter: And then like, who the right long term partners are, where the capital flows are going to come from. All these questions become, I think, a lot more complicated. And and everything becomes a lot more regional in kind of what we see as the emerging world.

[00:17:51] Jarrad Hope: Right. I mean, I want to pick up on something that you mentioned a little a while back, this notion of, like, low hanging fruits when it comes to charter cities. But then, like, you know, having that on one hand, but then also talking about how these projects are very capital intensive, they take a very long time and requires engagement from a lot of different stakeholders. I guess, like, you know, this low hanging fruit, I guess, is a very relative term. But I'm very curious to hear a bit more about what's actually involved in creating a charter city or, you know, or getting these stakeholders in place, getting the capital in place. Where does it come from, sort of these sort of questions.

[00:18:27] Mark Lutter: Yeah. I mean, with the regardless of the capital, you can think of it in terms of like, let's call it three tranches. There's one tranche, which is just kind of search capital, which might be a few million dollars. And there you can often raise it typically from like high net worth individuals, SF and SF adjacent who like big long term kind of high risk bets. Right. And that you use to find a location to negotiate with landowners, maybe get the land under contract, whatever that is. Right. Negotiate with governments. The second tranche of capital is a bit lower risk, but that's going to be like acquisition capital. So that's the money you put down for the land or for the joint venture or whatever that is. And there you'll have a real world asset that you pay money for. So it's still risky in the sense you're locking money up in a very illiquid asset. It's not risky in the sense that, like, you actually have a real world asset that you can sell at some point if things don't work out right. And then the third tranche of capital is going to be development capital. And there that's kind of traditional real estate and or infrastructure capital, where you partner with the relevant real estate and or infrastructure fund to actually build the thing. And that right. You have to think about, all right. What's the demand? How much do I how much do I build? How quickly do I build? How adequate are financial markets in this region? In Africa, for example, a lot of projects will basically do pre-sales on units to finance the build out because the capital markets are quite thin and it's hard to get development financing other parts of the world, the capital markets are much more developed.

[00:20:04] Mark Lutter: So you can get development financing. And then in terms of. Right, like the, the government engagement, what you need is typically given the kind of scale and scope of these projects, typically you'll need head of state, buy in just because oftentimes these projects don't fall neatly within existing legal or regulatory frameworks. And so working away through the bureaucracy can just take a long time and be a giant headache. So you. Yeah, can get that head of state by in who can then hopefully sign the agreement or tell the ministries to do what they need to do. And then there you've got kind of a broader what might be described as sensitization work in terms of getting local population to understand. All right. This is what's happening. This is how it works. We're not taking any of your land. We'll hopefully create jobs, right. Oftentimes charter cities if you Google them, still have a pretty poor reputation. And so a lot of politicians and other stakeholders will see that and be hesitant and just having a very good ground game to get the relevant local buy in so that you don't have the pushback that unfortunately kills many of these projects.

[00:21:17] Jarrad Hope: Where does that bad reputation come from?

[00:21:21] Mark Lutter: So Paul Romer, who originated the idea. He gave a talk, I believe, in 2009. And he advocated charter cities where a high income country, a guarantor country, would administer the city and a low income country. And that made many people think of colonialism.

[00:21:37] Jarrad Hope: Colonialism? Yeah.

[00:21:38] Mark Lutter: Second is just that, like charter cities, like they don't have to be you could have communist charter cities, but in

[00:21:45] Mark Lutter: Practice, all the people who want them and advocate for them tend to be pretty market oriented. And you just have kind of a default segment on the left that is like anti-market. And therefore charter cities are seen as bad because they're market friendly. So you you do have that the initial kind of hesitation because of the claimed links with colonialism and then just kind of standard anti-market sentiment that that causes a lot of people to, to be hesitant.

[00:22:15] Jarrad Hope: Gotcha. So, I mean, given, like, these sort of challenges, like, how do you compare and contrast this approach with, say, like doing a special economic zone, working with an autonomous region or even like intentional communities? How do you compare and contrast those?

[00:22:31] Mark Lutter: Yeah. I mean, I think it really depends on what your goals are, right? If you look at special economic zones where there's depending on how you count over 4000 in the world right now, 70% of countries have them. Most of them like according to the literature, like on average, they probably don't contribute much. Many of them might just be like a single warehouse with tax breaks to a politically connected friend. Right? Obviously some special economic zones, like the ones in China, Shenzhen right, was extraordinarily successful. And I tend to argue that that's a little bit closer to a charter city in terms of it had very substantial legal autonomy. It was very large. It was multi-industry. The authority was delegated, not prescribed. So like it falls in line with a lot more of the kind of Charter City framework than a what when most people consider special economic zones and like we work with many special economic zones as well. Right. The continuum from charter city to special economic zone isn't super strict.

[00:23:30] Mark Lutter: So we're happy to to engage if they, right, are focused on more than just a single industry, if it's kind of they have ambitions to kind of be city scale to, to have more delegated authority in terms of like semi-independent regions. I mean, yeah, we're happy to work with those two again, depending. Right. Like Zanzibar, for example, is kind of like Hong Kong used to be one country, two systems. Right? It was separate from Tanganyika until 64 when they both gained independence and it became right, Tanganyika and Zanzibar became Tanzania. So some things are quote unquote union matters including for example right, monetary policy, foreign policy. But a lot of things are at the Zanzibari government level. And so we're open to engaging places like that. If, I mean, I think we also try to be intellectually honest, where if there is a semi-autonomous region that doesn't want to do a charter city, if it just wants good policies, right. Great. Do the policies right. Charter cities aren't a universal solution. They help solve some things, but not everything. And if you can get reforms at a larger level, it's oftentimes more advantageous to get those reforms at the larger level if you have relevant political support. And then intentional communities. Yeah. I mean, I don't know, I've got friends who live in group houses, like I have friends who work on an in intentional communities. Sympathetic to to those. I see them as relatively distinct from charter cities. Right. I think if you look at, for example, a network state concept if you take kind of the strict definition Bellagio lays out in the book, then

[00:25:15] Mark Lutter: The most successful network state in the last 50 years was arguably Jonestown, right,

[00:25:19] Mark Lutter: Where you had a thousand people commit suicide and the jungles of Guyana. But they were able to get a thousand people to the jungles of Guyana. But the only way they were able to do that was it was basically a cult with very strong kind of boundary between in-group and outgroup and right to get people to mass migrate to a new place, you need that kind of cult like element, which is something I'm not particularly fond of. I think this isn't to say like a more expansive definition of the network state isn't quite interesting and quite applicable, but I think the really strict definition, like, just requires that very strong bond that oftentimes bleeds into kind of barriers with the broader community and like behavior, which can have very, very negative outcomes.

[00:26:10] Jarrad Hope: Yeah. No absolutely I, I'm not a it's unfortunate that there was an attempt to make a definition of the term network state. I mean, in my view Bellagio was popularizing what crypto anarchists and cypherpunks are talking about and sort of like, you know, early 90s to, to mid 90s creating virtual states or cyber states or yeah, temporary autonomous zones. And you didn't have like the lead requirement, per se. Right. It was more about doing the the things you can do on the net, right? Like the virtual aspects of government governance. With the, the twinge of, like bolstering the, the antifragility or the autonomy dare I even say sovereignty of such a system? Of course, that's not entirely true, because it's dependent on, you know infrastructure that the internet is running on and that that also has national authority claims on it. So it's a bit dubious. But there are some things you can do there. Okay. So let's say that, you know, you've raised this capital for, for a charter city you've got the you you've you've got the development plans in place. You're now building it. How do you view developing the economy for for the city? Like, what are the inputs and outputs that are expected of it? Is that something that you, you know leave to the market and, you know, like, build it? They will come or is there something more intentional behind that?

[00:27:53] Mark Lutter: No, I think it has to be intentional. I mean, in the early days, the best analogy is probably like a shopping mall where shopping malls will typically charge different rents for storefront depending on what kind of store it is. So they have an anchor tenant, which might be like a JCPenney or a target or something that takes up a lot of floor space. But drives traffic and they typically charge a much lower cost per square foot for that anchor tenant than they will for the food court or for the jewelry store or whatever. Right, because the mall needs people there, and they get people there by having a big kind of all in one store that people need to go to. And when they're there, then they spend money at the things that are convenient because they're nearby. And I think Charter cities should take a similar approach. Right? Like no matter what they're doing, they're pretty capital intensive. And so with that level of capital intensivity, the question is then, all right, how do you de-risk it and you de-risk it by finding all right. This is the anchor tenant. This is the anchor industry. All right. If you're focusing in Africa, for example, you typically want to do resource processing. So Africa extracts a lot of natural resources. Oftentimes they're processed overseas in China or other places.

[00:29:07] Mark Lutter: But if you put like palm oil processing or like copper processing, right? You create a lot of jobs. You get government buying, government support. It and it links into the existing supply chain. And so by doing that and thinking of the existing supply chain, right, then you help get that initial kind of agglomeration, those initial workers that justifies the infrastructure investment. I mean, the other thing you have to ask is just right, like deciding, for example, what infrastructure to build is important. Different industries will have different requirements for initial infrastructure in terms of electricity cost per kilowatt hour, in terms of roads, right. The strength of the roads depending on like how heavy the trucks are the size of the sewage systems. And so all of these are conscious decisions that you need to make early that you can't just kind of say, well, there's a market because there is not a market, right? There are specific concrete decisions you have to make. Once you're a larger city, then there is somewhat of a market, right? Once you've got 10,000 people, then 100,000, then you have a market, then you can make kind of more right general decisions. But when you start, it's kind of very explicit with a relatively high risk profile, given the capital costs that you need to be very conscious about doing.

[00:30:38] Jarrad Hope: Gotcha. I mean, that kind, that kind of approach. I mean, it makes perfect sense. It kind of sounds like you might be sympathetic towards like Ciudad Morazan or like the entrepreneurial communities idea that's behind that then. Right? Like, you have this sort of almost like a landlord like approach, and you're renting out that while developing very specific industries within the, within the region.

Mark Lutter of the Charter Cities Institute and Braavos Cities discusses focusing on tangible, actionable research to help make better decisions for developing charter cities. Lutter explains the significant challenges in city development, including the necessity of political buy-in and complex stakeholder coordination amidst increasing global uncertainty. He notes that younger, growing populations often drive city growth. Alongside Jarrad Hope, they explore topics such as urbanization patterns, financing mechanisms for low-income housing, and economic development strategies essential for successful charter city projects.

<p>Logos Podcast is a bi-weekly interview show about building sovereign communities: the people, philosophies, challenges, and solutions. We invite the world's foremost experts and radical thinkers to discuss how to emancipate from repressive systems through new social, political, and economic institutions.</p><section class="footnotes-container">&nbsp;</section>

Logos Podcast is a bi-weekly interview show about building sovereign communities: the people, philosophies, challenges, and solutions. We invite the world's foremost experts and radical thinkers to discuss how to emancipate from repressive systems through new social, political, and economic institutions.

Jarrad Hope

Logos Podcast

<p><a href="https://www.marklutter.com/">Mark Lutter</a> of the <a href="https://chartercitiesinstitute.org/">Charter Cities Institute</a> and <a href="https://braavos.cc/">Braavos Cities</a> discusses focusing on tangible, actionable research to help make better decisions for developing charter cities. Lutter explains the significant challenges in city development, including the necessity of political buy-in and complex stakeholder coordination amidst increasing global uncertainty. He notes that younger, growing populations often drive city growth. Alongside Jarrad Hope, they explore topics such as urbanization patterns, financing mechanisms for low-income housing, and economic development strategies essential for successful charter city projects.</p><section class="footnotes-container">&nbsp;</section>