Silicon Valley has been disrupting the world economy with its waves of entrepreneurs pushing new business, as well as cultural models. Until now, however, public governance has often been a boundary to its innovation push. Patri Friedman, an entrepreneur and investor, has set off on a quest to upgrade local governance by combining the concept of charter cities – communities governed by their own laws as opposed to the laws of the state they belong to – with his Silicon Valley experience. 

“I spent 10 years at Google, so I tend to think of things in these terms where if you have a large complex system that a lot of people depend on, like a national government, you don't want to make huge changes. That's just dangerous,” he tells fDi. “The power of charter cities lies in that reforms that are too risky or too different — that it’ll take people time to get used to — or that you just need time to build an economy around, we deploy them in these little places, and that's just the best way to do new things.” 

Tried and tested

Mr Friedman has experimented with alternative governance models for years. He founded the Seasteading Institute in 2008 to build ‘startup communities that float on the ocean with any measure of political autonomy’ and assisted several governments in the development of new governance models. Progress has struggled to emerge, but things may be approaching a turning point. 

“For years, all we had was failure. Now we are in a place where there is actually a real success case, like Honduras Prospera,” he says.

In December 2019, Mr Friedman launched Pronomos Capital, a $10m venture capital fund whose mission is ‘to build prosperous cities that uplift entire regions’, with the support of Silicon Valley tycoon Peter Thiel. The fund is not invested in Honduras Prospera, a semi-autonomous city currently being developed on the island of Roatán, Honduras, but the hope is that the city can become a blueprint for alternative governance models and pave the way for new such developments globally.

Currently, the fund has three companies in its portfolio: Bluebook Cities, which is working at a financial centre for west Africa; Talent City Inc., a firm that wants to develop a charter city in southern Nigeria; and Yung Drung, which wants to do the same in Bhutan. 

“We’re pretty hands on because there is no ‘cookie-cutter’ approach. No one has ever done this before, and Prospera is the one that has come the closest so far,” Mr Friedman says. 

The future of governance 

Mr Friedman believes that, should these first experiments be successful, the sky is the limit. 

“My long-term vision is that we want to develop a repeatable process to rezone land with better laws and institutions, and work with governments, citizens and developers to implement it around the world. Ten years from now, I want to be managing billions of dollars because it takes hundreds of billions of dollars to build a bunch of cities. This is going to be a huge sector. We just want to continually grow, year-on-year, the population and the income of the people living in these cities, and make the process more and more repeatable and standardised, so we can do it in more and more places.”

The Covid-19 pandemic may well give him an unexpected chance to spread his message. 

“When the old systems are really failing, it’s an opportunity for small countries to do brand new things to create the new Hong Kongs and Singapores,” he concludes. “The key ingredient is not that a country has a trillion dollar GDP. The key ingredient is that it has a group of dedicated people in the government who want to help their country and are open to new ways of doing it. And we’re just seeing more and more of those around the world.”

This article first appeared in the October - November print edition of fDi Intelligence.