Devon Zuegel (@devonzuegel) has been Editor in Chief at The Stanford Review, software engineer at Affirm, host on a crypto show on a16z, founder of GitHub Sponsors, host of the Tools & Craft podcast, now works at Pronomos Capital, a venture capital that invests in startup cities. She is also a prolific writer.
In this episode, Devon and I talk about urban experiments, startup cities, venture capital, and town founders.
Henry: Hi, Devon! Welcome to the podcast. How are you?
Devon: I’m great. Thank you for having me on.
Henry: Thank you. This podcast explores the intersection between personal growth, urbanism, technology, and real estate development. I have a giant Venn diagram with your interests. Could you talk about your history, past, and interests?
Devon: Sure. I’m a little bit all over the map, but some threads tie it all together.
I studied computer science in college, and at the same time, I was the editor in chief of the Stanford Review, an economics-focused paper on campus. And then, after that, I became a software engineer. And after that, I became very involved in housing policy in San Francisco.
San Francisco doesn’t build enough housing, and I tried to fix that. I’ve also done some work in some crypto companies. And my most recent job was as a product manager at GitHub, where I built financial systems for open source developers to make money. I recently quit my job at GitHub, and I’ve been exploring the space of charter cities and startup cities.
And so I’m excited about Porta Norte. There’s a lot of potential in Latin America for charter cities. The thread that runs through all the things that I’ve worked on in my career is considerable interest in social organization and innovating on social organization. Many institutions have gotten us far, but we don’t have any reason to believe the institutions we have are the best form they could be.
People talk a lot about conventional technology, electrical engineering, software, airplanes, and medicine. All those things are crucial. Still, social technology is just as important as all other technologies but very understudied. I’ve been exploring that space and thinking about what I want to do next concerning that.
Henry: So the common thread is the designer’s dilemma. When you are a designer, you’re looking to improve everything. Therefore you see problems in everything. Then you get a little bit irritated when things are not right. Unfortunately, some designs of our cities are cringeworthy, and it’s impossible not to pay attention to them.
Many people in the startup community are focused on software engineering and are also interested in urbanism. That’s quite a recent insight for me. You recently tweeted that the urge to do your own home versus programming your language came from the same place.
The Venn diagram of interests is intertwined. What patterns have you seen?
Devon: Yeah, I think you’re spot on. Many people in the software, Silicon Valley, San Francisco, the tech world, and beyond are interested in urbanism because it mirrors many of the types of problems that we run into in our workday today.
So imagine that you work at Twitter or Facebook or any of these social networks. How I like to think of it is you’re building a city that doesn’t have buildings, but a website is like a building. A website has a lot of similarities to architecture. This may sound like a strange concept when you think about it because it’s not three-dimensional. You can’t walk in it, but your avatar can be in it. There is a sense of space and how people relate.
Fundamentally, what these platforms are doing, just like any architect would do, is to design how people interact with each other. But they’re more like cities than buildings because cities are all about the sort of organic interactions that people have.
The mayor of New York City doesn’t know everything that’s happening in New York, just like how Mark Zuckerberg doesn’t know everything that’s happening on Facebook. And, they can’t even imagine what all the things are happening both for good and bad.
Cities are just a rich source of metaphors for the kinds of work that many tech companies are doing. I could go into many other similarities, but I think that’s the major hook that pulls people in.
Henry: These similarities go back a long time. I remember a lecture from Christopher Alexander, the author of a very famous book in architecture and design called A Pattern Language. He is an emeritus professor at Berkeley. He gave a lecture about patterns in architecture in a room full of computer scientists, and he didn’t understand why.
His book became famous in the computer science community because the structure of patterns that he laid out is the same structure or type of thinking for design in computer science. He uncovered this correlation in design patterns between designers of the physical and the digital world.
That book is fantastic, and I recommend it to everybody. It is excellent if you want to build your own home. One of the core concepts is that you don’t need architects; you can design everything yourself.
In the past, people and cities didn’t rely on architects. They did it on their own. If you go to historical towns, they are the ones who have charming streets where everything is romantic, walkable, and everything works in harmony. Everybody built their own home, and it was a community thing. It was built in an open-sourced way.
Devon: So there’s another connection between programmers and architecture that I never really explained before. The types of people who go into software are often pretty impatient people, myself included, who want to build things fast. They don’t want to ask for permission. And software, in a lot of cases, is excellent for that because you can pull up your text editor and start writing code that runs today. You don’t need to have a piece of land to do it or anything like that. You just need to have your laptop.
Many software engineers have fantasies of building things in the physical world but feel it’s more challenging because you deal with atoms instead of bits. You’re fundamentally dealing with real costs and with neighbors who may or may not like what you’re doing. You’re dealing with things that break. Then you have to fix it as opposed to just rerunning the code.
I’ll speak for myself, but this extends to many other programmers. It’s this feeling that we want to build things in the real world, but we don’t have the patience for it.
What you think is very unfortunate because the most important things that can happen in the real world, like your life, are more based on the real world than the connections that happened to you made, which are very important. But software can only go so far in improving your quality of life.
Henry: That will to change things fast permeates the physical world, but it takes much longer. Rearranging atoms is much more complicated than rearranging bits. There are so many people from software engineering who want to do urban experiments.
I’ve talked to many who have wanted to do towns or build a community with their friends. And it is challenging. There are so many experiments digitally, but very few physical experiments get executed in the real world.
I want to do a slight shift.
You wrote a blog post called: What are startup cities for? I found it because Balaji re-tweeted your post. I read your blog post, and Porta Norte fell into one of the categories you defined in your post.
I wanted to connect with you, so I sent you the link to a blog post I wrote on Startup Cities, and then you said you had already read my blog post. Then we started talking about our interest in urbanism and startups, et cetera. But mainly startup cities.
A few weeks later, I sent you a link about other people who had done a compendium of all the startup cities worldwide, and they used your categories. Your categories permeated the internet.
I wanted to go into the framework and categories you listed in your blog post: economic opportunity, competitive governance, lifestyle, community, and technological experimentation. Can you go into detail on each, please?
Devon: Sure. I should have a disclaimer that these are simplifications of motivations. Indeed, other things are probably not covered here. And a lot of detail that it’s not perfect, but they’re like rough groupings of the types of motivations I’ve seen for startup city founders.
The first of the five is economic opportunity, and it’s really about unleashing economic development, reducing poverty, and reducing unemployment.
People here in the U.S. don’t appreciate how screwed up certain primary institutions are in most of the world. And that’s not to say that U.S. institutions are perfect or great either, but we solve specific problems that other places haven’t entirely solved.
So, for example, China in the 1970s was super communist, and they didn’t have any private property whatsoever. You couldn’t leave your job if you wanted to, because you were assigned your job and you’d do it for your whole life.
Many things like that resulted in massive misallocation of capital and labor in the market and land. In the 1980s, China created a special economic zone in Shenzen where they changed a lot of those things, they’re still technically communists, but they made it so that people could lease land for 99 years, which is similar to ownership.
Henry: Also in England, I think.
Devon: Yeah. Several places have done that as well. But, I’m not sure about England. I think Singapore has a similar system. They’re all slightly different, though. China did all these things to bring more market competitive pressures to their economy.
GDP in Shenzhen multiplied like ten times within just a few years. It was swift. There are other places in the world. China is doing a lot better because it adopted many of the same reforms that Shenzhen experimented with in the 1980s.
There are a lot of other countries in the world that have different but backward policies that hold back economic development. They might have people who are incredibly talented and energetic. However, they have labor laws where you can’t fire ineffective employees at all.
So that’s a long way of describing it, but that’s what the economic opportunity perspective is for startup cities. This is also very well aligned with business models because if you create a lot of economic development and increase people’s productivity in your city, there are probably hundreds, thousands, internet ways to capture some of that value back to yourself. And if you own the land where this is happening, you can benefit a lot. So that’s the economic opportunity reason.
Devon: Yes. The second one. These are not in any particular order, by the way. The second one is around competitive governance.
Someone I’m very close to is currently going through their green card process to get permanent residency in the United States. And this process is a complete mess. He had to send this medical paperwork to show that he didn’t have certain diseases.
The first time he sent it in, they got back to him and said, oh, sorry, you filled out the form in blue pen and not a black pen, so you have to send it again. So he did. They got back to him again and said, you sent it in on A4 paper instead of a letter-sized paper, so you have to send it in again. And there’s this back and forth until finally a few days ago they were like, okay, you’ve got the paperwork done correctly. Thank you.
This process is backward. It is a complete waste of time and money. He had to resend these letters many times at a very high cost cause he had to send them in on high-speed shipping. So it was like $50 per letter that he had to send. He had to take time out of his workday to go to the post office and mail it by hand.
By contrast, Dubai, Singapore, and Estonia have a ton of their government services online. You just submit a form in 10 seconds, and you are done. And that’s that. These government agencies are held accountable for the quality of their services.
I mean by competitive governance that there are some governments in the world, very few sadly, but hopefully, a growing number treats governance as a product. They say, how do we make governance as good as possible for our citizens? So we’re not wasting their time and making them spend useless money. We’re not putting them in situations where they live in jeopardy just because they filled out some paper wrong.
Unfortunately, most countries, states, and cities don’t act that way. Instead, they are comfortable knowing that they have a captive audience.
I’m talking about this guy. He’s not going to just leave the United States just because of this one paperwork, but they know that they have a captive audience. And so they don’t have to have good services, just like any monopoly.
One thing that’s exciting to me about startup cities is that once more and more come online, there will be more competitive pressure, and people will leave if they don’t feel like their government is serving them. So that’s number two.
Number three is lifestyle.
Lifestyle sounds like a superficial thing. And maybe in some cases it is, but in other cases, it’s purely about safety.
Some places in Latin America are unsafe to live in, although many different places in the world either, but I’m most familiar with Latin America. If you live in Sao Paulo or Buenos Aires, your kid might get mugged, your house might get broken into, people might carjack you, you might get kidnapped, and stuff like that. Therefore, startup cities have an opportunity to offer safer places.
This is not going to be true in every single place in the world? Luckily not every country is dangerous like Brazil. But in the places where that is the case, startup cities will provide essential options for people to live a life where they’re not worried their children will get kidnapped.
Lifestyle can also include other things that are not as serious as physical safety. It might be that you want to live on a Caribbean island. Maybe that’s important for you and your lifestyle because you’re into scuba diving or something like that. I think that scuba diving communities might pop up, and there might be a startup city that serves them. That’s a random one. I don’t know if that’s a good business idea, but that’s one version.
Henry: New ski towns might also be startup communities.
Devon: I have not looked into the numbers, but I would bet that Aspen in Colorado and many other ski towns have seen a lot more people move there during COVID because now more people can work remotely. Startup cities enable people to live where they can do their hobbies, think it’s beautiful, and have a beautiful house. Yeah, ski towns.
Henry: And to serve them all year round, now they’re adapting the mountains for mountain bikes when they have no snow. With this, they can have an active community all year long. That’s an instance of them improving their product.
Devon: I did not know of that. But that makes a lot of sense, and it’s probably almost as fun as skiing. Probably even more fun for some people.
So the fourth category that I have is the idea of community, where like-minded people can live together.
This has already existed in some shapes and forms, but it usually exists as vacation towns. So one place that I’m familiar with is a town called Chautauqua in upstate New York. They have this nine-week program each summer. So like June through August, where they offer sermons, lectures, ballets, theater, all sorts of things like that. It is primarily geared towards retired people. They invite their children and grandchildren to stay with them.
My grandma goes to this place every summer and hangs out with her friends interested in the same opera. They have a beautiful town where she knows she will be friends with everyone there when she walks outside. She could become friends with almost everyone there because they have similar interests.
Chautauqua has always been a summer place. It’s more of a vacation spot where you take a few weeks off of the year, and you go, but again, now with more remote work, I think there’s more space for this to become more of a year-round sort of thing.
I don’t know if Chautauqua will specifically evolve to become that, but I think a Chautauqua-like place could exist for different types of people who have other interests. People who share values want to live together instead of where they may not share values with their neighbors.
And then the fifth is around technological and social experimentation.
Right now, roughly all of the land on earth is claimed by a nation-state. There are a few exceptions. All the land that you would want is already claimed. And those nation-states tend to have laws in place about what you can and cannot do.
The menu of laws, legal systems, and social structures that exist out there is only a tiny subset of what’s possible. It’s a shame that we don’t have a frontier anymore because we can’t go out and experiment with social structures in the way we used to be able to. You used to be able to go further out.
Henry: Mars is the next frontier, right?
Devon: I think that’s literally far away, but maybe we’ll get there. Hopefully. I would love for us to open a new frontier. Cause frontiers both challenge the older places to reconsider whether what they’re doing is good or not. And they also just create space for “weirdos” to try stuff out.
And so the kinds of things that I would love to see experimentation for are things like life extension or medical tourism. If you are, towards the end of your life, and you want to try a drug that might save your life, you should be able to try it. But like in most countries in the world, you can’t do that.
Instead of trying to reform those countries, we should be able to build an alternative in the frontier. Competition might make those countries reform themselves.
You want to experiment with new technologies like flying cars or space travel. I see creating a new frontier as a valuable social addition because it’ll give us space to experiment and figure out what we’re missing in our existing communities.
Those are the five. Repeating the categories quickly, they were economic opportunity, competitive governance, lifestyle, community, and technological experimentation.
Again, there’s probably some missing. So if anyone thinks of something that doesn’t fit into those categories, I’d be super interested to hear it.
Henry: Let’s talk a bit more about examples of each of these.
So, economic opportunity. Free trade zones have a connotation of import and export, but special economic zones have a better tax structure or immigration laws that make people establish there and facilitate commercial activity.
One of the best examples of this category is Singapore. But what do you expect to see here? Is there something else rather than special economic zones and free trade zones? What do you wish to see in the future? What are the best examples today?
Devon: You’ve touched on how free trade zones and special economic zones usually have import and export connotations. I think that’s right.
I would love to see people experiment in Porta Norte around a free trade zone for knowledge workers. I don’t think that’s been tried before. The closest thing I am aware of is the Dubai International Financial Center (DIFC). But they’re narrowly focused on finance, fintech, and oil for the middle east.
Henry: Can you explain a little bit more
Devon: Dubai is a fascinating city. It’s part of the United Arab Emirates. It is one of the 7 Emirates, which is like a federal system. Each of the 7 Emiratis has a king or a Monarch.
In the 1970s, Dubai had only a few 10,000 people there or something like that. And at the time, the king decided that they would invest in import-export infrastructure, simplify the laws, lower taxes, and stuff like that. Now for anyone who knows about Dubai, it’s not that small anymore. It’s millions of people. It has some of the most modern towers in the world.
There are also many very valid critiques of Dubai that I won’t get into, but they exist. And I agree with some of them. But you can’t get around the fact that it’s awe-inspiring that they took it from this little fishing village to a global trade center.
And then in the two-thousands, around 2004, they decided they wanted to attract more financial businesses like banks because they felt that would help the region, especially Africa, access capital. But then they realized that their legal system didn’t work very well with the English common law system, which is how most finance is done around the world.
And so they decided to create this special zone inside of Dubai called the Dubai International Financial Center, governed by a common-law framework distinct from the Emirates legal system, with laws and regulations issued in English.
Henry: They can even have foreigners on their board of directors.
Devon: Exactly. Usually, the Emirates has restrictions for foreign-owned businesses. However, companies in DIFC can be 100% foreign-owned —which is excellent. This policy alone generates hundreds of millions of dollars of GDP annually that didn’t exist before.
Anyway, this is the most similar thing to a free trade zone for knowledge workers that I know of, but it’s still pretty constrained to finance.
It’d be exciting to envision a zone focused on people who build internet businesses or something like that. What would that look like?
Henry: What would that look like for you?
Devon: That’s a good question. I should think about that.
Fast internet is, of course, the number one most important thing. What I touched on earlier around the government having simpler processes would be very important.
I spend more time than I would like dealing with various government interfaces. I had to get my driver’s license renewed recently and wait in line. No one should have to go through that because it’s just, I know it sounds so petty and so small.
If you think about how many people in the world have spent hours waiting in line for a driver’s license, that’s a lot of wasted time. Those humans could be doing anything else with their life and creating value by being with their family, exercising, sleeping, etc.
That’s for driver’s licenses, but that’s not even that important, let alone, I don’t know, Medicare or something life-threatening. Digitize government services and have maybe a concierge service where, if you have questions, you can call a support person, and they’ll help you navigate the bureaucracy.
Those are the first ones off the top of my head. I could probably give you better answers if I thought about it more.
Henry: If you do something for knowledge workers, you need to push the envelope in all the five categories you just mentioned. I’m trying to improve them all.
If you are a technological worker, you want economic opportunity, sound fiscal and labor laws, and an ecosystem of good businesses that generate know-how.
You also want competitive governance. You want the place to work like just to work, that’s it. That they try to attract you and give a smooth onboarding.
You want a good lifestyle for exploring your interests like skiing, mountain biking, nature immersion, etc.
You want a community with like-minded people where you can have deep conversations over coffee in public spaces.
You want technological experimentation where the government doesn’t meddle in your things or inhibit your company’s growth.
Devon: Yeah. And related to that, also just a feeling that the government is responsive to you.
If there’s something deeply wrong in the place where I live, I want to feel confident that things can change. The cities I’ve lived in don’t feel flexible and bendable.
And some of that is good because people shouldn’t be able to just change anything all the time for everyone else and hurt them or whatever. But certain things are just like really terrible inefficiencies that you can see walking around.
If you see a problem on a startup’s website, you can often email the CEO, and if they agree with you, they will send their best team to solve that problem fast. But this is not a guaranteed thing. I’m not saying that always works either. There’s a feeling of responsiveness that you just don’t usually get in an urban landscape.
Henry: Yeah. I wish urbanism were as responsive as Singapore bent to Lee Kuan Yew’s will. He had a vision and built it fast. Of course, it was an authoritarian regime. Paris was also responsive and built the Boulevards designed by Haussmann.
Few people will get trampled upon if we want to get big things done. To make an omelet, you need to break some eggs.
Devon: To clarify my position, I do not favor totalitarian governments or monarchies. But at the same time, democracy, especially consensus-driven democracy, where many people have to agree, now you have to stop the whole thing if anyone gets in your way. That also doesn’t work very well.
So what I think is an exciting alternative is startup cities. You can have tiny baby kingdoms where people can leave if they don’t like what you’re doing. What this means is no one gets trampled because they can exit. If Haussman comes and tries to take away your property, just say no, leave and sell your land.
You can refuse to live in a community like this. But you also get the benefits of some of the top-down coordination that can happen.
It is important to live in a world with many smaller cities and open borders. We don’t have that today.
My ideal world would have lots of little tiny kingdoms run by businesses. Most likely where the CEO gets to decide what happens, but you can choose any of those cities you want to go to. And you go to the one where you agree with how they approach things.
Thus resulting in the best of both worlds, where people choose and are not coerced into anything. All the choices they make or what they think matter. But at the same time, you have someone who can see the bigger picture and have a bigger design.
This could be someone who does things that I disagree with. That’s fine. Cause I can just leave. I don’t have to live there. Now I think the question is how do we get to that future? I don’t know how to do that because I believe we are very far from having anything that resembles open borders.
And culturally, we’re very far from that. So I don’t know how helpful is this image is that I’m painting, but it is the image that I would love to see.
Henry: I would say there are baby steps going that way. Current examples would be Selina. It’s a hybrid between a hotel and a hostel. It’s targeted at millennials, and you can do a lot of yoga, arts, meditation.
They started in Panama, in Casco Viejo, about seven years ago. Now they have over 60 destinations. Their business model includes helping the community and making it part of the development.
Some people go to Costa Rica, then to Panama and Colombia, while staying in Selina. If Selena had more billions of dollars, they could do not only buildings but a series of neighborhoods with public spaces. These might be the initial steps towards that future.
Devon: This looks cool. I’m poking around their website, and I have to check this out more. Yeah, I think we’re going to see more of those. The issue is that the Westphalian nation-state system doesn’t allow for this very quickly.
It’s tough for many people to get visas in different countries and that sort of thing. Luckily the U.S. is a huge country. And so, I was able to recently move from San Francisco to Miami because I disagree with San Francisco’s governance.
So I voted with my feet, but many people don’t live in big countries with diverse cities. For example, my boyfriend is from Argentina, Buenos Aires is the main city. They have other cities, but they’re not that different.
Compare it to Los Angeles, where you can go to LA if you’re a musician. If you’re a software engineer, you can go to San Francisco. You have specialization of cities.
In the next 10 to 20 years, it’ll be interesting to see if the system bends or breaks. More and more people will want to live that way, where they can choose the city they live in based on their profession, values, or whatever they care about with where they live. But right now, it’s not working very well.
Henry: It is not. But the pandemic has opened up a lot of places. Many countries, including Panama, have made new laws for digital nomads. It has happened in Malaga, in the U.S., and some places even pay you to reside there.
The talent competition is rising. That competition will pressure governments to, hopefully, develop more competitive governance. This is much more important now because people have a greater ability to move.
The countries that take advantage of this trend will rise in value. In places like El Salvador, making Bitcoin a legal tender, opening up for digital nomads and technological people will result in major benefits. There are many people who want to do arbitrage where they reside in Latin America while working for a U.S.-based company, earning much higher salaries and spending it where their money is worth more.
These types of experiments will happen more. Panama has an experiment for knowledge workers called Ciudad del Saber or City of Knowledge. It was previously a military base for the U.S. in the Panama Canal Zone. Now it is converted to a Special Economic Zone of 120 hectares that have attracted the United Nations, universities, schools, businesses, and multinational companies. It has been highly successful. It’s all services companies and none of the import/export.
I use it as a model to explain what we want to do in Porta Norte. We will brand it or market it as a Special Economic Zone for services because we’re not going to be in the import/export business. We want people to start companies, have better labor laws, tax structures and bypass some of the red tapes that happen when people want to come to Panama.
Devon: What things did the Ciudad del Saber do to attract people? Why are people, companies, and universities moving there?
Henry: Because they have tax and immigration benefits, great telecommunications infrastructure, great infrastructure overall with redundant power supply, a high-tech ecosystem, amenities like sport and recreation facilities, and other benefits.
Devon: Are these universities coming from abroad, or are they Panamanian?
Henry: Both. Some examples are Louisville, Florida State University, and La Universidad Francisco Marroquín. In total, they have 34 academic programs.
The Government of Panama is betting on indirect benefits of having more educated people over here, more universities, and not from a direct tax they charge Ciudad del Saber. In Porta Norte, we are inspired by the City of Knowledge and try to incorporate some of the lessons learned.
The challenge at the beginning of new projects, if it’s not a company town, is that it usually becomes a place with no life in the days because everybody leaves in a car to go somewhere else to work and come back only to sleep –becoming a dormitory city. Residents almost always arrive before workers, and companies get interested in moving there when there are a lot of residents. So it’s a chicken and egg problem that we are struggling with, and we have many strategies to fight that, but it’s something that you have to fight.
Devon: Right. Yeah. That’s very exciting. I’ve been meaning to check it out. I should go to the City of Knowledge. Can I just drive or walk in?
By the way, I used to work there at a Venture Capital firm in Ciudad del Saber, so it’s all connected. The DNA of Ciudad del Saber has permeated Porta Norte. CDS inspired me to invest in things I enjoyed like public spaces, culture, education, and sustainability. It made me ponder how to create the virtuous cycle I experienced working there.
Ciudad del Saber has been highly successful. The thing is that they cannot build more, it’s full. The strategy we are debating in-house is how to position ourselves to attract the clients that want to go there but can’t. When people grow too big, or “graduate,” from the City of Knowledge, we can attract them to Porta Norte. We have been talking to some business owners established there.
There’s also another chicken and egg problem. Usually, when these companies come from abroad, they want the structure, and they don’t want to invest in capital expenditures for their buildings. They just want to rent.
Ciudad del Saber inherited many buildings from the U.S., thus having that problem solved from the start. We had no inheritance. This is something we have to solve. Rearranging atoms has a lot of complications, and a lot of things have to be aligned, but we’re working on it.
Devon: It’s fantastic to hear that you already have some idea of what the market could be. It’s the people who want to be in Ciudad del Saber but can’t.
Henry: Or that they have grown too big for them. Or businesses that want to buy land. We sell land, but Ciudad del Saber doesn’t.
Since when have you been interested in urbanism? I saw you wrote some great Book Notes on The Walkable City from Jeff Speck.
I talked with Jeff Speck a lot to structure Porta Norte.
Devon: Oh, cool! No, I didn’t know that. How did you meet him?
Henry: When I was starting Porta Norte, I loved watching Ted talks, and I liked his TED talk called The Walkable City. So I contacted him, and we had a chat. It was before the book. He gave me the roadmap of who to hire.
He introduced me to three architecture firms, which I later interviewed when I attended the Congress for the New Urbanism (CNU). He recommended I talk to Andrés Duany, who became the master planner of Porta Norte. Jeff was a significant influence in Porta Norte.
After that, you also did another great blog post called We Should Be Building Cities for People, Not Cars.
Devon: Exactly. Yeah. I don’t know. I’ve been interested in cities for quite a while. I don’t know if there was one moment when I was immediately interested in it.
How could you not be interested? It’s just so interesting. I don’t have an exciting answer there. It’s just that cities are such an interesting intersection of economics, architecture, engineering, and politics, which are all of these different types of things that I also find fascinating. And you need to understand all of them to build cities.
It’s just an exciting challenge, and it matters. People tend to underestimate the importance of infrastructure in their life vastly. And when I say infrastructure, I am not just talking about highways, sewage, water pipes, and stuff like that. I’m talking about the platform that they’re living their life on.
What does the environment around them make it easy or hard to do? They at least shape the outcomes of people’s lives a lot more than they realize.
This comes even down to tiny details. Like having chocolate in your house makes it a lot more likely that you’re going to eat chocolate. If you have a goal of eating less, just don’t put it in your house. So when you go to the grocery store, don’t buy chocolate. Maybe you can buy it when you’re out at a restaurant or something, but don’t bring it into your house.
That’s like a micro example, but there are also examples like does your street have a lot of trees and nice sidewalks that you can walk on? or does it have huge roads with cars going fast? Are there trees to protect you from the sun? If not, it will not be comfortable, and you’re going to walk less. And it might not even be an active choice, but you’re just going to do it because the environment is pushing you away from walking.
These things are fundamental and underlooked, and we need to design spaces that match how we want to live our lives. And I don’t think that we’re doing that right now.
Henry: We are not doing that right now. And why is that? Why have the incentives changed, and how can we align incentives better to improve designs?
Cities from before had public spaces, and cities nowadays have very few parks and public spaces. I don’t know if that is also what you have seen. I wonder why has that happened? Is it because all real estate development is delegated to the real estate developers? Are municipalities not doing what they have done historically? What is happening?
Almost no new places in Panama have public spaces. In Porta Norte, we’re taking the municipality’s role and building them. But I wonder what has happened? What incentives have changed? Maybe the answer is just cars, and that people don’t use public spaces anymore, but I don’t think that’s true.
Devon: I think there’s a mixture of things. The top one that comes to mind is that we have released a lot of the constraints on ourselves around where we need to live in the last hundred years. It used to be that you had to live within walking distance to your job at a factory or your fields because there was roughly no other way to get around.
And you had to live in certain places because it was safer to protect against bandits. So you had to live in tighter-knit communities with walls that create interesting constraints that create beautiful towns.
Now you can have air conditioning. So you can live in hot places, which have a lot of open lands, like Florida, where I live or Texas or wherever.
And a lot of those things are great. Cause in many ways, life has gotten a lot better, but the lack of constraints had caused us to run into a lot more coordination problems. In the past, the constraints forced us to coordinate because we all had to be in the same place simultaneously. So we had to solve these problems, and we were closer together.
Now people like to create their little castle on their property, and they optimize for building the nicest house with the nicest yard for themselves and their families. Nowadays, they don’t think externally so much.
And it’s because they can just get in their car, drive to the edge of the city and buy a piece of land that they can afford and build there. It’s also because it’s more within your control to create a beautiful yard for you and your family.
It’s a lot harder to get your community of thousands or millions of people to coordinate and create a park and agree upon what should be at the park. So long story short, the reduction in constraints has made it so that coordination is more necessary for us to do things together. So people do the easier thing. But people would still value having these public spaces and having a tighter-knit community.
The numbers that you see on Zillow, the real estate buying website in the U.S., show the square footage of the house. But you don’t have an easy way to measure how close you are to friends and how likely you’re going to run into somebody at a coffee shop. Those are much harder to measure, so they don’t end up on the Zillow page.
And as a result, people make decisions based on the square footage of their house and how big their yard is, and they underwrite other things that make life pleasant, essential, and valuable with your friends and community. It’s also a measurement issue.
Henry: What company is starting to incorporate the walk score? Are you familiar with it?
Devon: Yeah, I am familiar. The walk score is a good step forward. However, I don’t think it fully captures everything we want, but I’m happy to see that development.
I think that’s a typical metric now on Zillow, but I am not sure. I think people are just still way more likely to maximize the number of rooms in their house than they are to optimize their walk score.
Which, you could say, is the revealed preference and what they care about. I’m inclined to think it’s a little bit of a short-termist. You’d love to think about what you’re going to do with that new room, but didn’t realize that having one less room in your house is fine so that you can be closer to the people you love.
That’s my bias and the way I make decisions, and I’m probably putting them on other people. And I don’t know if everybody else has the same values.
Henry: That makes sense. I think the walk score is a proxy for having spontaneous encounters while walking in public spaces. Therefore, having more frequent connections with your community.
Something detrimental to walkability is how buildings interact with the sidewalk in new developments. They usually put the house in the middle of the lot, and you have a huge yard encircling your home. Sometimes they even put a massive wall between the home and the sidewalk or even parking.
In traditional urbanism, you always put the house immediately next to the sidewalk. This creates an interesting and secure place to walk next to. That’s how it’s in Porta Norte. It’s imperative to put all of the structures next to the sidewalk.
You might lose a little bit of privacy, but what it does to the public spaces is it creates a lively neighborhood where people can walk, feel safe, and create eyes on the street. It facilitates an active lifestyle.
Devon: I’m personally more laissez-faire. The battle I’m fighting is that most cities require the opposite; they require setbacks. In the U.S., most cities require your building far away from the street. They say you cannot have your house close to the next house. I want is to lift those restrictions, just let people build what they want to build.
Regarding Porta Norte, it’s great that you’re trying out a different set of constraints, but for me, I’m just like, let’s just let people build. If people don’t want to build parking in their house because they plan to bike everywhere, just let them do that.
Most cities now have parking minimums, which I think is a discussion that is very unintuitive for most people. Some people don’t have a car, and requiring them to build a parking space is subsidizing it.
Many times San Francisco developers want to build next to transit in a part of the city where you don’t need a car. Still, they are required to have two parking spaces per unit, subsidizing space for cars.
When we have a housing crisis, and people can’t afford to live, we shouldn’t subsidize cars; we should be making it cheaper to build stuff. So that’s what I’m fighting against. We need to shift towards more laissez-faire.
But I’m also excited to see, as I was saying earlier, little Kings or CEOs running projects. They should be more restrictive in those cases, like what you’re talking about with Porta Norte. So like an experiment. And if it works great, people will want to live there. And if it doesn’t work, people won’t live there, and the market will punish you for it.
And that’s good. That is how it should be. The issue is when it’s upheld at the government level, and it becomes illegal to build what you’re building or build something else. That’s where it becomes a problem for me.
Henry: What I love the most in experiments, which is very uncommon in real estate, is building places with concepts and meaning. Leaders should have a vision and execute. They should try to create a compelling vision to attract residents.
They should develop real concepts like developing a mountain bike town, a university town, or a place for technological progressives. Build places that focus on incorporating nature. Or do Solarpunk visions. I just want more visions and experiments to materialize.
Sometimes I get frustrated that there are so few experiments in real estate development and that usually, the people involved are old and conservative. And I understand the reason why. There is so much money behind infrastructure that you risk a lot if you build something radically different, and you risk absorption. The capital expenditures for making these types of projects are enormous. Failure is a huge deal because you are working with vast quantities of money.
So it’s hard to push the envelope. I wonder how to enable more experiments and how the future will change to enable more startup cities.
So can you tell me a bit about Pronomos? What they’re looking for, and what do they wish to invest in? What is the future of venture capital and startup cities? How would you project the future?
Devon: So I work at a venture capital fund called Pronomos Capital. I am an entrepreneur in residence there, which means I help with investments. And I’m looking at projects that I might be able to start or join. Pronomos is focused on charter cities, startup cities, and companies that exist to serve those types of new projects.
It could also be software-as-a-service for a city potentially. Right now, the biggest bottleneck for Pronomos is the number of founders. Just like what you’re talking about, there’s just a tiny pipeline of people working on this. It’s not zero –that’s a misconception. A lot of people think that it’s zero.
Many great people are working on it, but we need more. This is one of the reasons I was so excited to meet you, Henry, because you are quite far along with one of these projects. The number one thing that the space needs is a success story.
A big challenge is that these projects take a long time. It takes a while before we see real success. Success would be several thousand people living in a town that they are happy to be there and plan to be there long-term. That’s what I would count as an initial success.
I would hope that it would grow even more beyond that, but that would be the first point people would start to look at it and be like, oh, this is legit, this is a thing that can work, that there is traction.
Prospera is a charter city in Honduras, with only about 30 people living there. So it’s still quite small. But Porta Norte, there is no one living there right now. You guys are still doing the infrastructure build-out.
In the next few years, we’re going to start to see a few of these examples pop up. And once we have one sort of poster child success, I think that a lot more people will see that this is possible.
Going back to what we were talking about before with technology people. I think software people, myself included, are a little intimidated by the idea of doing something in the real world like we’ve done everything with bits for our whole career. And so it almost sounds impossible to build a building, which I don’t believe, but there’s some intuition that it just seems complicated. I think it is possible. There’s no reason that you can’t pencil out.
Software-type people just aren’t used to working on that type of problem. So I think that once you start to see a few success stories and people will see that there’s a path there, they will come with their machete and begin to hack away in the jungle and create even more of a track. And it’ll just become more and more trodden.
Henry: But what would seem like a success story, and where do you draw the line between being a real estate development, a master-planned community, a new city, and a startup city? What would be the business model? What would the founder do? Would it be local? Would it be a master-planned community? Would it be like a negotiation with a government doing a charter city? What would not count? Would that be a startup city if you do a new development with a university focused on computer science?
Devon: Pronomos is interested in being able to make your own laws to the extent to which you have increased autonomy compared to the country you’re operating out of.
A Free Trade Zone is one step in that direction. Prospera in Honduras was one of the earliest investments because Honduras has this unique system. You can create a Zone for Employment and Economic Development (ZEDE), which is about economic employment and development. It gives people who run these zones complete carte blanche, like a blank slate.
It allows you to create an entirely new legal structure. You don’t get to rewrite your own criminal laws; you still have to use Honduras criminal law. However, you can write all of the commercial laws, the labor laws, all of that sort of thing from scratch, which contrasts from a free trade zone or a free zone or whatever you want to call them. They have different names in different countries, which usually change one or two things. But are fairly similar to the surrounding countries.
So that’s what Pronomos is interested in. If I speak from my personal interest, I would be interested in seeing that, but I also don’t think it’s the only exciting kind of startup city out there.
If some of these ski communities we’re talking about really become like year-round communities. And I don’t know, maybe a bunch of hedge fund managers moves to Aspen. And now suddenly, there’s a hedge fund manager community and Aspen. That would be an interesting example for me.
I don’t know if I would say it’s like a charter city. Actually, I would not say it’s a charter city, but I might say it’s a startup city or something like that. So I don’t know. It’s a spectrum. I don’t think there’s one crisp definition.
Henry: It is a spectrum, and everybody has a different definition.
Is it on purpose, or is it not on purpose that Pronomos don’t have in their website where they have invested? Is it public? If I ask you, where have they invested? Are you able to say where or not?
Devon: I have always assumed it was public, but now that it’s not on the website, maybe I will hold off. I’ll ask them if I can share it. But it’s public that they’ve invested in Prospera.
Henry: You had the crypto project with a16z –Andreessen Horowitz. There’s this spirit between the people in software engineering and designers who have this native urge to improve the physical and digital world. I wonder if the new technologies arising right now, let’s say crypto or Decentralized Autonomous Organizations (DAO) can solve some problems.
Real estate developers usually don’t focus on public spaces. They want to extract every square meter they can. There are few institutions or structures focused on public goods. What would happen if you had Decentralized Autonomous Organizations where the community invests in a DAO focused on community benefits like maintaining public spaces clean, temples nearby, libraries, or laboratories.
This new way of making decisions with algorithms can improve the incentive structure to have more community-oriented elements.
Devon: An interesting contrast is land ownership, which serves as equity in a city. It’s not a perfect comparison, and there are some significant differences, but on a high level are similar.
I live in Miami beach. I don’t own my house, but let’s say I did. If Miami beach has a new library, now that improves the value of my home because people who love libraries now want to live here. Or if there are a lot of homeless people doing drugs in the park, the value of my house will drop.
So I think land ownership has historically served as equity, but it’s not perfect because people who rent don’t have equity, myself included, I don’t own here. And it also creates NIMBY issues where the land you own is not the same as your neighbor’s.
And if your neighbor starts to do construction to improve their house, they’re helping their equity, but they’re hurting your equity because now it’s like noisy. And so you want to stop them because you don’t want construction next to your house.
I would love to see people experiment with another proxy for equity instead of having land ownership as equity. What would it look like to have equity in the city overall?
So I don’t know what this looks like, but maybe it’s something like they own shares in the company that runs the community. And this gives you something like a right to live somewhere in the neighborhood. It would give you some voting powers or something. And then, because you own equity, it might incentivize you to push for things that might not be good for your short-term interests.
Maybe there will be some construction noise because people are building a library across the street from you, but now that you have equity, you won’t try to stop it. The reason is it is good for your equity in the long-term since the community is more beautiful and has a better education.
So I don’t know exactly how you would structure that. I’m not even totally convinced it would work. I would like to see experiments on alternative forms of equity.
Henry: Yeah. I’m sure it will work. Companies that reward equity tend to do better than the companies that don’t reward equity. It’s a perfect way to align interests. I’m going to ponder about how to make that work.
Devon: And you don’t need that much. However, your local interests would still dominate. I think that’s a pretty valid critique, but I also believe there is something fundamentally different about having a small amount of equity versus no equity at all. A little equity gets you to think about something a little differently. You start to think about it as an owner.
It might still be that you have other interests that dominate. But it gets thinking in an owner’s mindset. You don’t need a ton of equity to start with some of that mind shift. It might be even more effective if you have a lot of equity. But I think just having a small amount gets you thinking.
You can see this with crypto. In 2017, ICO’s were going crazy. People who bought tokens and ICO’s early would market that coin because they had equity. And some of them didn’t even have that much, but they would go out and shill the coin on Reddit and write blog posts about why this coin was going change the global financial system forever or whatever.
And again, maybe it’s not what you want because those people were pretty obnoxious. They made the crypto space look illegitimate, and it had a lot of problems, but you cannot deny that they had a lot of enthusiasm. That happened because they were owners of the network.
Could you take 10% of that enthusiasm and direct it more constructively? There’s a lot of pent-up energy there that could be used for good.
Henry: That’s a great way to think about it. Okay. I’ll think about it much more. I have been studying a lot about what you have done, and it’s impressive. I recommend everybody to read your blog. It’s amazing. You have excellent sources for cities, books, and reviews. Also, the YouTube videos I saw about you were highly eloquent, and your ability to write and communicate is off the charts.
So congratulations, you have unique skills and an exciting way of thinking. Thank you for sharing, and I hope we can do much more in the future. So do you have anything to add to the audience?
Devon: Yes. One thing I’m working on right now. I’m about to publish a long document about Prospera. The charter city I mentioned in Honduras is about 40 pages long and is structured as an FAQ. I had so many questions, and I thought other people would find it interesting, especially those building cities like yourself.
It’s not quite published yet, but you’ll find a link to that on my website, which is www.devonzuegel.com. That’ll be published hopefully this week; although I’ve been saying that for a while, it’s a monster document, but hopefully a useful resource to people.
Henry: Oh, that’s awesome. I didn’t know you were writing that. I’m very excited to read that. And also, they can find you on Twitter.
Devon: It’s just my name, @devonzuegel. And I tweet too much, so I’m sorry.
Henry: You have a great Twitter feed. Well, thank you, Devon. It is always a pleasure talking to you, and I’ll see you very soon. So thank you very much.
Devon: Yes. Sounds good. Looking forward to it. Bye Henry.
Subscribe to my blog: