1
00:00:00,000 --> 00:00:17,320
Welcome to the Free Cities podcast. My name is Timothy Allen and this is the official podcast

2
00:00:17,320 --> 00:00:19,020
of the Free Cities Foundation.

3
00:00:30,000 --> 00:00:35,700
Hello and welcome to this episode number 171 of the Free Cities Podcast.

4
00:00:36,240 --> 00:00:41,680
This episode is, as always, brought to you by the wonderful Veritas Villages,

5
00:00:42,060 --> 00:00:44,360
our lead sponsor here at the Free Cities Podcast.

6
00:00:45,220 --> 00:00:49,480
They're building off-grid, freedom-oriented communities in Latin America.

7
00:00:50,120 --> 00:00:57,000
Check out their new 340-acre acquisition that just got the go-ahead in Costa Rica.

8
00:00:57,000 --> 00:01:00,600
That's going to have almost 400 residences on it.

9
00:01:00,720 --> 00:01:06,080
Click on the link in the show notes to inquire about this project and all their other ones.

10
00:01:06,300 --> 00:01:10,340
They have places in Nicaragua, Panama, and as I said, Costa Rica.

11
00:01:10,840 --> 00:01:17,720
And if you're a Bitcoiner like me, well, you can buy any of your properties in any of their villages with Bitcoin.

12
00:01:18,240 --> 00:01:22,780
And they have a policy that you should be able to spend Bitcoin at communities.

13
00:01:23,720 --> 00:01:25,980
Basically, they're building Bitcoin citadels.

14
00:01:25,980 --> 00:01:35,040
that's what i call them anyway veritasvillages.com forward slash free cities don't forget to mention

15
00:01:35,040 --> 00:01:41,080
we sent you hey we've got another sponsor as well this month arc pad which is mitchell such and his

16
00:01:41,080 --> 00:01:47,500
company's planning a second iteration of their groundbreaking reef resort in the philippines

17
00:01:47,500 --> 00:01:54,080
this time they're planning one off the coast of prospera in honduras which is obviously one of the

18
00:01:54,080 --> 00:02:01,100
most important free cities projects in the world and you can purchase ownership in the Prospera

19
00:02:01,100 --> 00:02:07,460
Reef Resort. You either do it outright or via fractional shares from as little as one percent

20
00:02:07,460 --> 00:02:13,700
right up to full ownership and this I believe is a rare chance to get involved early. If you watch

21
00:02:13,700 --> 00:02:18,980
this episode on video about a third of the way through you'll see a little ad that's got nice

22
00:02:18,980 --> 00:02:28,200
footage of what's planned for more info tinyurl.com forward slash arc pad that will take you to our

23
00:02:28,200 --> 00:02:34,760
sponsorship page and of course we'll get a little commission on top of that so please be sure to

24
00:02:34,760 --> 00:02:41,560
mention us if you choose to do business with them right today's show today's guest is a lady by the

25
00:02:41,560 --> 00:02:49,020
name of Lotta Moberg. Lotta is an economist, author of our, at the Free Cities podcast that is,

26
00:02:49,160 --> 00:02:55,960
favourite book on special economic zones. She spent years studying them, not just as slogans

27
00:02:55,960 --> 00:03:02,340
like many people do, but as real political and economic systems. This conversation starts with

28
00:03:02,340 --> 00:03:10,260
the standard pitch from me that zones are policy sandboxes. Lotta pushes back on that

29
00:03:10,260 --> 00:03:14,140
and we begin to test the claim against incentives.

30
00:03:14,580 --> 00:03:18,820
If the experiment, in inverted commas, is simply lower taxes and fewer barriers,

31
00:03:19,100 --> 00:03:23,680
was it ever really an experiment or just politics in a lab coat?

32
00:03:24,960 --> 00:03:29,440
From there, we zoom out to why zones so often disappoint, actually.

33
00:03:30,000 --> 00:03:33,780
Governments can keep subsidising weak results to avoid admitting failure.

34
00:03:33,780 --> 00:03:37,620
Local legitimacy can matter more than technocratic design.

35
00:03:37,620 --> 00:03:52,800
And the popular story about the success of China's early zones after the communist regime change is actually more complicated than the neat version that certainly I presented in the film, at least.

36
00:03:53,340 --> 00:03:55,700
But many other people believe would say.

37
00:03:55,820 --> 00:03:58,300
Lotta has a lot of views on things like this.

38
00:03:58,320 --> 00:04:02,580
She's very academic about special economic zones and she studied them deeply.

39
00:04:02,580 --> 00:04:08,780
And in this conversation, she doesn't hold back, which is great to have all our ideas challenged.

40
00:04:09,280 --> 00:04:14,840
In the end, obviously, we connect all the lessons learned to the newer wave of zone thinking,

41
00:04:15,040 --> 00:04:19,700
including free cities and charter cities, projects like Prospera,

42
00:04:20,200 --> 00:04:28,640
where the bet is, of course, that clearer rules, contract style governance and more credible exit can change the incentive structure

43
00:04:28,640 --> 00:04:33,380
that makes conventional zones drift into a sort of theater.

44
00:04:33,840 --> 00:04:35,120
Anyway, this is a great episode.

45
00:04:35,320 --> 00:04:41,500
Lotta is one of the most notable thinkers on special economic zones,

46
00:04:41,980 --> 00:04:43,260
certainly in our game.

47
00:04:43,380 --> 00:04:46,120
So take note, lots of alpha here for you all.

48
00:04:47,020 --> 00:04:50,940
Quick reminder before we go, also about another offer

49
00:04:50,940 --> 00:04:54,720
that I mentioned last week for the first time, Alex Martinov.

50
00:04:54,720 --> 00:05:04,060
he's offering pro bono coaching to free city projects if you want to know who alex martinov

51
00:05:04,060 --> 00:05:10,920
is go and check out episode 111 that's me basically getting coached by him in the form of a podcast

52
00:05:10,920 --> 00:05:16,480
you may remember that my chat with alex was pivotal in my decision to go full-time on this

53
00:05:16,480 --> 00:05:22,180
podcast which was obviously a great decision anyway he says um if your project's at a stage

54
00:05:22,180 --> 00:05:27,440
where you can't quite afford paid coaching support that's kind of like business coaching

55
00:05:27,440 --> 00:05:35,280
alex has created a few spots in his calendar for pro bono coaching which is essentially free of

56
00:05:35,280 --> 00:05:42,320
course and this is his way to contribute to the free cities community get in touch with alex at

57
00:05:42,320 --> 00:05:50,280
alex at alexmartinov.com to schedule a call with him everything is of course in the show notes as

58
00:05:50,280 --> 00:06:00,080
normal right top subs this week on fountain here's the top five might make this a new feature

59
00:06:00,080 --> 00:06:05,280
justin bianchi well done mate and this also includes if you're a subscriber this includes

60
00:06:05,280 --> 00:06:11,020
the fact that you're subscribing as well justin bianchi number one bullish mike number two

61
00:06:11,020 --> 00:06:18,460
nicholas number three shadrach number four and new subscriber there darcy number five well done

62
00:06:18,460 --> 00:06:25,420
Darcy and I hope you have a good time on your Bitcoin journey. Darcy contacted me asking for

63
00:06:25,420 --> 00:06:31,480
a good starter point on Bitcoin. If anyone else wants to know about that, just drop me a line.

64
00:06:31,680 --> 00:06:37,780
I can recommend good ways into the space and to start understanding what's going on. Right,

65
00:06:37,880 --> 00:06:45,440
comments. A couple here from last week. Cifrant says the cypherpunks are not bullish enough.

66
00:06:45,440 --> 00:06:46,660
That's about the episode.

67
00:06:46,760 --> 00:06:47,560
Oh, it's going back a bit.

68
00:06:47,660 --> 00:06:51,640
143 with Max Hillebrand, the Praxeology of Privacy.

69
00:06:51,760 --> 00:06:55,820
That's something Max said in the interview, and I would tend to agree with him,

70
00:06:56,500 --> 00:07:00,460
mainly because he's just really a deep thinker and knows about a lot of stuff.

71
00:07:01,040 --> 00:07:02,060
And who have we got here?

72
00:07:02,380 --> 00:07:02,860
Ascot.

73
00:07:04,100 --> 00:07:05,440
Oh, this is rather nice.

74
00:07:05,560 --> 00:07:09,000
If you are interested in real alternatives to the status quo,

75
00:07:09,340 --> 00:07:14,260
you need to subscribe to Timothy's Free Cities podcast.

76
00:07:14,260 --> 00:07:20,780
deep unfiltered conversations and actionable insights from people doing the work those who

77
00:07:20,780 --> 00:07:27,380
build real world pathways to freedom free cities is top tier high signal content concentrated

78
00:07:27,380 --> 00:07:33,280
practical and absolutely worth your time that's just an overall comment about the whole podcast

79
00:07:33,280 --> 00:07:39,380
well i should basically frame that and make make it our advert shouldn't i many thanks ascot many

80
00:07:39,380 --> 00:07:44,860
thanks for listening and many thanks for the kind words right it's time for your top tier content

81
00:07:44,860 --> 00:07:50,960
then you lucky things better take it easy this week it's a pretty academic one so you'll

82
00:07:50,960 --> 00:07:58,080
definitely need to sit back relax while you enjoy my conversation with lotta moberg

83
00:08:09,380 --> 00:08:12,480
So introduce yourself and I'll just check the levels.

84
00:08:13,080 --> 00:08:14,400
Hey, my name is Lada Moberg.

85
00:08:15,040 --> 00:08:30,304
I written a book on special economic zones Yeah you have And in fact I got a message from Peter our CEO and he said we were talking about who we going to interview on this trip

86
00:08:30,344 --> 00:08:35,664
And he said, make sure you do Lotto. I said, why? She said, he said, she's written the best book on SEZs in existence.

87
00:08:36,044 --> 00:08:36,764
That's flattering. Thank you.

88
00:08:36,764 --> 00:08:42,024
and I mean I haven't read it obviously I've got a feeling Peter's actually read it because I think

89
00:08:42,024 --> 00:08:49,804
he used it as source material for our film um in that we made zones of progress yeah did he talk

90
00:08:49,804 --> 00:08:54,244
to you about zones of progress when he was making it or no because he we researched he researched

91
00:08:54,244 --> 00:09:01,384
the kind of storyline that we I directed it but he he was basically the main bulk of the the

92
00:09:01,384 --> 00:09:06,664
narrative okay but I know he was reading lots of books about stuff and I would imagine there

93
00:09:06,664 --> 00:09:12,184
aren't a huge amount of books on sez's are there it was wonderful to see the the that video come out

94
00:09:12,184 --> 00:09:19,124
and uh there are certainly a lot of lessons that i recognize that i am that i take both that i took

95
00:09:19,124 --> 00:09:23,544
away from my analysis my book but also that were kind of a little bit conventional wisdom that i

96
00:09:23,544 --> 00:09:30,424
kind of synthesized when i when i wrote my book um so yeah but so what do you think of that film

97
00:09:30,424 --> 00:09:35,884
then and the narrative because the narrative was i don't know it was probably the first time it was

98
00:09:35,884 --> 00:09:44,464
committed to film was the the kind of evolution to places like prospera of sez sez of the old

99
00:09:44,464 --> 00:09:51,264
stuff from like you know shannon airport and and you know maozi and like china and all that stuff

100
00:09:51,264 --> 00:09:59,044
and difc was is well known but the kind of new the new iteration is like where we are now is

101
00:09:59,044 --> 00:10:04,104
wasn't that well known about really i don't think and there wasn't a lot out there i don't think

102
00:10:04,104 --> 00:10:09,824
there were many people making the connection the evolutionary connection of them is that fair to say

103
00:10:09,824 --> 00:10:13,844
yeah and if i if i would take a step back to think about when i started looking at these things so

104
00:10:13,844 --> 00:10:19,084
when i um as you mentioned the question in the beginning like the scholarship of special economic

105
00:10:19,084 --> 00:10:25,524
zones this was something that i wanted to read myself and i wanted to write about free cities

106
00:10:25,524 --> 00:10:32,884
and it was really so this is to take even further back this was in uh like 2009 i think it was when

107
00:10:32,884 --> 00:10:38,584
Paul Romer had his talk on charter cities. So that was the talk of the town, the charter cities.

108
00:10:38,784 --> 00:10:44,304
And I wanted to write about that. And I wanted to use the research on special economic zones to

109
00:10:44,304 --> 00:10:48,644
then draw lessons from what this means, the implication, what goes right or wrong

110
00:10:48,644 --> 00:10:53,184
from a political economy perspective. But that's kind of where I'm coming from in my studies.

111
00:10:54,164 --> 00:11:00,724
So, and I started digging into it and I realized there was no research to really use to do the

112
00:11:00,724 --> 00:11:04,784
studies that I wanted to do. So I just ended up writing on special economic zones. And I thought,

113
00:11:04,884 --> 00:11:08,844
okay, well, I'll take that first step then. And then somebody can build upon that. And that

114
00:11:08,844 --> 00:11:13,624
happened pretty quickly. I'm kind of surprised it's not more both research on special economic

115
00:11:13,624 --> 00:11:18,824
zones, because I don't think my words is the final word at all. But on that topic, and then

116
00:11:18,824 --> 00:11:25,944
we have seen after that, I would point out Mark Lutter, who was my classmate at George Macy

117
00:11:25,944 --> 00:11:32,004
university we both did a phd there and also vera kichanoa she also wrote her dissertation

118
00:11:32,004 --> 00:11:38,944
and that was under mark pennington on this new kind of songs and i know that they both were aware

119
00:11:38,944 --> 00:11:42,624
of my work especially her because she was i think she's a little bit younger in terms of her

120
00:11:42,624 --> 00:11:49,704
educational when she did her phd so but that is when it comes to the lessons and we started talking

121
00:11:49,704 --> 00:11:51,864
about this from that video,

122
00:11:52,844 --> 00:11:55,104
there were tidbits that were out there

123
00:11:55,104 --> 00:11:57,884
of studies of special economic zones

124
00:11:57,884 --> 00:11:59,484
and hints at this might be right,

125
00:11:59,544 --> 00:12:00,264
this might be wrong,

126
00:12:00,364 --> 00:12:01,764
this might be how it kind of happened,

127
00:12:01,904 --> 00:12:03,644
but no framework really out there

128
00:12:03,644 --> 00:12:06,144
floating about how to think about zones,

129
00:12:06,604 --> 00:12:07,684
both the economics of it

130
00:12:07,684 --> 00:12:09,464
and the political economy of it,

131
00:12:09,524 --> 00:12:10,844
especially that I was focusing on.

132
00:12:11,224 --> 00:12:12,824
I'm not sure, Lotta,

133
00:12:12,864 --> 00:12:15,004
that I know what political economies are.

134
00:12:15,044 --> 00:12:15,584
What does that mean?

135
00:12:16,924 --> 00:12:18,344
Can you give me that 101

136
00:12:18,344 --> 00:12:20,324
on what a political economy is.

137
00:12:20,964 --> 00:12:22,364
I mean, that's also the name of the book,

138
00:12:22,424 --> 00:12:24,364
The Political Economy of SEZs.

139
00:12:24,384 --> 00:12:24,844
But you're talking,

140
00:12:25,024 --> 00:12:26,864
you've just mentioned political economies twice.

141
00:12:27,404 --> 00:12:28,964
And I'm not sure I know what they are.

142
00:12:29,404 --> 00:12:31,584
I might be a little bit too George Mason for this,

143
00:12:31,724 --> 00:12:33,824
but I think that you can't talk about political economy

144
00:12:33,824 --> 00:12:35,404
without talking about public choice.

145
00:12:36,084 --> 00:12:38,144
And public choice is basically the extension

146
00:12:38,144 --> 00:12:42,304
of utility maximization to people in political positions.

147
00:12:43,264 --> 00:12:44,724
So in neoclassical framework,

148
00:12:44,724 --> 00:12:46,064
often you have,

149
00:12:46,064 --> 00:12:51,444
there's an assumption that the economic man optimizes perfectly their economic decisions

150
00:12:51,444 --> 00:12:58,264
to maximize utility. The policymaker optimizes to maximize the economic man's utility. The

151
00:12:58,264 --> 00:13:02,984
policymaker in these neoclassical frameworks is not actually a person. It's kind of this omniscient

152
00:13:02,984 --> 00:13:10,304
and well-wanting, benevolent kind of dictator person who then sets the optimal tax rate,

153
00:13:10,304 --> 00:13:14,904
who sets the optimal regulations and everything like that. And of course, what's optimal in that

154
00:13:14,904 --> 00:13:19,444
case might not agree with the people who are creating those models. The political economy

155
00:13:19,444 --> 00:13:25,944
says, the political economy aspect is thinking about it from how policymakers then actually

156
00:13:25,944 --> 00:13:31,204
like taking the political part of our world, which unfortunately is such a big part of where

157
00:13:31,204 --> 00:13:36,724
we're living here now, and saying that's also a part where maximization happens. You can't

158
00:13:36,724 --> 00:13:42,064
understand why decisions are made without thinking about the people who actually make the decision

159
00:13:42,064 --> 00:13:43,184
what they're actually pursuing.

160
00:13:43,724 --> 00:13:47,224
And just assuming that they're trying to maximize utility of you, the citizen,

161
00:13:47,624 --> 00:13:49,124
is just incorrect.

162
00:13:49,364 --> 00:13:51,084
So it has a different axiom.

163
00:13:51,404 --> 00:13:55,164
It's not we used the model and used different data

164
00:13:55,164 --> 00:14:00,204
and then concluded that policymakers have different utility functions.

165
00:14:00,444 --> 00:14:01,364
You can, of course, do that.

166
00:14:01,424 --> 00:14:02,464
There's a lot of studies also.

167
00:14:02,664 --> 00:14:06,224
Usually they support the political economy view of things.

168
00:14:06,224 --> 00:14:09,564
But at its foundation, it's a different axiom that says,

169
00:14:09,944 --> 00:14:11,664
wait a minute, how can you classify people?

170
00:14:11,664 --> 00:14:15,744
these are humans over here they're trying to do what's best for themselves and these are these

171
00:14:15,744 --> 00:14:20,984
benevolent dictators sitting here and they're like not people even though my uncle isn't you know

172
00:14:20,984 --> 00:14:26,684
it might be a senator or whatever and i know he's a person you know is it i mean so that's a function

173
00:14:26,684 --> 00:14:33,904
of um i mean did it always used to be like that thinking about it is that a function of a modern

174
00:14:33,904 --> 00:14:39,644
politics that i mean was there a time when politicians did try to maximize the utility of

175
00:14:39,644 --> 00:14:46,904
people oh i mean because i don't know i maybe i look back with rosy rose tinted glasses but

176
00:14:46,904 --> 00:14:53,164
it seems like maybe they had our best interests at heart at some point is that is that not true

177
00:14:53,164 --> 00:14:58,724
you probably know i don't it it kind of demands an historian to think about the different regimes

178
00:14:58,724 --> 00:15:03,764
that have happened in the past and have they ever been benevolent i mean if you think about why the

179
00:15:03,764 --> 00:15:08,564
roman empire fell it wasn't because they wasn't they weren't benevolent enough for something like

180
00:15:08,564 --> 00:15:15,984
that. They inflamed the currency for their own purposes. So I think humans have always been

181
00:15:15,984 --> 00:15:20,224
humans. We care about ourselves. We care about our family. We care about the people around us.

182
00:15:20,384 --> 00:15:25,524
We're at our foundation. I believe that we're good people. But we're flawed in that sense that

183
00:15:25,524 --> 00:15:30,524
we also do have these models that are not just about, I'm going to sacrifice for being this

184
00:15:30,524 --> 00:15:36,084
civil servant, right? And just maximize everybody else's utility. It just kind of doesn't make

185
00:15:36,084 --> 00:15:42,324
sense um the scholarship of this also goes back hundreds of years there is um and this you have to

186
00:15:42,324 --> 00:15:47,724
ask one of my professors george mason who is now retired with richard wagner is the one who's

187
00:15:47,724 --> 00:15:54,104
written about this there's an italian economist hundreds of years ago who was really the maybe

188
00:15:54,104 --> 00:16:00,804
foundational person of political economy and then way later you have americans like jim buchanan and

189
00:16:00,804 --> 00:16:04,344
things like that writing on on these kind of topics developing the field so to speak

190
00:16:04,344 --> 00:16:10,504
I'm just thinking as well probably it's I mean the misunderstanding that

191
00:16:11,284 --> 00:16:21,064
benevolent actors exist is probably due to the I mean the way people view economics as well I mean

192
00:16:21,064 --> 00:16:25,244
Keynesian economists would probably misunderstand that but maybe

193
00:16:27,244 --> 00:16:33,964
Austrians wouldn't is that fair to say Austrians might see that political people are acting in their

194
00:16:33,964 --> 00:16:46,628
own interest and so are other people that the other the members of the society and stuff I don know It a little moot point I suppose I think it a contradiction in a way of the when we talk about

195
00:16:46,848 --> 00:16:49,188
so Keynesian is kind of an offshoot of neoclassic economics,

196
00:16:49,188 --> 00:16:51,168
but it's not really neoclassic economics

197
00:16:51,168 --> 00:16:53,548
because there's a lot of things built onto that,

198
00:16:53,608 --> 00:16:56,968
which says that, well, you don't get the supply and demand equilibrium there.

199
00:16:57,128 --> 00:17:01,248
You also get excess, often a deficient demand,

200
00:17:01,448 --> 00:17:03,288
animal spirits somehow suppress demand

201
00:17:03,288 --> 00:17:08,128
And therefore, the benevolent government has to step in to rectify that.

202
00:17:09,308 --> 00:17:17,048
And there's a kind of a disconnect between saying, well, people, everybody's maximizing their own self-interest.

203
00:17:17,048 --> 00:17:27,228
But at the same time, so that means that, oh, we have to really like police everybody's behavior then because they're going to walk around and, you know, and shoot each other down and take their money.

204
00:17:27,228 --> 00:17:34,488
But on the other hand, any neoclassical model suggests that if everybody optimizes, then you get the optimal kind of outcome from that.

205
00:17:34,908 --> 00:17:42,208
So then the Keynesians step in and make it a case for big government by saying, well, sure, but the models don't really work out that way.

206
00:17:42,348 --> 00:17:43,688
It doesn't really work that way.

207
00:17:44,308 --> 00:17:45,808
You have deficient demand sometimes.

208
00:17:45,948 --> 00:17:48,808
Animal spirits kick in and distort this neoclassical picture.

209
00:17:49,508 --> 00:17:53,468
So that's how you kind of explain why you have business cycles and things like that.

210
00:17:53,468 --> 00:18:01,088
so I am from the Austrian school so I definitely think that's the more proper way of looking at it

211
00:18:01,088 --> 00:18:08,048
we have most of us reverence for a lot of the insights of Adam Smith thinking about this way

212
00:18:08,048 --> 00:18:12,248
of how the economy actually is self-governing you have Frederick Hayek writing a lot about

213
00:18:12,248 --> 00:18:18,328
the emergent order of things it's he doesn't say that things are perfect he says that when we come

214
00:18:18,328 --> 00:18:22,008
together and we're trying to figure things out and I come up with something I'm good at and I

215
00:18:22,008 --> 00:18:28,208
discovered that if I do this little thing in in a world where our skills are complementary I can

216
00:18:28,208 --> 00:18:34,688
actually live a good life just doing that so Paul Romer got you into free cities right that's

217
00:18:34,688 --> 00:18:40,888
interesting and I mean is it is it free cities all the way or was the SEZ thing just something

218
00:18:40,888 --> 00:18:47,588
that you did because there was nothing out there really to pursue in the in the in the realm of

219
00:18:47,588 --> 00:18:52,268
free cities, which at the time there already wasn't, was there? That's how it started. And then

220
00:18:52,268 --> 00:18:58,748
when I also realized another thing, being at George Mason and being a free market person,

221
00:18:59,308 --> 00:19:04,468
I have biases. Everybody's got biases. And we, in this school, would be more conscious about our

222
00:19:04,468 --> 00:19:08,588
biases than others. But being conscious of bias means that you also are very conscious about

223
00:19:08,588 --> 00:19:13,348
policing those biases and coming from a standpoint when your biases doesn't lead you to a conclusion

224
00:19:13,348 --> 00:19:16,868
that might in any way be wrong from a scholarship kind of perspective.

225
00:19:17,708 --> 00:19:19,968
And I started thinking about special economic zones.

226
00:19:20,148 --> 00:19:22,668
And the more I thought about it, the less obvious it was.

227
00:19:23,328 --> 00:19:25,208
And that's how it actually became a lot of these questions.

228
00:19:25,308 --> 00:19:26,348
Like, why are they even there?

229
00:19:26,428 --> 00:19:27,128
Do they make sense?

230
00:19:27,428 --> 00:19:29,088
I started talking to some of my professors.

231
00:19:29,208 --> 00:19:30,128
I was floating the idea.

232
00:19:30,768 --> 00:19:31,768
How about special economic zones?

233
00:19:31,808 --> 00:19:32,268
What do you think?

234
00:19:32,688 --> 00:19:35,308
And these people who would agree on basically everything

235
00:19:35,308 --> 00:19:36,728
when it comes to economics, you know,

236
00:19:36,828 --> 00:19:38,788
they're for small government and all of that,

237
00:19:38,788 --> 00:19:45,968
they could have 100% opposite views on special economic zones from the, obviously it's a good

238
00:19:45,968 --> 00:19:50,328
thing because if they lower taxes and lower tariffs and things like that, if there's any

239
00:19:50,328 --> 00:19:54,308
loosening of regulation, it's a good thing. We should support that. And the other camp would be

240
00:19:54,848 --> 00:20:00,228
100% by definition. It was all by definition based on the first step from their axioms, right,

241
00:20:00,328 --> 00:20:05,968
of a free market would be absolutely clearly it's a bad thing because if you think that

242
00:20:05,968 --> 00:20:09,868
liberalization is good you should do it for the country as a whole if you in any way have power

243
00:20:09,868 --> 00:20:14,268
over a country and that's kind of per definition what a special economic zone is it's choosing

244
00:20:14,268 --> 00:20:19,788
not to implement a policy over the full territory but instead picking up this little sliver of the

245
00:20:19,788 --> 00:20:26,828
territory um then it's clearly wrong like it's clear something distorted about that and it was

246
00:20:26,828 --> 00:20:31,208
interesting coming out of those meetings that i'm like there is no clear answer now i have some now

247
00:20:31,208 --> 00:20:35,348
i have a kind of a question to answer that it doesn't like that doesn't answer itself from the

248
00:20:35,348 --> 00:20:43,088
What did those people say when you mentioned the idea of a sandbox, an SEZ being a sandbox, like in China, for example?

249
00:20:43,088 --> 00:20:52,328
You know, when you go from communism to a free market, if you tried rolling out some free market ideas throughout China, it would be complete mayhem.

250
00:20:52,748 --> 00:20:54,088
But there was this opportunity.

251
00:20:54,308 --> 00:20:59,648
OK, well, let's try it in a small geographic region, Xinjiang or, I don't know, Zhuhai or something.

252
00:20:59,848 --> 00:21:04,008
And if it works, which it obviously will, you and I both know it will work anyway.

253
00:21:04,008 --> 00:21:10,248
then you get the option to to to roll it out because that's hard to argue again isn't it

254
00:21:10,248 --> 00:21:16,008
argue against isn't it no it's not hard to argue against i don't think that i can i don't think i

255
00:21:16,008 --> 00:21:20,608
really got into that in that early stage because i wasn't really sure myself what i would have

256
00:21:20,608 --> 00:21:25,988
thought would be the strength and then what the real promises was in special economic zones

257
00:21:25,988 --> 00:21:33,348
the argument against saying well it's a sandbox is first well if it's if you're pursuing

258
00:21:33,348 --> 00:21:41,548
policies that amount to just lowering the cost of doing business, such as lowering the taxes,

259
00:21:41,708 --> 00:21:45,488
tariffs. We already know you get more activity. You're going to get, you don't need to test

260
00:21:45,488 --> 00:21:49,408
anything out. Now you're just playing with us to say like, oh, we're going to see what happens.

261
00:21:49,408 --> 00:21:55,368
Like, you know, what's going to happen. So that's just theater. And I like that. I agree with that.

262
00:21:55,468 --> 00:22:00,488
Like that's, I think is a good argument for it. I'd like to take a couple of minutes just to tell

263
00:22:00,488 --> 00:22:04,708
you about what I think is one of the most interesting real-world freedom projects that

264
00:22:04,708 --> 00:22:08,608
we've come across recently. If you've been listening to this podcast for a while, you'll

265
00:22:08,608 --> 00:22:13,068
know that I'm always looking for things that actually exist, not the concepts, not the

266
00:22:13,068 --> 00:22:17,948
renderings, but real projects where people are already building the future. And this brings me

267
00:22:17,948 --> 00:22:23,388
to the Reef Resort, developed by the seasteading company ArcPad, founded of course by Mitchell

268
00:22:23,388 --> 00:22:28,928
Suchner, who many of you will remember was the winner of the Innovation Award at the 2025

269
00:22:28,928 --> 00:22:34,608
Free Cities Conference. The Reef Resort, as far as we're aware, is the world's first operational

270
00:22:34,608 --> 00:22:39,448
seasteading resort. It's located just off the coast of Samal Island in the Philippines,

271
00:22:39,648 --> 00:22:45,588
where ArcPad currently operates. 14 floating units available through Airbnb and other platforms,

272
00:22:45,948 --> 00:22:51,128
a project that has already hosted thousands of guests in both their accommodation and floating

273
00:22:51,128 --> 00:22:56,248
restaurant. Now, here's the development that will be especially interesting to listeners of this

274
00:22:56,248 --> 00:23:03,128
podcast. ArcPad is planning a second reef resort, this time off the coast of Prospera in Honduras,

275
00:23:03,328 --> 00:23:08,428
one of the most important Free Cities projects in the world. And construction is intended to align

276
00:23:08,428 --> 00:23:14,688
with the 2026 Free Cities Conference. So this is where the opportunity comes for you. You can now

277
00:23:14,688 --> 00:23:19,788
pre-purchase ownership in the Prospera Reef Resort. Ownership is available either outright

278
00:23:19,788 --> 00:23:25,508
or through fractional shares, allowing you to purchase from as little as 1% up to full ownership.

279
00:23:25,508 --> 00:23:30,468
Your ownership percentage determines your usage rights, your share of rental income from the

280
00:23:30,468 --> 00:23:35,728
eco-resort operations, and your voting power in property decisions. This also gives you the

281
00:23:35,728 --> 00:23:40,988
opportunity, of course, to be part of a pioneering ocean-based development within the Free Cities

282
00:23:40,988 --> 00:23:47,328
ecosystem. Full units at the Prospera site start from $95,000, but with fractional ownership

283
00:23:47,328 --> 00:23:52,268
available, you can participate at whatever level suits you. If you'd like to explore this

284
00:23:52,268 --> 00:23:57,128
opportunity, I've included a link in the show notes where you can register your interest and

285
00:23:57,128 --> 00:24:02,008
access the pre-purchase information. If you're interested in free cities, frontier living and

286
00:24:02,008 --> 00:24:07,728
the future of ocean-based communities, then this is a chance to get involved at the ground floor.

287
00:24:08,008 --> 00:24:13,968
Seasteading is no longer just an idea. It's happening and now it's coming to prosperer.

288
00:24:15,288 --> 00:24:21,848
But what about, I mean, China's a really specific case. They had no property, for example. So they're

289
00:24:21,848 --> 00:24:29,588
going from communism to you know property markets for example i mean there must be a element of

290
00:24:29,588 --> 00:24:35,608
truth to the to the idea that if you tried rolling that out to one point whatever billion people

291
00:24:35,608 --> 00:24:42,068
that's crazy well i would ensue mayhem would ensue whereas if you try it out in a small area

292
00:24:42,068 --> 00:24:47,768
um it's a good political transition or a good maybe that's part of the political economy i don't

293
00:24:47,768 --> 00:24:52,768
a good transition would occur better than otherwise.

294
00:24:52,768 --> 00:25:07,792
That sounds good in theory I have not found good examples of how that actually how it works I don want to like dismiss people make that argument It possible that that happens sometimes but it is a kind of benevolent dictator view of how nation states work

295
00:25:07,912 --> 00:25:09,792
And that's quite uncommon to see that.

296
00:25:10,252 --> 00:25:19,332
And it actually, but when I went in too, that's what was written on special economic zones in depth was mostly kind of World Bank papers, case studies.

297
00:25:19,332 --> 00:25:23,512
And there were some like interesting observations and with some ideas out there.

298
00:25:23,512 --> 00:25:26,692
And Thomas Farol was a person who was at the World Bank at the time.

299
00:25:26,792 --> 00:25:35,732
We ended up co-authoring together later on Special Economic Zones, who was influential in the sense that he'd written things, but without really trying to have an academic framework around it.

300
00:25:37,612 --> 00:25:40,292
In the China case, it might look like that.

301
00:25:40,392 --> 00:25:41,872
It was like, so here is one story.

302
00:25:42,172 --> 00:25:47,932
Deng Xiaoping was this free market person, or he wanted to reform, but he wanted to do it in a cautious way.

303
00:25:48,452 --> 00:25:50,292
Came up with Special Economic Zones, and boom.

304
00:25:50,652 --> 00:25:51,992
He was against Special Economic Zones.

305
00:25:51,992 --> 00:25:53,372
He was just like the other caterers.

306
00:25:53,712 --> 00:25:59,412
They launched it in 78, really 79 kind of is when it got going, the first zone.

307
00:26:00,272 --> 00:26:02,912
And he was against it up until 84, I think it was.

308
00:26:02,992 --> 00:26:05,232
And that's when they kind of allowed for expansion of the program.

309
00:26:05,512 --> 00:26:07,532
What happened was it was a bottom-up process.

310
00:26:07,832 --> 00:26:13,252
It was people, it was businessmen in Guangdong kind of area on the other side of Hong Kong

311
00:26:13,252 --> 00:26:17,652
that wanted to do business across the pond with Hong Kong.

312
00:26:17,652 --> 00:26:21,612
And so they lobbied the local governments to allow for this zone.

313
00:26:21,992 --> 00:26:23,952
And the local governments somehow,

314
00:26:24,092 --> 00:26:24,612
regardless of the gene,

315
00:26:24,692 --> 00:26:26,512
there were probably a lot of brown envelopes

316
00:26:26,512 --> 00:26:27,372
on the table involved.

317
00:26:27,872 --> 00:26:29,612
They said, okay, have this zone then.

318
00:26:29,832 --> 00:26:30,552
Not a big deal.

319
00:26:31,032 --> 00:26:32,612
And then they saw all of a sudden,

320
00:26:33,052 --> 00:26:35,432
there's a trade-off if you're a,

321
00:26:35,792 --> 00:26:38,392
what I can assume in this case,

322
00:26:39,192 --> 00:26:41,732
a lot of, it wasn't this case,

323
00:26:41,792 --> 00:26:43,132
but a lot of countries, it's this case,

324
00:26:43,172 --> 00:26:45,092
we can assume that they are quite corrupt.

325
00:26:45,472 --> 00:26:46,832
And there's a trade-off between,

326
00:26:47,072 --> 00:26:48,972
am I protecting my local cronies

327
00:26:48,972 --> 00:26:51,372
or am I going to allow for less regulation,

328
00:26:51,372 --> 00:26:53,752
not protect them through regulations and other things,

329
00:26:54,152 --> 00:26:57,232
and allow for a free market, which would maybe increase,

330
00:26:57,412 --> 00:27:00,912
which will increase business activity, increase the tax revenues I'm getting.

331
00:27:01,452 --> 00:27:05,592
And all of a sudden they saw that, wow, all of a sudden we have a growing economy here.

332
00:27:06,292 --> 00:27:10,132
And now, of course, we have Shenzhen becoming a zone and growing in that area.

333
00:27:11,472 --> 00:27:16,272
So what happens then is that business starts flowing from other regions to them.

334
00:27:16,592 --> 00:27:19,772
And now this region is saying, wait a minute, this is not working out as well.

335
00:27:19,772 --> 00:27:24,392
my cronies are disappearing. I'm not getting as much pay anymore. So they start looking at what

336
00:27:24,392 --> 00:27:30,572
are they doing right? And it spread like that. So it was very much a local process that was not

337
00:27:30,572 --> 00:27:36,372
because of the communist party were benevolent and thinking they should reform. But they saw that,

338
00:27:36,692 --> 00:27:41,632
actually, this could actually be good for us. So they saw the experiment, but it wasn't really

339
00:27:41,632 --> 00:27:48,292
a conscious kind of, we have a lab, kind of very conscious experiment, kind of became an experiment

340
00:27:48,292 --> 00:27:50,072
that they could observe and then say, okay.

341
00:27:50,412 --> 00:27:53,172
And then like it was 1992 that they allowed

342
00:27:53,172 --> 00:27:56,212
for all the regional capitals to become their own kind of zones.

343
00:27:56,952 --> 00:28:00,172
And that's when they really put their green stamp on it.

344
00:28:00,232 --> 00:28:01,292
Like, yeah, we're supporting this now.

345
00:28:01,652 --> 00:28:03,632
We may have told a little fib in the film then.

346
00:28:04,092 --> 00:28:06,832
Well, at least the way I interpreted it,

347
00:28:07,612 --> 00:28:10,772
the four main zones at the beginning

348
00:28:10,772 --> 00:28:13,832
were kind of like a thoughtful process by the government.

349
00:28:14,012 --> 00:28:14,932
All right, let's do this.

350
00:28:15,092 --> 00:28:15,892
You're saying it's not?

351
00:28:16,292 --> 00:28:17,372
No, I think it's a little bit.

352
00:28:17,372 --> 00:28:19,112
But they kind of cashed in on it.

353
00:28:19,312 --> 00:28:20,892
They cashed in on it.

354
00:28:21,012 --> 00:28:22,612
Yeah, it depends on how you tell the story.

355
00:28:22,992 --> 00:28:24,412
And there's not that much written.

356
00:28:24,532 --> 00:28:28,332
So I'm not going to say that the sources that I have is like the perfect truth.

357
00:28:28,492 --> 00:28:33,412
But there is a book called, I think it's called The Political Economy of China,

358
00:28:33,532 --> 00:28:35,012
Special Economic Zones or something like that.

359
00:28:35,012 --> 00:28:35,832
Oh, wow. Perfect.

360
00:28:36,392 --> 00:28:38,612
Right. And it sounds like, oh, well, you just copied that.

361
00:28:38,672 --> 00:28:42,072
No, it wasn't The Political Economy of it in terms of a framework.

362
00:28:42,252 --> 00:28:44,552
The book was just telling what happened.

363
00:28:44,872 --> 00:28:45,552
And then they met.

364
00:28:45,632 --> 00:28:46,272
And then this happened.

365
00:28:46,272 --> 00:28:55,452
And then these had a meeting and then they decided this, you know, so you can then understand the process and putting your framework around and building a framework around it.

366
00:28:56,032 --> 00:29:08,112
I mean, one thing I did, I have always thought in the case of China is that I think no matter what you would have cited opposite Hong Kong would have done really well inside China.

367
00:29:08,112 --> 00:29:15,952
Doesn't matter. Do you know what I mean? Like Shenzhen was if when you say, well, Shenzhen is one of the powerhouses of, you know, China now.

368
00:29:15,952 --> 00:29:19,132
And that's because of, you know, the fact that it was a special economic zone.

369
00:29:19,452 --> 00:29:22,872
I can't help thinking, well, yeah, it's also right near Hong Kong.

370
00:29:23,532 --> 00:29:26,492
So obviously Hong Kong is going to do business.

371
00:29:26,612 --> 00:29:32,152
Hong Kong is super successful and really does, you know, generate a lot of wealth and a lot of everything.

372
00:29:32,152 --> 00:29:36,412
So I don't know. I'm you're the expert, though.

373
00:29:36,412 --> 00:29:40,892
but that's new i hadn't heard that before so i wonder what else we got wrong in the film

374
00:29:40,892 --> 00:29:47,352
so so um i don't remember that was a lot that i thought that was wrong so well but the thing is

375
00:29:47,352 --> 00:29:52,312
in the film peter because peter spent quite a while in china right and he speaks he speaks

376
00:29:52,312 --> 00:29:59,592
is cantonese or whichever whichever one it is and he talked about a policy that the chinese

377
00:29:59,592 --> 00:30:05,612
government had and he says it in the film and it's like or whatever you know something like that

378
00:30:05,612 --> 00:30:11,672
And it means feeling for the stones under your feet when you're crossing a river or something like that.

379
00:30:11,672 --> 00:30:12,472
Crossing a river by feeling the stones.

380
00:30:12,552 --> 00:30:12,772
Right.

381
00:30:12,852 --> 00:30:13,832
You know this thing, right?

382
00:30:14,092 --> 00:30:16,012
But that was the way they decided.

383
00:30:16,392 --> 00:30:24,832
He connected that with special economic zones, which was they want to reform, but they're going to do it in a tentative way to begin with.

384
00:30:24,892 --> 00:30:26,492
And that involves the zones.

385
00:30:26,612 --> 00:30:27,452
I think that's right.

386
00:30:27,512 --> 00:30:28,192
A little bit later.

387
00:30:28,272 --> 00:30:30,092
It's just that it's not quite how it started.

388
00:30:30,192 --> 00:30:31,972
It was just a messier start than people want to.

389
00:30:32,512 --> 00:30:33,172
It's fine.

390
00:30:33,172 --> 00:30:38,132
We always want to tell a story that is neat so that people don't get too confused, which is absolutely fine.

391
00:30:38,432 --> 00:30:43,392
It's just these first few years, it was a more trembling thing and it did start.

392
00:30:43,472 --> 00:30:52,032
And I do think that it's a good case for bottom-up processes and decentralization, that it actually did happen on a local level.

393
00:30:52,372 --> 00:30:53,752
And this was very much thanks to this.

394
00:30:53,952 --> 00:31:01,312
And here there's a good amount of scholarship about how decentralized, both politically and economically, China was for a period.

395
00:31:01,312 --> 00:31:25,712
It has gone up and down. And I don't think it's that decentralized, as decentralized anymore. But I do think still people underestimate how decentralized China is. And there's quite a lot of papers written on, and I won't be able to cite them now, but about how various reforms came about through, thanks to the political and economic fiscal, I should say, decentralization of China. And both of those are necessary conditions.

396
00:31:25,712 --> 00:31:28,312
because if you can't, political means I can do something.

397
00:31:28,472 --> 00:31:30,432
I can change it and it changes where I live.

398
00:31:31,232 --> 00:31:33,472
And fiscal means I have an incentive to do it.

399
00:31:33,932 --> 00:31:38,312
If I make things better and increase tax revenues in my local area,

400
00:31:38,392 --> 00:31:40,792
it doesn't all flow to the center and I won't see it.

401
00:31:40,832 --> 00:31:42,712
So I have an incentive to make those reforms.

402
00:31:42,732 --> 00:31:46,012
How far back did you go historically then in your research?

403
00:31:46,672 --> 00:31:47,232
Not a lot.

404
00:31:47,232 --> 00:31:54,892
I focused on, I think China is the one that goes back furthest really

405
00:31:54,892 --> 00:31:58,512
when you look deeply into kind of a process that happened.

406
00:31:58,972 --> 00:32:01,112
I mean, I tell the story of special economic zones.

407
00:32:01,212 --> 00:32:04,012
There's a little bit like you can think about the Hanseatic League

408
00:32:04,012 --> 00:32:05,572
as a kind of league of different zones.

409
00:32:05,572 --> 00:32:09,312
But you mentioned Shannon in the beginning of our conversation here.

410
00:32:09,332 --> 00:32:11,472
And that was really the first kind of industrial park

411
00:32:11,472 --> 00:32:14,092
where it's like the government says we're going to have this zone here.

412
00:32:14,372 --> 00:32:16,812
And that was famously because it used to be that

413
00:32:16,812 --> 00:32:18,292
if you're going to fly across the Atlantic,

414
00:32:18,292 --> 00:32:19,912
you have to stop somewhere to refuel.

415
00:32:21,072 --> 00:32:24,152
And Ireland is the perfect place to stop and refuel.

416
00:32:24,152 --> 00:32:30,872
and um so thanks to that there was an economy around that and then technology advanced and

417
00:32:30,872 --> 00:32:33,792
you don't have to stop in ireland anymore and they said oh no what are we going to do

418
00:32:33,792 --> 00:32:39,692
so they created this zone to boost the economy which is a perfect example of why zones work i

419
00:32:39,692 --> 00:32:44,972
think you can get a better version of a zone than that because it's it takes a lot to fly a plane

420
00:32:44,972 --> 00:32:50,092
that you don't you don't need to fly via shannon but oh let's do it anyway because you know there's a

421
00:32:50,092 --> 00:32:52,672
there's a benefit to us, which is the whole point of special

422
00:32:52,672 --> 00:32:55,372
economic zones as far as I'm concerned. How far back can you

423
00:32:55,372 --> 00:32:59,392
go? What do you know, just from my own personal interest here, in

424
00:32:59,392 --> 00:33:03,592
the a lot of people site a lot of different places as I was

425
00:33:03,592 --> 00:33:06,352
modeling SEZs historically and stuff.

426
00:33:06,712 --> 00:33:09,892
Yeah, I haven't looked that far. So so they're probably going

427
00:33:09,892 --> 00:33:13,992
to be better people out there to think about equivalents,

428
00:33:14,032 --> 00:33:18,052
historical analogies. But in terms of zones, like we know

429
00:33:18,052 --> 00:33:19,972
them, and those are traditionally

430
00:33:20,016 --> 00:33:22,836
Additionally, your, you know, your industrial zones.

431
00:33:23,136 --> 00:33:26,156
Before you have industry, it's hard to say that you have industrial zone.

432
00:33:26,276 --> 00:33:29,476
Before industry, then it was more about trade generally.

433
00:33:29,936 --> 00:33:30,956
But trade was free.

434
00:33:31,476 --> 00:33:34,716
Like the transaction costs were still high because of technology.

435
00:33:34,916 --> 00:33:41,056
But in many episodes, it hasn't like trade was disrupted by wars and things like that, invasions.

436
00:33:41,056 --> 00:33:47,936
but I don't I think it's fair to say that the stone concepts that we can actually learn from as a

437
00:33:47,936 --> 00:33:54,376
in the form that we're seeing it now is not as doesn't go back hundreds of years I don't know

438
00:33:54,376 --> 00:33:58,236
if it's helpful it could be helpful if you're a historian to make the analogies and maybe draw

439
00:33:58,236 --> 00:34:02,496
some lessons but that has not been my focus and do you think there's a lot of research out there

440
00:34:02,496 --> 00:34:08,756
now because what there's over 6 000 zones right it's very well tried and tested methodology

441
00:34:08,756 --> 00:34:11,376
behind zones, the kind of, the core.

442
00:34:11,796 --> 00:34:14,616
Is there a lot known and written and said about them?

443
00:34:14,996 --> 00:34:16,016
Not that I know of.

444
00:34:16,116 --> 00:34:17,156
I don't think there's much that come out.

445
00:34:17,296 --> 00:34:18,656
There are specific countries.

446
00:34:18,876 --> 00:34:20,896
There's one scholar that writes about

447
00:34:20,896 --> 00:34:22,796
the special economic zones of India, for example.

448
00:34:23,116 --> 00:34:24,216
I think her name is Agarwal.

449
00:34:24,956 --> 00:34:28,676
And things like that, that I see coming through, but.

450
00:34:29,216 --> 00:34:30,316
Why is that then?

451
00:34:30,316 --> 00:34:32,456
They seem like they're, I don't know,

452
00:34:32,536 --> 00:34:36,036
maybe because we're in this place, in this world,

453
00:34:36,036 --> 00:34:41,236
and it's all about, you know, creating zones and maximizing the zone

454
00:34:41,236 --> 00:34:42,036
and all this kind of stuff.

455
00:34:43,476 --> 00:34:46,756
I'm surprised that there aren't more people talking about it

456
00:34:46,756 --> 00:34:52,256
because, all right, and I suppose I have quite a brutal view of it.

457
00:34:52,756 --> 00:34:55,596
You're a much deeper thinker than me on stuff like this,

458
00:34:55,696 --> 00:34:59,336
but it does seem a bit obvious why zones work

459
00:34:59,336 --> 00:35:02,676
and why you should use zones to do things.

460
00:35:03,056 --> 00:35:03,256
Yeah.

461
00:35:03,676 --> 00:35:06,256
So why aren't more people either doing it?

462
00:35:06,336 --> 00:35:09,356
Well, I suppose 6,000 zones is quite a lot of people doing it.

463
00:35:09,736 --> 00:35:14,176
But why isn't it more commonly understood that this is a brilliant tool?

464
00:35:15,596 --> 00:35:15,796
Yeah.

465
00:35:15,896 --> 00:35:17,356
So why there's not much scholarship?

466
00:35:17,516 --> 00:35:18,496
I think you hit on one.

467
00:35:18,696 --> 00:35:20,776
One is that people think it's going to be obvious.

468
00:35:20,776 --> 00:35:31,096
So if I'm going to have this big, if I'm going to write my dissertation on it or something like that, then you might have, if you have a preconceived notion that you already know your answer, if you're a wise enough scholar, then you might not pursue it for that reason.

469
00:35:31,796 --> 00:35:41,676
The second reason I think is just like I said, in terms of the motivation behind it, a government doesn't really want to have an answer they don't like.

470
00:35:41,676 --> 00:35:52,836
If they are decided that they want a zone program, they are not going to commission people to study, figure out whether the zones is a good idea because they already made up their mind.

471
00:35:52,896 --> 00:35:55,316
They don't want that to come out in any different direction.

472
00:35:55,316 --> 00:36:02,256
And as I explain in my book, zones are often pursued for political reasons.

473
00:36:02,456 --> 00:36:04,176
That doesn't mean it's always a bad thing.

474
00:36:04,376 --> 00:36:11,916
They can still, you know, all the things that we talk about, you know, increase employment and exports and economic activity as a whole.

475
00:36:12,096 --> 00:36:13,336
It can definitely do that.

476
00:36:13,336 --> 00:36:26,376
But it's their pursuit often for political reason that sometimes suggest that had this tool had not been available, they would actually have maybe liberalized more broadly in the whole country.

477
00:36:27,056 --> 00:36:29,596
Now, a third reason I would say, why isn't more scholarship?

478
00:36:30,196 --> 00:36:36,496
Because it would be obvious that it should be in the field of economics.

479
00:36:36,776 --> 00:36:38,036
It's like an export policy.

480
00:36:38,196 --> 00:36:40,016
So economists go out and look at zones.

481
00:36:40,016 --> 00:36:44,096
And there are papers trying to do this, answering the question, is this good for an economy?

482
00:36:44,276 --> 00:36:45,396
And it's actually really hard to do.

483
00:36:46,036 --> 00:36:48,296
There are two ways usually you see people studying this.

484
00:36:48,416 --> 00:36:57,896
One is to compare the special economic zones area with the economic development of the rest of the country over, say, the 10, 20 years after a zone in this area was open.

485
00:36:58,696 --> 00:36:59,456
So that's fair enough.

486
00:36:59,536 --> 00:37:00,096
We have a zone.

487
00:37:00,176 --> 00:37:00,916
We know that it's a zone.

488
00:37:01,156 --> 00:37:02,236
We know people are working there.

489
00:37:02,256 --> 00:37:03,816
So we know there should be some kind of impact.

490
00:37:03,856 --> 00:37:04,496
Is it good or bad?

491
00:37:04,636 --> 00:37:08,716
And they conclude that the zones are good because there's more economic activity here in the rest of the country.

492
00:37:09,276 --> 00:37:12,456
That doesn't answer, in my mind, was the zone a good idea?

493
00:37:12,516 --> 00:37:16,936
Because if the companies that were already in the country just moved from outside the zone to inside the zone,

494
00:37:17,096 --> 00:37:20,456
all you did was the transaction cost of moving from one place to the other.

495
00:37:21,256 --> 00:37:22,596
And yeah, there's a marginal.

496
00:37:22,836 --> 00:37:27,176
Of course, they got paid lower taxes, so they could employ more people.

497
00:37:27,176 --> 00:37:34,336
So maybe on net, but just saying that the economic activity was higher in the zone doesn't answer the question where there was a good idea for the economy as a whole.

498
00:37:34,416 --> 00:37:35,976
Did you get economic development and all that?

499
00:37:35,976 --> 00:37:47,876
The other way that you see people doing it, and I've seen two papers of this, not well cited because they can't be good papers, is to try to compare GDP growth between countries that have some programs that don't have some programs.

500
00:37:48,616 --> 00:37:51,396
Now, anything GDP growth is very difficult, right?

501
00:37:51,416 --> 00:37:52,656
You have to have many decades.

502
00:37:53,076 --> 00:37:55,916
And the more decades you have, the more factors you have to control for.

503
00:37:56,376 --> 00:37:59,196
You know, regime changes and wars happen.

504
00:37:59,456 --> 00:38:01,616
And how many dummies do you want to throw in there?

505
00:38:01,616 --> 00:38:10,036
And once you have your very multivariable thing, you have to then decide what kind of model you're going to use because of the time series aspects of it.

506
00:38:10,076 --> 00:38:11,856
There's a lot of issues with your data.

507
00:38:12,336 --> 00:38:15,516
And at the end, you might come up with a coefficient or not.

508
00:38:15,596 --> 00:38:29,476
And often it's going to be a coefficient in one direction, but not statistically significant, meaning you can't really determine whether this was a random noise or not that we saw that it was a good or a bad thing for the economy.

509
00:38:29,476 --> 00:38:33,736
and you also have to be very careful that the zone program actually was launched in terms of the

510
00:38:33,736 --> 00:38:39,156
were they allowed for the the permits to open the zones and actually have them working because

511
00:38:39,156 --> 00:38:43,076
that sometimes happens too like oh there's a program in this country and it might take 20

512
00:38:43,076 --> 00:38:48,256
years until they actually come into effect um lada you're the first person i've spoken to about

513
00:38:48,256 --> 00:38:54,196
this is making me think they're not a good idea now i mean like i'm glad to hear all this stuff

514
00:38:54,196 --> 00:38:57,196
because you're painting, I like it,

515
00:38:57,276 --> 00:38:58,996
painting a very neutral picture, which is good

516
00:38:58,996 --> 00:39:02,316
because I think we talk always in the positive

517
00:39:02,316 --> 00:39:03,656
about these kind of things.

518
00:39:03,936 --> 00:39:05,816
But it makes sense because we're not in the business

519
00:39:05,816 --> 00:39:06,956
of special economic zones, right?

520
00:39:07,016 --> 00:39:09,576
We should remember when I talk about special economic zones,

521
00:39:09,656 --> 00:39:12,036
I talk about these things that governments start

522
00:39:12,036 --> 00:39:15,576
often for meeting certain criteria,

523
00:39:15,796 --> 00:39:18,276
meeting certain metrics like increase exports

524
00:39:18,276 --> 00:39:20,236
or increase employment and things like that.

525
00:39:20,576 --> 00:39:21,816
And that is not our business, right?

526
00:39:21,816 --> 00:39:28,976
We are thinking about how to create communities from a bottom-up level that actually attracts people in a very different way, right?

527
00:39:29,036 --> 00:39:30,056
We don't have...

528
00:39:30,056 --> 00:39:35,376
Part of our strength is that we don't have the resources that a government has, right?

529
00:39:35,656 --> 00:39:43,816
Because what you often see with special development zones, unfortunately, is that the less profitable or less beneficial they are for the economy,

530
00:39:44,196 --> 00:39:48,956
the more money is being invested in them from the government standpoint.

531
00:39:49,236 --> 00:39:49,516
Why?

532
00:39:49,516 --> 00:39:53,396
because they put their name on it and they don't want it to fail so they want to make sure they

533
00:39:53,396 --> 00:39:57,576
fail so they increase taxes for the rest of the economy to put more and more money into this so

534
00:39:57,576 --> 00:40:06,336
one i wrote one paper on ghana and the temais the port there that um have a zone and people cite this

535
00:40:06,336 --> 00:40:12,716
now as a it was such a great project and all that but forever it was just a dump of money they didn't

536
00:40:12,716 --> 00:40:17,876
there wasn't any road going to it really so they just kept having to subsidize it because

537
00:40:17,876 --> 00:40:21,916
not enough industry wanted to establish themselves there.

538
00:40:22,396 --> 00:40:25,996
So if you look at the whole history of that zone, for example, in Ghana,

539
00:40:26,176 --> 00:40:31,576
it's like, look, of all I can tell, this was a big waste for the government.

540
00:40:32,036 --> 00:40:36,696
And then what happened, this was early 2000, 2006, around there, I think,

541
00:40:37,096 --> 00:40:40,196
World Bank stepped in and said, we're just going to throw money at this.

542
00:40:40,236 --> 00:40:41,476
Well, where does that money come?

543
00:40:42,036 --> 00:40:44,436
It's not because the World Bank is a profitable industry, right?

544
00:40:44,836 --> 00:40:47,176
So they now throw a lot of money.

545
00:40:47,176 --> 00:40:49,516
And now it is its own. It works, absolutely.

546
00:40:49,796 --> 00:40:52,876
But it's like from a very long history of not working,

547
00:40:53,216 --> 00:40:56,536
not working in terms of they have to throw so much money at it,

548
00:40:57,216 --> 00:40:58,676
I would say that was not like,

549
00:40:58,796 --> 00:41:01,896
it did not benefit the people of that country, would be my guess.

550
00:41:01,996 --> 00:41:04,876
What do you think then about the idea or the notion

551
00:41:04,876 --> 00:41:09,616
that governments might create free city type projects?

552
00:41:10,236 --> 00:41:11,996
Sounds like it would be a bad idea.

553
00:41:13,036 --> 00:41:16,236
But really, I mean, by its nature, you're working,

554
00:41:16,236 --> 00:41:19,996
well, most people are working in corroboration

555
00:41:19,996 --> 00:41:23,176
with the government, but for governments to then look

556
00:41:23,176 --> 00:41:24,856
at that in other countries and go,

557
00:41:24,856 --> 00:41:29,096
that seemed to work in say Honduras, oh, that worked.

558
00:41:29,096 --> 00:41:31,256
Why don't we try our same thing?

559
00:41:31,256 --> 00:41:34,796
Do you think that's not a good idea?

560
00:41:34,796 --> 00:41:45,094
No it a great idea in the way that I all the projects that I seeing have these the two components that I think are necessary for it to be successful and beneficial for the

561
00:41:45,094 --> 00:41:50,674
country is, one, there has to be some incentive for the government to keep it running, which

562
00:41:50,674 --> 00:41:52,374
often is some kind of share agreement.

563
00:41:52,514 --> 00:41:57,554
There's some kind of fees that get paid royalties that go to the government where you say, when

564
00:41:57,554 --> 00:42:01,674
we're profitable, or maybe even before we're profitable, we're going to be paying you money.

565
00:42:01,774 --> 00:42:03,534
So you're not going to lose any revenue from this.

566
00:42:03,534 --> 00:42:06,134
you started an area often

567
00:42:06,134 --> 00:42:07,634
where it's very sparsely populated.

568
00:42:07,814 --> 00:42:09,414
So if you're going to say you're going to lower taxes,

569
00:42:09,414 --> 00:42:11,874
you can see how much money

570
00:42:11,874 --> 00:42:13,814
is on the line here for the government.

571
00:42:14,614 --> 00:42:16,774
So it's definitely like,

572
00:42:16,914 --> 00:42:20,274
then you can definitely create the areas

573
00:42:20,274 --> 00:42:21,974
if the government has the right incentive.

574
00:42:22,114 --> 00:42:26,074
And the other part is not having the people on the side

575
00:42:26,074 --> 00:42:27,094
and seeing that it's beneficial,

576
00:42:27,194 --> 00:42:28,674
making them understand what this is doing.

577
00:42:29,134 --> 00:42:31,454
It's that it's not a neocolonial kind of project

578
00:42:31,454 --> 00:42:32,414
or anything like that.

579
00:42:32,414 --> 00:42:45,834
Because that creates sustainability, of course, of, you know, when you have the next election, next government comes in and then paints it in a bad light because it was the prior regime and things like that and convinces the people that, you know, this is a bad thing for you.

580
00:42:45,834 --> 00:42:53,814
If people see that there is money flowing out of it or the people living there seeing that there's more jobs created, that's beneficial for everyone.

581
00:42:54,074 --> 00:43:08,174
Then you actually have a test bed, so to speak, a sandbox, as you said, for a form that could be showcased for others to other companies coming in and striking the same deal with the government.

582
00:43:08,174 --> 00:43:16,494
maybe the government doing a similar thing and understanding that this kind of regulatory freedom and autonomy can be beneficial.

583
00:43:17,714 --> 00:43:18,474
I mean, it's...

584
00:43:18,474 --> 00:43:20,854
But I wouldn't call that special economic zones in the classical sense, right?

585
00:43:20,914 --> 00:43:25,554
We're starting from a very like bottom-up perspective as an outsider for the government.

586
00:43:26,254 --> 00:43:30,194
Especially, I think, in the form we see them now in Honduras as well.

587
00:43:30,754 --> 00:43:32,414
It makes the government look really bad.

588
00:43:32,414 --> 00:43:48,034
And in fact, I was chatting to, oh my brain, it's too late in the day, Mr. Morazan, the guy, Massimo, I was speaking to Massimo, Jesus.

589
00:43:48,494 --> 00:43:49,414
Took me a couple of seconds for you.

590
00:43:49,414 --> 00:43:51,814
Yeah, it's too late in the day, Lotta.

591
00:43:52,654 --> 00:43:59,154
Massimo basically is saying there's actually been a really interesting change in public attitude,

592
00:43:59,474 --> 00:44:05,834
especially in the locale, in the locale, locality of Morazan recently.

593
00:44:06,234 --> 00:44:06,474
Okay.

594
00:44:06,674 --> 00:44:10,754
Because, and as you know, the government there is doing really badly as well.

595
00:44:10,754 --> 00:44:14,574
And I think it seems to be happening quite commonly that they,

596
00:44:14,574 --> 00:44:19,654
it's certainly with regards to the special with regards to the ZAs that people are now looking at

597
00:44:19,654 --> 00:44:25,654
them going wait a minute all that stuff they told us it was crap it was bullshit and he told me that

598
00:44:25,654 --> 00:44:30,694
he said that this is what is known in Chaloma it's spoken about and maybe we should clarify for

599
00:44:30,694 --> 00:44:34,474
those who don't know you said ZAs very quickly so these are the zones for economic and development

600
00:44:34,474 --> 00:44:40,634
that are that the Honduran government set up right in the 2010s I hope the audience knows that

601
00:44:40,634 --> 00:44:44,054
I talk about them a lot well hopefully you're getting new people to listen to this all the time

602
00:44:44,054 --> 00:44:45,194
So there might be new people here.

603
00:44:45,214 --> 00:44:46,674
How far did you go in the book?

604
00:44:47,234 --> 00:44:49,734
Did you touch on any of the sort of modern iterations?

605
00:44:50,254 --> 00:44:54,314
No, it was really in the end where I have a chapter on kind of saying

606
00:44:54,314 --> 00:44:56,514
where are the kind of two things.

607
00:44:56,854 --> 00:44:59,894
One is where are the zones that are leading the way towards

608
00:44:59,894 --> 00:45:02,254
more regulatory reforms as opposed to just fiscal

609
00:45:02,254 --> 00:45:07,474
and pointing at the, you mentioned the financial center in Dubai

610
00:45:07,474 --> 00:45:08,394
and things like that.

611
00:45:08,534 --> 00:45:11,154
And South Korea had some interesting things.

612
00:45:11,394 --> 00:45:13,794
And then I also kind of did a little bit speculation.

613
00:45:13,794 --> 00:45:20,674
but about how the zones of the future can be these more autonomous areas

614
00:45:20,674 --> 00:45:25,794
and how the lessons from the industrial parks kind of point in that direction.

615
00:45:26,154 --> 00:45:32,114
The big thing that I think is common wisdom now that I feel wasn't at the time,

616
00:45:32,274 --> 00:45:36,314
but the World Bank writer on this, Thomas Farol,

617
00:45:36,414 --> 00:45:39,434
I remember mentioning in one publication kind of in passing

618
00:45:39,434 --> 00:45:44,014
was that privately developed zones are better than government-run zones,

619
00:45:44,174 --> 00:45:45,394
government-run and developed zones.

620
00:45:45,974 --> 00:45:51,814
And so that points to a direction that all the initiatives should be on the private basis.

621
00:45:52,274 --> 00:45:56,894
But that still points to, when I make that just a position,

622
00:45:57,294 --> 00:45:58,714
it's still like government initiatives,

623
00:45:58,714 --> 00:46:03,154
but whether the government allows for the private sector to develop and run the zones

624
00:46:03,154 --> 00:46:04,514
as opposed to running them themselves.

625
00:46:04,994 --> 00:46:07,294
Really? So that's commonly understood now?

626
00:46:07,734 --> 00:46:09,414
I think that most people would say that, yeah.

627
00:46:10,114 --> 00:46:11,854
That's a good, I think it's pretty good.

628
00:46:12,114 --> 00:46:15,314
Doesn't mean that all the new zones that are, you know, follow that model at all.

629
00:46:15,594 --> 00:46:17,954
Well, I mean, there aren't that many new zones really, are there?

630
00:46:17,954 --> 00:46:24,734
I mean, are you talking about, you know, real free city type projects or just even new special economic zones?

631
00:46:25,154 --> 00:46:26,194
Special economic zones.

632
00:46:26,394 --> 00:46:27,794
There are new ones that happen.

633
00:46:27,914 --> 00:46:29,354
I mean, there's a lot of governments.

634
00:46:29,594 --> 00:46:30,874
I don't follow it 100%.

635
00:46:30,874 --> 00:46:37,134
I know that there are zones in Africa where you do have a mixed bag between government throwing concrete at a place.

636
00:46:37,314 --> 00:46:38,834
And usually that doesn't go very far.

637
00:46:38,834 --> 00:46:45,394
they run out of money um and or people who understand that you need the private sector and

638
00:46:45,394 --> 00:46:50,594
and you have a developer and people pursuing this is for to make money which means that they

639
00:46:50,594 --> 00:46:55,454
want to invite companies that are promising promising to stay promising to develop and

640
00:46:55,454 --> 00:47:01,774
and hire people and things like that so yeah i think um i would think that there are more and

641
00:47:01,774 --> 00:47:08,374
more private zones and but it's hard to say i haven't seen any like really good surveys coming

642
00:47:08,374 --> 00:47:14,054
at like lately on trying to list them and compare them i feel like there was a drive there was a

643
00:47:14,054 --> 00:47:19,314
greek interest from the world bank side there um in the kind of early 2000s to write a lot about

644
00:47:19,314 --> 00:47:22,774
that and the people who were writing at the time i know have moved on to like other things

645
00:47:22,774 --> 00:47:29,154
part of it being practitioner and setting up zones absolutely so yeah do you know do you happen to

646
00:47:29,154 --> 00:47:34,874
know what people at that level think of say prosper for example and the z8s i don't know i

647
00:47:34,874 --> 00:47:36,854
I don't know in what circles you revolve,

648
00:47:36,934 --> 00:47:40,254
but I certainly don't revolve in anything to do with the World Bank

649
00:47:40,254 --> 00:47:41,654
or anything like that.

650
00:47:42,134 --> 00:47:44,514
Are they considered a cute little experiment?

651
00:47:45,034 --> 00:47:50,074
Or are they like we think of them as probably game-changing projects

652
00:47:50,074 --> 00:47:53,094
that might lead to who knows what?

653
00:47:53,914 --> 00:47:55,914
I'm not in those circles either.

654
00:47:56,094 --> 00:47:59,994
I'm in the private sector, so I can only speculate.

655
00:47:59,994 --> 00:48:03,054
I think most people think of it as a cute experiment

656
00:48:03,054 --> 00:48:05,254
and don't look at that carefully.

657
00:48:05,454 --> 00:48:06,874
It's not, if you're in the World Bank,

658
00:48:07,014 --> 00:48:09,854
you're not paid to think about the new things

659
00:48:09,854 --> 00:48:14,114
that are not kind of, haven't existed on the ground

660
00:48:14,114 --> 00:48:16,574
that long or made a big economic impact.

661
00:48:16,734 --> 00:48:19,894
But for sure, if you're the Honduran,

662
00:48:20,134 --> 00:48:23,554
the economist covering Honduras very soon,

663
00:48:23,634 --> 00:48:25,094
you won't be able probably.

664
00:48:25,294 --> 00:48:26,274
So that would be encouraging, right?

665
00:48:26,354 --> 00:48:28,234
You can't be, you might not be able

666
00:48:28,234 --> 00:48:30,994
to seriously write your report on the country

667
00:48:30,994 --> 00:48:35,054
without mentioning what happens in a big part of the economy

668
00:48:35,054 --> 00:48:36,294
once it is a big part of the economy.

669
00:48:36,574 --> 00:48:37,714
So what do you think about it then?

670
00:48:38,274 --> 00:48:40,894
What do you think about the whole ZA thing

671
00:48:40,894 --> 00:48:44,454
and the new versions that are sort of popping up

672
00:48:44,454 --> 00:48:45,814
and in the pipeline, you know, of a few,

673
00:48:45,894 --> 00:48:46,934
there's some that we can't mention.

674
00:48:47,554 --> 00:48:48,614
What do you think of it?

675
00:48:49,134 --> 00:48:50,414
Cute or life-changing?

676
00:48:50,414 --> 00:48:52,614
No, I think it's, well, per definition,

677
00:48:52,754 --> 00:48:54,274
it's life-changing for the people who are there.

678
00:48:54,274 --> 00:48:54,714
You know what I mean?

679
00:48:54,794 --> 00:48:57,214
I think it's, no, I think it is the way to go.

680
00:48:57,394 --> 00:49:00,074
Like that's, it's exactly, it's really cool

681
00:49:00,074 --> 00:49:01,974
to see that there are so many projects coming up.

682
00:49:02,354 --> 00:49:04,094
And I think it's going to change the world.

683
00:49:04,714 --> 00:49:07,774
But we are still in the early stage of it.

684
00:49:08,594 --> 00:49:12,834
And I do know that, I mean, most people think that it's,

685
00:49:13,974 --> 00:49:16,674
yeah, most people think it's not a big deal.

686
00:49:16,834 --> 00:49:21,614
But that's because, you know, any change happens like this, right?

687
00:49:21,614 --> 00:49:26,014
If things grow by 10% from very small,

688
00:49:26,094 --> 00:49:28,514
you don't notice it until it actually is starting to take off

689
00:49:28,514 --> 00:49:29,574
and becoming very big.

690
00:49:29,574 --> 00:49:34,174
So I definitely think we're doing the right thing.

691
00:49:34,314 --> 00:49:35,254
It's moving the right direction.

692
00:49:35,774 --> 00:49:38,714
I don't think it can move much faster than it is now.

693
00:49:38,794 --> 00:49:41,574
You see how people are working hard to make these projects happen.

694
00:49:42,254 --> 00:49:45,554
I started speaking at these kind of like free cities conferences,

695
00:49:45,874 --> 00:49:49,694
probably back in 2011, maybe, when I started kind of looking into these things.

696
00:49:50,074 --> 00:49:53,514
And at that time, you could never fill a room with free cities people.

697
00:49:54,034 --> 00:50:05,892
It was always blockchain and free cities together like you kind of pair them together to create a conference So it was certainly not you know men in suits sitting in a filling up a room

698
00:50:05,892 --> 00:50:07,632
And now it's like, it's that, you know,

699
00:50:07,632 --> 00:50:11,832
it's people with serious plans and serious budgets,

700
00:50:11,832 --> 00:50:14,772
serious, you know, business plans around it.

701
00:50:14,772 --> 00:50:17,212
When was the last time you came to this event then?

702
00:50:17,212 --> 00:50:18,212
This is the first time.

703
00:50:18,212 --> 00:50:19,052
Oh really?

704
00:50:19,052 --> 00:50:21,332
Yeah, I've done other conferences before this was a thing,

705
00:50:21,332 --> 00:50:22,172
but yeah.

706
00:50:22,172 --> 00:50:23,072
So what do you think?

707
00:50:23,072 --> 00:50:24,732
I mean, was it a surprise?

708
00:50:24,732 --> 00:50:28,012
Did you already know that you might, was it what you expected?

709
00:50:28,612 --> 00:50:32,612
The quality of people, the number of people, the projects talked about, you know.

710
00:50:32,812 --> 00:50:34,132
Yes, you're good at advertising it.

711
00:50:34,512 --> 00:50:35,072
Are we?

712
00:50:35,092 --> 00:50:36,072
And showing pictures.

713
00:50:36,332 --> 00:50:37,432
So I've been looking at the pictures.

714
00:50:37,432 --> 00:50:37,792
Oh, right, right.

715
00:50:37,892 --> 00:50:39,072
No, you know what I mean though.

716
00:50:39,232 --> 00:50:39,452
Yeah.

717
00:50:39,732 --> 00:50:46,352
Like the way you just described it, you would never fill a room with people into this.

718
00:50:47,012 --> 00:50:49,192
I just assumed you would.

719
00:50:49,472 --> 00:50:53,612
I've watched it grow, but maybe I haven't noticed it change as much.

720
00:50:53,612 --> 00:50:59,072
I know there's definitely loads of projects coming online and especially now, like I am absolutely pumped.

721
00:50:59,512 --> 00:51:08,092
I'm so excited now based on just new things happening every day and nothing to do with us even just watching things.

722
00:51:08,232 --> 00:51:11,192
I know what Optiflis are doing and I know what the people close to us are doing.

723
00:51:11,852 --> 00:51:20,932
But just new little things like Destiny the other day, you know, this one in Nevis and some kids, you know, and this is now really happening.

724
00:51:20,932 --> 00:51:25,632
I mean it's weird because it was you know what it's like it was I was a bit like this with bitcoin

725
00:51:25,632 --> 00:51:31,632
you know it used to be a edgy thing to do and now all of a sudden everyone's a bitcoiner you know

726
00:51:31,632 --> 00:51:36,912
and and it's a bit like it's happening with free cities now it's like you're not pushing against

727
00:51:36,912 --> 00:51:42,472
I mean we are still it's still very early but um it's always it's been one of those places where

728
00:51:42,472 --> 00:51:46,512
it's always oh something's something's gonna happen but it's just around the corner you can

729
00:51:46,512 --> 00:51:50,572
feel it it's happening but I actually feel like it's actually happening now I really do and

730
00:51:50,572 --> 00:51:56,432
obviously Prospera and Morazan, yeah, they've always been there. But even their story has been

731
00:51:56,432 --> 00:52:03,672
amazing. They've had a full on socialist government say, you're illegitimate shutting you down. And

732
00:52:03,672 --> 00:52:07,852
then they just didn't do anything about it. You know, that's a that's an incredible win. You know,

733
00:52:07,852 --> 00:52:13,072
all these little wins added to the fact that there are new projects coming up. You know,

734
00:52:13,352 --> 00:52:17,372
that's amazing. Yeah. And that's the progress that you know, that's the process, you know,

735
00:52:17,372 --> 00:52:22,352
things go through. If I think of like three areas, if you think of Bitcoin, I would single out

736
00:52:22,352 --> 00:52:30,092
Bitcoin as opposed to just any blockchain related thing or cryptocurrency. If you think of Bitcoin

737
00:52:30,092 --> 00:52:35,772
and you think of longevity and you think of free cities, I would take them in that order.

738
00:52:36,892 --> 00:52:43,792
And you want to look at it. I think that the game changer is when VCs sit in a room and you're

739
00:52:43,792 --> 00:52:48,552
looking cool and impressing people by saying, well, we put such and such million dollars in

740
00:52:48,552 --> 00:52:55,292
this space, then you won, right? Bitcoin got there a good few years ago now. It was kind of cool to

741
00:52:55,292 --> 00:53:01,772
say they were in this space, not institutional money. And that's, you know, Bitcoin went from

742
00:53:01,772 --> 00:53:06,312
VCs, it's cool to be here. And then the next step being institutional money, it's already there,

743
00:53:06,312 --> 00:53:13,692
right? Now you have pension funds putting their money into that. And at least university endowment

744
00:53:13,692 --> 00:53:15,992
and pension funds talking about it.

745
00:53:16,292 --> 00:53:19,672
So the, and then the next one,

746
00:53:19,792 --> 00:53:21,232
if you think about the longevity space,

747
00:53:21,292 --> 00:53:22,352
which I think is another one,

748
00:53:22,412 --> 00:53:24,652
it's smaller in a way because it's more niche.

749
00:53:24,832 --> 00:53:26,092
It's within the healthcare space,

750
00:53:26,372 --> 00:53:30,052
but still that too, I feel like it was such,

751
00:53:30,232 --> 00:53:32,572
it was a niche, it was laughed at.

752
00:53:32,872 --> 00:53:34,772
And then now they're at the stage

753
00:53:34,772 --> 00:53:37,452
that VC is a cool, cool person

754
00:53:37,452 --> 00:53:38,672
talking about investing in it,

755
00:53:38,872 --> 00:53:39,992
far away from institutional.

756
00:53:41,612 --> 00:53:43,532
Free cities are not at the stage of VC.

757
00:53:43,692 --> 00:53:48,572
cool to talk about it yet that you say that you would put million dollars in it but you show a few

758
00:53:48,572 --> 00:53:55,372
projects that are profitable and people um posting on social media that they became billionaires from

759
00:53:55,372 --> 00:54:02,192
investing in free cities projects and that's part of you know that's how it sounds very superficial

760
00:54:02,192 --> 00:54:08,312
but that's a lot of progression of just like how money starts flowing into an industry and and that's

761
00:54:08,312 --> 00:54:16,632
Well, what's also quite evident about what you just said is that the longevity industry is supremely connected with the Free Cities ecosystem.

762
00:54:17,132 --> 00:54:24,132
Because, I mean, longevity, by all accounts, is a bit of a regulatory quagmire.

763
00:54:24,432 --> 00:54:29,152
And I mean, just before you, I was interviewing Vladimir Leshko.

764
00:54:29,512 --> 00:54:32,772
He runs Unlimited Bio, which is based in Prospero.

765
00:54:32,852 --> 00:54:33,752
They do gene therapy.

766
00:54:33,752 --> 00:54:40,852
and um yeah he he that he could he said we were we couldn't really be doing this

767
00:54:40,852 --> 00:54:44,912
unless prosper existed so they're they're intricately connected by the way he said

768
00:54:44,912 --> 00:54:49,732
you sound like you're into are you into the longevity stuff you you sound like you're into

769
00:54:49,732 --> 00:54:55,792
i know some and i've made some investments in that space yeah okay he said well he said he

770
00:54:55,792 --> 00:55:02,892
reckoned he's a engineer he's a bio and he's a qualified bloke he's a you know he said i will

771
00:55:02,892 --> 00:55:09,052
in my lifetime, and I'm 54, so I think, you know, 35, 40 years, I'm going to live to,

772
00:55:09,212 --> 00:55:15,232
I'd be 90, I think, I hope. I will be able to live forever. What do you think about that?

773
00:55:15,912 --> 00:55:17,172
I hope he's right, obviously.

774
00:55:17,532 --> 00:55:19,072
Yeah, of course, I hope he's right.

775
00:55:19,252 --> 00:55:22,672
I don't know. I can't bet my money on it.

776
00:55:23,152 --> 00:55:30,452
So come on, what have you got into in longevity? Are you into longevity? Or is it a financial

777
00:55:30,452 --> 00:55:35,432
decision do you look at the market and go like you just explained to me there oh look capital's

778
00:55:35,432 --> 00:55:40,972
moving there if i get in good blah blah blah or do you think i'm really interested in that

779
00:55:40,972 --> 00:55:46,212
therefore i want to be a part of it and i want to put my money into it yeah there are two things

780
00:55:46,212 --> 00:55:49,632
right do you think it's valuable and do you think that the market is underestimating how valuable

781
00:55:49,632 --> 00:55:55,072
it is and the answer is yes on both of those for me so yes it is a financial decision in the sense

782
00:55:55,072 --> 00:55:59,492
that I think that it's still underestimated how big this space is going to be.

783
00:55:59,932 --> 00:56:02,712
But it's also something, yeah, and I think it's valuable in its face

784
00:56:02,712 --> 00:56:03,812
and I want to be part of it.

785
00:56:04,712 --> 00:56:10,212
So it becomes a personal thing in the sense that you want to be close to

786
00:56:10,212 --> 00:56:14,532
and touch it a little bit and have that kind of connection to it.

787
00:56:14,532 --> 00:56:20,752
But it's also, yeah, I guess it's a little bit that when you're drawn to something,

788
00:56:20,832 --> 00:56:24,592
you also want to be contributing to see it grow because you like it,

789
00:56:24,592 --> 00:56:27,352
which is not a way that you should make too many financial decisions.

790
00:56:27,512 --> 00:56:28,392
There's a little bit of that.

791
00:56:28,772 --> 00:56:29,352
Is that right?

792
00:56:30,052 --> 00:56:31,912
That's how I make financial decisions.

793
00:56:32,312 --> 00:56:33,672
Do you know what I just thought of, actually?

794
00:56:34,732 --> 00:56:35,652
It's interesting.

795
00:56:36,872 --> 00:56:42,992
You can change your time horizon, investing in longevity products, can't you,

796
00:56:43,032 --> 00:56:43,872
when you think about it?

797
00:56:44,712 --> 00:56:47,452
Because you might have a 10-year plan.

798
00:56:47,772 --> 00:56:48,752
I'm going to put some money in.

799
00:56:49,032 --> 00:56:50,572
You could have a 100-year plan.

800
00:56:51,032 --> 00:56:54,132
If you really believe in that, you could say, right,

801
00:56:54,132 --> 00:56:57,912
Well, all right, I'm going to see the benefit of this when I'm 200.

802
00:56:58,772 --> 00:56:59,532
I mean, really.

803
00:56:59,752 --> 00:57:05,612
I mean, it's an interesting concept because all that, if that's true and all this longevity stuff really does,

804
00:57:05,692 --> 00:57:11,092
then that blows the hot lid off lots of investing plans, I suppose,

805
00:57:11,192 --> 00:57:14,092
because most people wouldn't think 100 years into the future, would they?

806
00:57:14,352 --> 00:57:20,052
People will be holding suboptimally high amounts of bonds because right now anyone who is a wealth manager

807
00:57:20,052 --> 00:57:26,272
will often have a sliding, kind of this gliding scale, where over the course of a lifetime,

808
00:57:26,472 --> 00:57:32,792
where you use the projected lifetime, you load off, you sell off your equities and invest more

809
00:57:32,792 --> 00:57:36,472
in bonds, right, to keep it steady, which I think is not the right way to think about it all.

810
00:57:36,972 --> 00:57:41,952
But that's a great point. People are going to say, but you said I was going to be dead by now,

811
00:57:41,992 --> 00:57:45,132
and now I'm holding 100% bonds. What's going on here? And now I just learned that I'm going to,

812
00:57:45,132 --> 00:57:50,412
you know, live another 50 years, am I going to reallocate? And like, sorry, you kind of have to

813
00:57:50,412 --> 00:57:55,132
recalculate your model there. And it is interesting because I, so I'm in starting a company in the

814
00:57:55,132 --> 00:57:59,352
wealth management space. So I think about this a lot. And it's actually exactly in line in this

815
00:57:59,352 --> 00:58:05,152
topic, because our way of thinking about allocation is not asset classes, but time horizons.

816
00:58:06,112 --> 00:58:11,132
And we think of a, the longest time horizon where you kind of think of the world as being in

817
00:58:11,132 --> 00:58:24,690
equilibrium as a few decades because most people who are seriously placing their money do so when they have a few more decades to live which could be a complete miscalculation right It still you know a good way to go in terms of well

818
00:58:25,170 --> 00:58:29,990
okay, a few decades or more. Okay, fine. But it might be that you end up having too many people

819
00:58:29,990 --> 00:58:35,150
with that kind of passive allocation for sure. Presumably you could have your, you know,

820
00:58:35,650 --> 00:58:42,970
you have your 10, 5% allocation to, you know, 200 years into the future. We're going to put some

821
00:58:42,970 --> 00:58:47,730
money into one of these longevity companies and it's like yeah but it's a very long time horizon

822
00:58:47,730 --> 00:58:53,330
the rest of it yeah we'll stick to the you know i mean i don't yes not a lot i have no idea really

823
00:58:53,330 --> 00:58:59,070
what wealth management is i i don't really know i'm assuming let me guess it's you get a load of

824
00:58:59,070 --> 00:59:03,290
people's money and you allocate it and you make like family offices what they do is that wealth

825
00:59:03,290 --> 00:59:08,910
management yeah right okay so so and you can think of it as when we talk about wealth management

826
00:59:08,910 --> 00:59:14,410
if you think about allocating money, there's kind of two ways of doing it. Either you take a very,

827
00:59:14,510 --> 00:59:19,330
very small sliver of something and you're very specialized. And that's often in the institutional

828
00:59:19,330 --> 00:59:23,050
space where it's like, here's a pension fund. They have many, many billions and you get,

829
00:59:23,550 --> 00:59:27,730
they have allocated already how they're going to do. They have their own office, right? And they say,

830
00:59:28,030 --> 00:59:34,450
like I used to work in Chicago and I was part of a macro allocation strategies team,

831
00:59:34,450 --> 00:59:38,370
which meant that we did macro means top down.

832
00:59:38,830 --> 00:59:40,910
You don't look at specific companies.

833
00:59:40,910 --> 00:59:42,650
You'd look at everything in a country level basis.

834
00:59:42,750 --> 00:59:44,230
So if I like the US, I like the S&P.

835
00:59:44,370 --> 00:59:45,990
I don't like the specific company, right?

836
00:59:46,670 --> 00:59:51,470
And there you will have like an allocation of somebody,

837
00:59:51,710 --> 00:59:53,810
some fund out there have said,

838
00:59:53,950 --> 00:59:55,750
we want something that we call alts,

839
00:59:55,950 --> 00:59:57,930
which is a stupid label for stuff

840
00:59:57,930 --> 00:59:59,870
that we can't put in any other bucket.

841
01:00:00,270 --> 01:00:02,130
And by the way, that alts bucket is very big now

842
01:00:02,130 --> 01:00:03,130
because there's so much out there.

843
01:00:03,190 --> 01:00:03,950
It's real estate.

844
01:00:03,950 --> 01:00:06,650
It's currencies, it's macro, it's everything.

845
01:00:07,110 --> 01:00:08,210
So we're going to call that alt.

846
01:00:08,310 --> 01:00:10,310
And then within that alt, you might have a macro sliver.

847
01:00:10,410 --> 01:00:15,170
And then within that macro sliver, we're going to have an allocation to, we've decided, three or five different allocators.

848
01:00:15,530 --> 01:00:16,590
And then you get the mandate.

849
01:00:16,930 --> 01:00:21,290
So now you know that whatever they're doing with the rest of the portfolio, I'm not touching that.

850
01:00:21,350 --> 01:00:24,250
I'm just going to do my best to do what they want me to do.

851
01:00:24,630 --> 01:00:27,630
Whereas wealth management is generally more holistic.

852
01:00:28,250 --> 01:00:31,750
You might have a full portfolio that you're now allocating.

853
01:00:31,750 --> 01:00:38,670
So now you have to think about it like as a total portfolio and, you know, with the passive or active parts.

854
01:00:38,770 --> 01:00:46,390
And you mentioned, you know, you could have whether it seems silly to have like, should you have the passive or a little bit of this, a little bit of that?

855
01:00:46,530 --> 01:00:47,350
Absolutely, right?

856
01:00:47,450 --> 01:00:50,310
I don't think anybody should have just passive or active.

857
01:00:50,510 --> 01:00:54,670
And there's a lot of people because they're in one or the other space say this is the best and that's the best.

858
01:00:54,710 --> 01:00:58,930
And most wealth managers selfishly want more passive because they can do less work.

859
01:00:58,930 --> 01:01:03,510
but I think that everybody should have some of each

860
01:01:03,510 --> 01:01:04,830
and it's very individual

861
01:01:04,830 --> 01:01:06,170
so that's the individual choice

862
01:01:06,170 --> 01:01:07,290
like are you the kind of person

863
01:01:07,290 --> 01:01:08,550
who wants the long horizon

864
01:01:08,550 --> 01:01:10,170
or the shorter horizon kind of investment

865
01:01:10,170 --> 01:01:13,270
How do you get new clients?

866
01:01:13,710 --> 01:01:14,990
So you've just started a new

867
01:01:14,990 --> 01:01:15,830
We're starting it, yeah

868
01:01:15,830 --> 01:01:17,430
we're not managing money yet

869
01:01:17,430 --> 01:01:18,310
we're hoping to start this

870
01:01:18,310 --> 01:01:19,750
How do you get new clients then?

871
01:01:19,870 --> 01:01:22,490
Do you have to go phone people up and say

872
01:01:22,490 --> 01:01:24,890
you know, businesses, companies, I don't know

873
01:01:24,890 --> 01:01:26,970
and say who's managing you well?

874
01:01:26,970 --> 01:01:30,130
Yeah, I have colleagues who are more in the wealth management space.

875
01:01:30,250 --> 01:01:31,590
So it's a new space for me.

876
01:01:31,790 --> 01:01:34,310
So I'm not the one with the best connections there myself.

877
01:01:36,490 --> 01:01:37,990
But how does that all work?

878
01:01:38,130 --> 01:01:38,910
I'm just fascinated.

879
01:01:39,110 --> 01:01:41,470
Tell me if I'm asking too deep.

880
01:01:41,470 --> 01:01:46,110
No, the wealth management space is an industry of relations.

881
01:01:46,790 --> 01:01:51,150
And it's part of why I mentioned my talk here at the conference.

882
01:01:51,710 --> 01:01:55,110
I can only describe the industry as quite bad.

883
01:01:55,110 --> 01:02:03,370
it's because there's a lot of just money being spent on relation building there's less and less

884
01:02:03,370 --> 01:02:08,690
money spent actually allocating the money correctly so if you ever go to a party this

885
01:02:08,690 --> 01:02:12,750
probably has happened to you if you ever networked somebody's a wealth manager and they're like

886
01:02:12,750 --> 01:02:16,450
starting to ask you and they're very nice then they're not too obvious about it but they're

887
01:02:16,450 --> 01:02:20,550
hoping that you could maybe be a client and they're having hundreds of these conversations a week

888
01:02:20,550 --> 01:02:23,250
and maybe they'll end up with, you know,

889
01:02:23,290 --> 01:02:25,950
they're trying to fill up as many lunches

890
01:02:25,950 --> 01:02:28,610
and taking people out, wining and dining

891
01:02:28,610 --> 01:02:30,670
to make others like them

892
01:02:30,670 --> 01:02:33,630
and eventually get you as a client.

893
01:02:33,930 --> 01:02:35,730
You know, say, I'm going to manage your money.

894
01:02:35,830 --> 01:02:38,810
You're going to help you also, you know, plan your taxes and insurance.

895
01:02:39,030 --> 01:02:40,670
You know, you should probably have some life insurance

896
01:02:40,670 --> 01:02:42,970
and then they get a commission for the people that, you know,

897
01:02:43,010 --> 01:02:44,770
provide the life insurance and things like that.

898
01:02:45,190 --> 01:02:49,670
And when you pay the one, one and a half percent of your wealth every year

899
01:02:49,670 --> 01:02:55,150
for them to do this, you are also paying for all the dinners that they had with the other people,

900
01:02:55,290 --> 01:03:00,870
you know, that never became their clients. So part of it is, it is an industry that

901
01:03:00,870 --> 01:03:06,290
does rely on relationships, it should function in more kind of efficient way. But it's also hard to

902
01:03:06,290 --> 01:03:10,230
say, like, how will it function different way? Well, you can have people who are, you know,

903
01:03:10,230 --> 01:03:14,430
have good reputations, and everybody comes to them. Well, that doesn't maybe work, because you

904
01:03:14,430 --> 01:03:19,410
can't have one person managing everybody and but um yeah but that's that's that's kind of where the

905
01:03:19,410 --> 01:03:25,190
industry is the best we can do at this point is um when you have a client to come up with a more

906
01:03:25,190 --> 01:03:31,530
efficient way of working and and we think a lot about like how to you know how to make things

907
01:03:31,530 --> 01:03:36,730
more efficient like our our macro way of investing um we're working on automating quite a lot of that

908
01:03:36,730 --> 01:03:42,350
so that we can have like value-based investing without having we were 13 people in a team before

909
01:03:42,350 --> 01:03:45,330
And now it's me and a business partner doing the investment part.

910
01:03:45,910 --> 01:03:52,710
And we think we can pull through, do a lot of good work with maybe one other person on the investment side.

911
01:03:52,710 --> 01:04:03,890
And presumably you're using your contacts or your ideas about the world you revolve to specifically allocate to those kind of things.

912
01:04:03,990 --> 01:04:04,910
If the people want.

913
01:04:04,990 --> 01:04:05,750
I mean, how does it work?

914
01:04:06,150 --> 01:04:10,450
Presumably you say, I can get you 8% on all your wealth or something.

915
01:04:10,710 --> 01:04:11,730
Is that how it works?

916
01:04:11,730 --> 01:04:14,670
and they go, okay, good, or whatever it is.

917
01:04:15,010 --> 01:04:15,390
I don't know.

918
01:04:16,030 --> 01:04:18,170
It can't just be about relationships.

919
01:04:18,410 --> 01:04:21,790
There must be an element of this guy makes us more money than that guy.

920
01:04:22,130 --> 01:04:25,270
There's some of that, but there's return and there's also risk.

921
01:04:25,670 --> 01:04:29,910
So managing your risk is, I would say, often more important for people

922
01:04:29,910 --> 01:04:34,470
because it's kind of less obvious to whether you promise a –

923
01:04:34,470 --> 01:04:35,790
one, you can never promise a return.

924
01:04:36,030 --> 01:04:39,830
That's just not in line with the law.

925
01:04:39,830 --> 01:04:43,790
But you can say that we're targeting returns for certain allocations.

926
01:04:44,050 --> 01:04:55,550
So if we're thinking about whether you're looking at your long-term allocation, short-term allocation, the long-term allocation, you might have a projection for the global market to grow at a certain rate.

927
01:04:56,190 --> 01:05:00,070
And that's just going to be what you're expecting for your returns.

928
01:05:00,070 --> 01:05:12,210
If you have a shorter term and more active allocation where you're trading a lot, you have, of course, trading costs of that, but you don't incur more of those, then you know that you can still maintain a good return.

929
01:05:12,830 --> 01:05:15,250
So there you would expect a higher return, obviously, as well.

930
01:05:15,250 --> 01:05:28,550
So there it depends on, well, are you willing to take on the potential risk that comes with periods where if you have a value-based investing, meaning if value is higher than the price, I am going to buy this.

931
01:05:28,550 --> 01:05:32,070
If value is below the price, I am going to sell this actually going short.

932
01:05:33,250 --> 01:05:44,410
And if you want a lot of that kind of allocation, right, you can then, you know, your return profile of your portfolio will be different, will be higher.

933
01:05:44,750 --> 01:05:46,890
But your risk may also be higher, right?

934
01:05:46,890 --> 01:05:51,210
because you are incurring the risk of not wanting to touch your portfolio

935
01:05:51,210 --> 01:05:57,030
as periods sometimes stretch out for a long time of value diverging,

936
01:05:57,130 --> 01:05:58,970
prices diverging from value for a long time.

937
01:05:59,270 --> 01:06:01,250
And you see this, for example, we had a long period,

938
01:06:01,350 --> 01:06:03,210
you probably recall, where interest rates were very low.

939
01:06:04,030 --> 01:06:05,450
All the bonds look so expensive.

940
01:06:05,790 --> 01:06:08,710
And you could keep shorting bonds until the cows come home

941
01:06:08,710 --> 01:06:10,510
and you were not making any money, you know,

942
01:06:10,790 --> 01:06:12,450
and you're losing money, you know.

943
01:06:12,590 --> 01:06:15,150
And after a while, your clients might say, you know,

944
01:06:15,150 --> 01:06:16,230
stop doing a bond thing.

945
01:06:16,230 --> 01:06:19,070
And often that happens right before everything changes.

946
01:06:19,310 --> 01:06:21,990
But so, yeah, that's a little bit,

947
01:06:21,990 --> 01:06:24,370
I hope I've given you a little bit of picture of how it works.

948
01:06:24,370 --> 01:06:25,110
There's a lot to say.

949
01:06:25,110 --> 01:06:29,430
Well, no, I mean, I get the general gist, which is, you know,

950
01:06:31,430 --> 01:06:35,570
marrying risk and return and making sure that you keep your client happy.

951
01:06:35,570 --> 01:06:39,990
But I'm just wondering what they expect, what kind of return you expect?

952
01:06:40,408 --> 01:06:41,128
As a whole.

953
01:06:41,348 --> 01:06:41,548
Yeah.

954
01:06:41,748 --> 01:06:42,808
I mean, what is a good return?

955
01:06:43,808 --> 01:06:47,108
You get 8% from the S&P if you just put it all into that, wouldn't you?

956
01:06:47,368 --> 01:06:50,568
But then you run the risk of, you don't want to put all your eggs in one basket.

957
01:06:51,768 --> 01:06:57,188
Yeah, I mean, I would say, right, like S&P means that you're focusing on only one country.

958
01:06:57,368 --> 01:07:01,928
So you're putting your money kind of in one big basket, but still one basket, right?

959
01:07:03,288 --> 01:07:09,688
And if you're having an active allocation, I would say maybe five real, so five plus inflation,

960
01:07:09,688 --> 01:07:11,288
because it's also an inflation thing, right?

961
01:07:11,308 --> 01:07:11,928
I was going to say.

962
01:07:12,108 --> 01:07:12,308
Yeah.

963
01:07:12,448 --> 01:07:12,648
Right.

964
01:07:12,768 --> 01:07:13,708
So it beats inflation.

965
01:07:14,348 --> 01:07:14,588
Right.

966
01:07:14,668 --> 01:07:15,428
You want to beat inflation.

967
01:07:16,708 --> 01:07:19,568
And over time, you could just put into gold if you want to do that.

968
01:07:19,708 --> 01:07:22,028
But that's not a very good risk allocation there.

969
01:07:22,508 --> 01:07:24,828
Because then you'll have long periods when you might not be happy

970
01:07:24,828 --> 01:07:26,228
and sometimes you want to sell.

971
01:07:26,648 --> 01:07:29,308
So the risk part is very important, right?

972
01:07:29,308 --> 01:07:33,308
And that's something where I would say that a lot of allocators,

973
01:07:33,428 --> 01:07:37,688
a lot of allocators will completely not want to talk about risk

974
01:07:37,688 --> 01:07:40,888
because they know they don't have a really good way of managing it.

975
01:07:41,488 --> 01:07:44,088
And so they focus on only the return part.

976
01:07:44,468 --> 01:07:46,288
And then you can go to a cocktail bar and you say,

977
01:07:46,608 --> 01:07:50,788
oh, my manager made me 20% this year and it's so cool.

978
01:07:51,248 --> 01:07:54,348
And it turned out that it was all like in, say,

979
01:07:54,448 --> 01:07:57,188
one real estate project or something like that.

980
01:07:57,328 --> 01:07:58,668
Yes, you made 20%.

981
01:07:58,668 --> 01:08:01,748
There are a lot of alternatives realities out there

982
01:08:01,748 --> 01:08:03,368
where that project did not go well.

983
01:08:03,468 --> 01:08:04,788
If it's a very concentrated position,

984
01:08:04,908 --> 01:08:06,928
you didn't really manage your risk that well.

985
01:08:06,928 --> 01:08:12,088
and understanding a total risk of portfolio is a very complicated thing.

986
01:08:12,748 --> 01:08:16,608
I am not the one to create the framework around this,

987
01:08:16,748 --> 01:08:21,988
but our colleague who is focused on risk is very, very proficient in this.

988
01:08:22,388 --> 01:08:26,108
And so without a framework like that,

989
01:08:26,108 --> 01:08:30,208
I think we wouldn't have as good an offering, so to speak.

990
01:08:30,388 --> 01:08:31,428
So what's your role then?

991
01:08:31,608 --> 01:08:32,708
What would your role be?

992
01:08:32,708 --> 01:08:39,568
finding good new unusual investments or just you know i don't know yeah i'm bringing in a lot of the

993
01:08:39,568 --> 01:08:44,848
just the macro investing that i've done since i started in finance really and putting that

994
01:08:44,848 --> 01:08:48,628
together like putting our valuation models in place and things like that and then i'm going

995
01:08:48,628 --> 01:08:51,868
to be managing that and hopefully handing over some of the day-to-day on that to

996
01:08:51,868 --> 01:09:02,648
to a new colleague that we're looking for um so but um yeah so so then but i will also be involved

997
01:09:02,648 --> 01:09:04,008
to a larger, larger extent

998
01:09:04,008 --> 01:09:05,828
and a holistic kind of portfolio composition,

999
01:09:06,228 --> 01:09:07,968
which are going to be individual for each client.

1000
01:09:08,028 --> 01:09:10,068
Will it have a personality like, you know,

1001
01:09:10,268 --> 01:09:13,108
I'm just wondering because, you know,

1002
01:09:13,108 --> 01:09:15,248
you're obviously into some interesting things,

1003
01:09:15,808 --> 01:09:18,348
as in, you know, I mean, in investing terms, even.

1004
01:09:18,748 --> 01:09:21,448
You used to be a cannabis investor, right, in the past.

1005
01:09:21,688 --> 01:09:21,828
Yeah.

1006
01:09:21,828 --> 01:09:22,748
That's an unusual thing.

1007
01:09:22,808 --> 01:09:23,228
I still am.

1008
01:09:23,368 --> 01:09:24,188
Oh, you still are, right.

1009
01:09:24,508 --> 01:09:26,628
But also the free cities thing, you know, whatever.

1010
01:09:27,108 --> 01:09:28,588
So you could argue that you've got

1011
01:09:28,588 --> 01:09:31,248
an interesting eye for investments.

1012
01:09:31,248 --> 01:09:36,328
is that what the personality of the company would be if you see what I mean like it's not just some

1013
01:09:36,328 --> 01:09:42,128
boring oh we'll do that that no we're kind of like we've got an eye on a few things that you

1014
01:09:42,128 --> 01:09:47,668
probably don't know anything about yet or something I don't know I I've never really

1015
01:09:47,668 --> 01:09:53,648
been into any of that stuff I've never had an I mean interested in it now it was a bit late in

1016
01:09:53,648 --> 01:09:59,988
life but um I thought it was boring for the whole of time yeah it can be boring well yeah it can be

1017
01:09:59,988 --> 01:10:03,208
It's boring, but markets are interesting, really interesting.

1018
01:10:03,328 --> 01:10:05,128
And I didn't realize that for a long time.

1019
01:10:05,288 --> 01:10:11,408
I didn't think it could be interesting until I started working a little over 10 years ago in this field.

1020
01:10:11,628 --> 01:10:13,568
And I'm an economist by background.

1021
01:10:13,828 --> 01:10:18,788
So coming out of economics, and I did my PhD in economics, I would never think that I would even be in the private sector,

1022
01:10:18,968 --> 01:10:21,328
especially as writing, we were talking about the special economic zones.

1023
01:10:21,328 --> 01:10:23,148
That was my dissertation, the topic of my dissertation.

1024
01:10:23,848 --> 01:10:28,868
And doing political economy and macro does not fit well with my thinking of what finance is,

1025
01:10:28,868 --> 01:10:31,508
and looking at picking companies, I thought it was all about.

1026
01:10:32,208 --> 01:10:36,008
And what's interesting for me, which has been tremendously rewarding,

1027
01:10:36,228 --> 01:10:39,428
has just been to bring in all the economics, everything I learned,

1028
01:10:39,808 --> 01:10:43,208
and just putting that into our models and our way of thinking.

1029
01:10:43,928 --> 01:10:48,208
And seriously, after, say, two years of doing macro investing,

1030
01:10:48,648 --> 01:10:53,988
I looked through the curriculum and the syllabi of all the classes that I took at George Mason,

1031
01:10:54,508 --> 01:10:57,488
and it was like one that I had not used material from the classes.

1032
01:10:57,488 --> 01:10:59,228
It was like everything was useful.

1033
01:10:59,728 --> 01:11:02,328
And I bet my professors would never have thought that.

1034
01:11:03,168 --> 01:11:10,068
One simple example is just to think about, you might be familiar with the Economic Freedom Index by Fraser Institute.

1035
01:11:10,288 --> 01:11:11,448
It's a Canadian think tank.

1036
01:11:12,348 --> 01:11:16,848
But it's been run by professors mainly at the University of Florida.

1037
01:11:18,688 --> 01:11:26,368
So they rank countries by economic freedom and they see how it's changed over the years.

1038
01:11:26,368 --> 01:11:30,408
and their scholarships looking at, well, what's the growth implication of economic freedom?

1039
01:11:30,468 --> 01:11:31,308
And there's a lag, right?

1040
01:11:31,348 --> 01:11:34,528
You see economic freedom, you see subsequently some growth implication of that.

1041
01:11:34,828 --> 01:11:42,508
And just putting that into models in the sense that if you believe that a country will grow faster on the basis of this,

1042
01:11:42,768 --> 01:11:47,748
you also believe that that has an impact on the equity market with some scale.

1043
01:11:47,748 --> 01:11:55,388
And therefore, you'll have a model where you're seeing dividends from your equity position growing over time, say, faster.

1044
01:11:55,388 --> 01:12:08,808
So that can work. I mean, you talked about how the difference between investing because you have a high valuation versus investing because you think that the valuation is underestimated.

1045
01:12:09,468 --> 01:12:13,388
And you can still, I can definitely say that I made mistakes in that field.

1046
01:12:13,388 --> 01:12:20,748
So let's say when Macri became president of Argentina, I was really, I've been really optimistic about the potential of reforming Argentina.

1047
01:12:21,328 --> 01:12:26,048
And even though I visited, I talked to people.

1048
01:12:26,628 --> 01:12:30,028
There's a great think tank in Argentina called Libertari Progreso.

1049
01:12:30,828 --> 01:12:34,648
And Estebas is his name, Agustin, that I met with.

1050
01:12:34,948 --> 01:12:35,848
And he was so skeptical.

1051
01:12:35,848 --> 01:12:37,108
And I just want to believe.

1052
01:12:37,308 --> 01:12:39,548
And I dismissed his views on this.

1053
01:12:39,748 --> 01:12:40,788
And I put money into it.

1054
01:12:40,788 --> 01:12:45,428
So that was more, we allowed for a little bit more like kind of the tactical, like not necessary value base.

1055
01:12:45,488 --> 01:12:51,108
But I also like overestimated what the probability was that the reforms were actually going to stick.

1056
01:12:51,408 --> 01:12:52,408
And they didn't stick.

1057
01:12:52,568 --> 01:12:53,028
They failed.

1058
01:12:53,528 --> 01:12:53,648
Right.

1059
01:12:54,348 --> 01:12:58,848
So things like that, like you can still, you can definitely, we all have our biases.

1060
01:12:58,968 --> 01:13:03,068
And it's something just always remember, I'm going to keep making mistakes probably.

1061
01:13:03,068 --> 01:13:04,868
Can you notice them in yourself though?

1062
01:13:04,868 --> 01:13:16,028
I fully recognize that experience of listening to negative news, but knowing that I really want it to happen and that overriding my opinion on what's going to happen.

1063
01:13:16,448 --> 01:13:16,688
Yeah.

1064
01:13:16,888 --> 01:13:18,628
Do you notice it when you're doing it now?

1065
01:13:18,768 --> 01:13:26,408
Like, can you see when it's you're not being purely analytical or purely, you know, neutral on us on something?

1066
01:13:26,908 --> 01:13:28,548
In most cases, I think we all do.

1067
01:13:28,548 --> 01:13:35,148
But the fact that you can still make these mistakes suggests that if one out of 100 cases you don't notice it, that can lead you astray.

1068
01:13:35,248 --> 01:13:40,408
And I think that you often just have to talk to your colleagues and friends and say, I think like this.

1069
01:13:40,668 --> 01:13:42,208
And just like get the pushback.

1070
01:13:42,408 --> 01:13:44,948
And sometimes just talking about it reveals to yourself.

1071
01:13:45,248 --> 01:13:54,028
In the Argentina experience that you just had there, someone who knew told you something and you kind of disbelieved them.

1072
01:13:54,108 --> 01:13:54,408
Is it?

1073
01:13:54,628 --> 01:13:55,028
Why?

1074
01:13:55,728 --> 01:13:56,648
Because I wanted to believe.

1075
01:13:56,768 --> 01:13:57,168
Yeah, right.

1076
01:13:57,168 --> 01:13:57,788
That's what I mean.

1077
01:13:57,788 --> 01:14:02,228
So the lesson is if someone's a specialist, then just believe them or not.

1078
01:14:02,428 --> 01:14:02,828
Probably not.

1079
01:14:03,028 --> 01:14:04,288
No, no, no, exactly.

1080
01:14:04,468 --> 01:14:10,408
I know we wouldn't want to go that far, but it's more in the line where you were going,

1081
01:14:10,528 --> 01:14:14,868
which is just recognize yourself, that your biases can kind of push you somewhere sometimes.

1082
01:14:15,268 --> 01:14:15,948
So, yeah.

1083
01:14:16,348 --> 01:14:17,408
That would be me.

1084
01:14:17,668 --> 01:14:19,008
I'd be a terrible investor.

1085
01:14:19,488 --> 01:14:22,768
I'm in the same reason I'd be a terrible trader of anything.

1086
01:14:23,648 --> 01:14:25,968
Markets just, I'm that guy.

1087
01:14:25,968 --> 01:14:30,768
I'm the person in the market who gets,

1088
01:14:30,908 --> 01:14:32,468
well, I just stay out of the market now

1089
01:14:32,468 --> 01:14:34,288
because I know that if I,

1090
01:14:34,468 --> 01:14:36,848
in fact, I know if I'm starting to,

1091
01:14:37,068 --> 01:14:37,708
oh, I want to buy.

1092
01:14:38,068 --> 01:14:40,148
I know this is the worst time to buy.

1093
01:14:40,628 --> 01:14:42,108
That's my signal, whatever.

1094
01:14:42,248 --> 01:14:43,588
Don't buy that thing now

1095
01:14:43,588 --> 01:14:47,188
because the fact that you're suddenly animated to buy it

1096
01:14:47,188 --> 01:14:48,988
means so is everyone else

1097
01:14:48,988 --> 01:14:51,728
and that's the actual time to be selling it.

1098
01:14:51,728 --> 01:14:52,988
It's the complete opposite.

1099
01:14:53,288 --> 01:14:54,628
But I just do neither

1100
01:14:54,628 --> 01:15:05,526
because I haven you know It is hard it is hard and it the equivalent of my experience say the anecdote from Argentina in the market is you buy something it goes up and that confirms that you right

1101
01:15:05,646 --> 01:15:07,306
You either hold onto it, you buy more

1102
01:15:07,306 --> 01:15:09,246
and you buy more and buy more as it goes up

1103
01:15:09,246 --> 01:15:10,006
until it goes down.

1104
01:15:10,146 --> 01:15:11,886
And then you are not happy.

1105
01:15:12,106 --> 01:15:13,986
What's, I want to talk about cannabis.

1106
01:15:14,326 --> 01:15:16,706
Well, not just cannabis, but before we do,

1107
01:15:17,266 --> 01:15:20,146
what's the difference between the way you would

1108
01:15:20,146 --> 01:15:29,066
invest or wealth manage your own money versus one of your big clients or one of your clients

1109
01:15:29,066 --> 01:15:34,906
there's no difference and i as soon as we get online with a with our product i i want to put

1110
01:15:34,906 --> 01:15:40,086
the money my money into it um and it would be great because then i don't have to i don't try

1111
01:15:40,086 --> 01:15:44,206
to do what i'm we are going to do as a whole because there's too much work for my own money

1112
01:15:44,206 --> 01:15:50,806
so I'm just a passive investor mostly myself now like value-based if I know that something

1113
01:15:50,806 --> 01:15:56,826
just looks way too overvalued then I would sell it and vice versa but I don't make a lot of trades

1114
01:15:56,826 --> 01:16:01,246
or anything like that you know I mean gold has been an interesting one recently for example we

1115
01:16:01,246 --> 01:16:05,706
are speaking at a time now where people have been talking about a gold bubble and it was hyperbolic

1116
01:16:05,706 --> 01:16:10,006
and then it came down a bit it came down like six and a half percent one day and then it stayed a

1117
01:16:10,006 --> 01:16:14,746
little bit and then it went down again and now people are like oh should I buy or sell sell and

1118
01:16:14,746 --> 01:16:19,386
so things like that that really became becomes big stories you kind of start having to look at

1119
01:16:19,386 --> 01:16:24,406
and often I do kind of think that I want to sell when everybody's super super excited about it like

1120
01:16:24,406 --> 01:16:31,146
I go to a networking event and you ask everybody like I was asking actually the day before gold

1121
01:16:31,146 --> 01:16:35,726
started going down we were we were having a group together of free market people actually and

1122
01:16:35,726 --> 01:16:39,726
I was just asking everybody what do you do now with the gold are you gonna when are you gonna

1123
01:16:39,726 --> 01:16:45,106
to sell gold and most people said never i never said and they and i bet several of them will change

1124
01:16:45,106 --> 01:16:51,846
their mind too when when it goes down you know well i mean i mean also there were lines of people

1125
01:16:51,846 --> 01:16:59,646
on the news buying physical gold literally the day before it started tanking so that those i i

1126
01:16:59,646 --> 01:17:06,726
because i'm a bitcoiner i think i've got used to noticing exuberance in in various shapes and forms

1127
01:17:06,726 --> 01:17:09,426
and like Twitter, for example, even places like that,

1128
01:17:09,466 --> 01:17:12,226
it's a really easy way to notice exuberance.

1129
01:17:12,426 --> 01:17:15,226
If you have a network like I do of Bitcoiners,

1130
01:17:15,626 --> 01:17:18,186
you can notice when they start talking

1131
01:17:18,186 --> 01:17:21,666
in an exuberant way about Bitcoin.

1132
01:17:22,066 --> 01:17:23,666
And it's really a good signal.

1133
01:17:24,026 --> 01:17:25,626
Not that I care, really.

1134
01:17:25,666 --> 01:17:27,366
I'm not buying and selling Bitcoin, you know.

1135
01:17:27,806 --> 01:17:29,506
I'm a buyer whenever.

1136
01:17:29,766 --> 01:17:30,646
I'm always a buyer of Bitcoin.

1137
01:17:30,646 --> 01:17:32,046
You're not a micro strategy investor?

1138
01:17:32,546 --> 01:17:33,926
No, no, I'm not.

1139
01:17:33,926 --> 01:17:34,666
I'm not.

1140
01:17:34,666 --> 01:17:36,126
I

1141
01:17:36,126 --> 01:17:39,246
I was a part

1142
01:17:39,246 --> 01:17:41,646
of the groups when people were talking

1143
01:17:41,646 --> 01:17:43,646
about all that kind of stuff I'm really

1144
01:17:43,646 --> 01:17:45,646
don't I just want something

1145
01:17:45,646 --> 01:17:47,706
really simple like you said

1146
01:17:47,706 --> 01:17:49,426
you put your money in your own fund

1147
01:17:49,426 --> 01:17:51,606
and let it

1148
01:17:51,606 --> 01:17:53,206
follow what we're doing

1149
01:17:53,206 --> 01:17:54,366
I'd be the same

1150
01:17:54,366 --> 01:17:57,006
I have no investments

1151
01:17:57,006 --> 01:17:59,626
other than Bitcoin and I own

1152
01:17:59,626 --> 01:18:01,626
a house you know I don't

1153
01:18:01,626 --> 01:18:02,526
care I just

1154
01:18:02,526 --> 01:18:08,086
it's too cold I don't want to think about that I don't want to wonder about that I don't want to

1155
01:18:08,086 --> 01:18:16,386
worry about that I'm not someone who wants to sit I love watching the markets but you you're

1156
01:18:16,386 --> 01:18:22,946
probably consumed by it right because it's your job as it should be like investing should consume

1157
01:18:22,946 --> 01:18:27,906
you whole you know like and it but it doesn't I don't want to be consumed by investing I've got

1158
01:18:27,906 --> 01:18:29,186
I want to spend time with my kids.

1159
01:18:29,326 --> 01:18:34,746
I want to chop wood and spend time in the countryside and stuff.

1160
01:18:34,966 --> 01:18:36,606
And I'm not here to give you investment advice,

1161
01:18:36,686 --> 01:18:39,026
but you are very concentrated in one asset.

1162
01:18:39,026 --> 01:18:40,226
Of course. Absolutely.

1163
01:18:40,386 --> 01:18:45,386
Just like if somebody who holds only US dollars and say,

1164
01:18:45,486 --> 01:18:46,126
well, I'm safe.

1165
01:18:46,246 --> 01:18:48,786
Well, you're not safe because the government can inflate that away for you.

1166
01:18:48,786 --> 01:18:53,106
So having something with real kind of asset exposure is often a good thing.

1167
01:18:53,206 --> 01:18:57,046
And it's pretty cheap to have some passive equity exposure

1168
01:18:57,046 --> 01:18:58,466
or passive on exposure.

1169
01:18:58,606 --> 01:18:59,626
I agree.

1170
01:18:59,886 --> 01:19:02,966
I agree that the theory of diversifying

1171
01:19:02,966 --> 01:19:04,826
should apply to me.

1172
01:19:06,806 --> 01:19:07,286
I don't know.

1173
01:19:07,406 --> 01:19:10,046
Maybe I'm either stupid

1174
01:19:10,046 --> 01:19:14,286
or I think that Bitcoin,

1175
01:19:14,586 --> 01:19:16,066
I think I understand Bitcoin

1176
01:19:16,066 --> 01:19:16,766
and what's happening.

1177
01:19:16,806 --> 01:19:17,626
A bit like what you were saying

1178
01:19:17,626 --> 01:19:18,446
about free cities

1179
01:19:18,446 --> 01:19:21,146
and ZAs and all this kind of stuff.

1180
01:19:22,506 --> 01:19:24,406
What surprises me always

1181
01:19:24,406 --> 01:19:25,866
is like amongst us,

1182
01:19:25,866 --> 01:19:29,026
Take the 400 people in the room over the weekend.

1183
01:19:29,406 --> 01:19:32,386
Amongst us, there's so many of these things, which are so normal.

1184
01:19:33,006 --> 01:19:35,366
Like we talk about all kinds of weird shit.

1185
01:19:35,466 --> 01:19:38,466
And it's absolutely normal to mention this, that and the other.

1186
01:19:38,766 --> 01:19:44,146
You go outside that bubble and people haven't got a clue that this world even exists.

1187
01:19:44,546 --> 01:19:46,366
Because I had the same experience with Bitcoin.

1188
01:19:46,366 --> 01:19:52,766
Outside of the Bitcoin world, in the older days especially, no one had a clue what was going on.

1189
01:19:52,766 --> 01:20:05,766
And even now, you know, biggest ETF in history, you've got BlackRock doing this, you've got sovereign wealth funds buying it, you've got, you know, and still people are like, yeah, it's a bit risky.

1190
01:20:06,106 --> 01:20:09,786
It's like, it doesn't appear to be a bit risky for me.

1191
01:20:09,826 --> 01:20:18,346
And if you understand the technology, obviously, which takes a lot to get underneath the surface of the technology, you could argue, right, you can just write that part off.

1192
01:20:18,346 --> 01:20:22,746
All right, there's never, there's always a bit of risk, but it's a very small amount of risk.

1193
01:20:22,766 --> 01:20:46,346
And other than that, it just becomes down to you whether or not you understand it. Like you might say, you understand that the special, you know, the kind of free city model is happening. And we're, but because we have a lot of data to back that up, your average person isn't going to clue what's going on. But we have, we know what's happening. So we can see the market happening.

1194
01:20:46,346 --> 01:20:51,626
right right and and i feel the same about bitcoin and now i don't care anymore because now it's just

1195
01:20:51,626 --> 01:20:58,786
so mainstream it's it's kind of like and i i i think and also i i i want it i want it i believe

1196
01:20:58,786 --> 01:21:04,866
in the parallel system that it's it's forming so i i i don't really want my wealth in a place

1197
01:21:04,866 --> 01:21:12,226
where um where's where yeah yeah on the other rails oops on the you know what i mean there's

1198
01:21:12,226 --> 01:21:16,706
there's two parallel rails running next to each other yeah i'm not trying to convince you at all

1199
01:21:16,706 --> 01:21:23,786
no no no because you you know but so am i and that would be my thesis so there's a winner yeah and

1200
01:21:23,786 --> 01:21:29,426
you know it's why why diversify away from the winner if you see what i mean well so there are

1201
01:21:29,426 --> 01:21:33,126
two kind of i feel like two senses of what you're saying one is the return versus risk

1202
01:21:33,126 --> 01:21:36,746
aspect and the other one is a little bit of social impact investing because you're like

1203
01:21:36,746 --> 01:21:41,726
i want to also see it and that and i would be like it's absolutely there absolutely is a place

1204
01:21:41,726 --> 01:21:45,746
for that but i wouldn't put all my mind into that so now we have the return versus risk

1205
01:21:45,746 --> 01:21:57,466
i understand a lot of things in life that sounds hyperbolic wow that's amazing i i know i lot of

1206
01:21:57,466 --> 01:22:05,066
moberg that is not what i mean i mean that i can understand like my neighbor's kiosk around the

1207
01:22:05,066 --> 01:22:09,186
corner and how that operates but even if i understand it to its core and i know exactly

1208
01:22:09,186 --> 01:22:10,666
what ice creams go through the shelves,

1209
01:22:11,866 --> 01:22:12,846
something can happen.

1210
01:22:13,086 --> 01:22:14,006
You know, there might be an earthquake.

1211
01:22:14,226 --> 01:22:15,646
There might be the government somehow

1212
01:22:15,646 --> 01:22:17,646
made a mistake in the accounting

1213
01:22:17,646 --> 01:22:19,206
and now they had to shut down

1214
01:22:19,206 --> 01:22:20,086
and they have to open there

1215
01:22:20,086 --> 01:22:20,826
and it becomes too costly.

1216
01:22:21,126 --> 01:22:21,806
There's so many things.

1217
01:22:22,146 --> 01:22:23,626
Governments exist out there.

1218
01:22:23,746 --> 01:22:24,366
They get involved.

1219
01:22:25,666 --> 01:22:29,306
And so, and there are disasters out there.

1220
01:22:29,386 --> 01:22:30,266
There is key man risks.

1221
01:22:30,926 --> 01:22:33,306
I don't think that even if you understand something,

1222
01:22:33,306 --> 01:22:34,606
you can ever,

1223
01:22:35,626 --> 01:22:38,186
if you would honestly be able to say,

1224
01:22:38,186 --> 01:22:40,606
I know there's nothing threatening this.

1225
01:22:40,786 --> 01:22:42,566
And I bet there are Bitcoiners out there who can say that.

1226
01:22:42,786 --> 01:22:44,746
Then I would say, wow, wow.

1227
01:22:45,366 --> 01:22:48,126
Then I could justify putting all the money into something.

1228
01:22:48,226 --> 01:22:52,066
But I think that what you're making a good case for

1229
01:22:52,066 --> 01:22:56,186
is both free cities movement, Bitcoin is,

1230
01:22:56,466 --> 01:22:59,426
well, one, I understand that the return is higher

1231
01:22:59,426 --> 01:23:02,026
than people anticipate and the risk is actually lower.

1232
01:23:02,266 --> 01:23:04,586
And I think that the risk part is a really big one

1233
01:23:04,586 --> 01:23:05,886
when it comes to the free cities movement

1234
01:23:05,886 --> 01:23:06,746
that we're actually seeing,

1235
01:23:06,746 --> 01:23:09,146
like we understand what the relationship is to the government.

1236
01:23:09,146 --> 01:23:11,066
Most people will say, ah, they're just going to shut it down.

1237
01:23:11,066 --> 01:23:12,986
They're going to be going to an election.

1238
01:23:12,986 --> 01:23:25,664
So we know that the risk is lower It not zero And as long as it not serious if you would have a good risk model and you plug it in what your expected returns and risk are for the Bitcoin part and the free cities part

1239
01:23:26,064 --> 01:23:29,724
it still wouldn't be, I'm going to allocate everything here. You're going to realize that

1240
01:23:29,724 --> 01:23:34,924
you understand that the value is higher than others understand it to be. And therefore,

1241
01:23:35,304 --> 01:23:41,944
it warrants an allocation. But the interesting thing about Bitcoin and probably to a degree

1242
01:23:41,944 --> 01:23:50,964
free cities is there is a there is like i have a belief in for example um my my my culture is a

1243
01:23:50,964 --> 01:23:56,984
bitcoin culture and most of my friends are bitcoiners and there is a camaraderie amongst us

1244
01:23:56,984 --> 01:24:02,504
which basically stipulates that if this thing goes down we're all going down together like we really

1245
01:24:02,504 --> 01:24:10,224
don't care i really i don't care if like if like i say i've got cash flow enough i own a house

1246
01:24:10,224 --> 01:24:16,744
there's no mortgage on it so i've got a house and i've got cash flow and if this thing does what i

1247
01:24:16,744 --> 01:24:21,164
expect it to do we're all good it's already doing what i expected to do we're all good

1248
01:24:21,164 --> 01:24:26,104
but it's kind of a pact of helping each other out like no it's a it's a life-changing technology

1249
01:24:26,104 --> 01:24:30,884
just like free cities are i mean the reason i'm so interested in free cities now is is because

1250
01:24:30,884 --> 01:24:38,024
i actually think that my my my introduction to free cities was through bitcoin um because a lot

1251
01:24:38,024 --> 01:24:44,144
of Bitcoiners are free city people. But what you realize when you sort of study Bitcoin is Bitcoin

1252
01:24:44,144 --> 01:24:51,364
is a perfect, not only is Bitcoin perfect property, perfect property, it's basically just nailed the

1253
01:24:51,364 --> 01:24:56,284
digital realm for all the things that we want in the physical realm. You get them with Bitcoin in

1254
01:24:56,284 --> 01:25:02,564
the digital realm, unconfuscatable, actual property rights, actual property rights. And then you

1255
01:25:02,564 --> 01:25:07,884
realize, okay, right, that's done. That's done. We've got it. We don't need to invent anything

1256
01:25:07,884 --> 01:25:15,364
new but in the physical world we we still we want this version of it you know there's no such thing

1257
01:25:15,364 --> 01:25:20,364
as cryptography of the physical realm if you create a bit of property in the physical world

1258
01:25:20,364 --> 01:25:26,384
you've got to protect it you in in the digital world you can crypt cryptographically protect it

1259
01:25:26,384 --> 01:25:32,464
it's amazing no you know it's amazing but in in the physical world this is a different totally

1260
01:25:32,464 --> 01:25:40,704
different and much gray much more gray area in how do you live free and protect your property and

1261
01:25:40,704 --> 01:25:47,164
and make sure that you you know you you have a good life and now i'm interested i'm like the

1262
01:25:47,164 --> 01:25:52,724
because bitcoin's a part of that because bitcoin can sort of fund it basically but really free

1263
01:25:52,724 --> 01:25:58,684
cities are all about this why i'm so interested in it all is they're all about trying to secure

1264
01:25:58,684 --> 01:26:03,844
that freedom, that property in the real world, which is very murky.

1265
01:26:04,204 --> 01:26:06,824
I mean, there's no such thing as property in the real world.

1266
01:26:07,104 --> 01:26:10,424
At the end of the day, someone can come out with a gun and take your property.

1267
01:26:10,884 --> 01:26:11,764
So you haven't got property.

1268
01:26:12,224 --> 01:26:14,684
It's about whether you can maintain property.

1269
01:26:14,964 --> 01:26:17,244
Whereas with Bitcoin, it's like you have property,

1270
01:26:17,484 --> 01:26:21,244
providing you don't leave your private seed on a table written down,

1271
01:26:21,424 --> 01:26:22,624
and then someone can take your property.

1272
01:26:22,624 --> 01:26:25,244
In theory, somebody can come put a gun on your head and say,

1273
01:26:25,344 --> 01:26:26,004
give me your codes.

1274
01:26:26,184 --> 01:26:26,804
And what are they going to say?

1275
01:26:26,804 --> 01:26:29,324
And what am I going to, when my mouth doesn't open, what happens?

1276
01:26:30,004 --> 01:26:33,004
Well, we don't want to think about that, right?

1277
01:26:33,184 --> 01:26:34,524
No, but all right.

1278
01:26:34,804 --> 01:26:36,904
There's a theoretical aspect to it, correct.

1279
01:26:37,584 --> 01:26:43,904
But that's what I'm interested in now is, and so the Bitcoin thing is like, cool, great tool.

1280
01:26:44,644 --> 01:26:46,024
Money, it's money.

1281
01:26:46,344 --> 01:26:47,044
It's real money.

1282
01:26:47,204 --> 01:26:50,044
It's not, it's not, all the characteristics of money.

1283
01:26:50,044 --> 01:26:54,284
We've got money sorted in the new world, in the digital world.

1284
01:26:54,284 --> 01:27:00,404
like this is this new frontier has arrived we had no access to the digital world until what 30 years

1285
01:27:00,404 --> 01:27:08,044
ago or whatever it didn't even exist and now we've got money in it as in you know money as in

1286
01:27:08,044 --> 01:27:14,504
this is you know fungibility portability all that kind of crap you know and and this is the world

1287
01:27:14,504 --> 01:27:21,704
we're in we're in the world of things moving digitally there you know but physically yeah

1288
01:27:21,704 --> 01:27:33,904
Free CDs are a way of us all trying to understand how to protect property rights and to live free in the real world, in this world, not the digital world.

1289
01:27:34,384 --> 01:27:40,444
And so I don't have a problem with just like saying, cool, you know, that's what I want.

1290
01:27:40,584 --> 01:27:43,404
I want money in Bitcoin.

1291
01:27:43,664 --> 01:27:45,584
I want real money in the digital world.

1292
01:27:45,604 --> 01:27:49,284
But what I also want in the physical world is what we're working towards.

1293
01:27:49,284 --> 01:27:51,384
And that is tricky as hell.

1294
01:27:51,704 --> 01:27:53,904
And I don't have an answer for it.

1295
01:27:53,944 --> 01:27:55,584
I don't actually think there is an answer for it.

1296
01:27:55,584 --> 01:27:56,124
I think.

1297
01:27:57,084 --> 01:28:03,964
Well, no, but I mean, like Prosper is a pretty good, you know, like there is ways to protect property that, you know, legally.

1298
01:28:04,524 --> 01:28:04,844
Yes.

1299
01:28:04,844 --> 01:28:05,524
Like physically.

1300
01:28:05,524 --> 01:28:08,124
Which we have outside of the zones as well, you know.

1301
01:28:08,364 --> 01:28:08,644
Sure.

1302
01:28:08,764 --> 01:28:08,924
Sure.

1303
01:28:08,964 --> 01:28:09,504
That's what I mean.

1304
01:28:09,604 --> 01:28:12,144
But I mean, you know, it worked.

1305
01:28:12,264 --> 01:28:17,984
It seems the legal one, which I always thought, you know, you know, governments are going to be governments.

1306
01:28:18,284 --> 01:28:20,784
They don't often respect legality.

1307
01:28:20,784 --> 01:28:25,044
it's not it's not they're not well known for it especially sort of like far left ones but

1308
01:28:25,044 --> 01:28:33,744
they kind of did the legal the legal protection worked really well it seems to have if you look

1309
01:28:33,744 --> 01:28:38,164
at what's happening in in honduras now and the narratives change yeah they got to rescind the

1310
01:28:38,164 --> 01:28:44,244
the law okay which is crazy anyway i mean they had a constitution change and now they've said it's

1311
01:28:44,244 --> 01:28:49,224
they've changed it back so the whole thing's a farce anyway but the government which was saying

1312
01:28:49,224 --> 01:28:53,004
right, we're going to shut you down, and now not doing that.

1313
01:28:53,124 --> 01:28:56,804
And now they're saying, oh, well, we won because there's going to be no new ZAs.

1314
01:28:57,164 --> 01:28:59,424
But the ZAs that are there, they're chugging them on.

1315
01:28:59,424 --> 01:29:02,864
I mean, I think it's important to point out that, at least my opinion,

1316
01:29:03,004 --> 01:29:08,304
is that the big protection of property rights in something like a Prospera,

1317
01:29:08,404 --> 01:29:12,684
something like an autonomous city that is run as a business

1318
01:29:12,684 --> 01:29:16,284
as opposed to the national states that we're used to,

1319
01:29:16,384 --> 01:29:18,324
is just a different incentive structure.

1320
01:29:18,324 --> 01:29:25,364
It's not perfect by no means, but you have, if you're running a company, you have the incentive to protect that.

1321
01:29:25,904 --> 01:29:30,524
And if you're going to sign a contract and live here, and you might ask, is there eminent domain?

1322
01:29:31,064 --> 01:29:33,184
And if the answer is no, then that's a good thing.

1323
01:29:33,224 --> 01:29:39,304
And you move in and you don't have those things that, you know, we talk about how governments protect property rights,

1324
01:29:39,424 --> 01:29:45,564
but at least you don't have the government being able to infringe on the property rights because you don't have that incentive.

1325
01:29:45,564 --> 01:29:52,164
and so that's that's a big win right there so i wouldn't i wouldn't need to we don't need to

1326
01:29:52,164 --> 01:29:58,244
necessarily go into are we 100 you know sure that nothing can happen because we know that people

1327
01:29:58,244 --> 01:30:03,604
with guns exist that can you know have bad intent and and sometimes it's it takes a while to get

1328
01:30:03,604 --> 01:30:07,744
your property back and they destroyed it meantime and things like that that can happen but yeah it's

1329
01:30:07,744 --> 01:30:12,784
just how the governance works and just the the a priori incentives of the people running the place

1330
01:30:12,784 --> 01:30:17,604
It's just different when it's by contract rather than by birth, so to speak.

1331
01:30:19,004 --> 01:30:23,384
We're born into a country often, and it takes a lot if you want to live anywhere else.

1332
01:30:23,884 --> 01:30:29,984
Yeah, and I'm one of those people that probably I would have thought the contract idea would have been,

1333
01:30:30,264 --> 01:30:31,764
that's not going to work too well.

1334
01:30:31,764 --> 01:30:37,064
But Prosper is proving that that kind of seems to work really well.

1335
01:30:37,484 --> 01:30:39,704
And now I'm a total convert.

1336
01:30:39,704 --> 01:30:43,704
I can't see another way, actually.

1337
01:30:44,084 --> 01:30:45,804
I can't see a fairer way.

1338
01:30:46,584 --> 01:30:48,064
Like, here's my obligation.

1339
01:30:48,604 --> 01:30:49,864
This is your obligation.

1340
01:30:50,204 --> 01:30:51,724
Do you want to kind of go into business?

1341
01:30:52,144 --> 01:30:53,564
I mean, why wouldn't it be that?

1342
01:30:53,964 --> 01:30:55,924
Why have I never thought about that before?

1343
01:30:56,364 --> 01:31:00,044
Why have I always assumed that we need this kind of, like,

1344
01:31:00,204 --> 01:31:03,984
despotic person with a gun telling me what to do and taking my money?

1345
01:31:04,004 --> 01:31:05,144
Because you've never experienced anything else,

1346
01:31:05,204 --> 01:31:08,184
and the people governing you are telling you that it's very well good.

1347
01:31:08,184 --> 01:31:10,964
But Lotta, that's a crazy thought for a 54-year-old.

1348
01:31:11,044 --> 01:31:11,404
Do you know that?

1349
01:31:12,124 --> 01:31:14,004
Seriously, it doesn't.

1350
01:31:14,424 --> 01:31:17,204
I still wonder about it because no one I know.

1351
01:31:17,664 --> 01:31:21,924
All right, I revolve in certain circles now, but I didn't used to.

1352
01:31:22,584 --> 01:31:25,824
And my old life hasn't got a clue what's going on.

1353
01:31:25,944 --> 01:31:27,064
They don't know any of this stuff.

1354
01:31:27,144 --> 01:31:31,524
They don't know anything to do with anything, even finance, really.

1355
01:31:31,824 --> 01:31:33,944
Most people are completely financially illiterate.

1356
01:31:33,944 --> 01:31:44,902
they they think buying you know bonds means whatever premium bonds or something crap like that you know what premium bonds do You know we have them in the UK It like a lottery ticket

1357
01:31:45,082 --> 01:31:46,022
It's called a premium bond.

1358
01:31:46,422 --> 01:31:47,122
Oh, my God.

1359
01:31:47,242 --> 01:31:48,282
It's so retarded.

1360
01:31:48,802 --> 01:31:51,042
But like, you know, all those things.

1361
01:31:51,042 --> 01:31:52,182
I think it's changing.

1362
01:31:52,382 --> 01:31:57,142
I think people are becoming far more into certain ideas.

1363
01:31:57,442 --> 01:32:00,522
Inflation just used to be, oh, price is going up.

1364
01:32:00,642 --> 01:32:03,862
Now it's, oh, is it overt government spending?

1365
01:32:03,862 --> 01:32:08,642
You know, those kind of ideas are getting out there slowly.

1366
01:32:08,762 --> 01:32:09,222
No, they are.

1367
01:32:09,362 --> 01:32:10,402
I really do think they are.

1368
01:32:11,622 --> 01:32:14,742
Because I live in a village, you know, small one, not a village,

1369
01:32:14,862 --> 01:32:17,942
but there's a village pub and people talk about this stuff.

1370
01:32:18,502 --> 01:32:21,022
And inflation is talked about now.

1371
01:32:21,442 --> 01:32:25,302
But the reasons for it are starting to get wondered about and things like that.

1372
01:32:26,702 --> 01:32:29,422
But I don't know where I'm going with this necessarily.

1373
01:32:29,422 --> 01:32:35,562
but um but um yeah it's always hard to know when you as you're stepping in as you're saying you

1374
01:32:35,562 --> 01:32:41,042
know your accumulated friends who have a certain who are i don't know if i should use the word red

1375
01:32:41,042 --> 01:32:47,162
pill but that's kind of what you've been now um and just understanding more and more of it and so

1376
01:32:47,162 --> 01:32:51,462
you know is it the world changing around or how much is it you changing or you know the that you're

1377
01:32:51,462 --> 01:32:56,642
the people around you that you're inviting in your life but um i i want to you know you could

1378
01:32:56,642 --> 01:33:00,442
definitely be right we know that there's a big contingency out there who have no clue about what

1379
01:33:00,442 --> 01:33:05,922
we're talking are you red building like or were you red build yeah i think i was written college

1380
01:33:05,922 --> 01:33:11,242
in college probably yeah yeah not before that and i was old when i started college by the way i was

1381
01:33:11,242 --> 01:33:16,582
23 when i started undergrad what what was it like what what made you realize that everything's a scam

1382
01:33:16,582 --> 01:33:24,142
or you know like in loosely speaking yeah and i i think that's when i started when i q when i

1383
01:33:24,142 --> 01:33:28,642
adopted my framework of thinking and then realizing how much scam there is there i think

1384
01:33:28,642 --> 01:33:34,042
takes a few years probably so maybe it wasn't only there it was probably so i did my undergrad in

1385
01:33:34,042 --> 01:33:42,042
sweden and that's when i um when i what was it economics yeah yeah and in sweden you can't do a

1386
01:33:42,042 --> 01:33:46,722
phd in economics unless you've done your undergrad economics with at least 60 of the classes in that

1387
01:33:46,722 --> 01:33:50,162
in that field and you come to the u.s and you realize you start from scratch where people have

1388
01:33:50,162 --> 01:33:58,642
done in other fields. It's a very different system here, there in the US. So I started

1389
01:33:58,642 --> 01:34:04,282
just having a good framework of how the world works, I think, in college. So, and again, like,

1390
01:34:04,342 --> 01:34:08,842
that's not very, you know, a very young age. Before that, I wasn't that interested in high

1391
01:34:08,842 --> 01:34:14,562
school. I wasn't, I was kind of clueless and I was out just working in different places all around

1392
01:34:14,562 --> 01:34:21,442
the world and kind of thing. And yeah, I don't know if there was anything specific. I think it

1393
01:34:21,442 --> 01:34:26,222
is the kind of people you are drawn to. Like if you're a curious person and somebody says something

1394
01:34:26,222 --> 01:34:30,282
outrageous and people kind of turn their head like, and you'll go like, oh, that's interesting.

1395
01:34:30,502 --> 01:34:35,402
You know, I want to learn more. What is he talking about? And so I just accumulated those kind of

1396
01:34:35,402 --> 01:34:39,922
friends through college. So I then I started reading a lot of like the libertarian literature

1397
01:34:39,922 --> 01:34:41,822
And that was kind of my friends.

1398
01:34:42,062 --> 01:34:46,682
And people are very free thinkers in that kind of space.

1399
01:34:48,902 --> 01:34:54,922
I would say that I like calling myself a liberal, but you can't say that in the US, right?

1400
01:34:55,082 --> 01:34:57,922
Because liberal means the opposite, it means socialist.

1401
01:34:58,842 --> 01:35:01,862
But I have a lot of liberal values in that way.

1402
01:35:02,242 --> 01:35:05,082
The social freedoms is important to me.

1403
01:35:05,082 --> 01:35:15,842
And I think that I don't know a lot of people call themselves libertarians in the U.S. also have very illiberal values when it happens to freedom of movement.

1404
01:35:16,182 --> 01:35:26,582
And abortion is an interesting one because there you can have different kind of the same axioms can lead to, you know, being for or against and the gender issues and things like that.

1405
01:35:26,662 --> 01:35:32,402
I definitely think that anybody should be able to call themselves whatever gender they want and change gender if they want.

1406
01:35:32,402 --> 01:35:40,262
And but of course, if we wouldn't be, you know, that people are talking about forcing kids and all that, like, yeah, that sounds like a bad thing and all that.

1407
01:35:40,622 --> 01:35:42,202
But so that's kind of where I'm coming from.

1408
01:35:42,262 --> 01:35:48,202
I think that I am liberal throughout both on the social and fiscal part.

1409
01:35:48,722 --> 01:35:51,482
And yeah, I just have those kind of axioms.

1410
01:35:51,482 --> 01:35:52,502
It's very it's very simple.

1411
01:35:52,622 --> 01:35:54,082
It's like non-aggression principle.

1412
01:35:54,342 --> 01:36:01,562
And, you know, do be good to other people and you can't hurt anybody unless they hurt you or threaten to hurt you.

1413
01:36:01,562 --> 01:36:07,782
and from there you can derive a lot of things right and from there you uh if you are a curious

1414
01:36:07,782 --> 01:36:12,122
person you accumulate good people who infuse you with new ideas that's kind of my progression in

1415
01:36:12,122 --> 01:36:18,062
life i think i think i i can attribute almost everything to just ideas or people that i have

1416
01:36:18,062 --> 01:36:22,902
chosen to you know surround myself with and i keep doing that so yeah i think i'm the same except

1417
01:36:22,902 --> 01:36:30,062
i had just i just had completely different ideas and they weren't bad people at all they were you

1418
01:36:30,062 --> 01:36:36,242
know i i've loved my life up until this point it's just there were there were a number of things that

1419
01:36:36,242 --> 01:36:43,942
we all thought at a base level in the background that i i i find it astonishing to think that i

1420
01:36:43,942 --> 01:36:50,262
that i didn't address and there's probably a bunch now as well i'm probably working from a baseline

1421
01:36:50,262 --> 01:36:56,502
of all kinds of weird things that really i'm not noticing you know like the most common one that

1422
01:36:56,502 --> 01:37:03,882
fortunately i've i've kind of seen through is this notion that the government exists and it should

1423
01:37:03,882 --> 01:37:07,962
basically be able to tell you what to do and that's a really big one to get over

1424
01:37:07,962 --> 01:37:13,322
especially like and this is the one i see most in the uk that people have no idea it even exists

1425
01:37:13,322 --> 01:37:19,642
and when you see a lot of people really well-meaning people arguing um against certain

1426
01:37:19,642 --> 01:37:24,202
things they're basically arguing in favor of the state without even realizing it do you know what i

1427
01:37:24,202 --> 01:37:30,902
mean like i've seen a number of people there's a number of you know people who are noticing like

1428
01:37:30,902 --> 01:37:36,762
we this the problems we have at the moment the bad you know like the bad the the way the economy

1429
01:37:36,762 --> 01:37:40,342
is terrible the you know the way the this is terrible and that's terrible and you can say you

1430
01:37:40,342 --> 01:37:47,502
can see the symptoms of what's bad but the answer then is the get the government to fix it without

1431
01:37:47,502 --> 01:37:52,122
even wondering whether the government either might be the problem or is even the right person to fix

1432
01:37:52,122 --> 01:37:57,762
it if you see what I mean you know and it's it's so common I was that I would I would have been that

1433
01:37:57,762 --> 01:38:02,842
person if I if I even cared whether the government need to fix anything I didn't really think about

1434
01:38:02,842 --> 01:38:06,902
any of that stuff until you know I discovered bitcoin and basically that's what turned me on

1435
01:38:06,902 --> 01:38:11,602
to all that stuff but what's the cannabis story then talking of yeah the cannabis story I went

1436
01:38:11,602 --> 01:38:17,842
into that industry in the spring of 22 um I left the finance world macro and kind of took a break

1437
01:38:17,842 --> 01:38:25,262
from that it was together with brian singer is uh was my boss at the team in chicago and we became

1438
01:38:25,262 --> 01:38:29,582
then business partner and and started learning the ropes of the industry set up a credit fund

1439
01:38:29,582 --> 01:38:36,542
in the summer of 22 we created it did the legal work around it credit fund meaning that we lend

1440
01:38:36,542 --> 01:38:41,822
money we we set ourselves up so that we can raise money and then you charge a management fee and you

1441
01:38:41,822 --> 01:38:51,222
lend it out to companies. Cannabis has been on a wild ride. And there was a huge bubble in cannabis.

1442
01:38:51,422 --> 01:38:55,822
There was a time where everybody wanted to be in it. And we were kind of on the other side of that

1443
01:38:55,822 --> 01:39:00,482
bubble where it was still a lot of excitement at 22. And what happened was that you had COVID,

1444
01:39:00,482 --> 01:39:07,682
right? Spring of 2020. The story started emerging throughout that year about, well,

1445
01:39:07,722 --> 01:39:11,182
we're all going to be in lockdown now for a while. So everybody's going to sit at home and smoke pot.

1446
01:39:11,822 --> 01:39:14,402
and then Biden won the election

1447
01:39:14,402 --> 01:39:15,682
so now it's like oh

1448
01:39:15,682 --> 01:39:17,962
Democrats now increase probability

1449
01:39:17,962 --> 01:39:19,382
of federal legalization

1450
01:39:19,382 --> 01:39:22,122
because cannabis is legal in many states

1451
01:39:22,122 --> 01:39:23,702
but it's still this like weird thing

1452
01:39:23,702 --> 01:39:26,062
where there's not been a law passing

1453
01:39:26,062 --> 01:39:27,502
on a federal level that it's legal

1454
01:39:27,502 --> 01:39:30,422
so then you got this bubble

1455
01:39:30,422 --> 01:39:32,762
it peaked around like September 2021

1456
01:39:32,762 --> 01:39:34,682
where

1457
01:39:34,682 --> 01:39:36,422
and it just went hyperbolic

1458
01:39:36,422 --> 01:39:37,822
and it was a bubble in like private

1459
01:39:37,822 --> 01:39:38,982
it's a lot of like equity

1460
01:39:38,982 --> 01:39:41,982
But it's like this was that magnified.

1461
01:39:41,982 --> 01:39:44,982
And so that made for kind of a good story.

1462
01:39:44,982 --> 01:39:59,982
That was not obviously why we got into it, but it became, it was a lot of real things happening on the ground in terms of like in each state, you could see more and more states allowing for cannabis or passing laws to make it worse.

1463
01:40:00,000 --> 01:40:04,140
medical and then recreational. So those are the kind of two levels where you can have cannabis

1464
01:40:04,140 --> 01:40:09,600
legalization in a state in the US. So we thought this was very interesting. And we thought, wow,

1465
01:40:09,660 --> 01:40:14,880
this is a more inefficient market. Macro is a very efficient market. So this is going to be

1466
01:40:14,880 --> 01:40:18,620
something very different that, you know, will be very interesting to start doing business in.

1467
01:40:19,080 --> 01:40:24,420
And problem was that we looked around and saw, you know, a lot of people were very interested

1468
01:40:24,420 --> 01:40:28,700
in throwing money at, you know, anything having to do with like a credit fund in cannabis space.

1469
01:40:28,700 --> 01:40:31,620
but it still looked like valuations

1470
01:40:31,620 --> 01:40:35,060
that the industry were going to consolidate

1471
01:40:35,060 --> 01:40:37,240
and it was going to be on a rough ride

1472
01:40:37,240 --> 01:40:39,760
even though the peak of the bubble had passed.

1473
01:40:40,360 --> 01:40:43,060
So we were like, okay, we can raise money easily

1474
01:40:43,060 --> 01:40:45,320
but it doesn't look like a good time

1475
01:40:45,320 --> 01:40:47,940
to really create wealth with the money that we're raising.

1476
01:40:48,380 --> 01:40:49,340
Like, can you do it?

1477
01:40:49,360 --> 01:40:50,140
Yeah, maybe, you know,

1478
01:40:50,200 --> 01:40:52,360
but if you have the probability against you,

1479
01:40:52,360 --> 01:40:53,980
you shouldn't go into it.

1480
01:40:54,020 --> 01:40:55,300
So we decided we shouldn't go into it

1481
01:40:55,300 --> 01:40:57,320
but we kept just learning about the industry.

1482
01:40:57,480 --> 01:40:58,480
We thought, well, we can learn more

1483
01:40:58,480 --> 01:40:59,500
and be wiser about it.

1484
01:40:59,620 --> 01:41:01,220
So we went around,

1485
01:41:01,340 --> 01:41:03,900
we made our personal investments in the space

1486
01:41:03,900 --> 01:41:06,800
and we decided now recently to,

1487
01:41:07,040 --> 01:41:10,100
we found some good people to work with to launch this.

1488
01:41:10,240 --> 01:41:14,120
So it's part of alleviating people's fear about cannabis

1489
01:41:14,120 --> 01:41:17,280
is we're actually taking a real estate focus on it.

1490
01:41:17,280 --> 01:41:21,320
So our CEO really has a real estate background.

1491
01:41:22,100 --> 01:41:24,020
So it's always going to be a collateral,

1492
01:41:24,480 --> 01:41:27,160
which a real estate collateral of alternative use.

1493
01:41:27,160 --> 01:41:35,840
So not the cannabis use, but if you have to sell this, you know, I have to close down and, you know, somebody is going to, instead of this dispenser, it's just going to be a regular corner shop.

1494
01:41:35,940 --> 01:41:37,400
Like what's the value of this property?

1495
01:41:37,960 --> 01:41:45,760
So, and then you lend, lending on the base of collateral means that if you default, you know, we can take the value of that, of the collateral.

1496
01:41:46,020 --> 01:41:47,180
So that's where we are now.

1497
01:41:47,220 --> 01:41:49,760
And we just started launching it now and raising money now.

1498
01:41:50,260 --> 01:41:54,460
And so you're investing in properties that are connected to cannabis.

1499
01:41:55,100 --> 01:41:55,300
Yeah.

1500
01:41:55,300 --> 01:41:57,260
Not like cannabis farms and stuff like that.

1501
01:41:57,380 --> 01:41:58,320
It can be, yeah.

1502
01:41:58,500 --> 01:42:04,140
So the three areas of cannabis you can think of is like grow, manufacture, and then sell.

1503
01:42:05,660 --> 01:42:11,640
And then that would be like the last one is dispensaries or what it's called where you can sell cannabis dispensary.

1504
01:42:12,360 --> 01:42:15,820
And it's a different, you know, universe in different states.

1505
01:42:15,960 --> 01:42:17,500
In some places you can just go in.

1506
01:42:17,620 --> 01:42:22,360
Often you have to show your idea, but you don't have to have any special like card or anything like that.

1507
01:42:22,360 --> 01:42:29,660
Some states will have, you can have a medical card and then you can not pay a certain tax on it.

1508
01:42:29,980 --> 01:42:33,520
So you have a bigger payment up front to get the medical card.

1509
01:42:33,580 --> 01:42:36,060
But if you're a big consumer, that might make it worth it.

1510
01:42:36,560 --> 01:42:41,160
But you can also walk in and just show your ID and then you pay the full price with all the taxes, for example.

1511
01:42:41,480 --> 01:42:44,460
And then in some states like Florida, there's only medical.

1512
01:42:44,860 --> 01:42:46,600
So then you cannot go in.

1513
01:42:47,260 --> 01:42:51,240
They want your medical card and you cannot enter if you don't have the medical card.

1514
01:42:51,240 --> 01:42:56,100
so you get the medical card by just paying the right people does it sound funny to you discussing

1515
01:42:56,100 --> 01:43:02,880
like running a business it sounds like my mates when i was like 17 in a but not in a you know like

1516
01:43:02,880 --> 01:43:07,680
you're you're saying it in a very in a very upmarket way but it's like well we need to

1517
01:43:07,680 --> 01:43:12,960
grow it and then we need to get it out to the people and this is how you can get it but it does

1518
01:43:12,960 --> 01:43:17,780
seem weird isn't it like cannabis is for me has always been something that's illegal always you

1519
01:43:17,780 --> 01:43:18,400
You know, I don't know.

1520
01:43:18,420 --> 01:43:20,120
Where did you, of course, Sweden?

1521
01:43:20,340 --> 01:43:21,260
Was it legal in Sweden?

1522
01:43:21,280 --> 01:43:21,980
No, 100% not.

1523
01:43:22,080 --> 01:43:27,440
No, I grew up with like, we have a word for all drugs that is not alcohol or coffee or sugar.

1524
01:43:27,440 --> 01:43:33,480
You know, like all these other drugs that it's like, you know, that word is like, you know, cannabis would be in that bucket.

1525
01:43:33,920 --> 01:43:38,200
And it would be as bad as like heroin, you know, like whatever, meth, whatever, like all this stuff.

1526
01:43:38,400 --> 01:43:39,500
I would never have seen it.

1527
01:43:39,560 --> 01:43:39,920
No, I never.

1528
01:43:40,080 --> 01:43:42,340
The first time I saw cannabis was when I was 17.

1529
01:43:42,560 --> 01:43:45,720
And I went to Australia as an exchange student.

1530
01:43:45,720 --> 01:43:46,720
Yeah.

1531
01:43:46,720 --> 01:44:04,034
And I didn smoke it though until I was 18 because I promised my parents not to smoke No it just seems it just seems funny hearing you discuss basically a grow It like I say it a program for growing cannabis and then selling it

1532
01:44:04,194 --> 01:44:06,574
which I've never thought of it.

1533
01:44:06,754 --> 01:44:10,174
Well, no, but I mean, it is mostly illegal.

1534
01:44:10,294 --> 01:44:13,094
I mean, even in the States, is it relatively recently?

1535
01:44:13,094 --> 01:44:21,834
so it was in in the 90s where you start it was like california and colorado were the pioneers

1536
01:44:21,834 --> 01:44:26,554
i think colorado was first like with medical and california first recreational the other way around

1537
01:44:26,554 --> 01:44:33,714
but that's kind of it starts it starts growing by now most states have cannabis either i think it's

1538
01:44:33,714 --> 01:44:42,434
40 or so states have either recreational or medical and so most of the country you can you

1539
01:44:42,434 --> 01:44:50,674
can buy cannabis. It's important to note though that because it's not federally legal, it's the

1540
01:44:50,674 --> 01:44:56,274
interstate laws don't apply. You're not allowed to ship cannabis between states. So that also

1541
01:44:56,274 --> 01:45:01,674
makes an interesting investment case. You can, each state is its own country that has 100, you know,

1542
01:45:01,874 --> 01:45:06,914
complete sealed off. You cannot import export. It's not like with very high tariffs. It's like,

1543
01:45:07,214 --> 01:45:12,074
no, it's like complete restrictions. So that means that you have to grow it everywhere,

1544
01:45:12,074 --> 01:45:13,434
that you're also going to sell it,

1545
01:45:13,694 --> 01:45:15,914
which means that you're going to have to grow it

1546
01:45:15,914 --> 01:45:17,634
where it's very cold, like in Alaska.

1547
01:45:18,114 --> 01:45:19,814
I think Alaska is recreational

1548
01:45:19,814 --> 01:45:22,734
and you grow in maybe greenhouses,

1549
01:45:22,914 --> 01:45:23,794
but often like indoor.

1550
01:45:24,014 --> 01:45:25,974
So basically like a box, a warehouse.

1551
01:45:26,754 --> 01:45:28,454
And you're just putting the lights in there.

1552
01:45:28,734 --> 01:45:29,994
And yeah, it's definitely an industry.

1553
01:45:30,134 --> 01:45:30,974
It's a serious industry.

1554
01:45:31,094 --> 01:45:32,534
When I went into it, it was less serious.

1555
01:45:32,534 --> 01:45:33,414
You go to the conference

1556
01:45:33,414 --> 01:45:34,954
and everybody was kind of hippie, you know?

1557
01:45:35,694 --> 01:45:37,634
So it was a scene, it was interesting,

1558
01:45:37,894 --> 01:45:40,534
but it's also a time where everybody thought

1559
01:45:40,534 --> 01:45:45,014
thought that you could just print money by setting up a cannabis grow and that was part of our

1560
01:45:45,014 --> 01:45:54,014
apprehension of like going into it with other people's money but now it's really grown up

1561
01:45:54,014 --> 01:45:58,514
in just a few years and you have you go to conferences you're it's serious people people

1562
01:45:58,514 --> 01:46:04,154
realize that you can't just wing it and swing it it's more and more companies are cleaning up their

1563
01:46:04,154 --> 01:46:10,414
their finances and looking more kind of similar in any way to the free cities movement in the sense

1564
01:46:10,414 --> 01:46:11,794
that it's maturing a little bit?

1565
01:46:12,834 --> 01:46:15,254
Well, you haven't had the kind of the silliness

1566
01:46:15,254 --> 01:46:16,774
that has been going on in Free Cities mode.

1567
01:46:16,854 --> 01:46:19,934
I think we're starting on the right side already,

1568
01:46:20,154 --> 01:46:21,154
which is small, you know.

1569
01:46:21,734 --> 01:46:23,514
I know what you mean, is that there are some,

1570
01:46:23,894 --> 01:46:24,734
I don't know.

1571
01:46:25,774 --> 01:46:28,054
What do you think about the idea

1572
01:46:28,054 --> 01:46:30,994
that the Free Cities ecosystem

1573
01:46:30,994 --> 01:46:32,774
is a bit of an umbrella term now?

1574
01:46:33,034 --> 01:46:34,114
You know, like it kind of began

1575
01:46:34,114 --> 01:46:35,694
as the free private city thing, didn't it?

1576
01:46:36,034 --> 01:46:37,054
And now it's more about,

1577
01:46:37,194 --> 01:46:38,454
it's the marketplace of governance.

1578
01:46:38,454 --> 01:46:41,494
is like from, you know,

1579
01:46:41,654 --> 01:46:44,594
intentional communities right off the end to Liberland

1580
01:46:44,594 --> 01:46:45,774
or somewhere like that,

1581
01:46:45,834 --> 01:46:47,374
looking for complete autonomy and stuff.

1582
01:46:48,354 --> 01:46:51,254
Do you think that's a good move?

1583
01:46:51,694 --> 01:46:53,774
Because they're part of,

1584
01:46:54,494 --> 01:46:55,594
in a way that you could argue

1585
01:46:55,594 --> 01:46:56,794
they're not part of the same system.

1586
01:46:57,594 --> 01:47:00,874
But you come from very sort of,

1587
01:47:01,074 --> 01:47:03,654
you know, the kind of SEZ part,

1588
01:47:03,774 --> 01:47:04,894
which is very business-like

1589
01:47:04,894 --> 01:47:07,534
and very like pre-private city, I would imagine.

1590
01:47:08,454 --> 01:47:12,194
The intentional community stuff is completely different.

1591
01:47:12,974 --> 01:47:16,014
And a lot of the time it's just people coming together in one place

1592
01:47:16,014 --> 01:47:17,294
and saying, right, let's just live here.

1593
01:47:17,794 --> 01:47:20,534
But we are interested in all of them,

1594
01:47:20,574 --> 01:47:23,034
and we kind of created this umbrella term in a way.

1595
01:47:23,374 --> 01:47:23,614
Yeah.

1596
01:47:24,414 --> 01:47:26,494
I think, oh, there's so much in there.

1597
01:47:26,894 --> 01:47:30,574
So one, like the word, what word to use for the umbrella terms,

1598
01:47:30,614 --> 01:47:33,034
it's something I've had discussions about during this conference,

1599
01:47:33,034 --> 01:47:34,894
and I don't have a good answer to it.

1600
01:47:34,894 --> 01:47:39,894
I would say the first, the more original word for this was,

1601
01:47:39,894 --> 01:47:42,334
there was a, there used to be an organization around this.

1602
01:47:42,334 --> 01:47:55,248
It was we refer to as startup cities So there was a startup cities institute I think it was called It was based out of UFM the university in Guatemala And that is no longer an assistance

1603
01:47:55,528 --> 01:47:58,048
but most people in this space

1604
01:47:58,048 --> 01:48:00,428
have been affiliated or know about them

1605
01:48:00,428 --> 01:48:01,968
and talk to these people one way or the other.

1606
01:48:02,508 --> 01:48:03,988
And what is a better word for it?

1607
01:48:04,028 --> 01:48:05,948
Because at its core,

1608
01:48:06,328 --> 01:48:08,528
my philosophy is that

1609
01:48:08,528 --> 01:48:09,648
I think the world would be better

1610
01:48:09,648 --> 01:48:10,988
if everybody could live in a,

1611
01:48:11,428 --> 01:48:13,228
have a more decentralized world

1612
01:48:13,228 --> 01:48:17,368
where everybody can sign a contract in the kind of society you want to live in.

1613
01:48:17,908 --> 01:48:20,028
Everybody's not going to want to live in what we would think of

1614
01:48:20,028 --> 01:48:22,708
as some kind of libertarian utopia or anything like that.

1615
01:48:23,048 --> 01:48:25,888
I think that if you're a Marxist and want to have a Marxist utopia,

1616
01:48:25,988 --> 01:48:29,008
you should be able to have that and run it like that.

1617
01:48:29,208 --> 01:48:30,848
And should we then call it free cities?

1618
01:48:30,968 --> 01:48:34,788
It's a freedom to join, but it's in a way...

1619
01:48:34,788 --> 01:48:36,308
So I'm a little bit on two sides.

1620
01:48:36,808 --> 01:48:39,008
In a way, we can say it's startup cities

1621
01:48:39,008 --> 01:48:41,648
because we're all just saying this is something new.

1622
01:48:41,648 --> 01:48:45,068
On the other hand, if the movement grows, we can't call it startup cities anymore, right?

1623
01:48:45,188 --> 01:48:46,928
So I don't really know.

1624
01:48:47,308 --> 01:48:47,948
Decentralized cities.

1625
01:48:48,588 --> 01:48:58,368
I think intentional communities, just like you were going to, it sounds a little bit too much maybe like we're just a bunch of hippies putting out some tents in the forest.

1626
01:48:58,568 --> 01:49:04,728
So I think that in terms of attracting the serious money investments into the space, we do need a good word for it.

1627
01:49:04,748 --> 01:49:07,148
And I think maybe free cities is as good as anything I can think of.

1628
01:49:07,148 --> 01:49:13,508
But I think it's interesting to juxtapose to the startup cities goes more into this kind of, look, it doesn't have to be any specific.

1629
01:49:13,888 --> 01:49:15,248
It's not ideologically driven.

1630
01:49:15,248 --> 01:49:26,548
It's just us realizing that if people can choose to live in a place and start learning from birth that just because you're born in the place doesn't mean you're governed by that place.

1631
01:49:26,928 --> 01:49:32,968
And if you don't have kids and think you're going to have kids, I would never sign papers saying that your kids are hereby governed by this.

1632
01:49:33,228 --> 01:49:36,368
It has to be that after the age of X at least, you can always exit.

1633
01:49:36,368 --> 01:49:42,568
you know um then you know that's kind of what we want to capture right that it's more of this

1634
01:49:42,568 --> 01:49:47,768
voluntary community voluntary cities or something like that contractual the startup cities monica

1635
01:49:47,768 --> 01:49:54,548
has really been adopted by the kind of network state people that's where you sit well that's

1636
01:49:54,548 --> 01:50:00,228
where you hear that's spoken the most a lot of you know like the sort of longevity people those

1637
01:50:00,228 --> 01:50:08,548
kind of you know pop-up cities startup cities you know it it's definitely a um a personality to those

1638
01:50:08,548 --> 01:50:13,988
you know i think on the on one end you get the free city people which tend to be more bricks and

1639
01:50:13,988 --> 01:50:18,248
mortar and on the other hand you get the kind of network state people who are a bit more like

1640
01:50:18,248 --> 01:50:24,528
online dreamers i know i don't know i don't know what you think is but it's very much a personality

1641
01:50:24,528 --> 01:50:30,908
thing it's like it's like feet on the ground head in the clouds kind of thing yeah okay yeah i never

1642
01:50:30,908 --> 01:50:35,148
thought about that i'm just thinking from the perspective of if you want to pitch this as an

1643
01:50:35,148 --> 01:50:40,928
investment to somebody yeah right now it's not like i'm investing we talk about the investment

1644
01:50:40,928 --> 01:50:45,308
of real estate in these places that's where it's at right it's real estate maybe with the land value

1645
01:50:45,308 --> 01:50:51,908
as well um but the economics of it the risk profile is more like an equity investing investment

1646
01:50:51,908 --> 01:50:54,368
could be really high returns if this take off,

1647
01:50:54,468 --> 01:50:55,828
but it's also a big risk that, you know,

1648
01:50:55,908 --> 01:50:57,508
it is a startup project in that way.

1649
01:50:57,868 --> 01:51:02,708
So that's why I'm thinking the label of startup city

1650
01:51:02,708 --> 01:51:05,008
is more of this, hey, there's exciting return here.

1651
01:51:05,108 --> 01:51:05,888
Like, look at this.

1652
01:51:06,048 --> 01:51:07,408
Hey, VC, bro.

1653
01:51:08,108 --> 01:51:09,188
On the other hand, right?

1654
01:51:09,428 --> 01:51:10,828
Again, if it grows up,

1655
01:51:10,828 --> 01:51:12,528
then we don't want to call it a startup anymore.

1656
01:51:13,368 --> 01:51:14,048
So, yeah.

1657
01:51:14,428 --> 01:51:15,768
Well, also it might not be a city.

1658
01:51:15,888 --> 01:51:17,068
That's the other thing that bugs me.

1659
01:51:17,448 --> 01:51:17,708
Yeah.

1660
01:51:18,328 --> 01:51:20,408
But I think it happened naturally.

1661
01:51:20,408 --> 01:51:24,088
And I think all of those things they turn into, you know,

1662
01:51:24,128 --> 01:51:27,928
it's like when you name your child, you, it sounds weird at the beginning,

1663
01:51:27,928 --> 01:51:30,528
but then once you've called them that for 10 years,

1664
01:51:30,628 --> 01:51:34,548
you would never want anything any different, you know? Um, but, um,

1665
01:51:34,548 --> 01:51:37,028
a lot of, we've been speaking for almost two hours.

1666
01:51:37,148 --> 01:51:46,442
So I think we should wrap it up maybe but I like to finish with some kind of positive looking to the future type

1667
01:51:48,162 --> 01:51:52,842
You know, put Lott's eye on where we're going,

1668
01:51:52,922 --> 01:51:55,202
what's happening and where you think.

1669
01:51:55,662 --> 01:51:57,482
Give us a positive future.

1670
01:51:58,962 --> 01:52:00,922
I mean, actually, maybe not.

1671
01:52:01,322 --> 01:52:03,882
Give it your analytical eye like you did at the start.

1672
01:52:03,962 --> 01:52:06,462
I enjoyed that because I'd like to hear the truth

1673
01:52:06,462 --> 01:52:09,242
rather than my sort of fairy story.

1674
01:52:09,462 --> 01:52:10,402
No, I understand.

1675
01:52:10,682 --> 01:52:11,722
Ending on a positive note too.

1676
01:52:11,722 --> 01:52:15,762
No, I think, I do think it's interesting

1677
01:52:15,762 --> 01:52:19,642
that you took the parallel to the cannabis space

1678
01:52:19,642 --> 01:52:21,362
and the startup space.

1679
01:52:21,562 --> 01:52:23,882
I think that the overturned window

1680
01:52:23,882 --> 01:52:25,702
of what is acceptable to talk about

1681
01:52:25,702 --> 01:52:28,922
and say that you're involved in can move quite rapidly.

1682
01:52:29,302 --> 01:52:30,742
And I think we're going to see it.

1683
01:52:31,882 --> 01:52:34,102
The focus on creation in the space

1684
01:52:34,102 --> 01:52:35,602
is completely the right thing.

1685
01:52:35,602 --> 01:52:57,062
I'm an advisor to TIPOLIS and Titus Gable there is doing a tremendous job and like really is professionalizing this conference and helping with that of course together with Peter Young and really just thinking about it as a business very serious how that project is being like pursued and how that company is going.

1686
01:52:57,062 --> 01:53:19,122
So just, you know, when you have the right kind of people and the right kind of image, and then you have some case studies of not the founders, but other people who came in who put their money in and made a good return and also the political stability, you know, it just kind of beat a little bit of time.

1687
01:53:19,122 --> 01:53:23,042
You know, it's people going to sit and they're going to wait and going to see just like we see in Bitcoin.

1688
01:53:23,182 --> 01:53:29,222
We know that the Satoshi paper was published in 2008 and now we really have the adoption.

1689
01:53:29,882 --> 01:53:30,782
It takes time.

1690
01:53:30,882 --> 01:53:33,582
But I mean, we are we'll keep fighting the good fight.

1691
01:53:33,722 --> 01:53:39,122
I mean, it's we are we haven't had big setbacks, you know, like we haven't.

1692
01:53:39,742 --> 01:53:41,682
Jesus, don't say that out loud.

1693
01:53:42,602 --> 01:53:44,462
I think the whole world is going to collapse now.

1694
01:53:44,522 --> 01:53:45,822
That just made me clench.

1695
01:53:45,942 --> 01:53:47,082
Oh, I'm not like that at all.

1696
01:53:47,082 --> 01:53:48,762
I'm like, this is awesome.

1697
01:53:49,122 --> 01:53:54,042
there's a lot of things that go forward at setbacks when you say something like that out loud though

1698
01:53:54,042 --> 01:53:59,022
that's dangerous we've not had any major setbacks i'm not superstitious like you then no i am so no

1699
01:53:59,022 --> 01:54:02,622
i think we're i mean i think we're in the good track i think the right people are here i'm really

1700
01:54:02,622 --> 01:54:06,142
it's been super exciting to be here and see everybody who's involved and talk to people

1701
01:54:06,142 --> 01:54:11,922
and there are people coming through so many angles so the investments of in the longevity you mentioned

1702
01:54:11,922 --> 01:54:17,822
but general health care is is something that you have an opportunity to pursue so much faster and

1703
01:54:17,822 --> 01:54:22,002
it's so important for the whole world of course the longevity but it's also just to get the longevity

1704
01:54:22,002 --> 01:54:27,082
right we have to have more people who you know survive the the diseases that are out there and

1705
01:54:27,082 --> 01:54:31,662
we're seeing more and more there we know how how hard that is to and how long it takes you know to

1706
01:54:31,662 --> 01:54:38,342
go through the the passage of of acceptance in in legalization all that in u.s but really anywhere

1707
01:54:38,342 --> 01:54:43,842
in the world just to see how many fronts that come together yeah it changes the world and it

1708
01:54:43,842 --> 01:54:50,362
starts with the steps that we're taking now wonderful right i'm back i'm back thank god

1709
01:54:50,362 --> 01:54:57,542
i was getting despondent momentarily no i wasn't thanks lotta appreciate it i've been looking forward

1710
01:54:57,542 --> 01:55:02,162
to speaking to you and it's been it's been exactly what i expected so thank you thank you thank you

1711
01:55:02,162 --> 01:55:08,642
and um good luck on the way you're going back to america to do whatever so good luck and good

1712
01:55:08,642 --> 01:55:13,582
luck with your wealth management company might bung you a bit of money if you want put some of my

1713
01:55:13,582 --> 01:55:19,222
money in there no and yeah thanks for coming in it's been awesome thanks thank you