Y Combinator wants to build a city, awesome!

Y Combinator just announced a very exciting project on cities. The first stage of the project is research, but they claim “We’re seriously interested in building new cities and we think we know how to finance it if everything else makes sense”. They follow in the footsteps of Peter Thiel, The Seasteading Institute, and Balaji Srinivasan’s talk on Silicon Valley’s Ultimate Exit. Of course, the particulars of each vision is distinct. Given I have spent a great deal of time thinking about cities from a relatively distinct perspective, I thought I would share some thoughts on their project.

First, there are three important aspects to consider when building a new city, physical infrastructure, local governance, and legal institutions. Most urban planners focus on the physical infrastructure. They view the city as a big construction project, a la Sim City, neglecting local governance and legal institutions.

The second aspect is local governance; zoning, land use regulations, and other issues typically decided on the city level, which is slowly gaining more attention. Sidewalk Labs appears to be focusing on local governance, and YC is rightly also interested in local governance.

The third aspect is legal institutions. Now, YC writes, “our goal is to design the best possible city given the constraints of existing laws.” I believe this is a mistake. Improving the legal institutions is the low hanging fruit for new cities (I term cities with legal autonomy free cities). The importance of the legal institutions depends on the host country. However, there are two useful analytic categories, free cities in the developed world and free cities in the developing world.

This relates to another important question, in what country to build the city. Developing countries, primarily in Asia and Africa have rapidly urbanizing populations creating a greater demand for new cities. North America and Europe, on the other hand, are urbanized and new cities would have to compete with existing cities.

With regard to legal institutions, new cities in the developing world are playing catch up. Simply importing common law would be a huge competitive advantage. In Africa, for example, a city using common law could reasonably claim to have the best governance in the continent. New cities in the developed world are different. The developed world is already governed reasonably well. New cities in the developed world could instead attract tech innovators with a well-designed regulatory system, turning ‘Detroit into Drone Valley’. Given that technology is the driver of long run economic growth, such innovation zones are surely a worthy cause.

Given my chats with urban planners and architects who are involved in new cities, I am very happy to see Silicon Valley, and especially YC take an interest in cities. Even if their city project does not work out, I’m sure they will be a valuable addition to the discussion.

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