 Welcome to Free Thoughts. I'm Trevor Burris, and I'm Aaron Powell. Joining us today is Michael Strong, the co-founder of Conscious Capitalism and the CEO and Chief Visionary Officer of Radical Social Entrepreneurs. He's the lead author of Be The Solution, How Entrepreneurs and Conscious Capitalists Can Solve All the World's Problems and the author of The Habit of Thought from Socratic Seminar to Socratic Practice. Welcome to Free Thoughts, Michael. Thank you. I'm delighted to be here. I'd like to start with your background because you've had an interesting history and you weren't always into free markets. So what kind of brought you to this point? Absolutely. Thank you. My parents were not educated, and I basically educated myself discovering Harper's New York Review books, New Republicans, so forth. And as a college student, I realized that all smart people were socialists. We all admired Scandinavian socialism. And so then I discovered that economists, in particular Chicago economists, believed that free markets were good. And with all the hubris of youth, I thought, well, clearly they must be missing something. So for graduate school, I went to the University of Chicago in the Committee on Social Thought, and I went there to discover where the Chicago economists weren't wrong. I realized quickly enough that I was absolutely clueless about economics. I ended up doing a dissertation under Gary Becker on ideas and culture as human capital and really became free market then once I understood the benefit of free markets. Later, I went to an institute for humane studies workshop and discovered both anarcho-capitalism, David Friedman's work and so forth, and then Austrian economics, Hayek in particular. And I've become ever more deeply interested in these fabulously powerful paradigms, intellectual and moral paradigms ever since. But you didn't end up going into academia. No. While I was in graduate school in Chicago, I began training. So I went to St. John's College as an undergraduate, four years where you read and discuss the great books and socratic discussions, and I loved it. I had earlier gone to Harvard Board by having famous people talk at me. So while in graduate school in Chicago, I began training teachers through Mortimer Adler's Paidea project to lead socratic seminars in their classroom. That led to a full-time job training teachers in Alaska to lead socratic seminars. We were on soft money and when the grants ran out, some parents asked me to create a private school based on the same socratic principles. And that led to me essentially becoming by accident an education entrepreneur. And I've spent most of my life then creating small schools based on socratic inquiry, entrepreneurship and personal development in both charter schools and private school contexts. So a lot of your work and writings have to do with social entrepreneurship. Can you tell us what that is, how that's different from just starting a business regular kind of entrepreneurship? Absolutely. Well, I am absolutely a do-gooder. When I was on the left, I wanted to make the world a better place. Peace, prosperity, happiness, and well-being for all. And it was only through studying economics that I realized government is a catastrophically bad mechanism for making the world a better place. Entrepreneurship is a much better one. So to kind of connect it directly, I think it was about 2001, John Mackey, now CEO of Whole Foods, founder of Whole Foods, co-founder, he and I agreed that entrepreneurship was more effective at making the world a better place than government. So really, ideologically, I describe myself more as a radical social entrepreneur than as a libertarian, simply because for me, it's not about reduced taxes and regulation per se. It's the government systemically prevents people from making the world a better place through entrepreneurial initiative. And so you really don't draw the limits as your book is subtitled, how entrepreneurs and conscious capitalist can solve all the world's problems. Which is quite a claim. Well, absolutely. And just to kind of go out there in one example, so one of the, when I began working with what was originally flow, conscious capitalism and radical social entrepreneurs are spinoffs with Mackey. We were looking at how micro- entrepreneurs had brought millions of people, a little tiny bit out of poverty through micro loans. The whole Silicon Valley, tech entrepreneurship, solving problems thing was really getting going. But when I really looked into it, the biggest one was global poverty. And I met Mark Frazier, who had been a free zone developer and consultant for years, and he made the case that the reason poor countries are poor were bad law and governance. And way back, Milton Friedman had basically proposed a replicating Hong Kong in order to create prosperity around the world. And so through Mark Frazier and others, I began really looking into how can we create zones of higher quality law and governance in order to create prosperity. Eventually that led to my involvement in a free zone in Honduras. It was mistakenly associated with Paul Romer and charter cities, but Romer was sort of a afterthought from the Honduran perspective. So just before getting into all these solve all the problems, and I've got ideas for other things, the big one is global poverty. In China, thanks to special economic zones, in the last 30 years, average GDP per capita has increased from about $1,000 per person to about $6,000 per person, as average urban wages actually. And with about 700 million urban Chinese, never before in human history have so many people escaped poverty so dramatically. That alone is a spectacular improvement. And as zones around the world are being designed to improve law and governance, I see, as do many people in this movement, that we can very rapidly eliminate global poverty if we're allowed to do so. What is exactly a free zone or a special economic zone? Sure. They really began, the modern era began in the 1930s, with when the governments around the world became heavily statist. And a zone was a really a very localized region that was exempt from some of the trade barriers and later some taxes and regulations, because no matter what national politics dictated in terms of, you know, heavily statist policies, realistically, you need to trade to have some prosperity. So export processing zones, which was kind of one of the first phases, led to where there were, you know, in some cases, no tariffs on goods produced within the zone for export. Export processing zones led to greater prosperity in Taiwan, South Korea, Japan, Ireland, Mexico, Mauritius, in some respects, India later China, of course. And the idea was it's very difficult to get good policy passed on a nation-state basis, but it's very possible within a small localized zone. You know, in Dubai, there's a financial zone that's 110 acres. Chinese, especially economic zones are city scales so much larger. But the point is you're not, you don't have to fight all the vested interests if you only want reforms in a zone. Bob Haywood, who is the executive director of the World Economic Processing Zones Association for decades, was one of the world's leading experts and he believes that zones are a path around Douglas North's natural state issue, where basically oligarchy is a natural state of things. The miracle is why it's not oligarchy everywhere all the time. He points out that very often zones are initiated not by the central oligarchs, but by the second cousin, you know, the rent seekers who are a little bit on the outside, maybe the younger brother, somebody who's not already at the middle of the rent seeking system, but has influenced enough to say, hey, guys, you know, just give me a little freedom in this zone. And, you know, the rest of the family says, okay, whatever, you can have your little zone over there. And then, you know, it's more formal than that. But he said underline the whatever is going on in public, those sorts of family dynamics are going on in the background that allows these little zones to be created. And then those zones become prosperous. And as they become prosperous, everybody else wants in on it. And so that's how zones have expanded both to greater geographical territory, but also, hey, what makes a compelling case? The zones have led to broader economic liberalization. As some of the elites in some of these countries realize, there's more to be had through more economic freedom rather than the tight closed rent seeking oligarchy that's, again, North's natural state. Now you mentioned Dubai and it sort of, it seems kind of weird maybe because we just think of states as doing what states generally do that they would be like, here's, do you say 110 square miles? And what did they actually do to set up a zone that was different? Was there a line that you crossed and everything is suddenly very different, different police and everything? What did they actually do to do that? So not that extreme. And to be clear, Dubai has been one of the most innovative zone creators around the world. There are four businesses that want to identify the best jurisdiction within which to do business. There are lists made by trade associations of best zones in the world. And out of the top, so Dubai has, I don't know, 15, 20 zones at this point. And out of the world's top ranked zones, many of them are Dubai. So there's an airport zone, there's an IT zone, and there's a financial zone. And so Dubai has created a model. And I think the leaders of Dubai deserve credit for this for creating zones where there are both special freedoms within those zones, as well as some deliberate government-led attempt to concentrate talent. So industrial policy has a bad name among libertarians, but on a tiny, tiny scale of a city-state, especially a tiny zone within a city-state, I think Dubai, like Singapore, has run almost more like a business than just like a regular nation-state. But within these zones, then, there's a deliberate attempt to attract capital and talent based on specially designed zone rules. The most exciting of which, the one that I regard as an important precedent, is the Dubai International Financial Center, which has a different legal system. So typically, the zone is simply fewer laws than regulations, but same legal system. Dubai wanted to be a world-class financial center. This is the early 2000s. Sharia law is not very friendly to finance. So they're very pragmatic. They identified British common law, and they identified a prestigious commercial law judge from Britain, and another one from Singapore. Now they've got a panel of some 20 prestigious judges from around the world, from credible jurisdictions. And those judges actually handle commercial law cases within the zone based on British commercial law. And so as a consequence of that, they succeeded in attracting Citibank and Goldman Sachs and all of the big finance institutions. And Dubai has become the finance hub of the Middle East. They went from basically nothing to a top 20 financial center in less than 20 years by means of importing best of class commercial financial law. So I'm struck by the selection of countries that you've mentioned, because you started this by saying that government is... We need to free up entrepreneurship, and government is what gets in the way. But the countries that you've mentioned, Dubai and China and Honduras, aren't exactly prime examples of human liberty. These are fairly autocratic or authoritarian or restrictive regimes. And so is there a... I guess first, is there a tension there? And then second, why are countries like that willing to set up zones as opposed to, say, freer Western nations? Well, first of all, I'd love for all of them to have both personal liberty and economic liberty. But the fact is, when we look at potential sites for zones, I would say desperation and enlightenment are what we're looking for. And desperation or poverty. The world living in the United States, almost everything I see people care about on campuses anymore are definitely first world problems. Somehow, my sense is the left doesn't care about global poverty anymore because free markets are the solution. There are, believe it or not, billions of people that are incredibly poor. Actually, the New York Times gave a great example just because it's vivid. Nobody cares about children dying anymore. I hate to say it, but the New York Times, in a great cover story on factories, maquilas sort of things in India, talked about these rural women who, in their rural villages, were required to wash the feet of their in-laws and drink the dirty water from the in-laws after washing their feet. And then they go to the city to get a job in a sweatshop and are much happier. When you just, hello, and talk about Dubai, yes, human rights violations in Dubai are horrible. Meanwhile, there are people in Tibet who sell their 10-year-old daughters into sex slavery. So would you rather, in Nepal, would you rather fly to Dubai and be treated like crap or sell your daughter into sex slavery? In Libya right now, they are selling Africans. There are slave markets, and that's gotten some media, thank goodness, where Africans are being sold in old-fashioned 19th century, what we thought were long-gone slave markets. The fact is, global poverty is still an immense problem, and people need to move. I describe the world as zone for poverty. One of the analogies is that if you look at real estate development, often real estate developers will try to get a piece of land designated commercial zoning rather than residential, and very often the value of the land can go up 2X, 3X, 4X, whatever, simply by changing zoning. So instead of from residential to commercial, you can think of zone for poverty to zone for prosperity. Most of the world is zoned for poverty. It was one of the most cruel and horrific things we've ever done to zone the world so that people are so desperate they will go and sell their daughters into sex slavery or go and risk being enslaved. Even Honduran immigrants come into the US. They leave Honduras and then pay coyotes $10,000. They may be forced to smuggle drugs across the border. They may be raped in the process. They get to the US. They have no rights. Somehow we need to remember that the most urgent need is for people to move up from desperate, desperate, soul-grinding poverty to a decent standard of living. If that happens, it happens to be in countries that are not glamorous for human rights and individual liberty, Maslow's hierarchy. Let's get people to the point where they have a decent standard of living. Then lots and lots of bells and whistles. Yes, let's all be as wonderful as the most wonderful places on earth, but we've got some pretty fundamental issues we've got to work on first. You have an article with a great title that is relevant to what you just said. It's called Naomi Klein as a Young Earth Creationist. What are you saying there? One of the things that really frustrates me, and Naomi Klein is a really important symbol of this, is over the last, and this is a very mainstream, over the last 30 years, more people have escaped poverty more than ever before in history. China is the big case. I already mentioned that, but roughly a billion people have come out of poverty thanks to greater economic freedom. No one disputes. The academic critics all talk as if neoliberalism was this evil conspiracy, this horribly evil right-wing conspiracy. Meanwhile, neoliberalism for the most part is another name for greater economic freedom. Compared to 1980, there's dramatically more economic freedom in most countries in the world, not the US, by the way. But in most nations, there's more economic freedom and much more prosperity, and it's been one of the greatest gifts to humankind ever. When I read about academic humanists or critics of neoliberalism like Naomi Klein claiming that through capitalism, the rich get rich and the poor get poorer, that's insane. No credible economist claimed that the poor have gotten poorer in the last 30 years on balance, more people have escaped poverty. We just need to call these people out. They need to be ashamed. I still run into people who are shocked to hear that people in China are better off than 30 years ago. People in India, on average, are better off than they were 30 years ago. Most countries have actually improved. We need to make this absolutely mainstream. Just as a younger creationist, as somebody who denies evolutionary theory, they're wacko crazy, so too I think most of the academic humanities and all of those who assign Naomi Klein clueless anti-liquid neoliberal books need to recognize it's not even credible. It's basically like young earth creationism. Forget it. We can talk about how to make capitalism better for more people, how to help more people escape. There are lots of interesting legitimate conversations, but the notion that capitalism simply makes rich, rich, or poor is insane. You mentioned special economic zones. Is that the same or different than free cities and startup cities or are they all kind of the same thing? That's a great thing. One issue is there's not common terminology because all of these things have happened ad hoc around the world in all sorts of different ways. I would say the notion of free cities and startup cities is more ambitious. Originally, again, zones were simply reduced taxes, regulations. China's innovation, in part, was to go from little export processing zones to city scale. Shenzhen, now the world's manufacturing headquarters, is a very significant city and the entire city is its own. Most of the big zones in China are city scale. The next stage is to combine the Dubai innovation of actually implementing a new legal system at city scale. That's not yet been done, but that's the concept of free cities. I'll give Romer credit here at Charter Cities or startup cities. Mark Klugemann, an advisor to the Honduran government, calls them leap zones. But I think the next important innovation are city scale zones with access to higher quality law and governance. When we are allowed to create those, then we'll really accelerate the end of poverty. What's the incentive for a place like China to do that? If you set up an economic zone and it generates a lot of wealth, then presumably they can take part of that in taxes or it benefits the country and the government directly in that way, but say importing more liberal laws, wouldn't that be scary for a country like China where they say, okay, suddenly this city gets to live under significantly more liberal laws than anywhere else? If it works really well, that's going to look ... They're going to have to explain to the rest of the citizens why they're not doing it everywhere else. We'll know that that's certainly a legitimate concern. In China, they experimented on a small scale first and even what people don't realize is the first zones were designed and implemented around 1980. Even by the mid to late 80s, it looked as if they had failed. Bob Haywood sent me an article, I think from 1986, that announced that the special economic zone experiment had been a failure after six years. Now it's one of the greatest successes ever, but by means of these little experiments, China did want to become more prosperous. I think there were Milton Friedman had actually gone and talked to the Chinese government in the late 1970s. By the way, people always talk about how he went and advised Pinochet for an hour. He went to the Chinese leaders who were at least as wicked as Pinochet. In that China's case, it led in part to great prosperity through zones. The idea is that if a country does want to become prosperous, and this is the desperate notion, they are willing to engage in these experiments. Honduras talking about the tax thing is an interesting case. After the recent Honduran elections, we're not sure if it's going to move forward, but there there's an explicit design in the legislation where the central government gets 12% of the tax raised within the zone, and as a consequence, if the zone does become prosperous, the central government has a source of income. The Honduran who designed the legislation were brilliant, because in addition to that feature, the cash from the zone is allocated between the legislative branch, executive branch, judicial branch, military, and municipalities, and that's a straightforward way to get buy-in from all those sectors. In addition, it must go through a Honduran bank, and basically there are three Honduran banks owned by the few, and so they get the float on this tax. In many ways, it's possible to design legislation so that the right people get paid off as it were in the open, transparently. In addition, there are things such as certain pieces of land designated, so it just so happens the president's cousin owned that piece of land, and it's interesting how that became designated zone, because land values go up with his own. A lot of this, I think when you get into pragmatic zone dynamics, it is a matter of how do we incentivize the decision makers that be so that the prosperity does benefit those who are influential enough to make it happen. Sure, it can still be a risk, and that's one of the reasons why they're often opposition to zones is the rent-seekers who do believe that their rents may be threatened, may own a newspaper, say, and publish really hostile articles in the newspaper. As with all legislation, it's at some level interest-based, and you need to find a set of interests who are sufficiently aligned to support the zone, because short, medium, and long-term, they will gain. Are there any startup cities going right now? I have friends, acquaintances around here in the libertarian world in Washington, D.C., who are working on that and have written about it in different ways, but I'm unclear whether or not there's something that could actually be called a startup city that is going. I keep hearing about we're pushing in Honduras, we're pushing in different countries, but there seem to be a lot of setbacks. Right. Well, first of all, you have to remember all of this takes place at the pace of government, and government is slow. Honduras has been a long, slow battle. There is, I think, really excellent legislation in place, and with respect to the opportunity to create a startup city. Everything's in place. The recent election may be a setback. We do not yet know. But if the new president does support the startup cities in Honduras, it could happen quickly there. There's also an interesting situation in Myanmar where the Karin tribe there was engaged in a civil war. It's the longest-running civil war, something like 75 years. They mostly settled about five years ago with central government more recently. There were a few flare-ups after that, but more recently, it looks as if there's stable stability there. The Karin tribe, in exchange for a ceasefire, in essence, has obtained legal autonomy. There is, again, very early stage, premature to call it a startup city. Might it become an opportunity? It's looking cautiously optimistic. Basically, with all of these things, the way to think about it is that even with a zone, even if a country designates a zone with a new legal system, before you get significant capital and talent to come into it, they need to trust that the government will respect the new rules in that zone. There are all sorts of legal machinery that one can impose, an incentive machinery that one can impose, to increase the probability the government will respect it. But realistically, it could take a couple of years for investors to see, okay, that contractual dispute was settled with the new legal rules in place. That opportunity to confiscate went by, and they didn't confiscate. Just in the zones, the land value gains are one of the business models we have. Often, the land values do not increase much in the first year, two years, three years, four years, because nobody is going to trust the government to respect the rules until there have been a few test cases. China, especially economic zones, looked like a failure for six years. But after there is that credibility that's been built up, then you can see more capital and talent coming into the zone. I would say the Korean tribe claims they have autonomy now. Would I invest $10 million? I don't think so. But you start small and you build up. I see this as a startup. Venture capitalists know that most of their portfolio is going to end up losing money. But you want to bet on a few winners. I think the way to think about this is not that there is one magic project out there, but rather that the need is so tremendous. I would say the intellectual sophistication around this is developing rapidly. I know hundreds of people involved in this movement. Everybody brings a different piece to the puzzle and often they're working with different jurisdictions. Each of these jurisdictions could take five, 10, 15 years before they really prove themselves as a legitimate set of new rules. I think if you think of it that way, then there are several of these zones that are in process and might turn out to be a winner. But we can't yet promise that any particular one is a definite winner. I want to go back to something you said and I want to see how it relates to this. When you were describing your intellectual journey at the start of our conversation, you said you went from standard campus socialist to Chicago school economics and then via IHS to David Friedman style and Arco Capitalism. I was curious how these things fit in with that particular view. Do you see zones and startup cities and free cities as a stepping stone to that? Do you see them as evidence that Arco Capitalism would be ultimately the way to go as a system of pure entrepreneurship? Well, certainly that's the direction I'm going, but to add a little bit of nuance to that. For one, I don't know if you're familiar with Spencer McCullum. Spencer McCullum has something he wrote in an article called The Enterprise of Community. His version is rather than competing mutual defense societies with neighbors and so forth to have geographical contiguous spaces, somewhat like a shopping mall with different tenants. Spencer McCullum's model is a multi-tenant property. With the different tenants renting from, as it were, private landlord, that private landlord could increasingly take on the functions of a state. And I think people, especially in the dispute about anarcho-capitalism, get way too caught up on binaries. Is it or is not? I actually think there's a continuum between a private entity and a government. If you're talking about a private residential community with a homeowner's association and the homeowner's association gradually takes on more and more roles and obtains more autonomy vis-à-vis the central government, at what point exactly does it move from being a private to public entity? You can stipulate arbitrary boundaries. Maybe if they have private police enforcement, but private police enforcement, at what case can a situation be escalated to an outside authority? Well, if it's never, maybe then it's hardcore anarcho-capitalism. But I see this infinite continuum. I'm a big fan of Eleanor and Vincent Ostrom's notion of institutional diversity. I want more opportunities for prosperity around the world. I want entrepreneurs to create those. I actually think one of the competing ways through which jurisdictions will win is by providing higher quality human rights. And so I think a lot of the leftist attack on anarcho-capitalism is they picture these dystopias. What if, instead of dystopias, we had really smart entrepreneurs doing maybe conscious capitalism, non-profit, trust, hybrids, where the real goal is to have brilliant protection of rights, both property rights and human rights. And there would be different bundles of these rights. So maybe in Senegal, you get one bundle of human rights. And in Burma or Myanmar, the Karin tribe, you get a different bundle of human rights. And then Honduran Zede has a different bundle. Right now, there's the illusion that through democracy we have protection of rights in the US. I think anybody who reads, say, Randy Radley-Balco's work knows that's ridiculous. Libertarians are well aware of the extreme violation of rights from every direction. The notion that majoritarianism protects rights is absurd. The Constitution was designed to protect rights. Of course, that's degraded. So as we see rights not being protected by existing jurisdictions around the world, once we get over the kind of simple high school civics fantasy that governments set up to protect your rights, and we start beginning to think about entrepreneurial creation of jurisdictions, there might be some, if you will, evil dysfunctional zones, but I'm a great believer in the marketplace. If you go to grocery stores, you're treated nicely. Entrepreneurs have an incentive to treat customers nicely. And you can say, oh, well, it'll only treat the rich customers nicely. If I put it out well in the US, basically if you're poor, you're screwed all over the place too. And so it's, again, you know, Stigler said, before we consider which one, which opera singer is better, we have to listen to both. I think we need to really look at how badly dysfunctional government is. Not think of anarcho-capitalism as simply a matter of strictly aggressively for profit, but for-profit entities based on an alignment of interests between their various stakeholders, it's kind of conscious capitalism 101, which include we protect rights better than anybody else. I'd love to see, you know, 500, 1,000 different jurisdictions around the world advertising extent to which they protect rights better than anyone else. And I think that's a very plausible world. So one other footnote of that though is, and realistically, the US is going to be the hegemon probably for another 50 years, maybe 100 years, I would much rather have US be hegemon than Russia or China. So when I picture a world of exploding jurisdictions that are entrepreneurial in nature that do become quasi-anarcho-capitalism, you know, as bad as the US government is in its international policy, still rather have the US be the bully than Russia or China is the bully. So with that proviso, yeah, very much moving towards a sort of enterprise of community style anarcho-capitalism. So it's term conscious capitalism that you used a few times. I wanted to get some clarity on what you mean by that and how it differs from standard profit-driven capitalism. And so maybe imagine a company like Apple Computers, which is capitalist right now. What would Apple be doing differently if it were consciously capitalist? Sure. So a couple of things and much of this comes from John Mackey who really, you know, led on this one. So first of all, although there is the machinery of markets that necessitates profitability and ever, you know, the more profitable, you know, higher returns on investment are going to be preferred to lower returns on investment. That said, there are a couple of other things going on. And Milton Friedman and John Mackey had a great debate on this in Reason Magazine maybe 15 years ago. One element is, first of all, people love to, by nature, I think we want to be driven by a purpose. And so, of course, some people, their purpose is to make as much money as possible. But a lot of young employees and talented young people want to work for companies. And you could say it's window dressing, but companies that have a purpose. And so you may be cynical and say it's window dressing, but I actually think, again, Maslow's hierarchy, a lot of young people would rather work for some company where they believed they were doing good than some company that they thought they were engaged in evil. My part of my dissertation with Becker was looking at shadow prices for ideas and culture. And Becker is very empirically pragmatic. The question is, are there shadow prices? So, for instance, might a person of, you know, Talent X, you know, maybe an MBA from a great university, if he could work for, you know, a company that he thought he was eliminating global poverty versus a company that he thought was robbing widows or she. And, you know, there was a salary sacrifice of 20% for the do-gooder company rather than the let's kill all the widows and orphans company. That's a shadow price of 20% salary for working for the purpose driven company. And I think, you know, if we're really talking about killing widows and orphans versus ending global poverty, I actually think the shadow price for working for a do-good company would be higher than that. And, you know, over time, that mechanism, along with the consumer mechanism, again, there are estimates that one third of consumer purchases in the U.S. are based on, to some extent, on perception of the values of the company. Again, a lot of ridiculousness out there. I'm not claiming that it all makes sense. But I think that due to Maslow's hierarchy, as we become more prosperous, more of us are going to want to make decisions of various sorts based on meaning and purpose. And we want to be allied with good guys. And I think that that is an active mechanism. I actually want to write a book on Mises plus Maslow, because basically, yes, Mises is, you know, great economics, and it's as hardcore, you know, libertarian as you wish. But there are Maslavian mechanisms that are also active, and I believe those will grow. And if you combine, you know, reputation mechanisms, I think there's a plausible reason to believe that those, that direction will increase in the 21st century. If we go back to the discussion of sort of special zones and increase the amount of jurisdictions, it seems that although there would be very good ones, you said protecting human rights and trying to get people to come to you because you protect human rights, there's an inherent problem of right now, the poverty, the right of exit is very difficult if you're poor. And there definitely are people. I mean, you brought up selling into sex slavery. That's a for-profit in sets being driven by the profit motive. It doesn't have any of the conscious capitalism, obviously, but it's a really good example of how bad the profit motive can be. So it seems that if we did create certain areas like that in a place where, like Myanmar, where there's a lot of human rights abuses going on right now, it could go really badly for the poor as opposed to the relatively well off who could leave, just like we can leave McDonald's and transporting yourself and your family and whoever else is just not available to the poor. So that's a great question. I want to back up and say one of the most, I wrote an article called Academia's World's Low-Eklating Social Problem because I think one of the most damaging aspects of academia is so many people come out of universities with degrees that lead them to think they know what's going on in the world, but so much of university life is stupidly anti-capitalist. This goes a little back to Naomi Klein, young earth creationist, where if people think that capitalism is the profit motive, they really are not very well educated. Just to focus, new institutional economics is not sexy and it's not simple, in a way libertarianism is much simpler to understand, but if one starts really learning about institutions and say knows a little bit about the work of Nobel laureates, Kos and Buchanan and North and Williamson and Ostrom and so forth, then one sees that the way I look at it is what we're really trying to do is to create systems where entrepreneurial value creation is possible, where there are win-win systems and one does need to set up governance and protection of rights and property rights and transaction costs and all sorts of things who are more likely to get win-wins than not. And that's not an ideological issue. There are actually different ways to set up different situations to ensure positive outcomes rather than negative outcomes, but those positive outcomes are much more aligned with free market economics than they are with status absurdities that anti-capitalists promote. So the number one thing is first, let's realize that capitalism has brought billions of people out of poverty. Then the next thing is, okay, and then yes, bad things can happen, but in addition to blaming the pimps who are trading in the young girls of sex slavery, I want to point the blame in part on governments that are really perpetuating poverty. If we had a for-profit corporation that was keeping a billion people in Africa poor, there would be unbelievable outrage. One of the thought experiments I often try to do is when you see some bad or stupid thing that government has done, and of course those things are ubiquitous, imagine the global rhetorical blowback if it had been a for-profit corporation doing exactly the same things. So if we knew that, oh, more economic freedom led to prosperity and these entities are keeping people poor by stealing them, keeping economic freedom from them, imagine if evil corporation X was responsible for this. The campus would go absolutely ballistic. So I think a lot of this is learning to focus. I wrote a post called Hierarchy of Moral Outrage for Let a Thousand Nations Bloom, where yes, union carbide in India, the Bhopal disaster, bad thing. There's a anti-capitalist article saying the worst crime you've never heard of and it's talking about Bhopal. From my perspective, Bhopal relatively scale-wise, tiny, for me the worst crime you've never heard of is the fact that nation states are keeping people poor unnecessarily around the world. Six billion people basically enslaved in poverty unnecessarily. So if we open things up in zones and there is some more sex slavery, that's a bad thing. At the same time, we need to focus on the fact that governments are keeping people poor. The whole almost all bad things are because people are poor. Fred Turner, a wonderful poet, has an article called Make Everybody Rich. Basically, the solution to all problems is make everybody rich. And through economic freedom, classical liberal rule of law, secure transferable property rights and economic freedom, we can make everybody rich. And why are we not doing it? Because anti-capitalism and the states they support. So as Trevor mentioned, the beginning, the subtitle of your book, so ultimately, the conscious capitalist can solve all the world's problems. So I suppose I could ask, are there any problems that you think we need government for? But maybe another way of asking that is, so someone listening to this who is perhaps more skeptical of outright markets and entrepreneurship might say, that all sounds well and good, but really what you're describing is still, you're describing governments enabling people to then innovate and create wealth. That these zones that are set up are still inside of regimes that have provided defense, have provided a level of safety, have provided a level of baseline wealth, have set up rules that have allowed markets to progress to a certain point. When you're importing other rules like in Dubai, you're simply importing the rules from a different government. And so really what you're showing is that, yes, we can get more wealth if government is perhaps less heavy-handed, but we still really need it to make any of this operate at all. And of course, no one would disagree, even the most status person, that there are really bad governments and that there are better governments. So they say, yes, we need better governments. Well, what's a little bit funny about this, when you suggest that governments protect people's rights and provide rule of law and so forth, I think anybody who spends much time in many developing governments would find that laughable. I'll give you a specific example. When I was in Honduras working on the Zed project a number of years ago, NPR, since some interviewers down there to interview, it turned out it was Romer and Octavio Sanchez in the final cut, but when they were interviewing me, they said, what makes you think that you can do a better job than the Honduran government in providing these services? And I looked at them, and NPR is pretty left-leaning, and I looked at them and said, could we do any worse? And they immediately acknowledged, okay, done. These governments, I've been in government offices around the world where people show up two or three hours late. You go in and ask what are the rules for a project. They have no idea, and it's not all incompetent. I have huge respect for some of the people who are working within the Honduran government, but as a system, most governments are really, really incompetent, and some combination of evil and incompetent, because they're all the cronies and so forth. I think people need to become, James Buchanan's word, government without romance. If a private provider were providing the level of service of government services that we see in most of the developing world, they would just be unbelievably outraged. And one of the things that pushed me farther along in the NCAP direction was Bruce Benson's wonderful work, the Enterprise of Law. He was a guest on Free Thoughts, actually. Yeah, I think he's underappreciated in a big way, because just going back, my main focus has been in education, and when I see what I can do in a small school, where we personalize education and change lives, just do a little digression on this. Often I find students who are depressed, have been treatment centers. Sometimes they're too academically advanced. Sometimes they're considered learning disabled, but you're flexible, make the curriculum more flexible. The so-called learning disabilities go away instantly. I see all sorts of young people whose lives, I would say, are being destroyed by conventional, one-size-fits-all education and stupid bureaucracies. And I think immediately, why do we have to do this? So in various ways, I know how dysfunctional the education system is. Reading Bruce Benson's Enterprise of Law, I realized all the public choice mechanisms. And again, it's important to realize this is not about saying these people are bad. They're heroic public school teachers, heroic public school principals. It's a system that when the incentives are messed up, you get terrible outcomes. When you can't eliminate the dysfunctional systems, and when you can't reward the better entrepreneurial systems, then the dysfunction perpetuates. And Benson's Enterprise of Law showed me all sorts of ways in which I had taken for granted that legal systems more or less work. Education is crap, but the legal system works. And the more I've read, not just Bruce Benson, but a lot of Randy Burnett, a lot of libertarian leading people who have written about the actual function of the legal system. Radley Dahlko is another great one. It's so nightmarish. I mean, I think this is, talk about white privilege. I would say upper middle class educated white people can get away with all sorts of things, not fear being entrapped in the legal system. Somebody who doesn't have those protections, it's an absolute nightmare. One great John Hazness has a great article called, I think, The Ordinariness of Anarchy. Everybody thinks anarcho-capitalism is this weirdo exotic thing. Haziness makes a comparison with campuses. When I went to Harvard, my roommate was a drug dealer. Drugs have been de facto legal on elite campuses for decades. And meanwhile, if a poor black kid gets caught in the same thing, it's a nightmare. The homes are raided, the dog is shot, innocent human being shot. So when we have this delusion that somehow government is fair or the legal system is functioning, and you see a kid from Harvard can deal drugs, make money, a kid in the black neighborhood, family shot for no reason. Like, what planet are you living in? This is why one of the, I don't like kind of right-wing cliches about left media, but I would say there's not a balance in terms of the destruction caused by government with the bad things. Yes, they're bad capitalists and Bernie Mato and so forth. But if you start to really become aware of just how chronic and systemic and really evil actions routinely take place via government, there was a public, so a lot of media on private prisons and how evil they are, there was a public prison in Florida for most of the 20th century that routinely killed people, and there's a huge burial ground under this. And so yes, they're bad things that happen to private governments, they think, but because of evolution, we know, oh, if there's a selfish incentive, then people can be bad. But there's this stupid romance about government where, oh, buy the people for the people of the people, and we get good outcomes. No, buy the people of the people for the people, we get chronic injustice and violence and degradation, and we, you know, privileged educated people, we get away from most of it. But if you look at the actual facts of the ground of much of reality, mass incarceration of African Americans, it's a nightmare out there. So it seems safe to say that you're not a big fan, comparatively speaking, of politics as the best way of trying to rectify some of these things. Frank Zapp are brilliantly said politics is the entertainment division of the military industrial complex. It's mostly a joke. And, you know, Trump makes the joke a little bit more obvious, and it can be a painful joke. When I learned public choice theory, I was depressed for two years because I'd been raised, you know, our culture raises us to have this rosy view of government. And it's as if, you know, you fill in love with somebody and you find out that they're, you know, deceitful, cheating scoundrel. We are trained, I think, in some ways, the high school civics romance of government is actively damaging because it makes us believe. And I actually have a lot of compassion for my friends on the left because they were trained to believe that this thing works. And it doesn't, you know, on small scale. Again, local government, I'm very interested in Switzerland, where the cantons, at the canton level, governments seem pretty functional. I'm very interested in why Scandinavian governments seem to be a little bit more functional. But when you realize that Finland is smaller in population than Houston, and is the most ethnically homogeneous country in Europe, think, oh, could we even get Houston to function as well as Finland? I don't know. That might be really hard. So, you know, again, small scale, yes, we need governance. I think a mistake many libertarians get into is we sound anti-government. I'm for good governance, passionately for good governance. And then let's be radically pragmatic about how we get good governance. But the first step of getting there is to get rid of the rose-tinted glasses that make us believe that majoritarian democracy at large scale is anything but radically dysfunctional. I want to close out by asking you about something that you've had some involvement in. You were on the board of the Seasteading Institute, correct? And there's some interesting developments going on there. So what are we seeing with Seasteading? What is it, and then what's happening now? So Seasteading is very much part of the let's create new jurisdictions. When Patrick Friedman created the blog, Let A Thousand Nations Bloom, Seasteading, along with I introduced the idea of special economic zones as an alternative, there had been many people trying to create their own sovereign jurisdictions. So again, it's a portfolio sort of situation. So at sea, in theory, we should be able to create new jurisdictions. Of course, there are huge technological problems at the open sea, which is why over time Seasteading has moved away from deep sea projects to near shore projects. And that ultimately led to Tahiti being actually signing an agreement with Seasteading to have a near shore pilot project with its own law and governance. So they have actually got an agreement in place that would allow for a very small experimental community. Tom W. Bell, with whom I worked on legal issues before, he's one of the founders of the idea of polycentric law. He's working to create the governance system with that. He's been studying French law and how to integrate or work on the boundary between the common law legal system on the one hand and the French legal system on the other. But optimistically, there may well be a little pilot Seastead in the next year or two. Interesting. So then for people listening to this who aren't in a position to move to special economic zones, who aren't in a position to move to a boat or a Seastead or an oil rig, who want to help in this way, what can ordinary people do to participate in this vision that you've outlined today? That's a great question. Actually, one group I would recommend is the Startup Societies as an online group on Facebook. And they're organizing conferences. I'm going to speak at one of their conferences in D.C. in January. And I think a number of things. On the one hand, we need to explain to the world, A, that governments are responsible for poverty, that free markets cause prosperity. In its 101, it should have been obvious, 30, 40 years ago, 102. Adam Smith basically got it. But at any rate, we need to mainstream this. No one should still believe that neoliberalism caused poverty. So let's get rid of the young earth creationist idiocy out there that still on campuses, especially among humanities professors. So we need to absolutely make people aware of that. Then I think we do need to explain. I think it is important to go beyond as it were libertarian talking points to really, I have huge respect for Douglas North's natural state concept. We need to get into what does it take in terms of property rights and rule of law to create prosperity? We need to help people understand how it is that some countries have become prosperous and why more countries need more economic freedom. My wife is a Senegalese entrepreneur. She's actually has a TED talk coming out and is the leading proponent of explaining why African countries are poor because of a lack of economic freedom. I often speak as well and almost nobody knows that African countries are drowning in red tape and are heavily regulated. So there's a lot of basic economic development 101 that needs to be explained. Going beyond that, I think we need to get people to think about applying entrepreneurial creativity to the development of new jurisdictions. And it's not about some simplistic anarcho capitalist dystopia. But I think if we could mainstream this to the point where we had lots of people thinking about how would you create a zone that protected human rights better than do existing jurisdictions? And part of that is let's get really honest about how poorly governments today protect human rights. And as we kind of change this perception from government good and free markets bad to a much more nuanced, how can we design institutions on small scales and nurture those institutions so they're better for all human beings? Then also we'll need a pipeline of people with nuts and bolts skills. So we'll need a lot of entrepreneurial legal experts. I've worked with a lot of illegal experts. Some of them are really boring and not very creative. Others are very visionary. We need a whole generation of visionary legal experts. They're going to be countless concrete legal problems to be solved in moving from nation states to innovative jurisdictions. Also municipal services. We're a big fan of the Silver Springs, Georgia. Small, small Oliver Porter created this tiny government that was three or four people and subcontracting out the rest of municipal services in Sandy Springs. It's not Silver Springs, Sandy Springs, Georgia. And we've talked to Oliver Porter about the ways in which he wrote those contracts and how you've got different companies to provide different municipal services. Environmentalism. I'm a big believer in protecting the environment and Honduras. I've gotten to a granular level of, okay, governments have laws in the book. In general, in poor countries, they're not enforced to protect the environment. How do we actually create cost-effective ways for local, as it were, quasi-private governments to protect the environment? And some of this does get into a cost issue. Entrepreneurs are great at providing higher quality, lower cost and more specialized. Because governments have dominated, say, environmental protection, a lot of environmental protection is just incompetent. So when you start trying to do it from a private perspective, exactly how do you monitor, say, you know, effluence going into sensitive coral reef in an effective way? And exactly how do you ensure that there are appropriate penalties in place? So when I go to this bigger picture of entrepreneurial solutions to all problems, you know, I don't care if it's a nonprofit or a trust or a voluntary, you know, religious organization or a for-profit. I don't care what the entity is. I think people are way too, for atavistic reasons, attached to the motivation. We need to get away from exactly how, you know, that high-level motivation is and get into the granular level of incentives. And this is why new institutional economics is important, to see how do we create more effective structures for getting the job done. And in some ways those will be more effective systems for environmental protection, human rights protection, health and well-being of, you know, as an educator, young people, very high priority for me. If we could, as entrepreneurs, design entire safety nets, entire welfare systems, child protective services, most people, you know, libertarians, we don't care about children, I'm very interested in if you were an entrepreneur, child protective services is really messed up. You hear about kids being taken away, killed by foster families, horrible things, unjust injustices. Okay, if you're an entrepreneur, how do you solve that one more effectively? I don't know off the top of my head, but I do believe that if we have hundreds of thousands of our brightest and most ambitious people looking very carefully at systems and incentives in order to create a process of continuous improvement, we'll actually, through entrepreneurship broadly construed, be better at child protective services than our existing governments. And I could go on and on. I think one of the worst problems about politics is people get stuck in right-left idiocy. Again, if it was an evil plot to keep us thinking about ways to keep ourselves down, we would never go for it. It's not just the Russians influencing it, the Democrats and Republicans influencing us to think about politics non-stop when in fact, they're a positive, win-win, non-zero-sum solutions. And the more people we can separate out from the tribal bigotries of left-right politics into proactive entrepreneurial value creation that benefits everybody, the faster we'll get there. Thanks for listening. This episode of Free Thoughts was produced by Tess Terrible and Evan Banks. To learn more, visit us on the web at www.libertarianism.org.