Model City Monday 12/6/21

How sinister do you have to be before you get to call your volcano-based structure a "volcano lair"?

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Tegucigalpa, Honduras

The socialist opposition has won Honduras’ election and pledges to fight against charter cities there. "Immediately upon assuming the presidency, we are going to send the National Congress an initiative for the repeal of the ZEDE law," incoming president Xiomara Castro said.

This was what everyone was afraid of. But the last party tried pretty hard to protect ZEDEs from trigger-happy successors, and the constitution currently says that the only way to get rid of them is to win two consecutive 2/3 votes to do so, then give the existing projects ten years to wind down.

Can the socialists get a 2/3 majority? Wikipedia predicts the incoming Honduran Congress will look like this:

These are still preliminary; this person argues that the Nationalists might pick up a few more seats as more conservative rural areas get counted.

Liberty and Refoundation (the socialists) will probably enter into a coalition with the Savior Party and have 65/128 seats for a bare majority. They need 86 votes for a 2/3 majority, which in theory they can get if the Liberal Party agrees. The Liberal Party seems centrist and hard to pin down, but this article includes the following great quote:

"The Liberal Party opposes the ZEDEs because, above all, they undercut our national sovereignty, and because we don’t want them to become hideouts for extraditable criminals," said [Liberal Party leader Yani] Rosenthal, who served a three-year prison sentence in the United States for money laundering and participating in a criminal scheme with the Los Cachiros cartel.

Rosenthal kind of goes back and forth elsewhere, but in the end I think he’ll vote with the socialists on this. Still, there’s some speculation that his party might not vote as a bloc, and even a few defectors would be enough to prevent a supermajority.

In theory, even if the socialists win two consecutive votes, they have to give the projects ten years to wind down. Ten years is forever in politics, and probably before then the capitalists will get back into power and say never mind, everyone can keep doing what they’re doing. The socialists are aware of this and say that their supplementary strategy is to have everything about the ZEDE law declared unconstitutional.

This should be a hard sell, because ZEDEs are a constitutional amendment, plus the current Supreme Court explicitly ruled a few years ago that they were constitutional. But apparently the Honduran Supreme Court can declare constitutional amendments unconstitutional if it really wants. And the new government will get to appoint a new Supreme Court in two years, and although the exact process is complicated, they may be able to get people who agree with them on this.

Also, incoming president Castro is married to Manuel Zelaya, a former president who tried to pull an Andrew Jackson after the Supreme Court ordered him to stop holding an illegal referendum to change term limits in his favor. He ordered the military to hold the referendum anyway, and was only ousted after the military couped him instead. So this is not exactly a family known for their deep respect for the exact wordings of laws or court rulings (not that anyone in Honduras has really excelled on that front). See further speculation eg here and here. And here’s Mark Lutter from Charter Cities Institute on the elections and the future.

Conchagua Volcano, El Salvador

Meanwhile, insane El Salvadorean president Nayib Bukele says he is ordering the construction of a coin-shaped city dedicated to Bitcoin at the base of a stratovolcano:

"Residential areas, commercial areas, services, museums, entertainment, bars, restaurants, airport, port, rail - everything devoted to Bitcoin," the 40-year-old said.

And:

The president, who appeared on stage wearing a baseball cap backwards, said that no income taxes would be levied in the city, only value added tax (VAT).

He said that half of the revenue gained from this would be used to "to build up the city", while the rest would be used to keep the streets "neat and clean" […]

Mr Bukele did not provide dates for construction or completion of the city, but said he estimated that much of the public infrastructure would cost around 300,000 Bitcoins.

It’s tempting to dismiss this plan as crazy. First, this photo:

Second, Bitcoin miners don’t want a city the shape of a Bitcoin with a central plaza in the shape of a Bitcoin logo with a central plaza in the shape of a Bitcoin logo. They want cheap electricity. Bukele has promised that there will be cheap geothermal power from the volcano, which sounds good, but this article says El Salvador’s existing geothermal energy costs about 12 cents/kilowatt-hour, much higher than the 4 cents/megawatt-hour miners can get in the current cheapest areas. Maybe El Salvador could do a really good job upgrading their energy infrastructure, but at some point you’re subsidizing this rather than using it as a cash cow.

And third, this isn’t even the stupidest plan to build a cryptocurrency-themed city in the Third World. That arguably goes to Akon City, a thing where a pop singer named Akon was going to build a cryptocurrency city in Senegal. Now, without any construction having started, they’re planning to build a second one in Uganda! All competing for the same handful of crypto companies!

But I looked into Bukele to see if he was a moron with a habit of coming up with terrible ideas. It seems like no. He rose from nothing to become El Salvador’s first outside-the-traditional-party-system president, and has an approval rating of around 90%. And apparently he’s presided over a historic drop in the homicide rate of this previously murder-capital-of-the-world country. Although I’m betting that one day he’ll make a great Dictator Book Club entry, I’m prepared to give him the benefit of the doubt on "doesn’t do stupid things for no reason"

What’s the non-stupid explanation for this? Maybe it’s supposed to be a signal. You can give up 5% of the way through, but even trying to build a Bitcoin-shaped city at least shows very conclusively that you’ve got a crypto-friendly regulatory climate, so many easily-spooked crypto companies will flock to you. This makes sense in the context of big crypto companies moving to the Caribbean for regulatory reasons, eg FTX moving to the Bahamas and Binance moving to the Cayman Islands. But if I understand correctly, both of these companies make on the order of $1 billion a year. If El Salvador can tax them at 5% (dubious, since a big part of promising a friendly regulatory climate is low taxes), that’s still only $100 million if they can capture both of them. Which they can’t, because these companies seem happy where they are. And I don’t think there are a lot of similarly-sized crypto companies looking for Central American homes that I don’t know about. And even though El Salvador is pretty poor, it’s not so poor that $100 million is worth embarrassing themselves over. So I’m stumped.

EDIT: See this comment.

Praxis, aka Bluebook Cities, the Internet

Speaking of stumped, who are these people?

Right now, they’re a web page with a lot of buzz promising the City Of The Future, in very poetic language:

Praxis is a grassroots movement of modern pioneers building a new city. We are technologists and artists, builders and dreamers. We are building a place where we can develop to our fullest potentials, physically, culturally, and spiritually. Bitcoin was developed as a financial technology with political goals identical to those of the Founding Fathers: liberation. The ultimate end of crypto is the possibility of a future for humanity unshackled from the institutions that seek to limit our growth. Our ultimate goal is to bring about a more vital future for humanity, and we will use technology to achieve this righteous end.

Our civilization is unwell. We eat food that kills us, we’ve lost sight of beauty, and we neglect our spiritual lives. The world is deranged and decayed, and this frightens people. We don’t look up from our screens; we seek to live within them. Crypto is a fundamentally political technology -- escape to the metaverse is a betrayal of the principles on which it was founded. We are descended from the people who built Rome and Athens, who dared to split atoms and voyage to the Moon. We can build new worlds not just of bits, but of atoms.

But where is this city? What will its policies be?

As we leave old lands, our values are our compass. Like wolves, tribes of pioneers are muscular by necessity. For voyaging tribes to settle, they must perform murmurations: intricate coordination with little communication, at scale. This is only possible with a strong sense of asabiyya (group feeling derived from deeply-held shared values). Our values inform the destiny we desire, and for which we struggle. Asabiyya is forged in this struggle. With asabiyya, pioneers can earn the divine mandate to build a city. Cities are the fount of human ingenuity. In cities, people enjoy their fullest potential by contributing their resources under the auspices of civilization.

Who even are you? What experience do you have with city-building?

Civilizations rise and fall. All around us, we see civilizational decay. The people are not vital: physically, culturally, spiritually. We live in an era of obesity, remakes, and pollution. We are losing the divine mandate, and in an era of absolute weapons, what’s at stake is everything. But perhaps there’s some glory in death by a light brighter than a thousand suns. A worse fate may await humanity: atrophied bodies submerged in gel, fed synthetic bug paste, minds occupied by the petty amusements of a corporate metaverse. There, nothing is at stake; there are no frontiers to explore; no growth is possible. Nothing to live for, and nothing to die for.

As we walk between these twin fates, the light of our civilization dims. But beyond the horizon, we see a new light emerging. Like the sun at dawn, it cannot be stopped. Vitality itself is the foundational value of this new civilizational form, and we have the technology to enact our moral imperative as never before.

You’re not answering my…okay, fine, whatever, forget it.

As far as I can tell, Praxis is two 25-year-olds with no previous experience, armed with about $10 million in Peter Thiel’s money. Peter Thiel is a smart person known for having good business sense, but he’s also known to have a weakness for young people who dream big and sound like purveyors of esoteric secrets. I wonder if the simplest explanation is just that this is one of the cases where his weakness got the better of his sense, and now these two random people have $10 million earmarked for building a city, and no idea what to do.

But that’s not how they put it! The way they put it is - all previous charter city founders have started by approaching governments and pitching their ideas. But there’s a chicken-and-egg problem: governments don’t want to give land to a purely hypothetical city that might not pan out, and the city can’t pan out until governments give it land. Praxis’ plan is to build the community first, then go to a government saying "Here’s 50,000 people who have agreed to join our city, and lots of businesses and organizations that are excited about it. Please give us land for our guaranteed-success, concretely-existing project."

Now this is a different chicken-and-egg problem: why join a community of people with no land and no plans? Praxis writes:

What if we try to draw people to new cities not on an economic basis, but rather on a spiritual one? Which city (or country) founding projects have succeeded that have drawn people on a predominantly non-economic, but rather spiritual basis? Among others, Israel and America. Both groups were oppressed, and sought the freedom to live by their values. Both felt the intangible pull of the frontier. Both had a keen historical instinct. This is how cities with spiritual significance are founded.

The correct approach to city building in this new world is demand-first (or as Balaji Srinivasan calls it, Cloud City first). We build the citizenry before the city. First, we create communities of true believers, organized around shared values, online. People move to cities for people, and it follows that if you collect a group of people who all want to live together, they’ll all move together if at a moment in time everyone else does, too. Today, we have new tools. The emergence of Web3 enables us to supercharge communities with self-ownership, governance, and determination. Once you build a community of people ready to move to a new city together, you can self-finance the entire project. With something real to offer nations, conversations with governments become productive (e.g. Gigafactory). That’s how you make the risk dominoes fall.

The problem is, Israel worked because it had Judaism. Judaism is a very specific belief. Prospera is specifically libertarian, Telosa is specifically Georgist, and even the Bitcoin-shaped volcano city knows what it’s about. What is Praxis? The use of "atrophied bodies submerged in gel, fed synthetic bug paste" as a warning reads very slightly right-wing to me - there’s a right-wing meme about how the media keeps trying to get people to eat bugs, and how this is the shape our future dystopia will take. But whether I’m right or wrong, the fact that it’s hard to tell is a problem.

The only other clues we’re getting are their Discord, which seems to be focused around getting a currency called PRAX for completing tasks. Once you get enough, you can become a Member, which seems to be where the real excitement starts.

I’m not even being sarcastic - I expect being a member to be quite fun. I say this because when I was a teenager I was part of a bunch of country simulation projects, some of which got past the inherent nerdiness of being a country simulation project exactly the same way Praxis is doing it - by saying that we were going to become a real country someday, as soon as we were big enough to convince people. These were usually fun and interesting and educational, and I made lots of great like-minded teenage and twenty-something friends. But none of them ever came close to becoming a real country, and I’m not sure it was merely for lack of $10 million.

I hope I’m wrong and they manage to forge new lands through struggle to uplift the human spirit or whatever.

Elsewhere In Model Cities

  • Vitalik Buterin on the intersection between local government and blockchain technologies. He recommends they "start with self-contained experiments, and take things slowly on moves that are truly irreversible", which is a weird way of saying "what we crypto leaders really want is a city at the base of a volcano, shaped like a giant Bitcoin".

  • I’m not going to be able to fund Charter Cities Institute through ACX Grants this year, but I told them I’d give them a signal boost here. They’re a great organization, they could be doing more work with more funding, and if you’re at all interested in charter cities they’re the people you want to be supporting. If you can’t get in touch with them directly, let me know and I’ll make an introduction.

  • The California city of Oroville recently passed a resolution declaring itself a "constitutional republic" as some kind of opposition to COVID mandates. It later clarified that it was not seceding from the US, but reiterated that it was now "a constitutional republic". The best-case scenario here is ending up with a Conch Republic style colorful local legend; the worst case scenario is that they actually resist a federal law and everyone involved gets arrested.

Discussion

Re: El Salvador. You should read Matt Levine on finance! His writing is a lot like yours. On his newsletter from 11/22/21 he described at length the "Volcano Bond" that El Salvador is floating for this, which pays off considerably less than a regular bond for El Salvador's government. Okay, but the Volcano bond also comes with exposure to Bitcoin... okay but it looks like this Volcano bond is still worse than a proportionate basket of the regular governmental bond and some bitcoin. So who would buy this?

Bitcoin enthusiasts who love hanging out with a president who has a baseball cap on backwards. So this president gets a healthy premium on a bond for his government (which has a terrible credit rating btw) just by playing into this niche culture.

Sounds like a smart guy to me.

> El Salvador's homicide rate fell from 52 homicides per 100,000 people in 2018, the highest in the world at the time, to only 3.7 homicides per 100,000 people in January 2020

The quote is from Wikipedia, and Wikipedia's source for the second number is in Spanish, which I can't read - but as written, this is comparing homicides per year with homicides per month.

Assuming homicides are equally likely in all months (probably not true, but whatever), 3.7 homicides per 100k people in January would correspond to 44.4 homicides per 100k people in all of 2020. Still less than 52, but I but less impressive-looking than the other number.

Author

That's a good catch, but I would have expected them to annualize the homicide rate.

Here's a graph that shows a 5x decrease in homicides, which is less than 10x but more than 20% - https://www.statista.com/statistics/696152/homicide-rate-in-el-salvador/

The source actually says "3.7 homicidios diarios hasta el 19 de Enero, 2020" - 3.7 daily homicides as of 19 January 2020, so I think it's not talking about "per 100,000" at all, even though the older number in the same source is.

((3.7 / 6,830,000) * 100,000) * 365 = roughly 19.77 per 100,000 per year, unless I messed up the math.

Maybe this helps?

"El Salvador has made notable advances in reducing homicides since it earned the undesirable title of deadliest country outside a war zone in 2015 with more than 6,600 murders in a country of almost 6.5 million people. Five years later, the country closed out 2020 with the lowest homicide rate in more than two decades with 1,322 homicides, according to government statistics."

https://foreignpolicy.com/2021/03/03/el-salvador-homicide-historic-low-2020-gangs-migration/

Wikipedia now reads "As a result of his Territorial Control Plan, El Salvador's homicide rate fell from 52 homicides per 100,000 people in 2018, the highest in the world at the time,[33] to only 36 homicides per 100,000 people in 2019.[34]"

The quote was still there when I looked at it! I suppose I shouldn't be surprised that some ACX readers are Wikipedia editors.

Praxis is rubbing me up all the wrong ways.

First, setting aside the woolly language, their webpage is awful.

Second, if that genuinely is their notion of a temple, it too is horrible; it's the bare concrete look. If they can't spare any of that ten million to slap a coat of paint on, I'm not interested. They say we have lost sight of beauty, but I see no beauty there.

Third, they possibly *could* sound more like a cult, if they really put their minds to it, but come on:

"There, you can interact with Members and complete Tasks for PRAX to increase your chances of admission to our Membership."

Woo-hoo, initiation into a secret society. What is this, the Georgian era (not Regency, the other Georgian era) and its proliferation of Secret Societies, springing up out of the fin-de-siècle occultism? At least Dion Fortune was entertaining, this just sounds vaguely sinister or at least exploitative. I know the tradition is to put aspirants through a hard time, but first demonstrate that you are worthy to be called 'Masters' before telling me to do work for you. This sounds less like Crowley's Ipsissimus and more like those Gor play-acting groups.

Besides, wasn't there a recent post about one of these types of "we're going to re-imagine and re-invent the world" groups which went badly wrong?

In short, give me colour, heraldry, more concrete proposals and that you're not a bunch of twenty-five year old guys calling yourselves "masters", and I'm more open to conviction.

Author

Just to be clear, the "masters" thing is taken from a sarcastic post making fun of them, not from their own words.

Man, I came to post almost exactly this sort of comment. Even if they are completely Not A Cult, it certainly sounds like a cult and their completely Not A Cult city will be full of people who fall for cults.

Huh? How is crypto related to diet and beauty and spirituality? I don't get it. Some of these things seem so bizarre to me because it seems like they live in a totally different world. In their world, rules enforced by governments are the thing they see stopping them from doing what they want but like for most people being able to pay for housing and medicine and food and having money left over to invest in anything is the thing stopping them.

Author

I think there's a postmodernist/Marxist case that our distorted views on beauty and spirituality are downstream of our centralized economic and political systems, although I don't think I'd be able to explain it in my own words.

> The use of "atrophied bodies submerged in gel, fed synthetic bug paste" as a warning reads very slightly right-wing to me

They are hard to pin down.

There is a strong purity vibe throughout their prose which I would associate more with the right-wing. There is also a new-age hippyism that I'd associate with the left-wing. Passages like the one you highlighted remind me of some of the arguments fascists made for third-way economics: soulless cities with faceless citizens. Something along the lines of the market being good at getting things done but bad at deciding what those things will be. If you let the markets choose, it'll pick something bland, soulless, and inhuman to pursue in the name of efficiency.

Praxis really gives me that vibe.

I know associating anything with fascism is seen as condemning it, but I don't mean to do so in this post.

From the language, I'm almost certain Praxis is right-wing. Moreover, I can't imagine any leftists that would opt to use the founding fathers, Israel or a Tesla gigafactory in the manner that they have.

"The world is deranged and decayed"; "tribes of pioneers are muscular by necessity"; "All around us, we see civilizational decay" are all said within a few sentences of each other and all read like they belong in an unsavoury pamphlet.

And I can find a bunch of things I can't see righties using: "Cities will be reorganized around shared values, rather than the labor market principles", "self-actualize", the use of "spiritual" instead of "religious".

I don't see it fitting in either side of the spectrum. It has some draw to both sides, but seems like it is really trying hard to be orthogonal to left vs right.

"atrophied bodies submerged in gel, fed synthetic bug paste"

As a gentleman of means, I expect all-natural bug paste.

correction: search and replace megawatt with kilowatt.

Several Caribbean countries compete hard to attract rich immigrants and investors with their citizenship by investment programs. I've looked deeply into citizenship by investment in Dominica, which would cost $130k to get me a Dominica passport within 6 months to sorta replace my US passport if I renounced US citizenship for tax/political reasons. That would give the right to spend up to 6 months a year in Schengen, plus visa free access to most of the rest of Europe, South America, and Asia. Wikipedia has a convenient map: https://en.wikipedia.org/wiki/Visa_requirements_for_Dominica_citizens

I think Bukele is genuinely just really enthusiastic about bitcoin and that's the main reason why he's doing this. It's rare for politicians anywhere to do rigorous cost-benefit analyses about policies they like so I won't grade him too harshly relative to other politicians.

But it's not just a boondoggle based on his personal cheerleading for bitcoin. The potentials are way bigger than just a couple of crypto exchanges. It's about attracting crypto-rich retirees, tourists, and businessmen from all over the world. Total crypto marketcap is 2.4 trillion. If the average crypto owner spends 5% of his crypto wealth per year, that's a $120 billion/year pie to fight over. That's a couple orders of magnitude bigger than just FTX and Binance. If Bukele can get hodlers to spend an extra couple billion a year in El Salvador, by building his brand on social media with stunts like this, that's huge. El Salvador's entire GDP is only 24 billion. He doesn't even need to actually build the city. The two billion will be taxed several times as it passes through various hands down the supply chain, and additional economic growth from investments could increase the tax base.

OTOH his proposed construction cost is 300k bitcoins, which is about $15 billion, or two thirds of El Salvador's GDP. Spending two thirds of GDP building a model city seems way too ambitious, if they actually do it. I am not confident it will increase tax revenue enough to cover the interest on $15 billion of debt.

He seems not crazy at all in this interview with the Council of the Americas: https://www.youtube.com/watch?v=qPs_eif3Z8Y It sounds like he puts a very high priority on free trade and attracting foreign investment to develop El Salvador. His style of speaking sort of reminds me of Elon Musk (another good option for the dictator book club after he becomes God-Emperor of Mars).

Author

"correction: search and replace megawatt with kilowatt."

I've confirmed that my source said megawatt - is that a ridiculous enough number that it has to be wrong?

Definitely. I've looked deep into crypto mining. Very cheap electricity prices (e.g., hydroelectric in Chelan county Washington) would be around 4 cents per kilowatt-hour. Here in Las Vegas, electricity is 10 cents per kilowatt-hour.

Here is a map of US electricity prices where the lowest bucket is <5 cents/kwh and the highest bucket is >15 cents/kwh: https://commons.wikimedia.org/wiki/File:Electricity_price_map_of_the_United_States_2013.jpeg

Here is a list of countries around the world, where the only ones under 4 cents per kwh are Iran, Ethiopia, and Qatar: https://www.statista.com/statistics/263492/electricity-prices-in-selected-countries/

I think your source meant to say kilowatt hours, because 4 cents per kwh would be typical of the places bitcoin miners go.

Author

Sounds like you're right and Fortune magazine is wrong, thank you.

Yes. Residential electricity in the US tends to run between 5 and 50 cents per kWh, and there's really no way (99% confidence) "industrial" electricity in other places is 3 orders of magnitude lower. For example, new solar installations tend to target 10 or so cents per kWh. 4 cents / megawatt hour would mean you could rent the entire output of a good-sized nuclear powerplant (typically in the 500 MW - 1GW range) for less than minimum wage.

Yeah, that cannot be right. https://www.eia.gov/electricity/wholesale/ has data on wholesale electricity trades at various grid interconnect points, and the weighted average (by volume) for this year is $58.46/MW-h (not coincidentally, roughly 1000 times more). There are weird moment wen the price is zero (or even negative), due to crazy grid imbalances. But not significant volume at such prices (those trades have to be more "I will pay you to take power so my plant does not blow up before I can throttle it down"). Pennies per MW-h is not plausible.

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