How Do You Build a New Singapore? Inside Próspera’s Bet on Private Governance (Erick Brimen, Founder & CEO)

[00:00] One of the things that when you read about Prospera is that this is a haven for Silicon Valley billionaires. How do we create a sincerely productive and progressive charter city? What do we need to get right from the beginning for this to work? The most important and impactful dynamic that we're seeing today is dynamism and customer-centric mentality. Some of the things that we're actually doing on the ground today, it wasn't mass plan five years ago. If there wasn't a profit motive and there wasn't a dynamic way to operate this where the private sector is the one actually operating on the ground, [00:30] We wouldn't be what we are today.

Where do you sort of hope to be in 10 years time? What's the optimistic but realistic view of things when you look at it from your seat today? Within 10 years, our projects here could have about 100,000 people involved on the ground between employees and residents. Beyond that, we want to see some of the largest companies as well as some of the most innovative players realizing that governance is an industry that can be innovated upon and that it is being done. [01:00] that it can happen. How do you create the next Singapore?

[01:08] from scratch. Eric Brimman is doing just that. His company, Prospera, has built a charter city in Roatan, Honduras, [01:17] It's a private jurisdiction with its own legal system, [01:19] regulatory framework, and governance structure. [01:22] Brimmin's vision extends far beyond Honduras, though. [01:25] He wants to create the infrastructure [01:28] that enables hundreds of prosperous charter cities around the world [01:32] freeing millions from the constraints of bad governance in the process. [01:35] Today, Eric and I discuss how his childhood in Venezuela shaped his obsession with institutional design, [01:41] Why special economic zones might be the key to human flourishing, [01:45] and what it really takes.

[01:47] to build a city. [01:48] and a new model of governance [01:50] From the Ground Up. [01:51] I'm Mario. [01:52] And this is The Generalist. [01:54] I'm really excited to have today's episode brought to you by GoFundMe Giving Funds. I want to tell you about a new product GoFundMe has launched called Giving Funds, a smarter, easier way to give, especially during tax season, which is basically already here. GoFundMe Giving Funds is the DAF or donor advised fund from the world's number one giving platform trusted by 200 million people. [02:17] Make a tax-deductible donation to over 1.4 million nonprofits with zero admin or asset fees.

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[02:58] all while helping the causes you care about the most. [03:02] Start in just a few minutes at com/Mario. That's com/Mario. [03:09] Every revolution in AI creates one question that never changes: Can you trust the output? [03:16] AI for work is incredible, but without trust, it's just leading to faster mistakes. [03:21] The challenge isn't building an AI that can answer questions, it's making sure those answers are right. [03:27] That's where Guru comes in. [03:29] It's the AI source of truth that connects everything your company knows. [03:33] So, every insight, every answer, every recommendation is grounded in verified knowledge, not outdated information or hallucinations.

[03:42] When your teams and your AIs share one trusted foundation, [03:46] everything moves faster. [03:47] with fewer redos, fewer blind spots, [03:49] and more confidence in every decision. [03:52] Because in the age of AI, truth isn't just power, it's protection. [03:56] See what Guru is doing for thousands of companies like Spotify, DHL, and Stripe at com. [04:03] That's com. [04:06] Eric, I'm so excited to chat with you today. And I think we're going to get into some really unusual subject matter. Folks that aren't familiar with what you do, I think we'll be excited to hear how you have spent your life building something quite remarkable.

But maybe to set the stage, you can tell us a little bit about [04:25] Prospera and give us a sort of frame of reference for what you are doing and why it matters. Thanks for having me. Prospera is a platform for governance as a service. [04:38] so that we can catalyze public-private cities. [04:43] that create conditions for people anywhere in the world... [04:47] to reach their full potential. [04:49] the world we live in today is one in which [04:54] governance and governments [04:57] are conflated. [04:58] We think of governments as the only way [05:02] through which we can have the critical services of governance in a modern society, [05:07] And that's just simply not the case.

That's just the way things have evolved. [05:10] But if you would allow a distinction between governments as institutions... [05:15] and governance as a service that they provide, [05:19] There's space for partnerships to emerge [05:22] where the private sector can insert itself [05:25] and working with governments [05:27] actually provide better governance? At what scale? [05:32] Well, human civilization has thrived throughout the millennials. [05:36] at city scale. [05:37] And that's why Prospera works with governments to create public-private partnerships [05:43] to build city scale projects that run on the Prospera governance platform. [05:48] I think a term folks might be more familiar with would be something like a charter city.

What are the ways that Prospera sort of fits that definition? And maybe there are places where you feel it's not quite the right nomenclature. A charter city would be a particular city, [06:03] And they're characterized by having separate rules. [06:08] and laws and regulations. [06:11] that are generally enshrined through a charter. So a charter city could be the end product, if you will. Prospera is a platform to catalyze multiple charter cities. And for charter cities... [06:24] to have a governance system that they can run on. [06:28] So there can be charter cities that don't run on Prospera, for example.

And Prospera can power cities that we're not directly building. We're like the SAP... [06:39] for city management, if you will. [06:42] Yes. And this is more than theoretical. You have created one of these charter cities in Honduras in a place called Roatan. You know, when we talk about the city versus the platform, how do you think about, you know, differentiating or distinguishing between those two? Sure. Well, there's the city of Prospera. [07:01] And the first one, you know, adequately called Prospera, future ones may not. And then there's the platform, which is the software that software and services put together to provide governance, which extends beyond a single city and can be sustainable.

[07:18] provided for additional cities that join the platform. So over time, what you would expect emerges is something like a modern version of a Hanseatic League, where you have multiple cities throughout the world. They each have their own location, some things that are particular to them. But if they are part of the Prosper platform, then they're all sharing a modern version of common law with very efficient dispute resolution, [07:45] very innovation and entrepreneur-friendly regulatory frameworks, and then you know what to expect if you're in a prosperous city. [07:54] Amazing. Well, I think we've sort of laid the table there for folks to understand the scope of this conversation.

And we'll talk more about the platform and the city itself. But... [08:05] I don't think there are many people in the world who wake up one day and say, my ambition is to make a modern version of the Hanseatic League. So perhaps we can go backwards a little bit. Tell us about your upbringing and how that maybe informed the ambition you have with Prospera. I was born and raised in the country of Venezuela. [08:25] until I was sent off to military academy in the US and subsequently [08:31] college in boston i went to babson college [08:34] and studied entrepreneurship and economic development [08:37] Then went on to do investment banking, management consulting, and then entrepreneurial endeavors.

But I think what was transformative in my upbringing was having been born and raised in Venezuela, a country that unfortunately had, and now is worse, too much poverty. [08:56] And it's tragic. Wherever you see poverty, it's tragic. But in a place that is so rich with natural resources... [09:05] you would think that poverty should be a thing of the past. [09:08] and that's not the case. [09:09] And growing up in that environment, [09:13] I couldn't help it but to ask myself why that was the case, you know, and if there was something that could be done about it.

[09:19] and I started down the path [09:21] a more traditional altruistic path of wanting to do charity work. And that evolved into more of a government-centric path of saying, well, maybe I ought to run for president and make a difference in my country. But then I studied entrepreneurship and the wealth of nations and [09:40] and really understanding what makes [09:42] prosperity possible, [09:44] And I realized through a mixture of disciplines, including economic development, that [09:50] the prior two, the prior three, like nothing really matters. Doesn't matter how much charity you do.

It doesn't matter how good... [09:56] a president is, [09:58] if the institutions are not sound, [10:01] and there's no good governance, nothing else matters. Everything, you know, education, healthcare, all of it goes to waste and it doesn't take root. So having understood that what made the difference [10:14] was good governance. The next layer up was how do you deliver good governance. And once you study and understand the modern systems of governments, [10:24] whether it's democracy or variations thereof, you quickly realize that once a government takes hold, it's extremely hard to make profound changes that applies across the board because people, [10:38] The good thing about democracy is that everybody, in theory, has a say, and that means that [10:43] Everybody has a stake.

[10:45] in the system as is and if you want to change it [10:48] You have to convince everybody, which means that you end up with a very low degree of differentiation. [10:55] Because it has to be sufficiently acceptable to many different stakeholders. So transformative change is really hard, if not impossible, with democracy, safe revolution, or a significant breakdown in the system. But alas, starting entrepreneurship, you at some point realize that disruption is not such a bad thing. [11:17] And that when you have very savvy institutions, that you can internalize disruption in such a way that it doesn't upend the mothership.

And this in the business world is called intrapreneurship. Right. So we came up ultimately with a balance between being able to do transformative change within existing institutional frameworks of governments by adopting what many people call, say, charter cities. [11:47] but it was theoretical and it was implemented. And I think we're the first one in the world in modern era to actually implement it. [11:53] by developing an enhanced form of special economic zones, which are created often throughout the world, [12:01] But if they get embedded with the enhancement that we can advise governments to include, then they can go way beyond our traditional special economic zone and actually grow up to be a charter city of the type of Dubai or Hong Kong or Singapore.

When I look at your background... [12:17] On paper, you might not see the level of openness and creativity and ambition that I think your project has demonstrated. You see someone who maybe went through the finance route, went to banking, but clearly there was this sort of intellectual journey you were going on where you were thinking about these different structures. As you look back on it, were there maybe one or two or three turning points where you were introduced to... [12:43] seasteading, I could have imagined being a popular thought experiment at the time that you were sort of going through this journey or a first entrepreneurial endeavor that really made you realize like, I'm actually not built to be someone who is at Brown Brothers for the course of my career.

How did you, what was that transition like? There've been experiments throughout history. So what we're doing is not entirely new, right? I mean, there's been experiments throughout history that have attempted to [13:13] and always do try to push the boundary of how to better organize society. [13:18] And in modern era, [13:20] Seasteading has been a pioneering attempt to achieve that. [13:25] And I spent quite a bit of time with the Seasteading Institute people, and I agree fully with a lot of the objectives. You know, they're trying to create space. [13:34] for governance, [13:36] to be innovated upon, [13:38] And the idea there is if you go out to the open seas, you don't have a national government to contend with.

So you have a clean slate, so to speak. I looked at it and, you know, I think at some point that might very well be possible, you know, water world style. But ultimately, if you bring it down to the essence, that is a... [13:58] That's a technical solution to a political problem. You're trying to figure out how to technically create [14:05] Livable platforms on open seas. That's a big technical challenge so that you don't have to deal with governments. [14:12] which is a political challenge. And that seemed broken to me.

The technical viability of it was just not there. [14:19] And in any case, even if you solve the day, I imagined the political problem is not just going to go away. You know, there's there's always a government that wants to claim jurisdiction. And sure enough, that's what's been proven so far. [14:30] So that clicked, you know, you have to, the problem is political. You have to find a political problem. [14:36] solution, sorry, to the problem. [14:38] And that's where... [14:41] from a strategic perspective, this idea of creating special economic zones in partnership with governments, where the balance of incentives

[14:50] were sufficiently aligned for the project to emerge and then endure seemed like the best approach. And look, it's not guaranteed to work. And we're certainly in the midst of it ourselves with ups and downs. [15:02] And we're seeing the boundaries... [15:04] and limitations of this approach. [15:06] So there's no silver bullet, but I think... [15:09] To solve a political problem, you have to have a political solution, and that's what we're engaged upon. [15:15] I would say that was one big turning point in the realm of what you mentioned. [15:20] Obviously, in my life, personally speaking, being in Venezuela, I had many episodes in which I was [15:27] touched profoundly.

And then it was no longer just a theoretical thing of poverty, but it just became a bit of a life mission for me. And then at Babson, [15:37] studying entrepreneurship, I had a professor, a great professor, Larry Moss, it was his name, [15:43] And he was a narco-capitalist. [15:46] And I had him as a narco-capitalist on the one hand, and I had another professor who was pro-Chavez. [15:53] He was telling me as of Venezuela that Chavez and the socialist revolution was what was needed in order to solve the problem. So I had these...

[16:02] extreme opposite intellectual mentors. And I was developing a thesis around that. So that was definitely a moment where I was sharpening my own intellectual thinking of how to solve the problem. Yeah. You mentioned some of these formative moments in Venezuela. I think clearly that's such an important part of your inner landscape and the work you're doing. Yeah. If you had to maybe pick one or two of those moments that maybe revealed something about [16:29] this project in hindsight. [16:32] what might come to mind there. There's two moments, one in particular, [16:37] that didn't give me insights into the solution, but grounded me [16:44] in commitment to do something about the problem.

And that was, I must have been somewhere between 9 to 11 years old. [16:54] in Venezuela going to school. I grew up fairly privileged [17:00] thanks to my parents. And, you know, every morning I would have breakfast and typical, right? Every other day or so, I wouldn't get up on time or I would be running late or I would just be monkeying around playing soccer before eating. This must have been one of those days because I didn't finish breakfast on time and, you know, I had to get going and I had to jump in the car and I still had my food.

My mom, you know, packed it for me and I had to eat it before making it to school. And that was fine. I had an empanada, that's what they're called. We stopped at a light, you know, [17:29] probably halfway between home and school [17:33] And as I was there, just [17:36] Minding my own business. [17:38] in a nice car, being driven by a chauffeur, inside of air conditioning, right? Outside, I all of a sudden hear a knock, you know, like, and I look to my left and it's a kid. He must've been about my age, but you know, his skin was a bit darker.

Obviously it was in rags and he was doing some sort of weird hand motion. I don't know how long it took me to get it, probably two or three seconds, but it felt like a long time. [18:02] And then I got it. He was like signaling that he just... [18:05] He was hoping... [18:07] for food, right? He was, I think, he was asking me for my food. [18:10] Yeah. [18:11] As soon as I got it, I just kind of rolled, you know, tried to roll down the window. The light must have turned.

[18:16] Because the car drove. Just before I was able to. [18:21] hand them the empanada, what I had left. [18:24] It just I drove off and [18:26] And. [18:27] That kid just stayed behind there and [18:30] You know, it always made me wonder. And it certainly, it touched me as a kid. It made me feel sad, you know? It's just like, you realize that, [18:39] There are things that I took for granted that were definitely not available for all. But even as I think of that moment, I get a bit emotional because...

[18:48] I went off to school and I've had tremendous blessings in my life. But that kid, I don't know what happened to that kid. And I'll never know, most likely. But there were too many kids like that kid. [19:03] around the world, even in the US, right? That lack of opportunity. And when you bring it down, when you take everything else out, politics and what have you, [19:12] There's no reason why we should have a world [19:14] with that. I mean, there's abundance. The problem is that we have artificial barriers and most of them [19:21] I mean, there are technical barriers and all that, but the one that presents the biggest opportunity for positive transformation is if we can solve this issue of governance, right?

Governance that is as reactive and as dynamic as a free market economy is when trying to solve problems. [19:38] problems voluntarily. We don't have that in governance. And if we want to make the world a better place, hell, perhaps if we want to survive as a species the next 50 years, we better solve this problem. Well, I can understand why that moment stayed with you. And I thank you for sharing it. You mentioned that this is [19:57] On the one hand, you're maybe the only sort of or one of the few people doing this in the modern era, but there have been these historical experiences.

[20:05] analogs. And, you know, the three that I think are probably discussed most are Dubai, Singapore, and Hong Kong. Correct me if there's, you know, another one we should be adding to that mix. But when you started to familiarize yourself with the stories of those, you know, economic zones, those cities, what were the pieces that you thought [20:24] this is something that I need to try and hang on to. And this is something that actually... [20:31] doesn't make sense for the current era. How did you sort of start to take lessons from history there?

Yeah, those three are emblematic and they have... [20:42] sufficient similarities and differences to create a great conversation exactly along the lines of what you're describing. So I'll focus on those. Some differences to begin with, they were all created differently. [20:54] So they are not very insightful for how to solve problems [21:00] the process of creating charter cities because though they ended up [21:05] being in effect charter cities, [21:08] that were not created in a manner that is consistent across all three, nor in a manner that seems scalable and replicable. And that is precisely

[21:17] One of the things that Prosper has sought to solve for, and I'll talk about that. [21:22] In the case of Singapore, obviously became a sovereign country through a process of independence from Malaysia, relatively peaceful. There was no need to fight it. And that was a very unique moment in time. And then Hong Kong, obviously... [21:38] was a result of the colonial era with the British Empire and opium wars, and ultimately the settlement agreement of sorts, where Hong Kong would remain under the management of a colonial power, then to be handed over back to mainland China.

That was, again, very specific to its time, but I think we're way past colonization and the idea that countries can govern other countries and things of that nature. So that's probably not very replicable. [22:06] And then Dubai, Dubai is very unique because it is a very... [22:11] well-executed form of federalism of sorts. What the type that we would want to have in the US, or you have a nation state and then you have [22:20] political subdivisions, [22:22] the equivalent of states of the US that are able to exercise a high degree of autonomy and do so.

And in the case of the [22:30] Dubai Emirates, they created not one city. I mean, it's an aggregate one city, but in reality, it's well over 32 cities. [22:39] special economic zones within a general area, and each of those has a fairly high degree of autonomy and they compete against each other. And competition is the best force at enabling [22:50] Progressive excellence. So... [22:53] I would say of all those three models, there's something to keep and learn from. In all three, they run, especially in Dubai. When I talk about Dubai, I'm going to focus in the DIFC, the Dubai International Financial Center, because it's the closest to what we're doing and the most innovative.

But in all three examples, they run on common law. [23:12] not on civil law. And this is key because common law has evolved over thousands of years and it's the most natural form [23:21] of law because it has evolved through [23:24] judges and private parties, not just legislators. [23:27] In all three cases, they effectively imported initially a trusted and experienced judiciary. [23:36] In all three, they set up special courts with internationally recognized judges so that when you set up shop, not only do you have better rules through common law, [23:45] But you knew instantly that if there was a dispute, you had a trusted...

[23:49] this pre-resolution mechanism to rely upon. And so that's been standard across all of them. And in all three cases, they succeeded... [23:58] massively without reliance on natural resources. It's not like [24:02] People think Dubai had a bunch of oil. They didn't. Dubai was primarily a fishing economy prior to all this, right? Correct. Yeah. It's always been a trading post. In fact, all three of them have been trading posts, right? So all of them thrive based on market economies of trade. And so those are the similarities. So if you could replicate some of that, you know it's going to work.

It's worked everywhere. Right. [24:25] The question is, how do you catalyze it? And that is where our business model is innovative. [24:31] And, [24:32] picks and chooses from them three and then all sorts of other projects. And we've come up with an enhanced form of special economic zone. [24:38] that can be done in partnership with governments [24:41] through relatively simple legislative procedures so that they can create this political subdivision. And then in partnership with said government, we can advise on how to create this international best practice [24:55] governance platform embedded.

It's already created in our case, and then we're off to the races. So I would say those are the best examples and differences between these three in particular and how we've innovated upon them. [25:08] I think that's really helpful. And so, you know, to go back to sort of circa 2015, 2016, maybe even a little earlier as these ideas were percolating in your brain, you sort of see the fact that, okay, you don't necessarily need the natural resources for this to work. [25:38] for [25:39] the first charter city, which eventually in 2016 leads you to Ruatan?

What was the little journey to get there, let's say? [25:48] As most entrepreneurial endeavors, once you think you have something, you start going out to the market and you test it and you try to sell it. And in our case, we did that. But our customers, our first customer is our governments, right? Like that's who we sell to initially. We want to partner with them to create conditions so that their people are lifted. [26:18] solving problems [26:20] for the objectives of a particular government, which tends to be focused on their people.

You know, they have to lift their people up [26:28] Every country needs to focus on their people first and foremost. So that's the gist. [26:33] We went out and started speaking with governments all around the world from Eastern Europe, you know, former communist countries to the Caribbean, including Haiti and Latin America all the way down. [26:46] you know, Colombia down to Uruguay. [26:50] initially we decided to focus in the us this was back in 2015 [26:55] as a matter of fact. I hadn't realized that. Huh. We partnered with the state of Arizona and the governor [27:03] At the time, Doug Ducey immediately understood the benefits of the concept as he was engaged in moving the state towards a freer market economy as a way to compete.

We created a commission. He asked me to be the co-chair of that commission with his, at the time, chief of staff. And we worked together for almost a year developing the legislative infrastructure plan. [27:29] that would be necessary to create essentially what we now call charter cities in the, [27:35] It was a fascinating journey. We developed the IP. [27:38] We have that actually. It's now back a priority for us. But at the time, [27:45] The way to get it done would have required federal... [27:49] the federal government to participate.

And Obama was the president. [27:54] And that was going to be a bit challenging. [27:57] So in the midst of all that, Honduras reached out. [28:00] And they said, look, we love what you're trying to do in the US. Like we fully get it. In fact. [28:08] We have a law in the books that I think it's really close to what you're trying to do. Why don't you come and check it out? [28:14] And sure enough, we came down to Honduras, we met with the government, [28:18] We saw the law that they had passed in 2013, the Zede law, [28:23] and agreed it was a really good initial layer.

It needed some work to be built upon. It didn't actually create charter cities per se, [28:34] but it enabled the creation of this very unique form of special economic zones [28:39] So long story short, we pivoted entirely from working in the S. at the time, [28:45] to focus entirely in Honduras. It took us about three years of work to refine the legal framework, create the right regulatory layers. And in 2017, it got approved. 2020, we broke ground, started building the first building in Roatan. And why Roatan? From all the examples around the world that have worked very, very well, [29:09] The closest one is the [29:11] partnership, if you will, or the synergy between Hong Kong and Shenzhen, [29:15] in China.

So Hong Kong [29:18] Again, different way of being created, but once created, became a hub. [29:23] of intellectual and financial capital. [29:25] and it made it flourish, [29:28] but also became a platform from which [29:31] places like Shenzhen, [29:34] benefited tremendously. And obviously the rest is history. From Shenzhen, there were dozens and then [29:40] dozens and dozens of additional special economic zones that would leverage Hong Kong as a pathway for capital and talent. And then that's what's helped [29:50] Elevate China into a world superpower. We wanted to replicate a similar dynamic.

So in the context of Honduras and Central America, the island of Roatan was the closest thing to Hong Kong. In fact, it's one square mile larger than the island of Hong Kong. And it has an international airport. [30:09] that you can fly in and out directly. [30:11] daily from Houston, from Miami. And it's an English speaking population. [30:16] with, as a matter of fact, a common law set of roots because they were part of, they were a British colony before. So essentially, [30:24] Ruatan was a perfect place to start. [30:27] as a launching pad for additional projects on the mainland of Honduras.

And that's how we ended up here. Fascinating. And so just to take one sort of beat back, you had this sort of Arizona work that you did, and then Honduras comes into the picture. When you were sort of thinking of Honduras versus some of the ex-US countries that you had talked to, Colombia, Eastern European [30:57] sort of framework just much more completely and sort of was more synergistic with what you were thinking of? Was that sort of the main draw at that point? I would say that's what got us interested initially.

And then as we studied the country more and the island in particular, we realized that it is, it still remains a massive opportunity waiting to be unleashed. I [31:22] 10 million people strong, but it is one of the poorest countries in the hemisphere. Yet it's strategically located, just as Singapore was strategically located, Dubai and Hong Kong, it's strategically located, Roatan and the Northern Corridor of Honduras, which is where the second hub is intended, can be a very, very successful trading post. [31:44] especially in modern era with [31:46] you know, a bit of a decoupling between the US and China taking place where near shoring is a huge priority.

It's just, it's a goldmine waiting to be unleashed, not with natural resources, but with human talent. [32:00] and geographic location to serve [32:03] both the S. and the rest of Latin America. I mean, it's a phenomenally well-positioned and currently well-timed opportunity. We've talked a little bit about the ZEDE, which is an acronym, Z-E-D-E, for folks that aren't familiar with this. To sort of bring folks into the conversation a little bit, can you give a sort of precis of what that stands for and what it really means to the [32:33] zones for economic development and employment.

[32:37] in Spanish, zonas de empleo y desarrollo económico [32:41] and [32:42] It's essentially a law for the creation of special economic zones, but... [32:48] What is unique about it [32:49] is that instead of prescribing at the organic law level, the legal and regulatory system that would be inside the, [32:59] of the special economic zones to be created through the law it enabled through the creation of a commission that [33:06] Special economic zones created through its process could have different legal and regulatory systems. [33:11] So it created an opportunity for the private sector [33:15] and the government of Honduras through this commission, [33:18] to come up [33:20] with the international best practice stack of rules that would apply.

[33:25] to a zone and then they could either replicate that for multiple zones or do another zone that would be different. [33:31] And then another zone that would be different. And so what it got absolutely right is that instead of having a central authority like the Congress... [33:41] come up with the specific operational rules for a zone. You know, it's like a big centralized decision for something that is very minute. It created a process as opposed to a prescription. And that process allowed us [33:55] to work with this very forward-thinking commission and curate from around the world the things that have worked best.

And so we were able to co-create [34:04] with the commission and therefore the honduran government a zone which is now the prosper zone [34:10] that was best in class and remains. And I think will always be because of the internal dynamic nature of it. And so we were able to. So that's what made the law unique. Honduras is not known as a as an international destination of foreign capital. One of the reasons is because it's lacked liberal stability. [34:29] It's had corruption and lack of security and several important challenges. [34:35] Most of those do not apply on the island of Roatan, all the reasons why we started there, like the security issues and all that.

But the legal stability was a concern. [34:45] The Zeta Organic Law... [34:47] was created through a constitutional reform that guaranteed a substantial amount of legal stability contractually. [34:55] International treaties apply. [34:57] And so we looked at it and we said, well, [34:59] On paper, it's the most solid piece of stabilization framework that we could hope for. [35:06] Thank you. [35:07] The question is going to be, will the government of Honduras honor it over the decades? [35:11] And we figured that they would because... [35:14] we were able to create very powerful incentives.

[35:18] positive and negative, right? Negative being if they were to validate the agreement, very significant penalties would apply. [35:26] Positive being, if they just let us do our job, we were in a position to bring hundreds and then billions of dollars of investments and create. [35:35] thousands and then hundreds of thousands of jobs, of well-paying jobs for the local population. So we figured over time, the incentives were perfectly aligned [35:45] to sustain disagreements. [35:48] And we're in the middle of that gamble, you know, like literally we're in the middle of that gamble.

And I think the jury's still out. You know, the only reason why we're still operating after a very substantial change of government back in 2021, 2022 would have. [36:04] which would have shot us down if they had their way politically. The only reason we're still standing is because I think those structures were and remain very sound and solid. And we've worked our butts off to show results. [36:18] while at the same time have very powerful institutional framing of protection, [36:24] that we have to play the game and we're in the International Arbitration Center to make sure we have our rights protected and revalidated.

[36:33] The jury's still out, but you don't get to change the world without some issues, without some trouble along the way, if you will. Yeah, to put it mildly, and that foreshadows, I'm sure we'll talk about some of the challenges that you've had to face in these past three or four years. But to come back to the inception a little bit of this first crisis. [36:55] charter city, the city of Prospera, there are these few different stakeholders that I think it's useful for people to sort of have in their heads.

There's obviously the Honduran government, there's sort of Prospera, the platform, but there's also this sort of private capital element. To help people understand how those groups interact, perhaps you can walk us through that a little bit. I think this is a good time to explain the business model because in essence- [37:25] the business and that when we were designing it we wanted i mean look let me take a step back the s right i mean the the the [37:34] most powerful nation on earth and probably in history and in a very short amount of time.

[37:39] How did it get to be that? [37:40] You know, it's because the founding fathers created at the time an innovative form of government. [37:46] of the people, for the people, right? Free market capitalism with constitutional order. And it's worked. [37:52] Great, but it hasn't been perfect. [37:54] The extent to which it hasn't been perfect, you can bring it down to two core things. [38:01] that unfortunately the founders missed or didn't quite in bed, even though part of it was in the Federalist Papers. [38:07] One is there's no effective exit.

So it's intended to be a federalist form of government where each of the 50 states compete against each other, but there's no exit. So they're kind of trapped. Right. And then on top of it, you add the supremacy clause of the Constitution. And so. [38:22] It's like whatever the federal government says goes. [38:25] And so there's no easy way for a state to threaten exit of the union. [38:31] And if so, that would have kept the central government, federal government, a bit more in check. And two, the alignment of incentives is not there.

The system relied heavily on checks and balances, right? And the founders clearly wrote... [38:47] that it was a government for moral and ethical people at their in their time [38:52] judeo-christian values but it's a check and balance [38:57] system that depends upon people being moral enough to want to be in check and in balance. But it wasn't arousing through... [39:06] individual private incentives that behavior over the centuries would be aligned to the founder's intent. [39:15] And therefore, you know, you get corruption and you get, you know, politicians coming up with rules that actually...

[39:22] violate some of the core tenets of a free market economy and the American way of life. [39:27] Because the incentives are not there. [39:29] So then take that to our business model and what we try to do and how it all comes together. [39:34] Is there value in good governance? [39:36] The answer is absolutely yes. In fact, only [39:40] societies that benefit from good governance prosper. So it is absolutely valuable and it makes the difference between poverty and prosperity. So there is value. [39:48] Unless you can internalize that value, though, [39:53] And, you know, it doesn't matter.

It doesn't shape behaviors as much. [39:58] Yeah. [39:58] So there is value in governance. [40:01] How do you internalize it to be [40:03] part of the profit motive that keeps people acting a certain way. [40:07] That's where our model comes in. And we have, as I said, a partnership with governments to create these enhanced special economic zones. [40:14] But the model of governance as a service is where a company like Prosper comes in. [40:20] They signed the charter. They're responsible for operating the... [40:25] the zone, [40:27] with the rule sets that are proposed and approved.

[40:30] And [40:30] And then if done successfully, [40:33] what happens is that you attract investment and catalyze economic activity. [40:38] And if you do that and then you charge taxes, governments charge taxes, the zones charge taxes, they have to be competitive. Zero controversy. If you provide a service, then you get paid for it. It's just that when you have no market dynamic and you call it taxes, people get a little iffy about it. But if they provide a service, you should pay for it. So in the zone, we provide governance as a service.

People pay for it, but they pay for it. [41:03] as a percentage, a small percentage of the overall GDP. [41:07] I mean, again, taxes. [41:09] capped at a percentage level. [41:11] So then you got the zone operator, us. [41:14] incentivized to bring capital so that economic activity can emerge, so that a small percentage of it equals high nominal revenue. [41:23] So now we're aligned to creating attractive conditions to bring capital people and activity. But then we're in it for the profit, not for the revenue only, right? [41:32] So then what comes after...

[41:34] Revenue, costs and expenses in a typical government. [41:37] There's no profit motive, meaning that their primary motivation is actually to grow. The cost and expense line has because with that growth comes more power, more influence. And if you think legitimately that you're doing something good, as a lot of these people do, [41:51] Actually, you want to be bigger, not smaller. [41:52] which means that the budget grows out of proportion. I mean, it's a mess. In our model, you have to grow the top line and you only do it by having the right conditions and quality service

[42:04] So you got to have an operational structure which grows as the economy grows. [42:08] But you only have profit if your costs and expenses don't grow as much. And in fact, if you shrink that. If there's a sincere surplus. [42:16] Yeah, if you shrink that, you got to have a surplus. So unlike a typical governmental structure, our financial incentive is to keep [42:23] the equivalent of a bureaucracy, [42:26] Small. And overall... [42:28] high value, low cost and expenses. That's our incentive. That's our investors incentive. Make a zone attractive, keep operations, [42:37] Lean, make a profit.

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So the vast majority of the jobs are going for the locals. [44:07] Okay. And, and that people say, well, doesn't that create a problem in terms of access to skills? Like, you know, to do endurance have, you know, biotech engineer and all these things. The answer is not in high volumes. [44:21] But in the short term, you can bring foreigners where you don't find a Honduran to fill the role. As long as you're also investing in educating. [44:31] the Honduran population, okay? So [44:33] You have an alignment of incentive of employing locally, raising the skills, and [44:38] And importantly...

[44:40] we have a direct revenue share with the government of Honduras. So not only all the spillover effects, [44:45] but a percentage of the top line [44:48] goes directly to the Honduran government. [44:50] without them having any operational impact [44:54] obligation meaning it's pure profit for them which is amazing right i mean governments generally [45:00] They don't have to do anything, but they get a piece of the top line. [45:03] Exactly. We've invested in infrastructure. We run the day-to-day [45:07] They supervise, they don't administer. So it's essentially pure profit for them.

This is the beauty of the model now. So and then the final cap to it is, [45:16] as going back to the comment about the founders and America, we have the profits. [45:22] incentive, [45:23] And we've baked in exit. So when a company or property owner really joins the jurisdiction, [45:31] They're in it, but it's through a contract. [45:34] upon which we have obligations, they have obligations as well, but if we violate our agreements, [45:40] They can exit. In fact, they can exit if they want to exit regardless. There's a process by which to exit, but it's embedded in their incorporation agreement that they can exit.

[45:49] which, again, that was not embedded in the constitutional framework of the S. Sorry, the charter city can exit or Honduras can exit or the citizen can exit? Within our model... [46:01] inside of Procbra. [46:03] when you join [46:05] you know, you sign an incorporation agreement. [46:08] That is, [46:09] has the embedded right of exiting the jurisdiction. [46:13] So if you are a resident, a landowner, and you enter the jurisdiction and now you're under this governance framework, [46:21] You're not stuck in it for life. [46:23] So aside from the, let's say, proper alignment of incentives, [46:29] If you're not happy, you can exit.

You know, you tell me what other... [46:33] Governmental structure, you have embedded exit rights. [46:36] Nowhere else in the world do you have embedded exit rights. Here you do. Now, the way it's supposed to work is that there's supposed to be multiple Zs competing against each other. [46:46] so that we keep each other in check. [46:49] Honduras has limited the capacity to create more Zedas, so that dynamic is going to be [46:55] Not as powerful as we were hoping, but still people can exit RZ and remain, say, with the municipality or go back to the central government oversight directly.

So many interesting threads there. I'm going to try and summarize a little bit to make sure I'm following you. But essentially the different incentives, you have the Honduran government who gets to say, hey, you're going to bring a bunch of foreign investment and talented people into this part of the country. [47:25] of your top-line revenue, let's say, from taxes, the underlying business takes [47:31] that that taxation revenue and [47:34] Assuming it is able to keep its costs at a low enough rate, takes a profit from it over time. And the people that come into these jurisdictions have the ability to operate under these favorable set of rules, but aren't bound to them forever because they have the right to exit from them.

And then maybe the final piece is the local Hondurans. [47:56] are given access to all of these new jobs in which you have sort of mandates to hire 90% of Hondurans where possible, otherwise, you know, investing in education. And so these are sort of the different stakeholders and how they each [48:09] benefit. Have I missed anything important there or muddled anything? Perfect. There's a good reason why you run a podcast. You can synthesize things very well. Well, I want to make sure I'm following. Okay. And so... [48:21] In terms of the direct investment, when you read about Prospera, you see a lot of names that I'm familiar with from the tech world, you know, Peter Thiel, Marc Andreessen, so on and so forth.

How much foreign investment have you been able to bring into the city at this point? Because I imagine it's also been a bit challenged by some of the political upheaval. Yeah, it's been challenging. But as of right now, we've raised about $170 million. [48:49] In aggregate, it's a fraction of what we could have done by now. But you're right. There's been some political challenges in the country. The last four years have been extremely complicated, politically speaking. I have predicted by the end of 25, the number would have been at around $500 million.

And I think it will be a lot more over the next four years once the political challenges are resolved. [49:13] Having said that, [49:15] $170 million, depending on where you're listening from, [49:20] and your context and your experience. [49:22] might sound like a lot or a little. So let me put it in context. [49:26] In a place like Honduras, our project represented [49:30] about a third of all foreign direct investments into greenfield projects [49:36] for 2021, 2022, that fiscal year. Our project has generated more jobs [49:43] than as far as I know any other project in the country during this time frame.

[49:48] our project has brought more new industries into the country than any other project has ever [49:55] into Honduras and not just random industries, but very high value industries in biotech and crypto finance. [50:02] So aside from what we have already done, which again, in context has been [50:06] Super. [50:07] relevant and significant, we have been setting up a foundation that has the potential [50:13] to massively scale [50:15] not just because it's unique to Honduras, [50:18] scale at a global level, right? In industries that have transformative potential as a result, [50:24] for Hondurans, but for the world as well.

I mean, we are able to [50:29] house extremely innovative [50:31] biotech [50:32] innovation, gene therapy, stem cell research, all sorts of things that represent value, not just to the people of Honduras, but to the world at large. And that's just in four plus years under extremely complicated circumstances. [50:47] As you started to break ground in 2020 and have built it up over these past five years, [50:53] What have been the foundations that you found most important as you think about, you know, how do we create a sincerely. [51:01] productive and progressive charter city?

What do we need to get right from the beginning for this to work? To give our team credit. [51:10] And not just me, but, you know, [51:13] We've managed to aggregate a significant amount of experts and people to get this done. [51:20] those many years upfront that went into designing the system before we broke ground