{"id":1401,"date":"2013-07-17T05:16:51","date_gmt":"2013-07-17T05:16:51","guid":{"rendered":"http:\/\/www.rationalargumentator.com\/index\/?p=1401"},"modified":"2014-02-09T04:07:39","modified_gmt":"2014-02-09T04:07:39","slug":"hacking-startup-cities","status":"publish","type":"post","link":"https:\/\/www.rationalargumentator.com\/index\/blog\/2013\/07\/hacking-startup-cities\/","title":{"rendered":"Hacking Law and Governance with Startup Cities: How Innovation Can Fix Our Social Tech – Article by Zachary Caceres"},"content":{"rendered":"
\n
\"The<\/div>\n<\/div>\n
Zachary Caceres
\n<\/big><\/big><\/strong><\/span><\/div>\n
July 16, 2013<\/big><\/span><\/div>\n
Recommend this page<\/a>.<\/strong><\/div>\n
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Outside of Stockholm, vandals and vines have taken over Eastman Kodak\u2019s massive factories. The buildings are cold metal husks, slowly falling down and surrendering to nature.\u00a0 The walls are covered in colorful (and sometimes vulgar) spray paint. In the words of one graffiti artist: It\u2019s \u201ca Kodak moment.\u201d<\/p>\n

After its founding in 1888, Eastman Kodak became the uncontested champion of photography for almost a century. But in early 2012, the once $30-billion company with over 140,000 employees filed for bankruptcy.<\/p>\n

Kodak was the victim of innovation\u2014a process that economist Joseph Schumpeter called \u201cthe gales of creative destruction.\u201d Kodak could dominate the market only so long as a better, stable alternative to its services didn\u2019t exist. Once that alternative\u2014digital photography\u2014had been created, Kodak\u2019s fate was sealed. The camera giant slowly lost market share to upstarts like Sony and Nikon until suddenly \u201ceveryone\u201d needed a digital camera and Kodaks were headed to antique shows.<\/p>\n

How does this happen? Christian Sandstr\u00f6m, a technologist from the Ratio Institute in Sweden, argues that most major innovation follows a common path.<\/p>\n

From Fringe Markets to the Mainstream<\/strong><\/p>\n

Disruptive technologies start in \u201cfringe markets,\u201d and they\u2019re usually worse in almost every way. Early digital cameras were bulky, expensive, heavy, and made low-quality pictures. But an innovation has some advantage over the dominant technology: for digital cameras it was the convenience of avoiding film. This advantage allows the innovation to serve a niche market. A tiny group of early adopters is mostly ignored by an established firm like Kodak because the dominant technology controls the mass market.<\/p>\n

But the new technology doesn\u2019t remain on the fringe forever. Eventually its performance improves and suddenly it rivals the leading technology. Digital cameras already dispensed with the need to hassle with film; in time, they became capable of higher resolution than film cameras, easier to use, and cheaper. Kodak pivoted and tried to enter the digital market, but it was too late. The innovation sweeps through the market and the dominant firm drowns beneath the waves of technological change.<\/p>\n

Disruptive innovation makes the world better by challenging monopolies like Kodak. It churns through nearly every market except for one: law and governance.<\/p>\n

Social Technology<\/strong><\/p>\n

British Common law, parliamentary democracy, the gold standard: It may seem strange to call these \u201ctechnologies.\u201d But W. Brian Arthur, a Santa Fe Institute economist and author of The Nature of Technology<\/em>, suggests that they are. \u201cBusiness organizations, legal systems, monetary systems, and contracts\u2026\u201d he writes, \u201c\u2026 all share the properties of technology.\u201d<\/p>\n

Technologies harness some phenomenon toward a purpose. Although we may feel that technologies should harness something physical, like electrons or radio waves, law and governance systems harness behavioral and social phenomena instead. So one might call British common law or Parliamentary democracy \u201csocial technologies.\u201d<\/p>\n

Innovation in \u201csocial tech\u201d might still seem like a stretch. But people also once took Kodak\u2019s near-total control of photography for granted (in some countries, the word for \u201ccamera\u201d is \u201cKodak\u201d). But after disruptive innovation occurs, it seems obvious that Kodak was inferior and that the change was good. Our legal and political systems, as technologies, are just as open to disruptive innovation. It\u2019s easy to take our social techs for granted because the market for law and governance is so rarely disrupted by innovations.<\/p>\n

To understand how we might create disruptive innovation in law and governance, we first need to find, like Nikon did to Kodak, an area where the dominant technologies can be improved.<\/p>\n

Where Today\u2019s Social Techs Fail<\/strong><\/p>\n

Around the world, law and governance systems fail to provide their markets with countless services. In many developing countries, most of the population lives outside the law.<\/p>\n

Their businesses cannot be registered. Their contracts can\u2019t be taken to court. They cannot get permission to build a house. Many live in constant fear and danger since their governance systems cannot even provide basic security. The ability to start a legal business, to build a home, to go school, to live in safe community\u2014all of these \u201cfunctions\u201d of social technologies are missing for billions of people.<\/p>\n

These failures of social technology create widespread poverty and violence. Businesses that succeed do so because they\u2019re run by cronies of the powerful and are protected from competition by the legal system. The networks of cooperation necessary for economic growth cannot form in such restrictive environments. The poor cannot become entrepreneurs without legal tools. Innovations never reach the market. Dominant firms and technologies go unchallenged by upstarts.<\/p>\n

Here\u2019s our niche market.<\/p>\n

If we could find a better way to provide one or some of these services (even if we couldn\u2019t provide everything better than the dominant political system), we might find ourselves in the position of Nikon before Kodak\u2019s collapse. We could leverage our niche market into something much bigger.<\/p>\n

Hacking Law and Governance with Startup Cities<\/strong><\/p>\n

A growing movement around the world to build new communities offers ways to hack our current social tech. A host nation creates multiple, small jurisdictions with new, independent law and governance. Citizens are free to immigrate to any jurisdiction of their choosing. Like any new technology, these startup cities compete to provide new and better functions\u2014in this case, to provide citizens with services they want and need.<\/p>\n

One new zone hosting a startup city might pioneer different environmental law or tax policy. Another may offer a custom-tailored regulatory environment for finance or universities. Still another may try a new model for funding social services.<\/p>\n

Startup cities are a powerful alternative to risky, difficult, and politically improbable national reform. Startup cities are like low-cost prototypes for new social techs. Good social techs pioneered by startup cities can be brought into the national system.<\/p>\n

But if bad social techs lead a zone to fail, we don\u2019t gamble the entire nation\u2019s livelihood. People can easily exit a startup city\u2014effectively putting the project \u201cout of business.\u201d If a nation chooses to use private capital for infrastructure or other services, taxpayers can be protected from getting stuck with the bill for someone\u2019s bad idea. Startup cities also enhance the democratic voice of citizens by giving them the power of exit.<\/p>\n

Looking at our niche market, a startup city in a developing nation could offer streamlined incorporation laws and credible courts for poor citizens who want to become entrepreneurs. Another project could focus on building safe places for commerce and homes by piloting police and security reform. In reality, many of these functions could (and should) be combined into a single startup city project.<\/p>\n

Like any good tech startup, startup cities would be small and agile at first. They will not be able to rival many things that dominant law and governance systems provide. But as long as people are free to enter and exit, startup cities will grow and improve over time. What began as a small, unimpressive idea to serve a niche market can blossom into a paradigm shift in social technologies.<\/p>\n

Several countries have already begun developing startup city projects, and many others are considering them. The early stages of this movement will almost certainly be as unimpressive as the bulky, toy-like early digital cameras. Farsighted nations will invest wisely in developing their own disruptive social techs, pioneered in startup cities. Other nations\u2014probably rich and established ones\u2014will ignore these \u201cniche market reforms\u201d around the developing world. And they just might end up like Kodak\u2014outcompeted by new social techs developed in poor and desperate nations.<\/p>\n

The hacker finds vulnerabilities in dominant technology and uses them to create something new. In a sense, all disruptive innovation is hacking, since it relies on a niche\u2014a crack in the armor\u2014of the reigning tech. Our law and governance systems are no different. Startup cities are disruptive innovation in social tech. Their future is just beginning, but one need only remember the fate of Kodak\u2014that monolithic, unstoppable monopolist\u2014to see a world of possibility.<\/p>\n

Those interested in learning more about the growing startup cities movement should visit startupcities.org<\/a> or contact startupcities@ufm.edu.<\/em><\/p>\n

Zachary Caceres is CIO of Startup Cities Institute and editor of Radical Social Entrepreneurs.<\/strong><\/p>\n

This article was originally published by The Foundation for Economic Education<\/a>.<\/strong><\/p>\n<\/div>\n

<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Zachary Caceres July 16, 2013 Recommend this page. ****************************** Outside of Stockholm, vandals and vines have taken over Eastman Kodak\u2019s massive factories. The buildings are cold metal husks, slowly falling down and surrendering to nature.\u00a0 The walls are covered in colorful (and sometimes vulgar) spray paint. In the words of one graffiti artist: It\u2019s \u201ca Kodak moment.\u201d After its founding in 1888, Eastman Kodak became the uncontested champion of photography for almost a century. But in early 2012, the once…<\/p>\n

Read More Read More<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,356],"tags":[2287,634,2285,2288,612,1290,227,2286,1907,2284,200,1227,2289,2283,2282],"class_list":["post-1401","post","type-post","status-publish","format-standard","hentry","category-politics","category-technology-2","tag-camera","tag-competition","tag-creative-destruction","tag-digital-camera","tag-experimentation","tag-film","tag-free-market","tag-governance","tag-joseph-schumpeter","tag-kodak","tag-law","tag-markets","tag-social-technology","tag-startup-cities","tag-zachary-caceres"],"_links":{"self":[{"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/posts\/1401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/comments?post=1401"}],"version-history":[{"count":4,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/posts\/1401\/revisions"}],"predecessor-version":[{"id":1567,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/posts\/1401\/revisions\/1567"}],"wp:attachment":[{"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/media?parent=1401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/categories?post=1401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rationalargumentator.com\/index\/wp-json\/wp\/v2\/tags?post=1401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}