In this talk, Michael Strong argues that the primary driver of persistent global poverty is not technology or aid, but the legal and governance frameworks that constrain economic activity. He frames startup culture—characterized by problem‑focused, creative entrepreneurship—as a model that can be applied to law, zoning, and public institutions to "rezone" territories from a "zone for poverty" to a "zone for prosperity." Using vivid examples such as the transformation of Shenzhen through special economic zones, Dubai’s adoption of British common law on Sharia‑based soil, and the stark contrast between North and South Korea, Strong illustrates how changing the rule‑set governing a piece of land can dramatically raise wages and create a middle class that stabilizes societies. He highlights the Pentagon’s map of likely sources of war, noting that failed or heavily regulated states are breeding grounds for civil war, terrorism, and nuclear threats, underscoring the urgency of reform. The talk also discusses legal obstacles in developing countries (e.g., costly notarization in Mexico, 18‑document import processes in the Congo) that keep entrepreneurs from formalizing businesses, thereby perpetuating poverty. Strong proposes legal pluralism—importing alternative legal operating systems—as a pragmatic solution, citing Dubai’s financial center and a stalled but promising project in Honduras. Finally, he expands the vision to social services, advocating entrepreneurial operating systems for education, mental health, and child protection, urging the next generation to channel startup energy toward solving fundamental human problems rather than just building tech products.
Chapters
This talk is sponsored by the Center for Natural Living. I love startup culture. For me, South by Southwest is symbolically really cool because it's one of the great gatherings of startup culture around the world. I see startup culture as this culture where mostly young people, but not all young people, get together, they figure out how to solve a problem, and they create a solution. My favorite definition of an entrepreneur is somebody who stays awake at night thinking about what sucks and then how do you fix it? And I think that's the kind of life really almost everybody wants to be living, where you're all day every day creating meaningful solutions to meaningful problems. And the more we can shift from a world of 7 billion people, most of whom are suffering, to a world of 7 billion people who are engaged in creative flow every day that makes the world a better place, the richer and more meaningful all of our lives will be. So, although I call this Startup Cities, I want to emphasize that we're applying this startup culture to law, governance, security, community services, many things. For me, the city is not just roads and buildings, it's all of the social infrastructure that really makes life possible. As we'll see, the law, governance, security, and community services are a key component. There's a picture of a globe taken from Thomas Barnett's Pentagon's New Map. It shows the areas that the Pentagon regards as the most likely sources of war and violence in the world in the 21st century. Prior to the fall of the Soviet bloc, communist world, the Pentagon had a map that looked very different. Now they see basically failed states, states states that are disconnected from the rest of the world's economy to one extent or another as the greatest source of violence, terrorism, war. More than 90% of war deaths today are civil war deaths. There are states that are either falling apart or in danger of falling apart all over the world. If we have a nuclear terrorist, pro— odds are the nuclear terrorist would come from one of these countries or receive support from one of these countries. So for me, while I love startup culture and the coolness of startup culture, there is also a very serious aspect to this where if we don't solve some very serious global problems soon, we— the lives of all of us could be at risk. You know, the fall of the Soviet Union was a great thing in terms of world peace, but it's still a pretty scary place out there. Happily, I believe the startup culture can be applied to solve fundamental world problems. There's a blogger who described Steve Jobs as the greatest entrepreneur of our era. This is before he died. He said, "But the thing with Jobs is he's making great toys." I love my iPhone. I love it. I love my iPad. I love all the Apple devices I have. But when we've got things like poverty and war on a global scale, I'm sad to admit that to some extent even the great achievements of a Steve Jobs are toys. All of the wonderful tech innovations are great, but we've got really big problems. Why can't we take startup culture, which is brilliant, and solve problems with them? So, one of the ways in which we're talking about doing this is moving from zone for poverty to zone for prosperity. One of the things that not everybody is aware of, but I wish they were, was that poor countries are poor because of their legal systems. Some of the typical examples are North Korea versus South Korea, East Germany versus West Germany. It's exactly the same culture, but in one country prosperity, in another country poverty. You can take a Cuban or Jamaican or a Mexican who comes to the US, odds are their income will be 10 times higher, 50 times higher, 100 times higher than it was in their home country. Quick story of a Mexican man I know, Michael Strong, unemployed, uneducated, Young Mexican man moves to the United States illegally, manages to get to Alaska, works as a dishwasher in a restaurant illegally, works as a— his way up to a waiter in a restaurant illegally. After he's a restaurant— waiter in a restaurant, he manages to charm a woman and they fall in love. He happens to get married to an American woman. Now he's legal and a waiter in a restaurant. Saves money for a couple of years, then buys a small restaurant, builds that small restaurant, low-end Mexican restaurant, sells that one, then he buys a high-end Mexican restaurant in Anchorage, builds that, couple of years later he sells it, $500,000, goes back to his hometown in Mexico as a rich man. A very sweet story. He could never have done that in Mexico. Give you one of many reasons. In Mexico, it costs between $500 and $1,000 to get a document notarized. Sounds like a trivial sort of thing in a sense, except that means only upper middle class and upper class Mexicans can afford a legal business. Everyone who can't afford that kind of money can never get the documents notarized to have a legal business. U.S., $0 to $5, easy, anybody can get in a legal business. There are thousands of legal obstacles to business creation in the developing world, that's what keeps poor countries poor. Denmark is more free market than every poor country on earth. I often like to say, to kind of tweak both the left and the right, if the whole world was as free market as Denmark, we would have no more war and no more poverty. Might be a little bit of an exaggeration, but not a lot. So this is an example of Shenzhen, zoned for poverty under communist China. Then they replicated many of the institutions of Hong Kong across the water, and in 20 years, Shenzhen took off like a rocket. And it's first of many special economic zones. As a whole, special economic zones have raised urban wages in China from $1,000 a year to almost $6,000 per year. There is no NGO, no foreign aid program, no do-gooder initiative on earth that can raise the incomes of almost a billion people. I say almost because urban— most workers these days in China are urban workers. but still not everybody. Still nobody can raise hundreds of millions of workers' salaries from 1,000 a year to 6,000 a year without capitalism. So the special economic zones in China are a case study of what happens when you rezone from poverty to zone for prosperity. So when you look at China, you think it's one-off, but this— something similar happened in Dubai. Dubai rulers realized they were running out of oil. Dubai is not one of the most oil-richest countries in the Middle East. They realized they needed another economic base, so they started creating free zones that in effect rezoned Dubai from zone for poverty to zone for prosperity. Now Dubai is the most successful commercial city in the Middle East. It's not a perfect place by any means, but it shows that this pattern of changing the rule set on a piece of land from the existing rule set to a new rule set can fundamentally change the economic dynamism of a piece of territory. Once you start thinking of the world like that, you know, a lot of times real estate developers will get a piece of land rezoned from residential to commercial, and land values will go up 2 times, 3 times, 4 times. You think those clever real estate developers. When real estate goes from zone for poverty to zone for prosperity, land values can go up 5 times, 10 times, 50 times. You know, a piece of desert land like this that was almost worthless is now extremely valuable. When you look at the whole world is zoned for— most of the world is zoned for poverty, maybe a billion people in prosperous countries, 6 billion people in poor countries, you think, wait, why do we put 6 billion people in lands that's zoned for poverty? Who decided to do that? Why do we want to put them in places where they have to be poor? Why do people like Monaco have to pay $500 to get a document notarized so it can create a business? The Congo in Africa— Africa is the most highly regulated place on earth. Most countries in Africa are at the bottom of the World Bank's Doing Business Index. In the Congo, known for the horrible, horrible civil wars, horrible, horrible rapes, child soldiers, the Congo is one of the most hellacious places on earth. In the Congo, it takes 18 documents to import product legally. And you think, okay, you know, is it that 18 documents? That's not what causes directly the civil war and poverty in the Congo. But if you get a sense for how difficult it is to do business, where it's almost impossible to do a legal business, what have you got? You've got a poor country with no kind of sturdy, upstanding middle class. You've got a poor country where these authoritarian rulers and these corrupt thugs rule things. Whereas if you have a country where bit by bit people develop prosperity by hard work, by business, then you gradually create a middle class that can be a counterbalance to a lot of these global leaders. So, you know, we used to be stuck with, you know, one operating system. You know, you boot up your Mac or maybe some of you actually booted up a PC. I'm a Mac chauvinist, so I'll forgive you if you're a PC chauvinist. And you used to hate each other. You know, I've been a lot around a lot of Mac people who, of course, think little of PC people. And I've also known PC people who think very little of the Mac people. And, of course, Linux people who spit on both Mac and the PC people and so forth and so on. And it's okay for everybody to feel chauvinistic about their system. And yet, there was demand in the market for software that allowed you to run virtual operating systems. So you didn't have to be stuck. It turned out sometimes there's an application on another platform that you preferred, or you wanted to run code on another platform, another operating system for some reason. And gradually people became more pragmatic. Let's just use whatever one works. So why can't we do that with legal systems? In 2004, Dubai wanted to create a world-class financial center. They had Sharia law, Sharia law forbids interest, they looked around the world, Hong Kong, Singapore, London, Sydney, New York, Chicago, all ran British common law. They just started running British common law on 110 acres of Dubai soil. It's now one of the most successful financial centers on earth, and they actually hired a retired British common law judge to administer British law on UAE Sharia soil. It's worked beautifully. Honduras last year passed something similar where they allowed— they're going to allow British common law on Honduran soil. I was involved in getting a project going there. It was overturned by the Supreme Court. Now they're starting to do this again, and this we see as an opportunity to create, as it were, a new operating system rezoning from poverty to prosperity in Honduras. We believe that this could be a game changer. Why it matters, you know, there are lots of these images, but just consider There's a story about somebody in Korea who managed to escape into China, gets into a barn. In the barn, he kind of sees this incredibly big, huge dish of food, and he starts gobbling it, and then the dog shoves him aside and starts, you know, eating the dog food instead. And it's sad, but China is that much wealthier than North Korea that dog food appears like a luscious meal. This is a North Korean escapee who tells this story. For North Korean. It's very sad. This is a picture of the US-Mexican border. You know, Mexico is relatively successful compared to a lot of countries, but the reason why there's a difference in development is simply the legal system. Why have one operating system on one side and different operating system on the other if one operating system leads to poverty? Why are we risking terrorism and nuclear war, immigration problems in the US, millions of people, children dying unnecessarily, all the horrible things you hear correctly about poverty when it's simply a matter of changing our minds. That just like the PC and Mac chauvinists don't need to hate each other, people don't need to think legal system and nationality correspond. Here's another— Honduras and Korea used to be the same GDP per capita. Now Korea is more prosperous than Portugal. It's on its way to pass up Spain, Italy. Korea is soon going to be more prosperous than much of Europe. Honduras, unless it does something differently, is going to stay poor. Murder capital of the world, one of the poorest countries in Western Hemisphere, they need to do something. They need something like this. Startup cities around the world, there are poverty— poor urban areas around the world. People are moving by the hundreds of millions from rural areas to cities, cities that can't contain them, that have immense problems in terms of sewage, drinking water. Disease. We urgently need to solve this problem. Another direction that we like to focus on is the fact that innovation— people including Peter Thiel have talked about how the US is constraining innovation. When in our Honduran project, we've got a lot of entrepreneurs with specialized technology who want to do something different that they're not allowed to do in the US. Finally, the part that excites me most— I started out as an education entrepreneur. I've created interesting schools in the US, but I find there's not enough freedom in the US to create the schools I want to create. I'm most excited about these new entrepreneurial operating systems so I and others can create fantastic schools, better mental health solutions, better child protective services solutions. For me, just like the creativity that right now is going into thousands and thousands of websites— I love all the cool websites, I can't keep up with all the cool websites. What if we put that startup energy instead of just into tech goods and websites into solving fundamental human problems? The best and brightest of our generation and the next generation gets together for startup weekends not only to create a new web company but to create a new way to raise healthier, happier human beings that have healthier, happier, more positive human lives. Thank you.
