The Best Place to Build

Re: The Location Stack

Balaji Srinivasan has made another addition to his series of blog posts on The Network State. Productivity, legislative environment, and culture are all largely a function of longitude and latitude. A large American city like New York or San Francisco, for example, has big advantages in terms of pre-existing agglomeration benefits and a culture of business and innovation, but they suffer from stifling legislative environments. As cryptocurrency and remote work makes it much easier to move yourself, your business, and your community, choices of location become a ripe opportunity for arbitrage and competition. Before we can coordinate large groups of people to move, we need to decide where is best.

The goal is to create a Location Stack that measures hundreds of different regions on several scales like business freedom, crypto affinity, and easy visa application so that enterprising individuals, businesses, and communities can find the place that best suits their needs. One of the most important aspects of a region is how strict the controls are on what physical structures can be built there. Permitting, inspections, environmental review, NIMBY veto power, and thousands of pages of building code pose huge barriers to economic growth and mobility within countries. Which cities and countries have the fewest barriers to entry and the most potential for urban growth?

Monterrey, Mexico

Population: 4.7 million World Bank Construction index*: 10

Growth: 1.7% per year 2010-2020 Tallest Building: 1,002 feet

Monterrey is an industrial hub in the North of Mexico, nestled in the mountains of the Sierra Madre. It is the second-largest city in Mexico and has the highest GDP per capita and quality of living of any metropolitan area in the country.

The city has no construction regulations. It does not have occupational licensing for either the acting architect or the building’s inspector. Dealing with what permits there maybe is faster in Monterrey than in Hong Kong, Tokyo, and New York. Building in Monterrey is not hindered by extensive government involvement and there is a culture of optimism and growth that makes the city a great place to build.

*The World Bank Ease of Construction index is the sum of the following six indices: quality of building regulations, quality control before construction, quality control during construction, quality control after construction, liability and insurance regimes, and professional certifications. The component indicator is computed based on the methodology in the DB16-20 studies. It ranges from 0-15; The higher the number, the better.

Texas, United States

Population: 28 million World Bank Construction index: N/A

Growth: 1.65% per year 2010-2020 Tallest Building: 1,002 feet

Texas is the fastest-growing state in the US. Five of the top fifteen largest US cities are in Texas along with 8/15 of the fastest-growing cities. Texas has abundant land for development, strong transportation and trade infrastructure, and unfettered access to the richest economy on earth.

Texan cities are also known for their business friendliness and their lax planning regulations. As these cities grow, and the demographics of their residents change, their legislative environments may go the way of other American cities like New York and San Francisco. The increasingly concentrated wealth in the hands of incumbent landowners may give them the ability to push for the same sorts of development restrictions that plague America’s other metropolises. For now, though, Texas is the bustling heart of growth in the United States.

Singapore

Population: 5.8 million World Bank Construction index: 13

Growth: 2% per year 2010-2020 Tallest Building: 951 feet

This East Asian city state consistently tops rankings of the most efficient governments, business friendliness, and economic freedom. It sits at the chokepoint of the most travelled cargo route in all of human history, and hosts a cosmopolitan and technocratic culture.

Compared to Monterrey and Texas, Singapore has stricter rules pertaining to construction. There are hundreds of pages of building codes for accessibility, sustainability, and safety. This is balanced, however, by a ton of organizational capital for skyscraper building in the Singaporean bureaucracy and an acceptance for innovative construction design and techniques. Singapore is certainly not the ‘freest’ nation on earth by measure of its laws, but its government is a well-oiled machine that minimizes the cost of barriers to entry.

Honorable Mentions

Hong Kong: Similar to Singapore in its culture of skyscraper building and cosmopolitanism. For the past several decades it has been much more free as well, with many fewer laws. China’s sphere of influence has begun to snuff out the flame of liberty, however.

Chinese cities: In terms of the number of buildings permitted and built, China and it’s hundreds of metropolises has everyone else beat by a lot. It is not a free nation, and every project has to be directly approved by an arm of the CCP. However, the CCP really wants to build a lot of buildings.

Mauritius: I have a soft spot in my heart for this tiny island nation. It’s meteoric rise from a famine stricken backwater to an African trading hub through the use of deregulation and SEZs still inspires me. It scores even higher than Singapore on the World Bank’s ease of doing construction index, but the list certainly has some oddities. It is also a very small and somewhat isolated nation.

Conclusion

As the Network State evolves from digital communities to physical cities, the ability to build becomes ever more important. Buildings take the completely inelastic supply of land, and multiply it a hundred times. This allows humans to gather in greater numbers on less space, unlocking the super-linear growth of agglomeration benefits. Keeping track of where building is easiest will help inform the decisions of future founders and global citizens.