Stephen Jennings on Conversations with Tyler

Tyler Cowen interviews Stephen Jennings, founder and CEO of Rendeavour, recorded inside Tatu City, a special economic zone just outside Nairobi. The two met more than thirty years earlier working on New Zealand’s economic reforms, where Jennings was a central figure at the Treasury before a career at Credit Suisse First Boston in emerging markets. ~54 minutes. The raw transcript Kyle supplied is kept privately with the wiki’s attachments.

Why it belongs to City Building

Most of the city-building material in this wiki is argument — charter cities, network states, seasteads. This is an operator ten-plus years into actually doing it, and he is unusually candid about what the theory gets wrong: sovereignty is the part that doesn’t happen, and people, not money, are the scarce input.

The diagnosis: African cities without agglomeration

Cowen opens on a puzzle — most of the world’s cities get more productive as they grow, and many African cities seem not to. Jennings’ answer is institutional rather than cultural: planning controls broke down from the 1960s, plans went unenforced, utilities were never modernised, and capacity was never built. As those cities grew they got more congested and less efficient, not more productive. Tatu City is his attempt to supply the missing preconditions from scratch.

What Tatu City is

By his account: about 5,000 hectares of fully planned development, around 70 large industrial companies already operating, 3,000 students a day across four new schools, the first phase of a new business district, and tens of thousands of call-centre jobs arriving. Planned population around 250,000. Rendeavour runs seven projects in five countries.

”A first cousin to a charter city”

Asked why not a charter city outright, Jennings says ceding sovereignty is close to intractable politically. Tatu is instead a private municipality with a lot of devolved authority — enough to make its own decisions, with an owner whose incentive is the city’s long-run value. He argues most of the benefits people want from charter cities (governance quality, infrastructure, security) are available inside that model.

The holdup problem, both ways. Jennings describes the company as solving holdups on behalf of everyone inside the city — a developer or resident deals with the bureaucracy once, through the city, instead of thousands of times. Cowen presses the obvious reverse risk: the more valuable the city becomes, the bigger and more tempting a single target it is for political expropriation. Jennings accepts the risk and says the only defence is to keep adding visible value — jobs, investment — until the city is plainly indispensable. This exchange is the best single passage in the episode for anyone thinking about Charter Cities.

Design choices worth keeping

• Mixed income is in the owner’s interest, not charity. Housing goes down to roughly $30,000 while some residential land sells for a million dollars; he wants restaurants and shops affordable to a worker earning a few hundred dollars a month, because a city that is only for the elite isn’t a city.
• Cheaper housing means giving up car parking. Getting below $20,000 a unit requires scale, building upward, and homes within walking distance of work; cars are allowed, at a steep price.
• Plan the walking first. Starting from a clean sheet, lay out green pedestrian corridors and then fit roads around them — the reverse of an urban planner’s default, which is shaped by retrofitting old cities.
• Designed for diversity, including infrastructure for a Somali community and a hub for Chinese investment, and an aesthetic meant to read as Kenyan rather than as a copy of Dubai.
• Commercial viability disciplines ambition. He won’t impose infrastructure or styles that residents and developers won’t pay for; the rare exception he’d push for is a genuinely world-class school, because it recruits world-class professionals.

The binding constraint is people

Not land, not capital — the company is unleveraged with good cash flow. The shortage is world-class technical talent willing to live and work in Kenya and train local teams. On hiring he is blunt that interviews are poor predictors, and says the real signal comes from how candidates behave outside them.

Beyond the city

• Perpetual projects. Almost no capital exists on a 30–50 year horizon: private equity is effectively five years, and development finance institutions talk about exits too — he calls their long-term reputation one of the myths of the field. That scarcity is precisely his competitive edge, provided shareholders are aligned with the horizon.
• Governance, not technology. Congestion charging, land titling, utilities — the technical fixes are known; the obstacles are political will and entrenched rents. He does not expect Nairobi’s governance problems to be solved for decades, which is the demand for new cities.
• Development as the default. His underlying belief is that since the Industrial Revolution an ever wider range of countries has taken off, so the burden of proof sits with the pessimist.
• New Zealand as the cautionary case. He is sharply negative on his home country’s recent performance, and his most concrete comparison is housing: an apartment Tatu can build for about $35,000 would cost around $400,000 in Auckland, in a country where only a sliver of land is built on.

Connections

• City Building — the concept page this was filed under; see its summary of this episode.
• Charter Cities · Charter Cities Institute — the “first cousin” framing and the expropriation risk.
• Tyler Cowen · Progress Studies
• The Housing Theory of Everything — the Auckland comparison is that argument in two numbers.