Drive east from Reno, Nevada, on Interstate 80 and you’ll soon hit Storey County, a sparsely populated district of around 4,000 people that hosts some of the state’s most ambitious commercial projects. A massive Tesla Gigafactory is there, part of the Tahoe Reno Industrial Center, a growing, 107,00-acre industrial park that contains facilities for Google, Home Depot, Walmart, and others. In typical Nevada fashion, the TRIC land is partially owned by Lance Gilman, a cowboy hat–wearing county supervisor, realtor, and brothel owner. Thanks to the influence of a business partner of former corporate raider and convicted felon Michael Milken, who has invested in projects in TRIC, erstwhile Treasury Secretary Steve Mnuchin designated the park—against his department’s own guidelines—as an opportunity zone, making it eligible for a special tax break, according to The New York Times. (Citing an op-ed by Milken, a spokesman denied that he has any involvement or investment in TRIC.)*
Adjacent to TRIC is another highly ambitious project that may prove key to Nevada’s economic future—unless it becomes another cautionary tale of techno-utopian hubris. Jeffrey Berns, a former lawyer who reportedly made a killing by suing finance institutions in the wake of the 2008 crisis, owns 67,000 acres of pristine—and very dry—high desert land in Storey County. With his fortune, he’s poured money into a company called Blockchains LLC, which, as its name implies, is intended to promote and innovate uses of the blockchain—the distributed database technology powering Bitcoin, for which boosters see many other potential uses. Blockchains has promised to build a technological R&D facility and a “smart city” on its land. That project was announced in 2018, in a lavish ceremony in Prague, and was followed by an approving profile of Berns in The New York Times. Almost three years later, Blockchains has barely broken ground and is struggling to secure water rights. Last year, the company laid off almost 10 percent of its staff and appeared to refocus on less tangible projects, like a digital identity-management product.
While its marquee initiative is well behind schedule, Blockchains LLC is far from finished. Thanks in part to political donations from Berns and his company, Blockchains has become the key mover behind a forthcoming piece of state legislation to establish “innovation zones” in Nevada that would, in effect, be self-governed tech towns. A leaked draft of the legislation, obtained by the Las Vegas Review-Journal, states that a traditional local government is “inadequate alone to provide the flexibility and resources conducive to making the State a leader in attracting and retaining new forms and types of businesses and fostering economic development in emerging technologies and innovative industries.” It thus proposes an “alternative form of local government”—to allow companies, in the words of the Review-Journal, to “effectively form separate local governments in Nevada, governments that would carry the same authority as a county, including the ability to impose taxes, form school districts and justice courts and provide government services, to name a few duties.”
The goal of these zones, which surely will whet the appetites of Silicon Valley’s libertarian horde, is to attract big, well-capitalized businesses that invest in technologies like autonomous vehicles, robotics, renewable energy, and, yes, blockchains and cryptocurrencies. Promoters of the legislation—who include Democratic Governor Steve Sisolak, whose 2018 campaign received $10,000 from Blockchains, while another $50,000 went to the PAC that managed his transition into office—are keen to point out its relatively stringent requirements: To manage an innovation zone, one must have $250 million on hand and invest $1 billion over 10 years. While the zones would first be governed by a three-person body appointed by the company, once 100 residents register to vote, the zones would become democratic municipalities similar to others in Nevada.
That is, these towns would become functionally independent of the companies that established them—though one wonders how independent a government can be of the lone company upon which all residents depend for their livelihood. It’s not unrealistic to imagine, for instance, that a company might intimidate residents into not registering to vote, thereby preserving the three-person body to rubber-stamp the company’s wishes. But the company could probably get its way without resorting to such measures: It would be the town’s dominant—and perhaps only—political donor.
The legislation signals the maturation of Nevada’s tech industry, as Silicon Valley entrepreneurs have been lured east by cheap land, cheap housing, and TRIC’s success. The innovation zones also fit into a larger tech-affiliated movement to establish “charter cities”—built-from-scratch municipalities that may be ruled according to the diktats of people who care more about developing new technologies than maintaining democratic governance. (The charter city movement is inchoate, with few established examples, but its adherents are attempting to set them up anywhere from Latin America to on floating seasteads on the open ocean.)
According to Isabelle Simpson, a Ph.D. candidate at McGill University, charter cities reflect a desire to escape the entanglements of politics. As she writes in a forthcoming paper, “The charter city particularly favors start-up ‘founders,’ individuals who have founded a start-up company and emerged as an elite class and who, after having successfully realized their business exit strategy, have come to consider founding cities and ‘exiting’ political systems the next logical step in their career.” In short, when the existing political system becomes too bureaucratic and rule-bound, it’s time to create one’s own.
In researching the draft legislation, I was surprised to find out that, besides a smart city in South Korea, the main inspiration for Nevada’s innovation zones was Disney World. The Nevada governor’s signature economic initiative depends on grafting Disney World’s peculiar economic and legal structure—a hybrid of city and corporate rule—onto vast tracts of bone-dry land, in the hope that flying cars or self-aware artificial intelligence might bloom. But before it can build its Disney World, Blockchains has to find water. “The company is actively involved in acquiring water rights and will be probably for the next decade,” said Pete Ernaut, a representative for R&R Partners, which works with Blockchains on lobbying and marketing. Ernaut said that Blockchains has acquired about 8,000 acre-feet out of a needed 12,000 acre-feet. “You can’t get out of the batter’s box unless you have the water.”
Although it’s early in the legislative session and the final bill has yet to be introduced, Ernaut is confident that the innovation zones legislation will have the necessary support. (Nevada’s bicameral legislature currently has a Democratic majority in both chambers; Berns donated $50,000 to the state Democratic Party in 2019.) But he also emphasized the importance of public debate. “This is a big idea,” said Ernaut. “It can’t be done unless people are allowed to poke holes in it and ask questions and become satisfied with the answers.” He added that the legislation “has to survive the highest level of cynicism, devil’s advocacy, skepticism—whatever you call it—in order to succeed. And it should. This is not something that should be entered into lightly.”
For now, while it has Sisolak’s vocal support, this is largely a Blockchains LLC production. No other companies have yet signaled their interest in setting up one of these innovation zones. (“The eligibility requirements pursuant to the bill are very stringent by design,” said Ernaut.) But if Blockchains’ predictions bear out, the project will generate 125,000 jobs over the life of its development and $4 billion in annual revenue. There will be novel sources of revenue like taxes on new technologies and transaction fees on a Nevada-based stablecoin—part of the vision of a city running on a blockchain. The original 2018 prospectus also promised a college and an e-sports arena, as the Times noted.
Yet for now, this all just a tech daydream. According to LinkedIn, Blockchains employs about 95 people—a far cry from the 1,000 it planned to employ by 2021. The company has eight available job listings, none of them having anything to do with master-planning or constructing a city. Whether the company—and Berns’s reputed fortune—can sustain itself long enough to see the project through is uncertain. But the import of this legislation, which stands a good chance of becoming law, is clear: Tech moguls will effectively be deputized to chart the economic future of the state. Or, as Pete Ernaut put it, “This has the potential to change Nevada forever.”
* This article has been updated to clarify a New York Times report and include a response from Milken.
