The fantasy business model would be to be rich enough to be able to personally cover these costs and establish a high tech R&D environment :) I'm not suggesting that this is actually possible, it's one of those things - what would I do if I had Bill Gates kind of money.
(And by the way, not trying to rain on your parade; on the contrary, I find this discussion fascinating, so thanks for starting it.)
If you want to do that with your own billions, have at it. But I wouldn't want to locate a business there, do business with you, or even go to work for you, an employer from whom I could have no possible legal recourse in the event of a dispute.
It sounds like you are risk averse and probably don't share the goals, wouldn't be swayed by the value proposition - so you wouldn't move there. It's true that there would have to be trust in the person doing this, but I'm assuming the billions didn't drop from the sky and I have done something to earn them, the process of getting them should provide plenty of material to evaluate my trustworthiness. Trusted third party insurance is also an option.
That part is easily solved: the dictator can put up a bond in some trusted country. The bond is forfeited if the dictator betrays you. The contract laws of the trusted country apply.
It could be that some enterprising dictator could gain a better reputation for respect of property than the US government[1]. A reputation for respecting property rights, combined with a country, is an extremely lucrative asset, and it would be costly to lose it.
> As a business owner, I then have the choice of doing my business in a major Western democracy with an elected government
If moonchrome can offer a better regulatory environment, you might prefer to do business with him. Maybe your business is melanoma detection. HN user danifong approached YCombinator with that idea, and Graham told her[2]: “The trouble with the melanoma detection idea is that you’d spend most of your time dealing with legal and regulatory crap. That sort of work doesn’t really take advantage of your skills.”
[1] The USA has questionable regard for property rights, e.g. http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
[2] http://daniellefong.com/2010/02/11/how-law-shapes-the-busine...
For example, requiring a dictator to post bond is all well and good until he decides at some point while you're within his borders that he's going to (a) kill you, in which case collecting on the bond won't you much good, though it will soften the blow for your investors, or (b) start cutting off toes and fingers until you release the bond. (Obviously you could structure the bond in such a way that option (b) is unworkable, which means that it either becomes a straight up hostage ransom situation, or reduces to option (a).)
Even given all of that, you're right that it still might make sense to do business there for a particular kind of business given a particular risk tolerance. It might well be an experiment worth trying. By the same token, if you develop a new kind of versatile routing software that does an especially good job of finding the optimal approach to trying to route materials past someone who is actively trying to stop you, selling it to Mexican drug lords might be an experiment worth trying. Just make sure you have a really good idea what you're getting into and that the risks to your person as well as your business are worth it to you.
History teaches us that there will always be hold-outs and that the most effective way to achieve this goal is through brute force. This is how the U.S. base in Diego Garcia came to be. The islanders who lived there were forcibly deported from their homes in the 1970s by the British who owned the islands.
That's assuming you want them all of the island and that you need everyone's consent to take over, you just need the majority to be take power trough democratic process and the few that wish to remain could be employed/incorporated in to the state.
I recently read a fascinating book called "Miles from Nowhere" which described life in the least populated counties in the U.S. One recurring theme is that counties with almost no one living in them are subject to being taken over by groups with their own agenda. For example, a county with only 150 people in it might be the target of a group of libertarians. 800 libertarians may agree to move there to set up a libertarian government. The point the book made was that virtually uninhabited is very different than uninhabited, and that there are still people there who have wishes, dreams and rights of their own.
So what you are describing is actually an act of force. Overtaking Nauru for your own purposes is a unilateral destruction of someone's home. Imagine for some odd reason the entire population of China decided to buy out and relocate to your city and turn it into a Chinese culture and economy. You may have nothing against the Chinese or Chinese culture, but you may wish to simply keep your home city as is.
Democracy is often thought of as peaceful, but it can often be a vehicle for the majority to disregard the legitimate needs of the minority.
But that's the system they already live in, I wouldn't change that, I would just use that system to achieve my goal. I agree that it's not completely moral but that's inherent in democracies, even with constitutions protecting the minorities, they will always be subjected to mob rule.
Pity there's no Kindle version:-/
If you like geography, this book is a good read. It's a bit dated, having been written in the early 1990s, but this, in my opinion, turns out to be a good thing. It gives us some great glimpses of how isolated these communities were and I'm sure the Internet has since changed this considerably.
But I don't have any right to do that. I only own my own home/property; 'my' home city as a whole doesn't belong to me. Attempting to control what my neighbors may do with their homes and what kind of social arrangements they'll be allowed to participate in, to the point of trying to exclude entire ethnic groups from settling within some arbitrary boundaries - simply because I feel some personal sense of propriety over what doesn't actually belong to me - is the more direct and clear act of brute force here.
> Overtaking Nauru for your own purposes is a unilateral destruction of someone's home.
No, it isn't. Unilaterally destroying someone's home is a unilateral destruction of someone's home. Purchasing people's homes with their consent, and leaving alone those who don't want to sell, isn't destruction of anything.
For example you can sign a contract to waive your rights to anual leave but its invalid and unenforcable.
But given the way certain nations have been behaving of late, having your own nation may not make much of a difference.