Anarcho-capitalism is not the consequence of the rest of Objectivism, so that's the specific flaw in your reasoning. (Sorry to be blunt here, it's just easier.)

The letter you linked to is erroneous because, contra what it says, forming a "competing government" is an initiation of force. It is retaliatary force for the actual government to act to stop a "competing government."

(The next two paragraphs are kind of a tangent, the actual philosophical response to your mistake is after that.)

I don't think this is an interesting issue, though. Rand's philosophy is hierarchical: metaphysics, then epistemology, then morality, then politics. Derivative issues in politics are largely "implementation defined." For example, I don't think you can have a government without any taxes at all in today's world, whereas Rand thought no taxes would be the ideal thing to aim for. That issue doesn't have any bearing on whether Objectivism is correct or not.

As another example, I also don't care about who builds the roads, and stuff like that. If we had non-governmental roads from the start, we'd probably all live in private cities, and the world would be vastly different, but we're stuck with what we have, so who cares?

Let me change direction and go to a likely source of your error. Let me give an example. Honesty is an Objectivist virtue, so some people think you have to be honest all the time. That's not true: There is a certain context in which honesty is applicable. You don't have to be honest to a robber asking where your kids are. Likewise, non-initiation of force only applies under a system of laws and government. It's a political principle. It would not apply to people stranded on a desert island. It does not apply to a state of nature. It doesn't apply to people seeking to initially form a government. It also doesn't apply when the government is bad, past a certain "implementation defined" point (i.e., Objectivism doesn't have a specific principle for where that line is - it's too situational).

So, it's an error of context to say that the non-aggression is some universal moral rule that implies that we all have to have anarcho-capitalism. It's not a moral rule, it's a political rule. It's part of the next level up.

This is true in the same way (more or less) that honesty is not a universal moral rule. Understanding the context for honesty requires understanding the actual more fundamental principle it derives from, which is to always act in a way that serves your own life and happiness. (Which, itself, even has a context that depends on hierarchically previous ideas - Rand was not against suicide in the case of losing a precious loved one, for example, if you can't conceive of living happily without that person.)

> Rand's (and your) reading of Kant is significantly flawed.

I don't claim that I can provide evidence for the things I say about Kant, because that evidence presupposes agreement on fundamentals of Objectivism, and that's not something I can provide evidence for either, other than pointing to reality and suggesting someone undertake a multi-year study of the Objectivist literature. So, the stuff about Kant is just intended as a "sampler," something to get someone thinking and maybe intrigued.

Putting the Kant stuff aside, I'd be genuinely interested to see what your reaction (again) to what I've said.

(Two more tangential paragraphs follow.)

By the way, normal people do not have the epistemological background to _not_ make errors that have to do with disassociating abstractions (concepts, principles) from the concretes they refer to. Ayn Rand calls that "rationalism," and I think that's the category in which your mistake falls. Many normal people (especially those drawn to programming) habitually think this way. That's how I was for most of my life, and the only thing that kept drawing me back to Objectivism was honestly realizing that nothing else made sense, and knowing that there was more background to Objectivism that I still lacked.

Most people who aren't rationalistic people just don't trust abstractions _at all_. For example, pragmatists who say that there are no rules, or people who say that no knowledge is really trustworthy. This is throwing the baby out with the bathwater.