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Rand’s illustration is an instance of a mistake Karl Popper calls the myth of the framework: https://blog.dennishackethal.com/posts/objectivism-vs-the-myth-of-the-framework

Libertarians such as David Friedman have explained how that situation could be resolved peaceably:

https://www.youtube.com/watch?v=_yo7vnXmVlw
https://www.youtube.com/watch?v=-PnkC7CNvyI

A monopoly on violence amplifies the risk of abuse.

There exist many legal variations between states of the US, eg with regard to wiretapping laws (single-party vs two-party-consent states), yet presumably that wouldn’t lead KodoKB to conclude that federalism is bad.

Since an objectivist government, by definition, cannot aggress upon its citizens, it cannot stop them from forming private arbitration services anyway. It has no way to enforce its monopoly. So an objectivist society would sooner or later turn into an ancap one anyway.

Even if it’s true that people need shared, objective legal standards for a society to function, that doesn’t mean government is the only way to supply such standards. (Logan Chipkin)

Private protection/arbitration agencies would actually be better than the governments described in #5 (the US and Chinese government, respectively). Consider how things would be different if these governments were not extorting their citizens for money, but instead had to rely on a value proposition to earn their money – that is, if they both operated like private arbitration agencies. Then both would prefer to have shared rules around intellectual property so their customers continue to give them money.

That sounds no worse than the current situation between the US and China, say. China protects Chinese companies violating US trademarks.

(There’s a common libertarian saying about how criticisms of libertarianism are usually just criticisms of the status quo.)

Common standards often emerge voluntarily because people prefer objectivity and wish to avoid arbitrariness.

Consider communications technology and the web. Competing phone companies agree on standards for underlying technology so their customers can call each other. Developers of web browsers adopt common standards for the web. Developers of operating systems follow shared, cross-OS standards (called POSIX).

These standards result in objectivity, and they emerged without government involvement. People develop and agree upon such standards voluntarily because of the benefits they offer: without them, there’d be chaos. People generally don’t like chaos.

The anarcho-capitalist stance: competing governments in a single territory would not only work but be superior to having a single government, a monopoly on violence.