So maybe I’m not supposed to issue that command from inside a container?

Yes you are right that you shouldn’t. The error says that it doesn’t have access to docker-compose. This is because

prefect server start

uses docker compose to spin up containers but you can’t spin up docker containers inside a container my default unless you mount the docker sock to that container so it can spin containers outside

Didn’t see this reply, see you answered one of my questions. thanks!