Stifling Innovation: Regulators Push for Flintstones Future, Not Jetsons

Things are changing very fast in the tech landscape. Yesterday’s processes simply aren’t adequate enough for today’s demands. For many, these changes are happening too fast.

Products and services that used to take years to reach a mass audience now gain a massive customer base within months.

Innovative companies are entering sectors where the status quo hasn’t changed in decades. Regulators don’t know how to handle this.

Whether it’s because of the lobbying powers of entrenched industries or simply because of reckless legislation, new rules are putting innovation and startups at risk.

My fear is that premature regulation puts our future closer to an episode of The Flintstones rather than The Jetsons.

Here are a few sectors where regulators are putting pressure on, arguably prematurely:

On-demand & peer-to-peer services:

  • Popular online rental startup Airbnb is receiving pressure from New York authorities because of claims that the company’s services violate state hotel laws. The state’s Attorney General has gone to the extent of filing a subpoena for customer data.
  • Seattle is curbing the growth of transportation startups Uber, Lyft and Sidecar by limiting the number of drivers that can operate in the city at one time to 150, despite customer demands that call for a higher driver supply.
  • Taxi & limousine commissions in New York questioned the pure legality of Uber’s right to operate in the state, as far back as 2012.

Digital currencies

  • Even with bitcoin’s meteoric rise in notoriety in 2013, some of Washington’s most influential are looking to ban bitcoin. Lobbyists and senators alike are waging a war on what some argue is the biggest innovation in financial technology. Yes, the IRS has classified bitcoin as ‘property’ for tax purposes. But its legal use in commerce is still unclear and this benefits the big financial institutions.

Automotive sales

  • New Jersey is preventing car manufacturer Telsa from selling its cars online because state laws require the use of a middle man (a car dealership storefront). The maker of the first long-range and all-electric vehicle is also seeing pressure from states like Ohio, New York and Texas for similar reasons.

So why do these regulatory stances bother me? Because they limit our society’s ability to innovate in new areas, take bigger risks and improve life for everyone.

Why does the process of me purchasing a car online require regulation when the manufacturer has passed all safety standards? Is it because long-standing players in the automotive sector have to compete harder against an innovative company? I think so.

If I want to summon a black-car driver from my phone, why should the number of options I have be limited to an arbitrary amount? Is it to ensure that taxi cab drivers are still relevant and not put out of business by market-driven alternatives? Maybe.

Flying cars and automation will take a longer time to develop if questionable regulations dissuade companies from building them.

If safety is the underlying reason for this sort of scrutiny, fine. Yet it appears that this wave of regulation is designed to protect the legacy businesses that have existed for decades.

Regulation can stifle innovation when it isn’t thoughtful.

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