14 ms·

How Corruption Is Strangling U.S. Innovation (2012)

122 points by hype7 13y ago

hapless 13y ago
to summarize: regulatory capture is an existential threat to the American economy, and any regulation that restricts a silicon valley firm is prima facie regulatory capture. I, too, am alarmed by the changes in campaign funding we have seen in the last 20 years. The author applies his alarm narrowly to problems in his private equity portfolio. I do not share his alarm on that particular topic. By and large, I prefer to live in a world with taxi and hotel regulation, even if it impairs the ability of some bay area millionaires to add to their fortunes. Not all regulation is a sign of regulatory capture. Not all lobbying is intrinsically bad. Not every improvement in efficiency improves outcomes for society.
- WildUtah 13y ago
  I prefer to live in a world with taxi and hotel regulation Please enjoy them, then. The rest of us whose judgment is sufficient to choose our own taxis would appreciate if you kept the cops out of our private choices.
  - deleted 13y ago
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  - yarrel 13y ago
    Express kidnappers agree with you.
    - deleted 13y ago
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    - ivanca 13y ago
      Of course, without a clause any taxi driver is free to kidnap and murder you! These silly liberals don't think things trough. /s
    - Fuxy 13y ago
      So as long I'm a taxi driver I can kidnap you? Or do you actually believe that all these regulations are going to prevent somebody from kidnapping people? I sincerely doubt that.
  - alayne 13y ago
    Sure, just make sure the taxis only drive on your private road.
  - marcusf 13y ago
    Stockholm, Sweden, has a fairly unregulated taxi market in that pricing is set independently. This causes massive issues, specifically for tourists who have no idea what to pick. They end up paying $500 USD to go from the airport to town, a ride that is usually closer to $60-70 USD. I guess what I'm saying is judgement is contextual.
    - Fuxy 13y ago
      That's why old regulations were good in old times but now that app can help you choose the best taxi at the best price this is not necessary. Technology changes, people change so regulations must change with it. We should version control all laws and regulations and we should debug them when we see people taking advantage of them in unexpected ways.
      - mattlutze 13y ago
        *can help you choose the best taxi [registered through that app] at the best price [available through the app]. Do not forget that Uber, TaxiMagic, etc. are still closed and managed environments -- they are simply more opaque, as a corporation is choosing the makeup of that market instead of a government entity. Laws are already version controlled and debugged when necessary, where does that come from? Laws are amended and repealed all the time, in every level of legislation.
        Fuxy 13y ago
        You can have multiple apps on your phone however i know very few people who would ask every taxi parked there how much they charge. Plus the first one is a market place the second is just one taxi. Hell I wouldn't mind if a government entity launched an app that did the same thing.
  - gutnor 13y ago
    You judgement is sufficient because you live in a world where taxi are regulated and as such any legitimate unregulated competition will strive to provide you the same guarantee you get with the regulated ones. Now I'm not saying that the current regulation shouldn't get refreshed to consider what is currently available. But I'm amazed how people are just all or nothing about regulation. You should want enough regulation so that a basic level of service is guaranteed. If that is not the case, it becomes too hard for customer to efficiently compare services. Like in this case, you should be able to compare taxi companies in less than a few minutes. If you need more than that, then chance are that you will stick with the reliable provider you know. Good competition happens when consumers are willing to try alternative.
  - brianmcc 13y ago
    Don't assume you represent "the rest of us". You don't. Your choice is valid, but it's not mine, and that will be true for many others.
    - crusso 13y ago
      The irony with your statement is that your position is to make the choice for everyone in the market in a one-size-fits-all fashion. His choice is to allow variety, competition, and customization so that more people get a chance to find the service that satisfies their needs. I don't think anyone is saying to completely do away with all regulation in every instance - but have you seen the competitive barrier taxi regulation in most metro areas? It's specifically designed to prevent competition from those without massive resources. It's the stereotypical big guy keeping the little guy down with their million dollar medallions and special connections to lawmakers.
      - brianmcc 13y ago
        Upvoted for a fair point. Regulation must work effectively for it to deserve support going forward, and I am 100% with you when it comes to opposition to excessive or prevents-fair-competition type regulation in this kind of space. I'd probably prefer improved regulation than zero regulation though: regulate what matters, but otherwise step aside. Taxi and hotel regulation IMO comes with a safety aspect which should, for example, protect lone or vulnerable travellers from harm (to a limited extent, of course, but some is better than none). Personally, I will accept a bit of restriction to my options in return for widely vetted service provision.
  - pizza234 13y ago
    Well, dividing the world in them and us is certainly not a very good beginning of a conversation :-| But aside, the problem is not in the individual problem theirselves. The problem is that an excessive deregulation is a part of a large process of demolition of the human rights of the great majority of the population. Paradoxically, such huge problem is difficult to notice, because it requires vision. In a world where there would be an excess of human rights and slow economy, deregulation would be fine. In such world, I would agree to liberalize the taxing and housing. We're on the opposite side, though. So keeping deregulating is going to make the disaster we're already in even worse.
  - AutoCorrect 13y ago
    Let's take a look at that: Quick, tell me which ISP provides fiber to the home with unlimited bandwidth? Only 1, so far, and only in limited areas. If it was ONLY our judgement that determined the quality, then I would be all for it. Unfortunately, there's sometimes a race to the bottom. Regulations help, to a certain extent, to control that. I know I wouldn't want open heart surgery provided by the lowest bidder.
- NoPiece 13y ago
  You don't need to care about the millionaires in silicon valley, but you should care about the poor unemployed guy who is denied the right to earn a living by driving people around in his car.
  - res0nat0r 13y ago
    What about the guy driving the car and the family of the girl who were killed accidentally by an Uber driver, and Uber trying to skate responsibility? Regulations aren't in place contrary to popular opinion here just to make rich people richer...
    - deleted 13y ago
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    - atom-morgan 13y ago
      Accidents happen. How would this be any different if a taxi driver killed them and tried to skate responsibility?
      - 3am 13y ago
        It's a great question. As a contractor, is the Uber driver forced to carry his own liability insurance? How much? Is Uber liable, too? What is the answer to those same questions for a regulated taxi or limousine service? I don't have time to look up the answers because of work, but I'm genuinely curious if anyone knows. It seems like these are reasonable questions to ask, and could lead to a constructive conversation about the role and necessity of regulation.
    - icebraining 13y ago
      Isn't that why we have judges? To evaluate who is responsible when a crime happens? Why exactly is industry regulation required for that?
      - res0nat0r 13y ago
        If the driver worked for Yellow Cab or some other official service and had proper insurance, liability coverage, indemnity protection he wouldn't be liable for $100k in damages or whatever it may be, or other bills which could arise from this due to that dreaded regulation word. Many things that keep you safe every day are due to regulation, not hindered by it.
- ahomescu1 13y ago
  > By and large, I prefer to live in a world with taxi and hotel regulation I can see why you'd want licensing for taxi drivers (to help against customers getting ripped off or mugged), but what's the point of limiting the number of taxis (which is really one of the main points against taxi regulation)? I'm not sure it restricts the number of cars in the streets, if people who would otherwise take a cheap taxi now have to own a car instead. My point is there is such a thing as too much regulation.
  - glesica 13y ago
    > My point is there is such a thing as too much regulation. Or just poorly constructed regulation. I agree with you. I want taxi regulations, because I've got enough historical and international perspective to know what will happen without them and to know that they are, at worst, the lesser of two evils. However, I absolutely want smart regulation that gets out of the way where it isn't helping anyone and ensures that the services people want can be delivered. That being said, I would prefer better public transit than more taxis, but that's just another side of the same many-sided die.
  - bowlofpetunias 13y ago
    In some places we have this thing called public transport. In some very odd places we even use bicycles. Taxis, like all other cars, clog up the roads with their inefficient size to passengers ratio, and pollute the air. Limiting the number of taxis can be a matter of maintaining a half way liveable city. If there were plenty of cheap taxis in my town (Amsterdam) I would use them a lot, because I'm a big fat lazy motherfucker. Unfortunately, there are too many people like me, and our selfishness would be detrimental to the society around us. (I'm typing this as it's pouring outside and I have to get to the office. I would love a cheap taxi right about now, but the world doesn't revolve around me.)
    - icedog 13y ago
      Regulation isn't an appropriate response. If taxi's are cheap to operate (hence ample supply but artificially limited) then personal vehicles are cheap as well. "Big fat lazy motherfuckers" will just buy their own vehicle and make an even larger mess. Pardon my idealistic views, but it would be better to curb demand for taxis with: a. cheaper, more consistently on-time public transportation b. safer bike routes c. casual carpool programs The real question is why you rather take a taxi than your local public transportation.
- atom-morgan 13y ago
  By and large, I prefer to live in a world with taxi and hotel regulation Why, exactly?
  - gaius 13y ago
    Well, for a start, if you buy or rent an apartment in a nice quiet building, you didn't sign up for one of your neighbours deciding to run a hotel with strangers coming and going at all hours. Regulation prevents people getting profits by externalizing their costs onto others without their consent.
    - atom-morgan 13y ago
      So the amount of foot traffic going in and out of my (quiet) apartment is the issue? I hope I'm not exceeding this limit already by myself especially since none of my neighbors know who I am. As for having my friends over, this is an issue as well?
      - gaius 13y ago
        "having your friends over" eh? http://www.huffingtonpost.com/2014/03/17/airbnb-orgy_n_4978830.html http://www.huffingtonpost.com/2014/03/17/airbnb-orgy_n_49788...
        atom-morgan 13y ago
        Yes, having my friends over. We talk, drink, play video games, code, etc. This one scenario necessitates regulation to punish all other people who use or would potentially use Airbnb/Lyft/Uber in a responsible and professional manner?
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    - head_stomp 13y ago
      Why is this person renting or buying an apartment in a building whose management allows their residents to rent their apartments out like hotel rooms? Why can't this function through contracts with disputes being adjudicated through a court system rather than through comparatively blunt statutory regulation? For example, replace "run a hotel with strangers coming and going at all hours" with 'smoke cigarettes' or 'own a pet.'
tim333 13y ago
Looking at the case of Uber I think it's not so much corruption as vested interests that are fighting against it. NY taxi medallions for example are worth about $13bn or $1m each and the guys who have spent $1m are going to lobby against Uber, corrupt politicians or not.
dalek2point3 13y ago
Step 1. take a bunch of stories in the news about tech firms. Step 2. rehash them together without a discussion of the individual issues at stake in each case, which can be quite different and complex. Step 3. slap on a catchy title. voila, your HBR article is ready!
- ATLobotomy 13y ago
  Step 0. Find stories where the software industry isn't benefiting from the frivolity of the system.
- wehadfun 13y ago
  Yea I was a underwhelmed that Tesla, AirBnb, and Uber where the examples in Harvard Buriness Review of corruption stifling innovation. These are billion dollar companies and their political problems are dam near mainstream news. How about this guy [0] who invented a needle that could cut down needle prick injuries by over 99% and cost the same as the regular accident prone needles in use but was blocked by medical monopolies with legal kickbacks. [0] http://www.washingtonmonthly.com/features/2010/1007.blake.html http://www.washingtonmonthly.com/features/2010/1007.blake.ht...
PythonicAlpha 13y ago
Good that also the problem of Intellectual Property has been touched in the article! This is an important one. Because they always claim, that make the IP rights stronger does strengthen the innovators. The opposite is true! You see it also in the patent system. When old (and stupid) patents hinder innovation (what happens all day today), than the patent system becomes the biggest hindrance to innovation. The point is good: When it is better to "own" old IP than to make new one, the system is strangling innovation, nothing else. This system is for the "owners" not for the "creators"!
apsec112 13y ago
In Africa, the arrow usually goes money -> power: you want pull with the government, so you buy it. In the US, the arrow usually goes power -> money. People with power use it to enrich themselves, as this article demonstrates. The reverse almost never happens. Much ballyhoo is made of "money in politics" and how terrible it is. But those who believe US companies can "buy legislation" are welcome to explain how (e.g.) Google, the second-largest corporation in the US by market cap, was not allowed to build a bridge by the Mountain View City Council (http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on-google-bridge-idea http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on...). Nothing big. Nothing unethical. Just an ordinary twenty-foot bridge over a creek between two Google offices. Denied for unspecified "environmental reasons", even though the bridge would save thousands of miles of polluting car travel every day. Google offered to conduct an environmental impact review at their own expense, but even that was denied.
- pedalpete 13y ago
  Is it possible your example of Google actually proves the point? Maybe Google didn't pay the right people in government to get the bridge approved? I don't know anything about this bridge proposal, but I would think that the 'money in politics' issue is less of an issue in regional/city politics than it is in state and federal. Local representatives look their constituents in the eye on a regular basis. State and federal members don't have the same reminder of who they work for.
  - davidw 13y ago
    > Is it possible your example of Google actually proves the point? One of the classic signs of a conspiracy theory is that it is not falsifiable: evidence to the contrary is actually evidence of the the theory! > I would think that the 'money in politics' issue is less of an issue in regional/city politics than it is in state and federal. Not at all, it's just that it's less money. How do you think the area where Google is got transformed from a rural-ish area full of farms and orchards into what it is today?
    - jsight 13y ago
falconfunction 13y ago
Amazon has a patent on 1 click to buy, and I am supposed to believe that mickey mouse remixes are stifling competition? Are you a child or do you write for children?
- euank 13y ago
  It's not mickey mouse, the extension of copyright that resulted. The point he's making is that a big business (Disney) can sway legislature for their own benefit. If you're not aware, the copyright period has been extended several times up to the point of ridiculousness based mostly on Disney's lobbying. Patents are a massive problem in tech, but copyright is a problem for innovators in the arts - especially authors. The insult at the end is entirely unneeded. Hell, I wouldn't be surprised if a child saw the issues presented more clearly for not having had to deal with reality nearly so often.
  - falconfunction 13y ago
    Copyright is a problem if you're an artist too stupid to understand satire.
    - er35826 13y ago
      It's also a problem if you're an artist that makes something 'close enough' to Mickey Mouse, and you don't have the resources to both fight the legal battle, and support yourself while your income stream is shut off due to the legal battle.
    - glenra 13y ago
      It's also a problem if you'd like to preserve old art or repurpose it for the modern era. The tragedy isn't Mickey cartoons, it's all the less-famous art that is being lost forever with the passage of time. Which could have been reissued by whoever came across it, were it not for perpetual copyrights making that impossible to do legally.
anjc 13y ago
Two things. As much as I don't like the idea of incumbents using their weight to protect against innovative competition, is this not just the nature of a strategic view of competitive advantage? I mean, it's not nice, but it seems like strategy 101 to bolster barriers to entry to protect against new entrants. Without these barriers being possible, incumbents would presumably create barriers in a different manner (through acquisition etc)? It's not like massive incumbents will whither and die because they can't encourage legislation to be adopted, it's just a currently effective strategy. Secondly, a semantic point, it talks about 'disruptive innovations', but surely the key characteristics of disruptive innovations, at least in the sense that Christensen described them, is that incumbents either don't see the value in them or else the product targets a segment with a low-performance product that incumbents don't see the threat of. Tesla and Uber don't seem to fit this bill for me, they seem more like maybe sustaining and radical innovations, respectively, and I don't think existing value networks will be affected. They seem like they're just segmenting and differentiating to me. I can't see everybody driving around in Tesla-type cars bought in manufacturer-owned dealerships in 20 years, say, because as the article says itself, it only suits "innovative manufacturers like Tesla and Fisker that only have a very few number of models and who want to locate in high-traffic areas". I don't think it's disruptive.
- marcosdumay 13y ago
  > As much as I don't like the idea of incumbents using their weight to protect against innovative competition, is this not just the nature of a strategic view of competitive advantage? Yes. What is wrong is that the government shouldn't be helpping them.
hibikir 13y ago
This is just a partial look of the problem, which is inherent to a republic, and goes kind of like this: If a law would be a big economic boost to 50 people, but a minor loss to 50K, chances are those 50K will put less pressure on the legislature to stop the law than the 50 people to at making sure it passes. So established players with money can make sure we get laws that help them, hurting the majority of the electorate. Lobbying is pretty much unavoidable. For more on the concept, and on why some groups can form a lobby, while others just can't get anything effective passed, there's 'The Logic of Collective Action' from Olsen, 1965. It talks a lot about unions, but the argument is the same for groups that represent companies.
- cwp 13y ago
  Yes, this is a general problem, but that doesn't mean that it can't be ameliorated. One of the most insightful things I read about health-care reform in the U.S. was this: a lot of people on the left would have preferred a single-payer system to what was actually enacted, but that really wouldn't have been feasible in the U.S. The reason single-payer is successful in keeping costs down is that the government sets prices. There's a committee of experts somewhere that sets prices of drugs, procedures etc, and periodically adjusts them based on technological advances, market conditions etc. This couldn't work in the U.S. because the pricing body would be subject to intense lobbying by medical suppliers, and would quickly reflect their interest in keeping prices high, rather than the public interest in lower prices. (I wish I had a citation, sorry.) So does that mean single-payer medical systems are impossible? No, of course not. It works fine the U.K., Canada and Taiwan to name a few. In those countries, the kind of lobbying that dominates politics in the U.S. is simply illegal. At the same time, not all special-interest lobbying is harmful. Consider the case of wheel-chair users. They represent a tiny fraction of the citizenry, but they benefit greatly from a law that requires public buildings have wheel-chair access ramps. That would saddle the majority with a small cost, but the public doesn't care either way. So the wheel-chair lobby has to put effort into getting the law passed, and it's a good thing if it succeeds! So, yes, this is a general problem that has no solution. But that doesn't mean that corruption on the scale and scope that exists in the U.S. is inevitable, or that it's not really hurting U.S. democracy. It is.
snarfy 13y ago
If you've ever visited DC, it's plainly visible in the skyline. There is a law stating no buildings can be taller than the monuments, so all the buildings are the roughly same height. There are a handful of true government buildings, and everything else is associations, thousands of them, things like american dental association, metal workers association, etc. There are so many associations there is an association of associations. It is these people writing the laws. The congressmen don't even read them all before they sign them.
- dvcc 13y ago
  Aside from the point of congressmen not reading bills prior to signing them, this is not really an issue. Why should we expect every member of congress to be an expert in dentistry? We shouldn't as that would be a waste of time. That is what the numerous associations/think tanks are there for. To guide legislators in their decisions. Abuse exists, but that does not mean we should abolish the idea of it.
  - snarfy 13y ago
    None of those people represent me. They represent dentists, steel workers, etc. My representation is severely drowned out by all of the money. This is the problem. Their laws may benefit me, or they may hinder, but they certainly do not benefit democracy. I should not need a million dollars to throw at capitol hill for my vote to count. Sure, we should have experts from the industries to guide the laws, I'm just not sure they should be paid by industries when they do it.
bippi 13y ago
my "cool story, Hansel" that goes with this: I worked in electronic bingo. One of the things we faced was that paper bingo card manufacturers routinely wanted to limit the effectiveness of electronic bingo markers so-as not to drive themselves out of business. One method they did was limit the number of cards that could be sold to any one person, electronically or otherwise. Also, in some jurisdictions we had to have a paper copy of each card sold to match what was in the bingo machine. Thus, the paper market would never, ever die. So-much-so that the electronic company we were, invested in a printing press.
wehadfun 13y ago
Why can't Tesla just have regular dealerships and let people buy them? Why can't airbnb just collect and pay the taxes? Why can't uber properly license the drivers?
- glenra 13y ago
  > Why can't Tesla just have regular dealerships and let people buy them? "Regular dealerships" are a horrendous waste of resources. It's a business structure that made sense 50 years ago and makes very little sense today. Tesla doesn't need regular dealerships, so you're asking why they shouldn't be forced to waste money buying land and buildings and hiring people that could all be doing something MORE useful, just in order to make their company look more like the rest of the industry they're trying to disrupt. It's like asking "Why can't Apple just use Windows on its computers like everybody else does?" Or "Why can't Walmart just set up tiny little stores that sell a few things - why do they have to make these huge box stores that sell everything?"
  - wehadfun 13y ago
    Dealerships don't make since today? I like being able to take my car to the place I bought it to be fixed. I like that I do not have to try and convince some sales guy to come take a look at my car. I like the fact that I can touch, get in, kick, and drive the car I buy before I but it.
    - glenra 13y ago
      As technology advances cars are more reliable, more consistent, and tend to require ever less ongoing maintenance and a lot of what they do still need is stuff like changing the oil (which you can do most quickly and conveniently at the nearest drive-through Jiffy-Lube place that specializes in this one service) or replacing the tires (which you can do most cheaply and conveniently at the nearest CostCo while you do other shopping there). There's no particular reason why we should expect the best firm at selling cars would be the best firm at fixing them. If there's a market demand for a network of company-owned garages, companies will supply that. If there's a market demand for a way to try out the car first, companies will provide that service too. But there's no reason either of these needs to be legally tied into how you have to buy the car. Me, I'd like the option to buy my car just the way I'd buy a computer. Go to the manufacturer's site online, spec it out, make the purchase online, and have the car delivered to my door or someplace nearby that I can pick it up when it's ready.
at-fates-hands 13y ago
This is pretty interesting considering most conservatives want less regulations and most liberals want more. In every example, they cite over regulated industries where the biggest players are using those regulations as a means to stifle innovation.

122 points by hype7 13y ago

to summarize: regulatory capture is an existential threat to the American economy, and any regulation that restricts a silicon valley firm is prima facie regulatory capture. I, too, am alarmed by the changes in campaign funding we have seen in the last 20 years. The author applies his alarm narrowly to problems in his private equity portfolio. I do not share his alarm on that particular topic. By and large, I prefer to live in a world with taxi and hotel regulation, even if it impairs the ability of some bay area millionaires to add to their fortunes. Not all regulation is a sign of regulatory capture. Not all lobbying is intrinsically bad. Not every improvement in efficiency improves outcomes for society.

WildUtah 13y ago
I prefer to live in a world with taxi and hotel regulation Please enjoy them, then. The rest of us whose judgment is sufficient to choose our own taxis would appreciate if you kept the cops out of our private choices.
- deleted 13y ago
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- yarrel 13y ago
  Express kidnappers agree with you.
  - deleted 13y ago
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  - ivanca 13y ago
    Of course, without a clause any taxi driver is free to kidnap and murder you! These silly liberals don't think things trough. /s
  - Fuxy 13y ago
    So as long I'm a taxi driver I can kidnap you? Or do you actually believe that all these regulations are going to prevent somebody from kidnapping people? I sincerely doubt that.
- alayne 13y ago
  Sure, just make sure the taxis only drive on your private road.
- marcusf 13y ago
  Stockholm, Sweden, has a fairly unregulated taxi market in that pricing is set independently. This causes massive issues, specifically for tourists who have no idea what to pick. They end up paying $500 USD to go from the airport to town, a ride that is usually closer to $60-70 USD. I guess what I'm saying is judgement is contextual.
  - Fuxy 13y ago
    That's why old regulations were good in old times but now that app can help you choose the best taxi at the best price this is not necessary. Technology changes, people change so regulations must change with it. We should version control all laws and regulations and we should debug them when we see people taking advantage of them in unexpected ways.
    - mattlutze 13y ago
      *can help you choose the best taxi [registered through that app] at the best price [available through the app]. Do not forget that Uber, TaxiMagic, etc. are still closed and managed environments -- they are simply more opaque, as a corporation is choosing the makeup of that market instead of a government entity. Laws are already version controlled and debugged when necessary, where does that come from? Laws are amended and repealed all the time, in every level of legislation.
      - Fuxy 13y ago
        You can have multiple apps on your phone however i know very few people who would ask every taxi parked there how much they charge. Plus the first one is a market place the second is just one taxi. Hell I wouldn't mind if a government entity launched an app that did the same thing.
- gutnor 13y ago
  You judgement is sufficient because you live in a world where taxi are regulated and as such any legitimate unregulated competition will strive to provide you the same guarantee you get with the regulated ones. Now I'm not saying that the current regulation shouldn't get refreshed to consider what is currently available. But I'm amazed how people are just all or nothing about regulation. You should want enough regulation so that a basic level of service is guaranteed. If that is not the case, it becomes too hard for customer to efficiently compare services. Like in this case, you should be able to compare taxi companies in less than a few minutes. If you need more than that, then chance are that you will stick with the reliable provider you know. Good competition happens when consumers are willing to try alternative.
- brianmcc 13y ago
  Don't assume you represent "the rest of us". You don't. Your choice is valid, but it's not mine, and that will be true for many others.
  - crusso 13y ago
    The irony with your statement is that your position is to make the choice for everyone in the market in a one-size-fits-all fashion. His choice is to allow variety, competition, and customization so that more people get a chance to find the service that satisfies their needs. I don't think anyone is saying to completely do away with all regulation in every instance - but have you seen the competitive barrier taxi regulation in most metro areas? It's specifically designed to prevent competition from those without massive resources. It's the stereotypical big guy keeping the little guy down with their million dollar medallions and special connections to lawmakers.
    - brianmcc 13y ago
      Upvoted for a fair point. Regulation must work effectively for it to deserve support going forward, and I am 100% with you when it comes to opposition to excessive or prevents-fair-competition type regulation in this kind of space. I'd probably prefer improved regulation than zero regulation though: regulate what matters, but otherwise step aside. Taxi and hotel regulation IMO comes with a safety aspect which should, for example, protect lone or vulnerable travellers from harm (to a limited extent, of course, but some is better than none). Personally, I will accept a bit of restriction to my options in return for widely vetted service provision.
- pizza234 13y ago
  Well, dividing the world in them and us is certainly not a very good beginning of a conversation :-| But aside, the problem is not in the individual problem theirselves. The problem is that an excessive deregulation is a part of a large process of demolition of the human rights of the great majority of the population. Paradoxically, such huge problem is difficult to notice, because it requires vision. In a world where there would be an excess of human rights and slow economy, deregulation would be fine. In such world, I would agree to liberalize the taxing and housing. We're on the opposite side, though. So keeping deregulating is going to make the disaster we're already in even worse.
- AutoCorrect 13y ago
  Let's take a look at that: Quick, tell me which ISP provides fiber to the home with unlimited bandwidth? Only 1, so far, and only in limited areas. If it was ONLY our judgement that determined the quality, then I would be all for it. Unfortunately, there's sometimes a race to the bottom. Regulations help, to a certain extent, to control that. I know I wouldn't want open heart surgery provided by the lowest bidder.
NoPiece 13y ago
You don't need to care about the millionaires in silicon valley, but you should care about the poor unemployed guy who is denied the right to earn a living by driving people around in his car.
- res0nat0r 13y ago
  What about the guy driving the car and the family of the girl who were killed accidentally by an Uber driver, and Uber trying to skate responsibility? Regulations aren't in place contrary to popular opinion here just to make rich people richer...
  - deleted 13y ago
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  - atom-morgan 13y ago
    Accidents happen. How would this be any different if a taxi driver killed them and tried to skate responsibility?
    - 3am 13y ago
      It's a great question. As a contractor, is the Uber driver forced to carry his own liability insurance? How much? Is Uber liable, too? What is the answer to those same questions for a regulated taxi or limousine service? I don't have time to look up the answers because of work, but I'm genuinely curious if anyone knows. It seems like these are reasonable questions to ask, and could lead to a constructive conversation about the role and necessity of regulation.
  - icebraining 13y ago
    Isn't that why we have judges? To evaluate who is responsible when a crime happens? Why exactly is industry regulation required for that?
    - res0nat0r 13y ago
      If the driver worked for Yellow Cab or some other official service and had proper insurance, liability coverage, indemnity protection he wouldn't be liable for $100k in damages or whatever it may be, or other bills which could arise from this due to that dreaded regulation word. Many things that keep you safe every day are due to regulation, not hindered by it.
ahomescu1 13y ago
> By and large, I prefer to live in a world with taxi and hotel regulation I can see why you'd want licensing for taxi drivers (to help against customers getting ripped off or mugged), but what's the point of limiting the number of taxis (which is really one of the main points against taxi regulation)? I'm not sure it restricts the number of cars in the streets, if people who would otherwise take a cheap taxi now have to own a car instead. My point is there is such a thing as too much regulation.
- glesica 13y ago
  > My point is there is such a thing as too much regulation. Or just poorly constructed regulation. I agree with you. I want taxi regulations, because I've got enough historical and international perspective to know what will happen without them and to know that they are, at worst, the lesser of two evils. However, I absolutely want smart regulation that gets out of the way where it isn't helping anyone and ensures that the services people want can be delivered. That being said, I would prefer better public transit than more taxis, but that's just another side of the same many-sided die.
- bowlofpetunias 13y ago
  In some places we have this thing called public transport. In some very odd places we even use bicycles. Taxis, like all other cars, clog up the roads with their inefficient size to passengers ratio, and pollute the air. Limiting the number of taxis can be a matter of maintaining a half way liveable city. If there were plenty of cheap taxis in my town (Amsterdam) I would use them a lot, because I'm a big fat lazy motherfucker. Unfortunately, there are too many people like me, and our selfishness would be detrimental to the society around us. (I'm typing this as it's pouring outside and I have to get to the office. I would love a cheap taxi right about now, but the world doesn't revolve around me.)
  - icedog 13y ago
    Regulation isn't an appropriate response. If taxi's are cheap to operate (hence ample supply but artificially limited) then personal vehicles are cheap as well. "Big fat lazy motherfuckers" will just buy their own vehicle and make an even larger mess. Pardon my idealistic views, but it would be better to curb demand for taxis with: a. cheaper, more consistently on-time public transportation b. safer bike routes c. casual carpool programs The real question is why you rather take a taxi than your local public transportation.
atom-morgan 13y ago
By and large, I prefer to live in a world with taxi and hotel regulation Why, exactly?
- gaius 13y ago
  Well, for a start, if you buy or rent an apartment in a nice quiet building, you didn't sign up for one of your neighbours deciding to run a hotel with strangers coming and going at all hours. Regulation prevents people getting profits by externalizing their costs onto others without their consent.
  - atom-morgan 13y ago
    So the amount of foot traffic going in and out of my (quiet) apartment is the issue? I hope I'm not exceeding this limit already by myself especially since none of my neighbors know who I am. As for having my friends over, this is an issue as well?
    - gaius 13y ago
      "having your friends over" eh? http://www.huffingtonpost.com/2014/03/17/airbnb-orgy_n_4978830.html http://www.huffingtonpost.com/2014/03/17/airbnb-orgy_n_49788...
      - atom-morgan 13y ago
        Yes, having my friends over. We talk, drink, play video games, code, etc. This one scenario necessitates regulation to punish all other people who use or would potentially use Airbnb/Lyft/Uber in a responsible and professional manner?
    - deleted 13y ago
      [deleted]
  - head_stomp 13y ago
    Why is this person renting or buying an apartment in a building whose management allows their residents to rent their apartments out like hotel rooms? Why can't this function through contracts with disputes being adjudicated through a court system rather than through comparatively blunt statutory regulation? For example, replace "run a hotel with strangers coming and going at all hours" with 'smoke cigarettes' or 'own a pet.'

tim333 13y ago

Looking at the case of Uber I think it's not so much corruption as vested interests that are fighting against it. NY taxi medallions for example are worth about $13bn or $1m each and the guys who have spent $1m are going to lobby against Uber, corrupt politicians or not.

dalek2point3 13y ago

Step 1. take a bunch of stories in the news about tech firms. Step 2. rehash them together without a discussion of the individual issues at stake in each case, which can be quite different and complex. Step 3. slap on a catchy title. voila, your HBR article is ready!

ATLobotomy 13y ago
Step 0. Find stories where the software industry isn't benefiting from the frivolity of the system.
wehadfun 13y ago
Yea I was a underwhelmed that Tesla, AirBnb, and Uber where the examples in Harvard Buriness Review of corruption stifling innovation. These are billion dollar companies and their political problems are dam near mainstream news. How about this guy [0] who invented a needle that could cut down needle prick injuries by over 99% and cost the same as the regular accident prone needles in use but was blocked by medical monopolies with legal kickbacks. [0] http://www.washingtonmonthly.com/features/2010/1007.blake.html http://www.washingtonmonthly.com/features/2010/1007.blake.ht...

PythonicAlpha 13y ago

Good that also the problem of Intellectual Property has been touched in the article! This is an important one. Because they always claim, that make the IP rights stronger does strengthen the innovators. The opposite is true! You see it also in the patent system. When old (and stupid) patents hinder innovation (what happens all day today), than the patent system becomes the biggest hindrance to innovation. The point is good: When it is better to "own" old IP than to make new one, the system is strangling innovation, nothing else. This system is for the "owners" not for the "creators"!

apsec112 13y ago

In Africa, the arrow usually goes money -> power: you want pull with the government, so you buy it. In the US, the arrow usually goes power -> money. People with power use it to enrich themselves, as this article demonstrates. The reverse almost never happens. Much ballyhoo is made of "money in politics" and how terrible it is. But those who believe US companies can "buy legislation" are welcome to explain how (e.g.) Google, the second-largest corporation in the US by market cap, was not allowed to build a bridge by the Mountain View City Council (http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on-google-bridge-idea http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on...). Nothing big. Nothing unethical. Just an ordinary twenty-foot bridge over a creek between two Google offices. Denied for unspecified "environmental reasons", even though the bridge would save thousands of miles of polluting car travel every day. Google offered to conduct an environmental impact review at their own expense, but even that was denied.

pedalpete 13y ago
Is it possible your example of Google actually proves the point? Maybe Google didn't pay the right people in government to get the bridge approved? I don't know anything about this bridge proposal, but I would think that the 'money in politics' issue is less of an issue in regional/city politics than it is in state and federal. Local representatives look their constituents in the eye on a regular basis. State and federal members don't have the same reminder of who they work for.
- davidw 13y ago
  > Is it possible your example of Google actually proves the point? One of the classic signs of a conspiracy theory is that it is not falsifiable: evidence to the contrary is actually evidence of the the theory! > I would think that the 'money in politics' issue is less of an issue in regional/city politics than it is in state and federal. Not at all, it's just that it's less money. How do you think the area where Google is got transformed from a rural-ish area full of farms and orchards into what it is today?
  - jsight 13y ago

falconfunction 13y ago

Amazon has a patent on 1 click to buy, and I am supposed to believe that mickey mouse remixes are stifling competition? Are you a child or do you write for children?

euank 13y ago
It's not mickey mouse, the extension of copyright that resulted. The point he's making is that a big business (Disney) can sway legislature for their own benefit. If you're not aware, the copyright period has been extended several times up to the point of ridiculousness based mostly on Disney's lobbying. Patents are a massive problem in tech, but copyright is a problem for innovators in the arts - especially authors. The insult at the end is entirely unneeded. Hell, I wouldn't be surprised if a child saw the issues presented more clearly for not having had to deal with reality nearly so often.
- falconfunction 13y ago
  Copyright is a problem if you're an artist too stupid to understand satire.
  - er35826 13y ago
    It's also a problem if you're an artist that makes something 'close enough' to Mickey Mouse, and you don't have the resources to both fight the legal battle, and support yourself while your income stream is shut off due to the legal battle.
  - glenra 13y ago
    It's also a problem if you'd like to preserve old art or repurpose it for the modern era. The tragedy isn't Mickey cartoons, it's all the less-famous art that is being lost forever with the passage of time. Which could have been reissued by whoever came across it, were it not for perpetual copyrights making that impossible to do legally.

anjc 13y ago

Two things. As much as I don't like the idea of incumbents using their weight to protect against innovative competition, is this not just the nature of a strategic view of competitive advantage? I mean, it's not nice, but it seems like strategy 101 to bolster barriers to entry to protect against new entrants. Without these barriers being possible, incumbents would presumably create barriers in a different manner (through acquisition etc)? It's not like massive incumbents will whither and die because they can't encourage legislation to be adopted, it's just a currently effective strategy. Secondly, a semantic point, it talks about 'disruptive innovations', but surely the key characteristics of disruptive innovations, at least in the sense that Christensen described them, is that incumbents either don't see the value in them or else the product targets a segment with a low-performance product that incumbents don't see the threat of. Tesla and Uber don't seem to fit this bill for me, they seem more like maybe sustaining and radical innovations, respectively, and I don't think existing value networks will be affected. They seem like they're just segmenting and differentiating to me. I can't see everybody driving around in Tesla-type cars bought in manufacturer-owned dealerships in 20 years, say, because as the article says itself, it only suits "innovative manufacturers like Tesla and Fisker that only have a very few number of models and who want to locate in high-traffic areas". I don't think it's disruptive.

marcosdumay 13y ago
> As much as I don't like the idea of incumbents using their weight to protect against innovative competition, is this not just the nature of a strategic view of competitive advantage? Yes. What is wrong is that the government shouldn't be helpping them.

hibikir 13y ago

This is just a partial look of the problem, which is inherent to a republic, and goes kind of like this: If a law would be a big economic boost to 50 people, but a minor loss to 50K, chances are those 50K will put less pressure on the legislature to stop the law than the 50 people to at making sure it passes. So established players with money can make sure we get laws that help them, hurting the majority of the electorate. Lobbying is pretty much unavoidable. For more on the concept, and on why some groups can form a lobby, while others just can't get anything effective passed, there's 'The Logic of Collective Action' from Olsen, 1965. It talks a lot about unions, but the argument is the same for groups that represent companies.

cwp 13y ago
Yes, this is a general problem, but that doesn't mean that it can't be ameliorated. One of the most insightful things I read about health-care reform in the U.S. was this: a lot of people on the left would have preferred a single-payer system to what was actually enacted, but that really wouldn't have been feasible in the U.S. The reason single-payer is successful in keeping costs down is that the government sets prices. There's a committee of experts somewhere that sets prices of drugs, procedures etc, and periodically adjusts them based on technological advances, market conditions etc. This couldn't work in the U.S. because the pricing body would be subject to intense lobbying by medical suppliers, and would quickly reflect their interest in keeping prices high, rather than the public interest in lower prices. (I wish I had a citation, sorry.) So does that mean single-payer medical systems are impossible? No, of course not. It works fine the U.K., Canada and Taiwan to name a few. In those countries, the kind of lobbying that dominates politics in the U.S. is simply illegal. At the same time, not all special-interest lobbying is harmful. Consider the case of wheel-chair users. They represent a tiny fraction of the citizenry, but they benefit greatly from a law that requires public buildings have wheel-chair access ramps. That would saddle the majority with a small cost, but the public doesn't care either way. So the wheel-chair lobby has to put effort into getting the law passed, and it's a good thing if it succeeds! So, yes, this is a general problem that has no solution. But that doesn't mean that corruption on the scale and scope that exists in the U.S. is inevitable, or that it's not really hurting U.S. democracy. It is.

snarfy 13y ago

If you've ever visited DC, it's plainly visible in the skyline. There is a law stating no buildings can be taller than the monuments, so all the buildings are the roughly same height. There are a handful of true government buildings, and everything else is associations, thousands of them, things like american dental association, metal workers association, etc. There are so many associations there is an association of associations. It is these people writing the laws. The congressmen don't even read them all before they sign them.

dvcc 13y ago
Aside from the point of congressmen not reading bills prior to signing them, this is not really an issue. Why should we expect every member of congress to be an expert in dentistry? We shouldn't as that would be a waste of time. That is what the numerous associations/think tanks are there for. To guide legislators in their decisions. Abuse exists, but that does not mean we should abolish the idea of it.
- snarfy 13y ago
  None of those people represent me. They represent dentists, steel workers, etc. My representation is severely drowned out by all of the money. This is the problem. Their laws may benefit me, or they may hinder, but they certainly do not benefit democracy. I should not need a million dollars to throw at capitol hill for my vote to count. Sure, we should have experts from the industries to guide the laws, I'm just not sure they should be paid by industries when they do it.

bippi 13y ago

my "cool story, Hansel" that goes with this: I worked in electronic bingo. One of the things we faced was that paper bingo card manufacturers routinely wanted to limit the effectiveness of electronic bingo markers so-as not to drive themselves out of business. One method they did was limit the number of cards that could be sold to any one person, electronically or otherwise. Also, in some jurisdictions we had to have a paper copy of each card sold to match what was in the bingo machine. Thus, the paper market would never, ever die. So-much-so that the electronic company we were, invested in a printing press.

wehadfun 13y ago

Why can't Tesla just have regular dealerships and let people buy them? Why can't airbnb just collect and pay the taxes? Why can't uber properly license the drivers?

glenra 13y ago
> Why can't Tesla just have regular dealerships and let people buy them? "Regular dealerships" are a horrendous waste of resources. It's a business structure that made sense 50 years ago and makes very little sense today. Tesla doesn't need regular dealerships, so you're asking why they shouldn't be forced to waste money buying land and buildings and hiring people that could all be doing something MORE useful, just in order to make their company look more like the rest of the industry they're trying to disrupt. It's like asking "Why can't Apple just use Windows on its computers like everybody else does?" Or "Why can't Walmart just set up tiny little stores that sell a few things - why do they have to make these huge box stores that sell everything?"
- wehadfun 13y ago
  Dealerships don't make since today? I like being able to take my car to the place I bought it to be fixed. I like that I do not have to try and convince some sales guy to come take a look at my car. I like the fact that I can touch, get in, kick, and drive the car I buy before I but it.
  - glenra 13y ago
    As technology advances cars are more reliable, more consistent, and tend to require ever less ongoing maintenance and a lot of what they do still need is stuff like changing the oil (which you can do most quickly and conveniently at the nearest drive-through Jiffy-Lube place that specializes in this one service) or replacing the tires (which you can do most cheaply and conveniently at the nearest CostCo while you do other shopping there). There's no particular reason why we should expect the best firm at selling cars would be the best firm at fixing them. If there's a market demand for a network of company-owned garages, companies will supply that. If there's a market demand for a way to try out the car first, companies will provide that service too. But there's no reason either of these needs to be legally tied into how you have to buy the car. Me, I'd like the option to buy my car just the way I'd buy a computer. Go to the manufacturer's site online, spec it out, make the purchase online, and have the car delivered to my door or someplace nearby that I can pick it up when it's ready.

at-fates-hands 13y ago

This is pretty interesting considering most conservatives want less regulations and most liberals want more. In every example, they cite over regulated industries where the biggest players are using those regulations as a means to stifle innovation.