Why DC And Silicon Valley Don't Mix Well

from the first,-do-no-harm dept

Larry Downes has a good piece over at Forbes discussing how it’s often best for innovation if regulators stay the hell away from innovative industries. He notes the very different paces (innovation quick, regulation slow) and how that leads to bad outcomes:

The wildly different clock speeds of Moore’s Law and Washington law, however, make for increasingly damaging collisions at the intersection of technology and public policy. Even with the best of intentions, lawmakers, regulators, and judges can’t possibly anticipate tomorrow’s innovative products and services. Nor can they guess how specialized legislation, thrashed out over the course of years and infected by lobbyists and special interests, will return to haunt us when technology inevitably changes.

Faced with the unknown unknowns of dramatically new products—social networks, location-based ads, driverless cars–the best advice for governments is simply to leave them alone. Don’t just do something, stand there. At least until it’s crystal clear that the market has failed, consumers are being harmed, and that lawmakers have a remedy that won’t make things worse.

However, regulators often don’t understand this at all. They think that the quick pace of innovation means that companies themselves should slow down — and that it’s their job to force them to do so. Downes shares this troubling story:

At a conference I attended over the summer, on the other hand, the Federal Trade Commission’s Julie Brill got it dangerously wrong. Given the novelty of policy problems in privacy, cybersecurity and competition in the fast-changing Internet ecosystem, Brill argued, both Washington and Silicon Valley should proceed with caution. “Regulators need humility,” she said, “but so do companies.”

The dynamism of the Internet ecosystem certainly calls for more humble trade policy. But the last thing we want is for companies to slow down so Washington can catch up. In Silicon Valley, we have a special name for humble start-ups. We call them failures.

That’s not to say that there isn’t room for any regulations — but as Downes notes, the thing that DC should be most focused on is “fixes to previous government efforts that tried but failed to fix a problem that turned out not to need a regulatory solution.” Other industries seem to want handouts and investments and the like, but you don’t see that much in Silicon Valley.

I was recently on a call with some entrepreneurs and some government officials, in which we were discussing a few laws — and the government folks kept asking the entrepreneurs if they needed help protecting against copycats (generally foreign ones). The entrepreneurs kept ignoring the question — and it kept getting asked. Eventually, someone on the call said: “Um. No. Look, someone’s going to copy us. We know that. But we don’t care because we know we can innovate faster than anyone who copies us.” The government folks seemed confused, with one saying something to the effect of “that’s great if you can do that, but…” But that really is the difference in mindsets. Entrepreneurs really just want to build stuff and are confident (sometimes too confident) in their own abilities to compete. We don’t want government handouts — we want government to get out of the way.

That’s not to say companies should be free to do absolutely anything, but as Downes notes, we don’t need the government fiddling around where there is no evidence of real harm. If there is harm, then you can understand why it can make sense to get involved — but too often government officials seem to think they should get involved just because there’s a possibility of harm, or because a competitor got beaten. But that’s not good for innovation and it’s not good for the public.

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Chris Rhodes (profile) says:

Re: Re: Re:2 FTFY

And children in many parts of the world are subsistence farmers. You should definitely go and tell them they can’t work in the fields anymore. (Of course, they’ll probably just starve to death, but you can sleep soundly knowing that they didn’t live to continue working in such conditions).

Sending children to school instead of having them help support the family is a not a result of regulation, but of the fact that we’ve become rich enough as a society that we can do better by our children than previous generations. You’ll notice that the laws didn’t come into effect until a huge boost in productivity took place (the industrial revolution).

That’s also why well-meaning efforts by people such as yourself to interfere with child labor in many third-world countries often has such devastating results. It isn’t a choice between factory work and happy-fun playtime at school for those children; it’s a choice between factory work and other, less desirable forms of making money, like child prostitution.

Ninja (profile) says:

Re: Re: Re:3 FTFY

I partially agree. You see, while I don’t think Brazil is doing it completely right we have a program here called “Bolsa Fam?lia” (something close to Family Wage). The government gives financial support for the families if they keep the children at school. Theoretically the children are monitored and must have very high attendance and good grades. Sure there are flaws in this sort of initiative but it is one way to prevent what you said. I don’t agree with you that third world countries should let the children do heavy labor but I do think there’s some excess care with our kids. They can work helping their parents when not at school yes just with the according labor intensity and with much more free time than the adults have (and I say free time to play, not to go have other classes).

Other than that, I do agree that bad regulation may have contributed to the crisis but for me it is clear that it was a human trait: greed. In my opinion the banks should be the ones paying for the damage, not the taxpayers. And yes there should be clear regulation regarding how much risk a bank can assume. Brazil got past the crisis without too much issues because our central bank had very strict rules in place. They relaxed those and facilitated credit to unprecedented levels now. The result is that more than half of Brazilian families are now in some sort of debt. I don’t think this will end well. But then again, as I said, clear rules might decrease how much it can be earned in the financial market but they will help prevent major disasters. And in the end shouldn’t we make money by investing it in services and people instead of making virtual money with fantasy operations in a bubblish market?

ChrisB (profile) says:

Re: Re: Re:4 FTFY

> banks should be the ones paying for the damage, not the taxpayers

Ah, someone who understands.

> clear regulation regarding how much risk a bank can assume

What? You almost had it. If the banks had been allowed to fail, then no regulation would have been needed. Now, we have the ridiculous position of the teenager crashing his new car and his parents just buy him another, but with a STERN TALKING TO. Failure is an integral part of capitalism. Capitalism without failure creates huge bubbles, just like when small forest fires are prevented, you get massive ones.

> bubblish market

As long as there are central banks manipulating the amount of money in the system, and governments that create incentives for home ownership and risky investments, we will continue to have bubbles. Back in 2008, we had a chance for short term pain, but we choose to kick the can down the road. Now, $3T later, the US economy is still sputtering, and our kids piggy banks are bare.

Ninja (profile) says:

Re: Re: Re:5 FTFY

If the banks had been allowed to fail, then no regulation would have been needed.

If they failed it would produce a cascade effect that could have been worse. By regulations I mean to prevent them from walking towards destruction. One way would be to make the CEOs and key positions liable in case of failure (ie: the CEOs still made out with fat bonuses in their accounts). It’s one thing to fail with your own money or the money of a few who risked. Another thing is to fail with everyone’s money.

As for the last paragraph I agree.

Chris Rhodes (profile) says:

Re: Re: Re:6 FTFY

If they failed it would produce a cascade effect that could have been worse.

And pulling off a band-aid all at once hurts worse in the short-term than dragging it out for several hours.

If we had allowed the banks to collapse, the economy would have nose-dived worse than it did, sure, but we would already have recovered. Now we’re stuck with a bunch of zombie banks, and we didn’t even fix the problem; we’ve just ensured the economic downturn will persist for years. Rather than seeing the banksters go bankrupt like they deserved, they’re still getting fat bonus checks while the rest of the economy heads into stagflation territory ala Japan.

This “lost decade” of the US is brought to you by “regulation” and “oversight”.

Ninja (profile) says:

Re: Re: Re:7 FTFY

Maybe yes, maybe not. One can’t be sure. But it’s not the point I wanted to make. In my opinion they should have just be left to fail and die. My point is there should have been clear rules to prevent them from reaching this point collectively.

Let’s develop the idea: a company wants profit above all. What’s more profitable? Use slaves as workforce working as much as possible, discard their effluents in the environment without removing harmful substances, charge infinite prices etc. They usually do not employ people on a slavery-like regime because we have labor laws. They don’t screw up the environment royally because we have environmental laws. Sure in the end it would be perceived that working that way is harmful for them in the long term but we don’t want to have a dead planet or several generations of workforce treated like shit before the companies realize that it’s a mistake. Hence the need for rules. Clear, concise, coherent and updated in an adequate time frame.

Seegras (profile) says:

Re: Re: FTFY

Like “if you’re gambling away your money, you’re going to be bankrupt?” Well, there used to be something like that, before some people decided to “bail-out” banks on account of them being big…

Anyway, a whole lot of the shenanigans banks are involved today could probably be prevented in just having a few very simple laws. Like “capital gains are subject to taxes” and “You may not lend out more than half the money you’re indebted” or something like that… You can tell it’s not going to be popular 😉

Anonymous Coward says:


The absolute worst conclusion you could have possibly drawn from the article.

In some sectors no regulation is not as much of a problem while in sectors with tbtf-companies among them there is a massive need to keep the governments and economic systems damages from a bankrupcy to a minimum.

On IT, Regulators need to go the other way and officially embrace the internet as a platform for communication between public and any level of government. They can regulate that specific part of the internet to oblivion for all I care.

Information sharing is only a problem for those seeking to keep information from being shared and to be honest, the technological enforcement mechanisms in this area is only going to increase the arms-race from those wanting to avoid the boundaries (companies wanting to avoid industrial spionage, people with privacy concerns and those working in the field getting threatened).

The real problems for internet, smartphones and other new communication devices is the damage it does to real world middlemen and the regulaters seeing any kind of decline in any industry as a bad thing and prioritizing “improvements” there.

Chris Rhodes (profile) says:

Re: Re: FTFY

The absolute worst conclusion you could have possibly drawn from the article.

Who says I came to my opinion from this one article?

in sectors with tbtf-companies

“Too Big To Fail” companies are the result of regulation, not a justification for them. The irony is that people who scream “more regulation!!” are getting exactly what they wanted.

After all, the only corporations who can afford to hire the legion of lawyers and accountants necessary to implement the thousands of new pages of government requirements are going to be corporations like JPM Chase and Bank of America.

And trust me, that’s a feature to Chase and BoA, and not a bug. Sure, they pay a bit to generate all that useless paper work, but they make a lot more in the long run by removing competition.

Anonymous Coward says:

Re: Re: Re: FTFY

There is no denying that some regulation is fucked up and a lot of it does more harm than good.

The only problem is that markets do not have any selfregulation as soon as a company has become too dominant. Any newcomers will be squeezed and bullied untill they bottom up even without any laws being broken.

Without legislation you cannot avoid monopolies and illegal pricing. I would defer to Adam Smith on this one!

Government should act in some markets and it is an absolute necessity. I could mention California and their liberalisation of electricity production (which basically is the definition of a monopoly market.)…

Now we can discuss what kind of legislation is generally good and what is generally bad, but the anarcho-capitalistic no regulation as a sweeping statement simply doesnt fly!

Anonymous Coward says:

Re: Re: Re:3 FTFY

Again a specific example of bad enforcement legislation. Looking at legislation in a broader view and seeing the need in economy and anti-competitive markets is essential to reach a more balanced view. There are a myriad of examples of bad legislation since that is what will be brought foreward in news, but good legislation is needed and it does make improvements.

There is no doubt that copyright served an important role when copying was expensive and hard to do since it made for a certain way of monetizing a product. Copyright today needs to be reformed, not abolished. That is my take.

Chris Rhodes (profile) says:

Re: Re: Re:2 FTFY

as soon as a company has become too dominant

Show me any abusive monopoly in history and I’ll show you an industry supported by government interference.

The progression is clear. Corporations use the government to pass laws to benefit them. Any regulation or rule that you can get passed by congress is going to be one that works to their benefit.

“Corporations like McDonald’s are selling people shitty fast-food that contributes to the obesity epidemic! We need to give the government the power to mandate where citizens must buy their food from to prevent this catastrophe!”
*Government uses its new-found power to pass a law mandating that everyone eat at McDonald’s at least three times a week*
“Damn this free market and its monopoly creation!!” *shakes fist*

Lambs to the slaughter, every time. No really, maybe the next regulation they pass will be in your interests instead of the corporations! Keeping crossing your fingers and wishing real hard!

Anonymous Coward says:

Re: Re: Re:3 FTFY

Slightly cynical, are we?
If you want a discussion, keep it more specific and take a stance on my points. You are rambling about corruption and that is always a problem, but it is a question of having the correct openness on the work and restrictions on the law making process (they are obviously not even close to there yet! It works a lot better in certain european countries.).

The rest seems to be about specifics of some laws. In most cases I am all for having as loose definitions as possible and as low capital demands as possible on the contractor. The fundamentals in the process has gone wrong and we now see insanely specific clauses. I heard from a medium sized software developer that they would rather have EU pay for the work they made to make a bid rather than the actual software development since it is more expensive. The US system on this is better, but we see the same problem. But that is not really regulation, but rather outsourcing. As for the bought legislation, it is more of an indirect subsidie rather than regulation. And again, I agree that is a wrong approach.

ChrisB (profile) says:

Re: Re: Re:2 FTFY

> Without legislation you cannot avoid monopolies and illegal pricing.

Ah, the myth of the free market cartel. Have you ever wondered why Walmart has never raised prices, even after they crush mom ‘n’ pop companies? It is because that is the socialist bogeyman, used to stop the free market.


Government regulations do not protect you from corporations, they protect corporations from competition.

out_of_the_blue says:

It's "no evidence of real harm" day again already!

Because after all, we can’t predict that corporations will ever get greedy.

This is kind of apt ot the “entreprenuer” bit:
Woodrow Wilson, in a speech: “We do not want a big brother government… I do not want a government that will take care of me. I want a government that will make other men take their hands off so that I can take care of myself.”

Of course the argument is over where to draw the line: I say for example, that Google should get its evil paws off everything about me. — And then you’d say “Oh, no! They have to track you all over the web to get money from advertisers!” — Well, if search is essential but inherently creepy, let’s just nationalize Google, regulate it, support it with taxes. It can be the road map to the information superhighway. Separate search from advertising: there’s no necessary connection. — Will save hundreds of millions just stopping Google from doing wacky things like buy power cables from offshore wind power, and experiment with fuel cells.

Anonymous Coward says:

Re: It's "no evidence of real harm" day again already!

Translation: I’m an idiot and, like bob, thinks there’s a vast Google orchestrated conspiracy surrounding the world and me. Of course, rather than… you know, not use Google services, like a f*cking adult who can choose for themselves what to do or not do or use and not use, I’ll spew non-fact filled propaganda every opportunity I get. And throw in random ad homs about Mike and corporations while I’m at it.

You know OotB, you could spare us all the brain cells we sorely need and just not post. We heard you the first time. “Google bad. OotB knows.” Now stfu already.

The rest of us adults, which you appear to not be, are aware of various things and can make adult choices about who we wish to conduct business with (not literal business, but you get the gist of what I’m saying) or not. But seriously, stop f*cking bitching already.

Don’t like Google? Don’t f*cking use it/their services. It’s really not that f*cking hard. But then you wouldn’t have something to b*tch about now, would you? And we can’t have that.

Anonymous Coward says:

Re: It's "no evidence of real harm" day again already!

This is where we may actually agree to something…

Government regulation is needed where open policies conflict, and a perfect example would be the “Do Not Track” preference. Although I don’t see any need for government involvement yet, since the major websites haven’t yet conformed to the policy. I would say in about 2 years when most sites are updated to the most recent Apache, IIS, NGINX, etc or patches have been supplied, there should be some government pressure to enforce that the standards are applied.

Technology has always been a form of trust on the Internet, look at the underlying protocols like BGP, managed MPLS, DKIM, DNSSEC. The trust is that the user says who they are and what they desire, and although safe guards are created it’s still a system of trust that relies on community support and as a last resort government involvement.

PS. If you are worried about Google, I would suggest alternatives, such as DuckDuckGo.com or ixquick.com.

Anonymous Coward says:

Re: It's "no evidence of real harm" day again already!

You are really rambling and hard to understand, but I have seen some relatively reasonable bits in the crazy talk lately.

What I read from this rant is you seeing a problem in google branching out to far too many fields while using the synergies between their markets to force others to compete at a disadvantage. While your solutions are ramblings, there is absolutely a valid point in advertisement, private information gathering on users and search engines being under one roof can create all sorts of problematic interactions of searches being used directly for information gathering and advertisement being the endproduct. It makes for a reasonable questioning of the search algorithm and how much information gathering and advertisement is actually what controls the result.

Androgynous Cowherd says:

Fixes to previous government efforts that failed

Fixes to previous government efforts that tried but failed to fix a problem that turned out not to need a regulatory solution:

1. Amend the Constitution to change the Progress Clause to “To promote the Progress of Science and the Useful Arts, Congress shall pass no law granting Monopoly Privileges to any Authors, Inventors, or Businesses.”

2. Abolish copyright law.

3. Abolish patent law.

4. If Big Pharma runs into any problems, then investigate a suitable regulatory fix — likely involving changing the regulations that make pharma R&D so expensive, rather than adding more regulations or, especially, adding regulatory burdens to anyone else (as patents do).

Would You Believe it (profile) says:

Gummint Regulation

I read in a story once, how the gummint should regulate:
1. Keep the infrastructure, roads, rail, air, etc.,free of problems so the industries can get raw materials, and ship out the end product.
2. Keep the competition honest, but don’t restrain it.
3. Get the hell out of the way so innovation can occur.
4. Prices will settle where they will, based on supply and demand, not artificial constraints. The first guy to make something can charge a bunch. Soon, somebody will figure out how to make that item cheaper and better. Stay out of the way and let them fight it out in the market. Law has no place here.

Dave Nelson (profile) says:

Market Restraint

I guess what bothers me the most is the fact that these laws, protecting the profits of companies with an archaic business model, are limiting us to possibly inferior products because these ol’boys don’t want to change or allow anyone else to. This really has to end. I want the new stuff, the good stuff, not some old, inferior, product that has been superceded (or would be if the good-ol’-boys didn’t have a lock on Congress).

out_of_the_blue says:

Late but cogent thoughts on the reeking corporatism.

I’m back because incidentally chasing down source for my tagline that has: “no evidence of real harm”. This appears to be it.

And I was much too kind here: right from start, this is corporatist claptrap: “it’s often best for innovation if regulators stay the hell away from innovative industries” — A truism. Just as it’s best for bank robbers if free to innovate while cops stand idle. It’s best for banksters if the whole gov’t stands idle as they saddle the people with phony paper debt. — There is more to consider than MONEY, kids. Civilization isn’t about your hellish corporations raking in money and you getting more toys.

At very least, to accept the quoted notion and rest of Mike’s take here means to never even suspect the presence of bad actors. From all my reading here at glorious Techdirt, bad actors, especially at the corporate level, just don’t exist in Mike’s world view. — Yes, Mike attacks some minor bad actors now and then, but really only to attack copyright: he doesn’t admit that’s JUST a few bad actors abusing copyright and that actually copyright works good millions of times a day. To say Mike picks and chooses is exaggeration: the actual ratio of his anomalous examples to the everyday good uses is somewhere out past 0.000…

Now, since copyright is so deeply embedded in Mike’s notions of “innovation” — which appears to mean solely how corporations can gain money off the internet; Mike has no known industrial policy, is all advertising-based — it’s fair to bring in Mike’s position on it (actually, this is ALL you can find after 15 years!): he says copyright is “broken”, but doesn’t know how to fix it, and as for moral concerns: PFFFT! Mike doesn’t care. [Emphasis added.]


And this “position” on piracy is even more revealing:


Mike Masnick (profile), Aug 11th, 2012 @ 12:45am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: >>> I will answer all of your questions to the absolute best of my abilities, but please first answer mine: Why is piracy not OK? Simple, direct question deserves a simple, direct answer. Thanks.

It’s not okay because I don’t think it’s okay. You’re asking a moral question. There is no answer to a moral question other than “that’s what I believe.” I don’t think it’s right to ignore the wishes of a content creator.

But that, of course, is entirely separate from what that content creator can do to deal with the fact that many (perhaps most) others have a different moral view on the issue.

Arguing over morals is a waste of time, because it doesn’t move the discussion forward.

That’s why I don’t focus on moral questions, but practical questions. You, apparently, prefer not to do that sort of thing. It makes for silly grandstanding, but nothing useful.

Mike’s view of morality has become clear: whatever gains a buck is moral. For instance, he’s supported Isohunt and Hotfile (both those court cases settled for millions after being found GUILTY of contributory infringement), and now supports similar mega-grifter Kim Dotcom and Megaupload. — And those while claims to support copyright! With “supporters” like Mike, it’s amazing copyright is still around. — But by the way, it is because at basis simple common law: “I made it, therefore I own it”.

Anyhoo, with Mike’s evasion of morality in mind, I expand on my (much earlier) comment that we can predict what corporations will do if not regulated:

You’d SUE any mechanic that didn’t heed warning signs a wheel was about to fall off your car, but will listen to Ivy League frat boys advise on the national economy: There’s no evidence of real harm! Let corporations “innovate” away and monetize the last shreds of your privacy! Continue to expand the money supply! Let banks speculate leveraged 300 times! Never been a depression before!

We’re now 30 years after Reagan with income taxes, estate taxes, and especially capital gains much lower; regulation especially anti-trust has been gutted, import tariffs dropped, all with the predicted bad effects resulting as The Rich got richer, industries moved overseas and real jobs disappeared, and yet these self-styled “innovators” continue to insist that they’re over-regulated! Man, they truly do want to openly STEAL everything not nailed down, and with that leveraged wealth will force the 99% to pry the nails out and hand over the rest.

Yes, Mike and his Born Rich pals slant it as them being free to “innovate”, but any reasonable person knows that inevitably means ripping off everyone else. Governments are here to prevent thefts and unfairness: the dismantling of protections against Money Manipulation and Speculation is worse than national shame, it’s certain disaster. An Ivy League “economist” should know the history of monopolizing and murderous corporations, and WARN against “laissez-faire” as CORPORATIST TRIPE.

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