Adam Thierer on the Future of Governance
We live in a “permission society,” where it sometimes feels like anything that is not prohibited is mandatory. What is the entrepreneur to do in such a climate? Perhaps, rather than using bad governance as an excuse not to innovate, we should see it as an opportunity to satisfy the needs being unmet by lumbering bureaucracies.
Adam Thierer, a Senior Research Fellow at the Mercatus Center at George Mason University, has written something of a manual for Evasive Entrepreneurs & the Future of Governance, following his last book, Permissionless Innovation , which offered a kind of cognitive therapy for the obsessive-compulsive personalities that head various regulatory agencies.
Thierer specializes in innovation, entrepreneurialism, Internet, and free-speech issues, with a particular focus on the public policy concerns surrounding emerging technologies.
From excessive playground rules to ride-sharing red tape, signs of the permission society are everywhere. Thierer says that legitimate concerns about new technology need not stymie innovation in areas that can make all of our lives better.
Is it sometimes better to ask forgiveness than permission?
TRANSCRIPT
Bob Zadek 00:17
Good morning, everyone. Welcome to The Bob Zadek Show, the longest running live libertarian talk radio show on all of radio, the show of ideas never once the show of attitude. Thank you so much for listening this Sunday morning.
This morning’s topic could not be more timely, and the right topic for the right time in our nation’s history, indeed, in the world’s history. We are going to discuss entrepreneurship and innovation. Specifically, we will discuss the role of innovation in making us more free, and how it can improve the quality of our lives and make the world a better place.
That seems to be obvious. Why waste valuable radio time on something as obvious as that? Well, because one would like to think that something as benign as innovation — as another newest and best product or service to make our lives healthier, happier, and longer — would have nobody opposed to it; therefore, we live in a world that just invites and rewards entrepreneurship. One would like to think that, but one would be wrong. In many subtle and not so subtle ways, our own government and other governments in other countries are active in stifling, discouraging, and eliminating the benefits of innovation. In effect, our own governments are working and have policies that are directly contrary to our best interests.
This morning’s guest, Adam Thierer, has written an important book that calls our attention to all of the ways in which the government operates directly adverse to the interests of the governed. Once we learn to identify how the government stifles innovation, how government interests are adverse to innovation, we will be able to act as responsible voters and citizens to help our government understand that they must stop stifling innovation. The tools of government are subtle, but they are powerful. To help us understand this environment in which our government works directly against our self interest, I’m delighted to welcome Adam Thierer to the show. Adam has written a book entitled and the title says a lot, Evasive Entrepreneurs. It is subtitled How Innovation Improves Economies and Governments. It improves governments as well as us. To help us understand this important but subtle dynamic, I’m delighted to welcome Adam Thierer to the show this morning.
Adam, thank you so much for your book. Before we get into the book, we’re going to spend some time discussing the principles of the book and what we have just learned from our experience with the government’s behavior during COVID, the government’s behavior during COVID and the innovators’ behavior during COVID. Your book, which uses COVID as proof positive that everything you’ve written about is correct, was published in May of 2020, a couple of months into the COVID crisis of last year. How did you know COVID was coming? How did you know how to time this book so perfectly? Your timing was impeccable.
Adam Thierer 05:19
Thanks for that, Bob. It’s a pleasure to be on your show.
It was a very unique timing, for better or worse, when the pandemic and the lockdowns hit, because I had a big book tour plan; I had about a dozen cities I was going to visit. Unfortunately, that was derailed. That was the downside. On the upside, the story that I was telling in the book, about how entrepreneurs find a way to make a difference and fight for positive change in society, was proven positive by all the activities undertaken by average individuals and institutions across America following COVID and the lockdowns. So luckily, my publisher, the Cato Institute, allowed me to very quickly, right before the book went to press, add a new postscript at the end of the book pointing out that everything you just read in these pages is now coming true in real time as we see average people take steps to try to make the world a better place or to make life a little bit easier, utilizing new forms of technology in particular to do so. The important additional note that I made in the book and then I made in the postscript is that oftentimes those small actions have a big world of difference in terms of changing government institutions or policies for the better.
I argue that in many ways we can think about entrepreneurialism as mini revolts without violence. They’re peaceful. They’re basically efforts by people to go and shake up the status quo. That status quo can include a lot of broken, inefficient, backwards, or archaic government regulations and policies. That’s exactly what happened. People rose up and started making their own face masks. Distillers and brewers were making hand sanitizer for people. There were people bringing 3D printers to hospitals to help print and ventilator parts. There were people coding their own new types of online informational solutions about tracking COVID in their communities. The interesting thing about all those efforts is that they were technically against the law, and yet the law had to change. What happened following COVID and the outbreak is that policymakers in one state after the next started relaxing rules if not banning them entirely because they knew the rules were counterproductive.
You would think that during a crisis, those rules and regulations that were put on the books with good intentions should have been more important than ever, but it was the very people that put them on the books that said, “Yes, indeed, these are not serving our goals and intentions, and they are counterproductive.” It was a great, teachable moment where we saw how public policy undermines the innovative spirit of the American people. It had to change, and it did. The real question now is will it stay that way? Can we continue to change these archaic, outdated, inefficient decisions or is it back to the status quo?
Bob Zadek 11:58
So it’s just the mentality that, “We don’t do things that way around here.” It is just comfortable. People don’t choose to be uncomfortable by nature. Therefore, it’s the way we do things. It’s narrow-mindedness. One would think that regulators, elected officials, would become darlings of their constituency if they took the position to support anything that makes life better. Why isn’t that a winning approach? I’m surprised that isn’t the default way government behaves, rather than the way that they actually behave as you have described it.
Adam Thierer 13:32
It comes down to the uncertainty associated with innovation and technological change. There’s a lot of psychological explanations that behavioral economists and other psychologists use to explain why people support the status quo. It’s in fact called “status quo bias.” There’s another term for it called “loss aversion.” People will generally want to maintain or sustain what they currently have as opposed to taking a risk on something new and different that could maybe make them better off in the future. Those impulses are in all of us. None of us want to lose money or take a risk we don’t have to, but it’s only through trial and error experimentation and risk taking that we gain wisdom and that we prosper as a species. Entrepreneurs are the prime actors. In my book, I make them almost a heroic actor in being willing to take that plunge. In a better world, policymakers and the general public would understand that, appreciate that will, and not penalize.
Unfortunately, the law all too often preserves the status quo. I call it a “set it and forget it” policy mode. We put laws in place. We just set them there and they never change. I even have statistics in my book about how something on the order of like 85% of all the laws in the US Federal code have only been changed once or never. Most of them have never been changed. Something like 65% of all laws, once they’re on the books, are never altered. That can’t possibly be right. I showed examples in my book of all the stupid laws that are still in the book. There are laws in some states that say, if a woman is driving a car, a man must walk in front of her with red flags waving that a woman is coming down the road. That’s just an insulting misogynistic kind of legislation, and yet, it’s still in the books. People say, it’s not enforced anymore. Who cares? The problem is that there’s so many laws that penalize modern innovators and entrepreneurs. Unfortunately, I think our policymakers just don’t understand that dynamic, and that it’s easier just to leave things as they are, as opposed to taking the plunge and change.
Born Free versus Born into Captivity
Bob Zadek 18:02
In your book, you mention how the government is structured in a way to avoid the risk. You talk about why some innovations are subject to more regulation than others. Uber is a good example. You talk about new industries that are born free versus born into captivity. It’s a wonderful way to explain what’s going on. Please help our audience understand what you meant by those two concepts.
Adam Thierer 19:02
To comment on your earlier point about risk. I wholeheartedly agree, of course. It’s a major focus of my life’s work. In fact, I have a book chapter I wrote years ago called “Failing Better.” Learning how to fail and learn from failure is one of the crucial things that really differentiates America from a lot of other countries and cultures where failure is frowned upon and treated with social stigma or shame. Whatever you want to say about America’s problems, one thing that we still have is that we still have more of a culture that tolerates failure and learning from it.
One of my favorite quotes of all time that I learned when I was in Catholic school as a youth, from one of my Jesuit teachers, a quote from St. Thomas Aquinas. To paraphrase, Aquinas said that if the sole goal of a captain was to make sure that his ship never sank then he would never take a ship out of port. Of course we know that’s not the sole goal of a captain. He of course doesn’t want his ship to sink, but captains braved the high seas and the risks that they entail because they know that there’s reward out there for doing so. That’s the key. There can be no reward without risk.
What do I mean about industries that are born free versus born into captivity? Every new technology that comes along ultimately is confronted with this. If you’re lucky, as someone who’s an entrepreneur and inventor, you’re in a “born free” sector. What I mean by that is a sector that is not encumbered with prior restraints on innovative activity. There aren’t a slew of permission slips being issued by an alphabet soup of different regulatory agencies, the Federal whatever commission. That’s the problem. So many other sectors or industries are born in the captivity of that world.
For example, when computing technologies came along and the internet, we did not have a federal computer commission. We did not have a federal internet commission. They were essentially born free and able to innovate very rapidly. As a result, the leading information technology companies in the United States are household names across the globe. Love them or hate them, the reality is that these companies are on everybody’s lips everywhere you go. You look in other sectors and you say, okay, I want to be a driverless car innovator or a commercial drone innovator or some advanced medical device innovator. Unfortunately, in those contexts, you’re going to be confronted with a slew of laws and regulations. Even though a driverless car is basically a computer on wheels, it’s not going to be treated like a computer and left largely unfettered. It’s going to be treated more like a traditional vehicle and regulated very heavily right out of the gate, which is exactly what’s happened. Over the last 10 years, there’s been efforts to try to provide more room for driverless car innovation, but it keeps getting pushed back from various types of institutional forces and governments at the federal and state level and in industry. Same with commercial drones. Same with advanced medical devices. You have to deal with some federal bureaucracy, maybe several, and then all the state and local officials.
This has a powerful determining effect on which industries or sectors prosper in our country, and which ultimately fail and go somewhere else. Because we live in a world as I call in the book of “global innovation arbitrage.” Innovation and capital tends to move wherever it’s treated best. Entrepreneurs are not going to stick around in the country where they are basically told, you gotta come get all these permission slips before you can innovate. They will go somewhere else where they have more flexibility. That economy is really, really powerful in determining national competitive advantage.
Bob Zadek 23:03
What I’ve experienced firsthand, anecdotally is that when legislators and regulators are confronted with something new, the default rule is that these must be regulated somewhere. How did this slip by? There is a presumption of regulation. I experienced that firsthand when I was doing some lobbying on behalf of a lender group, which was simply an activity making these kinds of loans, but was not regulated. We walked into the conference room of a United States senator. She said, “Tell me again who regulates you.” We had to say, “Well, really no one.” She was aghast. That seems to be the expectation in government.
It’s almost as if governments don’t appreciate that wonderful old constitutional principle that everything which is not forbidden is allowed. That was called the “Lotus rule” from a ship that sank in the 1920s. They don’t seem to appreciate that rule. The government stifles innovation using many tools that you have outlined in the book.
Government Interference with Innovation
Give us some examples of how the government almost inadvertently stifles innovation, and explain to us what happens to governments over time when they stifle innovation?
Adam Thierer 26:15
There’s a variety of policy instruments that stifle innovation, sometimes unintentionally, and other times, unfortunately, quite intentionally. We have very direct limits on a variety of important technologies, specifically in the field of health and finance, where we have a very heavily pre-emptive restraint on any sort of innovation for the most part. Everything there is born into captivity and heavily regulated out of the gates. In many other cases, we have inadvertent tax and regulatory policies that discourage business formation and entrepreneurship. They really come down to this crazy quilt of different permitting and licensing schemes at the federal and especially the state and local level. This creates real problems in America, because we have states, and federalism can become incredibly burdensome when innovators want to go out and start something new and different.
Let’s just take one random new technology, telehealth. You want to basically provide doctor’s advice or medical advice by the internet. This is something that we’ve been talking about in this country for a quarter century and had high hopes for. It has been a very slow roll because technology and broadband is catching up. COVID taught us that this can be done, but we have state and local laws governing the licensure of the medical profession or the licensing of medical devices at the federal level through the Food and Drug Administration. They’re making it very difficult. It’s sometimes impossible for entrepreneurs to provide that platform or for doctors to provide that advice. This would seem like something that we should have long ago learned should be good and allowable.
We used to have doctors make house calls. Maybe we could have a much more robust system so that I don’t have to get on a plane to talk to a cancer specialist in California if I’m here in Virginia where I’m at now. Why can’t I maybe just do a Zoom chat with them or something, send them my x-rays or my biopsies or whatever my results from tests? That world is encumbered by layers and layers of permits and licensing rules and other regulations. This is the fundamental challenge for the United States going forward. Only when COVID happened did we realize the cost of that was enormous. That had to change. My hope is that between that crisis we’ve had with COVID and between the fact that innovation continues to happen,, people will take matters into their own hands, However, it would be a lot better if our policymakers would just reform policies to make it easier and stop basing public policies on hypothetical worst case scenarios or yesterday’s thinking about the state of the art.
The Effectiveness of Technological Disobedience
Bob Zadek 30:15
In your book, you dance around the issue of the civil rights revolution we had in our country. You mentioned what seemed to be civil disobedience. You seem to endorse it, but you do so with a bit of hesitancy. You’re quick to point out that you are advocating outright lawlessness. These aren’t your words, but that’s the impression the reader gets. Many entrepreneurs may be breaking the law in order to get rid of the law. Uber is a classic example. Airbnb to some degree behaves with innovative civil disobedience in an effort to change the law. In your book, you point out how effective this evasiveness in the short run is at changing bad laws, as compared with the more conventional way.. The study proves that rent control never works, never accomplishes its goal. Minimum wage never accomplishes its goal. Nobody seems to be persuaded by the studies. Uber did accomplish an awful lot without the benefit of studies just by acting initially lawlessly. Please tell us about the effectiveness of breaking the law in the short run driven by the confidence that ultimately the law will give, rather than you will end up in jail.
Adam Thierer 32:26
Let me give you a concrete example. In chapter two of my book, I go through dozens upon dozens of examples of technological civil disobedience. There’s an effort called The Nightscout Project that I discuss in my book. The Nightscout is a nonprofit organization founded by parents of diabetic children. It really started and came together when a handful of parents, mostly some dads with some coding skills, were really frustrated about the inability of industry and more specifically the government to get around to bringing better insulin monitoring and delivery devices to the market that would help their kids. They founded an effort and started pooling knowledge. Their motto became, “we are not waiting.” What we mean by that is we are not waiting for the FDA to get around to approve new and better insulin monitoring and delivery devices for our children with diabetes. What they started doing is taking off the shelf hardware or existing diabetic monitoring devices, and then recreating them and reworking them with open source technology and blueprints to come up with better systems, which have now been tested and shown to be superior to the heavily regulated ones. On their website, there’s a box that says “be impatient.” What they mean by that is don’t sit around waiting for the regulator to tell you it’s all fine and well while your children are suffering. It’s proof of concept because now their work is out there in the real world and helping children.
This is the same story I tell about 3D printed prosthetics in the book. I’ve actually gone to conferences and seen children being custom fitted with new prosthetic arms and hands free of charge by people who bring 3D printers to an auditorium and their own materials, and they make custom hands and arms for children with limb deficiencies. That’s technically against the law. There are rules and regulations governing the making of prosthetics. Most of these rules and regulations were put down with the best of intentions, but they never changed. They didn’t leave a lot of room for innovations like this. When average people take new technologies of freedom, and basically make their lives or the lives of their children in this case better, I think we should applaud that. I think it’s an interesting kind of form of natural civil disobedience. They’re not marching down in town square doing something dramatic. They’re just taking steps on their own in their own homes. I think that’s profoundly powerful.
I think this in the long run improves the government. My hope is that governments finally wake up and say, “Okay, look, we were wrong. You know that this was not right, what we were doing to restrict the things we need to open up.” COVID forced that on them. I would like to see innovators and innovations like that forced a change in thinking among regulatory institutions in particular to be more open to the idea of risk taking entrepreneurialism utilizing new technologies. That’s my hope.
Bob Zadek 35:59
You pointed out that if those same parents had commissioned another study and had statistics that indicate the harm of the existing regulation, and how the regulation had to be changed, that would be an impossible task. There’s almost no history of the normal process working. Here you have parents, not trained in anything except in parenthood are able to affect the change. It really is about the most powerful argument one can make in support of the evasiveness part of the title of your book.
Adam Thierer 37:44
The other important part of that is these parents that are engaging in these acts of creativity and innovation are not deep-pocketed. Most of them are doing this non-commercially in a nonprofit way. They don’t have lobbyists in Washington. They don’t have big budgets for marketing and advertising efforts. This is all spontaneous bottom up activity amongst the people. To me, that should make it even more exciting and rewarding, and hopefully, policymakers appreciate it. This is true bottom up democracy in action in a real world sense. People are voting with their innovation. They’re voting with their brains and with their hands to create a better world.
Ben Franklin once said, “Man is a tool-building animal by his nature,” because that’s how the species prospers. I would hope policymakers would be persuaded by that. The unfortunate reality is that we have lines and lines of lobbyists outside of doors in Washington, in Congress, in every regulatory agency, getting their case heard. That is going to be a really powerful thing in terms of preserving the status quo. Shaking up that system is what I’m trying to propose here, to engage in permissionless innovation.
Bob Zadek 39:28
You make the point in your book about vested interests. Once a policy is established, there are some beneficiaries and they become supporters of this sclerosis-driven system because they have learned how to benefit. They benefit profoundly and can afford to fight to keep the status quo, while the average American, whose benefit is indeterminate and too small to think about, does not have the same resources to fight for change.
You mentioned one of the characteristics of the existing system. We experienced it profoundly during the COVID crisis, with respect to the Centers for Disease Control and the FDA, which is that the governmental system is driven by process. Comment about how strong that motivation is that it is process driven. It happened with the testing when we were early in the COVID crisis. There was a company in Washington State, Oregon, which had superior testing products, but which couldn’t get past the front door because it wasn’t how the FDA operated. Comment briefly on how process driven this system is.
Sclerosis in the American Bureaucracy
Adam Thierer 41:59
This is the chronic problem of the modern American regulatory system. Everything going “by the book” is really problematic when the book is so large, and we don’t even know everything in it. I quoted those statistics earlier about how few laws are even changed. There’s so much in law that policymakers and even the regulators who enforce the laws admit that they don’t know. “Well, who cares, most of the things aren’t going to be enforced.” Really? A lot of times they are. The problem is that if there’s that much uncertainty hanging over the heads of the innovative class in a country, then our innovation culture is going to be negatively impacted by it. This is what really discourages business formation and risk taking when you most need it. It is fear of the uncertainty associated with the actual legal or regulatory process of going by the book. It begs the question, how do we break out of that long chain?
COVID actually gave us one clue how we do it. The answer is sunsetting. We need to sunset more laws and regulations on a regular basis. I’m not an anarchist, I believe there are some good laws out there that need to be enforced, but you have to prove it to me. You need to prove it to me regularly. You need to give me a really good cost benefit analysis that shows a certain law, license, or permit actually serves some compelling public interest. The problem is that in the world of a set it and forget it government, we never do that. Businesses have to reinvent their business models every couple of years now in this country, or else they’ll be obliterated by technological change.
Governments never have to change anything. They never even have to look at their business model, how they’re operating. Again, set it and forget it. Sunset policies help us to reevaluate the government more regularly. I argue in my book that we ought to basically have for any technology provision in law, a two year sunset. If it’s a good law, Congress can always come back and put it in the books, but after two years, it should go away, then we’ll figure out what to do from there.
Governmental Reforms to Support Innovation: The Innovator’s Presumption
Bob Zadek 45:06
I don’t want to hurt your feelings, but Thomas Jefferson beat you to it. Thomas Jefferson was said to believe that every law had to sunset in 20 years, which was one generation in those times, because he felt it was immoral for one generation to bind another generation who didn’t get to vote on whether they chose to be bound. Jefferson would agree with you 100%. You also give lots of examples of how this system, the stifling of innovation, can be fixed. Some of your suggestions wouldn’t occur to people ordinarily so you perform a valuable service by listing them. Give us some of the examples of how the government could simply create a much more hospitable environment for innovation, for example, reverse presumption, which I hadn’t thought about until you pointed it out. You mentioned already sunsetting regulations. Help us understand what remedies are available pretty easily if there is a governmental will.
Adam Thierer 46:57
In addition to the idea of sunsetting, or as I call it, “the sunsetting imperative”, I think there are a couple of other ideas that are pretty easy that could be written in the law more regularly or that we could have policymakers abide by. One of which I call the “innovators’ presumption,” which is that we need to reverse the burden of proof in law. It should be just as in criminal law, which is innocent until proven guilty. Unfortunately, you’re usually born into regulatory captivity. The system is geared against the idea of risk taking.
How would I change that? There’s actually been some attempts in the past, including by regulators themselves, to write into law some provisions that would state that any person or party who opposes a new technology or service shall have the burden to demonstrate that the proposal is inconsistent with the public interest or public welfare. Why is that important? Again, I call this the innovators’ presumption. It’s important because it switches the burden of proof. It tells the world around that agency around that law, “Hey, to innovate, other people have to make the case against you, but you go forward. You’ve got the green light, not the red light.” The innovators presumption would be something I think we could write into any policy governing new innovation and technology.
A final thing that I talked about in the book is called the “parity provision”. This is a little bit more complicated. To make it simple, every single policy fight often ends up being new innovators and entrepreneurs versus some defender of the status quo, often some industry that doesn’t want to be disrupted because they enjoy healthy profits and don’t like competition. We see this again and again, and things like the battle of Uber and taxi cab companies, with Airbnb and hotels. The parity provision is what we need to address the so called level playing field problem, which is the incumbents, special interests who defend the status quo, will always say, “These new kids in town who want to play by a different set of rules. That’s not fair. That’s an unlevel playing field. Therefore, they say, we should level the playing field of law and regulation, such that everybody plays by our rules, the old rules, the old burdensome taxes and regulations.” Why do incumbents say that? They say that not because they like the taxes and regulations, but because they’ve learned to live with them, and they’re paying them and they know the new guys in town can’t.
How do we adjust that? We just reverse the presumption. Let’s level the playing field, but let’s level the playing field in the direction of greater freedom and not burdensome rules and taxes. Let’s treat everybody the same as the new innovative. Let’s give them more freedom and more permission to go out and innovate. A combination of those three general reform ideas, the parody provision, the sunsetting imperative and innovators presumption, are the kind of ideas that we need to instill into public policy to make sure our entrepreneurial class and innovators in the United States are given more green lights to go forth and do important things that can move the needle on human progress.
Bob Zadek 50:29
As we run out of time, regretfully, I’ll just mention that we are in a world economy. If we don’t create or continue to create a petri dish for innovation here in our country, another country will. The ability to successfully innovate without permission is what draws talented immigrants to our country. It’s what draws people into STEM studies because the prospects of being free to invent, it makes our life infinitely better. If we don’t create that environment, somebody else will. Adam, you have written such an important book, at the perfect time, yearning for more government openness to innovation, basically, the government realizing they do not know everything, and they should just open up and allow people to teach the government and teach us all the better way to do something.
This is Bob Zadek, we have spent an hour speaking with Adam Thierer. Adam has written Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. The converse, not part of the title, is the absence of innovation harms economies and harms governments. What a great public service. I hope you have enjoyed the hour I have spent with Adam. If you did enjoy it, If you’re listening to the podcast, please be sure to indicate you like the podcast and offer any suggestions you might have, how we can even improve our presentation. Thank you so much to Adam and my friends out there for giving me an hour of your time this Sunday morning. Have a nice Sunday.
LINKS:
- AMAZON: Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments, April 28, 2020
- AMAZON: Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom, March 11, 2016
- Adam Thierer (@AdamThierer) / Twitter
- Adam Thierer | Mercatus Center
RELATED SHOWS:
- Antitrust 101 with Ryan Young, August 21, 2019
- Derek Khanna — What’s Stifling Innovation?, August 3, 2014
- Luis Perez-Breva on Artificial Intelligence Myths, October 15, 2017
- Michael Strong on Creating a World in Which All Humanity Flourishes, September 17, 2017
- Bill Frezza’s History of Telecom Innovation (and Not), November 19, 2015
