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Innovation

5 min read

Part of Markets and money.

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Every episode (4)

Who argued it

Adam Thierer · Luis Perez-Breva · Bill Frezza · John Chisholm

Entrepreneurship · COVID-19 · Public Policy · Monopoly

Background

Permissionless innovation

In the 2014 episode with Derek Khanna, the discussion of innovation turns on entry into markets. Khanna notes that the last new American entrant to the American car market was Chrysler Motors in 1936, and that Tesla followed; the absence of successful new entrants over 75 years, he says, shows something is wrong Derek Khanna - What’s Stifling Innovation? (2014). Bob Zadek attributes the barrier not to manufacturing cost but to the established franchise system, protected by laws in all 50 states and by federal law, which in most states denies Tesla the right to sell cars other than through a franchise dealer. Zadek compares the arrangement to requiring Apple to sell only through Best Buy and other dealers, and extends the point to Uber, whose resistance comes from the established cab industry and its cartels in most American cities.

Khanna supplies the Silicon Valley term for the alternative: “permissionless innovation.” He describes it as having an idea, gathering friends, banging out an iPhone app or a new website and launching in the morning without asking anyone for permission, getting a license, hiring a lawyer to map the regulatory environment, or paying off a local city council member. He notes that most such ideas fail, and that Mark Zuckerberg launched Facebook without asking anybody for permission, whereas creating a new car manufacturer in the United States is the opposite — a gaggle of lawyers before an engineer joins the team. Zadek calls the term a campaign phrase he would tattoo on his arm.

Zadek ties the same theme to occupational licensing, a subject he says he has covered over six years of shows. He objects to the word “license” as suggesting governmental permission, and to the supplicant begging permission to braid hair, arrange a floral bouquet, or decorate an apartment. Khanna’s account of the 2012 election post-mortem — a focus group run by the National College Republicans with pollster Kristen Soltis Anderson — reports that young people believed the party had nothing to offer them, and that one participant said Republicans should figure out what barriers to competition exist and work to reduce them.

Evasive entrepreneurs and the permission society

Adam Thierer, in the 2021 episode, generalizes the pattern. Zadek opens by arguing that innovation is a universal public good that improves life, and asks why innovative entrepreneurs must evade anything. Thierer answers that there is always a group or set of individuals or institutions defending a given status quo, and that entrepreneurialism unsettles somebody’s settled status quo Finding Freedom in the Permission Society (2021). He quotes Calestous Juma’s Innovation and Its Enemies: Why People Resist New Technologies: “The quickest way to find out who your enemies are is to try doing something new.” The defenders, in Thierer’s account, say they like the way a law works, or that rules long on the books must be good, and tell the innovator to get a permission slip.

Thierer distinguishes industries “born free” from those “born into captivity.” Computing and the internet, he says, had no Federal Computer Commission and no Federal Internet Commission, and were able to innovate rapidly; driverless cars, commercial drones, and advanced medical devices face a slew of laws and regulations, with a driverless car treated as a traditional vehicle rather than as a computer on wheels. He cites the Nightscout Project as an instance of technological civil disobedience: parents acting non-commercially, without lobbyists or big budgets, who achieved change where commissioned studies had not. Zadek observes that Cato’s data-driven studies struggle to produce change while these parents succeed. Thierer also invokes Saint Thomas Aquinas, paraphrased: if the sole goal of a captain were to keep his ship from sinking, he would never leave port.

Entrepreneurship and exit

The 2015 episode with John Chisholm concerns his book Unleash Your Inner Company and the tenets of entrepreneurship, including the necessity of passion and perseverance, identifying unmet customer needs, and why being different is often more successful than being better John Chisholm’s Advice for Unleashing Your Inner Company (2015). The 2009 episode with Patri Friedman, co-founder of the Seasteading Institute, concerns autonomous floating micro-nations on the high seas, the political philosophy of exit over voice, and the ocean as a frontier for governance and innovation Seasteading (2009).

Innovation and tax structure

In the 2021 episode with Chris Edwards, the discussion covers tax policy, the historical context of the 16th Amendment, proposed wealth and billionaire taxes, and how tax structures affect innovation specifically through angel investment Debt & Taxes (2021).

Across episodes

The episodes show no development across episodes: the 2014 Khanna episode and the 2021 Thierer episode both argue that established interests and permission requirements block new entrants, with Khanna supplying the term “permissionless innovation” and Thierer supplying the born-free/born-into-captivity distinction; the 2009 Seasteading and 2015 Chisholm episodes touch the topic only in their framing.

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