Do You Have Faith in the Government to Solve Problems?

When I talk to people about startup trends, I highlight some of the major trends that are sweeping through the world.  You might have heard of them and they aren’t unique ideas but you see it again and again.

  1.  Software is Eating the World
  2. Networks beat Hierarchy
  3. Everyone A Node on a Network
  4. Everything Will Be Unbundled

The next thing I do is point out some minor trends that I see over and over again.  One is that if you have confidence in government to keep up and solve problems, you need to examine your beliefs.  Government cannot possibly keep up.  That makes the regulatory rule book an impediment to innovation, not an ally.  “In Washington, truth is just another special interest—and one that is not well financed,” -Economist Michael Massa.

This is one of the reasons I didn’t like the way we solved the net neutrality problem in US.  We have put our faith in the FCC, not the market.  We could have re-regulated and changed it to a more competitive marketplace.

In this months Chicago Booth magazine, Professor Randy Krozner examines what happens when innovation meets the government.  It’s not dogmatic.  It’s a fact based look.  

The regulators that work for government regulatory agencies are just as political as the politicians.  They aren’t immune.  They aren’t passive.  They aren’t King Solomon like angels.  Their decisions are largely political because they were put in their positions, and are overseen by elected politicians.

The most aggressive agencies that kill innovation are the FDA, and the USDA.  They can’t keep up with science and regulate heavily out of fear.  People buy it because it’s easy to prey on fear.  But every agency kills innovation in its own way.  One reason to be against Dodd-Frank is purely on the innovative front.  It’s such a general and far reaching mandate for financial regulators, you have no idea where it could end up.

Another danger is if a regulatory agency decides on an outcome before anything is totally settled.  The agency will pick winners and bankrupt losers.  The government shows no mercy when you are on the wrong side of the political argument and your competitors are well financed.

I think most Americans would like to get rid of all the lobbying that goes on.   In order to do that, we need to put our faith in independent capitalistic enterprises to solve big problems.  They will do it with the four trends I highlighted in the first part of this post.  The way forward is to eliminate the powerbase the lobbyists from both political parties operate on.  That means eliminating or shrinking wide swaths of government.  A total dismantling and re-imagination of the regulatory system.  This might not have been possible before but with technology, it’s 100% possible today.   The political party that recognizes this and implements it will win the hearts and minds of generations to come.