Innovation & Entrepreneurship

We hear a lot today about the importance of “disruptive innovation,” “deep technologies,” “moonshots,” and even “technological miracles.” What do these terms mean and how are they related? Are they just silly clichés used to hype techno-exuberant books, articles, and speeches? Or do these terms have real meaning and importance?

This article explores those questions and argues that, while these terms are confronted with definitional challenges and occasional overuse, they retain real importance to human flourishing, economic growth, and societal progress.

Basic Concepts

Don Boudreaux defines moonshots as, “radical but feasible solutions to important problems” and Mike Cushing has referred to them as “innovation that achieves the previously unthinkable.” “Deep technology” is another buzzword being used to describe such revolutionary and important innovations. Swati Chaturvedi of investment firm Propel[x] says deep technologies are innovations that are “built on tangible scientific discoveries or engineering innovations” and “are trying to solve big issues that really affect the world around them.”

“Disruptive technology” or “game-changing innovations” are other terms that are often used in reference to technologies and inventions with major societal impacts. “Transformative technologies” is another increasingly popular term, albeit one focused mostly on health and wellness-related innovations. Continue reading →

In recent essays and papers, I have discussed the growth of “innovation arbitrage,” which I defined as, “The movement of ideas, innovations, or operations to those jurisdictions that provide a legal and regulatory environment more hospitable to entrepreneurial activity.” A new Economist article about “Why startups are leaving Silicon Valley,” discusses innovation arbitrage without calling it such. The article notes that, for a variety of reasons, Valley innovators and investors are looking elsewhere to set up shop or put money into new ventures. The article continues:

Other cities are rising in relative importance as a result. The Kauffman Foundation, a non-profit group that tracks entrepreneurship, now ranks the Miami-Fort Lauderdale area first for startup activity in America, based on the density of startups and new entrepreneurs. Mr Thiel is moving to Los Angeles, which has a vibrant tech scene. Phoenix and Pittsburgh have become hubs for autonomous vehicles; New York for media startups; London for fintech; Shenzhen for hardware. None of these places can match the Valley on its own; between them, they point to a world in which innovation is more distributed.

If great ideas can bubble up in more places, that has to be welcome. There are some reasons to think the playing-field for innovation is indeed being levelled up. Capital is becoming more widely available to bright sparks everywhere: tech investors increasingly trawl the world, not just California, for hot ideas. There is less reason than ever for a single region to be the epicentre of technology. Thanks to the tools that the Valley’s own firms have produced, from smartphones to video calls to messaging apps, teams can work effectively from different offices and places.

That’s the power of innovation arbitrage at work.  Continue reading →

by Adam Thierer & Trace Mitchell

[originally published on The Bridge on August 30, 2018.]

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What is an entrepreneur?

While it may seem straightforward, this question is deceptively complex. The term can be used in many different ways to describe a variety of individuals who engage in economic, political, or even social activities. Entrepreneurs affect almost every aspect of modern society. While most people probably have a general sense of what is meant when they hear the term entrepreneur, it can be difficult to provide a precise definition. This is due in no small part to the fact that some of the primary thinkers who have given substance to the term have placed their focus on different aspects of entrepreneurialism.

How Economists Talk About Entrepreneurs

Austrian economist Joseph Schumpeter thought that the purpose of an entrepreneur was “to reform or revolutionize the pattern of production by exploiting an invention.” Schumpeterian entrepreneurs are highly creative, disruptive innovators who challenge the status quo in order to bring about new economic opportunities. American economist Israel Kirzner viewed the defining characteristic of entrepreneurs as “alertness.” Kirznerian entrepreneurs are individuals who are able to identify the ways in which a market could be moved closer to its equilibrium, such as recognizing a gap in knowledge between different economic actors.

In the time since Schumpeter and Kirzner helped lay the groundwork, a number of George Mason University-affiliated scholars have made major contributions to our understanding of entrepreneurialism. Continue reading →

Yesterday was National Lemonade Day. Over at the Mercatus Bridge blog, Jennifer Skees and I used the opportunity to highlight the increasing regulatory crackdown on kids operating ventures without first seeking the proper permits from local authorities. We ask, “wouldn’t it be better to teach them the value of hard work and entrepreneurial effort instead of threatening them with penalties for not getting costly permits to do basic jobs?” Here’s our answer:

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Today is National Lemonade Day. For many Americans a lemonade stand was their first experience in entrepreneurship. But unfortunately, this time honored tradition that teaches the value of hard work, entrepreneurship, and innovation may be under threat from overzealous grown-ups.

Should we really force kids to get licenses to start lemonade stands, sell bottles of water outside a ballpark, or mow lawns for a little extra money? And wouldn’t it be better to teach them the value of hard work and entrepreneurial effort instead of threatening them with penalties for not getting costly permits to do basic jobs?

Recent news stories have highlighted examples of kids being confronted with local regulations that essential tell them not to be entrepreneurial until they’ve gotten someone’s blessing–or else face fines or other penalties for those efforts.

Out in San Francisco, for example, a neighbor threatened to call the police on an eight-year-old girl selling water to raise money for a trip to Disneyland after her mother had lost her job. The neighbor berated the little girl for “illegally selling water without a permit.” Luckily, national outrage seems to have fallen in favor of this rogue entrepreneur instead of “Permit Patty.” But this is far from an isolated case.

Another story went viral earlier this year involving kids and lemonade stands. Country Time lemonade pledged to pay the fines received or the permit cost for children’s lemonade stands. Who thought we’d reach the day when we need a Lemonade Legal Defense Fund? But just prior to the launch, Stapleton, Colorado police were called to shut down the lemonade stand of  four and six year-old brothersfor failing to have a business license. Kids who probably can’t read or fill out the necessary forms are expected to obtain a formal license for a tradition that dates back about 120 years. Continue reading →

I recently posted an essay over at The Bridge about “The Pacing Problem and the Future of Technology Regulation.” In it, I explain why the pacing problem—the notion that technological innovation is increasingly outpacing the ability of laws and regulations to keep up—“is becoming the great equalizer in debates over technological governance because it forces governments to rethink their approach to the regulation of many sectors and technologies.”

In this follow-up article, I wanted to expand upon some of the themes developed in that essay and discuss how they relate to two other important concepts: the “Collingridge Dilemma” and technological determinism. In doing so, I will build on material that is included in a forthcoming law review article I have co-authored with Jennifer Skees, Ryan Hagemann (“Soft Law for Hard Problems: The Governance of Emerging Technologies in an Uncertain Future”) as well as a book I am finishing up on the growth of “evasive entrepreneurialism” and “technological civil disobedience.”

Recapping the Nature of the Pacing Problem

First, let us quickly recap that nature of “the pacing problem.” I believe Larry Downes did the best job explaining the “problem” in his 2009 book on The Laws of Disruption. Downes argued that “technology changes exponentially, but social, economic, and legal systems change incrementally” and that this “law” was becoming “a simple but unavoidable principle of modern life.” Continue reading →

The ongoing ride-sharing wars in New York City are interesting to watch because they signal the potential move by state and local officials to use infrastructure management as an indirect form of innovation control or competition suppression. It is getting harder for state and local officials to defend barriers to entry and innovation using traditional regulatory rationales and methods, which are usually little more than a front for cronyist protectionism schemes. Now that the public has increasingly enjoyed new choices and better services in this and other fields thanks to technological innovation, it is very hard to convince citizens they would be better off without more of the same.

If, however, policymakers claim that they are limiting entry or innovation based on concerns about how disruptive actors supposedly negatively affect local infrastructure (in the form of traffic or sidewalk congestion, aesthetic nuisance, deteriorating infrastructure, etc.), that narrative can perhaps make it easier to sell the resulting regulations to the public or, more importantly, the courts. Going forward, I suspect that this will become a commonly-used playbook for many state and local officials looking to limit the reach of new technologies, including ride-sharing companies, electric scooters, driverless cars, drones, and many others.

To be clear, infrastructure control is both (a) a legitimate state and local prerogative; and (b) something that has been used in the past to control innovation and entry in other sectors. But I suspect that this approach is about to become far more prevalent because a full-frontal defense of barriers to innovation is far more likely to face serious public and legal challenges. Continue reading →

By Andrea O’Sullivan and Adam Thierer (First published at The Bridge on August 1, 2018.)

Technology is changing the ways that entrepreneurs interact with, and increasingly get away from, existing government regulations. The ongoing legal battles surrounding 3D-printed weapons provide yet another timely example.

For years, a consortium of techies called Defense Distributed has sought to secure more protections for gun owners by making the code allowing someone to print their own guns available online. Rather than taking their fight to Capitol Hill and spending billions of dollars lobbying in potentially fruitless pursuits of marginal legislative victories, Defense Distributed ties their fortunes to the mast of technological determinism and blurs the lines between regulated physical reality and the open world of cyberspace.

The federal government moved fast, with gun control advocates like Senator Chuck Schumer (D-NY) and former Representative Steve Israel (D-NY) proposing legislation to criminalize Defense Distributed’s activities. They failed.

Plan B in the efforts to quash these acts of 3D-printing disobedience was to classify the Computer-aided design (CAD) files that Defense Distributed posted online as a kind of internationally-controlled munition. The US State Department engaged in a years-long legal brawl over whether or not Defense Distributed violated established International Traffic in Arms Regulations (ITAR). The group pulled down the files while the issue was examined in court, but the code had long since been uploaded to sharing sites like The Pirate Bay. The files have also been available on the Internet Archive for many years. The CAD, if you will excuse the pun, is out of the bag.

In a surprising move, the Department of Justice suddenly moved to drop the suit and settle with Defense Distributed last month. It agreed to cover the group’s legal fees and cease its attempt to regulate code already easily accessible online. While no legal precedent was set, since this was merely a settlement, it is likely that the government realized that its case would be unwinnable.

Gun control advocates did not react well to this legal retreat. Continue reading →

Dan Wang has a new post titled “How Technology Grows (a restatement of definite optimism)” and it is characteristically good. For tech policy wonks and policymakers, put it in your queue. The essay clocks in at 7500 words, but there’s a lot to glean from the piece. Indeed, he puts into words a number of ideas I’ve been wanting to write about. To set the stage, he begins first by defining what we mean by technology:

Technology should be understood in three distinct forms: as processes embedded into tools (like pots, pans, and stoves); explicit instructions (like recipes); and as process knowledge, or what we can also refer to as tacit knowledge, know-how, and technical experience. Process knowledge is the kind of knowledge that’s hard to write down as an instruction. You can give someone a well-equipped kitchen and an extraordinarily detailed recipe, but unless he already has some cooking experience, we shouldn’t expect him to prepare a great dish.

As he rightly points out, the United States has, for various reasons, set aside the focus on process knowledge. Where this is especially evident comes in our manufacturing base:

When firms and factories go away, the accumulated process knowledge disappears as well. Industrial experience, scaling expertise, and all the things that come with learning-by-doing will decay. I visited Germany earlier this year to talk to people in industry. One point Germans kept bringing up was that the US has de-industrialized itself and scattered its production networks. While Germany responded to globalization by moving up the value chain, the US manufacturing base mostly responded by abandoning production.

The US is an outlier among rich countries when it comes to manufacturing exports. It needs improvement. Continue reading →

The White House has announced a new effort to help prepare workers for the challenges they will face in the future. While it’s a well-intentioned effort, and one that I hope succeeds, I’m skeptical about it for a simple reason: It’s just really hard to plan for the workforce needs of the future and train people for jobs that we cannot possibly envision today.

Writing in the Wall Street Journal today, Ivanka Trump, senior adviser to the president, outlines the elements of new Executive Order that President Trump is issuing “to prioritize and expand workforce development so that we can create and fill American jobs with American workers.” Toward that end, the Administration plans on:

  • establishing a National Council for the American Worker, “composed of senior administration officials, who will develop a national strategy for training and retraining workers for high-demand industries.” This is meant to bring more efficiency and effectiveness to the “more than 40 workforce-training programs in more than a dozen agencies, and too many have produced meager results.”
  • “facilitat[ing] the use of data to connect American businesses, workers and educational institutions.” This is meant to help workers find “what jobs are available, where they are, what skills are required to fill them, and where the best training is available.”
  • launching a nationwide campaign “to highlight the growing vocational crisis and promote careers in the skilled trades, technology and manufacturing.”

The Administration also plans on creating a new advisory board of experts to address these issues, and the administration is also “asking companies and trade groups throughout the country to sign our new Pledge to America’s Workers—a commitment to invest in the current and future workforce.” They hope to encourage companies to take additional steps “to educate, train and reskill American students and workers.”

Perhaps some of these steps make sense, and perhaps a few will even help workers deal with the challenges of our more complex, fast-evolving, global economy. But I doubt it.

Continue reading →

I’ve been working on a new book that explores the rise of evasive entrepreneurialism and technological civil disobedience in our modern world. Following the publication of my last book, Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom, people started bringing examples of evasive entrepreneurialism and technological civil disobedience to my attention and asked how they were related to the concept of permissionless innovation. As I started exploring and cataloging these cases studies, I realized I could probably write an entire book about these developments and their consequences.

Hopefully that book will be wrapped up shortly. In the meantime, I am going to start rolling out some short essays based on content from the book. To begin, I will state the general purpose of the book and define the key concepts discussed therein. In coming weeks and months, I’ll build on these themes, explain why they are on the rise, explore the effect they are having on society and technological governance efforts, and more fully develop some relevant case studies. Continue reading →