America's Anti-Innovation Culture
A recent headline in the Washington Post announced that “Airbnb for cars is here. And the rental car giants are not happy.” The story explained that as rich as they are, major rental car companies “worry about being left behind” by innovative upstarts. So they “have spent several years waging a quiet legislative war” to regulate them.
In other words, industry incumbents are using their influence in government to impede innovation. This situation is symptomatic of a larger problem: the growing hostility to innovation in America.
What the rental car industry is doing is of course nothing new. The ongoing battles waged by taxi companies and hotels against Uber and Airbnb, respectively, are other prominent examples. And even those innovative services are still struggling to overcome our societal risk aversion despite significant acceptance among younger adults.
The first punch industry incumbents throw to the gut of innovators entering their ring is always the same: Go to the government and make a case about the need to “level the playing field” and “protect public health and safety.” Leveling the playing field and protecting public health and safety are code phrases that translate into regulating the innovators the same way incumbents are — it never means deregulating incumbents. The incumbents know that if their fight plan works, small startups without the ability to comply effectively with sometimes hefty regulation will be TKO’d. In such cases, it is not the incumbent’s superior product or service in the marketplace that beats out competitors, but the heavy hand of government intervention.
Like it or not, incumbents have their fingers on the pulse of public sentiment. They recognize that, increasingly, America has a suppressed appetite for innovation. For the very first time, the Bloomberg Innovation Index bumped the United States out of its top 10 list of the most innovative countries in 2018. This is symptomatic of a worrisome decline in our pro-innovation and startup culture.
So perhaps incumbents know they can get away with a certain amount of anticompetitive advocacy because they will receive little pushback from a society that would prefer to maintain a relatively cushy status quo. Our elected officials and un-elected regulators, who ought to serve as a backstop to bad market behavior, are merely responding to the signals we’re sending as a society. We elect political leaders who reflect the American risk-avoidance culture.
It was not always so. There was a time in American history when pain and discomfort were a part of life. What could be more motivating to progress and entrepreneurship than the hope of getting away from that hardship and to a more comfortable place? But we no longer experience the same kinds and levels of discomfort that may have made us eager to experiment and to assume the reasonable risk that accompanies the greatest of innovations, such as advancements in land, sea, and air transportation.
Do we want a future built on a society that will tolerate reasonable risk to promote sweeping innovative advancement — a core historical trait of American exceptionalism? Minor innovations, such as updates to your iPhone or Android device, are not enough. We will have to break out of our comfortable attitudes and allow experimentation in potentially revolutionary ideas such as supersonic flight or commercial drone delivery.
Some of the direct effects of our anti-innovation culture and government intervention will be obvious, such as removing self-driving vehicles from our roadways. The indirect effects will be subtler yet more profound. Just imagine life and society today, if preceding generations had not had the courage to accept the risks involved in experimenting with the automobile or the power of electricity. We now reap the incidental benefits of the countless things that we have built around the greatest innovations of the past.
The indirect effects and aggregate consequences of our anti-innovation culture will be far worse than any direct benefits that flow from regulators’ attempt to answer calls to “level the playing field” and “protect public health and safety.”
Devon Westhill is Director of the Federalist Society’s Regulatory Transparency Project. The views expressed here are his own.
