Regulation stifles innovation. Entrepreneurs must kowtow to bureaucrats. Regulators are always and can only be bad for innovation and customers. Ayn Rand had it right. Or did she?
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A British employment tribunal (basically a court) ruled that Uber drivers could not be treated as self-employed. Rather they should be treated as workers, a class which acquires certain employment rights, such as minimum wage and holiday pay, not present in the self-employed. The Court did not class them as employees, a status which would have conferred even more rights.
The Court’s conclusion makes for fantastic reading. This was not a kangaroo court or a panel of Luddites. The judgement makes it abundantly clear that the justices understood the issues. You can read the judgement here.
The good stuff is towards the back half of the judgement. I recommend skipping over the extensive quotes from case law and rather concentrate on the language used by the judges. The gloves were off.
The thirteen primary reasons to find against Uber given by the court were:
“Scathing” is what one leading sharing economy CEO called the judgement.
We know the gig economy has lots of benefits. In a recent report McKinsey points to the many potential advantages of the gig economy for increasing labour force participation.
But the firm explicitly calls out the vexing relationship between gig platforms, workers and their rights:
“[K]ey challenges still must be addressed for this shift to be a feasible and satisfying development for workers.” Issues such as benefits, income-security measures, and training and credentials offer room for policy makers, as well as innovators and new intermediaries, to provide solutions.”
There is a tension between the innovation benefits and the social and individual costs.
Over in the US, George Hotz who was building the Comma One self-driving accessory for cars, decided to stop selling the product. Why? A US regulator sent him a letter asking him to provide information on the conditions under which the Comma One would safely work.
I can empathise with how Hotz might have felt on receiving an official letter like this. But I’m baffled by Hotz’s response. The request from NHTSA is extensive but hardly invasive. In fact, reading it one feels that Comma.AI could just deal with it.
Three other stories emerged this week that raised the sorts of questions about the relationship between unregulated products and the public good.
- Soylent, the meal replacement technology, has stopped sales of a bunch of its products because they are making people sick. If you don’t know Soylent, the idea is to replace your meals with a nutritionally-optimised powder, bar or milkshake.
- Facebook now allows advertisers to target ads by race and ethnic origin.
- Brain-training apps have been under regular scientific attack for not actually training the brain. Apparently, learning to play an instrument does more for you. (Working out in the gym will also improve cognitive function.)
So what’s going on?
As an entrepreneur, I feel the pain of regulations which fall heavily on smaller firms, don’t make sense in a Moore’s Law world or just don’t make sense at all (the inane EU cookie warning for one). And we also know of prejudicial regulations that just seem appalling today. For example, Jews were only allowed to study at my alma mater, Oxford University, in 1856 (some 760 years after teaching started.)
And yet some of the largest innovations in our industry, chip making, the PC industry, Web search, all blossomed without having to flaunt many regulations. In many cases, they were founded or supported by government investment or regulation.
And yes, during the transition from circuit-switched to packet-switched telephony architectures, and ultimately the Internet, telcos fought hard to extend their universal service and other obligations on emerging young Internet-based firms.
Such regulatory burden would have killed that innovation. And there are many more cases where incumbents sought to use existing regulation to stop consumer-oriented innovation. No doubt.
There needs to be a balance. Regulators need to be smarter. We need to be more aware of regulatory capture and the risks therein. But we can’t subscribe to a fundamentalist belief that all regulation is always wrong and anti-innovative.
Entrepreneurs should also accept that their businesses succeed because of civil society, a rule of law & institutions not in spite of them.
Disclosure: I’ve worked with regulators and in unregulated industries. I sat on the Consumer Board of OfCom, the UK’s media and telecoms regulator for three years. I’ve also worked as an investor and entrepreneur. I’m lucky to have seen this particular elephant from several sides.