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PERMISSIONLESS INNOVATION
& THE CLASH OF VISIONS OVER
EMERGING TECHNOLOGIES
Adam Thierer
Senior Research Fellow
Last updat...
www.permissionlessinnovation.org
Some Questions about
Recent Tech Innovations
4
Where did all the modern info-tech
innovation we now take for granted
come from?
How did
all this area
develop so
quickly?
6
How did the U.S. become
a global digital innovation leader?
Source: Booz & Company
7
How many major European info-tech
innovators can you name?
Why so few?
8
How Did This US-EU Tech Imbalance Develop?
9
US tech firms are giant and are household names across the globe.
Why Are U.S. Firms Crushing E.U. Firms?
10
• Facebook’s market cap is twice as large as every billion dollar tech company ...
Where Are Europe’s Tech Innovators?
11
How Can Consumers Have Access
to All These at This Price?!
12
So… What Was the “Secret Sauce”
That Made All This Happen?
Tax code?
Education?
Labor market?
R&D spending?
VC market?
13
Answer = “Permissionless Innovation”
= the general freedom to experiment & learn
through trial-and-error
• openness to cha...
Values, Attitudes & Innovation
(or, what we can learn from Deirdre McCloskey)
• Deirdre McCloskey – values & attitudes mat...
In the old days, the Internet was “permissioned”
This warning to students appeared in a 1982 MIT handbook for the
use of A...
What Changed?
We opened the Net & digital revolution took off
• early 1990s: commercial opening of the Net
• 1997: Clinton...
The Rest is History
o Permissionless innovation has driven the explosion
of Internet entreprenuerialism over past 2 decade...
But We’re Not Done!
We should extend the vision
19
What’s good for cyberspace
is good for meatspace
We need same general policy approach to
other sectors and technologies,
w...
And that may be happening naturally…
21
“Software Is Eating the World”
- Marc Andreessen
22
Key Drivers of Modern Tech Disruption
 the digitization of all data
 massive increases in processing power
 exploding s...
“The Law of Disruption” That Governs Modern Life
Technology changes exponentially; Political systems change incrementally....
25
Which Policy
Vision Will Govern
Our Future?
Transportation
Supersonic
Space
Hyperloop
Virtual / Aug.
Reality
Future Tech
Flashpoints
3-D Printing &
Add. Manuf.
Roboti...
27
Technologies That are “Born Free” Will Have an Easier Time
than Those “Born in Regulatory Captivity”
“Born Captive”
(lo...
28
A Few “Born in Captivity” Broke Free
• The Internet (defied FCC + state & global regs)
• Sharing economy (defied state ...
But What about the Risks of New Tech?
Why some favor the “precautionary principle”
29
The “Precautionary Principle”
= Crafting public policies to control or limit new
innovations until their creators can prov...
Modern Concerns Driving Calls for
Precautionary Tech Regulation
1. Privacy / Psychological
• reputation issues, fear of “p...
Technopanic!
Fear sells & drives policy
32
Source: Adam Thierer, Mercatus Center at GMU
33
Techno-Dystopianism Pervades Popular Culture
Source: Adam Thierer, Mercatus Center at GMU
The Conflict of Visions over Innovation Policy
Innovation must be carefully guided should be free-wheeling
Priority Stabil...
What’s Wrong with Precaution?
35
General problem with
“permissioning” innovation
If we spend all our time living in constant
fear of worst-case scenarios—a...
“The Risk of Avoiding All Risks”
There can be no reward without some risk.
37
Specific problems with
“permissioning” innovation
o less entreprenurialism / lost opportunities
o diminished marketplace e...
The Atlantic “Silicon Valley Insiders Poll”
(surveying a panel of 50 executives, innovators, and thinkers)
39
Just How Important is Innovation?
• technological innovation “widely considered the main
source of economic progress” (Mok...
41
Technological Innovation Gave Us the
“Hockey Stick of Human Prosperity”
• If you care about human flourishing, then defending technological
innovation should be your #1 priority!
• Very little l...
But again, what about those risks?
Answer: We need constructive solutions for a
complex world.
43
When Might Precautionary Controls Make Sense?
… but most cases aren’t like this. We should first look to
more constructive...
Precautionary Principle Approach
“Top down” / “Hard Law” Responses to Technological Risk
• Product or service prohibitions...
Permissionless Innovation Approach
“Bottom Up” / “Soft Law” Responses to Technological Risk
• Education / etiquette / tran...
The Familiar Cycle of Technological Adaptation
• Citizen attitudes about most emerging technologies typically
follow a fam...
Case Study: The Camera
Recall negative reaction to camera & photography in late
1800’s…
“Instantaneous photographs and new...
• Telegraph
• Telephone
• Jazz, Rock & Rap
• Transistors
• Caller ID
• Video games
• Online porn
• RFID chips
• Gmail
• Wi...
“Panic Cycles”
Source: Information Technology and Innovation Foundation
50
Transportation
Supersonic
Space
Hyperloop
Virtual / Aug.
Reality
Future Tech
Flashpoints
3-D Printing &
Add. Manuf.
Roboti...
Today’s Latest Panics
Source: Information Technology and Innovation Foundation
52
Recall the Concerns Driving Calls for
Precautionary Tech Regulation
1. Privacy / Psychological
• reputation issues, fear o...
Technology / Sector
Privacy &
Psychological
Safety Security
Economic
Disruption
Intellectual
Property
Data Innovation
Big ...
POLICY
BLUEPRINT
General Policy Lessons / Values
to Help Promote Innovation
 Forbearance (or “First, Do No Harm”): Don’t jump to regulate
...
57
FTC’s Maureen Ohlhausen
on Big Data & IoT:
“approach new
technologies and new
business models with
regulatory humility....
Permissionless Innovation 10-Point Policy Blueprint
1) Articulate and defend permissionless innovation as the general poli...
The Precautionary Principle vs. Permissionless Innovation
A Range of Responses to Technological Risk
Prohibition
Censorshi...
Mercatus Center Tech Policy Program research
Books, Papers & Filings
• Book: Permissionless Innovation: The Continuing Cas...
www.PermissionlessInnovation.org
ADAM THIERER
athierer@mercatus.gmu.edu
“Permissionless Innovation” & the Clash of Visions over Emerging Technologies
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“Permissionless Innovation” & the Clash of Visions over Emerging Technologies

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"Permissionless Innovation & the Clash of Visions over Emerging Technologies." A presentation created by Adam Thierer (Mercatus Center at George Mason University). It focuses on coming public policy fights over various emerging technologies, such as: driverless cars, the Internet of Things, wearable technology, commercial drones, mobile medical innovations, virtual reality, and more.

This presentation has been updated to reflect most recent version.

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“Permissionless Innovation” & the Clash of Visions over Emerging Technologies

  1. 1. PERMISSIONLESS INNOVATION & THE CLASH OF VISIONS OVER EMERGING TECHNOLOGIES Adam Thierer Senior Research Fellow Last updated October 2016
  2. 2. www.permissionlessinnovation.org
  3. 3. Some Questions about Recent Tech Innovations 4
  4. 4. Where did all the modern info-tech innovation we now take for granted come from?
  5. 5. How did all this area develop so quickly? 6
  6. 6. How did the U.S. become a global digital innovation leader? Source: Booz & Company 7
  7. 7. How many major European info-tech innovators can you name? Why so few? 8
  8. 8. How Did This US-EU Tech Imbalance Develop? 9 US tech firms are giant and are household names across the globe.
  9. 9. Why Are U.S. Firms Crushing E.U. Firms? 10 • Facebook’s market cap is twice as large as every billion dollar tech company in Europe combined. • Airbnb is larger than all of Germany’s unicorns • market capitalizations for US-based unicorns was almost $2 trillion in 2015, while market caps for the handful of large European tech firms was just $120 billion
  10. 10. Where Are Europe’s Tech Innovators? 11
  11. 11. How Can Consumers Have Access to All These at This Price?! 12
  12. 12. So… What Was the “Secret Sauce” That Made All This Happen? Tax code? Education? Labor market? R&D spending? VC market? 13
  13. 13. Answer = “Permissionless Innovation” = the general freedom to experiment & learn through trial-and-error • openness to change, disruption, risk-taking • willingness to accept possibility of failure • avoid prior restraint • find less restrictive solutions to hard problems  The U.S. embraced this ethos & made it the basis of policy for the digital economy in the 1990s and beyond. 14
  14. 14. Values, Attitudes & Innovation (or, what we can learn from Deirdre McCloskey) • Deirdre McCloskey – values & attitudes matter! – an embrace of “bourgeois virtues” incentivizes innovation and propels economies forward • “A big change in the common opinion about markets and innovation… caused the Industrial Revolution, and then the modern world… The result was modern economic growth.”  The Internet & the Digital Revolution are the greatest proof that social and political attitudes toward markets & risk-taking are the key to innovation and prosperity. 15
  15. 15. In the old days, the Internet was “permissioned” This warning to students appeared in a 1982 MIT handbook for the use of ARPAnet, the progenitor of what would become the Internet: 16 “It is considered illegal to use the ARPAnet for anything which is not in direct support of government business... Sending electronic mail over the ARPAnet for commercial profit or political purposes is both anti-social and illegal. By sending such messages, you can offend many people, and it is possible to get MIT in serious trouble with the government agencies which manage the ARPAnet.”
  16. 16. What Changed? We opened the Net & digital revolution took off • early 1990s: commercial opening of the Net • 1997: Clinton admin. adopted “light touch” Framework for Global Electronic Commerce: 1. “the private sector should lead. The Internet should develop as a market driven arena not a regulated industry.” 2. “governments should avoid undue restrictions on electronic commerce” & “parties should be able to enter into legitimate agreements to buy and sell products and services across the Internet with minimal government involvement or intervention.” 3. “where governmental involvement is needed,” the Framework continued, “its aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment for commerce.” 17
  17. 17. The Rest is History o Permissionless innovation has driven the explosion of Internet entreprenuerialism over past 2 decades, esp. in U.S. o No one needed a license or permission to launch the great technological innovations of the digital age • PCs, Net, servers, email, storage, websites, smartphones o But Europe adopted opposite approach & floundered A powerful real-world natural experiment in comparative governance systems 18
  18. 18. But We’re Not Done! We should extend the vision 19
  19. 19. What’s good for cyberspace is good for meatspace We need same general policy approach to other sectors and technologies, whether based on bits (digital economy) or atoms (industrial economy). Our policy default should be Innovation Allowed 20
  20. 20. And that may be happening naturally… 21
  21. 21. “Software Is Eating the World” - Marc Andreessen 22
  22. 22. Key Drivers of Modern Tech Disruption  the digitization of all data  massive increases in processing power  exploding storage capacity  ubiquitous networking capabilities  steady miniaturization of everything  increasing sensorization of the world  falling cost of almost everything 23
  23. 23. “The Law of Disruption” That Governs Modern Life Technology changes exponentially; Political systems change incrementally. 24 Pace of Change Time Technological Change Political Change Source: Larry Downes Gap between= the “Pacing Problem”
  24. 24. 25 Which Policy Vision Will Govern Our Future?
  25. 25. Transportation Supersonic Space Hyperloop Virtual / Aug. Reality Future Tech Flashpoints 3-D Printing & Add. Manuf. Robotics Smart cars Private drones A.I. Sharing Economy Crypto Bitcoin Dark markets Advanced Health Mobile medical apps Biohacking / Embeddables Genetic issues Personalized medicine Food modification 3D-printed devices Internet of Things Wearable Tech Smart Homes Smart Cities Industrial Internet 26 Source: Adam Thierer, Mercatus Center at GMU
  26. 26. 27 Technologies That are “Born Free” Will Have an Easier Time than Those “Born in Regulatory Captivity” “Born Captive” (lots of law / existing agencies) • Driverless cars (DOT) • Medical tech / genetics (FDA) • Food tech (FDA, Ag.) • Commercial drones (FAA) • Supersonic (FAA) • Space tech (FAA / NASA) “Born Free” (no law / no agencies) • Most online services • Smartphone apps • Social networks • 3D Printing • Virtual Reality / AR • General robotics • Artificial intelligence
  27. 27. 28 A Few “Born in Captivity” Broke Free • The Internet (defied FCC + state & global regs) • Sharing economy (defied state & local regs) • Wearable health devices & Smartphone apps (defied FDA regs) • 3D-printed prosthetics (defied FDA regs) Query: How’d that happen? • enlightened policy choices? • an end-run around regulation? • technological civil disobedience? • global innovation arbitrage?
  28. 28. But What about the Risks of New Tech? Why some favor the “precautionary principle” 29
  29. 29. The “Precautionary Principle” = Crafting public policies to control or limit new innovations until their creators can prove that they won’t cause any harms. • “better to be safe than sorry” mentality • “Mother, May I” (“permissioned”) policy • preemptive regulation of tech It is the antithesis of permissionless innovation 30
  30. 30. Modern Concerns Driving Calls for Precautionary Tech Regulation 1. Privacy / Psychological • reputation issues, fear of “profiling” & “discrimination” • amorphous psychological / cognitive harms 2. Safety • Health & physical safety, child safety 3. Security • Hacking, cybersecurity, law enforcement issues 4. Economic • Automation, job dislocation, sectoral disruptions 5. Intellectual Property 31
  31. 31. Technopanic! Fear sells & drives policy 32 Source: Adam Thierer, Mercatus Center at GMU
  32. 32. 33 Techno-Dystopianism Pervades Popular Culture Source: Adam Thierer, Mercatus Center at GMU
  33. 33. The Conflict of Visions over Innovation Policy Innovation must be carefully guided should be free-wheeling Priority Stability / equilibrium Spontaneity / experimentation Risk risk anticipation is preferred risk adaptation is preferred Solutions Preemptive (ex ante) top-down controls/solutions Reactive (ex post) bottom-up remedies Presumption Innovators must ask, “Mother, May I?” Innovators are “innocent until proven guilty” Ethos “Better to be safe than sorry” “Nothing ventured, nothing gained” 34
  34. 34. What’s Wrong with Precaution? 35
  35. 35. General problem with “permissioning” innovation If we spend all our time living in constant fear of worst-case scenarios—and premising public policy upon such fears—it means that best-case scenarios will never come about. Wisdom and progress are born from experience, including experiences that involve risk and the possibility of occasional mistakes and failures. 36
  36. 36. “The Risk of Avoiding All Risks” There can be no reward without some risk. 37
  37. 37. Specific problems with “permissioning” innovation o less entreprenurialism / lost opportunities o diminished marketplace entry / rivalry o stagnant markets & potential cronyism o less economic growth o potential loss of global competitive advantage (esp. w/ rise of “global innovation arbitrage”) o higher prices & fewer choices for consumers 38
  38. 38. The Atlantic “Silicon Valley Insiders Poll” (surveying a panel of 50 executives, innovators, and thinkers) 39
  39. 39. Just How Important is Innovation? • technological innovation “widely considered the main source of economic progress” (Mokyr, et. al.) • Obama Admin (2010): o “technological innovation is linked to three-quarters of the nation’s post-WWII growth rate” o “innovation in capital goods is primary driver of increases in real wages” o “across countries, 75% of differences in income can be explained by innovation-driven productivity differentials” • Other “growth accounting” studies generally find that technological progress accounts for 30 - 34% of growth in Western countries 40
  40. 40. 41 Technological Innovation Gave Us the “Hockey Stick of Human Prosperity”
  41. 41. • If you care about human flourishing, then defending technological innovation should be your #1 priority! • Very little liberty-enhancing change comes through political process today. – Hard to name many major legislative victories for freedom in recent decades. – Most wins come in courts, but are slow & costly. • Technological innovation does more to liberate us from oppression than anything else. – Each new innovation empowers us to live a life of our own choosing; makes us wealthier, healthier & happier. “Technologies of freedom” + permissionless innovation = PROGESS & PROSPERITY! 42 Why You Should Really Care
  42. 42. But again, what about those risks? Answer: We need constructive solutions for a complex world. 43
  43. 43. When Might Precautionary Controls Make Sense? … but most cases aren’t like this. We should first look to more constructive, “bottom-up” solutions. 44Source: Adam Thierer, Mercatus Center at GMU
  44. 44. Precautionary Principle Approach “Top down” / “Hard Law” Responses to Technological Risk • Product or service prohibitions • Information suppression / censorship • Licensing & permitting processes • Ongoing administrative regulation / oversight • Product development guidance • Restrictive defaults • Nudges / informal guidelines • “Bully pulpit” / “agency threats” Source: Adam Thierer, Mercatus Center at GMU
  45. 45. Permissionless Innovation Approach “Bottom Up” / “Soft Law” Responses to Technological Risk • Education / etiquette / transparency • Empowerment tools • Self-regulation & new competition / choices • Property rights & contracts • Common law, torts, products liability • other targeted & limited legal interventions • Social pressure / media pressure • Social norms, resiliency & adaptation Source: Adam Thierer, Mercatus Center at GMU
  46. 46. The Familiar Cycle of Technological Adaptation • Citizen attitudes about most emerging technologies typically follow a familiar cycle: initial resistance gradual adaptation eventual assimilation • citizens have found ways to adapt to technological change by employing a variety of coping mechanisms, new norms, or other creative fixes. • If nothing else, familiarity breeds comfort; resiliency. • Lesson: Be patient and give social & economic norms a chance to adjust. 47
  47. 47. Case Study: The Camera Recall negative reaction to camera & photography in late 1800’s… “Instantaneous photographs and newspaper enterprise have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that ‘what is whispered in the closet shall be proclaimed from the house-tops.’” — Samuel D. Warren and Louis D. Brandeis, 1890 • But we our societal norms & personal expectations adjusted. • Instead of rejecting cameras, we bought a lot of them! • We learned how to use them respectfully, too. 48
  48. 48. • Telegraph • Telephone • Jazz, Rock & Rap • Transistors • Caller ID • Video games • Online porn • RFID chips • Gmail • Wireless geolocation 49 Other Technopanics & Media “Moral Panics” Somehow we got through it all! Source: Adam Thierer, Mercatus Center at GMU
  49. 49. “Panic Cycles” Source: Information Technology and Innovation Foundation 50
  50. 50. Transportation Supersonic Space Hyperloop Virtual / Aug. Reality Future Tech Flashpoints 3-D Printing & Add. Manuf. Robotics Smart cars Private drones A.I. Sharing Economy Crypto Bitcoin Dark markets Advanced Health Mobile medical apps Biohacking / Embeddables Genetic issues Personalized medicine Food modification 3D-printed devices Internet of Things Wearable Tech Smart Homes Smart Cities Industrial Internet 51Source: Adam Thierer, Mercatus Center at GMU
  51. 51. Today’s Latest Panics Source: Information Technology and Innovation Foundation 52
  52. 52. Recall the Concerns Driving Calls for Precautionary Tech Regulation 1. Privacy / Psychological • reputation issues, fear of “profiling” & “discrimination” • amorphous psychological / cognitive harms 2. Safety • Health & physical safety, child safety 3. Security • Hacking, cybersecurity, law enforcement issues 4. Economic • Automation, job dislocation, sectoral disruptions 5. Intellectual Property 53
  53. 53. Technology / Sector Privacy & Psychological Safety Security Economic Disruption Intellectual Property Data Innovation Big Data Online advertising Internet of Things & Wearables 1 3 2 4 5 Robotics Driverless Cars Drones Artificial Intelligence 4 1 3 2 5 Sharing Economy 3 2 4 1 5 Medical Innovation Tele-med / Mobile medical apps Genetic testing / editing 3 1 2 4 5 3D Printing Additive Manuf. 5 1 4 3 2 Cypto Bitcoin & Blockchain Decentralized markets 5 1 3 2 4 VR / AR / Immersive Tech 1 2 3 4 5 Source: Adam Thierer, Mercatus Center at GMU
  54. 54. POLICY BLUEPRINT
  55. 55. General Policy Lessons / Values to Help Promote Innovation  Forbearance (or “First, Do No Harm”): Don’t jump to regulate new tech based on worst-case scenarios.  Humility: Understand the limits of your knowledge & ability to forecast the future.  Patience: Wait to see how individuals & institutions adapt.  Restraint: Limit & target interventions after exhausting all other options  Evaluate & reevaluate: Conduct strict cost-benefit analysis for all new proposals & periodically sunset old rules before they hinder future progress.
  56. 56. 57 FTC’s Maureen Ohlhausen on Big Data & IoT: “approach new technologies and new business models with regulatory humility.” Sen. Kelly Ayotte on Internet of Things: ”To stay on the cutting edge, we need to make sure that our regulatory environment is conducive to fostering innovation.” CFTC’s Christopher Giancarlo on Blockchain: ”It’s is time again to remind regulators to ‘do no harm.’” Sen. Cory Booker on Driverless Cars & Drones: ”America right now is the net exporter of technology and innovation in the globe, and we can’t lose that advantage.” Many Policymakers Embrace Permissionless Innovation
  57. 57. Permissionless Innovation 10-Point Policy Blueprint 1) Articulate and defend permissionless innovation as the general policy default. 2) Identify and remove barriers to entry and innovation. 3) Protect freedom of speech and expression. 4) Retain / expand immunities for intermediaries from liability associated with 3rd party uses. 5) Rely on common law / other existing legal solutions to solve problems. 6) Wait for insurance markets and competitive responses to develop. 7) Push for industry self-regulation and best practices. 8) Promote education and empowerment solutions and be patient as social norms evolve to solve challenges. 9) Adopt targeted, limited legal remedies for truly hard problems. 10)Evaluate and reevaluate policy decisions to ensure they pass a strict benefit- cost analysis. 58
  58. 58. The Precautionary Principle vs. Permissionless Innovation A Range of Responses to Technological Risk Prohibition Censorship Info suppression Product bans Anticipatory Regulation Administrative mandates Restrictive defaults Licensing & permits Industry guidance Resiliency Education & Media Literacy Labeling / Transparency User empowerment Self-regulation Adaptation Experience / Experiments Learning / Coping Social norms & pressure Top-down (ex ante) Solutions Bottom-up (ex post) Solutions Precautionary Principle Permissionless Innovation 59
  59. 59. Mercatus Center Tech Policy Program research Books, Papers & Filings • Book: Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom • Paper: The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation • Paper: Removing Roadblocks to Intelligent Vehicles and Driverless Cars • Paper: US Medical Devices: Choices and Consequences • Paper: The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change • Testimony: Senate Testimony on Privacy, Data Collection & Do Not Track • Filing to FAA on Unmanned Aircraft System Test Site Program • Filing to FTC on Privacy and Security Implications of the Internet of Things • Journal Article: Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle • Book: Bitcoin: A Primer for Policymakers Articles & Blog Posts • Who Really Believes in “Permissionless Innovation”? • “Permissionless Innovation” Offline as Well as On • The Third Industrial Revolution Has Only Just Begun • The Next Internet-Like Platform for Innovation? Airspace (Think Drones) • Muddling Through: How We Learn to Cope with Technological Change • When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be Disappointed
  60. 60. www.PermissionlessInnovation.org
  61. 61. ADAM THIERER athierer@mercatus.gmu.edu

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