1. PERMISSIONLESS INNOVATION
& THE CLASH OF VISIONS OVER
EMERGING TECHNOLOGIES
Adam Thierer
Senior Research Fellow
Last updated October 2016

2. www.permissionlessinnovation.org

4. Some Questions about
Recent Tech Innovations
4

5. Where did all the modern info-tech
innovation we now take for granted
come from?

6. How did
all this area
develop so
quickly?
6

7. How did the U.S. become
a global digital innovation leader?
Source: Booz & Company
7

8. How many major European info-tech
innovators can you name?
Why so few?
8

9. How Did This US-EU Tech Imbalance Develop?
9
US tech firms are giant and are household names across the globe.

10. 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

11. Where Are Europe’s Tech Innovators?
11

12. How Can Consumers Have Access
to All These at This Price?!
12

13. So… What Was the “Secret Sauce”
That Made All This Happen?
Tax code?
Education?
Labor market?
R&D spending?
VC market?
13

14. 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

15. 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

16. 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.”

17. 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

18. 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

19. But We’re Not Done!
We should extend the vision
19

20. 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

21. And that may be happening naturally…
21

22. “Software Is Eating the World”
- Marc Andreessen
22

23. 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

24. “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”

25. 25
Which Policy
Vision Will Govern
Our Future?

26. 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

27. 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

28. 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?

29. But What about the Risks of New Tech?
Why some favor the “precautionary principle”
29

30. 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

31. 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

32. Technopanic!
Fear sells & drives policy
32
Source: Adam Thierer, Mercatus Center at GMU

33. 33
Techno-Dystopianism Pervades Popular Culture
Source: Adam Thierer, Mercatus Center at GMU

34. 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

35. What’s Wrong with Precaution?
35

36. 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

37. “The Risk of Avoiding All Risks”
There can be no reward without some risk.
37

38. 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

39. The Atlantic “Silicon Valley Insiders Poll”
(surveying a panel of 50 executives, innovators, and thinkers)
39

40. 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

41. 41
Technological Innovation Gave Us the
“Hockey Stick of Human Prosperity”

42. • 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

43. But again, what about those risks?
Answer: We need constructive solutions for a
complex world.
43

44. 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

45. 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

46. 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

47. 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

48. 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

49. • 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

50. “Panic Cycles”
Source: Information Technology and Innovation Foundation
50

51. 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

52. Today’s Latest Panics
Source: Information Technology and Innovation Foundation
52

53. 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

54. 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

55. POLICY
BLUEPRINT

56. 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.

57. 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

58. 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

59. 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

60. 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

61. www.PermissionlessInnovation.org

62. ADAM THIERER
athierer@mercatus.gmu.edu