Regulation & Innovation: Why Can’t We Be Friends?

It’s an idea that comes after graduation and before your first job. In the midst of your post-grad “Catcher in the Rye” phase, you’ll find a silver lining as you melodramatically gaze out of your childhood bedroom window: I can start my own business.

It’s perfect. You can stop pretending to look for a real job, and you’ll finally have an answer to the question, “So, what do you do?”

You’ll get to be your own boss, work from your couch donning sweats and blue-light glasses and “work” on something you actually find meaningful. Screw finding a normal nine-to-five job—You’re far too creative for corporate life. You could even ask your cousin (who was like, really into Steve Jobs) if she wants to join forces. Between your creativity and her tech background in WordPress blogging, you’re certain you’ve got the next million dollar idea.

As your mind drifts to scenes of communal workspaces, lunchtime yoga breaks and your very own company dog, you’re buying into a certain kind of 21^st century American dream (one whose twin sister happens to be the “sharing economy”). Sorry, you’re not that unique.

Rewriting the Rules

Although clichéd, some of the most inventive startups of today were born out of a similar set of goals.

Companies such as Uber, Lyft, Poshmark and Airbnb are all based on convenience, accessibility and consumer experience. These trailblazers sidestep corporate policy and small business regulation by focusing on creativity, disruption and word-of-mouth advertising. By utilizing tech and social media, they’re able to lower overhead costs and barriers to entry.

This unique take on entrepreneurship has redefined our labor market as well as the typical “American Dream.” Disrupting an entire industry pays out: In 2018, Uber reported that it supported $17 billion of GDP in the U.S. over a study period. Airbnb, your go-to Euro trip app, is currently valued at a whopping $100 billion. Beyond fame and fortune, Travis Kalanick and Brian Chesky helped rewrite the rules of entrepreneurial success.

Start-up companies also have experienced their fair share of backlash. Taxi companies in San Francisco, Washington D.C., New York City and Miami have previously filed lawsuits against Uber, claiming the service violates decades-old regulations outlawing unlicensed ride services.

Why the Backlash? 

The way Uber has defined itself is a subject of contention. But, so are the government regulations that define the taxi services industry, particularly the way they seem to discourage innovation. Let me explain.

Taxis are subject to a variety of government regulations designed to ensure a safe, consistent and fairly priced experience for drivers and riders. In exchange, taxi companies enjoy rules that strictly limit industry disruptors and guarantee consistent clientele. The downside? Competition is what spawns innovation.

Why do you think the stereotype of the outdated, garbage-strewn taxicab exists? Because there’s no incentive to improve customer service, invest in new technology or, God forbid, throw away trash—Payment is the same regardless of what your cab smells like.

Under this system, it makes sense that disruptive and successful technologies are shunned rather than embraced. Government regulation doesn’t just stifle innovation; it eliminates the need for it.

Our Take

Enforcing regulation that suppresses innovation rather than fostering it goes against the heart of economic prosperity. Although the rules in question were originally instated to protect workers, crippling creativity is too large a price to pay.

As our labor market shifts with technology and social media, our rules and regulations should follow suit. Failure to adapt at a national level bears economic and cultural consequences that will ripple through our nation.

What do you think of regulation in our sharing economy? Add your two cents in the comments below or join the discussion on Facebook.