Mandates kill innovation
It feels almost impossible to comprehend the advances in innovation and technology that have occurred over the last three decades. The pace of change is exploding, as demonstrated by the dot-com boom, the miniaturization of computers, advances in wireless technology, and most recently innovations in artificial intelligence; it is hard to keep up. If consumers struggle to adjust to the pace of the technological revolution, how can legislators and regulators possibly react and address policy issues in a meaningful way without impairing future growth and innovation?
Before we tackle that question, it’s worth reviewing several different examples over the last few years where the government pursued policies that could or will seriously impair the innovation economy.
This past May, Congress introduced a bipartisan and bicameral bill to mandate AM antennas in electric vehicles. But clinging to outdated technologies even as technology evolves may not be the best path forward. While some senators have argued that “AM radio is … an essential communications channel for emergency alerts and for disseminating news,” the industry has pointed out the Federal Communications Commission’s Wireless Emergency Alert system easily replaces the necessity of AM radio and works even when a phone cannot connect to a cellular network. More importantly, very few models of vehicles are even removing AM radios.
On the other side of the Atlantic Ocean, at the end of last year, the European Union announced a new rule mandating that all electronic devices use the USB-C format. USB was designed to be the one port to rule them all. The goal of the USB-C standard was for all devices to be able to use and share the same charging cables.
While having a universal standard and AM radio seems sensible, government mandates compelling technologies do not. In time USB-C may become redundant and AM radio may not be used, but the law will remain and companies could be shackled to old technology as a result.
This is not the first time that governments have sought to mandate technologies that either are obsolete or likely to become obsolete in the future. In fact, there are two relatively recent examples that demonstrate how mandates could have blocked innovation.
Floppy disks once were the best way to bring files from one computer to another, but today one would be lucky to find a laptop with a disk drive, let alone a tray for a floppy disk that holds only 1.5 megabytes (MB) of data. Imagine what our devices would look like if Congress decided to mandate the use of floppy disks in computers. Instead, technology evolved far beyond the need for limited floppy disks and today we have data centers that can hold more storage than we would ever need and phones in our pockets that can hold 250,000 times or more as much data as the original floppy (1.2 megabytes compared to up to one terabyte).
More recently, Apple has surprised consumers on several occasions by removing disk drives from computers, then shortly thereafter removing the headphone jack from iPhones. Despite some objections from users, these actions were evolutionary. Software was becoming increasingly digital, and Bluetooth headphones were eclipsing their wired counterparts. The space saved has helped Apple innovate to build smaller, faster and more powerful devices, maximizing the space that these ports and drives previously occupied. Had the government stepped in to mandate various functions on these products we may not have seen as many advances in technology over the last few years.
Policymakers should not impose any law or regulation that mandates a specific technology. Innovation far exceeds the pace of rulemaking or legislating, and policymakers shouldn’t try to compete. Any action taken to address innovation should be flexible enough to support an environment that spurs innovation and encourages new, faster and better technology. Any of the examples given would not have happened but for permissionless innovation. When Congress has allowed technological trends to advance it has spurred innovation. In contrast, heavy-handed government intervention has kept us from seeing our dreams realized with innovations like drone delivery and flying cars.
The speed of innovation continues to accelerate and once ubiquitous technologies now seem arcane. If legislators and regulators continue to hang on to antiquated rules and laws, we could miss out on important and groundbreaking innovation. Lawmakers and regulators must look forward instead of backward to ensure that the laws and regulations they create or enforce help foster innovation. Governments should not be in the business of picking winners and losers in technology or attempting to dictate the direction of innovation. Our society has moved on from outdated technology such as VHS, Betamax and CDs. As these technologies have become obsolete, it’s time for the policy landscape to look to the future.