permissionless innovation & the future of tech policy (mercatus center - nov 2014)

“Permissionless Innovation,” the Precautionary Principle & the Future of Emerging Technology

Adam ThiererSenior Research FellowMercatus Center at George Mason University

Last updated November 23, 2014

New Mercatus Book & Research

Permissionless Innovation: The Continuing Case for Comprehensive

Technological Freedom

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www.permissionlessinnovation.org

Outline of Discussion

1. The Digital Revolution… How That Happen?

2. Competing Policy Visions– “Permissionless Innovation” – the “Precautionary Principle”

3. Future Tech Policy Battles / Research Opportunities– driverless cars– the Internet of Things & “wearable” tech– private drones– other emerging tech issues to watch

4. Constructive Solutions– addressing concerns without derailing innovation

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Where Did All This Modern Info-Tech Innovation Come From?

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How Did All This

Happen So Quickly?

Question: How Did U.S. Become Global Tech Innovation Leader?

7Source: Booz & Company

• 9 of the top 10 most innovative global companies are based in U.S.

• Majority are involved in computing, software & digital technology

Question: How Many Major European Info-Tech

Innovators Can You Name?(Why so few?)

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How Did This US-EU Tech Imbalance Develop?

Source: Alberto Onetti, Mind the Bridge Foundation

Answer = “Permissionless Innovation”

• Permissionless innovation = the general freedom to experiment & learn through trial-and-error experimentation.

• The U.S. embraced this ethos & made it the basis of policy for the digital economy in the 1990s and beyond.

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Values Matter(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,” she has argued, “caused the Industrial Revolution, and then the modern world… The result was modern economic growth.”

• The Internet is the greatest proof ever of this!

In the old days, the Internet was “permissioned” (pre-1990s)

This warning to students appeared in a 1982 MIT handbook for the use of ARPAnet, the progenitor of what would become the Internet:

“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.”

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But once we opened up the Net, the digital revolution took off

• early 1990s: commercial opening of the Net• 1997: Clinton admin. adopted “light touch” approach with

the Framework for Global Electronic Commerce (1997)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.”

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The rest is history

• Permissionless innovation has driven the explosion of Internet entreprenuerialism over past 2 decades.

• Nobody needed a license or permission to launch the great technological innovations of the digital age.

• Meanwhile, Europe adopted opposite approach & floundered.

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

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But What about the Risks? (or, Why Some Still Favor “Precautionary

Principle” Policies)

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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

prescriptions & preemptive regulation– It is the antithesis of permissionless innovation

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Rationales for “precautionary” regulation

1. Safety • child safety, physical safety

2. Security

3. Privacy • reputation issues + fear of “profiling” & “discrimination”

4. Economic • automation & job dislocation concerns

5. Intellectual Property • copyright & patent enforcement

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.

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Specific problems with“permissioning” innovation

• less entreprenurialism / lost opportunities• diminished marketplace entry / rivalry• stagnant markets & potential cronyism• loss of int’l competitive advantage • higher prices• fewer choices for consumers

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

But again, what about those risks?!

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Constructive ways to respond to risk posed by technological innovations

Bottom-up approaches to new tech risks:• Education / etiquette / transparency• Empowerment tools• Social pressure / media pressure• Social norms• Resiliency & adaptation• Self-regulation & new competition / choices• Property rights & contracts• Common law, torts, products liability• other targeted & limited legal interventions

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Give adaptation a chance!

• Remember, we faced such challenges before & muddled through• Recall 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 got through it! We adjusted our societal norms and personal expectations to accommodate photography.

• Instead of rejecting cameras, we bought a lot of them! (But then learned how to use them respectfully, too.)

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The Precautionary Principle vs. Permissionless InnovationA Range of Responses to Technological Risk

ProhibitionCensorship

Info suppression Product bans

Anticipatory Regulation

Administrative mandatesRestrictive defaults Licensing & permitsIndustry guidance

Resiliency

Education & Media LiteracyLabeling / Transparency

User empowermentSelf-regulation

AdaptationExperience / Experiments

Learning / CopingSocial norms & pressure

Top-down Solutions

Bottom-up Solutions

Precautionary Principle

Permissionless Innovation

Future Fights

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Virtual Reality

Future Tech Flashpoints

3-D Printing

RoboticsSmart cars

Private dronesA.I.

Sharing Economy

CryptoBitcoin

Dark markets

Advanced Medicine

Medical DevicesBiohacking

EmbeddablesGenetic issues

Mobile medical appsTelemedicine

Internet of Things

Wearable TechSmart HomesSmart Cities

1. Safety • child safety, physical safety

2. Security • Cybersecurity, law enforcement issues

3. Privacy • reputation issues, fear of “profiling” & “discrimination”

4. Economic • automation & job dislocation concerns

5. Intellectual Property • copyright & patent enforcement

Recall the Concerns Driving Calls for Precautionary Tech Regulation

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Case Study #1:“Internet of Things” & Wearables

• The Promise: “Always-on” sensor devices that can collect data, track activities, and customize experiences to users’ needs and desires

• The Fear:– Privacy: How much data are they collecting /

sharing?– Security: What if all this stuff gets hacked?– Discrimination: Will these devices & services be

used to disadvantage users?

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The opportunities before us…

Addressing Concerns about IoT & Wearables

• Privacy & security best practices (“privacy by design”)• Education & tech etiquette efforts• Social pressure & social sanctions will play big role (current ex:

phones in theaters & locker rooms)• Common law adjudication via existing legal standards (privacy

torts, contracts, property rights) • Likely policy outcome

– FTC (Section 5) “unfair & deceptive practices” enforcement– Targeted data use restrictions for most serious concerns

• A certain amount of social adaptation will be required.

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Case Study #2: Intelligent Vehicles

• Autonomous cars on the way but legality remains unclear in some states

• The Promise: – Huge reduction in car accidents & deaths– Traffic reduction– Potential environmental benefits

• The Fear: – Will robot cars make smart decisions?– Who’s liable when accidents still happen?– Are driverless cars hackable?– What about privacy? How much info is collected?

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Addressing Concerns about Intelligent Cars

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• Privacy & security best practices by industry• Evolution of insurance & liability norms • Possible policy tweaks:

– Revised licensing procedures for “drivers”? – Liability changes? (likely common law will

handle)– Possible data use restrictions for privacy?

Case Study #3: Private Drones

• Currently illegal to operate a drone for profit– FAA must integrate commercial drones in US airspace by 2015– Regulations are under consideration now

• The Promise:– Countless beneficial applications (agriculture, environmental

monitoring, hazardous work, shipping, journalism, entertainment)

– Could be safer than cars for routine delivery tasks• The Fear:

– Safety (they’ll fall on our heads or run into stuff!)– Privacy (they monitor our every move)

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Addressing Concerns about Private Drones

• Common law adjudication– already federal, state, and local laws that

protect property rights & privacy (ex: “peeping Tom” laws)

• Possible policy tweaks:– Targeted FAA no-fly safety zones– Drone identification mandates?

• Again, be patient! Social adaptation likely.

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3 Other Big Disruptions to Watch

• 3-D printing• “Biohacking” / embeddables / ingestables• Genetic diagnostics (“23 & me” fight)• the “sharing economy” (or “collaborative

economy”)

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General Policy Lessons / Valuesto Help Promote Innovation

• Forbearance (or “First, Do No Harm”): Don’t jump to regulate new tech based on worst-case scenarios.

• Patience: Wait to see how individuals & institutions adapt.• Humility: Understand limits of knowledge & ability to

predict the future.• Restraint: Limit & target interventions after exhausting all

other options• Reevaluate (constantly): Conduct strict cost-benefit

analysis for all new proposals & periodically sunset old rules before they hinder future progress.

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Related Mercatus Center ResearchBooks, Papers & Filings

• Book: Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (Thierer)

• Paper: The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing

Innovation (Thierer)

• Paper: “Removing Roadblocks to Intelligent Vehicles and Driverless Cars” (Thierer & Hagemann)

• 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

(Thierer)

• Book: Bitcoin: A Primer for Policymakers (Brito)

Articles & Blog Posts

• Who Really Believes in “Permissionless Innovation”? (Thierer)

• “Permissionless Innovation” Offline as Well as On (Thierer)

• The Third Industrial Revolution Has Only Just Begun (Dourado)

• Mr. Bitcoin Goes to Washington (Brito)

• The Next Internet-Like Platform for Innovation? Airspace (Think Drones) (Dourado)

• Domestic Drones Are Coming Your Way (Brito)

• When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be Disappointed (Thierer)

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www.permissionlessinnovation.org