“Permissionless Innovation” & the Grand Tech Policy Clash of Visions to Come

Adam ThiererSenior Research FellowMercatus Center at George Mason University

June 6, 2014

Outline of Discussion

1. The Digital Revolution… How’d It Happen?

2. Competing Policy Visions: “Permissionless innovation” vs. the “precautionary principle”

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

4. Principles to Foster Innovation

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New Mercatus

Book

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www.permissionlessinnovation.org

Where Did All This Modern 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?

6Source: Booz & Company

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

• 7 of the 10 are involved in computing, software & digital technology

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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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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

• Again, before early 1990s, online innovation & commercial activity wasn’t even allowed.

• But the commercial opening of the Net changed all that. 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.

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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.

– this “better to be safe than sorry” mentality – “Mother, May I” (“permissioned”) policy prescriptions &

preemptive regulation– It is the opposite of permissionless innovation

• Rationales for “precautionary” regulation– safety– security– privacy– economic (automation & job dislocation concerns)– IP

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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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But hey, seriously, what about those risks?!

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Better way to respond to risk posed by technological innovations

Bottom-up approaches to new tech risks:• Education / etiquette• Empowerment • Social pressure / media pressure• New social norms• Resiliency & adaptation• Self-regulation & new competition / choices• Torts, property rights, contracts • other targeted & limited legal interventions

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Give adaptation a chance!

• Remember, 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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Future Tech Flashpoints

Internet of Things• Wearable Tech• Smart Homes• Smart Cities

Health Issues• Medical Devices

• Biohacking• Embeddables• Genetic issues

• Mobile medical apps• Telemedicine

3-D Printing

Robotics• Smart cars

• Private drones• A.I.

Concerns Driving Calls for Precautionary Tech Regulation

• Privacy• Safety• Security• Economic disruption• Intellectual Property

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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”• Genetic diagnostics (“23 & me” fight)

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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)

• Mercatus filing to FAA on Unmanned Aircraft System Test Site Program

• Mercatus filing to FTC on Privacy and Security Implications of the Internet of Things

• Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle

(Thierer)

• 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