My Biggest Surprise: How Law Shapes the Business Landscape, and a Patent Puzzle
daniellefong.com
daniellefong.com
Big companies are smarter than gov't regulators, they understand their business better, and they have a longer time horizon. So when the government comes around to regulate them, they think "OK, how can we turn this into a huge barrier to entry for new competitors?" They have large lobbyist and strategy budgets. They generally win.
The most misregulated industries in the US are energy, medical, and transportation. So there are lots of glaring inefficiencies, but they are there for a reason. Technologists assume the reason is stupidity and that clever inventions can fix things. Frustration ensues.
For your energy storage system, I suggest you target large energy consumers like manufacturing plants. Big ones have access to spot markets. Give them a system to store energy when it's cheap and deliver it to the machines during the daytime. If you can show <5 year ROI, you'll be able to sell it.
Regulatory oversight is certainly not perfect, or ideal, or even completely beneficial to anyone involved. Unfortunately, it is a necessary evil in any market with a combination of a large enough cost of entry and a captive market in which the majority of customers can't simply opt-out altogether.
Medical insurance is a topical example that immediately comes to mind. Ten people with some resources can't start an innovative new medical insurance company; the costs are just too great. As a result, existing insurance companies have no incentive to compete in terms of price or services, and because a large enough number of people (and businesses) simply have to have insurance, they don't have to worry about their market shrinking too much.
The flap over gas prices a year ago would be another example, and before that, there was California's energy deregulation that resulted in serious problems just a few years ago.
I think that medical insurance here in the USA is particularly bad. Nationalization is also bad, but relatively superior, I think, lowering costs for everyone and improving care in the final analysis. Medical care, and insurance in particular, could be orders of magnitude better, but only if customers actually care about medical insurance. It's not exactly a treasured consumer choice. If health insurance and medical care were rolled in together, and marketed as being about healthy lifestyle choice, then you could get people to take notice. Kaiser Permanente accomplishes some of these goals, but is rather monolithic, and doesn't go far enough.
I've thought about trying to fix health insurance too. Another dramatically huge problem with huge barriers to entry. But maybe there could be a Yelp of health insurance that I could get people to care about. It was one of the 'alternative ideas' I had for that particular YC interview. Telling the partners raised the predictable eyebrows!
Yes. People who go to law school, if the law school is any good, learn about "freedom of contract" and how much that has to do with the business environment in a country. Most of the examples in this blog post are examples of regulatory restrictions on freedom of contract, and those restrictions are indeed what shape the business environment even more than natural resource disparities among countries or other things that members of the general public suppose make one country or another thrive.
"...you’d spend most of your time dealing with legal and regulatory crap. That sort of work doesn’t really take advantage of your skills.”
The truth is, when someone figures out how to work the regulatory environment in favor of their business, they'll have a defensible competitive advantage. Accomplishing that requires a skill that is usually not found in technology people, and explains why lobbyists and lawyers make a lot of money.
That was really amazing and I learned a lot. A thought on presentation - I've got a longer attention span and more endurance than the average blog reader, I am rather completely fascinated by this topic and it's directly relevant to me, and yet I had a hard time getting through that entire post in one sitting.
It required an awful lot of thinking on one unified theme (how law shapes the business landscape), but all the examples were stand alone and thought provoking in and of themselves. I wonder if a three part series might not get more readers reading all the points, more exposure, and more knowledge spread. But that's a presentation point only, cheers for the very fascinating, incredibly well researched and presented piece. The regulation tying profits to return on capital and inability to store surplus power strikes me as particularly crazy.
No. Please do not split up essays like this one to benefit the ever-disappearing attention span of the average reader. There's an important difference between something being as long as it needs to be, and something being long for the sake of filling space.
The presentation on this was just fine.
I'll put some effort in the future to distilling the argument and contracting the post. For now, at least it's available.
In any case, it was really interesting.
It is possible to use regulation to create more efficient markets (such as the UK broadband market - where the distortions caused by the last-mile problem are regulated, enabling smaller players to be competitive) but I think it's only possible because people are more accepting and expectant of government intervention.
If you are willing to let the government do more, they can step in and make as many changes as they need to allow a market to function; if you are really opposed to any sort of government interference then you will only let them do the absolute minimum even if a tiny bit more intervention would make a big difference.
The flip side is that we might be more susceptible to over-regulation. CAP is a good example - although US agricultural subsidies aren't much better.
I'm always incredibly skeptical of the, "A little of this is going rather poorly, what we need is more of it" argument.
Actually, I've been thinking about this quite a lot lately - I've been in Taiwan and Thailand the last two months, and there's a wonderful culture of street food here. You can buy roasted peanuts or get some noodles or meat or vegetables stir-fried from a cart on the street.
We don't have this in the United States because of regulation - one particular regulation in California says you need to have a sink to wash your hands in order to sell food. Thus, no street vendors unless they have a portable sink (really, I asked a farmer's market person on this - you need a portable sink in a van to run a street market).
Now, on the surface, this is an imminently sensible regulation. Who wants to have food by someone who didn't wash their hands? But that's just the thing - I do! The food is good, the vendor would be happy to sell it, I'm happy to buy it, and I darn well know the guy with the cart doesn't have the highest health standards and I make my own choices. Some street food is not up to my standards, some is.
Regulation prohibits me from making that adult decision for myself, so I'm forced into higher priced food of similar quality, or going to Taco Bell instead of getting some stir fried chicken, vegetables, and noodles.
I imagine at least one-third of regulations make sense on some level and do at least as much good as harm, but it's a little like censorship to me. It's a door you don't want to open if possible, despite the fact that there is rather nasty stuff you'd rather suppress. You'd rather suppress the bad stuff, it's probably objectively good to suppress the bad stuff, but you're always going to wind up with well-intentioned-yet-misguided people going too far. Hence, we're unable to buy street food due to the seemingly sensible regulation that no one can buy food from someone unless that person has a sink.
While that sounds good and well, how do you make that choice? What are the input data that you have that makes it possible for you to make an informed choice about this?
I suspect you can't. You just have the illusion of an informed choice, because you have no idea of knowing whether someone's food is full of salmonella or E Coli until after the fact, when you get sick.
The key question is why these regulations exist. If it's because there is a significant chance of someone dying, I see nothing wrong with it. But the key is that there needs to be some dispassionate assessment of objective risk. Since at least the US population seems to be extremely risk-averse in some ways (e.g. terrorism, child abductions) but happily accepts a vastly higher risk in other situations (e.g. driving a car) the key is to not be swayed by emotions.
Which was exactly the kind of distaste for regulation I was talking about!
How about comparing your interstate highway system (total government intervention and pretty good) to the railway network (just enough interference to make running a railway difficult without actually helping)? I'm sure there are other examples.
Regulation of infrastructure which can be built once and then shared in an efficient manner is very different from regulation of service provision.
I think that you've got the causality backwards - the distaste comes from experience.
> If you are willing to let the government do more, they can step in and make as many changes as they need to allow a market to function
Or, they can step in and screw things up.
It's unreasonable for Americans to assume that regulation will become more effective if we stop resisting it. Instead, it's up to those who favor more regulation in the US to make US regulation work so they can point to successes instead of whining "but Europeans can do it".
BTW - I don't think that you understand the scale of the US, how much larger our federal govt is. Ohio, a fairly middling state, is comparable in population to Finland. California has over 36 million people, and it's just over 10% of the total.
The EU has 170% of the population of the US. Both together have less people than India.
All together I would say that Europe has more government than the US (which is not necessarily a good thing) because of the duplication of function between the member states as well as the central bureaucracy.
Yes, but the EU govt hasn't ramped up to anywhere near the scope of the US govt.
> Both together have less people than India.
Yup, and its national govt is fairly limited. (It's growing, but the amount of money that it controls is fairly small by US standards.)
I designed a software program to detect skin cancer a few years ago. At the time, there were probably already a dozen such skin cancer pattern recognition programs/systems for sale. Almost all of them are/were significantly more accurate at detecting melanomas than dermatologists. I was mainly just trying to improve the accuracy of the existing software a tiny bit and to improve my programming skills. I didn't work on the hardware side of the equation at all. I didn't expect to make any money or to achieve much...I'm not too sharp as far as algorithms go and I usually coast by on marketing and domain knowledge. But, miraculously, I did eventually achieve my accuracy/consistency goals. I was unbelievably excited. I formed a small company to handle the IP for all my medical software experiments - including the skin cancer software - and I set about marketing the software to medical companies with dollar signs in my eyes. And it was one of the few times I DIDN'T run into crazy patent issues. I eventually sold the company to one of the largest engineering conglomerates in the world (to their medical division, specifically) so that I wouldn't have to deal with the regulatory crap. Being greedy, I worked out a royalty scheme on the skin cancer software in exchange for a smaller company sale price.
SERENDIPITOUS SIDE STORY: I was working on the software one day while my wife was getting ready to go to an amusement park, and I noticed she had a mole that reminded me of one of my cancer training slides. I asked her to get it biopsied. She put it off for a week or two, but I kept nagging her that I didn't like the looks of it. She went to her GP, and they told her it was fine and not to worry about it. I was pissed off, and asked her to go to a dermatologist to have it looked at. She went to a dermatologist...and was again told that it was fine and not to worry about it. I demanded she have it biopsied...to ease my mind. My wife works at the same hospital with these physicians, and she didn't want to rock the boat...but I'm very annoying when I get stuck on something. So, my wife finally had it biopsied. It comes back as a particularly nasty melanoma. She ends up having several large excisions and her lymph nodes biopsied. They eventually completely removed her axillary lymph nodes on one side (which caused some other problems), but she was extremely lucky overall. She had PET scans and other monitoring for a bit. Then they said she is completely cancer-free. They do exams every other month for her now, because she is pregnant - and pregnancy increases melanin production. Melanoma also has a large genetic component, which I didn't really know about until all of this happened. Her uncle died of the same type of melanoma yesterday. And they had told him HE was completely cancer-free about 10 months ago. This shit can keep you up at night.
My plans to move to a tropical paradise have been derailed, unfortunately, but my wife is still cancer-free.
So...in the few years since the sale I've made exactly $0 in skin cancer software royalties. It turns out the huge conglomerate bought my company for the insurance/billing stuff we had designed, not the skin cancer software. They have been largely unsuccessful in selling complete skin cancer detection systems that they already own, and don't intend to do much in that area for the foreseeable future. Most dermatologists simply don't want the software/devices, for starters.
If you have the time, I'd really like to chat some more about your experiences and your work. My friend, Adam Stein, who once worked for the FDA that I mentioned is looking for a cofounder in this area, and says that he's learned the ropes to deal with the regulatory issues.
As for the side story involving your wife, again, wow. I hear too many stories like this. Medical experts simply don't have a big enough stake in your health to be counted upon. Health is something you have to take in your own hands. I am so glad that you did.
1.) Some John Edwards ambulance chaser type finds patients who had skin cancer which was not found by the detector. He finds a doctor to say "if they came to see me, I would have spotted it."
2.) The FDA doesn't care about the disclaimer and calls it a medical device. Then you need a doctor's permission to use it.
3.) It isn't a medical device, but the FDA persuades congress to rewrite the law slightly to make it into a medical device.
Incidentally, I'm pretty sure 2 will apply, since that's the same system which applies to other medical imaging devices.
Why did you mention John Edwards there? Did it really make what you were saying more clear? Or was it just a great opportunity to get in a political dig?
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In Artificial Intelligence, and particularly in the domain of nonmonotonic reasoning, there's a standard problem: "All Quakers are pacifists. All Republicans are not pacifists. Nixon is a Quaker and a Republican. Is Nixon a pacifist?"
What on Earth was the point of choosing this as an example? To rouse the political emotions of the readers and distract them from the main question? To make Republicans feel unwelcome in courses on Artificial Intelligence and discourage them from entering the field?
"""
However, your comment has convinced that it probably would have been better not to personify at all, since it wasn't strictly necessary and is distracting.
Yes. Skin cancer exists all over the world, at varying rates due to complexion/sun exposure/protection habits, etc.
Australia actually has the highest skin cancer rates in the world (with the hole in the ozone being a major reason.)