How Corruption Is Strangling U.S. Innovation (2012)
blogs.hbr.org
blogs.hbr.org
In the US, the arrow usually goes power -> money. People with power use it to enrich themselves, as this article demonstrates. The reverse almost never happens.
Much ballyhoo is made of "money in politics" and how terrible it is. But those who believe US companies can "buy legislation" are welcome to explain how (e.g.) Google, the second-largest corporation in the US by market cap, was not allowed to build a bridge by the Mountain View City Council (http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on...).
Nothing big. Nothing unethical. Just an ordinary twenty-foot bridge over a creek between two Google offices. Denied for unspecified "environmental reasons", even though the bridge would save thousands of miles of polluting car travel every day. Google offered to conduct an environmental impact review at their own expense, but even that was denied.
Local representatives look their constituents in the eye on a regular basis. State and federal members don't have the same reminder of who they work for.
One of the classic signs of a conspiracy theory is that it is not falsifiable: evidence to the contrary is actually evidence of the the theory!
> I would think that the 'money in politics' issue is less of an issue in regional/city politics than it is in state and federal.
Not at all, it's just that it's less money. How do you think the area where Google is got transformed from a rural-ish area full of farms and orchards into what it is today?
"Evidence" that could be evidence in either direction isn't useful evidence. :) The theory that they probably failed to pay some party (whether financially or some other form of power-kickback) was my first thought on reading the initial story. It seems to be as valid of a theory as any other without clear evidence pointing either way.
Is that what happened? I honestly have no idea, thus I have no idea whether this incident points towards more or less corruption.
The assertions raised absolutely are falsifiable. You just need to bring the proper data to do so.
The original assertion is that Google's failed bridge proposal is an example that money doesn't buy power.
But that begs the question of whether Google actually tried to buy the result they were looking for. If they didn't expend their money on this issue, it's not at all a counter-example against "money buys power". [1]
Further, one would have to reasonably show that even if Google did expend their money, that they outspent any would-be counter-parties.
So you can definitely falsify the assertion. You just need the proper data.
[1] Given the peripheral benefits of the proposal, it could quite likely be a reinforcing example. If one can't get even a good project through a political body without paying the right gatekeepers, it only reinforces the original charge.
Money buys power over time. It's not like you cut a check, "Ok, here's your corrupt deal sir". Think of the law as limestone and money as water -- it'll get where it wants to go, eventually, however circuitously it has to.
Well, actually, in truly corrupt places, that is exactly what you do. Perhaps in ways that are less traceable than a check, but yes, you pay people personally to do things in a fairly direct way. That or you intimidate them, like this boy who was held hostage for years, and then disolved in nitric acid in order to get his father to recant his testimony:
http://it.wikipedia.org/wiki/Omicidio_di_Giuseppe_Di_Matteo
That kind of thing happens in the US and elsewhere too, for sure. And I'm not saying money does not buy influence, but it's a different kind of thing. It'd be very difficult to completely level the playing field for those with and without money.
"Such a waste of talent. He chose money over power. In this town, a mistake nearly everyone makes. Money is the Mc-mansion in Sarasota that starts falling apart after 10 years. Power is the old stone building that stands for centuries. I cannot respect someone who doesn't see the difference." -- Frank Underwood / House of Cards US
It really isn't. Politicians fear scandals because the powerbase that they spend many long nights and hard years building can be undone in a heartbeat. "A week is a long time in politics".
Hate to break it to you, but it's the same in America (and most "western" countries). There are too many examples of corruption in our [American] government, in the last 6 months, to even list - from local traffic cams to the new F-35 fighter jet. And it's at all levels of government.
Don't kid yourself, America is not liberty, it's Negative Liberty. And money buys power. it always has.
Can anyone suggest a country, where there is relatively less corruption?
US is doing pretty OK, although not nearly the best.
I know it's near impossible to measure actual corruption, but other data points would be helpful.
It's the closest proxy we have though, especially given the subjective nature of corruption.
A single event doesn't certainly demonstrate anything; a disproportionate amount of "legislation purchasing" happened and is happening - and this is very factual.
If you have a look at what's happening in the sectors... well, all the sectors, but especially the financial, food and military ones, you would have a clear idea of which process are we in.
It demonstrates what is possible, not probable, and as long as we keep that in mind, there is nothing wrong with it. My life is string of single events, and I will refuse to believe it "doesn't demonstrate anything."
I don't doubt that any event is meaningful.
What I'm saying is that, in a certain context, a single event that highlights that "corporations have relatively little power", doesn't disprove many events highlighting that "corporations have plenty/excess of power".
But the important thing that money does is allow you to hire lobbyists. Congresspeople need to pass legislation on a wide variety of issues. As anybody who's ever heard their rep talk about the "intertubes" knows, our legislators aren't necessarily experts on everything. The executive branch gets around this by hiring experts, but somehow we've decided to steadily cut Congress's staffing budget for the last few dozen years.
But there are a class of people who are personable, who have been cultivating relationships with the right people for years, and who have persuasive sounding plans for legislature that could "Save America and benefit your constituents" who are perfectly happy to step up to help out. And if their advice isn't exactly impartial, well, I honestly worry a bit more about incompetence than venality so I won't say this is the worst possible thing. But I'd be very supportive of any motion to say, bring back to the Office of Technology Assessment[1] or such.
And many of the other things the article brings up are just standard Public Choice[2] problems. Taxi cab drivers will vote as a block to stop Uber, consumers will vote based on other issues. Dealership owners and employees vote for state legislators, Teslsa employees are mostly off in some other state and consumers have more important things to care about, etc.
[1]http://en.wikipedia.org/wiki/Office_of_Technology_Assessment
Source? That's really interesting - I would have expected it to have a much larger impact.
Maybe the denial had nothing to do with money. I've seen projects denied at the city level for lack of proper permits, zoning, insurance, studies, etc, etc. Even a bad presentation at a council meeting could derail a project (I've seen that too).
Compared to a company like ATT, Google spends peanuts on lobbying. In fact, the whole tech sector does, compared to the health sector, banking, or defense.
I, too, am alarmed by the changes in campaign funding we have seen in the last 20 years. The author applies his alarm narrowly to problems in his private equity portfolio. I do not share his alarm on that particular topic.
By and large, I prefer to live in a world with taxi and hotel regulation, even if it impairs the ability of some bay area millionaires to add to their fortunes. Not all regulation is a sign of regulatory capture. Not all lobbying is intrinsically bad. Not every improvement in efficiency improves outcomes for society.
Please enjoy them, then. The rest of us whose judgment is sufficient to choose our own taxis would appreciate if you kept the cops out of our private choices.
Or do you actually believe that all these regulations are going to prevent somebody from kidnapping people?
I sincerely doubt that.
I guess what I'm saying is judgement is contextual.
Technology changes, people change so regulations must change with it.
We should version control all laws and regulations and we should debug them when we see people taking advantage of them in unexpected ways.
Do not forget that Uber, TaxiMagic, etc. are still closed and managed environments -- they are simply more opaque, as a corporation is choosing the makeup of that market instead of a government entity.
Laws are already version controlled and debugged when necessary, where does that come from? Laws are amended and repealed all the time, in every level of legislation.
Plus the first one is a market place the second is just one taxi.
Hell I wouldn't mind if a government entity launched an app that did the same thing.
Now I'm not saying that the current regulation shouldn't get refreshed to consider what is currently available. But I'm amazed how people are just all or nothing about regulation.
You should want enough regulation so that a basic level of service is guaranteed. If that is not the case, it becomes too hard for customer to efficiently compare services. Like in this case, you should be able to compare taxi companies in less than a few minutes. If you need more than that, then chance are that you will stick with the reliable provider you know. Good competition happens when consumers are willing to try alternative.
His choice is to allow variety, competition, and customization so that more people get a chance to find the service that satisfies their needs.
I don't think anyone is saying to completely do away with all regulation in every instance - but have you seen the competitive barrier taxi regulation in most metro areas? It's specifically designed to prevent competition from those without massive resources. It's the stereotypical big guy keeping the little guy down with their million dollar medallions and special connections to lawmakers.
Taxi and hotel regulation IMO comes with a safety aspect which should, for example, protect lone or vulnerable travellers from harm (to a limited extent, of course, but some is better than none). Personally, I will accept a bit of restriction to my options in return for widely vetted service provision.
But aside, the problem is not in the individual problem theirselves.
The problem is that an excessive deregulation is a part of a large process of demolition of the human rights of the great majority of the population.
Paradoxically, such huge problem is difficult to notice, because it requires vision.
In a world where there would be an excess of human rights and slow economy, deregulation would be fine. In such world, I would agree to liberalize the taxing and housing.
We're on the opposite side, though. So keeping deregulating is going to make the disaster we're already in even worse.
Quick, tell me which ISP provides fiber to the home with unlimited bandwidth? Only 1, so far, and only in limited areas. If it was ONLY our judgement that determined the quality, then I would be all for it. Unfortunately, there's sometimes a race to the bottom. Regulations help, to a certain extent, to control that. I know I wouldn't want open heart surgery provided by the lowest bidder.
I don't have time to look up the answers because of work, but I'm genuinely curious if anyone knows. It seems like these are reasonable questions to ask, and could lead to a constructive conversation about the role and necessity of regulation.
Many things that keep you safe every day are due to regulation, not hindered by it.
The first question is, why should we care if the driver is liable? If the driver wants to share the liability with the employer; we have a system of enforced agreements for that, it's called contracts.
But regardless, that didn't answer my question. When someone is killed, there's a trial to judge who is responsible for the tragedy. If the judge/jury thinks that Uber is (in part) responsible, we don't need regulations to force them to pay. If they don't, why should they pay?
Regulations seem like a way to replace the justice system with blind rules.
Many things that keep you safe every day are due to regulation, not hindered by it.
Who says I want to be safe? Why do you need to force that decision on me?
I can understand that you and others want to be safe. But the solution is easy: you keep a program with all those checks and certifications and you provide a nice symbol that only those drivers can use on their cabs (everyone else would be prosecuted for fraud).
Then drivers can choose to take the certification, and people can easily choose if they want to only use certified taxi services or not.
I can see why you'd want licensing for taxi drivers (to help against customers getting ripped off or mugged), but what's the point of limiting the number of taxis (which is really one of the main points against taxi regulation)? I'm not sure it restricts the number of cars in the streets, if people who would otherwise take a cheap taxi now have to own a car instead. My point is there is such a thing as too much regulation.
> My point is there is such a thing as too much regulation.
However, I absolutely want smart regulation that gets out of the way where it isn't helping anyone and ensures that the services people want can be delivered.
That being said, I would prefer better public transit than more taxis, but that's just another side of the same many-sided die.
Taxis, like all other cars, clog up the roads with their inefficient size to passengers ratio, and pollute the air. Limiting the number of taxis can be a matter of maintaining a half way liveable city.
If there were plenty of cheap taxis in my town (Amsterdam) I would use them a lot, because I'm a big fat lazy motherfucker. Unfortunately, there are too many people like me, and our selfishness would be detrimental to the society around us.
(I'm typing this as it's pouring outside and I have to get to the office. I would love a cheap taxi right about now, but the world doesn't revolve around me.)
Pardon my idealistic views, but it would be better to curb demand for taxis with: a. cheaper, more consistently on-time public transportation b. safer bike routes c. casual carpool programs
The real question is why you rather take a taxi than your local public transportation.
Eh, probably because public transport would have to cost twice as much as a taxi to make it even half as comfortable? Not even counting that a taxi will take you door to door?
The previous poster is from Europe, I'm guessing that you're from North America. In which case your definition of an "appropriate response" to societal problems and market externalities is completely different.
Regulating in order to maximise the value to all of society is perfectly appropriate for Europeans.
taxis arose because public transportation doesn't always go where people want and is not as timely. Regulation is required for safety, it should not be used to curtail competition against entrenched interests
http://www.npr.org/blogs/money/2012/07/31/157477611/does-new...
Why, exactly?
Regulation prevents people getting profits by externalizing their costs onto others without their consent.
How many stay-at-home parents pay taxes on their income? Or would you be ok with AirBnB if payment mostly occurred through barter or a "gift economy?"
This is an important one. Because they always claim, that make the IP rights stronger does strengthen the innovators. The opposite is true!
You see it also in the patent system. When old (and stupid) patents hinder innovation (what happens all day today), than the patent system becomes the biggest hindrance to innovation.
The point is good: When it is better to "own" old IP than to make new one, the system is strangling innovation, nothing else.
This system is for the "owners" not for the "creators"!
There are a handful of true government buildings, and everything else is associations, thousands of them, things like american dental association, metal workers association, etc. There are so many associations there is an association of associations.
It is these people writing the laws. The congressmen don't even read them all before they sign them.
Why should we expect every member of congress to be an expert in dentistry? We shouldn't as that would be a waste of time. That is what the numerous associations/think tanks are there for. To guide legislators in their decisions.
Abuse exists, but that does not mean we should abolish the idea of it.
Step 2. rehash them together without a discussion of the individual issues at stake in each case, which can be quite different and complex.
Step 3. slap on a catchy title.
voila, your HBR article is ready!
These are billion dollar companies and their political problems are dam near mainstream news. How about this guy [0] who invented a needle that could cut down needle prick injuries by over 99% and cost the same as the regular accident prone needles in use but was blocked by medical monopolies with legal kickbacks.
[0] http://www.washingtonmonthly.com/features/2010/1007.blake.ht...
Lobbying is pretty much unavoidable. For more on the concept, and on why some groups can form a lobby, while others just can't get anything effective passed, there's 'The Logic of Collective Action' from Olsen, 1965. It talks a lot about unions, but the argument is the same for groups that represent companies.
One of the most insightful things I read about health-care reform in the U.S. was this: a lot of people on the left would have preferred a single-payer system to what was actually enacted, but that really wouldn't have been feasible in the U.S. The reason single-payer is successful in keeping costs down is that the government sets prices. There's a committee of experts somewhere that sets prices of drugs, procedures etc, and periodically adjusts them based on technological advances, market conditions etc. This couldn't work in the U.S. because the pricing body would be subject to intense lobbying by medical suppliers, and would quickly reflect their interest in keeping prices high, rather than the public interest in lower prices. (I wish I had a citation, sorry.)
So does that mean single-payer medical systems are impossible? No, of course not. It works fine the U.K., Canada and Taiwan to name a few. In those countries, the kind of lobbying that dominates politics in the U.S. is simply illegal.
At the same time, not all special-interest lobbying is harmful. Consider the case of wheel-chair users. They represent a tiny fraction of the citizenry, but they benefit greatly from a law that requires public buildings have wheel-chair access ramps. That would saddle the majority with a small cost, but the public doesn't care either way. So the wheel-chair lobby has to put effort into getting the law passed, and it's a good thing if it succeeds!
So, yes, this is a general problem that has no solution. But that doesn't mean that corruption on the scale and scope that exists in the U.S. is inevitable, or that it's not really hurting U.S. democracy. It is.
Secondly, a semantic point, it talks about 'disruptive innovations', but surely the key characteristics of disruptive innovations, at least in the sense that Christensen described them, is that incumbents either don't see the value in them or else the product targets a segment with a low-performance product that incumbents don't see the threat of.
Tesla and Uber don't seem to fit this bill for me, they seem more like maybe sustaining and radical innovations, respectively, and I don't think existing value networks will be affected. They seem like they're just segmenting and differentiating to me. I can't see everybody driving around in Tesla-type cars bought in manufacturer-owned dealerships in 20 years, say, because as the article says itself, it only suits "innovative manufacturers like Tesla and Fisker that only have a very few number of models and who want to locate in high-traffic areas".
I don't think it's disruptive.
Yes. What is wrong is that the government shouldn't be helpping them.
Also, in some jurisdictions we had to have a paper copy of each card sold to match what was in the bingo machine.
Thus, the paper market would never, ever die. So-much-so that the electronic company we were, invested in a printing press.
In every example, they cite over regulated industries where the biggest players are using those regulations as a means to stifle innovation.
Why can't airbnb just collect and pay the taxes?
Why can't uber properly license the drivers?
"Regular dealerships" are a horrendous waste of resources. It's a business structure that made sense 50 years ago and makes very little sense today. Tesla doesn't need regular dealerships, so you're asking why they shouldn't be forced to waste money buying land and buildings and hiring people that could all be doing something MORE useful, just in order to make their company look more like the rest of the industry they're trying to disrupt.
It's like asking "Why can't Apple just use Windows on its computers like everybody else does?" Or "Why can't Walmart just set up tiny little stores that sell a few things - why do they have to make these huge box stores that sell everything?"
I like being able to take my car to the place I bought it to be fixed.
I like that I do not have to try and convince some sales guy to come take a look at my car.
I like the fact that I can touch, get in, kick, and drive the car I buy before I but it.
There's no particular reason why we should expect the best firm at selling cars would be the best firm at fixing them. If there's a market demand for a network of company-owned garages, companies will supply that. If there's a market demand for a way to try out the car first, companies will provide that service too. But there's no reason either of these needs to be legally tied into how you have to buy the car. Me, I'd like the option to buy my car just the way I'd buy a computer. Go to the manufacturer's site online, spec it out, make the purchase online, and have the car delivered to my door or someplace nearby that I can pick it up when it's ready.
If you're not aware, the copyright period has been extended several times up to the point of ridiculousness based mostly on Disney's lobbying.
Patents are a massive problem in tech, but copyright is a problem for innovators in the arts - especially authors.
The insult at the end is entirely unneeded. Hell, I wouldn't be surprised if a child saw the issues presented more clearly for not having had to deal with reality nearly so often.