Realizing the Potential of Disruptive Technologies
Electric scooters dominate the streets of our cities, used for nearly 40 million trips across the country just last year alone. Bitcoin and other cryptocurrencies continue to emerge as formidable alternatives to cash and credit, with companies like Square boasting nearly $125 million in sales. And autonomous cars are making their debut as soon as this month in New York City and California.
These are just a few examples of how disruptive technologies are reaching into all corners of society and reshaping contemporary life; from how we pay for goods and services to how we commute and engage with co-workers and peers from across the globe.
Yet, as disruptive technologies continue to make headlines, they also prompt the need for specialized regulations that protect people and preserve existing infrastructure. This leaves many local and state governments with a daunting challenge: how to reconcile seemingly competing impulses of safety with innovation.
Cities across the nation have banned scooters, citing rises in accidents and fears of fatalities. U.S. Department of the Treasury officials, in the wake of Facebook’s Libra, have recently argued that cryptocurrencies represent threats to national security. And widespread distrust in autonomous cars has driven automakers to halt the once-breakneck pace of development for this technology.
Rather than propel innovators to work to improve these new technologies, history tells us that stringent regulatory legislation or even outright bans have, more often than not, caused innovators to abandon them. In 1865, for example, the British Parliament responded to the advent of steam-powered vehicles — and the fear that they would endanger other users of public roadways — with a law requiring that such vehicles be preceded by a pedestrian waving a red flag as a warning signal. Unsurprisingly, this law discouraged further development of “horseless carriages” in Britain, effectively smothering a nascent industry and creating opportunity for more forward-looking nations. Just 15 years later, the first internal-combustion vehicles were introduced in Germany.
In the face of rapid change, experimentation, and the “failing forward” that defines the current era of disruptive innovation, regulators struggle to keep pace because they continue to adopt a reactive posture, developing rules in response to new technologies on a fixed timeline. Such a standpoint, though, fails to account for the rapid cycles of iterative development that innovations will undergo. And so, to catch up, regulators are often tempted to implement bans or strict precautionary regulations that stifle new technologies from achieving their potentially transformative potential.
In turn, the United States runs the same risk of falling behind other nations at the forefront of this technological revolution.
However, history also illustrates that when regulators strike that right balance in their policies and guidelines, they can encourage innovators and businesses to improve their technologies in ways that reflect needed protections. While federal anti-pollution laws enacted in the late 1970s didn’t ban gasoline-powered automobiles, they did require automakers to reduce emissions to a certain level. Although General Motors initially resisted the new legislation, GM eventually turned to scientists at Corning Incorporated to develop the materials essential for catalytic converters, which made those necessary reductions in emissions possible.
By taking a more adaptive approach to regulation, characterized by a similar cycle of trial and error for the very technologies that they are monitoring, regulators can more effectively respond to new developments, jettison rules that no longer work well, and quickly implement new, more effective policies.
Regulatory spaces, sometimes referred to as “sandboxes,” are emerging as promising incubators for adaptive regulations, encouraging innovators to develop safer or better technology through waivers, close partnerships across sectors, and testing opportunities with small cohorts of customers. These spaces not only allow for technological improvements, but enable the collaborative creation of regulations that benefit both businesses and society. The United Kingdom, for instance, has already put this vision into practice for two dozen companies at the forefront of financial technology — and other countries have followed suit.
Why not extend the same approach to autonomous cars, scooters, and other emerging technologies ranging from 5G to artificial intelligence? We can encourage rapid prototyping and real-time monitoring that surfaces necessary adjustments in the interest of safety and aligned regulations — and all in a low-stakes testing environment.
As we step over yet another electric scooter splayed across the sidewalk or read about problems with another form of cryptocurrency, we should not just gripe about the inconvenience, danger or aesthetic demerits of the technology — or call for the technology to be banned outright.
Instead, let’s facilitate conversations between government officials and private companies to regulate them better. Let’s structure opportunities for innovators and entrepreneurs to pilot their products under close oversight and consultation. If we want these companies to behave better, and technologies to be safer, let’s create a framework that balances their interests with those of the public.