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Law & Public Policy Thought Leader Uncategorized

The disruptive caucus: parties must choose innovators over incumbents

By Eric Tanenblatt, leader of the Public Policy and Regulation practice, Dentons

Eric Tanenblatt, leader of the Public Policy and Regulation practice, Dentons

Eric Tanenblatt, leader of the Public Policy and Regulation practice, Dentons

Every so often, a seemingly fringe product or service will fundamentally reshape the market’s landscape by displacing slow-moving, risk-averse incumbents.

That’s the new normal of business, but too often those in government work to artificially stifle this process by protecting a legacy structure.

Here in Georgia we have no short supply of good old boy-types and politicians eager to insulate them from the challenges of disruptive innovation. That’s a problem, both for commerce and for public policy.

Increasingly, this is the new local partisan divide: not simply left or right, progressive or conservative, but eagerness or resistance to embrace disruptive innovation even when it threatens the entrenched class.

In the same way that consumers demand transparency and immediacy in transactions, so to do voters deserve the same in matters of public policy. And while neither party has proven particularly eager to embrace disruptors, the opportunity exists in the current legislative session at least to reach for the mantle.

It’s the natural tendency of policy makers to favor the incumbent over the disruptive challenger (and it’s no secret why), but that’s not to say this inclination is a healthy function of our legislative process.

Indeed, the status quo, in business as government, needs the occasional reshuffling. Yet too frequently do those in government intercede to slow or even reverse market-driven realignments.

In jurisdictions across the country, the old guard has marshaled the political class to combat disruptive market challengers. Those challenged differ from one another—taxi cabs, hotels, private lenders, retailers—but the threat and the response are just the same: leverage friends in government to make business difficult on disruptors.

Now, it’s not true that government always intervenes — and in these instances of laissez-faire management, the market tends to correct itself in a manner that benefits consumers.

It wasn’t long ago that Amazon posed an existential threat to major big box retailers like Walmart and BestBuy, but now these retailers have developed robust digital presences that mirror that of Amazon’s. That’s the natural order of the American system; at least it should be.

Government’s inclination to snuff out innovation when it threatens incumbents is a cancer on our body politic that must excised. The new sharing economy, an expansive market built on the principal of collaborative consumption, has swelled in spite of this tendency. But if left unchecked, this cancer will metastasize and we might not know the next Uber or Airbnb.

Consider the case of Uber and Lyft, ridesharing services whose value proposition to consumers is so self-evident that incumbent taxi cab commissions have pulled out all the regulatory stops to slow the growth of their business. Very often, compliant office holders or beuracrats have done their bidding.

Their story is no different in practice from the challenges faced by home-sharing clearinghouse Airbnb, which stung hoteliers; it’s no different from the challenges faced by electric car maker Tesla, which stung the powerful dealership lobby when it moved to sell direct to consumers; and it’s no different from the challenges faced by peer-to-peer personal lender LendingClub.

Their stories are no different because the dynamic is true in every disruptor-incumbent market struggle.

There’s a tremendous opportunity for either party to reach for the mantle of innovation. Just as innovative disruptors have jolted old markets into activity by offering consumers new and expanded choice, so too much our elected officials remember that voters might someday find new choices too.

It’s time for government to stop stifling the new economy. If incumbent businesses cannot compete with innovator disrupters, there’s a reason – and if our policy makers don’t understand why then perhaps it’s time they be displaced, too.

1 Comment

  1. Jim balloun February 16, 2016 5:39 pm

    Excellent and insightful Eric. Charter schools and user fee transportation are two examples, both of which will benefit consumers but disrupt power structuresReport

    Reply

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