104. What Is Permissionless Innovation?

With all the rules governments make today, it’s becoming extremely hard for innovators and entrepreneurs to do what they do best. But what if we stopped asking for permission and instead, practiced something economists call “permissionless innovation?”

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Links:

• Permissionless Innovation
• Hack Your Pancreas and 3D-Print Your Smile
• Lyft driver in Utah cited $6,500 for providing a service

Here’s a transcript of our conversation:

Brittany: Hi Connor.

Connor: Hey, Brittany.

Brittany: So I get a little overwhelmed in a good way when I think about just all the technological innovations that we’re enjoying today from smartphones to, there’s like delivery drones now. I mean, there’s just so much to get excited about. But with so many innovations we enjoyed today, it happened because people like entrepreneurs, they took risks and they created value, but they didn’t do it without asking permission, right? Because there’s so many laws on our books today that these people just innovated. They didn’t ask the government first, they just did it. Our friends at Mercatus, which is a great organization, if you wanna learn more about economic policy, they call this permissionless innovation, which is one of my favorite words. Of course, permissionless would mean without permission, right? And innovation, of course, we know what that means. So I thought that could be a really fun discussion for today, and I kind of wanted to open it up with a quote from Ayn Rand who we’ve talked about in previous episodes. But she has a quote that is one of my favorites, and it kind of sums up what this hill principle means. And it’s, the question isn’t who’s going to let me, it’s who is going to stop me? And I’ve always loved that. So Connor, what do you think about this quote and this whole concept of permissionless inter-innovation?

Connor: You know, we’ve talked in the past about civil disobedience, and this kind of reminds me a little bit of that, especially the Ayn Rand quote you shared. Yeah. Just someone who is gonna stand up for what they think is right or what will help other people, a business they want to create and say, you know, you may not want me to do this. There are competitors who may not want me to do this, but I’m gonna do it. Who’s gonna stop me? Yep. And, there’s actually a book called Permissionless Innovation. This is more for the parents. And it was written by a gentleman from Mercatus, that you mentioned named Adam Tier. And, he even calls, so he calls permissionless innovation, he calls it technological civil disobedience. I like that. And the issue is, you know, there’s so many laws on the books today. I mean, I remember we did this video once for Libertas Institute, and it was a fundraising video. We were trying to help people understand why our work is so important. And we did some research and just in our state, Utah, I mean, it’s probably similar or frankly even worse in other states, but in our state of Utah, we looked up how many regulations there are. It’s called the administrative code. It’s the, you know, we talked about the legislative branch and the judicial branch, and then we talked about the executive branch, right? At the federal level, it’s the president and then all the people and all the departments, right? All the bureaucrats who go around and kind of implement all the laws and issue fines and, you know, audit you and things like this. And in the state, it’s the same thing. There are executive branches at the state level, right? It’s the governor, and then it’s the Department of Health and the Department of Justice and the Department of Business or whatever. And so we did the research in our state and we looked up how many regulations there are just from the executive branch, all these bureaucrats saying, you can do this, you can’t do that. Here’s what’s gonna happen if you, you know, blah, blah, blah, blah, blah. It was, I think it was like 10,000 pages or something.

Brittany: Oh My goodness.

Connor: So we went out and we bought reams of paper. We didn’t actually print the administrative code from online, but we wanted to kind of simulate what the equivalent amount of paper looks like. And so we stacked it all up, and it was taller than me. like, if you print all those regulations, it was taller than me. And so surely somewhere in those regulations, there’s gonna be something that a business owner and entrepreneur is gonna run up against, right? Like someone wants to create a new technology, or they wanna create a new, you know, business model completely like a new industry or whatever, and they’re gonna, you know, break a law and not get the government’s permission. And so when I think of like entrepreneurs and innovators, you know, I think of that technological civil disobedience, that there are people out there who I think rightly so, aren’t going out and kind of asking for permission, kissing the ring. You know, mother may I, they’re just gonna go out and try and serve people. And if there are certain regulations they’re gonna run into, then, you know, the, maybe they’ll just deal with the consequences, right?

Brittany: Yeah. And I don’t think, I mean, to be honest with you, I think if we did ask permission, we wouldn’t have any of the things we have today, or at least, you know, a fewer of them. I think specifically of Uber. I don’t know. I know you live in a city where you probably drive more. I don’t drive, and I’m in a bigger city, so I use Uber a lot, not just to get from one place to another, but I have like an Uber Eats problem. So I have food delivered to me. I don’t even wanna tell you, but it’s sometimes it’s more than four days a week. So, I’m using these services a lot. And I mean, in addition to just helping me, these, you know, Uber has given people safe rides. it tracks you so they know where you are. You can even share your location with someone. you know drunk drivers stay off the road. So we’re safer as other drivers, even pedestrians. But we saw what happened with the taxi companies and the, like the cab unions when Uber came about, right? They were trying everything to stop Uber, but they kind of couldn’t because Uber already existed, right? The market had already spoken. People were already such fans that even petitioning the government couldn’t get rid of Uber entirely. Now, they could put more regulations on it, but they couldn’t get it away. Cuz again, the market had spoken. So I just keep thinking like, can you imagine if Uber had tried to get permission first and you know, maybe had to, like, maybe the government would’ve said like, oh, you know, taxi cabs this, they would’ve had to talk to them and maybe it would’ve never happened. We wouldn’t have had any of this. And Uber is just one tiny example. I’m sure you have other examples you can think of.

Connor: Let me actually stick with this example and speak with a little bit of personal experience. So when Uber came to our state, and more specifically to our capital city in Utah, which is Salt Lake City, they, had a kind of a playbook, right by this point. And they determined that they were going to directly violate the law and just, just go out and serve people and, create customers and just deal with it. So in our state, what happened was, we actually were the first group before any of the media, we found out that people driving for Uber and Lyft were getting tickets. I believe it was like $6,000

Brittany: A ticket. Like per ticket.

Connor: Per ticket. Oh my goodness. This massive amount. And so we interviewed this mom, I, recall she was a single mom. She was, you know, working multiple jobs trying to support her family. And here she is slapped with this massive ticket, not cuz she’s a criminal and a bad person, just cuz she was driving for Uber. And so we did this whole interview, we blew up the story, and then the media went on and, it was crazy. But, as Uber, like their business decision, was, we will pay your fine. Like they told.

Brittany: That’s cool.

Connor: They told their drivers, don’t worry about it. We will pay the fine if you’re ever running into trouble. And, that was the way that they got drivers to start driving customers to start doing it. So that when they had to go deal with the political problems, right? Like, think of, a food truck fiasco, right? Yeah. Where the twins are having to go to battle, if you will, against, the mayor and, his buddy, Bob. And, they’re having to go to the city council, right? They needed the people on their side. They held a rally and they were able to apply pressure, political pressure to say, knock it off, right? Stop these protectionist laws. And that pressure worked well, it was exactly what Uber decided to do. They wanted to build what’s called a constituency. in other words, just a group of supporters so that when they went to city hall or when they went to the legislature, they had a lot of fans, right? They had people drive like it was now their job. They drove for Uber all day. They had people who now depended on it like you, right? Yeah. For getting around town. And so those people were able to come and share their stories and say, why are you trying to take this away from me? Why are you trying to punish me? And so it was a very, it was very much technological civil disobedience. It was them saying, we don’t think we need your permission. We’re just gonna start doing this. And then later on we’re gonna pressure you into legalizing what should have already been legal so that we can go to business and serve our customers.

Brittany: See, and it’s, funny, this is just one example of the market, but there’s ways this is actually saving people’s life. I know a couple years ago there was parents of diabetic children, I think they called themselves the Night scout project, and they were tired of waiting for the government to sign off on all these medications because you can’t do like, delivery service or even like, certain devices are not allowed just because there’s so much regulation within the FDA and with all the medications. So they like started a hashtag. We are not waiting. And I believe they use like open source, which I’m trying to think of a good way to explain open source. That’s kind of like a, like an idea or a code sometimes that no one owns. Yeah. So you can get these programs online for free that would normally cost to you, I mean, hundreds if not thousands of dollars. But a lot of people have come around and said, we’re gonna do this open source. So that’s what this project was. And they found a way to get like, devices that would help monitor, what is it, its insulin levels, and deliver insulin. So they were able to do this at a much lower cost than all these FDA approved drugs. I don’t know what the pushback was. I’m sure they had some, but it also reminded me of one more quick one. There was a kid in college who hated his teeth. His teeth were all messed up. His parents weren’t able to afford braces. So he went to use his college’s, 3D printer, and he studied, he spent all this time kind of doing self-directed learning as we talked about before, learning how to make, Invisalign braces or like a retainer. So like they’ll, they go over your teeth and he 3D printed this. He didn’t ask permission. He didn’t, you know, wait for someone to make it cheaper. He just 3D printed his own retainers and was able to straighten his teeth. So there’s all these fun little things where it’s not even just Uber, right? These are medical, these are health things that, permissionless innovation is helping with.

Connor: So what is the opposite of permissionless innovation? The opposite, of course would be permissioned innovation or, innovation that requires you to get permission. I’ll share an another example from our state that we’ve seen. And the challenge here is that there’s so many examples that we don’t even know about because these businesses never start Yeah. Or never get off the ground because they find, oh, shucks, I’m not allowed to do this. Okay, I’ll shut it down. And so our economy, our, world, the market is deprived of all these cool, you know, potentially amazing business models and products and services because the entrepreneur finds out along the way, he can’t do it. He probably doesn’t have the kind of budget that Uber did, right? Yeah. To just pay for the fines and keep doing it. And so they decide not to, or even worse, they’re worried about, you know, criminal prosecution, like getting locked in jail maybe, or things like that. So one of the stories that happened in our state, I’ll share a little bit of a different story so this makes more sense. there are some people, especially different, religions like the Amish and Mennonites and others who have what are called healthcare sharing ministries. So they don’t do insurance a lot. You know, most of them, maybe all of them, they don’t do insurance. They instead do healthcare sharing. And what that means is it’s kind of like insurance. So like your mom and your dad out there, right? They’re paying probably a few hundred dollars a month and they have insurance that way if you, you know, break a bone or something, even worse happens, you can go to the hospital and the insurance company will pay for most or all of the bills. It’s a way for families to pay a little bit of money or sometimes a lot of money every month. And, that way they’re kind of guaranteed to get help when they need it if something really bad happens. So that’s kind of how healthcare and insurance works. You can go out, there’s all kinds of companies and, and they’ll just sell you insurance. Well, for some of these, you know, religious groups especially, they have healthcare sharing where it’s not really a guarantee, it’s not a promise like the insurance company, it’s just more of like, Hey, here’s a bunch of people and we’re all gonna pool our money. And if you need it, then you can use it. You know, if someone else needs it that month, they can use it. And it’s a way to just kind of help one another. It’s very much in their mind kind of a Christian way of helping those in need and having a community of, people helping one another. And, so it’s really interesting and, a lot of people can join them. If you just search for healthcare sharing ministries, you’ll find several. Well, in our state of Utah, there is a gentleman named Alex who wanted to take that same model basically, and use it for cars, for car maintenance.

Brittany: That’s cool. I’d never heard of this before.

Connor: Well, exactly, because he would shut down before it even really, got off the ground. He, set it up. He had customers, you know, and it was just for your car, your typical like, oh, my engine’s out or my, you know, transmission’s out or whatever. Some of that more expensive car maintenance. It was a way to kind of like, you know, pay a little bit every month. And then when you have those big expenditures, then you can get, you know, some of that help that you need. And so he set it up. He, went out, started selling, got customers. It was up and running. He was starting to grow it. And then the department of Insurance came after him and said, you’re not allowed to do this because we think that what you’re doing is actually insurance and it’s illegal because you are not regulating, you know, complying with all these things. And he didn’t have the money to fight it. He had already spent, I think it was like $150,000 in oh goodness, money trying to grow this business. And here comes the government to shut him down. And everyone I tell that story to just like your reaction, Britney, they’re like, Hey, that’s cool. Like, I’m interested in learning more, right? Like, I might like that. And yet the government deprived those people of that opportunity just because it didn’t fit neatly into that little box that was permissioned innovation. Alex was only allowed to innovate if he had permission, which he didn’t obtain. And so he wasn’t able to succeed. He and he didn’t have the, you know, budget that Uber did to, fight it and steamroll the government. and so unfortunately he just shut it down. And I think that’s really sad.

Brittany: It’s sad too, because it’s not just the innovator who suffers, right? So he lost out on all this money he had to spend and he also missed out on, earning money. But look at all the people who missed out on benefiting from of his services. I mean, that could be said about so many of these companies that we never even heard about like this one because they’re not allowed to even get started. So it’s crazy to me. I would, I would argue that right now we live in a permissioned innovation landscape. But I would like to see us get to a place where, one, it’s easier to take risks because you don’t have to worry about jail time or something terrible or, you know, a $6,000 fine per incident, cuz that’s a lot for a lot of people. But I think we have a lot of room to grow on that, sphere.

Connor: I think we do. for those interested, we will link on the show notes page both to the permissionless innovation book, Mercatus, center, which is a great group to check out, especially if you have anyone of college age in your family. it’s a great group to check out. We’ll also link, to the article, the interview, we did about, Uber Lyft, that I mentioned, just so you can kind of see what that person went through in case you’re interested in learning more. This was a few years back, but kind of interesting to see what some people deal with when they’re trying to innovate, against the government’s regulations. So check out Tuttletwins.com/podcast, and let’s, you know, fight for a freer market so that our innovators can do so without permission. And, like Ayn Rand, right? They can just say, who’s gonna stop me? I’m gonna go help people. So, a much freer, better world I think, and, something we can all work for and aspire to. Until next time, Brittany, we’ll talk to you later.

Brittany: Talk to you later.