
How Corruption Is Strangling U.S. Innovation (2012) - hype7
http://blogs.hbr.org/2012/12/how-corruption-is-strangling-us-innovation/?utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet
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apsec112
In Africa, the arrow usually goes money -> power: you want pull with the
government, so you buy it.

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...](http://www.mv-
voice.com/news/2013/12/12/council-deadlocks-on-google-bridge-idea)).

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.

~~~
imrehg
The Power -> Money direction indeed seem to be such, and everyone's picking up
on it, including popular culture

"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

~~~
vacri
_Power is the old stone building that stands for centuries_

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".

~~~
icebraining
That's only inconsistent if those with power are the politicians. Are they
really?

~~~
doktrin
Then we're back to money == power, which is a premise the show argues against.

~~~
icebraining
I think that's an oversimplification. There are more actors besides
politicians and people with lots of money. People like the directors and
executives of agencies like the NSA or the CIA, political advisers, board
members of the FED and similar organizations, etc.

~~~
vacri
It's an oversimplifaction to say that politicians are the only ones for whom
power can disappear in a heartbeat.

------
hapless
to summarize: regulatory capture is an existential threat to the American
economy, and any regulation that restricts a silicon valley firm is _prima
facie_ regulatory capture.

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.

~~~
WildUtah
_I prefer to live in a world with taxi and hotel regulation_

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.

~~~
yarrel
Express kidnappers agree with you.

~~~
ivanca
Of course, without a clause any taxi driver is free to kidnap and murder you!
These silly liberals don't think things trough. /s

------
PythonicAlpha
Good that also the problem of Intellectual Property has been touched in the
article!

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"!

------
snarfy
If you've ever visited DC, it's plainly visible in the skyline. There is a law
stating no buildings can be taller than the monuments, so all the buildings
are the roughly same height.

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.

~~~
dvcc
Aside from the point of congressmen not reading bills prior to signing them,
this is not really an issue.

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.

~~~
snarfy
None of those people represent me. They represent dentists, steel workers,
etc. My representation is severely drowned out by all of the money. This is
the problem. Their laws may benefit me, or they may hinder, but they certainly
do not benefit democracy. I should not need a million dollars to throw at
capitol hill for my vote to count. Sure, we should have experts from the
industries to guide the laws, I'm just not sure they should be paid by
industries when they do it.

------
dalek2point3
Step 1. take a bunch of stories in the news about tech firms.

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!

~~~
wehadfun
Yea I was a underwhelmed that Tesla, AirBnb, and Uber where the examples in
Harvard Buriness Review of corruption stifling innovation.

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...](http://www.washingtonmonthly.com/features/2010/1007.blake.html)

------
tim333
Looking at the case of Uber I think it's not so much corruption as vested
interests that are fighting against it. NY taxi medallions for example are
worth about $13bn or $1m each and the guys who have spent $1m are going to
lobby against Uber, corrupt politicians or not.

------
hibikir
This is just a partial look of the problem, which is inherent to a republic,
and goes kind of like this: If a law would be a big economic boost to 50
people, but a minor loss to 50K, chances are those 50K will put less pressure
on the legislature to stop the law than the 50 people to at making sure it
passes. So established players with money can make sure we get laws that help
them, hurting the majority of the electorate.

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.

~~~
cwp
Yes, this is a general problem, but that doesn't mean that it can't be
ameliorated.

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.

------
anjc
Two things. As much as I don't like the idea of incumbents using their weight
to protect against innovative competition, is this not just the nature of a
strategic view of competitive advantage? I mean, it's not nice, but it seems
like strategy 101 to bolster barriers to entry to protect against new
entrants. Without these barriers being possible, incumbents would presumably
create barriers in a different manner (through acquisition etc)? It's not like
massive incumbents will whither and die because they can't encourage
legislation to be adopted, it's just a currently effective strategy.

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.

~~~
marcosdumay
> As much as I don't like the idea of incumbents using their weight to protect
> against innovative competition, is this not just the nature of a strategic
> view of competitive advantage?

Yes. What is wrong is that the government shouldn't be helpping them.

------
bippi
my "cool story, Hansel" that goes with this: I worked in electronic bingo. One
of the things we faced was that paper bingo card manufacturers routinely
wanted to limit the effectiveness of electronic bingo markers so-as not to
drive themselves out of business. One method they did was limit the number of
cards that could be sold to any one person, electronically or otherwise.

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.

------
at-fates-hands
This is pretty interesting considering most conservatives want less
regulations and most liberals want more.

In every example, they cite over regulated industries where the biggest
players are using those regulations as a means to stifle innovation.

------
wehadfun
Why can't Tesla just have regular dealerships and let people buy them?

Why can't airbnb just collect and pay the taxes?

Why can't uber properly license the drivers?

~~~
glenra
> _Why can 't Tesla just have regular dealerships and let people buy them?_

"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?"

~~~
wehadfun
Dealerships don't make since today?

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.

~~~
glenra
As technology advances cars are more reliable, more consistent, and tend to
require ever less ongoing maintenance and a lot of what they _do_ still need
is stuff like changing the oil (which you can do most quickly and conveniently
at the nearest drive-through Jiffy-Lube place that specializes in this one
service) or replacing the tires (which you can do most cheaply and
conveniently at the nearest CostCo while you do other shopping there).

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.

------
falconfunction
Amazon has a patent on 1 click to buy, and I am supposed to believe that
mickey mouse remixes are stifling competition? Are you a child or do you write
for children?

~~~
euank
It's not mickey mouse, the extension of copyright that resulted. The point
he's making is that a big business (Disney) can sway legislature for their own
benefit.

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.

~~~
falconfunction
Copyright is a problem if you're an artist too stupid to understand satire.

~~~
er35826
It's also a problem if you're an artist that makes something 'close enough' to
Mickey Mouse, and you don't have the resources to both fight the legal battle,
and support yourself while your income stream is shut off due to the legal
battle.

