Successful innovation, which is essential to better health, safety and security, requires freedom to experiment and develop. But there is an array of government rules and processes that increasingly prohibit “permissionless” innovation.

1. “Permissionless Innovation” & the Grand
Tech Policy Clash of Visions to Come
Adam Thierer
Senior Research Fellow
Mercatus Center at George Mason University
June 6, 2014

2. Outline of Discussion
1. The Digital Revolution… How’d It Happen?
2. Competing Policy Visions: “Permissionless
innovation” vs. the “precautionary principle”
3. Future Tech Policy Battles / Case Studies
– driverless vehicles
– the Internet of Things & “wearable” tech
– private drones
– other emerging tech issues to watch
4. Principles to Foster Innovation
2

3. New
Mercatus
Book
3
www.permissionlessinnovation.org

4. Where Did All This Modern Tech
Innovation Come From?
4

5. 5
How Did
All This Happen
So Quickly?

6. Question: How Did U.S. Become Global
Tech Innovation Leader?
6
Source: Booz & Company
• 9 of the top 10 most innovative global companies are based in U.S.
• 7 of the 10 are involved in computing, software & digital technology

7. 7
How Did This US-EU Tech Imbalance
Develop?
Source: Alberto Onetti, Mind the Bridge Foundation

8. Answer = “Permissionless Innovation”
• Permissionless innovation = the general
freedom to experiment & learn through trial-and-
error experimentation.
• The U.S. embraced this ethos & made it the
basis of policy for the digital economy in the
1990s and beyond.
8

9. In the old days, the Internet was
“permissioned” (pre-1990s)
This warning to students appeared in a 1982 MIT
handbook for the use of ARPAnet, the progenitor
of what would become the Internet:
“It is considered illegal to use the ARPAnet for
anything which is not in direct support of
government business... Sending electronic mail
over the ARPAnet for commercial profit or political
purposes is both anti-social and illegal. By
sending such messages, you can offend many
people, and it is possible to get MIT in serious
trouble with the government agencies which
manage the ARPAnet.”
9

10. But once we opened up the Net, the digital
revolution took off
• Again, before early 1990s, online innovation &
commercial activity wasn’t even allowed.
• But the commercial opening of the Net changed all
that. The rest is history.
• Permissionless innovation has driven the
explosion of Internet entreprenuerialism over past
2 decades.
• Nobody needed a license or permission to launch
the great technological innovations of the digital
age.
10

11. What’s good for cyberspace
is good for meatspace!
We need same general policy approach to other
sectors and technologies,
whether based on bits (digital economy) or atoms
(industrial economy).
Our policy default should be
Innovation Allowed
11

12. But What about the Risks?
(or, Why Some Still Favor “Precautionary
Principle” Policies)
12

13. The “Precautionary Principle”
= Crafting public policies to control or limit new
innovations until their creators can prove that they won’t
cause any harms.
– this “better to be safe than sorry” mentality
– “Mother, May I” (“permissioned”) policy prescriptions &
preemptive regulation
– It is the opposite of permissionless innovation
• Rationales for “precautionary” regulation
– safety
– security
– privacy
– economic (automation & job dislocation concerns)
– IP
13

14. General problem with
“permissioning” innovation
If we spend all our time living in constant fear of
worst-case scenarios—and premising public policy
upon such fears—it means that best-case
scenarios will never come about.
Wisdom and progress are born from experience,
including experiences that involve risk and the
possibility of occasional mistakes and failures.
14

15. Specific problems with
“permissioning” innovation
• less entreprenurialism / lost opportunities
• diminished marketplace entry / rivalry
• stagnant markets & potential cronyism
• loss of int’l competitive advantage
• higher prices
• fewer choices for consumers
15

16. But hey, seriously,
what about those risks?!
16

17. Better way to respond to risk
posed by technological innovations
Bottom-up approaches to new tech risks:
• Education / etiquette
• Empowerment
• Social pressure / media pressure
• New social norms
• Resiliency & adaptation
• Self-regulation & new competition / choices
• Torts, property rights, contracts
• other targeted & limited legal interventions
17

18. Give adaptation a chance!
• Remember, faced such challenges before & muddled through
• Recall reaction to camera & photography in late 1800’s…
“Instantaneous photographs and newspaper enterprise have invaded the
sacred precincts of private and domestic life; and numerous mechanical
devices threaten to make good the prediction that ‘what is whispered in the
closet shall be proclaimed from the house-tops.’”
— Samuel D. Warren and Louis D. Brandeis, 1890
• But we got through it! We adjusted our societal norms and personal
expectations to accommodate photography.
• Instead of rejecting cameras, we bought a lot of them! (But then learned
how to use them respectfully, too.)
18

19. The Precautionary Principle vs. Permissionless Innovation
A Range of Responses to Technological Risk
Prohibition
Censorship
Info suppression
Product bans
Anticipatory
Regulation
Administrative mandates
Restrictive defaults
Licensing & permits
Industry guidance
Resiliency
Education & Media Literacy
Labeling / Transparency
User empowerment
Self-regulation
Adaptation
Experience / Experiments
Learning / Coping
Social norms & pressure
Top-down
Solutions
Bottom-up
Solutions
Precautionary Principle
Permissionless Innovation
19

20. Future Fights
20

21. Future Tech
Flashpoints
21
Internet of Things
• Wearable Tech
• Smart Homes
• Smart Cities
Health Issues
• Medical Devices
• Biohacking
• Embeddables
• Genetic issues
• Mobile medical apps
• Telemedicine
3-D Printing
Robotics
• Smart cars
• Private drones
• A.I.

22. Concerns Driving Calls for Precautionary
Tech Regulation
• Privacy
• Safety
• Security
• Economic disruption
• Intellectual Property
22

23. 23

24. Case Study #1:
“Internet of Things” & Wearables
• The Promise: “Always-on” sensor devices that
can collect data, track activities, and customize
experiences to users’ needs and desires
• The Fear:
– Privacy: How much data are they collecting /
sharing?
– Security: What if all this stuff gets hacked?
– Discrimination: Will these devices & services
be used to disadvantage users?
24

25. 25
The opportunities before us…

26. Addressing Concerns about IoT &
Wearables
• Privacy & security best practices (“privacy by design”)
• Education & tech etiquette efforts
• Social pressure & social sanctions will play big role (current ex:
phones in theaters & locker rooms)
• Common law adjudication via existing legal standards (privacy
torts, contracts, property rights)
• Likely policy outcome
– FTC (Section 5) “unfair & deceptive practices” enforcement
– Targeted data use restrictions for most serious concerns
• A certain amount of social adaptation will be required.
26

27. Case Study #2: Intelligent Vehicles
• Autonomous cars on the way but legality remains
unclear in some states
• The Promise:
– Huge reduction in car accidents & deaths
– Traffic reduction
– Potential environmental benefits
• The Fear:
– Will robot cars make smart decisions?
– Who’s liable when accidents still happen?
– Are driverless cars hackable?
– What about privacy? How much info is collected?
27

28. Addressing Concerns about Intelligent Cars
28
• Privacy & security best practices by industry
• Evolution of insurance & liability norms
• Possible policy tweaks:
– Revised licensing procedures for “drivers”?
– Liability changes? (likely common law will
handle)
– Possible data use restrictions for privacy?

29. Case Study #3: Private Drones
• Currently illegal to operate a drone for profit
– FAA must integrate commercial drones in US airspace
by 2015
– Regulations are under consideration now
• The Promise:
– Countless beneficial applications (agriculture,
environmental monitoring, hazardous work, shipping,
journalism, entertainment)
– Could be safer than cars for routine delivery tasks
• The Fear:
– Safety (they’ll fall on our heads or run into stuff!)
– Privacy (they monitor our every move)
29

30. Addressing Concerns about Private Drones
• Common law adjudication
– already federal, state, and local laws that
protect property rights & privacy (ex: “peeping
Tom” laws)
• Possible policy tweaks:
– Targeted FAA no-fly safety zones
– Drone identification mandates?
• Again, be patient! Social adaptation likely.
30

31. 3 Other Big Disruptions to Watch
• 3-D printing
• “Biohacking”
• Genetic diagnostics (“23 & me” fight)
31

32. General Policy Lessons / Values
to Help Promote Innovation
• Forbearance (or “First, Do No Harm”): Don’t jump to
regulate new tech based on worst-case scenarios.
• Patience: Wait to see how individuals & institutions
adapt.
• Humility: Understand limits of knowledge & ability to
predict the future.
• Restraint: Limit & target interventions after exhausting
all other options
• Reevaluate (constantly): Conduct strict cost-benefit
analysis for all new proposals & periodically sunset old
rules before they hinder future progress.
32

33. Related Mercatus Center Research
Books, Papers & Filings
• Book: Permissionless Innovation: The Continuing Case for Comprehensive Technological
Freedom (Thierer)
• Mercatus filing to FAA on Unmanned Aircraft System Test Site Program
• Mercatus filing to FTC on Privacy and Security Implications of the Internet of Things
• Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary
Principle (Thierer)
• Bitcoin: A Primer for Policymakers (Brito)
Articles & Blog Posts
• Who Really Believes in “Permissionless Innovation”? (Thierer)
• “Permissionless Innovation” Offline as Well as On (Thierer)
• The Third Industrial Revolution Has Only Just Begun (Dourado)
• Mr. Bitcoin Goes to Washington (Brito)
• The Next Internet-Like Platform for Innovation? Airspace (Think Drones) (Dourado)
• Domestic Drones Are Coming Your Way (Brito)
• When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be
Disappointed (Thierer)
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34. 34
www.permissionlessinnovation.org