The next wave of innovation: Are we ready and willing?
And most important, who decides?
Long ago, Benjamin Franklin wrote, “It is the first responsibility of every citizen to question authority.” We don’t think about it much, but free speech and even dissent also have a place in enabling economic progress by challenging existing business norms. Launching new ideas and creating goods that previously were unavailable—even unimaginable—at any price requires change and an unwillingness to accept the status quo.
A free market drives economic progress. As part of the process, creators, innovators and builders may challenge and even offend current ways of conducting business. Nonetheless, when an idea is successful, productivity takes off and customers benefit—often ahead of the larger society. As was the case when electricity, cars and computers were launched, it’s just another example of massive disruption that we accept as essential to our lives today. In 1800, agriculture accounted for 96% of employment in the U.S. The economic “dissent” of the industrial revolution destroyed nearly 90% of those jobs, eventually resulting in higher living standards across the country. Today, innovations from gene therapy to robotics to artificial intelligence are poised to radically transform just about every economic sector. The coming transitions could be messy and may well destroy existing business models, but this ultimately should create greater value while delivering better services and opportunities for individuals and society.
Such disruptions and “messiness” are currently in the spotlight as Congress and the Biden administration seek to rein in the reach of Big Tech firms. Congress, in a bipartisan effort, has introduced bills aimed at restricting how these companies operate and grow their businesses. Two of the bills could require several of these companies to divest business lines if regulators determine that they present conflicts of interest and/or result in discriminatory business practices. Others would mandate greater scrutiny over proposed mergers and acquisitions by these firms. Meanwhile, President Biden signed a broad-based executive order that includes 72 actions and recommendations intended to reshape practices around corporate consolidation and antitrust laws.
In response, the impacted companies and associated interest groups counter that a number of these actions will have unintended consequences that will restrict future innovation and opportunities for new business start-ups, and create user obstacles that will negatively affect consumers.
Threat or opportunity?
Clearly, where one side sees a monumental threat, the other sees opportunity. In the case of regulating the reach of Big Tech, both sides have legitimate concerns. Vigorous competition and choice are at the heart of our free enterprise system. However, taking a broad-brush approach to “solving” this very complex issue seems ill advised. When you hear outcries from politicians and others about “protecting” people or industries, remember the uniqueness of our system. It was built on encouraging disruption and innovation and allowing consumers and the market to serve as the ultimate arbiters. An imperfect process, yes. But so far, we’ve been the better for it.
The innovative dynamism that creates entirely new industries also replaces existing products, services and norms. Each disruption results in jobs destroyed, jobs created and greater value and efficiency in the economy. It can take time for that value to be realized, but if history is any judge, the destruction of what once was creates much more than it destroys and increases income, improves living standards and generates the wealth needed to continue the cycle all over again.