It's not about Facebook, it is about some startup you have never heard of that actually is doing something positive for the world and suddenly finds its business smothered by poorly thought out regulations. Considering that we have powerful congressmen who do not even understand Facebook's business model (and whose staff failed to explain it to them) does not give me confidence in Congress' ability to craft constructive regulation.
Are there any actual case studies and examples of tech startups being killed by regulation? Or is this a campfire story that is retold whenever the possibility of regulation is mentioned.
The inherent nature of regulations mean there is always going to be a 'winner' and a 'loser'. For example I have no doubts that regulations removing lead from gasoline resulted in lost profits and hurt businesses, but we can also believe that the societal gains were far greater than the losses.
Similarly regulations in favor of privacy for citizens is going to naturally result in some companies, somewhere, having to adapt or take a hit or possibly not survive the transition. That doesn't mean we shouldn't implement those regulations because ultimately the larger monopolistic companies pose a far greater problem than the smaller startups can solve.
I completely agree. I was referring to the GP's framing of the situation as Big Bad Regulation squashing Mom & Pop tech startups- a bogeyman of dubious existence.
How willing are you to invest in an early-stage startup whose founders could be arrested over a data breach? How much of your own money would you be willing to risk? Would you be willing to work as a founder of such a company and take on the risk of jail time? If this "bogeyman" is of "dubious existence" then your answer should not be impacted at all by the nature of the regulation or the punishment for non-compliance.
Sure, given how many questionable firms from Theranos to Juicero have been successfully funded.
So long as dumb money continues to flow, there is little to fear. When this bout of irrational exuberance does abate, tech will have bigger things to worry about than consumer protection laws.
If like me you view copyright and related laws like the DMCA as regulation, then absolutely -- all the peer-to-peer networking companies from 15 years ago were killed by regulation, not to mention companies that tried to sell circumvention tools (all killed by the DMCA).
Really though, the tech industry has not yet been subject to such significant regulations. The history of the railroad industry is filled with examples of the destructive effects of bad regulations, ultimately leading to a near collapse of the entire industry in the 1960s (a cascade of bankruptcies, especially in the northeast). The Staggers Act saved the freight industry by relaxing rules, but passenger industry remains uneconomical and is basically quasi-state-run.
That is a fair point about the DMCA, but doesn’t the reduction of piracy caused by both the rise of new upstart streaming services like Netflix or Steam, and the entrenched major players relenting and offering their own services and allowing their properties to be streamed, refute that legislation had a dampening effect on innovation?
Not to mention, while some p2p tech companies were sued out of existence, others that went legit (like Napster) or toed the line (like BitTorrent) were not.
Yes, regulation will lead to some losers. But it’s questionable that consumers will be among them.
Netflix is basically just an incremental update to the cable TV model: one centralized distribution service that negotiates broadcasting rights. The only real difference is that people are free to choose when to watch things, and even that is just an "Internet version" of the same thing people had with their VCRs (time shifting) or rental services. It is innovation, yes, but in a box that does not really change the larger business model; by way of analogy it is like railroads switching from steam engines to diesel locomotives.
Peer-to-peer is a totally different concept of global distribution, one that challenges the entire business model that is built around copyright. If Netflix is a diesel locomotive, peer-to-peer is an automobile -- it is more than just a new way to do the same thing that we had done previously, it is an entirely new concept of how things can be done. That is why the RIAA and MPAA panicked. They understand how to negotiate with or sue a centralized distributor like Netflix or Megaupload, but their entire business model is threatened by peer-to-peer distribution.
Bittorent is only half the promise of peer-to-peer. Yes, you are participating in distribution, but you still need a central service to help you find the torrents you want to download. Hardly anybody is working on distributed search, or good ways to deal with spam/malware/etc. that do not involve a central service of some kind. There was a time when people were talking about peer-to-peer messaging systems, but the death of peer-to-peer left us all relying on more centralized approaches.
Ironically, the death of peer-to-peer contributed to the rise of tech giants, all of which follow the same centralized model that peer-to-peer challenged. I think it is entirely possible that a peer-to-peer social networking system could have hindered the rise of Facebook. Youtube might never have been created if peer-to-peer had flourished. We may not have even been having this conversation if the talent that went into Google and Facebook had instead been devoted to peer-to-peer.
It is impossible to know. The problem with deliberately killing a technology in its infancy is that it is hard to know how the technology might have developed or what it might do for society. It is certainly possible (I would say likely) that consumers would have benefited from the growth of peer-to-peer technology.
I think you are placing too much faith in the P2P technology and overlooking the consumer side. Facebook and YouTube users don’t care about what tech is underlying their apps, so long as it is convenient and easy is use. Would Mastodon, had it existed in 2003, have beaten FB? Depends if they could have presented a better user experience. Ultimately I don’t think it’s the tech- nor regulation that supposedly suppresses the tech- that truly matters in the cases you’ve discussed. It hinges upon the UX.
It’s also doubtful that P2P withered away as in the narrative presented. It flourishes today under another under-regulated category: blockchain. And has also yet to see widespread mainstream adoption, or even very useful products, despite the lack of broad legislative oversight.
You are right that UX was a problem for P2P systems, but there is no technical reason that the UX problems could not have been solved had serious effort been devoted to it. The problem is that the technology had become de-legitimized and it was too risky to work on. Imagine if iTunes had natively supported P2P downloads with all of Apple's UX expertise going into it -- do you doubt that Apple could have designed a good P2P UI?
Blockchain is indeed another P2P application, but as you say, it is questionable as far as mainstream adoption goes (though it is likely to see use in non-consumer, business-to-business applications where the hard technical problem of identity is easier to manage). The thing about P2P filesharing is that it was very popular and was starting to enter the mainstream, and we are sitting here arguing about whether or not the UX problems were a cause or effort. Blockchain also came after years of stagnation and missed opportunities in P2P because the first killer app was snuffed out.
iTunes is not a particularly great example of Apple providing excellent UX- but that aside, I doubt that they deigned to pursue P2P because of “delegitimization” or fear of having to deal with regulation.
Did these P2P services even offer any major consumer benefits aside from convenient ways to pirate media? Because that’s a value proposition that could return as the proliferation of streaming subscriptions (having to juggle multiple accounts at once to gain access to desired content) may cause some to simply kiss goodbye to streaming and return to the Pirate Bay. But even with legal challenges taking out the Groksters and the like, I fail to see how P2P for other purposes were damaged. They could’ve simply lost out because of lack of interest from both consumers (poor UX, no value add) and tech companies (saw no interest in pursuing such tech).
By the time those case studies exist it'll be too late. Regulations have a way of coming into existence more than going out of existence. I don't see why we can't learn the same lessons from banking or manufacturing.
As someone in the tech industry I'm far too deep in conflicts of interest to make any good judgements on "should be" type questions :)
Just like the clipper chip was a tradeoff between public safety and privacy (ultimately not passed because the cost was too large), any upcoming regulations will trade something away.
As long as legislators are aware, then that's fine. However I will remark that our senators seem to be especially clueless about technology.
