Innovations and the governments that squash them

Innovation is now the norm in industries, writes Gordon Crovitz in the Wall Street Journal – innovation so fast that it disrupts industries. He mentions how the free maps app on his phone has made the GPS device he bought superfluous. A new book, “Big Bang Disruption,” by Larry Downes and Paul Nunes, points out this happens a lot. As Crovitz writes:

“Powerful new technologies like cloud computing and big data allow entrepreneurs to develop products and services that are ‘simultaneously better, cheaper, and more customized,’ Messrs. Downes and Nunes write. ‘This isn't disruptive innovation. It's devastating innovation.’

“Who would have thought that a mobile phone would challenge industries as varied as home phones, video cameras and flashlights? Digital alternatives undermined the business models for travel agents, restaurant guides and newspapers. Even disrupters rapidly get disrupted: Digital videogames decimated the pinball industry, but the market value of Zynga collapsed after consumers abandoned Farmville for the next new game.”

The even better news is in heavily regulated industries. Government regulations slow innovation, the authors write, by adding costs to designing, testing and deploying something consumers will like better. But Downes and Nunes predict this can’t last forever. Crovitz writes:

“The authors predict consumer demand will force changes in heavily regulated industries such as pharmaceuticals, energy and autos as well as for services like education, medicine and law. Many cities have given up on decades-old laws regulating taxis as Uber and other new mobile services enter the market—and their enthusiastic users show up at city council and public utility meetings to demand deregulation. Consumers are likewise pushing back against efforts to restrict the use of genetic-analysis kits.”

“Washington keeps getting bigger and more complex,” Crovitz writes, but it doesn’t have to, not if Americans push back: “Downes and Nunes predict that ‘regulators will be left unable to justify limits that no longer have economic, social or political rationales. The devastation when it comes will be that much more dramatic.’”