As tech-focused candidates like Carly Fiorina continue to climb Republican primary polls, presidential candidates are touting more support than ever for Silicon Valley disruptors like Uber and Lyft. But big name startups only scratch the surface of what the innovation economy is capable of, according to the conservative tech lobby, which is calling on 2016 hopefuls to embrace a policy of deregulation in Silicon Valley ahead of Wednesday’s primary debate.
“GOP presidential candidates Gov. Jeb Bush and Gov. Mike Huckabee recently called for the United States to embrace a GDP growth target of 4 percent and 6 percent respectively, almost double current GDP growth,” conservative tech advocacy group Lincoln Labs said in a report out Monday, calling on policymakers to adopt the deregulatory model startups need to move fast and provoke competition in traditionally entrenched sectors of the economy.
“Later this week, Republican presidential candidates will debate in California, the heart of America’s innovation economy. As they discuss the future of the country, we hope they will take time to review and consider our proposals,” Lincoln Labs co-founder Garret Johnson said in a statement Monday. “We are on the verge of an explosion in economic growth thanks to the innovation economy.”
According to the group’s Monday white paper, “Lobbying for the Future,” that explosion is being stifled by “out-of-date regulatory schemes” and the need for “permissionless innovation” for entrepreneurs.
While battles between explosively successful startups like Uber and taxi unions across the country get no shortage of media attention, Lincoln Labs says a broader policy of deregulation is necessary to ensure the survival of startups lacking Uber’s deep pockets.
“[T]his report is written on behalf of those 18-25 year olds with a good idea, a team of colleagues with big dreams, empty bank accounts, crashing on their friend’s couch, who have a healthy skepticism for the status quo,” the authors wrote. “Those who want to turn their idea on a napkin into a business usually can’t afford a lawyer or a lobbyist …”
The group points to three key areas in need of policy reform — opening up the $6.2 trillion government sector to more tech-focused consulting and competitive bidding, reforming patent and copyright law by shortening terms and dismissing low-quality patents (the primary perpetrator in patent trolling) and removing “outdated laws and regulations stifling competition.”
Perhaps the most widely recognized example of such clashes is that between ridesharing startup Uber and numerous state and local governments and labor unions across the U.S. Earlier this summer New York City Mayor Bill de Blasio dropped a plan to limit the number of Uber drivers operating in the city — a cap the taxi industry and unions lobbied heavily in favor of.
While the taxi industry sees Uber and competitor Lyft as threats to their business model, some governments see them as threats to worker’s rights.
The premier taxi disruptor walked away victorious in New York, but wasn’t so fortunate in its home state, where in June the California Labor Commission ruled an Uber driver in San Francisco was an employee of the company, not a contractor, entitling the driver to worker’s rights and benefits.
The ruling could set a dangerous precedent for Uber, which depends on its drivers’ contractor status to keep operating costs low, as it compels drivers to pay out of pocket for gas, insurance and maintenance, while declining to offer them benefits and labor protections. Two U.S. District Courts declined to rule on the larger question of whether drivers should be classified as independent contractors in March, pushing the case to a jury court under California law, which could have big implications for the sharing economy growing out of Silicon Valley.
At the federal level Federal Trade Commissioner Maureen Ohlhausen promised a tech conference attended by Uber, Lyft, Airbnb and others in June there was no “planned, big enforcement push” coming to disruptors, and that the agency wants to work with startups in clearing their regulatory hurdles, while ensuring healthy competition with established market players.
“I’d love to hear the candidates discuss how they are going to directly address this issue of the rising challenge of starting and running a small business in America,” Jon Lieber, chief economist at Thumbtack, told InsideSources. “Unfortunately, many of the regulatory barriers facing very small service businesses like the ones on Thumbtack come at the local and not the national level, so they are very difficult for a president to affect.”
“If the candidates really wanted to help small businesses succeed they’d be thinking about what changes the federal government can implement to encourage state and local politicians, who in general face far less scrutiny than their peers at the national level, to stop making life harder than it needs to be for small business owners,” Lieber said.
Not everyone agrees government simply getting out of the way will guarantee expansion in the startup economy.
“It’s wishful thinking to believe that if we just ‘fixed’ policies related to startups that all would be good,” Rob Atkinson, president of the Information Technology and Innovation Foundation, told InsideSources. “The reason we have fewer startups is not principally related to government overreach as the Lincoln Labs report suggests.”
“Their implicit belief that if you just get rid of barriers and all will be good is naïve in my view,” Atkinson continued. “Having said that, one of the best things we could do to spur startups would be to significantly increase federal funding for research and institute better policies to incent universities to do a better job of commercializing those discoveries. We should do more to enable innovators from foreign countries to move here, as the Startup Act in Congress would do. The Startup Act would also make it easier for new startups to take advantage of the R&D tax credit.”
Kansas Republican Sen. Jerry Moran and Virginia Democratic Sen. Mark Warner have been tweaking the Startup Act for more than three years. If adopted, the bill would modify the U.S. regulatory structure, tax code and immigration laws in ways that would benefit startups.
“It would be good for the candidates to talk about creating an Office of Innovation Review in the White House Office of Management and Budget, and its job will be to ensure that proposed federal regulations do not hinder innovation,” Atkinson said. “This office [would] be the ‘innovation champion’ in government, and [would] push agencies to either affirmatively promote innovation or achieve a particular regulatory objective in a manner that is least damaging to innovation.”
“Some of this is also about the attitude and orientation of the president,” he continued. “Does the next president truly support disruptive innovation? Will they encourage their administration to not just get rid of barriers but also actively promote innovation, so that both startups and innovative incumbents can thrive.”
Regardless of how to get there, all sides agree on the potential for significant economic growth.
“Instead of regulating the sharing economy out of existence, policy makers should embrace it,” Lincoln Labs authors wrote. “The sharing economy is a win-win for consumers and creates thousands of new jobs in the private sector.”