We live in an exciting world. Sooner than you think, stuff you order online will be delivered all but instantly, cars will navigate without a driver, and everything from homes to shopping carts will be plugged in to the internet.
The latest entity to nudge humanity along that path is not a tech behemoth or a university research team but, of all things, a pizza company. In New Zealand, Domino’s has started to test the delivery of food to customers via a drone called DomiCopter. “It doesn’t add up to deliver a two kilogram package in a two-ton vehicle,” Scott Bush, a general manager for Domino’s Pizza Enterprises, which is independent of the U.S. chain and operates in seven countries, told CNN Money last August. “In Auckland, we have such massive traffic congestion it just makes sense to take to the airways.”
A Domino’s customer who orders a pizza and requests drone delivery will receive a notification on his smartphone when the order is approaching. The customer will then go outside and hit the “accept” button on the Domino’s app, thus allowing the drone to lower the food via a tether. Once the package is released, the drone pulls the tether up and flies back to the Domino’s store.
Pretty cool, right? If tests prove successful, the company plans to extend the model to Australia, Belgium, France, the Netherlands, Japan, and Germany.
It’s not alone. The online retail giant Amazon is testing similar technology for its Prime Air delivery service in Canada, the United Kingdom, and the Netherlands. If all goes according to plan, customers in these countries will be able to receive packages in 30 minutes via drone-like “Octocopters.” The drones’ 20-mile-radius limit means that residents of big cities near Amazon distribution sites may be the only ones eligible for the service at first.
Drone delivery is just the beginning. In August, the U.K.-based Delphi Automotive announced that it will launch a fleet of six automated taxis in Singapore in 2017. During the testing phase, a driver will be present in case of problems and the vehicles will be equipped with a steering wheel and pedals for their human understudies. The plan is to completely eliminate drivers, steering wheels, and pedals by 2019 and to expand the fleet to 50 taxis that can be hailed with the touch of a smartphone.
These innovations have one unfortunate thing in common: At least for now, they’re only going to benefit consumers outside the United States.
When forward-thinking companies engage in global innovation arbitrage, America isn’t always a winner. “Capital moves like quicksilver around the globe today as investors and entrepreneurs look for more hospitable tax and regulatory environments,” the Mercatus Center’s Adam Thierer explained in a blog post at The Technology Liberation Front. “The same is increasingly true for innovation. Innovators can, and increasingly will, move to those countries and continents that provide a legal and regulatory environment more hospitable to entrepreneurial activity.”
Regulatory uncertainty (when innovators can’t be sure what the rules will look like in the coming months and years) and regulatory burdens (when the rules that do get handed down make operations and compliance significantly more costly) create powerful incentives for people to exercise their right to take their businesses to countries where the legal regime is friendlier.
U.S.-based companies such as Amazon have moved their drone research offshore to escape the risk-averse regulators at the Federal Aviation Administration. Ignoring pleas from innovators and consumers, the agency has banned the use of commercial drones under many circumstances and imposed inane regulations—like requiring that a drone operator be within sight of the device at all times unless granted a waiver—on the rest.
Meanwhile, whereas the U.S. won’t allow companies to experiment with disruptive technologies without first getting permission from the government, the U.K.’s leaders have communicated loud and clear that that country is open for business—not just for drones, but for driverless cars and other technologies.
The U.K.’s Department of Business, Innovation & Skills even published a report called Unlocking the Sharing Economy, which promises not to make the same regulatory mistakes that other countries have. “The U.K. is embracing new, disruptive business models and challenger businesses that increase competition and offer new product and experiences for consumers,” the authors write. “Where other countries and cities are closing down consumer choice, and limiting people’s freedom to make better use of their possessions, we are embracing it.”
If missing out on pizza-delivery drones and driver-free cars doesn’t seem like a big deal to you, think about the tremendous cost in lives, money, and well-being that accrue when regulation-wary innovators decide to stay out of more vital industries, such as health care.
That’s effectively what has happened with Google. During a 2014 interview with businessman Vinod Khosla, co-founders Sergey Brin and Larry Page were asked whether Google was interested in venturing into that sphere. “Health is just so heavily regulated, it’s just a painful business to be in,” Brin responded. “Even though we do have some health projects…I think the regulatory burden in the U.S. is so high that I think it would dissuade a lot of entrepreneurs.” Added Page: “I do worry, you know, we kind of regulate ourselves out of some really great possibilities.”
The most visible and infuriating example of this global innovation arbitrage is the exit from the U.S. of the Google-backed startup 23andMe, maker of mail-order DNA-testing kits that allow people to learn about their own personal genetics, ancestry, and predisposition to various diseases. After being ordered by the Food and Drug Administration to stop offering certain services out of fear that consumers may not understand the difference between being predisposed to a particular disease and actually having it, the company decided to open up shop in the United Kingdom. British consumers will enjoy the benefits. Americans, on the other hand—having been protected by the government against their will—are left with fewer choices and less information.
No one can anticipate what innovation will bring. But we know for sure that if the U.S. government fails to create a more hospitable environment, other countries will be more than happy to invite our innovators to their shores.
If we want to bring the revolutionary technological progress we’ve seen in other fields, such as information technology, into spheres like health care, American lawmakers need to embrace permissionless innovation. To help them do that, Thierer has come up with a 10-point checklist that would help spur the development of dynamic new products and sectors—and to keep them here, where Americans can benefit.
The list includes making permissionless innovation the default policy position, so that industry doesn’t have to wait for government to hand down rules before it can begin experimenting; removing many of the unnecessary regulatory barriers that are already in place; protecting technology providers from onerous liability for third-party uses of their services or platforms; and pushing for more industry self-regulation.
The U.S. is increasingly seeing groundbreaking technologies move to other countries more welcoming to innovators than we are. Even worse, it’s likely that many potential innovations never see the light of day at all because of rampant overregulation. It’s time to give innovation back to the innovators and set the U.S. up to win the game of global innovation arbitrage.