“Permission-Slip” Innovation: How to Get Governments to Say Yes to Your World-Changing Idea
Building new services in regulated sectors requires getting regulators’ blessing — and relentless advocacy
Earlier this year, investor Marc Andreesen called for building our way out of America’s innovation malaise — in part by creating new services in regulated sectors like finance, insurance, education, health care, housing, and transportation.
As someone who’s spent the last year evangelizing for exactly this kind of innovation, I can report that the path to progress is full of countless potholes and speedbumps. But I’ve also become convinced that the difficulty of the journey shows the vital necessity of embarking on the trip.
From Google to Electric Scooters
I spent more than a decade at Google in government relations and public policy, where we never had to seek permission from government policymakers to operate our search engine or other services. Internet services like Amazon, eBay, or Facebook didn’t have to get operating permits from the cities of Omaha, Spokane, or Fort Lauderdale.
That’s why many entrepreneurs choose to build purely online apps (like games, dating, or social apps), instead of new services in regulated sectors — which represent close to half of all GDP and 60% of household budgets. This contributes to an innovation gap: we’ve made leaps and bounds in how we entertain ourselves and connect socially online…but before Covid hit, we went to the doctor, commuted to work, and found a place to live in much the same way people did a decade ago.
“Time to Build”…In Regulated Industries
Andreesen isn’t the only one to ring this alarm bell. Peter Thiel has called out the lack of progress in regulated industries; Bradley Tusk built a startup investment firm around modernizing regulated spaces; and Eli Dourado calls for promoting “hard” technology in highly regulated industries.
It was partly this challenge that drew me last year to join Lime, the world’s leading “micromobility” operator of shared electric scooters and bikes. My team works to persuade city and state officials across the world to legalize scooters and allow them on city streets.
I had seen friends go work for Uber, Lyft, and Airbnb as those companies revolutionized transportation and lodging. The playbook of launching first, and then begging for governmental forgiveness later, worked well for ridesharing and short-term rentals. But it also made city leaders wise to this model.
So though the earliest days of our industry saw some operators dump scooters on city streets without permission, in a matter of months it became clear that cities would impound scooters of companies who did this without city permission.
“Permissionless” vs. “Permission-Slip” Innovation
Adam Theirer of the Mercatus Center described the two major strains of technology regulation as “permissionless innovation” — allowing experimentation by default — vs. the “precautionary principle” — limiting new innovations until they are proven not to be harmful.
And shared scooters — much like autonomous vehicles, drones, and home mortgage innovators — are a form of precautionary “permission-slip innovation,” where a product cannot be used by consumers until governments bless the product in the first place. Think of it as the FDA drug pre-approval model applied to other areas of public interest, such as transportation, health care, or education.
After a year and half working in the “permission-slip” space of shared scooters, I’ve learned a few lessons that may be useful for useful for future innovators in other regulated industries:
Lesson #1: Get policymakers excited about a future solution to a present problem. Politics focuses on present problems: how does my trash get picked up, how do I get health care, how will my kids be educated? Where politics often fails is in preparing for the future.
Regulated-industry innovators need to figure out what present problem they are solving — and paint a compelling picture for how your new service will make things better. I’ll never forget how Amazon’s first Prime Air concept video captured our imaginations in 2013.
At Lime we’ve persuaded cities to allow scooters by showing how they solve cities’ big problems: traffic congestion, carbon emissions, or transportation “deserts” that lack affordable options. This type of persuasion is more challenging for abstract innovations like cryptocurrency and blockchain. If you’re trying to launch a “permission-slip” service, it has to solve a truly pressing consumer problem.
Lesson #2 Find the visionary policymakers who want to build their own legacies. When your innovative service depends on someone in government saying “yes,” you’ll need to find public servants who are willing to think big. U.S. Transportation Secretary Elaine Chao has done this for both autonomous vehicles and unmanned aerial vehicles. Florida State Sen. Jeff Brandes has championed many new transportation innovations. And city transportation leaders in Austin, Los Angeles and Portland were among the earliest champions of scooters; now they get calls for advice from city planners all over the world.
But not every government official is willing to think big — many instead focus on minimizing risk. This is likely to be especially true post-Covid, as economic anxiety causes many policymakers to instead think small. If you’re going to succeed, you’ll need to nurture a few early champions within government.
Lesson #3: Prepare for status-quo preservation couched as value objections. The future doesn’t show up to lobby for itself at city council meetings, but the affected interests of the present certainly do.
In our work at Lime, cities often couch their aversion to scooters by invoking safety. But our ridership data shows that 99.99% of all scooter trips are incident-free. The perception that scooters are “ruining” a car-dominated status quo, rather than opening up new mobility options, remains strong.
But few citizens and policymakers will come out and say “we like things the way they are”; they’re much more likely to object on the basis of preserving “acceptable” values like safety, workforce stability, cultural preservation, or NIMBYism. For example, Sidewalk Labs’ promising Quayside project to build a “smart city” in waterfront Toronto died due to objections over privacy and corporate power.
Lesson #4: Anticipate being subject to lots of individual whims. When your ability to launch a “permission-slip” service depends on the approval of local, state or federal authorities, be prepared for lots of individual whims to come into play.
Cities officials sometimes ask Lime to avoid deploying scooters in front of restaurants or businesses whose owners complain a lot — despite scooters being parked on publicly-owned sidewalks. One mayor didn’t like seeing scooters on his drive into work, and asked that we remove them along his driving route. One local clergy member was hit by a scooter, and asked his city councilmember to require operators to share rider info without a subpoena.
When you’re operating a “permission-slip” startup, each of these individuals have a hand in your ability to serve customers. You’re going to have to roll up your sleeves and prepare to manage what feel like a thousand small individual concerns if you want your service to change the world.
Lesson #5: Aspire to become boring. The Gartner consulting firm invented the Hype Cycle to chart all new innovations’ trajectory: a new “technology trigger”; followed by a “peak of inflated expectations”; the inevitable “trough of disillusionment” when the new technology fails to meet those lofty expectations; and finally a “slope of enlightenment,” leading to a “plateau of productivity,” when the new technology finds its most valuable use in business and society, and its downsides are managed.
If you’re building a “permission-slip” business in a regulated industry, you must be prepared to navigate every step of the hype cycle. But ultimately, you should actually aspire to become a bit boring — accepted by policymakers as a valuable service, with proportionate regulations in place.
At Lime we’ve seen cities like San Francisco and Los Angeles declare our scooters an “essential service” for getting around in a post-Covid world. And we’ll know that shared scooters have reached the acceptance phase when local regulators treat their regulation like car parking rules or noise ordinances — just an everyday part of city government.
How We Can Encourage Building in Regulated Sectors
That’s what innovators should expect from policymakers when they jump into highly regulated industries. But there are some things we could do in both politics and business to improve the situation:
- Policymakers could adopt a “pro-building” approach when it comes to innovative new services. They already do this with actual buildings — which politicians everywhere enjoy cutting ribbons for. But as Andreesen notes, “We need to demand more of our political leaders, of our CEOs, our entrepreneurs, our investors…What are you building directly, or helping other people to build, or teaching other people to build, or taking care of people who are building?”
- Regulators can also borrow from regulation that works. Cities could regulate shared scooters the way they regulated restaurants — making sure they meet health and safety codes, but not dictating the menu or interior design. That’s largely how cities have regulated food trucks, and how the FAA is approaching the emerging category of “air taxis” — saying publicly that its existing flexible regulatory frameworks allow for this new vehicle type.
- The flip side of borrowing from proven regulation: policymakers shouldn’t reflexively saddle new innovation with old rules if those rules no longer make sense. If a new health startup yields more efficient care, policymakers shouldn’t rush to apply all the old rules to the new thing. Instead, they should take a fresh look at what patient harms they’re trying to avoid.
- Society might yield more breakthroughs in regulated industries if more of my former lobbying colleagues at Google, Amazon and Facebook were to bring their expertise to lobbying for those industries. Regulated-industry innovators need their talents.
Building Is Hard…and Necessary
Ezra Klein wrote earlier this year of “ ‘vetocracies,’ in which too many actors have veto rights over what gets built. That’s true in the federal government. It’s true in state and local governments.”
The picture I’ve painted may seem daunting, and it’s true it can be frustrating and inefficient to seek permission to operate on a city-by-city basis. But if you believe that innovation in everyday regulated sectors is critical to improving our standard of living — and to ensuring America’s edge into the future — this process of engaging with the public interest is necessary and vital.
Innovators have to run sophisticated advocacy campaigns to get governments to say yes. As Klein put it, “you can’t sidestep the existence of the government, as too many in Silicon Valley want to do. You have to engage with it.”
The challenges of this work have convinced me that it’s critical for society to have entrepreneurs (and their lobbyists) doggedly promoting innovation in highly regulated industries. If you believe that if citizens desperately need innovation in regulated services, the advocacy to smooth the way politically becomes not just a job, but a cause.