Regulation and overregulation

The spat between the California Department of Motor Vehicles (DMV) and Uber over the licenses required, or not, to operate autonomous vehicles has ended with the revoking of the vehicles’ registration, followed by Uber’s announcement that it is moving its sixteen Volvo XC90s to neighboring Arizona, where state governor Doug Ducey, a Republican, has offered a warm welcome, accusing California of “overregulation.”

Regulation is certainly the issue at hand here. The arguments of both parties in this regard seem very clear: on the one hand, the state of California and its DMV, which says that all the companies that have tested autonomous vehicles within its jurisdiction have requested the corresponding license, and that if Uber wishes to do the same it must follow suit.

In response, the company, which claims that its vehicles, even if they are advertised as self-driven, are not, and instead simply provide driving aids that require a driver to be behind the wheel at all time, and that therefore, they are exactly the same as any vehicle similar to Tesla’s Model S, which does not require any special license to be driven on the roads of California.

The DMV has shown it has the power to enforce its legislation and that it does not admit interpretation of the law, and has forced Uber to stop its road tests. Uber could accept this, apply for the license in question, which would be granted immediately, and continue road testing its vehicles, but instead, has decided to take its technology to Arizona.

As a result the benefits of technological development: sophisticated and future-oriented jobs, an image of innovation, research and development at local universities, more transportation options for residents and, as technology improves, greater road safety, will all go to Arizona. If they could choose, every country would choose to host technology companies. Some countries, in fact, have turned the idea into a development strategy, such as South Korea (through domestic development) or Ireland (fiscal incentives to investors).

Otto, the autonomous trucks company founded by former managers of Google’s self-driving vehicles project, was recently acquired by Uber: it had carried out its road tests in Nevada without telling anyone or asking for any permissions, giving it much greater flexibility… and ending up being acquired for $680 million dollars.

In other words, if governments decide to apply the letter of the law, it can paralyze business. But if a company responds by moving to another state, who is the winner? Does the DMV really think that the outcome to this dispute benefits California? Or has its rigid stance sent jobs, research, an image of progress and the benefits that the company’s activities would bring somewhere else? Is it really worth it to be so rigid in the application of regulations as to discourage companies that, by the nature of their activity, demand greater flexibility?

Of course, if you think that technology companies are little more than “the axis of evil”, that they eliminate jobs or threaten our way of life and our customs, you will be happy to see the rules applied to the nth degree, and won’t be shedding a tear when those companies go elsewhere. But is that attitude sustainable?

Generationally, such attitudes are being overtaken by those of younger people who want more technology, more advances, more convenience and more development. Countries where economic growth ends up resembling some type of theocracy or dictatorship that does not restrict the freedom of companies to innovate is nothing like a progressive country that supports technology and does what it can to attract the companies that develop it. It is basically a question of aligning with traditions and the past, as opposed to committing to the future.

As technology advances, countries must adapt their priorities, policies and regulations to try to maintain their competitiveness. Attitudes along the lines of “the law applies to everybody” block the change, progress, and adaptation of companies that push themselves to the limits of abilities. There are countries that use regulations as a brake, and others that use it as a weapon, flexibilizing it or adapting it as they think best suits each situation.

Governments that choose to apply their regulations rigidly and do not explain their policies may also have to face the ire of voters in favor of technological change.

This is an episode that has not ended well for all parties concerned. California loses because an innovative company that generates abundant resources has gone to pastures new; Uber loses because it no longer has the possibility to test its technology in a showcase like San Francisco, while many local people lose the chance to work for the company or use its futuristic products.

California and Arizona’s respective responses resemble what has been happening for many years between the United States and Europe or between countries that attract investment and technology and those that shun it. Administrations that offer their territory as a laboratory, as places conducive to innovation and development, benefit in all kinds of ways, from projecting an image of being committed to the future, to investment, sustainable jobs and quality of life.

(En español, aquí)