I have long believed that our region has a specific model of technology entrepreneurship that is different from models elsewhere. Last week, another member of our community provided his perspective on what that model is, and why our region is an innovation hotbed with boundless entrepreneurial potential.
Evan Burfield is best known in our region as a founder of 1776 and Union. I spoke with him last week about his new book, “Regulatory Hacking, a Playbook for Startups,” and asked him why he wrote it.
Burfield explained that while managing 1776 and Union, he has often been confronted with startups here and elsewhere that were applying what Burfield described as the “Silicon Valley playbook.” He was referring to a company creation viewpoint that encourages companies to ignore prevailing political and government restraints and to avoid working with the government as a customer or partner.
He just didn’t understand how this approach made any sense for growing technology businesses. Silicon Valley mythology dictates that issues of regulation and government should be ignored when startup entrepreneurs create their business ideas. The realities of technology business growth are far more constrained by government regulation and politics than many like to admit. Regulating technology is the natural result of its growing complexity and of the risks facing citizens as a result of that increase in complexity. Arguing that regulation shouldn’t apply to technology is mistaken, he concluded, because “regulation is how government addresses risks.”
Perhaps there is a distinction to be made between regulating markets – say antitrust or internet access – and regulating the application of technology that could cause physical or social harm. Market regulation might be seen as more partisan or more likely to vary in application as political power shifts. However, from Burfield’s perspective, regulation of technology was likely to exist and affect startup growth whoever was in power, because as technology continues to become more complex, its ability to cause harm also increases.
His conclusion, therefore, is that at a minimum, budding entrepreneurs must be ready to understand and work within the regulatory environment. But Burfield believes that they should also be creative and identify opportunities where regulations are likely to change, or where the entrepreneur can lead a change, so as to position their businesses to accelerate their growth. He calls the process of looking at regulation in this way “regulatory hacking.”
Burfield is quick to add that regulatory hacking is not ignoring or dismissing rules and regulatory expectations. This is a key point: Regulatory hacking is not finding ways to push externalities onto others by ignoring regulation. It is finding ways to constructively work within regulations to do something that serves a social purpose.
As Burfield looks that the realities of technology and regulation, he sees a distinct opportunity for our region’s innovators to lead the nation in creating businesses that will balance regulation, political considerations and economic opportunity. Technologies such as artificial intelligence, sensors, blockchain and others will change our economy for the better only if political concerns and regulation are properly addressed. “The exciting new technologies that are starting to come to market are going to be much more consequential and risker,” is Burfield’s prediction.
Regulatory hacking very much describes a phenomenon that was revealed in my prior work with The 2030 Group and the Greater Washington Partnership. Our region grows our largest and most successful businesses when the business takes advantage of the interplay between regulation and entrepreneurship. MCI, AOL, Capital One and many others have grown by taking advantage of proximity to our nation’s capital and growing within regulatory constraints and pushing the boundaries in constructive ways. Burfield’s work therefore reinforces what makes our region unique as a business community and makes it relevant for technology startup entrepreneurs.
Although our region has this unique opportunity, we should not be complacent. Burfield points out that many entrepreneurs and governments around the world are actively embracing regulatory hacking. They are thinking ahead, anticipating how to grow technology businesses that will properly balance risks with economic opportunities. Burfield is dismayed that the current national political environment is not looking forward but instead is transfixed by “economic arguments that feel ripped from the 1950s or even the 1920s.”
My conversation with Burfield about his new book reminded me why our region is such an engrossing business community to work in. The interplay of politics, regulations and technology that will shape the economic destiny of billions of people occurs in our midst every day.