Innovation is the Future Unless We Muck it Up

Innovation is the future. For anyone who believes in the ideals of free-market capitalism, this ought to be uncontroversial. Permitting entrepreneurs and pioneers to create new ways for us to bring value to each other’s lives allows the world to become an ever more prosperous and interesting place.

Malthusians once fretted about how global population growth would leave us with too many mouths to feed and not enough food. They worried that the world had finite resources and we would soon outgrow the ability to cater to even our most fundamental needs for food and water.

In reality, of course, global poverty and hunger have been on a consistent downward trend for decades thanks to capitalism making everyone better off. Innovation has played a crucial role – from new agricultural technologies to lab-grown meat, from industrial-size greenhouses to genetically modified crops, innovation has opened the door to countless new ways to more cheaply and easily produce things we all want to consume and need.

But there is a significant obstacle to this Utopian vision of ever-increasing innovation to make all our lives better – government. Unfortunately, every society in the world is plagued by the omnipresent spectre of state actors ready to pounce on any burgeoning growth or new frontier of technology. The motives for this action vary.

They might include protectionism, for example – the perceived need to safeguard existing companies and workers against the apparent threat from an insurgent new rival, even if the disruptor offers better prices and services for consumers. The way the taxi lobby fought to stop Uber in its tracks in the early days of that company’s entrance into the market is a good example.

Sometimes, though, the motivations for government interfering unnecessarily in market innovations are bafflingly incoherent. Take, for instance, the case of Swimply, a bright new start-up which serves as the “Airbnb for swimming pools” allowing people to rent out private pools by the hour, for anything between $15 and $300 depending on the facilities available.

Renting out a swimming pool is a simple idea, but one that has the potential to add a lot of value to a lot of people’s lives. Those people lucky enough to enjoy a swimming pool of their own will be able to get the most out of it by inviting others to enjoy it when they are not using it. After all, no one, no matter how dedicated, can swim all day, every day.

Similarly, those of us who would not ordinarily have access to a private swimming pool can take family and friends to enjoy one for a small fee, all the while safe in the knowledge that a reputable company is overseeing the relationship between renter and user in case of any issues. There are 8.7 million private swimming pools in homes across the U.S. – why not put them to better use by allowing their owners to share them with others?

Renting out a swimming pool is, in effect, not too different from renting a house, a driveway, a tuxedo, or a piece of specialised equipment, all of which are commonplace. Why, then, do state actors feel the need to get involved and disrupt that mutually beneficial relationship?

Sadly, in San Jose, that is exactly what has happened. Swimply has a whopping 25,000 listings across the U.S., Canada, and Australia. But in San Jose, for reasons which remain unclear, the model of renting out private swimming pools is banned. When local resident Crystal Campisi listed her pool on Swimply in 2021, she received a cease and desist letter from city code enforcement, informing her that she would be liable to pay fines as large as $1,200 per day if she continued renting out her pool.

Regulatory sandboxes could offer a solution to the problem of overzealous intervention in markets from state actors where additional regulations are unnecessary. They allow for a finite space in which entrepreneurs and innovators are free from the burden of red tape and, with the exception of key measures like consumer protections, can innovate freely. Regulatory sandboxes can serve as a great way to allow unleashed innovation within a controlled environment.

By temporarily limiting free market innovation to certain pre-determined industries or geographical areas, perhaps politicians and bureaucrats could be reassured that any potential problems they might foresee would be rooted out long before expanding that deregulation to the wider economy. But ultimately, whatever the vehicle, it is high time for governments to stop getting in the way of innovation and allow the free market to do its thing.