Chris Dixon: regulation busters are the future of tech

There are good regulations, but others only help incumbents, and some stop innovation altogether

In recent years there have been a rash of startups that seemed to be designed to take on, and disrupt, traditional industries. That includes companies like Lyft and Uber in the taxi space, HomeAway and AirBnb in the hotel space, and Tesla, which is taking on the auto industry. A number of them, not coincidentally, have run into big legal problems.

During his fireside chat at  the Post Seed Conference, Chris Dixon of Andreessen Horowitz, a firm that has made investments in a number of these types of companies, was asked what his thoughts on these types of "regulation busters." Are they a good a investment? (When it comes to Uber at least, all signs point to yes!) 

Post Seed was hosted by Vator, Bullpen Capital and Venture51.

Dixon distinguished between what he considers to be good and bad regulations.

"My personal view is that there are two types of regulations. There are clean water seems like a no-brainer, everyone supports that. We wouldn't invest in a company that... we're not investing in dirty water. A significant portion of my own view is I'm not sort of a hardcore libertarian, or something. I think there's significant number of regulations which are important and which need to be respected by everyone, including startups," he said.

"I think there's a set, like the taxi one would be a poster example, where a lot of the regulations do not seem to be protect consumers. They seem to be to protect incumbents. The Tesla stuff, with the dealerships, that's just seems flagrantly a law to protect car dealerships. So to me it varies a lot."

One example he gave of a company dealing with unnecessary regulations was Zenefits, a platform for companies to manage their human resources needs, which just recently targeted by the Utah Insurance Department for giving away services for free.

"Zenefits is providing what is clearly a positive consumer service. There's a law in Utah which is just basically protecting the existing insurance brokers and I don't anyone even, you know, with straight face pretends that it does anything but that."

In the end, what allows these types of companies to succeed is when people actually get to use them, then demand them, he said.

"With Uber and Lyft and these things, it's interesting hat because people have used these services they just know that they're good. It just takes you five minutes to use it and you know, like, you've got a rating on the driver. I lived in New York for a long time. I love New York but the cabs there, it's like Crazy Taxi. You're like dodging the fire hydrant and it's like a video game. It's just it's clearly just a better system to have a reputation system, and all the thing you would expect in these modern applications," he said.

And then there are the types of regulations that are actually a burden and do more to stop investing and innovation, than they do to help the cause.

"I think with the consumer one it's easier for consumer to see the benefit and realize the regulation is there just to to protect the incumbents. Where you run into much more difficult challenges is in areas like healthcare, where it's so complicated, so confusing, it's very easy to think that everything the FDA does is protecting you from terrible drug. I don't know a single person whose an entrepreneur in healthcare who things the FDA is doing a good job. They would day it's killed off innovation," said Dixon.

"We don’t invest, for the most part, in FDA regulated companies, nor do any other Silicon Valley VCs because the regulations are so onerous. Imagine if every time Apple released a new OS build, they had to go through a four-year regulatory process. You just can t do the kind of innovation we're used to doing, where you do iterative released if every time you do it you have to prove scientifically that there's absolutely that never ever going to be a problem. It's just not how the innovation process works."

Still, he seems to find this to be encouraging, and sees it as the next big thing in tech.

"This era of technology, it seems to be the core theme is about moving beyond bits to atoms, Meaning technology that that affects real word, and transportation and housing and healthcare and all these other things, as opposed to just moving bits around. And those areas tend to be more heavily regulated and, this issue is only beginning to be significant and will probably the defining issue of the next decade in technology."