When Lack of Understanding about Innovation Can Prove to be Perilous

“Not all regulation is bad,” writes former Venezuela Presidential Chief of Staff Beatrice Rangel. “Particularly when it triggers innovation. Wisdom lays in valuing the difference between the grass and the flowers.

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The world was rather amazed to see the U.S. automotive industry on the wrong side of the regulatory lobby. That is to say, the side that would like to keep regulations.

Usually any industry whether it is Silicon Valley-based or Detroit-based pays enormous fees to a host of lawyers, lobbyists and communicators to freeze the regulatory landscape.

It was thus truly amazing to see the anti-regulation lobby oppose the Trump Administration’s rewind of the environmental protection rules created under the Obama Administration.

These norms aimed at propelling greater fossil fuel substitution and savings.

Two aspects explain such an unusual behavior.

First, the costs of compliance have already been made and factored into the prices of cars. Rolling this back is going to prove to be costly and, worse, uncompetitive. Indeed, once the U.S. adopted the legislation, the rest of the world followed and foreign governments are not about to roll back environmental protection. As a result, American cars will be less competitive in the medium run than those of the rest of the world.

It is particularly important to bear in mind that the auto industry is increasingly catering to the demands of Millennials. This generation cohort does not take environmental protection light and does not like to buy cars. They are on the sharing mode and the save the planet crusade. This of course is ill understood by the Trump Baby Boomers.

Second, all car manufacturers are now aware that the environmental protection rules have triggered a host of innovations that are making cars safer and more efficient. These innovations have percolated through other industries promoting a big bang in technology penetration.

The introduction of navigators for instance opened a new line of business for radio services such as music, news and sports channels that are now uploaded to satellites and downloaded to vehicles creating a brand new business for the entertainment industry and radio services.

Paints have been made more resilient to weather conditions and to impacts from collisions.

In short, the course to make cars safer, faster, cleaner and cheaper has attracted other beneficial travelers to the innovation road and these have made America stronger and more competitive.

All this seems to be ignored by the current U.S. administration that in its zeal to erase from the face of earth all vestiges of public policy enacted by the Obama Administration is throwing the baby out with the bath water.

And while the Obama years were too heavy on regulation not all regulation is bad. Particularly when it triggers innovation. Wisdom lays in valuing the difference between the grass and the flowers.

Published by LAHT.com on Sunday August 5th, 2018

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