Bill Gurley’s Tirade Against Washington and Regulatory Capture Revisited

Podcast Ep. 66 with the World’s Greatest Living Regulatory Economist - Sam Peltzman

Seen this last week?

Bill Gurley was on fire.

His anecdotes a venture capitalist confronted with the incumbent industry & regulators together ganging up on the disruptors are telling.

Gurley quoted George Stigler's adage that "as a rule regulation is acquired by the industry and is designed and operated primarily for its benefit."

George Stigler was a famed Chicago School free-market economist.

That is an intuitive story: big business wants to be regulated, and seeks to be regulated to fend off competition by new entrants.

The problem with the story is: it’s only partly true.

Sam Peltzman is professor emeritus at the University of Chicago.

Sam is was a graduate student to Milton Friedman and a contemporary to George Stigler, the famous economist who coined the term "regulatory capture".

He has thought and written about this question for 50+ years.

The truth is simpler, but even more sinister.

We learn in this episode that it's not industry that seeks to be regulated. Even the pharma industry did not proactively lobby for more regulations - they resisted the landmark Kefeuver-Harris amendments (1963) that shaped the modern FDA.

It's regulators who seek to regulate for their benefit.

The industry players lobby to be on the better side of the new regulation, but they’re passive takers of the action. They don’t typically go out to seek regulation.

Bill Gurley might be on the right track commenting on Elizabeth Warren's behaviour towards tech: "You attack 'em they have to come to you.”

This is a very nuanced episode on what might be the most important but least understood problem for greater progress in technology.

Sam Peltzman's legacy helps us to understand what's coming at us.

Yet his message is deeply optimistic: technology is still unstoppable. It can only be temporarily slowed down, not eliminated.