Steve Blank on Bill Gurley on Regulatory Capture

Steve Blank is one of my idols. He’s the pioneer of the “lean startup” method. His books are a thorough version of the popular book.

Not only did he build 10 successful companies, he’s a prolific thinker on defence, government and the history of Silicon Valley.

He wrote a post why Bill Gurley is wrong on regulatory capture.

His answer is hidden. You have to read the article carefully.

It’s not what you think. Blank largely thinks Gurley is correct that government regulations are a negative force on entrepreneurship.

Bill Gurley has the direction wrong.

Steve Blank:

“While tech hadn’t come to Washington, Washington came for the tech industry. Until then no tech company had an organized lobbying organization of significance in DC.”

This is an insight that took me 18 months to see clearly.

Regulatory capture is a satisfying theory. Both government and industry are bad in this story. It feels comfortable to satisfy different sides of the political spectrum by being able to say both “government is bad” and “corporations are bad”.

Blank says “it wasn’t us”, meaning the tech industry.

Guess what, even pharma didn’t want the 1962 Kefeuver-Harris amendments to the FDA. They didn’t go out to lobby for them. They initially went against them.

I learned that from Sam Peltzman, the greatest living regulatory economist:

This is an insight worth repeating: regulatory capture is not industry going out to get government regulation. They just adapt to mitigate the damage.

The real story is that rent-seekers sitting in public office regulate industry for their benefit, not the other way around like George Stigler thought.

Bill Gurley correctly observed why Elizabeth Warren is coming after tech:

“You attack 'em they have to come to you.”