i think emphatically not other than as richard kicked it off with a basic rule of law, that rule of law, property rights, and basic rule of law and i think apart from that we get into problems when government, whether through legislation or regulation tries to go beyond the basic principles and apply i think industry specific and sector specific rules. i think, for example, tort suits, contract disputes, fine, those are the issues that we can deal with all the time, antitrust, that regime is broadly applicable to many industries and can solve i think for example a problem like net neutrality without resort to a whole new framework of laws governing certain types of pipes and certain types of alleged natural monopolies or unnatural monopolies or private mother may i situations as mark was saying.

so i think that's the main problem when you get legislation, regulation that tries to go to that next step and get too specific. i think if the question is does techno logic progress require regulatory guidance, no, but i think from a company perk it i have and not just facebook but everybody in the valley and thinking back to our careers and sullivan and cromwell and at kirkland and working on some tell con act stuff back in the mid-90s, i think the reality of course is that companies must deal with the reality in america today and the world today of a robust regulatory state and a robust framework. that's the reality, so we can talk about that and on the practical level i think i would be with peter, of course, urging extreme caution among regulators in the computer and tech and internet sector today and a pew things in particular to mind on

that that are real challenges and real reasons why i think resorting to general principles of law and longstanding legal frameworks and antitrust being the example is the better way to approach these problems. one is the slow pace of regulation. peter alluded to this with the zynga farmville example. hypothetical that is. there is also the complexity of technology and specifically software these day. you think about i actually did work for a while at aol and time warner in the day and you think about the way aol used to ship product and peter can talk about that given his prior background but there are more discreet shipments and today there are code pushers every day. we push code every day. new lines of code written every day at facebook. there are no new products rolled out and subtle changes rolled out constantly. it is very hard for some people in different parts of the company to fully understand what exactly is going on with a

product. most of this is irrelevant to -- it is just background, irrelevant to users, but it affects how things work and how the product works and you have to be very in the weeds to understand this, very in the weeds at the company to understand this and it is very difficult almost impossible for regulators to get a good grasp on this, and i think that's different even than ten years ago given in software given the constant code push you see today and the style of pushing and engineers working on it constantly, and adopting an attitude of let's push it out there and let's just keep refining and keep making it better and better instead of waiting in the old aol style to ship a 3 about the 2 disk and you would have everybody working together towards the deadline of march 10th to ship the 3.2 disk, so the complexity and ever changing nature today is i think a reason for even more caution than normal. there is also of course

unintended consequences. my favorite example of this in our world is the vppa, the video privacy protection act, the late 80s statute that rita hastings of netflix is pushing and we support of this changing this law in congress. this is a statute many of you -- some of you may be familiar with it. it was enacted in the late 80s in the way of board hearings of all things when j bourque was nominated and an enterprising reporter from an independent paper in d.c. went to his local video shop hoping to find some interesting rentals on his -- so he paid the clerk $5 to get the rental history hoping to find something salacious and he did not and i think patton was on there and plenty of things like this, but congress was scared of this, and said let's make this illegal. let's make it illegal for a video provider to give records

of consumer rental or purchases to publicize those unless you get advanced consent from the user prior to every disclosure. okay. today move forward 20, whatever we are, 25 years, 23 years, to today. no one is going to video stores. sorry. reed hastings had a -- he even had the recognition that nobody is even getting dvds coming to the house anymore. they're getting this streaming and people like to do things for example on facebook and netflix and so just learning what their friends are renting on the side, so if larry goes on and says i want to rent film from netflix and tell my friends what i am watching because i think these are great, i think it would be fine, but and blockbuster and we

have been hit and netflix also hit with class action lawsuits under the vppa essentially that is absolutely obsolete and they're saying even if a user clicks yes, i want to participate in this program, that's technically a violation of vppa because it is not at the time of and not every single time. this is a classic my favorite example in our sector of how quickly a law that's targeted at the specific problem can become obsolete and frustrate new development. this would help the studios. this i think would help the studios market their films and gain attraction with the films and get excitement going about the films and you have a statute scaring people because have you the threat of massive damages and statutory damages and so it is that is an example of the unintended consequences and also regulatory capture i think is another problem obviously with the regulatory state today and more so than years ago. i understand that regulatory capture and arbitrage has been around forever, but i think it is more sophisticated today and

every company now has including facebook a lot of far fewer than most other companies of our size but we have plenty of people in d.c. and so do all the other companies because you're trying to defend yourself against legislation that your competitor might be pushing or regulations your competitor is pushing or bad stories or bad means on the hill that your opponents are pushing. all of those are reasons that short comings and things to be kaflg of today particularly in our sector. i would strongly support what tony said about i think in the privacy realm market based solutions are available more so than in others today. i think you see in our sector alone and social networking plenty of people have come after us and tried to position themselves as great alternatives to us on a privacy matter, so on

the basis that it provides better privacy protection. that's great. we welcome that. i think that's the right solution to that. i think that's another thing. social networks and also just the advance of technology generally have made consumers much more able, i believe, to protect their interests on things like privacy today. users, consumers, able to criticize, organize, complain, and ultimately punish companies for actual problems and actual bad experiences rather than theoretically bad experiences. if there is an actual bad experience, path had a thing the other day that can go -- that can be publicized and be out there on all the blogs even to the mainstream press within hours, within a day, and then that will have the ceo apologizing and changing course very quickly and far faster than any agency in washington could do this, and far more effectively. i see judge cavanaugh and griffith here so another point i would make is critical to any

regulatory state is effective system of judicial review. i do think that's something that it is interesting to be thinking about i think that's important in the d.c. circuit is fantastic, of course, but it is interesting to me to see the difference, the difference in agencies like the fcc and the f da which are routinely -- whose rulings are routinely challenged at the d.c. circuit and elsewhere in the judiciary versus agencies like the stanley cup a-- sec and ftc. >> not anymore. >> the sec. >> the sec, you know, there have been some of the chamber of commerce attacks have been some of those have been great, gibson's work, scalia's work on that and it has been good and beneficial to the sec because i am a believer that that sort of aggressive challenge and robust

judicial review that makes the agency better ultimately, i think the sec keeps trying and they keep losing some of these and i think little by little they're getting better on these and you look at the fcc and i think their rule makings are at some level getting better and i think that sort of judicial review is very important and particularly on this, it is important that there be an atmosphere of non-retaliation to a company or to an entity that challenges the -- you can understand why no one wants to challenge the sec, will they fear what the next step is going to be and the next chapter and the next investigation and ftc, there is a similar scarcity of challenges to ftc rule making. i think it is effective judicial review is an important piece of this regulatory stage when we think about technology. finally, just throw out and i won't address it, international harmonization, we operate essentially in every country except dictator ships where we

would love to operate there but we're blocked by the countries in question. so we're forced to deal in the legal department as a company with a myriad of rules, absolute patchwork of hundreds of country's rules addressing the same general area and that's a challenge and hinders innovation. that's a major check on innovation, i think, peter, and those are practical observations. >> thank you. >> richard may have a question. >> the next stage here, i have a million questions which i will happily ask if you guys don't, but let's let the panelists talk to each other more the moment. >> microphones over there. >> i want to make one comment particularly to what mark said. i think the battle over the internet stuff is in the short-term sense it may well turn out to be mow nop lis particular but if you let the technology go in the long-term it will be more competitive and

the dynamic element inclienz me towards light handled regulation. i want to pick up on what peter said. i thought this was about technology and the high tech industry, but i have had the miss fortune of teaching both environmental law and the fda law and the level of public ignorance and disgrace in these statutes is simply too much. pam said earlier on with respect to wicked in filming, get over it. i can't get over it. let me give you a specific story as to why i cannot. when the fda was founded in 1906, it could not regulate the manufacturer of drugs within the states. it only got the power in 1938. people talk about the level of progress. i will talk about insulin as one of these particular items. insulin was a drug invented by a man that could only be described as a lun particular who worked in canada and eventually got the support of eli lilly which was a great company at the time and doing this and this is the

progress of this. he figured out and basically in a nightmarish dream what to do, relegated to a basement laboratory and every single protection production system that he made he managed to screw up and he finally got the formula and promptly forgot it and nonetheless, from the time that he first got this idea to the time that insulin was on the market and was a grand total of less than three years. first ten people that took it, most of them died. some of them lived. by the time it got to 1930, it was in broad general use. what's the gain? peter was talking about it. let me mention what the treatment was in 1921. it was slow starvation. you slowed down metabolic processes and reduced a normal william of 120 bounds to 50 pounds and then she kroekd. the woman most known elizabeth hughes and she was down to 49 pounds at the age of 15 when they finally got insulin into her literally like lazarus

rising from the dead. she lived to the age of 73. she started to gain weight. she married by 1930, had several children and managed to self administer. the fda had only one rule, the government had only one role to play in the story, when they tried to get pure ethanol in order to do the isolation it was barred by prohibition and took the rockefeller family to get influence to allow them to do this because the government regularities thout it would do just as well as ethanol and why take something. the basic position on dynamic production is as follows that one invention which took three years, contributesed more to human beings and their welfare than every single advance with respect to diabetes in the 90 or so years that followed. those are all very important but they're in order of magnitude difference. what you have to do in technology is understand that the first generation of simple minded gets you a huge gain and the next thing is ten times as

many and get one ternt the amount. what the fda has done is killed that cycle. it is done so because of this notion that they somehow or other are going to protect people from the only things that will save them and because they come with the view that unless you could prove to our satisfaction it is safe, individuals can not make judgments. in fact, with the justice griffith and i have a violent disagreement. he wrote this elegant opinion on abigail's alliance that says people don't have a right to use a drug which passes a phase 1 title. what the question was whether or not you can rec the fda by giving it only the power to control trivial types of activities and after which the voluntary networks of private organizations, physicians, international work, will give you ten times as much information on an absolute updated basis, sort so forth. this is as far as i can see one of the longstanding public disgraces which causes huge losses with respect to innovation, huge amounts of gratuitous suffering, requires

companies to say absolutely nothing les there be retaliation and all the patients groups go against the professionals who know how to do quote, unquote science and most using techniques that are 60 years old and don't understand what they're about. that's the issue at stake in the larger issue of regulation and unless we fix that with up with the fda and the epa and the chemicals and so forth, we're con signed to long-term mediocrity and the rest of the world is a little better than we are on some of these issues and worse on others and this is the central issue of our time and we have so locked ourselves in starting with wic either and phil better and fathering through with the fiendish regulatory program in which everybody knows best what individuals should do except the individuals themselves. i just mention one thing. my late mother-in-law got graf is and this woman by the same she figured out what it was knew more about the disease than most of the physicians who treated her and constantly gave her all the information going out.

one of the things that you do when you stop this kind of information is all the hierarchal knock that comes from the accumulation of the spirit, the system going upward, is killed in favor of a bunch of pure accurates that only know how to re rj which. that's why it is important. the individual mandate in the grand seem of things is a pilgdsy, unimportant, insignificant, stupid kind of regulation. what really matters is the long-term flow of technology and that's what we're killing off. to pam, i can't forget about it. thank you. >> go ahead. >> this ties into peter's question, right, and peter talked i think very persuasively about some of the problems we have had in innovation and what he called the "what" and the why

story which i think peter suggests, well, the problem is regulation and richard picks that up directly. it is not my brief here to defend the fda. i actually think that richard may be right on this although i will note that there are some pretty compelling stories on the other side that got the fda involved in this in the first place so the trade offs turned out to be hard, right, from an economic perspective, not to richard. >> not hard, period. >> well, so we will -- i think there are circumstances in which decisions that individuals make have significant effects on other people in the world, whether it is vaccination questions, small pox, or the like, and there are circumstances in which we actually care about not just what individuals decide but how those individual decisions affect everyone else. the broader question, though, abstracts from the fda in which i agree that the fda has in fact

made innovation in the drug industry much harder, the broader question i think is how well we can map this slowdown across a range of formerly innovative sectors to regulatory sclerosis, and i am not sure that mapping is necessarily there. i am not saying it is not. some things we want to know. one is, well, we do have a couple of substantial exceptions and, boy, they're big exceptions. it is a pretty bleak picture that peter painted but if you look at actually just the computer and internet world and the financial world, there is a heck of a lot of value and wealth created here that was unimaginable 40 years ago in communications but also in terms of the things that computer technology does in all of those other industries. we have had productivity gains in lots of industries that seem like they're not innovative

industries, whether it is the steel industry or anything else largely because we have had computer innovation in those industries. we're innovating and maybe innovating in other areas, too, and we've got seemingly interesting movements in robotics and seemingly interesting movements in nanomaterials. ten years from now maybe we will look back and say that was the dawn of the space era and something that we all thought for most of my adult life is dead and now seems to be maybe waking up, and i guess two other points i will note on the why question that give me some pause. make me want to think further about this. one is the timeframe that peter identifies as when innovation stopped is largely speaking the timeframe not in which regulations started getting really heavy and the government started getting really involved in our lives, for the most part, the opposite, right, almost maps to the reagan revolution, to trying to back away from too

much regulation and while i don't think that we have in fact significantly reduced the size of government in any meaningful way in those periods, it doesn't seem like there is a sort of linear relationship between amount of regulation and slowdown in these industries. the final point i guess there to make is regulation is a national thing, but technology presumably isn't. so one thing that's worth asking is where are all the other countries that we might expect to be picking up the slack? you can tell some of those stories for similar countries in europe and whatnot but i remember in the mid-1980s when everybody in the country was absolutely convinced that by 2000 we're all going to have to speak japanese because japan is

going to be running and eat our lunch and driving technological change and u.s. is falling behind and it is going to be a disaster. now we say the same thing about china and maybe it will turn out to be true 20 years from now and maybe it won't. if the story is a regulatory story i think you have to do a fair bit of puzzling about why different countries with very different regulatory regimes don't seem to be innovating in places we're not. >> let me give suggested answers to all the different questions you raise there. in my mind the basic dichotomy world of bits versus world of stuff. stuff was regulated by the epa. i believe that was founded in 1971. >> '70. >> close enough for government work. and so i think that would not signal issue i would flag. i think that the fda bake

relentlessly more onerous as the decades passed and i think the 70s were also a major inflection point with the fda. >> '62. >> i think that the sort of all sorts of other areas we could point to where the load went up quite a bit of that time. i was not debating about tax policy and in my opinion we're at a point marginal tax rates are not the most important thing. if you were to reduce tax rates marginally, it doesn't solve the problem we need to construct hundreds of new nuclear react jors in this country quickly, and i personally wouldn't mind having slightly higher taxes if i could actually have the freedom to spend the other money on things i would like to spend it on. if we had as it i am living in a country for many purposes the effective tax rate is 100%. i am not allowed to spend any of my money on innovative drugs. i am not allowed to spend any of my noen on super sonic private

jets and on and on down the line. i would say the i think there was an important slowdown that took place around that time. you can map it onto a whole series of other things that shifted culturely, from science fiscal as a literary genre collapsed and technology described as things that are dangerous and don't work and when was the last positive sci-fi movie that's not a star trek rerun and i think when you take this issue seriously, i think the measurement question of how we measure these things is very hard. i suggest an economic measure. and there has been a deceleration in wages. i think the international question is very interesting. there are good reasons to hope that we will head towards a more multi-polar world and maybe innovation will start picking up in other countries in decades to

come, but the reality is that most of the world doesn't really need to innovate. the emerging markets are poor countries and they can do well just by coping things that work, and that's basically what the developing world is doing. it is becoming developed. it is basically convergence theory of globalization. if you're a talented person in china you should open a mcdonald's franchise or a coke franchise or something like that. that's the easiest thing to do. the only place people need to really innovate is in the developed world, japan, western europe, u.s., all of which suffer from the heavy regulatory load in one form or another so we're not really living in a world of hundreds of countries where people are free to do whatever they can. parenthetically i think the shift in the language from first world and third world which was the way the didchotomy existed n the 60s to a developing world is another illustration of this tech slowdown.

first world versus third world is agnostic on the question of globalization and generally positive on technological innovation and developed in developing worlds is bullish on globalization and implicitly bearish on technology because the developed countries are those countries where by definition nothing new can happen. they're developed. okay. tony wanted to -- this is quick. it relates to the long-term flow of innovation richard mentioned. it is a little more about the what to do and what's enough. it occurred to me that the epoch of great innovation that peter talked about, the planes, the rockets, were a direct function of substantial government investment as was the internet and in fact the entire semiconductor industry, and nuclear bombs, too. there is a very substantial amount of government investment there and you can say, well, it has become politicized and the question is, okay, can you

deplit size it or do you just withdraw as the government entirely and there is a distinctions to be made, i think, personally between investment versus regulation and it is possible to deregulate and still invest. it goes back to what i said before which is you cultivate and you invest and you get out of the way. what i want to think about is whether the problem here is that we spent so much money doing regulation badly that we have wasted all the money we might be able to use to invest sensibly and for that matter poison everybody's reactions to any government involvement whatsoever because i think if you spend too much time focusing on how bad regulation can be which it very well can be and often is and i think all the points made here so far are exactly right, there are other roles for government to play in investment and i think they tend to eclipse what i think is some potential for a positive role to be played by the government here deregulation but not

deinvestment. >> just to brief -- >> i will let you go but you guys should if you have questions now would be the time to start lining up. thank you. >> one sentence on tony's point. i am philosophically inclined to that view as well that the government has positive things to do although i will note in defense of peter's position that the government expenditures in science and technology are by in large in the industry that is we don't see them actually to be seeing substantial innovation, right. the government spends lots of money in medical, pharmaceutical, biotech, alternative energy and so forth, not in software or internet research particularly. >> that's because they have to offset the difficulties on the regulatory side. what i think is correct what tony said is the book that you should read is by vanner bush in 1945, the endless frontier, and i basically got it right and the

one sentence version of it was we subsidize re urch up to the point of proof of principle and after that we run it through the patent system and the government's repayment is a nonexclusive license of any technology used with government funds otherwise do with it what you will and that i think is what you have said, that's the way i best understand it, and the question is how much of it comes private and how much public and what is interesting is on the bioscience side the original grants were quite small and what has happened since that time is that if you look at public investments now, they all shifted from basic infrastructure including signs to transfer payments which is the other great thing that peter did not mention. the switch over is just enormous, and most of the innovation programs on infrastructure are disguised transfer programs because you get labor protections and all the other stuff built in making them totally corrupt. the damage done by the new deal on structural issues we have yet to live down and managed to