more on wall street but also because they were not allowed to build rockets. [ applause ] >> and supersonic planes and so on down the line. i think there were many different variables that might have come together. my own sense is that we have to think about the very heavy regulatory different between these areas. and this has been a big driver of this sort of heavy environmental mentality has drichb the regulation of the world of stuff. and the world of bits has progressed because it's been relatively unregulated. the thought experiment is if you thought of a company like zynga with the game farmville and you said, we have to take that through fda approval before we allow them to release the game and we have to see whether -- we have to have a phase, maybe

we'll skip the animal trial. let's go straight to the phase two and phase three trials and you have to test for efficacy and safety. you have to test, is it safe for people to use, double blind test with lots of different people and then you have to have a test for efficacy. does it improve your brain functioning? if it doesn't do that, you can't do it. if you change one line of code, you have to start all over from scratch. and you would not have a video game industry in this country or any sort of entertainment industry if you had that. we see this in an economy with stagnant wages. median wage has been flat since 1973. increasingly a broken political system which is becoming a zero

sum political system when there is no growth. there's basically a winner for every winner. a loser for every winner. obviously the political system finds it much harder to compromise where everybody coming out ahead. there's no way to craft such compromise. that's the basic understanding of what's happening. we have been in mass i have denial about this. i think the denial has manifested itself in a series of destructive bubbles that are predicated on continued progress that did not quite happen. i personally think that even the idea of science as a public good is not quite accurate and in some important ways the government playsed a big role in destroying science as well. it's a libertarian account of the history of science we had some very talented scientists who do a lot of good work in the early 20th century. in the 30s and 40s, government was able to accelerate science on a one time basis by taking those talented scientists,

giving them a lot of money and having them produce more, probably the single biggest thing they produced was the nuclear bomb. and again, i think it would be interesting to see what people on the left think of that as the single illustration of government funded science. "the new york times" op-ed on the day after hiroshima in 1945 made arguments very similar to the ones about science being a public good and sort of quoting it now almost verbatim that the people who believe that science should be a private matter and not a public good had a lot of answering to do the army having directed scientists had been able to give great invention to the world, the nuclear bomb. this contribution had been made in three short years whereas scientists working on their own would have taken a half a century to make that sort of progress. i think the problem is at the

tail end of it science becomes politicized and you basically have scientists you have to fight each other to get the government money. i think that just like the idea of a philosopher king is a bit of an oxy mor roan. the idea of a scientist and politician is an oxy moron. we have 100 times as many scientists as we did in 1920. it's perhaps less than 1% what it was in 1920. i think that's the rough math. i believe that it would be helpful to have a very comprehensive discussion as to how we get out of this sort of situation we find ourselves in. i think the first step is to acknowledge that we are -- that we are finding ourselves -- that we've been basically in a desert for something like 40 years. if you want to get out of the desert, you have to acknowledge that you're in one and not in

some sort of enchanted forest. [ applause ] >> i would be interested to get your perspective of someone on the trenches. let's step back to where we started and your sort of take on government regulation and its effect on what you're trying to do with technology. >> i start by saying -- it make for the some of the most interesting board meetings possible. some of these principals coming to play. great to be here, by the way. peter and i are in the minority

in silicon valley in general. i agree with mark that i agree a lot of what people said i won't take too much time here. i will try to give a bit of a practical reflection. i think the question as i saw in the program was something along the lines of does technological progress require regulatory guidance. i'm with peter on this, other than richard kicked it off with a basic rule of law. the rule of law i think apart from that we get to problems when government whether through legislation or regulation tries to go beyond some of the basic principals and apply industry

specific and sector specific rules. i think for example, you know, contract disputes are fine. those are the issues that we deal with all the time. and i trust that regime is broadly applicable to many, many industries and can solve i think for example an example like net neutrality without resorting to a whole frame works of law governing certain types of alleged monopolies or private mother may i situations as mark was saying. that's the main problem when you get legislation and regulation that tries to go to the next step and get too specific. so i think the -- if the question is does technological require leglation, no. from a company's perspective not just facebook, but everybody in the valley and thinking back to

our careers working on some some of the telecom act stuff many the mid '90s, i think the reality of course is the companies must deal with the reality in america today in the world today of a robust, a robust regulatory estate and a robust regulatory framework. that's the reality. we have talk ant that on a practical level, i think the i would be with peter urging extreme caution about regulators in the computer and tech and internet sector today. a few things in particular come to mind on that that are real challenges for later and real reasons why resorting to general principals of law and anti-frame being the example is the better way to approach these problems. one is the slow pace of regulation. peter eluded to this with the zynga farmville example.

the hypothetical. there's the complexity of technology and specific software these days. you think about i actually did work for a while at aol time warner back in the day. you think about the way aol used to ship product. there are more discreet shipments. today the code pushes every day. we push code every single day at facebook. there are new products rolled out and subtle changes in products rolled out constantly. it's 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. it's just background is i recall to users. it affects how thinks work. how the product actually works. you have to be very in the weeds to understand this. very in the weeds at the company to understand this. it's very difficult. almost impossible for regulators to get a good grasp on this.

it's different even than ten years ago in software given the constant code push that you see today at that style of pushing for that and engineers working on it constantly. and adopting an attitude of hey, let's push it out there and let's keep refining it and keep make it better and better instead of waiting in the old aol style to ship a 3.2 disc and everyone is working together toward that deadline of march 10th to ship the 3.2 disc. so the complexity and ever changing nature today is i think a reason for even more caution than normal. there's of course unintended consequences. my favorite example of this in your world is the vppa, the video privacy protection act this late 80s statute that rita hastings of netflix is pushing and supporting us to change this law in congress. this was a statute some of you may be familiar with it. it was enacted in the late 80s

in the wake of the hearings of all things when judge bourke was nominated some enterprising reporter from an independent paper in d.c. went to his local video shop hoping to find some interesting rentals. so he paid the clerk $5 to get his rental history hoping to find something salacious and of course he did not. i think patton was probably on there. plenty of things like this. congress said let's make this illegal to publicize those unless you get advanced consent from the user prior to every disclosure. today no one's going to video

stores. sorry, hastings had a -- he even had that recognition that no one's getting dvds coming to their house anymore. people are getting it streaming. people like to do things on facebook and netflix so just learning what their friends are renting on the side. if larry goes on and says if i want to -- i want to rent films from netflix and tell my friends what i'm watching because i think these are great, i think it would be fine. this is my favorite example in our sector of how quickly a law

that's targeted at that specific problem can become obsolete and frustrate new development. this should be a great way. this would help the studios. this i think would help the studios market their films, gain traction of their films. get excitement going about their films and a statute that's scaring people because you have the threat of massive damages. statutory damages. it is that's an example of unintended consequences. also regulatory capture i think is another problem with the leg latory state today. i understand that regulatory capture and arbitrage has been around forever. i think it's more sophisticated today. every company has including facebook we have a lot of far fewer than most other companies of our size, we have plenty of people in d.c. and so do all other companies you're trying to defend yourself against legislation that your competitor might be pushing or regulations that your competitor might be

pushing. so all those are reasons that shortcomings of the regulatory state and things careful today in particular of our sector. market based solutions are available more so than in others today. in our sector alone in essential networks plenty of people have come after us and tried to position themselves as great alternatives to us on. there are market solution people expressing markets and maybe social network on better privacy protection.

if there's an actually bad experience, pat had this thing the other day, that can do -- that would be on the blogs to the mainstream press within hours. within a day. and then they'll have the ceo apologizing and changing course very quickly. far faster than any agency in washington could do this and far more effective. another point i'd make is critical to any regulatory state is in effectiveness with judicial review. i do think that's something that it's interesting to me thinking about i think that's important and fantastic it's interesting to me to see the difference in

agencies like the fcc and fda whose rulings are rue tenially challenged at the d.c. circuit and elsewhere in the judiciary versus agencies like the fcc and ftc which are more rarely challenged. the sec there have been some chamber of commerce attacks. i think it's been benefit to the sec. i'm a believer that sort of aggressive challenge and rebous judicial review that makes the agency better, ultimately. i think the sec keeps trying. they keep losing some of these. little by little they're getting better. you look at the fcc i think their rule makings are at some level getting better. i think that sort of judicial review is very important. and particularly on this, it's important that there be an

atmosphere of nonretaliation to a company or entity that challenges -- you can understand why no one wants to challenge an sec rule. they fear what the next step is going to be, what the next investigation is going to be. ftc a similar conspiracy and challenges to ftc rule making. i think that's effective judicial reviews an important piece of this regulatory state when you think about technology. finally i throw out, by international harmonization. we operate in essentially every country except dictatorships. we would love to operate there, but we are blocked. we're forced to deal with a patch work of hundreds of countries' rules addressing the same general dwrair. that's a challenge.

that's a major check on innovation. those are some observations. >> i have a million questions which i will happily ask if you don't. >> i want to make one comment to about what particularly what mark said. i think the battle over the internet stuff is in a short-term sense it may well turn out to be relatively monopolistic. the technology many the long-term will become more competitive and the dynamic element is what inclines me toward light handed regulation. i thought this was a panel about technology and the high tech industry. i have had the misfortune 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, just get

over it. i can't get over it. [ applause ] >> and let me give you a specific story as to why i cannot. when the fda was founded in 1906 it could not regulate the manufacture of drugs within the states. it only got that power in 1938. people were talking about the level of progress. i'm going to talk about insulin. insulin was a drug invent bd amman who could only be described as a con trained lunatic who worked in canada and got the support of eli lilly which was a great company at the time. this is the progress of this. he figured out basically in a nightmarish dream what to do. he was relegated to a basement laboratory. every production he screwed up. he finally got the formula, then importantly forgot it. nonetheless from the time that he first got this idea to the time that insulin was on the

market was a grand total of less than three years. first ten people who took it most of them died. some of them lived. by the time it got to 1930 it was in broad spread general use. what's the game? let me mention what the treatment for diabetes was in 1921. it was slow starvation. you slowed down metabolic processes. you reduced a normal woman of 120 pounds to 50 pounds and then she crooked. elizabeth hughes was the daughter of charles evabs hughes. she was down to 49 pounds at the age of 15. when they finally got insulin into her it was like laz rus rising from the dead. she lived to the age of 73. she started to gain weight. married, had several children. the fda had only one rule, the government had one role to play in that story that was when they tried to get pure ethanol in order to do the isolation it was barred by prohibition and it took the rockefeller family to

allow them to do this because the government regulators thought methanol would do just as well as ethanol. now the basic position on dynamic production is as follows. which one invention which took three years ago contributed more to human beings and their welfare than every single advance with respect to diabetes in the 90 or so years that has followed. those have all been 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 truths gets you a huge gain and the next thing is ten times as much and get .1 the amount. what the fda has done is killed that cycle. it has done so because of the notion that they're somehow going to protect people from the things that save them and they come with the view that unless you can prove to our satisfaction that says individuals cannot make judgments. in fact, here's where the justice and i have a violent

disagreement. he wrote this elegant opinion on that says people don't have a right to use a drug that -- the question was whether or not you can wreck the fda by giving it only the power to control trivial types of activities after which the voluntary networks of private organizations, physicians, international work will give you ten times as much information on an absolute updated basis, so forth. this is essentially as far as i can see one of the long standing public disgraces which causes huge losses with respect to innovation. huge amounts of gratuitous suffering. requires companies to say absolutely nothing. and all the patient groups who have to go against all the professionals most of them are using techniques 60 years old. that's what's at stake in the larger issue about regulation. unless we fix that thing up with the fda and the epa and all the drugs on chemicals and so forth

we are resigned to a long-term mediocrity. the rest of the world is a little better than we are in some of the issues. worse others. this is the central issue of our time. we have so locked ourselves in with this fiendish regulatory program in which everybody knows best for what individuals should do except for the individuals themselves. i'll mention one thing. my late mother-in-law, this woman by the time she figured out what it was, knew more about that disease than northeast most of the physicians who treated her and constantly gave her all the information going on. one of the things you do when you shop this kind of information is all the knowledge that comes from the accumulation is killed in favor of a bunch of bureaucrats who only know how to read charts which they don't understand. this is what we have to fight about. the individual mandate in the grand scheme of things is

insignificant stupid kind of regulation. what really matters is the long-term flow of technology that's what we're killing off. back to pam, i can't forget about it. thank you. [ applause ] >> yes. go ahead. >> it ties it into peter's question. peter talked persuasively about some of the problems we've had in innovation and what he called the white. the why story, which i think richard -- peter has sort of suggests the problem is regulation and richard picks that up directly. it is not my brief here to defend the fda. i actually think -- 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 -- that got the fda involved in this in the first place. the tradeoff is hard from an economic perspective. not to richard. >> they're not hard, period. >> 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's vaccinations questions, smallpox or the like there are circumstances in which we care not just what individuals decide, but how the individual decisions affect everyone else. 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 slow down across a range of in a formerly innovative sectors to regulatory sle row sis. i'm not sure that mapping is

necessarily there. i'm not saying it's not. some things we want to know. one is we do have a couple of substantial exceptions. boy, they're big exceptions. it's a pretty weak picture that peter painted. if you look at actually just the computer and internet world or the financial world, there's a heck of a lot of value and wealth created here that was unimaginable 40 years ago in communications, but also in terms of all the things the computer technology does in all of those other industries. we've had productivity gains in lots of industries that seem like they're not innovative industry, the steel industry or anything else largely because we've had come computer innovation in those industries. we're innovating and maybe we're innovating in other areas, too. we've got seemingly interesting movements in robotics. seemingly interesting movements in nano materials. ten years from now maybe we'll look at that and say that was a

dawn of the space era. something we thought for most of my life has been dead. now seems to be waking up. there's two other points i'll note on the why question that give me some pause. make me want to think further about this. one is that the time frame that peter identifies as when innovation stopped, is largely speaking the time frame not in which regulation started getting really heavy, and the government started getting really involved in our lives. for the most part it's been the opposite. it 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's a sort of linear relationship between amount of regulation and a slow down in these industries. the final point, i guess to make

is regulation is a national thing. but technology presumably isn't. and so one thing worth asking is where are the other countries that expect to be picking up the slack. you can tell some of those similar stories for countries in europe and whatnot. i remember in the mid 1980s when everybody in the country was absolutely co-convinced that, you know, by 2000 we're all going to have to speak japanese because japan is going to eat our lunch. they're driving technological change. the u.s. is falling behind and it's going to be a disaster. now we say the same thing about china, maybe it will be true, maybe it won't. 3 the story is a regulatory story, i think you've got to do a fair bit about puzzling why different countries with very different regulatory regimes

don't seem to be innovating in places that we're not. >> let me give a few suggested answers to all the different questions you raise there. in my mind the basic dichotomy is world of bits versus world of stuff. stuff was regulated by the epa i believe that was founded in 1971. >> 1970. close enough for government work. that would be the single issue that i would flag. i think the fda became relentlessly more own rus as the decades passed. and i think 70s were a major inflection point with the fda. >> 1962. >> i think that. >> i think there's all sorts of other areas where the load went up at that time. i was not debating about tax