The Destructive Compound Effect of Regulations

Let us pretend that it is 2006. Button’d MP3 players and mobile phones are all the rage. Apple’s iPod comes out with a touch screen, however, the FDA and CDC decide that touch screens can cause serious sanitary issues and spread diseases. So they ban them.

What is the effect of this regulation?

• Consumers will not be able to use a touch screen MP3 player

• Companies would not be able to produce touch screen MP3 players

• Workers who worked for those companies producing touch screen MP3 players would either do something else or lose their job.

Is that all? There is much much more..

• Investors that would have invested their money in such companies, now have to invest it elsewhere (malinvestment)

• The expertise and innovation in the area of touch screen development would be lost.

• Adjacent products would never come into existence such as touch screen smart phones, touch screen iPads and touch screen laptops.

Is that all? Not even close..

• Companies that would have developed apps for touch screen smart phones and iPads would never have existed.

• Consumers would never have benefited from those apps

• Software developers would never have been needed to write those apps

• Investment would never have been there for developing those apps

• Entire industries like office buildings, restaurants, catering, apartments that would have served those companies and employees developing those apps would not have been there (or would have provided service to other but fewer companies and employees)

• Smart phones would not have been able to be as easy to use and therefore have been less popular. Fewer companies would make and sell them (bring back Blackberry and Nokia)

• People employed around the world who assemble smart phones would not have had work

• Poorer countries that rely on smart phones for internet access, communication and even money transactions would have far far fewer phones to help its people.

The problem is that we would have never have known what we have missed and we do not know what we are missing today from regulations.