Regulation is one of the most controversial topics in politics. Some people think that it is necessary to prevent us all from descending into a survival-of-the-fittest dystopian nightmare, while others see it as a barrier to innovation.
Regulation seems like a good idea when you first encounter it. After all, society needs rules, right? But when you dig a little deeper into it, you soon discover some quite disturbing issues.
Firstly, a lot of regulation seems quite arbitrary and not particularly protective of people and property. There are lots of regulations that companies have to comply with that don’t actually add value to themselves or the wider society. They appear to be more of an exercise to justify the existence of bureaucracies.
Secondly, regulation is incredibly costly. Most governments have no idea how much compliance costs are shaving off GDP. But someplace estimates in the region of around 30 to 40 percent, meaning that without so much regulation, we could be vastly wealthier than we are today.
Finally, there are legal risks. Nobody who runs a peaceful business wants agents from the government arriving at their premises, demanding that they do something differently, but it happens.
In truth, entrepreneurs should love deregulation. It allows them to act more freely and uncover profit opportunities that wouldn’t otherwise have become available.
Decreased Barriers To Entry
Getting into some sectors is challenging. If you want to set up a bank, for instance, you have to jump through a mountain of regulatory hurdles, all at vast expense.
With deregulation, however, these costs typically come down considerably. When governments scrap rules, they level the playing field, allowing entrepreneurs with fewer resources to challenge established players. The industry as a whole hates it because it means competition and description. But that’s what entrepreneurs are all about!
You can see the effects of lower barriers to entry in Ambit energy plans. The energy sector was once one of the most tightly regulated and government-controlled in the country. But handing it over to the private sector has created dozens of new opportunities for people to seek profits. And it’s leading to a more efficient and vibrant energy sector overall.
Deregulation allows the most efficient companies to thrive. Firms in deregulated markets can no longer hide behind statutes to protect themselves from upstart firms. Instead, they must either improve their processes or die out.
Achieving better efficiency, however, tends to be something that entrepreneurs are good at doing. People looking at problems with fresh eyes are often able to identify factors holding the company back and correct them.
More Scope To Develop Ideas
Why don’t we have jetpacks or flying cars yet? The reason is mainly regulation.
Technology is racing ahead in the 21st century. There are so many opportunities to build new products that make people’s lives better. Practically anyone today could become an entrepreneur given the current circumstances.
However, government agencies will frequently make it difficult to deploy those ideas under the guise of safety. We don’t have flying cars, for instance, because the government doesn’t believe that the private sector and individual consumers are able to use them responsibly.
That attitude, however, is changing. We’ve already seen firms like Uber receive the go-ahead to trial flying cars between airports and city centers. And Google is already ferrying people around Phoenix, Arizona, in driverless taxis.
The point is this: deregulation means fewer rules which means that creative entrepreneurs are much freer to experiment with their ideas. With less worry and risk of failure, more people are likely to take up the challenge.
In the 1960s and 1970s, civil aviation authorities deregulated the airline industry. The goal was to break the government-sponsored monopolies and give people more choice.
Once the market was allowed to operate, prices came down considerably. Instead of paying a week’s wages to fly across the country, you could do it for a day’s pay or less. That meant a much bigger market for new companies to target and access.
Larger markets aren’t necessarily a good thing for companies, but they’re certainly not a bad thing for startups looking to grab a slice of the pie for themselves. Any company offering innovative products and services can get a bigger reward for their efforts.
Entrepreneurs love this fact because it means that they can share the benefits of their operations with more people. For many, the goal isn’t to make money – it’s to create value. Companies have a goal to ensure that people benefit from their products. And they intend to share them with as many people as possible.
The level of regulation across the economy reached new heights after the year 2000 with government departments adding new rules every week it seemed. In an environment like that, it was hard for the average business to keep pace with the changes, and most entrepreneurs felt like they were managing their companies for the public interest, not private gain. For many, it was a soul-destroying experience.
But from around 2016, massive deregulation began kicking in, and company leaders finally found themselves more in control of their own affairs.
Fundamentally, deregulation gives entrepreneurs more power. They’re able to make decisions independently of the jurisdiction in which they operate. And they don’t have to continually ask permission to do things.
Deregulation, therefore, is somewhat of a job perk for business leaders. It’s a chance for them to stretch their legs and feel like masters of their own destiny. It gives them a new sense of power and personal efficacy – the main reasons many founders start businesses in the first place.
When you run a business, you ideally want to spend your time doing work that you enjoy. But if regulations are high, you have to dedicate a lot of your time to paperwork. And, again, that gets in the way of achieving your goals and reducing the enjoyment you derive from your work. With deregulation, there’s less you need to do personally, freeing up your time.