New Jersey’s tips on ostracising policy makers for incumbent protection.

One of the great things about innovation, startups and disruption is that innovators often simply enable the demands of the market, challenging the traditional control centric nature of the status quo. Amazon re-wrote the rules on what a book is, creating disruption in the way we buy, share and consume the works of authors. Airbnb redefined the way we can explore the world, by tapping into the world's surplus of private space. iTunes and iPods changed the game on how we buy, consume and share music. In every case, the needs and demands of a digitally empowered consumer were at the forefront of driving the new models. Displacing incumbents who failed to keep up with the times.

displaced incumbents

The Internet and mobile phones—a combination I known as “radical connectivity”—profoundly empower individuals in ways that spell disaster for traditional “big” organizations. Big news organizations have seen both news production and advertising revenue disrupted by radical connectivity. The entertainment industry, from publishing to record companies, is in its own death throes. Big armies face distributed cells of terrorists instead of nation-states, while ad-hoc hackers the world over look for disruptive opportunities for “lulz.” Big political parties find themselves besieged by insurgents like Tea Party candidates, while citizens crowd-source solutions to public problems outside of big government. Tenured professors at big universities are growing large audiences on YouTube outside of tuition-paying students. Even big manufacturing faces a growing challenge from desktop 3D printers, spelling an end for big brands.

Incumbent Protection vs The End of Big

In his best-selling book 'The End of Big: How the Internet Makes David the New Goliath' author Nicco Mele gives an insightful peek into a world that is changing. How seemingly innocuous technologies are unsettling the balance of power by putting it in the hands of the masses - and what a world without "big" will mean for all of us. A fascinating, sometimes frightening look at how our ability to stay connected - constantly, instantly, and globally - is dramatically changing our world.

Faced with almost certain disruption, incumbent special interest groups lobby for regulation and controls in a desperate attempt to keep disruptors out. Senate Bill 661, approved by the Republican-led chamber in a vote last year , labelled by Tea party activists the proposed change would protect "establishment" candidates from grassroots challengers. Some going as far to the bill as the "incumbent protection act." A sentiment that resonated in the New York verus Airbnb case where regulators tried to block the start-up's huge growth and disruption threat to the hotel industry. Similarly in New York, the taxi federation moved to block Uber from Yellow Cabs to protect the existing Credit Card acceptance monopoly agreement with the incumbent provider. But of course it’s not just the bureaucracy. Now we’ve got the incumbents in the market using the courts to try and stifle competition. And on what grounds, eh? Seriously? Young people must be banned from using smartphones to hail a cab because old people won’t use smartphones to hail a cab?

Tesla's incumbent protection battle

Tesla, like Apple, has a direct-to-customer sales model, which just hit another big roadblock. New Jersey's Motor Vehicle Commission has voted in favor of a rule banning direct car sales, effectively kicking Tesla out of the state as of this April. For those keeping score, this is the EV maker's third such defeat, following similar moves by Arizona and Texas -- while Tesla won a legislative battle to go dealer-free in North Carolina, it appears to be losing the war. Not surprisingly, the company is furious. It accuses Governor Chris Christie of not just reneging on a promise to delay the rule for the sake of debate, but of speeding things up to please dealerships that fear real competition. Whether that's an accurate representation or just corporate bluster, the ban will undoubtedly hurt Garden State residents who want a wider selection of eco-friendly rides. Can we go as far to call the move against the Tesla model as incumbent protection?

Proposal PRN 2013-138 seeks to impose stringent licensing rules that would, among other things, require all new motor vehicles to be sold through middlemen and block Tesla’s direct sales model. This move comes in spite of discussions with the Governor’s staff as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature. Instead, rather than engage in an open debate on such a significant policy issue, the Administration has expedited the implementation of a new law that the Commission intends to stealthily approve at a meeting in Trenton today at 2:00 PM EDT.

Seriously, why can't incumbents just compete? Why use new policy, legal threats and regulation to prevent the market from getting what they want?

Such a move to control the situation only acts to ostracise policy makers and incumbents from the market. Spelling an even more certain death.

Are they that blind?

© Scott Bales 2014. All Rights Reserved.