Walking the streets in Palo Alto, Calif., it’s hard to imagine that the rest of the United States is still crawling out of a recession. I suggest we don’t tell the entrepreneurs here, most of whom are 19 to 27 years old—one of the demographics most shaken by the economic downturn. What accounts for this continued growth? Likely, the entrepreneurial spirit of these young people will continue even in difficult times, or perhaps unemployment and under-employment provides more reason to branch off and try something new and innovative. Clearly, the barrier to entry for many business ideas has fallen precipitously. Today, twentysomethings with novel ideas and the ability to write basic software code are inventing multimillion- or even multibillion-dollar iPhone apps (like Instagram). Hard work, ambition, and a healthy skepticism of old ideas and market models are the secret sauce of Silicon Valley and other innovation hubs throughout the United States.
The full utilization of American ingenuity and innovation demands these entrepreneurs, and thankfully there is no shortage of dreamers willing to take big risks and run with ideas, ideas that often seem crazy at first. While innovation can happen just about anywhere—Silicon Valley, a parent’s basement, a college dorm room—in Washington, D.C., policymakers have a different job: It’s less about encouraging than it is about not stifling our promising startups.
In my time in Silicon Valley visiting startups, angel funders, and VCs, no one asked me about new tax breaks or government-sponsored startup incubators. But I heard repeated concerns regarding problems with our immigration policy and numerous accounts of the difficulties navigating our ineffective patent system and how our current implementation of copyright, as opposed to constitutional copyright, discourages innovation, hurts content creators, and reduces the amount of content available for the consumer.
We can harness the incredible resource of human ingenuity, the greatest force for economic growth in history. But in order to do so, Congress needs to use care in creating and updating regulatory and legal structures that promote innovation. And right now, Congress may be poised to weaken what was once a model of forward-looking legislation.
Before 1996, website owners could be held liable for the content (defamation, false information, sexual content, etc.) posted by their users. As a clear example of the perverse effects that often exist with poorly written laws and regulation, the more that a website regulated content that was illegal or defamatory, then the more likely it was to be held legally liable for content it didn’t find. This policy meant that website owners had an incentive not to police user content on their website at all. Overall, it created a high bar for any website with user-generated content.
Congress responded with Section 230 of the Communications Decency Act in 1996. Section 230 is a relatively straightforward solution to this problem: Now, most websites aren’t liable for user-generated content (with the exception of intellectual property which is mainly dealt with under Section 512 of the DMCA).
Let’s say Section 230 was never implemented, and Reddit’s future founders arranged a meeting with their members of Congress to propose changing the law to facilitate their market model for a message board on the Internet. Assuming they didn’t ask the member of Congress who referred to the Internet as “a series of tubes,” it is likely that the politicians would respond, “This is such a small market, and a silly idea, so why would we bother changing the law for you?” And yet, today Reddit is a billion-dollar company and according, to one study, 6 percent of adults on the Internet are Reddit users (including me).
Section 230 is simple and intuitive to entrepreneurs, and it doesn’t require a lawyer to implement. It’s essentially a permission slip telling the Internet: “Go innovate.” And entrepreneurs, such as Alexis Ohanian, co-founder of Reddit, responded by launching a diverse array of websites with user-generated content. Facebook—which currently has 1.2 billion users, or one-eighth of the world’s population—would have been impossible without Section 230. Ben Huh, CEO of the Section 230-enabled Cheezburger Network, told me: “Section 230 is one of the hidden pillars of the free speech of the Internet.”
It’s impossible to know what innovations we are currently missing out on today but for simple reforms like Section 230 – there are no lobbyists for the future that represent the interests of non-existent industries. Reddit’s co-founder, Alex Ohanian notes in his upcoming book, Without Their Permission:
I saw the power of the free market at my dinner table growing up, as the internet disrupted my own father’s small travel agency. Did he hire lobbyists and lawyers to add laws to protect travel agents? No, he adapted his business. And that’s served as a role model for me ever since: innovate, don’t legislate.
If we are serious about growth, innovation, and a robust economic recovery, Washington should listen to entrepreneurs like Ohanian, Huh, Mark Zuckerberg, and Twitter’s Jack Dorsey and ensure that Washington does not inhibit new forms of innovation. Congress needs to assess current and proposed laws to ensure that they provide clear rules of the road like Section 230.
Unfortunately, Congress is at risk of regressing. Now 47 state attorneys generals are asking Congress to change the section. Currently it reads:
Nothing in this section shall be construed to impair the enforcement of section 223 or 231 of this title, chapter 71 (relating to obscenity) or 110 (relating to sexual exploitation of children) of Title 18, or any other Federal criminal statute.
The AGs want to append the two words “or State” after “Federal,” which would serve the noble purpose of dealing with sex trafficking—it would allow states to hold sites like Craigslist liable if they hosted ads for underage prostitutes. But their proposal would go beyond these stated aims and gut Section 230’s protections for online platforms. According to Santa Clara University law professor Eric Goldman:
“Textually, the change to Section 230 would be quite modest (it would only add two words), but its effect would be profound. This amendment would allow state attorneys general to prosecute Internet companies, including potentially their executives, for violations of state criminal law for their online publication of third party content.”
By trying to hold service providers responsible for the actions of their users, these exceptions would effectively eliminate public space on the Internet.
Policymakers should empower the full potential of innovation, through strengthening Section 230 and passing future permission slips for innovation, rather than restrain it in a complicated regulatory structure, which is what these exceptions would create. While the nation’s AG’s are busy trying to “eviscerate” (according to professor Goldman) one of the few provisions in law that was forward leaning and built for innovation, innovators have their own laws: Moore’s Law, Kryder’s Law, and Nielsen’s Law.
Innovation often seems small at first, and even the experts in the field can’t always predict where technology is going—that is the beauty of markets. The Internet speeds this process up, allowing for new and small ideas to be tried and fail quickly, and then iterate to the next cycle. As Ohanian told me, “A generation ago if you wanted to build a business empire, you needed to build a factory. Today, you only need a laptop.”
But it may only take two words to bring down an empire.