Federico Fernández: Liberating Innovation

“There is something that you always have to keep in mind. If you bet on the end of the world, you can only be right once.  Really… the odds are against you.”

Automatically Generated Summary

00:00 Introduction

Section Overview: The host introduces the podcast and the guest, Federico Fernandez, CEO of Somos Innovación. They discuss innovation and regulation.

00:51 Federico’s Work

Section Overview: Federico explains that he is the CEO of Somos Innovación, a network of think tanks dedicated to promoting progress through innovation.

02:11 Relationship Between Innovation and Regulation

Section Overview: Timothy asks Federico about his talk at LibertyCon regarding the relationship between innovation and regulation. They discuss how to avoid regulation destroying innovation.

Most Potent Places for Innovation

• 02:42 The US is still the home of innovation.
• 03:11 There are pockets of innovation everywhere.
• 03:37 Regulation could be found all over the world.

Harshest Form of Regulation

• 04:05 Jack Ma was put in jail because of what he said in China.
• 04:32 The Chinese government kidnapped an expert in a field because they needed more innovation in that area.

04:56 Silicon Valley

Section Overview: Timothy asks Federico about Silicon Valley being the most innovative place. They discuss what makes Silicon Valley unique.

Ingredients to Create a Silicon Valley

• 05:21 Culture
• 05:41 Job hopping

06:24 Changing Jobs and Failure in Silicon Valley

Section Overview: In this section, the speakers discuss the culture of changing jobs frequently in Silicon Valley and how it is viewed as a positive thing. They also talk about failure and how it is perceived differently in the tech industry compared to other industries.

Job Hopping in Silicon Valley

• 06:24 Changing jobs frequently is seen as a positive thing in Silicon Valley.
• 07:37 The “move fast and break things” culture of startups aligns with job hopping.
• 08:58 Failure at a startup is not viewed negatively in Silicon Valley.

Failure in Tech Industry

• 09:47 Failure is expected in the tech industry, with 99% of startups failing.
• 10:54 Failure can lead to gaining valuable experience and knowledge.
• 11:15 Many people who fail at startups end up working for successful companies like Google.

07:11 Precautionary Principle and Innovation

Section Overview: In this section, the speakers discuss the precautionary principle and its impact on innovation. They compare its implementation in Europe versus the US.

Precautionary Principle

• 07:11 The precautionary principle has become a dangerous dogma in Europe.
• There are certain cultural features lacking that attribute to failures such as Route 21 project failure near Boston due to institutional structure
• It stifles innovation by being too cautious.

Comparison between Europe and US

• 08:20 The US has a more important institutional structure than Europe.
• It’s hard to compare because there are many factors involved.

11:57 The Difficulty of Earning a Living

Section Overview: In this section, the speaker reflects on how difficult it is to earn a living by providing something of value to others. They note that governments and regulators often forget about this and make it impossible for people to earn a living. The speaker also acknowledges that advancements in technology can make it harder for individuals to provide services that are valued by others.

Reflections on Earning a Living

• 11:57 Reflecting on how difficult it is to earn a living by providing something of value
• 12:24 Governments and regulators often forget about the difficulty of earning a living
• 12:46 Advancements in technology can make it harder for individuals to provide services that are valued by others
• 13:07 Changes in technology can be a reason for failure, even if one is not doing anything wrong

13:23 Changes in Providing Services

Section Overview: In this section, the speakers discuss whether or not providing services is getting harder. They acknowledge that disruptions bring instability but believe that changes brought about by automation have been mostly positive. The speakers express optimism about the future and believe AI will be a fantastic tool to help us in many ways.

Changes in Providing Services

• 13:23 Discussing whether or not providing services is getting harder
• 13:54 Disruptions bring instability but changes brought about by automation have been mostly positive
• 14:18 Expressing optimism about the future and belief that AI will be a fantastic tool to help us in many ways
• 16:09 Belief that babies born today will be pioneers in space exploration

17:45 Europe’s Stifling of Innovation

Section Overview: In this section, the speaker discusses how the European Union stifles innovation and tries to turn Europe into a regulatory superpower.

The European Union as an Institution

• The European Union has been an amazing institution that has prevented many countries from self-destructing.
• The predecessors of the European Union can be dated to the day after World War II ended.
• The speaker admires the European project but believes that it is trying to turn Europe into something that does not exist and will never exist, which is a regulatory superpower.

Europe’s Approach to Innovation

• Europeans are extremely innovative individuals, but there are issues with how innovators and innovation are perceived in Europe.
• Whenever something new and cool comes up, some European politician or public official tries to ban it or run an investigation about it.
• This kind of mindset and starting point about how to approach innovation is extremely dangerous.

Why Does Europe Stifle Innovation?

• There is a part of the theory that suggests that since innovation is not coming from within Europe by default, when it comes from outside, it’s seen as a threat and needs to be regulated.
• Institutional norms in the European Union unfortunately go against innovation.

21:02

21:02 Factors Against Innovation in Europe

Section Overview: In this section, the speaker explains why institutional norms in the EU go against innovation.

Innovators as Part of Ecosystem

• Innovators are part of the ecosystem, but it includes social abuse and institutional norms.
• How innovators and innovation are perceived in Europe goes against innovation.

Example Scenario

• If someone invites you over but tells you they have a tiger walking around their house, a minefield on their floor, won’t feed you or give you water, and their neighbor has a lovely house with normal people and no wild animals, you would go to the neighbor’s house.
• Similarly, if Europe is seen as a place where innovation is stifled, it won’t become a hotspot for innovation.

23:38 The Importance of Innovation and Permissionless Innovation

Section Overview: In this section, the speaker discusses the importance of innovation and permissionless innovation. He talks about how banning new technologies is easier than banning cars or motorcycles, and how there are no lobbies for new technologies that haven’t yet become established.

The Three Ways to Promote Innovation

• 24:22 The first way to promote innovation is through public advocacy and research. This includes publishing indexes, reports, articles, podcasts, videos, etc.
• 25:13 The second way is by keeping open channels with members of parliament, regulators, public officials, politicians and other stakeholders in order to warn about the risks of over-regulation or banning technologies.
• 27:45 The third way is by being in contact with innovators themselves – entrepreneurs – by interviewing them and putting a spotlight on their work.

Permissionless Innovation

• 26:08 The speaker advocates for permissionless innovation which means that unless you can build a very strong case against a new technology or business model regarding harm (in the most physical sense), it should be allowed to exist. Consumers should decide whether they adopt it or not rather than faceless bureaucracies applying regulations that were written 20 years ago.
• 26:53 He gives an example of Uber being kicked out of Colombia using a regulation written in 1998 when neither Uber nor smartphones existed. He argues that this kind of regulation is insane and happens all the time.

Governance Models

• 28:30 While the speaker acknowledges that governance models are an important area for innovation as well, he notes that they don’t want to spread themselves too thin. They have been in contact with the Estonian experience regarding e-government and would like it to be better known and applied in more countries.

29:36 Estonian Tax System and E-Government

Section Overview: In this section, the speaker discusses two distinctive aspects of Estonia’s system: its tax system and e-government.

Flat Income Tax

• 30:16 Estonia has a flat income tax rate of 20%.
• 30:36 You only pay taxes on revenue or dividends you receive, not on money that stays in your company’s account.
• The flat tax is transparent and fair, as it does not penalize people for making more money.

E-Government

• 31:59 Estonia has a revolutionary e-government system.
• It allows citizens to create a company in 15 minutes or less without filling out forms or going through bureaucratic processes.
• The state cannot ask for personal information more than once, making it easier for citizens to interact with government agencies.
• Citizens do not pay income tax until they make money. This encourages entrepreneurship and innovation.

35:00 Estonia’s E-Government System

Section Overview: In this section, the speaker discusses Estonia’s e-government system and how it has made government services simple, easy, transparent, and fair.

E-Government System

• 35:14 The e-government system allows citizens to have a relationship with the government online.
• 35:43 The system drastically reduces red tape by allowing citizens to complete tasks online instead of going to public offices multiple times.
• 36:25 Estonia’s e-government system is different from other countries because it was used to radically transform and improve the kind of things that citizens have to do with towards the state.

Estonian E-Residency

• 37:18 The Estonian e-residency program allows anyone in the world to get an e-card which gives them all the economic rights that an Estonian citizen has.
• 38:06 Becoming an e-resident of Estonia does not grant you their tax rate if you’re still dwelling in another country. You may still have to pay taxes in your local government.

Advantages of Estonia’s E-Government System

• 38:25 The simplicity of Estonia’s e-government system gives them an advantage over other countries.
• 39:49 Many people who want to open a company or sell services in the European Union or even globally can benefit from opening a company in a serious jurisdiction with good rule of law using Estonia’s e-residency program.

40:31 Free Cities and Innovative Governance Models

Section Overview: In this section, the speaker discusses free cities in Central America that are attracting individuals who want to start a business and create new regulatory environments. The speaker also mentions other places with interesting developments in governance models, such as the UAE and Liechtenstein.

Interesting Developments in Governance Models

• 41:00 The UAE has achieved amazing transformation, particularly Dubai.
• 41:24 There are interesting developments in all Gulf area countries.
• 41:41 Countries like the UAE are trying to treat their citizens as clients.
• 42:05 Liechtenstein is doing amazing things with private organizations that you join if you like what they have to offer.

42:30 New Alternatives for Governance Structures

Section Overview: In this section, the speaker talks about newer alternatives for governance structures such as Prospera in Honduras. They discuss how these arrangements can push boundaries and lead to innovation.

Mobile Voting

• 42:54 Mobile voting could improve primary voting in the US by giving people more options and making it easier to vote.
• 43:19 Both parties tend to be hijacked by extreme members because very few people vote in primaries.

Private Places as Clients

• 44:16 The idea of private places where you are literally a client can work.
• 44:41 Robert Nozik’s book “Anarchy State and Utopia” proposes classical liberal societies with private organizations that you join if you like what they have to offer.
• 45:27 Alternate governance structures should never be a place for retreat but rather an opportunity for trial and error.

46:42 The Failure of the State and Private Neighborhoods

Section Overview: In this section, the speaker discusses how people end up living in private neighborhoods due to a lack of security in their country. However, he argues that private neighborhoods are not a sustainable solution to the problem.

Private Neighborhoods vs Prospera

• 47:04 The speaker believes that Prospera is a better solution than private neighborhoods because it is a new experiment with a different institutional arrangement.
• 49:46 While there may be some similarities between Prospera and private neighborhoods, they are shallow. Private neighborhoods are just trying to survive while Prospera is trying to achieve something different.
• 50:10 The essence of property rights is protection, but private neighborhoods are not doing anything radically different from the rest of the country.

Institutional Relationships and Structures

• 47:28 The issue with Latin America is not its people or Honduras specifically; it’s the kind of institutional relationships and structures that have been put in place.
• [](t=296# 46:42 The Failure of the State and Private Neighborhoods

Section Overview: In this section, the speaker discusses how people end up living in private neighborhoods due to a lack of security in their country. However, he argues that private neighborhoods are not a sustainable solution to the problem.

Private Neighborhoods vs Prospera

• 47:04 The speaker believes that Prospera is a better solution than private neighborhoods because it is a new experiment with a different institutional arrangement.
• 49:46 While there may be some similarities between Prospera and private neighborhoods, they are shallow. Private neighborhoods are just trying to survive while Prospera is trying to achieve something different.
• 50:10 The essence of property rights is protection, but private neighborhoods are not doing anything radically different from the rest of the country.

Institutional Relationships and Structures

• 47:28 The issue with Latin America is not its people or Honduras specifically, but rather the institutional relationships and structures that have been put in place.
• 49:21 New governance systems should become more popular and make people aware of their successes so they can be a force for change.

49:46 Security and Property Rights

Section Overview: In this section, the speaker discusses how property owners want their property protected but living in compounds like private neighborhoods is not sustainable. He also talks about how Prospera could deliver positive change.

Solutions for Security

• 50:10 Living in compounds like private neighborhoods is not sustainable as it does not bring any change.
• 51:20 If Prospera delivers what it promises, it has potential impact for Honduras, Central America, and beyond.