While tech industry magazines, blogs, and podcasts spent the turn to 2020 celebrating the greatest innovations of the last ten years, a Washington, D.C.-based newspaper instead focused on “the decade’s biggest technology disappointments.”
Leave it to Beltway insiders to focus on the industry’s failures instead of the nearly $2 trillion economic impact it makes on the nation’s economy each year.
Cynicism aside, the headline also was deeply ironic.
Policymakers, by nature, fear failure more than almost anyone, especially Silicon Valley entrepreneurs. In the policy space, failure leads to high-profile congressional thumpings – or a disparaging presidential tweet. That fear has kept Washington from updating laws and regulations to reflect the significant innovations that have taken hold in the financial markets since 2010.
That will have to change if we want another decade like the past one.
To be fair, federal regulators at least have rightly acknowledged the rapid pace of technological change and the need to modernize regulations, statute, and their own personnel and practices to account for it. Ten or 15 years ago, offices of innovation and hired tech and data experts would have been a novelty—if they existed at all. Today, their offices line the halls of agencies ranging from the Commodity Futures Trading Commission to the U.S. Department of Education.
These efforts are worthwhile, but they alone are insufficient.
It is not enough to simply hire from Silicon Valley. Policymakers must adopt the best of its culture and ethos, and they must devote ample resources to the innovators and technologists who populate their halls. A report from the IBM Center for the Business of Government noted that, without adequate funding, innovation office staff will be “forced to engage in difficult budget fights every year, enter into unwise partnerships, or rely on department heads skeptical of motives for basic funding, detracting from their ability to do the work they were charged with doing.”
Even more important than resources, though, is a commitment to rethinking the culture of and mentality within the bureaucracy. Leaders in other nations have altered the way they think of policy- and rulemaking. Politics aside, Dominic Cummings, senior adviser to new British Prime Minister Boris Johnson, was right when he said recently that the operations of government often work too slowly and that the civil service needs data scientists, software developers, communication experts, researchers, and an assortment of “weirdos and misfits with odd skills” to break logjams.
Cummings is hardly alone. From Canada to Taiwan to the United Arab Emirates, policymakers have adopted an innovation mentality when it comes to law and rulemaking. They continually evaluate the status quo and ask how it can be improved to drive growth and innovation. They also have decided not to fear failure or, at the very least, imperfection. They recognize that incremental change is better than living with rules and laws that no longer resemble the economic or technological landscape in which they were originally promulgated.
The United States has a long way to go in this endeavor. For example: Well into the digital age, major and community financial institutions were required to send paper copies of deposited consumer and business checks the Federal Reserve system. It wasn’t until late 2004, more than 13 years after Adobe co-founder Dr. John Warnock launched the Camelot project meant to allow any user to capture any document from any application, that the Federal Reserve started to accept batch copies digitally.
There are dozens of other examples, even when it comes to nonbinding advisory actions. It can, for example, take federal agencies years to update Frequently Asked Questions governing the financial technology and financial services sector.
That snail’s pace simply will not suffice in a world where data is exchanged in a nanosecond (or faster).
Silicon Valley must play a role in Washington’s culture change. While the congressional hearings of the last year might scare off some CEOs, the obvious chasm between the Valley and the Capitol is precisely why this is a time for innovators must engage. They must educate, and they must listen, but ultimately they must push for Washington to adapt its cultural approach to regulation from the status quo to one that fosters continual revision and iteration of the rules that govern the industry.
The pace of technological advancement between now and 2030 could be even more rapid than what we saw over the last decade. Just as there were in the 2010s, there will be mistakes. The greatest failure, however, will be if Washington does not change its own culture surrounding financial regulation.
Steve Boms is president and founder of Allon Advocacy, LLC, which assists financial and technology organizations of all sizes in working with elected officials and regulators in Washington, in statehouses across the United States and internationally.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.