back to article Be the next tech hotshot – by staying the hell away from regulators

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things – that's Adam Smith, by the way. I'm often left rather scratching my head as I read the latest …

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The small, the big and the ugly

> leave people to get on with things and they'll tend to get them sorted out.

That works well at the "small business" level. Where there are lots (well, OK: a few) companies that are evolving: some will succeed and flourish, some will fail and some will mutate into something else. Early Silicon Valley startups would be prime examples. However once you get past a certain level, the lack of regulation can lead to exploitation and corruption as seen in Standard Oil monopoly and anti-trust suits around 1900 - when it controlled about 90% of the american oil/petrol market.

One might venture to think of some certain software companies as other examples - and maybe some of todays internet giants have some of those same features, too.

Now, I'm not in favour of protectionism, either for specific, powerful, lobbying, industries or for one country to erect barriers to prevent foreign competition. But there does come a time when some businesses get too large, too powerful and too influential. Then they stop being a "power for good" and mutate into entities who's primary goal is to maintain their own existence - or share price. Maybe that's one area where regulation needs strengthening: to stop the lizards from becoming Godzillas. Otherwise we may have another "financial crisis", but in a different area of business, occupied by different sorts of "too big to fail" companies.

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Roo
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Windows

Re: The small, the big and the ugly

"Then they stop being a "power for good" and mutate into entities who's primary goal is to maintain their own existence - or share price."

Ah, that would be the point at which highly paid execs use the "duty bound to maximise shareholder value" line to avoid taking responsibility for decision making...

I can't see anything happening that would threaten the validity of that excuse - it's way too useful. I wouldn't be surprised to find out that Bob Diamond was using it every 2nd sentence while being interviewed about fixing LIBOR.

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Anonymous Coward

Re: The small, the big and the ugly

When they know that, even if they get caught red handed engaging in criminal activity, the only punishment is to come to some cosy agreement with a regulator to pay back a fraction of the profit via some non-admission-of-liability, then the rational way to maximise shareholder value is to go right ahead...

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Re: The small, the big and the ugly

Tell that to Madoff, Caught red handed, admitted his guilt and sentenced to 150 years of chokey

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Re: Madoff

Madoff stole from the rich, not the poor. Key difference.

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Childcatcher

Re: The small, the big and the ugly

Good points, and actually in keeping with Smith's contentions. "Wealth of Nations" actually points out that making capitalist principles the ultimate aim holds dangers, and that many of those dangers are moral dangers, a common pre-occupation with Scottish Enlightenment thinkers, For example, in the section on what would now be considered to be assembly line techniques, specialised tasks in production, Smith acknowledged that such division of labour results in far greater productivity, but pointed out that a worker doing a single, mindless repetitive task has no opportunity to make something of their lives; they are expected to be mindless drones, a process Smith called alienation.

Now contrast that aspect of morals to big business, which on the one hand has created an imperative that profit comes first, an aspect enshrined in the requirements of corporate directors. In that quest for profit, any aspect of moral governance goes out of the window; the "prime directive" is no longer building a better society, but generating most profits. Corporates even want laws changed to their advantage, laws which are designed for civil society.

Given that the conditions pre-exist to make big corporates behave in ways that are not to the moral good which concerned Smith so greatly, regulations must take the place of the individual choosing to do the right thing.

And the point of the article was surely that micro-businesses are in better positions to take that moral position, which should not be constrained until something Trumps (capital intended) that moral imperative.

See what happens when you start quoting Adam smith?

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Facepalm

Business analogy

This kinda makes me think of big companies who move from 'expanding business' to 'back to core business' and back in a cycle of several years.

For each movement they have a lot of arguments and you are not allowed to point out the (previous) arguments for the move in the opposite direction.

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Re: Business analogy

Ah, yes - similar to the way their internal structures change from flat to pyramid and back again. This sort of change is often done to create the appearance of progress, appeasing the analysts and hence, hopefully, upping the share price. To be fair (although I'm not sure why) a mature company with decent profitability but little chance of further growth can do little to excite the investment community any other way (except for cutting costs - usually by laying off staff, this is viagra to many investors, no matter how short-termist it may be).

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Anonymous Coward

Human condition.

The problem is them damned Humans, they don't like change. Oh sure they recognise that everything that is anything only came about because of change, but they still insist on trying their damnest to hold back the tide. They do it in every aspect of their interactions with each other, and the world at large.

Seriously look around, this is what Humans do.

Species becomes endangered, put it on the endangered species list to make sure it survives. Still got a problem, spend millions creating a dedicated breeding program, dedicated to ensuring the species survives. Whilst not forgetting to spend billions teaching everyone in the world about "Survival of the fittest".

Climate becomes less friendly, create laws and regulations to control it... I'm wondering when they're going to figure that one out...

Aquatic enviroment changes, create laws and regulations to 'stabilise' it... I'm not sure they'll ever figure that one out...

Business model becomes unviable, create laws and regulations to ensure it survives.

Humans are control freaks, they believe they can control everything, despite recognising long ago that they're only really pawns in the game nature (natural process) is playing. They do this on a micro scale with everything they do, and they've recently started deluding themselves that they can do it on a macro level... I guess my childrens children will find out if they were successful... although god knows what the world will look like then... a world created and controlled by Humans... I look forward to not being around to see that.

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Childcatcher

Re: Human condition.

Amen. Fortunately, I won't be hanging around long enough to see this one play out (terminal disabled veteran). This characteristic, the ability to build models of the environment around us and to manipulate that environment so that we can "refine" the models may be that which separates our kind from others. I'm a dozen kinds of engineer and half-a-dozen kinds of analyst, but I can see in others that control-freak tendency, even without the background in engineering. Sales/marketing, politics, academia (!!), yada, yada.

Doing something for some else's good leads the pack for freaking control.

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Boffin

@obnoxiousGit - Re: Human condition.

> The problem is them damned Humans, they don't like change.

ORLY? Or perhaps they don't like the "Fuck everyone and everything else, I'm alright Jack" mentality which has caused so many problems in the past?

"Those who do not learn from history are doomed to repeat it." - George Satayan

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Hmmm

Where to begin?

The amount of Sloppy Thinking and biased agenda is huge.

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Anonymous Coward

Re: Hmmm

"The amount of Sloppy Thinking and biased agenda is huge".

Hello! Economics!!

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"Perhaps all of these restrictions are necessary, perhaps they're not: that's more of a political question than an economic one."

Really? Economics has nothing to say about whether a regulation is 'necessary' or not? If a regulation is 'necessary', what form would it take, as opposed to a regulation that wasn't necessary?

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Anonymous Coward

OTOH, you could regulate to encourage new business

By treating the taxation differently, between none productive money and money spent taking risks by creating jobs and building the economy. I think the British system is too protective of money that doesn't do anything here, at least insofar as it doesn't seem to recognise the difference.

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Anonymous Coward

Re: OTOH, you could regulate to encourage new business

The UK has a rentier economy. Lenders prefer to invest in property, utilities etc where they have a physical asset that can be pulled back in the event of failure.

How you change that culture is the difficult question. The banks lending officers are comfortable in assessing property, not business plans which might boil down to nothing more than an optimistic mix of bright ideas and enthusiam.

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Thumb Up

Re: OTOH, you could regulate to encourage new business

have an upvote, that's a nice point.

The problem is houses don't DO anything, whereas you could argue allowing people to live in them allows other people to do stuff.

Invest in a company with warm bodies that DO stuff, then you are closer to the profit , in theory.

I would suggest that the former case in the UK is a strong indicator of the lack of diversity in the UK economy. If it was that easy to get a profit from small biz many more would do it, and I know from personal experience that government regulations of *any* sort are "friction" on the ability to do work.

Once you get to a certain size the "inertia" of the company, overcomes the "friction" of the regulations...

Not a great analogy, but having worked in Big American biz, having bodies dedicated to doing this sort of thing, is clearly practical.

Except HR....

P.

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Unhappy

Re: OTOH, you could regulate to encourage new business

"By treating the taxation differently, between none productive money and money spent taking risks by creating jobs and building the economy."

Actually this has been tried in the UK.

Typically what happens is some sort of tax break for higher rate tax payers only if they invest in some kind of "scheme."

Typically tax lawyers and accountants construct "pseudo" risky schemes that look like they are investing in something new (and risky) but in fact are not.

Then tax courts rule it's an "Aggressive tax avoidance" scheme the people reach a (very reasonable) agreement to pay off (some) of their (alleged) liability and it all starts over again.

Look up "Business Expansion Scheme" ad nausum.

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Anonymous Coward

Re: OTOH, you could regulate to encourage new business

"Actually this has been tried in the UK."

I'm thinking nothing so abstract. I'm talking about rewarding the people who get off their arses and make stuff happen. Investing in funds doesn't cut it. Actually starting a business, growing a business and employing people is what I'm thinking of; real things that a smart accountant can't invent to deceive.

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Re: OTOH, you could regulate to encourage new business

"I'm thinking nothing so abstract. I'm talking about rewarding the people who get off their arses and make stuff happen. Investing in funds doesn't cut it."

But it's there already, for example "entrepreneur's relief" for capital gains, that is a huge reward for people who qualify and have made up to £10m.

But we don't need more incentives to dodge tax, because few people go "Oh, I've got this brill idea, but what with 40% tax it's not worth making myself a millionaire". The problem of insufficient innovation and entrepreneurship is two fold - the zillions of pages of bureaucratic regulation you need to cope with, the high costs of establishing and growing a business (business rates and employers' NI in particular), and a wider culture of risk averse investing. These days you can't get small company funding from an equity market, because they are now all about secondary trading of established companies. VC's will rip you off and steal your company, banks are reluctant to lend, and still steal your company (a big hello to RBS GRG at this juncture).

You know the biggest innovation in funding innovation, and encouraging a culture of entrpreneurship? Kickstarter. And why? Because it encourages people to take risk investment. What's the reaction of government? To try and restrict it, regulate and strangle it. The best thing government can do for innovation is to keep well out of the way, shred a few more million pages of possibly well meant legislation, and scrap employer's NI and business rates as they currently exist. Load it all on corporation tax so it comes out of profits, and levy a punitive withholding tax on (mostly US) corporate tax dodgers.

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Paris Hilton

There are a couple of simple things that could be done

For example, businesses are expected to pay tax on their profits from day 1. I believe in the US you don't have to pay taxes for the first 5 years.

I first heard this point made back in the Thatcher era, you could keep winnings from the lottery without being taxed but actually making something that people want you are expected to pay right away. This is why we live in a casino economy - it's doesn't encourage long term thinking and punishes the profitable.

Moving the VAT threshold would help too. Hitting the magic £80k (or whatever it is) is quite easy to do if you have 5 or so employees, and suddenly you have to charge your customers more. This doesn't encourage people to grow or invest.

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Incredible Edible Todmorden

As someone who lives in the place (I know someone has to), I can state that Incredible Edible is not all it's cracked up to be. It is not a great advert for people getting up and doing their thing without permission. Its an abuse of tax payers' money. It gets grants, freebies, and loads of help from the council using tax payers' money. Its message of getting the town to feed it self is laughable - a couple of small patches of land do not feed a town of over 10,000.

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After reading this article I have only two questions:

Who are you? And what have you done with the real Tim Worstall?

I'd expect to read something like this at Heritage or CATO or maybe even National Review. But not on El Reg!

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Re: After reading this article I have only two questions:

>I'd expect to read something like this at Heritage or CATO or maybe even National Review.

Er - that is the real Tim Worstall. 'Senior Fellow at the Adam Smith Institute' it says here. 'I quite like Cato' it also says here.

Why on earth the Reg keeps pushing neocon nutter politics while pretending it's giving everyone an education is something best left as an exercise for the reader.

As for what Adam Smith actually said, it looks like this:

"The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

And:

"It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion"

But don't ask the Adam Smith Institute about that, because they'll deny he meant it and stick fingers in their ears singing lalalala.

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Re: After reading this article I have only two questions:

Yes, it is quite amazing how Adam Smith has been hijacked by hard capitalists. I was amazed the first time I read Wealth of Nations when I did an access course to go to university in the late 1990s. It is very reasonable: argues ideas of high taxation for high earners and a welfare safety-net for those without to the extent that the great phrase "From each according to his ability, to each according to his need" could have been attributed to Smith, not Marx. It is a truly wonderful read, and an object lesson on how a work can be completely misrepresented by people with an axe to grind.

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Anonymous Coward

Re: After reading this article I have only two questions:

"The Adam Smith institute: promoting bonkers solutions to the problems of people with too much money that would have the real Adam Smith spinning in his grave".

...at least that's how I read their slogan.

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Re: After reading this article I have only two questions:

> neocon nutter politics

You don't know what a Neocon is, do you?

> "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

Here's some context: Smith was writing before the introduction of income tax. I would say he would probably have approved of the Income Tax Act of 1842, which set income tax at about 3% for those who could afford it. Maybe he would have approved of something far higher -- say, even five times that rate. Quite why you think you can conclude from that quote that he would have approved of current levels of taxation and state waste, you don't explain.

> But don't ask the Adam Smith Institute about that, because they'll deny he meant it and stick fingers in their ears singing lalalala.

I read their blog, and I read Tim's blog, and this is bollocks. They believe there should be taxation, and I know Tim believes progressive taxation is just fine. They do argue that the state in its current form is way too big and that taxes are too high. Fair enough. Unless you believe that all taxes should be at 100%, then you actually agree with them that taxes have some sort of optimum level at which the state gets some and you get to keep some, and you're just quibbling about what that level is.

The ASI have repeatedly stated that their preferred solution to poverty is to give money to poor people. Doesn't sound to me like a bunch of rich people trying to hoard their money and screw the poor.

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Regulation is needed

Not excessive regulation admittedly, and not anti competitive regulation brewed up by the big companies and lobbied through the government.

Two examples from your piece stand out as examples where legislation and regulation matter.

The GP in Todmorden encouraging people to dig up "wasteland" and plant fruit and veg sounds admirable, until someone "doesn't ask" and digs up a bit of wasteland which is in fact a protected area containing rare plants or animals. Or digs up an area that was wasteland because it was contaminated.

There is a very good reason new medical treatments have to be scrutinised before being used, to prevent another incidence like the thalidomide issue (saw something last night about it which is why I used that example, there are others) I would dispute the time period generalised in the article as well

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Re: Regulation is needed

"The GP in Todmorden encouraging people to dig up "wasteland" and plant fruit and veg sounds admirable, until someone "doesn't ask" and digs up a bit of wasteland which is in fact a protected area containing rare plants or animals. Or digs up an area that was wasteland because it was contaminated."

Of course, of course. Where would we be without government to tell us both what we can do, and what we can't do. I feel so much safer knowing that some public sector numpty has left contaminated ground as wasteland, or that it secretly harbours endangered wildlife.

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Re: Regulation is needed

>Where would we be without government to tell us both what we can do, and what we can't do

We'd be in a situation where the strongest, richest most ruthless numpty in the neighbourhood can do anything he wants, and no-one else can do anything about it (short of armed insurrection). That's where.

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Anonymous Coward

Re: Regulation is needed

The history of Europe from about 1840 on was basically the attempt to escape from that situation, and the reaction of the rich numpties. It wasn't very nice for the majority, and the rich numpties got their comeuppance in 1918 and 1945. Neocons are neocons because they don't know any history prior to the entry of the US into WW2, at about the half way mark.

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Thumb Down

"they'll tend to get them sorted out..."

Well, yes. some will get sorted out.

Meanwhile others will get screwed, ripped off, conned, mis-sold or just be the victims of a well-meaning but totally ill-informed, misguided and poorly planned scheme which seemed like a good idea at the time.

Still, caveat emptor, eh? It was probably the victims' own fault for being so stupid...

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There are the basic rules

– the rule of law, property ownership, a tolerable administration of justice, and so on – and really not much more to prevent people getting on with whatever it is that they want to do.

Sounds nice and simple - but 'property ownership' is defined by the 'rule of law'. In the past we've had laws which said that women can't own property, that jews can't own property, that people can be property. Indeed, our modern idea of property emerged from a system (Enclosure) which involved the mass theft of communal property.

Now we have laws which says that people can own ideas and systems where people can buy elections. We have laws which say you can buy a mountain, but you can't build anything on it. But there are also laws which say you can do whatever you like underneath someone else's property, and they can't do anything about it.

These simple rules aren't nearly as simple as some would have you believe.

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Re: There are the basic rules

Point taken, and agree with almost all your points except the implied criticism of the law that allows someone to do things "underneath someone else's property". With the caveat that there should be a reasonable distance (which can be argued, but should be less than 30 metres*) between the surface and the working, there can be no sensible way that a person can hold that it should be stopped. The suggestion that everyone owns a cone or slice of influence below (and therefore above) their property on the surface is just weird in a world that got to where it is by mining, oil prospecting and flight.

*Note, I'm from a mining area originally. I know the damage that can be caused by underground workings, yet I'm more than happy with the compensation schemes in place rather than a lunatic concept of owning all below the land.

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What has capitalism brought us?

A quick list:

- global warming, global war, global famine

- loss of ozone layer and other natural defenses

- high rates of cancer, dementia, genetic diseases

- massive pollution of land, sea and sky

- dictators and the despicably evil running most of the world

- tiny elites living off the labour of billions

- WASTE!!!!

So it can all fuck off frankly. Gief Global Planned Economy with simple aim to get us the fuck off this rock.

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