How much should innovators worry about regulation?

Self-driving cars. Facial recognition software. Telemedicine. Delivery drones. Artificial intelligence. Ridesharing. Short-term room rentals. Everywhere you look, people are using new technologies to disrupt old markets. And the companies pushing these new models have often had a stormy relationship with the law.

There are plenty of household stories to this effect. We’ve heard of Uber’s struggles with employment law. Airbnb’s struggles with local taxes. Facebook’s policy changes in the wake of the 2016 election and its ongoing antitrust concerns. And while these are giant companies with millions or billions of dollars at stake in these legal challenges, the core questions are the same for smaller businesses, too. How much should innovators and entrepreneurs concern themselves with regulation?

Life in the legal gray area

Tech has always run ahead of regulation, but the recent explosion of new business models has widened the regulatory gap. Lawmakers can’t keep up, and innovators must decide how to act when the old rules don’t quite fit them. Should they take full advantage of their new market space and risk the fall-out of angry, punitive legislation in the future? Or if they play it safe, do they risk shrinking their potential market and impact?

It can be hard enough to comply with the laws that are already in the books. Complying with laws that haven’t yet been written can give anyone a headache. So what can innovators do? It may help to think about the regulations from the other side, and San Francisco’s new Office of Emerging Technologymay provide a good place to start.

As the San Francisco Chronicle reported, the city created its Office of Emerging Technology as a response to the prevailing attitude among the area’s tech companies. Daunted by the hoops they had to jump to get proper licenses, many of them chose to “ask forgiveness, not permission.” The Office of Emerging Technology would streamline the licensing and regulatory processes.

Should you expect regulation to change?

It’s unlikely we’ll see widespread regulatory changes anytime soon. But it’s possible that the Office of Emerging Technology will spur other cities and states to explore their own “sandbox” approaches to regulation.

The World Economic Forum suggests that experiments like this are necessary. They claim that we have entered a Fourth Industrial Revolution marked by an unprecedented, exponential explosion of new technologies. Businesses are evolving too fast for the old, top-down style of legislation. For lawmakers to govern effectively, the World Economic Forum suggests they’ll need to adapt, taking steps to:

• Collaborate with businesses and civic leaders
• Adopt a more “agile” stance, rooted in faster implementation and iteration
• Focus more on values and principles
• Ask businesses to demonstrate not merely how they comply with technical aspects of the law, but with the underlying values and principles

Right now, these may seem like “pie in the sky” ideals. But San Francisco’s Office of Emerging Technology seems to embody several of these concepts. In fact, the San Francisco Chronicle quoted one official who said the office was necessary because technology should “serve the public’s best interests, not the other way around.”

How to act when you’re one or more steps ahead of the law

San Francisco and Silicon Valley aren’t the only places where innovators are disrupting stale business models. In fact, Colorado has been ranked fifth in the nation for startups. Here and elsewhere, entrepreneurs are constantly finding newer and better ways to give people what they want. And that means that companies everywhere are wandering into the uneasy legal gray area where the old rules don’t quite fit and the new rules haven’t yet been written.

What can these businesses do? How can they work in the shadows of future litigation for laws that aren’t yet in the books? Once you make sure you’re clear of all the existing laws, you might think about how your actions reveal your values and your commitment to the common good. As in most cases, documentation could be key. When lawmakers, judges and juries don’t fully understand your business, litigation could offer you a chance to educate them. And it might help to show records of all the steps you took to ensure the public’s safety and privacy.