Regulatory capture

I enjoy learning about counter-intuitive models and about examples where well-intentioned and logical solutions fail (cobra effect).

I heard Bill Gurly, a famed VC, talk about "regulatory capture" in an interview. It's a term for a phenomenon where regulatory agencies that are introduced to protect consumers from businesses, can end up being advantageous for the businesses and worse for consumers. The reason for this is that businesses, because of their higher vested interest, resources, and expertise, end up influencing the regulators, regulations, and execution. This Wikipedia article has several examples of this.

The lesson here is that introducing sustainable change isn't easy. A complex equation of several variables resulted in the current situation and trying to change the situation requires changing the equation and the variables. You should think about long-term incentives and dynamics and build in mechanisms for checks and refinement if things don't go as planned.

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