People had already been fleeing high-tax, high-regulation states in droves before the ongoing pandemic and civil unrest added more stresses to many already precarious policy arrangements across the country.
Technology companies, in particular, have been feeling the heat, especially in the state fortunate enough to be the birthplace of Silicon Valley: California.
The Golden State has been cooking the goose that laid its golden eggs through measures like the California Consumer Privacy Act, which subjects all businesses with a web presence to onerous, European-style data regulations.
These data regulations are expensive with few benefits for privacy. Worse yet, they are anti-competitive. Larger technology companies can shoulder compliance costs in a way that smaller upstarts cannot. Ironically, data regulations tend to empower the big companies that receive the most criticism for privacy overreaches.
Then there’s California’s Assembly Bill 5, which attempted to tame sharing economy platforms by reclassifying contractors as full-time employees.
It sounds nice, but AB5 ended up hurting affected employees the most. Rather than being fully vested, they found themselves fully unemployed. AB5 also erected another regulatory barrier in front of innovative startups that might otherwise bring great benefits to society.
California’s hostile posture to innovation strained businesses even in relatively good times. Now that things are more uncertain, entrepreneurs are ready to move to other states. One recent survey from Blind found that two-thirds of tech workers in the San Francisco Bay area were ready to say farewell to the region and work in other locations.
Many tech firms have already turned to remote work because of the pandemic. Facebook and Twitter are just two companies that are allowing their employees to work remotely in perpetuity. Florida’s low-tax environment, combined with our unbeatable beaches, surely makes for an attractive possible home for newly-remote employees.
Other startups wonder whether they want to be headquartered in California at all. A 2019 report from Startup Genome found some 1,240 startups ready to relocate. The state’s posture couldn’t be clearer: Innovation is not welcome here.
Florida can attract these refugees by doing the opposite and embracing a policy environment of “permissionless innovation.” We have the right ingredients. A highly-skilled labor force, good fiscal management, and world-class research universities. Check, check, check.
We have the will, too. Florida has already assembled an ambitious vision in the Florida High Tech Corridor spanning from the Sun Coast to the Space Coast. The decision to spin out Florida Polytechnic University as a freestanding institution of higher technology research is another promising development.
What’s missing is a full embrace of permissionless innovation in policy.
The first step is to emulate the federal policy decisions that positioned the U.S. as a global technology leader. The Framework for Global Electronic Commerce of 1997 specified that the “private sector should lead” technological development and “governments should refrain from imposing new and unnecessary regulations” on innovators.
This strong promise of technological freedom gave entrepreneurs the green light to innovate in our country. Florida should do the same.
The next step is to not make California’s mistakes. The legislature should reject rules that make it harder to innovate here, whether proposed in the name of privacy, labor, antitrust or neutrality. These goals sound positive, but laws passed in their name are often expensive or even counterproductive.
Finally, we should learn how our current rules affect innovation. Oftentimes, outdated or ineffective regulations thwart innovation for no reason other than they happen to still be on the books.
The Legislature could consider regulatory review and regulatory budget reforms that ensure our policies are tight and effective.
For instance, with regulatory review, an impartial body of experts examines the code from top to bottom to identify useless policies that only prevent progress.
Or legislators could consider a regulatory budget, similar to our fiscal budget. If policymakers believed a new regulation is necessary, some other regulation would be slashed for balance. This encourages regulatory parsimony: allowing regulations we need while discarding those we don’t need.
When it comes to attracting innovators fleeing from inhospitable environments, the ball is in Florida’s court. With smart policy changes, we can become the next hotbed of technology and innovation. All the state needs to do is get out of the way.
Andrea O’Sullivan is the director of the Center for Technology and Innovation at The James Madison Institute.