Hong Kong must choose – its glorious history of light regulation or an oppressive future of knee-jerk banning and regulation of new business and tech.
Photo: Hong Kong Science Park (Credit: Eugene Lim/flickr.com)
A fight broke out yesterday at a conference in Causeway Bay. While actual physical blows were not traded, rhetorical fisticuffs were exchanged between a scientist and business leader over vaping (also known inaccurately as e-cigarettes). Their fight mirrors that for many new industries rising in Hong Kong and our government’s response will determine if we are a centre for innovation or a wet blanket on the fire of economic growth.
Cycles of innovation
Vaping is, in the opinion of this editor, a worthy effort to help smokers to kick the habit by switching to a water-based, non-burning alternative. Those in the business, of course, want to see it grow. Yesterday, industry players and observers participated in a symposium where differences in opinion about how the industry should develop saw heated exchanges.
On one side was a Dr Farsalinos, cardiologist and researcher at Onassis Cardiac Surgery Center in Athens, Greece, who has studied epidemiological level behaviour among people who are current and former smokers switching to vaping, and how people actually moderate their vaping based on the types of devices they use. His position was that absolute minimum of regulation was needed to allow people to the freedom to mix and match the content of their vaping devices (flavouring and concentration of nicotine), batteries, and ‘tanks’ (that hold the liquid to be vaped). Different vapers would have different needs and desires and he believes his research shows they are intelligent enough to sort themselves out.
However, he found a vigorous opposite in Ray Story, the founder and owner of UTVG, the world’s biggest manufacturer of vaping devices. Mr Story’s position is that clear regulation is needed concerning the manufacturing and quality of devices and liquids. He likened the match between tanks and batteries, and liquids and devices, to that of whether or not a car is approved for use with diesel or gasoline (petrol). If the wrong fuel is used, the engine doesn’t work properly. Safety and quality control problems arise and problems are caused.
This is not an uncommon argument that many will recognise from a range of technologies. When they are created, enthusiasts pile in and have a deep knowledge of the technology. In this case, this author met a vaper who was making tanks of his own design, just for his personal use, using 3D printer, an innovator in two transformative technologies.
Growing up is hard to do
But as an industry grows, the technology must become more sophisticated as the users become less so. Mass adoption means the tech must be simple to operate. That means making it idiot-proof and reduce opportunities for people to break the tech and possibly wreck it – or hurt themselves.
Mass adoption means the tech must be simple to operate.
That is the concern of Mr Story – that people who don’t understand the tech will hurt themselves. He cites the incidence of a store in California found liable after mismatches between batteries and other tech led to battery explosions. He believes that regulation will help to minimise problems and ensure safety for consumers, leading to wider adoption.
He doesn’t make the case, but it follows that that assurance is needed if investors and distributors are to get behind the product. Some standardisation also reduces consumer confusion. If consumers are confused, they don’t buy.
If consumers had to know how to take apart their car and rebuild it, very few would be sold. That being said, enthusiasts can still indulge their passion if they want, even given the widespread safety regulation applied to the industry on the issue of seat belts, crash resistance, airbag deployment and the like.
Two industries with similar concerns are drones and self-storage. Drones, like vaping, are proving popular with consumers and seem to be on the verge of a consumer explosion. Restricted to hobbyists now, problems may arise when in the hands of masses of adults and children flying them all over. Discussions are underway about regulation to limit size (so over-heavy drones don’t hit people), enforce no-fly zones (airports, military installments etc.) through law or technology, and address privacy concerns. If distributors are concerned they could be sued for idiotic behaviour by users or exploding batteries, they’ll be loathe to sell them.
Self-storage seems simple enough – pay to keep your things. But legal issues arise. The industry in many places has been successful in creating industry standards to make it easier for consumers to understand what they need to consider and understand their legal rights and obligations. The industry moves have helped self-storage to explode in popularity with consumers, entrepreneurs, investors and finicky landlords. Certainty brings success.
Of course, it is easier for the government to allow industry to set standards when physical harm isn’t an issue. Consumers are free to download poorly crafted apps for their phones to their heart’s content, but if a finger gets blown off, regulators feel compelled to step in.
Over-heavy regulation and, of course, outright bans, kills industries and even the city-wide appetite for innovation. In many places and, some feel, Hong Kong lately, conservative regulators are thwarting the best efforts of innovation and investment promoting agencies in the private sector and even their own government colleagues. The classic case is Uber, where regulators put the screws to the popular service and InvestHK had to remove their glowing test case of tech investment from their web page.
Hong Kong’s choice
There is a cycle of adoption and Hong Kong will have to choose which side to fall on. The best path is to let tech and business be free until it becomes widespread enough to land in the hands of many non-specialists, only regulating when physical harm is a possibility. In many cases, responsible business leaders with experience and an eye to the future self-regulate and determine standards so they industry can grow. Computers and telecom industries come to mind.
Industry has taken a conscientious approach to maintain standards and establish legal precedents that stand up in court.
Unsophisticated consumers may need some extra protection. An unsophisticated consumer doesn’t mean a moron – many very intelligent people can drive their car, but wouldn’t know how to fix it. But those people depend on certain standards, industry or government established, to feel comfortable not only using certain technologies themselves, but also feel comfortable with other people using the tech around them.
Self-storage is probably the best case, where the industry has taken a conscientious approach to maintain standards and establish legal precedents that stand up in court. By contrast, regulators are typically slow and heavy handed.
Slow can be good if it means watching an industry to see how it evolves. Heavy handed is disastrous. Quick to ban, slow to permit and regulate, is the worst case. If Hong Kong is to be Asia’s World City and an competitive innovator, it must stick to the light regulatory regime that made it successful. Let vaping, Uber, drones and self-storage thrive and Hong Kong will steal an advantage against our many competitors in the region and attract the world’s best and brightest of techies, entrepreneurs and investors.