If there is any ironclad rule of entrepreneurship, it is that every new innovation is likely to be attacked by businesses and regulators opposed to change.
Entrepreneurs are men and women who take action to bring into reality their vision of what might be. Sometimes that is simply a vision of a better job and a better life for the entrepreneur and his or her family—like the business of IJ client Silvio Membreno, who came to the United States from Nicaragua and has earned his living as a flower vendor in Hialeah, Fla., for the past 15 years. Sometimes an entrepreneur has a vision of offering a unique service in a new place, such as IJ client Jestina Clayton: She found a wide-open market in Utah for the traditional African hairbraiding she learned in her native Sierra Leone.
Silvio’s and Jestina’s success threatened established businesses, which ran to lawmakers to outlaw them rather than compete. But with IJ’s help, Silvio and Jestina fought back. Silvio joined with us to file a lawsuit challenging regulations being pushed by florists and other established retailers to drive mobile vendors out of business. Thanks to an IJ legal victory over Utah’s cosmetology cartel in federal court in August, Jestina is now free to continue her hairbraiding.
Sometimes, however, entrepreneurs have a vision so large it not only threatens local bullies or lazy competitors, but also changes the shape of entire industries in order to create something new and better. Consider, for instance, the Internet communications company Skype. In less than a decade it rose from a small startup with a few employees to an international juggernaut, used by more than 500 million people, in nearly every country, connecting more people around the world on any given day than several of the largest traditional telecom companies combined—at a tiny fraction of the cost. That success was possible in part because Skype was free to innovate outside the thicket of traditional telecom regulation—and had deep pockets to fend off legislation that might have shut it down.
In just the past year we have begun to see powerfully disruptive entrepreneurship occurring in two fields very familiar to IJ: vending and transportation.
On the vending front, food trucks are changing how Americans eat. Once relegated to construction sites, food trucks are now booming in popularity, selling creative, cutting-edge cuisines to an excited public. Innovative culinary entrepreneurs rely on the Internet, using Twitter and Facebook and other web tools to let patrons know where they will be selling that day and to establish a following. A trend that began at the beginning of the economic downturn due to the relatively low startup costs of food trucks has bloomed into thousands of trucks nationwide serving millions of patrons each day. Unfortunately, it has also attracted opposition from regulators and politically connected restaurant associations who seek to use the law to block food trucks from competing with brick-and-mortar establishments.
All but five of the 50 largest cities in the United States now have laws that make it difficult, if not impossible, to successfully operate food trucks. IJ has rebutted the myths that have fueled these ordinances in a report, Seven Myths and Realities about Food Trucks, and has begun taking cities to court. An IJ lawsuit in El Paso forced the repeal of protectionist legislation that stifled food truck vendors, and this past November, IJ teamed up with two Chicago-area food trucks—The Schnitzel King and Cupcakes for Courage—to kick off a major constitutional challenge to a protectionist ordinance recently passed in the city.
IJ has long fought against regulations that prevent independent taxi and sedan car drivers from earning an honest living. Recently, however, Internet entrepreneurs have started a quiet revolution in the transportation industry. Smartphone apps created by companies such as Uber.com, Hailo.com, TaxiMagic and others use the Internet and GPS to link drivers and riders, routing limos, sedan cars and taxis to passengers within minutes and allowing passengers to pay online with their phone. Since most of the sedan-car operators who use these services are independent entrepreneurs, they pose a major challenge to taxi cartels. The new services make transportation more convenient for riders and more profitable for drivers, who spend less time circling around looking for passengers and more time running their meters. Hailing a car with your smartphone is now possible in more than 20 U.S. cities and dozens of European cities as well.
It is estimated that in the past two years since hail-by-app began in London, more than 50 percent of the cabs there—likely the world’s busiest taxi market—are hailed by smartphones. That success was made possible because the city adopted a hands-off regulatory approach to the new technology, increasing competition. Unfortunately, many U.S. cities, at the behest of a powerful taxi lobby, are considering legislation aimed at prohibiting competition between taxis and livery vehicles and outlawing the convenience of hailing by smartphone app. These proposed laws have nothing to do with protecting public safety but are merely a way for politically powerful cab companies to try to shut down a flourishing new market. In Portland, Ore., and Nashville, IJ has teamed up with independent sedan car drivers to prove that such protectionist laws are not only wrong, but unconstitutional.
Entrepreneurs expect to fight the status quo. Too often today, however, they must also fight unjust and arbitrary regulations to see their vision become reality. But entrepreneurs who refuse to submit do not stand alone. IJ stands with the innovators—and is itself as entrepreneurial as the clients it defends. We are seizing opportunities presented by these new and emerging business models to establish a rule of law under which individuals can control their destinies as free and responsible members of society—and our past successes show that we can win.
Also in this Issue: