Why Governments Block Startups

There are a lot of permits and regulations needed in order to open a hotel, in the same way there are regulations needed to open a taxi franchise. This is a major barrier to new entrants in these markets.

It's in the interests of the entrenched (hotel|taxi) franchisees to have this barrier to new entrants as high as possible, since they're already past it. So they lobby and push government to enforce and even make the barrier even higher for new entrants in order to preserve their hold over the market.

This, of course, stifles competition and decreases innovation. It gets ridiculous when even plumbers, manicurists, and barbers need certification and licensing.

It's always in the interests of entrenched players to increase regulation. Whenever you see regulations, certification and licensing required, it usually indicates a stagnant industry ripe for disruption.


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