Podcast Summary
Is Business Broken?
Episode: What Happens When Business Regulates Itself?
Host: Kurt Nickish
Guests: Andy King (Professor, Strategy & Innovation), Tim Simcoe (Professor, Strategy & Innovation)
Release Date: October 16, 2025
Episode Overview
This episode kicks off a series on self-regulation in business, set against the backdrop of recent U.S. Supreme Court decisions (notably the rollback of Chevron deference) that reduce the reach of federal regulation. The panel explores what happens when industries set their own rules, examining the dynamics, effectiveness, and limitations—especially in the absence of robust government oversight. The conversation spans historical examples, the mechanics (and failures) of self-regulation, and skepticism about its ability to address major challenges like environmental protection and consumer safety.
Key Discussion Points & Insights
1. What is Self-Regulation? (02:00 – 04:30)
- Clarification: Not about individuals controlling their own behavior ("I'm going to diet this week"), but about industries or communities creating and enforcing rules in the absence of government.
- Examples:
- Sports leagues (NFL) create and maintain their own play rules.
- LEED certification for green buildings (run by nonprofit, not government).
- Industry standards for WI-Fi compatibility.
- Social norms, like tipping in restaurants.
- Quote:
"I'm talking about rules of the game that are put into place without government. If you think about a sports league, they set rules for how the players will play."
— Andy King (02:19)
2. Types of Self-Regulation & Enforcement Challenges (04:31 – 07:27)
- Two Models:
- Technical Standards (Simcoe): Usually self-enforcing because non-compliance leads to product failures—firms want their devices to work.
- Social/Environmental Standards (King): Stronger incentive to "cheat" because compliance can be costly; effective enforcement often requires third-party validation and monitoring.
- Quote:
"In my case, the potential benefits from violating, from cheating, exist. And so you have to worry about the enforcement more."
— Andy King (04:31) - Responsible Care example: Chemical industry initiative for post-accident safety—individual firms often want the badge without the effort.
3. From Informal Norms to Codified Rules (07:27 – 13:00)
- Norms: Unwritten, culturally enforced practices (e.g., trust in e-commerce, strong anti-corruption norms).
- Transition to Formalization:
- New technologies/problems often drive formal, consensus-based standard-setting organizations (e.g., International Electrotechnical Commission).
- These bodies emerged to solve specific challenges of the industrial age, and now the digital era.
- Quote:
"Historians have tried to understand how these institutions get formed... If you have good rules in place, you have these kind of cultural norms, your society works better and is successful."
— Andy King (08:01) - Quote:
"As new technologies emerge, they provide new kinds of problems that have to be solved. And people will set up a new institution or a new standards organization to try and coordinate."
— Tim Simcoe (12:23)
4. The Role and Limits of Government (13:00 – 21:48)
- Government as Backstop:
- Self-regulation is most credible/robust when government exists as an "enforcer of last resort."
- Often, self-regulation arises from fear of adverse regulation (post-disaster safety pushes, e.g., after Exxon Valdez or Three Mile Island).
- Cheating & Collusion Concerns:
- Some self-regulation resembles cartels (colluding to raise costs or set rules in their own interest).
- Potential for using self-regulation as a shield against stricter government oversight.
- Limits and Prerequisites for Effective Self-Regulation:
- Credible, often third-party monitoring.
- Graduated sanctions (not just expulsion).
- Negotiation forums for rule updates (Ostrom's principles for governing the commons).
- Quote:
"There is a strong incentive for business to say don't regulate us, we'll regulate ourselves...and they do sometimes work, but often that's not the case."
— Andy King (18:49) - Quote:
"The government is both a complement and a substitute to industry self regulation."
— Tim Simcoe (18:44)
5. The Impact of Recent Legal Changes: The End of Chevron Deference (21:48 – 24:01)
- Supreme Court Shift: Rolling back Chevron makes it harder for agencies to interpret ambiguous laws and enforce regulation.
- Implications:
- Increased pressure on industry self-regulation to "fill the gap."
- Potential for critical rules/norms to default to private sector solutions.
- Quote:
"It's perceived as pushing more regulatory activity back towards industry actors."
— Tim Simcoe (22:18) "Self regulatory kinds of activity may be able to fill the gap that emerges."
— Tim Simcoe (23:14)
6. Critique and Warnings: Can Self-Regulation Handle Society’s Biggest Issues? (24:03 – 29:42)
- King’s Scepticism:
- Industry self-regulation, particularly on environment, is often "window dressing" or toothless.
- Historic government regulations (Clean Water Act, Clean Air Act) produced transformative benefits—self-regulation unlikely to replicate these gains.
- Quote:
"We have a lot of industry self regulations that either don't work or nobody knows if they work on the environmental front...and I think this is just an attack on the kinds of regulation that we need as a society to make it work."
— Andy King (24:10) - Simcoe’s Perspective:
- Agrees that environment and safety require government regulation with real enforcement.
- Notes some areas (e.g., building codes/housing) where overregulation may be a concern and could benefit from more flexible/self-regulatory approaches.
7. Possible Bright Spots and Local Innovation (29:42 – 32:46)
- Small-Scale Successes:
- Local, community-driven self-regulation efforts ("saving the local turtles") are widespread and can improve quality of life.
- While unlikely to scale up to global crises like climate change, these grassroots initiatives build social trust and problem-solving capacity.
- Potential for Civic Revitalization:
- Reduced top-down regulation may stimulate renewed local problem-solving and civic engagement—though both guests are skeptical about its ability to address "big" problems.
- Quotes:
"Maybe the very self regulatory forces can be a buffer against this dictatorial state power."
— Andy King (30:21)
"As you withdraw some of the stuff that's coming from the federal government, people have to step into that void and it sort of rebuilds this muscle for developing local social interactions."
— Tim Simcoe (31:43)
Notable Quotes (with Timestamps)
-
On Self-Regulation vs. Government:
"A free market works well when it is well regulated. And I fear that self regulation is great, but it can be used as a means to just destroy all kinds of rules."
— Andy King (26:59) -
On the Role of Social Norms:
"One of the things that I remember people always astonished by... was how much trust there was. You could put something online and you'd pay your money and your shoes would come...that sort of sense that that's the norm has proven to be very helpful."
— Andy King (08:19) -
On Collusion and Cartels:
"Usually there's a disaster...and then all of a sudden the people that are involved in that activity go, 'oh my God, this is going to tar us all with the same brush.'...they try to come up with a set of rules they'll all abide. Now the interesting thing... that's a cartel."
— Andy King (15:55) -
On Local Self-Regulation as Community Building:
"...as you withdraw some of the stuff that's coming from the federal government, people have to step into that void and it sort of rebuilds this muscle for developing local social interactions, figuring out how you're going to solve a problem as a community."
— Tim Simcoe (31:43)
Timeline of Key Segments
- 00:00 – 02:00: Introduction, context (Chevron deference, importance of self-regulation)
- 02:00 – 04:30: Definition of self-regulation; practical industry and social norm examples
- 04:31 – 07:27: Enforcement—technical vs. social/environmental standards
- 07:27 – 13:00: Evolution from informal norms to formal rules; institutional origins
- 13:00 – 21:48: Role of government, cartels, enforcement, and monitoring
- 21:48 – 24:01: Impact of Chevron rollback; regulatory authority shift
- 24:03 – 29:42: Concerns over effectiveness; historic regulatory successes; limitations of self-regulation
- 29:42 – 32:46: Local innovation as bright spot; skepticism about scalability
Conclusion
This episode offers a wide-ranging, nuanced exploration of self-regulation, challenging the assumption that industries can (or will) effectively police themselves—especially on issues with broad societal implications. While standards and local initiatives have their place, the consensus is clear: for problems where incentives to cheat are high or stakes are public (like the environment and consumer safety), robust government regulation remains essential.