Ignoring the Rules Sometimes Works

At some general, annoying level, following the law is a low-variance strategy, while ignoring it is a high-variance strategy. If you construct a comic-book supervillain lair and build a mind-control ray as part of a plot to take over the world, then there is a chance that you will either (1) rule the world, which is very good, or (2) be captured in a military raid and imprisoned in an impregnable island fortress, which is very bad. If you don’t do that, you cut off those tails of the distribution.

More prosaically, if you want to build a global taxi service that people can hail from a smartphone app, one way to do it is to coordinate with the taxi commissions of hundreds of cities to get regulatory approvals and make sure that you comply with local requirements, and another way to do it is to completely ignore those regulations and just launch your app everywhere. The second approach might expose you to ruinous fines or shutdown orders or bad publicity or prison, but it also might work; you might end up so popular in so many places that the local regulators can’t ban you and will have to accept your proposed terms. This is sometimes called “regulatory entrepreneurship.” The first approach can’t work that well; it will be slow and expensive and subject you to lots of different restrictions on your service. But it can’t work that badly, either; it cuts the “prison” tail off the distribution.