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Why Didn’t Government Invent Uber?

The public sector failed to innovate the taxi industry, but there are other opportunities.

Uber, the ubiquitous transportation company recently valued at $50 billion, has famously made it easier than ever for consumers to find a driver and pay for a ride. The company has had enormous success with its relatively simple idea of using an app to match passengers with drivers because most riders found the previous system for hiring taxis to be painfully cumbersome. Surprisingly, until Uber and its competitors like Lyft, Curb and Hailo burst onto the scene, there appeared to be little effort among local governments to address this common complaint. While some cities like Chicago and New York are now trying to play catchup and build their own official taxi apps to compete, these efforts are most likely a case of too little, too late. But the burning question for most cities should be, “Why didn’t we think of this first?”

After all, most major cities have taxi commissions that set the rules by which taxi drivers must operate, including specifications about the equipment they use, and they are supposed to be operating in the public interest. It’s hard to imagine that no taxi commission had the wherewithal to recognize the potential of mobile apps to deliver value to both drivers and riders. The taxi commissions, which arguably know more about the taxi industry and its customers than almost anyone else, would have been ideally positioned to create Uber or at least some close clone. Instead, virtually across the board, these commissions ignored the available technology and relied on someone else to innovate.

The government is not alone in having this problem. Netflix, not Blockbuster, pioneered online movie streaming. Amazon, not Borders, made it easy to buy books online. And Apple, not BlackBerry, created the world’s most popular mobile device. But while countless books and articles have been written about why successful companies fail to innovate and are ultimately left in the dust by their rivals, few have asked why government agencies have missed so many opportunities to spawn successful new initiatives.

There are likely many partial explanations. One commonly cited reason why companies fail to innovate is because their internal cultures discourage it. Many government agencies can probably relate, as bureaucracies don’t have a reputation for attracting those eager to change the status quo. Another explanation could be that government agencies have few incentives to pursue risky projects. While the private sector is more likely to “celebrate failure,” that same ethic has yet to take hold in the public sector, which means risky ideas may never receive a green light. Finally, government agencies face a series of political constraints not found in the private sector. Uber, for example, has notoriously disregarded existing taxi laws in the pursuit of a disruptive business model. It’s hard to imagine a government-run service doing the same.

This doesn’t mean that Uber-style innovation in government is a lost cause. One successful model is the CIA-backed venture capital firm In-Q-Tel. Established in 1999 as an independent nonprofit corporation, In-Q-Tel funds high-tech startups designed to serve U.S. national security interests. Its investments have yielded an array of successful companies like data analytics firm Palantir, which serves both private- and public-sector customers. State and local governments should create a similar type of venture capital firm to spur investment in businesses delivering technologies geared toward education, policing, public transportation and other areas.

Strategic investments could unlock a new wave of innovation benefiting the public sector. After all, each city or state does not need to develop its own unique applications — it just needs one platform that can be used by all. By combining resources and cooperating across borders, government agencies could accomplish more together than any individual effort could on its own. In addition, policymakers might be more inclined to modernize regulations if they have a direct stake in a company’s financial success.

The government does not need to compete with the private sector, but it does need to seize opportunities to leverage technology to better pursue its mission. There is no reason why the next Mark Zuckerberg can’t get his start as an enterprising public servant.

Daniel Castro is the vice president of the Information Technology and Innovation Foundation (ITIF) and director of the Center for Data Innovation. Before joining ITIF, he worked at the Government Accountability Office where he audited IT security and management controls.