On Sunday March 12, The Zebra Founder and CEO Adam Lyons joined Mark Cuban, entrepreneur, “Shark Tank” star, Dallas Mavericks owner, and The Zebra investor, along with Austin tech and innovation executive Michele Skelding, at South by Southwest Interactive Festival (SXSW) in Austin, Texas to tackle: “Is Government Disrupting Disruption?”

The panelists spoke in a packed ballroom of nearly 2,500 people and addressed several ongoing and hot-button issues across local, national and global economies in which government is a boon to innovation – and when it runs the risk of disrupting disruption. 

SXSW filmed the hour-long session, which will be available on YouTube soon.

SXSW 2017: Mark Cuban & Adam Lyons Discuss Government Role in Tech Innovation

Lyons and Cuban have a history.

Both grew up in Pittsburgh. Both dropped out of school and pursued entrepreneurial ventures. Both disrupted the status quo and created unique and successful businesses.

Yet despite the fact that Cuban has since become a recurring investor in The Zebra, he and Lyons only first connected a few years ago when Lyons cold-emailed Cuban and said he wanted to disrupt the insurance industry. He was succinct. Cuban bit.

And now they’re sharing the stage at SXSW.

Innovate within Verticals to Disrupt

Moderator Michele Skelding, entrepreneurial advisor at the University of Texas and former SVP of global technology and innovation at the Austin Chamber of Commerce, began the SXSW panel by asking how innovators can maintain an active conversation around what regulation governing bodies are implementing, and how government can advance – rather than slow – innovation.

Cuban said he’s more interested in verticalization – taking innovative ideas and applying them to the insurance industry, for example, or other industries where entrepreneurs have knowledge of how they work already.

“What’s happening now is there’s so much leapfrogging in approach to solving problems that its difficult for horizontal approach to work,” Cuban said. “It has to be vertical.”

Insurance as a Vertical

The insurance industry is highly regulated, which created an enormous barrier – and an opportunity – when The Zebra was in its early stages. Lyons found that a true car insurance comparison marketplace didn’t exist in the United States because each state regulates insurance independently, setting different requirements for minimum liability coverage, uninsured motorist coverage, and how insurance companies can price for certain rating factors, among other things.

Yet Lyons saw the demand from consumers for a simpler way to find the right insurance coverage for them. Lyons knew that a unique approach and innovative technology were the only ways to create a solution for this problem – in a $220 billion industry no less.

The Zebra team worked hard to navigate the insurance industry and used its highly regulated nature as an advantage, seeking publicly available information, building relationships with state insurance departments, and understanding how insurance carriers evaluated risk.

“I think what’s tricky as a startup is if you find that solution and then regulation changes,” Lyons said. “But for us we were able to navigate that from the very beginning. We have hundreds of licenses to operate as an agency and brokerage and we had to build a lot of these internal tools.”

government disrupting disruption

Adam Lyons, Mark Cuban, and Michele Skelding at SXSW 2017

Knowing Good vs. Bad Regulation

Cuban also emphasized acknowledging different types of regulation, saying some protect certain people while others protect “all of us” and what’s scary are regulatory efforts intended to be used as a source of revenue.  

“Where [Trump is] doing the wrong thing is in getting rid of regulation with short-term thinking because he thinks it’s going to create jobs when it won’t.”

On the other hand, Cuban said that one of his greatest investment regrets was because of his misguided focus on regulation as a hurdle when Travis Kalanick, founder and CEO of what is now Uber Technologies, Inc., reached out to him years ago.

“Where I saw regulation [with transportation agencies and cab companies], he ignored it,” Cuban said. “And (despite some bad recent press), he’s done it.”

On the Issues: Regulation

Public health care

Cuban: “We [should] take on that liability because we think our citizenry deserves something, and it becomes a right, that’s a responsibility. My preference would be to amend the Constitution so that health care for chronic and serious illnesses is a right. Period. End of story.”

Transportation and ridesharing

Lyons: “When Austin created these new regulations…it creates uncertainty that scares investors, that scares markets – even the perception of what could happen in the future. For us, we’re going to win no matter what. We’re not going to make excuses and not going to worry about things we can’t control.”

Immigration ban and H1B visas

Cuban: “Obviously we want the best talent globally. If they’re not working for us, they’re working for someone else. They’re not just not working… But there should be a limit to number of visas [any company] can have at one time.”

Lyons: “Agreed, we need more visas and equal and fair access to them. I’d add that diversity is important as a startup. You want different backgrounds, you want different cultures and different values if you’re trying to be creative and think outside the box. That gives you a big advantage.”

How do entrepreneurs facilitate the right kind of disruption?

Lyons and Cuban agreed that no entrepreneur can expect to know everything about an industry, that there is always more to be disrupted, and that empathy is key in balancing regulation in a society that wants – or needs – to innovate.

“One of the things we’ve done is continue to listen and learn and adapt,” Lyons said. “Government should spend a lot of time listening and learning, too.”