Regulatory Thermocline

A thermocline is a layer with very distinct temperature gradients in lakes or oceans. I.e. a big body of water does not linearly get colder the deeper you go, there are layers that behave quite differently.

The analogy here is that similar different "layers" and "gradients" exist when it comes to regulations, be it housing, manufacturing, or general business regulation. One example is taking a company public on the stock market: companies take years to prepare for the regulatory steps to comply with SEC rules. A publicly traded company has much stronger obligations and regulatory scrutiny than a privately held company. A tiny startup has again a much lower regulatory burden. A private person again faces a lower standard if only acting for himself. There is almost no regulation on private activity not facing the market or any consumers.

This could be an important concept strategically. For many companies it would be a strategic mistake to go public too soon; similarly, one must be ready to face the regulatory scrutiny that faces e.g. a commercial producer of heavy equipment or housing.

It's one thing to build prototypes on private property, but if facing the market with a broad offer to regular consumers, the company should be ready to pass the regulatory regime with flying colors. Until it is confident it can do that, it might be smart, strategically, to stay below the "regulatory thermocline."