We are seeing a flurry of regulation
But we should ask ourselves if we are seeing regulatory capture — ie letting corporations write lax rules that lead to public harm.
Andrew Ng points out some contradictions:
“It’s also a mistake to set reporting requirements based on a computation threshold for model training. This will stifle open source and innovation: (i) Today’s supercomputer is tomorrow’s pocket watch. So as AI progresses, more players — including small companies without the compliance capabilities of big tech — will run into this threshold. (ii) Over time, governments’ reporting requirements tend to become more burdensome. (Ask yourself: Has the tax code become more, or less, complicated over time?)
The right place to regulate AI is at the application layer. Requiring AI applications such as underwriting software, healthcare applications, self-driving, chat applications, etc. to meet stringent requirements, and even pass audits, can ensure safety. But adding burdens to foundation model development unnecessarily slows down AI’s progress.”
But more to the point: “Regulation favours the incumbent”
The phrase “regulation favours the incumbent” refers to the idea that regulatory policies or legal frameworks often benefit existing, established companies (the incumbents) at the expense of new entrants or startups.
Here are some reasons why:
Barriers to Entry: Regulations can create high barriers to entry. For instance, new regulations might require businesses to get certain licenses, meet specific standards, or maintain particular records. While large, established companies might have the resources to meet these requirements, smaller startups or new entrants might struggle, making it difficult for them to compete.
Costs: Compliance with regulations often comes with costs – be it in the form of equipment, software, staff, or training. Established businesses, with their larger revenue streams and capital, are generally better equipped to absorb these costs than new entrants.
Economies of Scale: Incumbents often benefit from economies of scale. This means the more they produce, the lower the cost per unit. So, if both an incumbent and a new entrant have to invest in new machinery to meet a regulation, the cost per product or service unit might be much lower for the incumbent due to their larger scale.
Influence on Regulation: Established companies, especially in certain influential industries, may have more sway over policymakers and regulators. This means they can potentially shape regulations in ways that favor their operations or make it harder for new competitors to emerge.
Experience with Bureaucracy: Incumbents have often navigated regulatory environments for years or decades. They might have dedicated legal and compliance teams, and they know the ins and outs of the regulatory landscape. New entrants lack this experience and might find it challenging to navigate complex regulatory requirements.
Risk Aversion: Established companies have more to lose, and as a result, they might be more risk-averse. Regulations can serve to legitimize their cautious approaches, while startups, which often rely on disruptive and innovative models, might find those models hampered by regulations designed for older business paradigms.
Certainty and Stability: Incumbents often prefer a stable business environment. While they might grumble about regulations, the certainty they provide can be preferable to a “wild west” scenario where anything goes. New entrants, however, might thrive in less regulated environments where they can innovate and disrupt without many constraints.
How much of this applies to AI?