Politicians And Regulations Are About To End The Startup World

Many trends are shaping our current technologic landscape. However, there is one that everyone keeps ignoring. That’s the collision between the technological and political establishments. 

For decades, the technology industry has been evolving at the fringes of the political space. Power circled Washington, and the enemy was the Wall Street club. The forces at work kept bankers on a tight leash. For decades, Wall Street has influenced the country and by extension, the world. That ended in 2016. 

The 2016 US Presidential Elections changed that perception. Suddenly, the political establishment started regarding big technology companies as the new power broker. And with good reason.  

Like a wild vine, tech corporation’s tendrils have extended everywhere. They not only control their core business but myriad other side industries. Such unchecked expansion is creating real shockwaves in the social fabric at a global scale.

The acceleration of automation, AI and other technologies are corroding the pillars of society. And the political sphere just woke up to it. 

We’re entering a time of titanic wars. Politicians are starting to pursue regulation to tame the tech beast aggressively. Meanwhile, the startup elites keep investing in staying under the radar.

The era of “ask for forgiveness later” is finished. Startups aren’t targeting game apps anymore. Disruption is expanding and touching industries deeply tied to our society. Such a push is finding increasing resistance and stiffer regulations. 

This isn’t necessarily wrong. The cry for more regulations around technology, isn’t only political. An increasing number of technocrats are asking for better safeguards.

The problem though is the complexity of the matter. The political establishment is wary of several aspects. On one side you have the monopolistic aspects of certain technology corporations like Amazon or Google. The fear is that they have so much power that they can swing whole markets. 

On the other side, the capacity of individual companies like Facebook or Twitter, to subvert the information channels, terrorizes politicians. If Facebook’s News Feed algorithm is casually capable of swinging an election, what would happen if they did it on purpose? 

The immediate reaction to this fear is to assert control. The first line of attack will be to apply new definitions to the current antitrust laws. This is coming in conjunction with technology specific taxes like the Google Tax that’s about to pass in Spain. 

The problem though is that such interventions are only scratching the surface. The unregulated technology iceberg is massive, and it’s growing more extensive and complex every day.

That technology is out of control is an understatement. As much as I love technology, we’ve gone from a niche market to an industry that controls every aspect of our lives. When the incentives of the tech elites diverge from the people they serve, there is a problem. 

Governments are struggling with the rapid rise of technology as a world-defining force. The speed of innovation and the increasing reach of startups is outpacing the already sluggish process. It’s not only the speed and reach. It’s the complexity of assessing the actual impact of technology on society. 

I’ve been quite vocal about the way politicians draft new regulations. It’s not feasible to have a political taskforce draft something that can impact millions. Not even when politicians seek help from the experts. The issue is that technology is increasingly entwined with much larger systems. It’s not an isolated application anymore. It’s an app that connects with our social graph, with the financial system, with the insurance world or the global transport infrastructure. 

Understanding the impact of a simple change in the regulations requires technology. We need predictive models and simulations that inform the short, mid and long-term effects of regulation. Even more importantly, such models need to make sure they don’t introduce biases or unethical recommendations. Drafting whatever we feel like isn’t a viable option anymore. 

To offset the lack of good judgment and vision of regulators, some companies are taking matters into their own hands. They try to build models that support their claims that their services are good for society. 

As I mentioned before, the clash between technology and politicians is reaching a breaking point. The problem is, there isn’t a single fault line. Several disruptive trends are on a collision course with fundamental social and civil rights. Some of them, though, are happening concurrently and approaching faster than most predictions.  

The one space that’s ripe for regulation is the transportation industry. There are no doubts because change is here and happening as we speak. There are two significant forces in play here. On one side we have the growing presence of ride-sharing companies like Uber, Lyft or BlaBlaCar. 

Their business model is challenging the public transport sector at large. Governments are deflecting any change of the current licensing model. They’re making small concessions and exceptions, but they seem reluctant to address the elephant in the room. The current model doesn’t work and needs to be rethought. 

On the other side, we have car-sharing companies like Car2Go, Lime or Mobike. These organizations are tapping and accelerating the change from ownership to renting of the transportation infrastructure. They are challenging many local rules, including stationing, accessibility or rights of drivers. Like the previous group, there is increasing friction between municipal forces and startups. Most cities wrestled with Uber’s aggressive push some years ago. Second and third generation sharing companies aren’t finding such fertile ground anymore. 

 

The previous two trends are reshaping public transport, especially in cities. They are the present. Following that trajectory closely we have autonomous vehicles. 

Driverless vehicles are going to have a massive impact on current regulations. From insurance claims to liability scope to the obliteration of whole industries like that of truck drivers. 

Two of the most challenging and fastest moving countries in this respect are US and China. The US is achieving an impressive track record, but China is catching up quickly. 

The one advantage of China is the lax enforcement of specific laws there. If Beijing has a vested interest in a technology, they won’t enforce the rules. And that’s what’s happening. 

Governments are deploying city and state exceptions and drafting new regulations for autonomous vehicles. Nonetheless, most countries are wholly unprepared for this, both regarding new laws and the chained effects this will have on their economy. 

As startups keep automating century-old processes, the menace of a labor world without human workers looms bigger. This wave is unavoidable and has significant repercussions for any country, but mainly, for any political party. 

Politicians draw their power from their constituents (that’s the theory). Anything that threatens their livelihood is a political nuke. Automation of labor is the mother of all thermonuclear bombs. 

The impact will reshape the political landscape. It will obliterate the old partisan groups and will give rise to new forces within the spectrum. It’s surprising though that there isn’t a single country-level regulatory framework that covers this. The European Union spearheads the effort with some early-stage civil robotic laws, but it’s still far off and too abstract. 

The consequences of ignoring this are dramatic. Addressing three side effects is essential. The obvious one is, what to do with all the low-skilled workers that will lose their jobs to automation. Many experts argue that their integration into the new digital markets will be impossible. Besides, society needs to absorb these unemployed in a very short time span. For many, the only viable option to do this is through nation-wide Unconditional Basic Income (UBC). The problem though is that the current experiments with UBC are throwing mixed results.

Another issue to tackle is labor protection against automation. Will governments allow full automation of any job? Will there be a “Human Quota” for certain industries? Everything points to the rise of a “made by humans” brand. Right now there are zero thoughts or legislation around this. Some will see it as a protectionist approach, but Human Quotas might be the only way to slow down the growth of the unemployed artificially.

Last but not least, the automation of work will take a toll on our tax system. With fewer workers comes fewer taxes. As mentioned before, some countries are already toying with technology taxes. But their scope is aimed at taking a cut of their digital businesses. There needs to be a serious analysis of what’s being automated and how much should we tax it with. Robot taxes will be first, mostly because they’re easy to comprehend and straightforward. AI systems taxes might be a much more difficult task to assess or tax. 

Among the growing concerns around labor is the so-called Gig Economy. In all honesty, the Gig Economy isn’t new. It’s been in our societies for years now. Technology-enhanced platforms are only augmenting the impact of a preexisting situation. 

Several ramifications are essential to explore. The first one is around what exactly is a crowd worker. There isn’t a clear cut definition, much less one all countries can agree upon. The absence of this makes it hard to decide which legislation applies to them. Most of the friction between startups and regulators is around this point. 

Apart from an unclear description, there is uncertainty around what legal jurisdiction is appropriate. Most of the Gig Economy platforms have a global footprint. It’s hard to assess what takes priority; the country of origin of the crowd worker, of the recipient, or of the platform. 

The outcome of such legal void is the unprotected status of the crowd workers. Governments need to start regulating on a pan-regional scope. For example, the European Union should set a Directive that describes and protects EU crowd workers.

These issues though, are superficial. The most worrisome effect of the new Gig Economy is the continuous erosion of high-wage structures in western countries. Many high-wage positions are being spliced into smaller tasks. Such “mini-jobs” are being outsourced to the Gig Economy, mostly to youngsters in developing countries. The consequence is an erosion of high-paid jobs in the west, and low access to highly skilled positions in developing countries. 

It’s critical to start drafting regulations to protect minimum income for all. It’s paramount that we protect the most vulnerable workers from turning to the Gig Economy to survive. In other words, Gig Economy status needs to be legislated and narrowed down. The enabling platforms shouldn’t be the ones handing down and defining the eligibility of their crowd workers. That should be a nation and region-wide effort by the states. 

Derived from the extended use of automated systems is the fairness and morals of such. One thing is using these Artificial Intelligence systems for commercial purposes; another is employing such predictive models to make life or death decisions about people.

What recent studies have demonstrated is a pervasive recurrence of bias in such systems. The most significant risk here is the invisibility of the problem. Prejudice is hard to prove in humans; when we scale it with AI systems, it’s even harder. 

There is an increasing number of companies spurring AI-bias expert teams to keep their systems in check. There are also new organizations devoted exclusively to such a task. However, the proliferation of critical decision-based systems is faster than that of the checks and balances. 

The more extended these systems become, the more significant the risk of shattering society. The development of smart cities or autonomous vehicles is accelerating the adoption at a critical infrastructure level. 

Some regulators are taking notice. New York City became one of the first cities to pass an Algorithmic bill. The European Union is funding a project named Algoaware for Algorithmic Awareness-Building. The research is in its early stages, but it’s a significant step forward. 

But not all the trends are related to Artificial Intelligence. Synthetic Biology and more precisely, the use of CRISPR-Cas9 for DNA manipulation is becoming the future of many industries. With great advances comes grave risks too. 

For example, gene editing is becoming the de-facto for an increasing number of startups in the food industry. Food is tightly regulated, and the use of CRISPR-Cas9 in the industry has raised concerns. 

Nonetheless, depending on the country, gene-editing of crops is subjected to very different regulations. In July of 2018, Europe’s highest court ordered the expansion of genetically modified crop regulation to gene-editing too. Meanwhile, the US took the opposite approach and dropped any regulation around crop gene-editing. 

Both regions illustrate how difficult it is to strike the right balance. Europe always tries to protect the consumer, while the US tends to favor research and free commerce.

However, the technology is showing incredible results in a wide variety of fields, including human experimentation. Adding strict regulations might hinder progress. Some countries like China are already taking advantage of this. 

Beyond human or crops editing, CRISPR-Cas9 is also used for insect gene editing. Some scientists use it to produce Malaria-deterrent mosquitos. These modified impotent mosquitos can wipe whole populations in one generation. The goal is to eradicate the major Malaria infection vector, mosquitos. The disease kills north of half a million people each year. Making black or white regulatory decisions isn’t as clear-cut in specific fields, much less when it has a direct impact on human survival. 

Another fast-moving disruptive technology is Blockchain. Beyond the cryptocurrency frenzy, the technology itself is poised to change many industries. 

There are two elements to Blockchain; the underlying infrastructure, commonly known as the “ledger,” and the applications built on top via Smart Contracts. 

While everyone is debating about the infrastructure level, the most complicated aspect to Blockchain is the distributed contracts built on top of it. If a contract gets out of control, the potential repercussions are significant. An increasing number of organizations are adopting the underlying Blockchain infrastructure as an experimental, computational platform. It’s a matter of time before we start experiencing more and more incidents. 

The question though is who is responsible if something happens? The very decentralized nature of Blockchain makes it very hard to assess. And while the industry is in its infancy, contracts will get exponentially more complicated.

Imagine a field that brings black-box-decision-making algorithms and runs in a distributed and decentralized platform. The more systems we tie into this network (and we will), the higher the chance of triggering a Butterfly Effect. 

Several countries have already started regulating Blockchain. The problem is, they’re focused on its economic use cases. Those are the low-hanging fruit issues. As the infrastructure layer matures, the Blockchain fabric will become more complex. New use cases will find room in it to thrive. The most challenging aspect about it will be its global footprint. It will be close to impossible to enforce local regulations on such a distributed system. 

Europe, though, is taking an interesting approach. They already have an EU Blockchain Observatory that serves as a watchdog. Now they’re toying with the idea of applying a “stamp of approval” on specific applications built on top of Blockchain. The idea is enticing. It will turn regulators into trusted entities. This approach though still conflicts with the current privacy regulation, GDPR. Regulators need to iron out these tensions between a decentralized system and the right to privacy control. For new rules to be enforceable, they’ll need to take a global scope and become very flexible. 

These new trends are shaping our future. Some of them are already in full swing. Others will take a little longer, but they’re unstoppable. Innovation though usually has two faces. The useful, effective, potentially-life-saving one, and a much darker one. 

One of these dark sides is the trend toward civil-military integrations. The boundaries between commercial, civil uses and military ones are blurring. Many governments are approaching the leading Artificial Intelligent companies with partnership proposals. 

In the US, Google, Microsoft or Amazon have already had employees resigning due to their ongoing military contracts. The opposition to such integration runs all the way to the top. Companies like Microsoft are urging regulators to restrict the use of facial recognition technology. 

The truth is, there are no regulations that address the use of such technologies by the government. Even the GDPR, which is rather broad, doesn’t apply when it comes to national security activities or law enforcement. And this is a big issue. Many security agencies are deploying these AI systems to track and control their citizens. Sometimes even worse. In China, already, such civil-military collaborations are the norm.

This is a long article, but I wanted to give a 360 view of the significant regulation challenges we’re facing as a society. Politicians are finally waking to the menace of technology. During the next few years, we’re poised to see a string of ill-advised regulations trying to clench the rising power of startups. It will not work. The whole regulation process needs to be rethought. We won’t be able to protect our societies otherwise. 

The regulatory process needs to take a much more active role. New systems need to designed so that new predictive models can be used as part of the regulatory process. Boundaries will matter less and less, so some global legal framework needs to happen too. There’s been talks about a split of the Internet into two or even three networks. Rest assure, the partitioning will be done around regulations.

And on top of all that, we must elevate the average technological literacy of our government. 

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