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There are two ways to impose rules on an industry: before it breaks something, or after. Artificial intelligence is going down the latter route.
California governor Gavin Newsom vetoed a bill last weekend that would have imposed some fairly mild standards on AI models such as OpenAI’s ChatGPT or Google’s Gemini, asking them to take reasonable precautions to avoid catastrophic harm.
The measures — including publishing a safety statement and testing new models for havoc-causing potential — are hardly a bureaucratic nightmare. They were only likely to bind AI engines bigger than those that exist today. Most large firms already say they’ll prioritise safety. Besides, the proposed standards had already been watered down substantially.
Still, some of tech’s biggest names, including venture capitalists Andreessen Horowitz and Y Combinator, cried foul. Some argued that rules should come from Washington — unlikely in a divided Congress — or should be more based on evidence of actual risks from AI, which are still mostly theoretical.
There are parallels here with another industry that threatened to undo civilisation: banks. Big lenders such as JPMorgan and Goldman Sachs spend much money and time fighting plans to keep them in check. They too scored a recent victory, forcing the Federal Reserve to weaken complex rules that would have made them hold more capital.
Regulatory refuseniks in all industries tend to tread similar arguments, claiming hasty rules chill innovation and stifle upstarts. Both Wall Street and Silicon Valley fret that overly tight red tape might stop them from doing good. Banks wouldn’t be able to serve Americans with mortgages; AI creators would shy away from producing models with which developers freely tinker.
True, AI regulation could be neater. Newsom complained that the bill’s size threshold would spare smaller entities that could still do grave damage. That happened in banking, when mid-sized and lightly regulated Silicon Valley Bank unravelled chaotically in 2023. Still, better to set the threshold high and tweak later. In preventing crises, the perfect is the enemy of good.
The masterminds behind AI, and their venture backers, ought perhaps to pay more attention to the Wall Street analogy. For one, hated rules have only made big banks bigger. Despite harsh oversight, US institutions reign supreme because customers deem them safer. Financial invention, meanwhile, continues apace.
Moreover, regulation born out of an unprevented crisis can be very onerous indeed. Consider the heavy-handed Dodd-Frank rules drafted after 2008’s financial trauma, which still curb bankers’ animal spirits today. In time, the AI supremos who killed California’s bill might wish they had been less successful.
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