Thoughts on regulatory sandboxes (Day #0)

Image credit: Diana S / Sandbox (Flickr)

I just came back from Digital Freedom Festival in Riga, Latvia. I was moderating a panel on Collaborative Economy with three incredible speakers. During the conversation, there were repetitive mentions to the concept of regulatory sandbox.

For some people, this might be a strange notion so let me quote here:

“The regulatory sandbox aims to create a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity in question.”

The primary goal is to beta test new disruptive practices and make sure regulations take into account all the details.

There are several countries currently deploying a regulatory sandbox. Some examples can be found in United Kingdom, Hong Kong or Malaysia. More will follow, I’m sure.

Never before the global economy has been so interdependent with so many countries.

They idea is a fantastic one. In true lean startup fashion, regulatory bodies can now test different disruptive technologies. Once the testing period ends, they can make better-informed recommendations.

And while I love the idea, I think it falls short of what we need. More and more I realize how our world is becoming exponentially more complex. The Internet is bringing everything together and creating relationships that are very hard to track. Never before the global economy has been so interdependent with so many countries. And obviously, regulations are suffering from the same problems.

What’s been clear to me for a while is that human beings can’t track all these interactions. Now add reinforcement loops, delays, and other system dynamics, and you just made it exponentially complex.

It’s still surprising that we regulate based on what we think the law should look like. In most instances, the law gets drafted by popular demand or expert consultation. And while experts are, well, experts, they only know about one domain. More and more we’re seeing disruption tearing the fabric of many other unrelated areas. Let me be clear. We can’t expect to do a good job if we keep regulating by hand.

We can’t expect to do a good job if we keep regulating by hand.

A year ago I proposed on stage something that I believe most discarded. The creation of regulation AIs and system simulations. The initial idea is to start building small scale systems that can simulate some of the essential elements a law needs to keep in mind. The more we use the simulation, the more elements we can try and test.

The idea isn’t to predict what will happen with a specific regulation in the process. The goal is to get a sense of the different scenarios that will be plausible if we apply this or that change within our society.

I am aware what I’m proposing is to create a massive scale simulation. I’m also aware; this has been done for pandemics or micro-voting targeting. So yes, it’s hard but not impossible.

Regulatory sandboxes and other approaches are creating laws that are too myopic, too elite, too short term.

Simulations still need to be interpreted, so humans will still be involved. I’m not proposing a regulatory Skynet, but I do believe we need help to make the world a better place.

Regulatory sandboxes and other approaches are creating laws that are too myopic, too elite, too short term. We need to analyze the long-term impact. We need to include minorities, to empower all citizens, not only the technocratic elites.

That’s the thought of today. Please do leave comments and share your opinions on the matter.