Beware of The Unethical Use of Regulation to Establish Moats

meaKnyts Slogan In Codice Aperto Speramus: In Open Code We Trust

Introduction:
In the world of proprietary AI, companies like Open AI, Google and Facebook face a significant challenge in establishing a sustainable competitive advantage. As exposed in this leaked memo from Google, this challenge stems from the fact that the largest amount of innovation in the industry is expected to come from public data and open source AI.

While innovation and technological advancements have traditionally been drivers of competitive moats, the memo exposes that this will not be the case with AI. In light of this recent presentations to Congress shed light on a concerning trend — understanding that an edge cannot be secured through capital and innovation the industry is unethically attempting to use regulation to establish a competitive moat. Barely weeks after the leak we see AI leaders lobbying Congress for regulation to gain an unfair edge. In this post, we will explore the implications of such practices, highlighting the importance of open collaboration and the dangers of manipulating regulations for monopolistic gains.

The Power of Open Source AI and Data:
The Google memo emphasizes that the largest amount of innovation in the AI industry is likely to come from public data and open-source AI models; for the simple fact of volume, there will be vastly more public data, and there will inevitably be more development built on that data in the form of Open Source AI models. Open source development fosters collaboration, knowledge sharing, and diverse perspectives, enabling rapid iteration, transparency, and peer review. The inclusive nature of open source attracts a wide community of developers, leading to innovative solutions and improvements.

The top right hand quadrant of public data and public AI is likely to see the greatest amount of development.

Open collaboration lowers barriers to entry, allowing developers and organizations of all sizes to contribute, leading to a more vibrant ecosystem. The modular and extensible architecture of open source development encourages experimentation, customization, and the rapid deployment of new features. It is through community-driven efforts that groundbreaking innovations often emerge.

Furthermore, it is unethical for companies to build private AI models on public data without allowing the public to benefit from them. The quality of AI is directly linked to the volume and quality of data it can access, making it imperative to democratize AI and ensure public access to advancements that have been built on public data. Anything else is quite simply exploitation at population scale.

The Role of Regulation as a Competitive Advantage:
While it is generally agreed that regulatory oversight is necessary to ensure responsible AI development, the manipulation of regulation to create a monopolistic and exploitative framework is deeply concerning.

Open source AI offers immense potential for innovation, but represents a significant challenge to the proprietary business models of organizations such as OpenAI, Google and Facebook. Trust issues with Big Tech combined with the inevitability of internal leaks by developers concerned with the dangers of concentrating these new powers in the hands of so few, make it increasingly difficult to keep proprietary AI models locked away. Recent testimonies suggests that these organizations may resort to using legislation to stifle innovation and prevent new entrants from challenging their dominance. This strategic use of regulation aims to establish a moat by restricting competition and hindering the progress of potential competitors.

Instances of Strategic Regulatory Support:
Although it seems counter-intuitive for companies to actively advocate for regulations as a means of securing competitive advantages, there have been many cases where companies have supported or sought regulations that ultimately benefited their interests.

1. Facebook: In the wake of privacy concerns and data breaches, Facebook has called for regulation of social media platforms. The company has expressed support for regulations that define clear guidelines on privacy, data protection, and content moderation. By advocating for regulation, Facebook aims to shape the rules in a way that favors its existing infrastructure and resources, making it more challenging for potential competitors to comply with the stringent requirements.
2. Airbnb: Airbnb’s collaboration with local authorities and support for regulations on short-term rentals helped legitimize its business and establish trust, giving it a competitive edge over other home-sharing platforms.
3. Uber: Uber revolutionized the transportation industry by leveraging regulatory frameworks to disrupt traditional taxi services. By operating under ride-sharing regulations and lobbying for favorable legislation, Uber created a competitive advantage over traditional taxi companies. The high cost and complexity of obtaining necessary licenses and permits acted as barriers to entry for potential competitors, allowing Uber to dominate the market.
4. Tesla: Tesla has capitalized on government regulations and incentives to gain a competitive edge in the electric vehicle (EV) market. The company has benefited from regulations promoting clean energy and reducing carbon emissions. By investing heavily in EV technology and building a strong brand around sustainability, Tesla positioned itself as a leader in the industry, while benefiting from government support in the form of subsidies, tax credits, and infrastructure development.
5. Amazon: Amazon has effectively utilized its scale and regulatory compliance to build a moat around its e-commerce empire. The company has invested heavily in meeting regulatory requirements, such as data privacy, product safety, and consumer protection laws. These compliance costs act as barriers to entry for smaller competitors, who may struggle to match Amazon’s resources and infrastructure, giving the company a competitive advantage.
6. Pharmaceutical companies: The pharmaceutical industry is heavily regulated, and companies that effectively navigate the regulatory landscape can create a significant competitive advantage. Large pharmaceutical companies often have the resources and expertise to comply with complex regulations regarding drug development, clinical trials, and approval processes. This creates a high barrier to entry for smaller competitors, protecting established companies and allowing them to maintain their market dominance.
7. Boeing: In the aerospace industry, stringent safety regulations and certification requirements act as barriers to entry for new players. Companies like Boeing have developed expertise in meeting these regulatory standards, allowing them to build a moat around their business. The complexity and cost associated with obtaining necessary certifications and approvals make it difficult for newcomers to compete effectively in this highly regulated industry.
8. Financial Institutions: Banks and financial institutions benefit from extensive regulations designed to ensure stability and protect consumers. These regulations require significant compliance efforts, including stringent capital requirements and regulatory oversight. The costs and complexities associated with regulatory compliance act as barriers to entry for new entrants, allowing established financial institutions to maintain a competitive advantage.

The Ethical Concerns:
While regulation is necessary for AI oversight and establishing safeguards, manipulating regulations solely to stifle innovation and prevent competition poses ethical concerns. The use of legislation to create a monopolistic and exploitative framework can be more dangerous than the technology itself.

Instead of pushing for ethical technological advancements and fostering an environment of equitable collaboration, companies may resort to lobbying for regulations that favor their existing business models. This manipulation will limit the entry of new players, stifle innovation, and hinder the potential benefits AI can bring to society. Furthermore it prevents us from addressing the very real dangers of the technology and putting guard rails that protect us from those dangers in place.

Conclusion:
Recent testimonies by AI industry leaders raise serious concerns around the unethical use of regulation to establish competitive moats. While open source AI and data offer tremendous opportunities for innovation, it is crucial to ensure that regulations are not weaponized to hinder progress and maintain a monopoly. Balancing the need for oversight and fostering a culture of open collaboration will be key to creating a healthy and innovative AI ecosystem that protects us from its dangers and benefits society as a whole.