The Stanford Business School just launched a new Policy Innovation Initiative. Earlier this week, I attended their launch event featuring Sarah Hunter, Policy Director of X (previously Google X), Kathy Hibbs, Chief Regulatory Officer, 23&Me, and Ted Ullyot, Partner of Policy and Regulatory Affairs, Andreessen Horowitz.
Why the need for policy and regulatory thinking within the tech world?
The motivation is simple. In the past decade or so, software innovations have dominated. We’ve seen how great software platforms – sometimes built by tiny crack teams – can scale rapidly in way that completely changes markets. Think Amazon and Ebay for commerce, Facebook, Snapchat, Instagram for social networking, Box, Salesforce, Workday and Slack for enterprise solutions (decode: software that helps us manage our HR, customer relations and intra-office discussions with much less pain). The market is increasingly saturated with software solutions for almost every area of life. Hence, while will continue to see gains in productivity and efficiency in these systems because of Artificial Intelligence, pure software will no longer be the area of rapid technological innovation.
Instead, technological innovation in the next decade will be dominated by technologies spanning hardware (things that are in our physical world) and software (the virtual world). Examples include self-driving cars and surgical robots, which are performing physical functions but controlled by algorithms in the virtual world. A term often used to describe this general area is “cyber-physical systems”.
Here comes the challenge: objects in the physical world are more directly risky to human life than software systems. Furthermore, these objects can harm people who don’t choose to use them – I choose to download Facebook if I can stomach the risks to my personal privacy. On the other hand, even if I never buy my own Self Driving Car, my life could be at risk if someone else owns a faulty one. There is a more acute need to manage risks to the general public.
Hence, the regulatory landscape is stacked against emerging tech. First, Legacy regulations abound to protect consumers from death or physical harm, such as long Food and Drug Administration (FDA) and vehicle/driver-licensing processes. Second, Because of potential harm to human life, regulators are likely to approach the emerging technology from the perspective of ‘mitigating every risk’ (read: adding even more new conditions and clauses). Third, regulations and legislation are typically based on precedent, and are hence biased towards incremental (as opposed to disruptive) improvements in incumbent tech and business models.
Regulatory risk will be the major Go-to-Market hindrance for most emerging tech companies in the next decade; if they fail to address regulations, a company could be dead in the water before they even begin. Policy teams within tech companies exist to minimize this regulatory risk. They advise companies on questions such as:
- Who do we need to influence so that regulations fall in our favour? Policy teams often go above regulators to paint visions for politicians: how the emerging technology will solve social problems and create new economic opportunities.
- Should we work with regulators to co-create new regulations, or break the regulations? The risk of breaking regulations varies – if you’re able to get widespread support from users (think Uber+AirBnB), you may be able to force regulators into certain positions. It’s more difficult to take this approach for hardware solutions.
- If we desire to co-create new regulations, what approach should we take? One company designed their own set of self-driving car regulations, which never came to pass because the technology was pivoting so quickly.
- How early should we engage regulators? Generally, it isn’t good to give regulators surprises, but sometimes engaging too quickly before there are good answers on how to mitigate the risks will scare them into coming down hard
- Is it even worth trying to enter this market, or should we start where regulations/Governments are more relaxed? For example, most successful drone companies tested outside the U.S.
The role of policy teams in tech companies can be likened to master chess players. They get to know the kings, queens, knights and pawns who influence the regulatory system, and appeal to a range of motivations to move the pieces in their company’s favour.
Each speaker pointed out that regulators aren’t technological dinosaurs who intentionally regulate technology to death (though they are often caricatured this way). They simply have a different bottom line, which is to minimize risks and externalities. Put this way, regulators and innovators can provide a healthy check and balance to each other.
Areas I Hope They Address
I’m excited about this initiative by Stanford Business School and would love to see it be a neutral place for tech and policy to folks to discuss the best approaches to regulating emerging tech. Here are some areas I hope they will address.
How do companies manage the competitive vs collaborative dynamic in lobbying for regulatory change?
On one hand, there are great advantages to be the first mover and defining the regulations in your favour. Kathy from 23&Me shared that if you are able to set precedent, all your competitors have to follow your standards. This locks is a certain competitive advantage. There are other circumstances where working collaboratively is more productive. For example, on the same issue, politicians and regulators might be far more willing to listen to a group of local start-up founders than large multinationals like Google. Smaller companies sometimes have to work through trade associations because they lack the scale needed for lobbying.
Will start-ups lose out as this policy/regulatory expertise becomes more critical to success, yet is dominated by large players?
Small companies are often unable to recruit for the policy/regulatory function because of their resource constraints. This is why VCs like Andreessen Horowitz have policy teams that advise their stable of start-ups. Will more of such advisory services become available to start-ups? Who will provide them?
We are also starting to see coalitions such as the “Partnership in AI” by Google, Facebook, Amazon, IBM and Microsoft – no doubt one of the objectives is to lobby Governments on AI-related policies. How do start-ups fit in? Is there a risk that the agenda is overly swayed by large companies?
An idea for policy teams in tech companies: Go beyond lobbying for regulation; work with Governments to support widespread adoption of emerging tech
One of the themes of the night was how tech companies need to paint a vision to politicians on the benefits of the emerging technology, so that they support favourable regulatory change.
I think we have to go further than persuading politicians to get to the point of favourable regulation. Widespread adoption of emerging technology especially in areas of healthcare, transport and education is hindered by more than regulation. For example, change can’t take place if you don’t inspire, resource, and manage the morale of teams on the ground who are accustomed to existing ways of work and will not change just because a new technology exists. I saw it first hand when I worked at the 40,000-strong Ministry of Education in Singapore.
Without this, politicians will find it difficult to move, even if they agree strongly with tech companies’ visions for the future. Singapore’s Prime Minister, who takes a personal interest in Smart Nation, recently lamented that the whole effort is moving too slowly. This, coming from one of the most efficient Governments in the world, suggests that there are deep-seated issues in achieving widespread adoption of technology.
Here are some things that are essential for widespread adoption of emerging tech, but that Governments/Politicians will not be able to tackle alone:
- Painting a vision that shows implementers and constituents how emerging tech will exponentially improve their reality;
- Tying concrete benefits to these emerging technologies such as creating new local jobs;
- Actively advocating for programs that help people deal with the downsides disruptive technology, such as re-training for displaced workers.
These are areas that policy teams within tech companies can consider as they seek to move chess pieces in their favour: not just to achieve favourable regulations, but to see widespread adoption of their technologies in regulated sectors.
<if you work in a policy/reg team within a tech company and already work on these areas, I would love to hear from you>
In the coming posts, I will also feature folks who work in policy/regulatory teams within Silicon Valley and Singaporean companies. Look out for those!