The call for Digital Regulation

With the pace of digital innovation underway today we are seeing more change than we have ever seen and this is forecast to continue. No industry is sacred to the Tech giants. How is it possible for regulation to keep up given this pace of change? Apart from the draconian speed of law making, there is a huge knowledge gap to bridge between technologists and law makers. Regulation seems to be the somewhat boring forgotten child. Yet our very existence is at stake if we don’t regulate digital change in years to come. How are we to do this?

Humanity’s greatest challenge

Elon Musk’s famous statement about Artificial Intelligence (AI) being our “biggest existential threat” and equivalent to “Summoning the Demon” illustrates this point somewhat alarmingly. Regulation is essential for a raft of AI applications, many of which we have not even thought about yet. Current applications range from rules around self-driving cars to banks screening mortgage applications.

With AI’s profile increasing, educational institutions are starting to jump on the bandwagon by creating specialist management and technical courses. The most recent example of this is MIT’s “Intelligence Quest”, an institute-wide initiative to discover the foundations of human intelligence and to drive the development of technological tools that can influence virtually every aspect of society. Essentially, MIT is looking to model human intelligence within machines – answering the question of how machines are able to learn effectively. This is a coming together of technologists, psychologists and philosophers which has wide ramifications.

On a totally separate yet equally impactful note, the absence of regulation within the Cryptocurrency and Blockchain world is rearing its head. A week ago we saw the most recent incident of fraud involving the heist of Coincheck, a Japanese Crytocurrency exchange, that resulted in $532 million being stolen. This is yet another example of illegal behaviour in a totally unregulated market that has emerged through the rapid pace of innovation. Countries such as South Korea and China looking to ban Bitcoin as a result. It is the tip of the iceberg, as is the emergence of Initial Coin Offerings (ICO’s), another unregulated Blockchain based market. A lot of ‘mom and pops’ stand to lose out if we are not careful! 

So, how do we even contemplate introducing digital regulation in this fast paced environment? Let’s face it, policy and regulation is a dry area at the best of times that is notoriously bureaucratic. How do we encourage technologists to pay credence to this when there is more money to be made getting machines to think like humans? Why should they care – what’s in it for them? Yet it is critical for our very future.

What is the solution?

Since the industrial revolution humans have introduced regulation to ensure sustainability. From the invention of the internal combustion engine that powers cars, to air travel, to medical science. We have always found a way to regulate no matter how fast the pace has been. Survival is the most natural instinct for humans. History tells us that it should be the same this time around, although it may not tell us the means.

We have already discussed the first challenge that we face – knowledge. The change that we are seeing today through technologies such as AI, machine learning, Blockchain, Crypto, Drones and FinTech touches so many facets of our lives. Given its breadth there is a need for greater digital knowledge across the board, notably among politicians and business leaders. Different skillsets are required at senior influencer level. There is need for a new type of leader – a new advisor and policy maker – one with the right combination of technical, strategic and legal expertise.

In addition, given what is at stake, there is also a call for a multi-partisan approach to policy making both globally and locally. The structure of government in mature democracies tends to favour two major parties counter-balancing each other. This is needed to ensure balanced decision making, which is generally healthy, yet it may fall short when there is a common objective at hand that needs collaboration. Politics often gets in the way of collaboration. There is a strong sentiment that this time around our political leaders are going to have to put aside pride and work together for the common good of humankind. Some thought is going to have to be given to incentivising this.

One interesting potential solution comes from the world of Adam Smith – why not let the market deal with it? The concept of fighting technology with technology. The regulation that has been introduced after the GFC in 2008 has been an interesting example of this. Developed markets have seen a 492 percent increase in regulatory changes between 2008 and 2015. It has spawned a new industry called RegTech(regulation technology).

Predictions are that the spend on regulatory compliance technology will reach $118 billion in 2010. This is big business! And the other interesting fact is that these companies seem to be run by older workers and not the millennials. Maybe this is because it is not as sexy?

It is unlikely that RegTech will be the silver bullet, it is more plausible that there will be a combination of forces regulating future digital change. One thing we can be certain of though is the need for education. The need for leaders and influencers with a broader set of skills over the coming decade. We need this knowledge spread throughout industry and the education sector in order to maintain a sustainable balance.

With the change underway we are certainly in for a very exciting and bumpy joy ride over the coming decade. Regulation is going to play a big part in this. Let’s just make sure we tackle each challenge in a measured way with the right level of analysis, and that we understand the hangover cure before we dive in.

 

By Craig Westcott

Fusion5 Executive Director 

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