Recently, we’ve been witnessing the rapid spread of a deregulatory movement for privacy and AI. Spurred in significant part by the Trump Administration, the U.S. has started to deregulate technology. The EU has caught the virus and has been contemplating weaking its regulation as well. As Luiza Jarovsky notes, some policymakers in the EU are aiming to “simplify” the GDPR and are increasingly being lured by the siren cries of tech companies complaining about EU regulation. For example, the Draghi Report (Sept. 2024) complains that EU privacy and AI regulations “create the risk of European companies being excluded from early AI innovations” and recommends “light-handed rules.” In a terrific piece, Europe Could Lose What Makes It Great, Anu Bradford, R. Daniel Kelemen, and Tommaso Pavone fear that “the EU seems poised to trade away its leverage as a global regulatory superpower.”
AI Companies – Please Regulate Us . . . Actually, Please Don’t
In 2023, AI company CEOs welcomed regulation. They wanted to ameliorate concerns that AI was developing so quickly and recklessly. But now, their true colors have been revealed. Now that the winds have shifted toward deregulation, these companies have changed their tune. Like nearly all companies, they never really wanted to be regulated; they just wanted to create the illusion that were being responsible and the mirage that there were guardrails.
When the AI companies initially called for regulation, I wasn’t fooled, and so I created a cartoon.
The Myth that Regulation Stifles Innovation
In my new book, ON PRIVACY AND TECHNOLOGY, I debunk a common pernicious myth that regulation stifles innovation:
But the notion that innovation and regulation are oppositional is false. Many organizations spend a pittance on privacy-law compliance as a percentage of overall profits. The most effective regulation often involves holding the creators and users of technology accountable for the costs they foist on individuals and society.
The alchemy for innovation isn’t anemic regulation; instead, it typically involves bringing together bright, creative people, many of whom want their work to do good. Silicon Valley in California, despite having some of the strongest privacy laws, restrictive business regulation, and high taxes, is where many technology companies are born. These laws haven’t driven the innovators away. Innovators are drawn to the Valley because so many other innovators, engineers, and technologists are there – it’s where the party is.
Regulation is often a friend of innovation, not a foe. Effective regulation aims to prevent nightmares like Frankenstein’s monster, and it can help steer organizations away from innovating in the wrong direction. Regulation might impede those who focus maniacally on building their technologies without concern about what they break. Regulation protects companies that innovate thoughtfully and responsibly by preventing companies that don’t from having an unfair advantage.
Unfortunately, regulation is the wrong bogeyman. The alchemy for innovation is not the absence of regulation. In the U.S., the foundation of innovation is a robust system of higher education, where the government has funded science and technology, leading to profound breakthroughs. Nearly everything with the internet and digital technologies today traces back in large part to inventions and discoveries from this foundation – the partnership between higher education and the government. Upon this foundation, innovation depends upon fostering the right environment for inventors, thinkers, and engineers — attracting them from around the world, giving them the ability to create, fail, recover, and keep trying again.
Regulation doesn’t stifle innovation – it steers it. What kills innovation is the destruction of its foundations and the environment that creates the conditions for it to flourish. Today, in the U.S., the very things that have led to innovation are being smashed to pieces. The goose that lays the golden eggs is being slaughtered. Sadly, in the future, the U.S. likely won’t be a world leader in innovation anymore.
As Professor Anu Bradford has explained quite thoughtfully in her article, The False Choice Between Digital Regulation and Innovation, the EU lacks many of the world’s largest tech companies not because of regulation but because of other factors, such as difficulties obtaining funding and punitive bankruptcy laws.
The EU Should Resist the Urge to Dismantle its Digital Tech Regulation
The EU has excelled at being the citadel of tech regulation. The EU has been the world’s conscience, and it has been remarkably successful with developing regulation – which is a form of innovation, as Professor Joshua Fairfield aptly argues. Many approaches from the GDPR have spread worldwide, including to laws in the U.S. Many of the nearly 20 state consumer privacy laws have incorporated concepts from the GDPR. US privacy law has moved closer to EU regulation than vice versa.
Sadly, the EU is now having doubts about its most successful project. This is the point in the superhero movie where the hero loses the fortitude to remain on the hero’s path and starts moping around while the world careens into chaos.
The EU should stay the course and even strengthen its regulation. In ON PRIVACY AND TECHNOLOGY, I propose many ways the GDPR and other laws can be improved to be more effective. Going in the opposite direction by weakening regulation will not magically make innovation occur. Instead, it will just weaken the EU’s leadership in regulation with no corresponding benefit in innovation – thus making the EU less relevant and less powerful. This is exactly the wrong direction.
In my book, I write:
Why can’t companies innovate to find ways to follow the law? Because innovating in order to comply with regulation is less intoxicating than innovating for profit, glory, or power. For companies, this is a matter not of can’t do but rather of don’t want to do. Calls to free technology from the shackles of law in order to facilitate innovation are really demands to defer to powerful companies that want to do whatever they please.
I hope that the EU, the U.S., and rest of the world realize the true foundations and environment for innovation and don’t buy into the canard that regulation stifles innovation. If this pernicious myth is believed, then we’ll have less effective regulation and also less innovation – the worst of all worlds. Nobody likes a hero movie where the hero gives up and loses.
Daniel J. Solove is a law professor at George Washington University Law School and the leading expert on privacy and data security law. Solove has published 10 books, including his latest book, ON PRIVACY AND TECHNOLOGY, and more than 100 articles.
