Regulatory madness
Lake Minchumina (LMA) → Lomlom (LLM)
Shoot first and ask questions immediately after.
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Four years ago, AI was under-understood. Substerstood? When it came to news, the key topics trending with AI included: natural language and coronavirus. No one was chatting about chat. The letters GPT and LLM hadn’t entered the lexicon. OpenAI wasn’t bandied about. Taylor Swift didn’t top any AI charts. Today, “Taylor Swift AI pictus is #1.”
McKinsey’s 2020 state of AI art report is many pretty pages meant to generate a fear of missing out moment among potential clients. If you’re not onboard, you’re off your rocker. And, it wasn’t quite enough to talk about what to do, they had outlined the risks. Of those, cybersecurity topped the charts. Personal privacy didn’t show up until item #4. It was so meh, that it was less concerning in 2020 than it was in 2019. Things like power consumption, cost, and hallucinations didn’t even show up. Nor did the words, “scrape” or “amok.” As in, “Will run AI run amok?”
The European Commission bottled their inner Alfred E. Neuman. They didn’t know why they should worry, but they worried. They worried so much they started to create a set of the rules for this nascent übersuchen, a technology whose distance from conventional computing is greater than the distance between current computing and a 1984 Casio CD-40 calculator watch.
In their rush to be big and be first, they forgot a few key things. Like – they didn’t affirm copyright. The proprietary branded cattle have left that barn. They did layout fines as big as 7% for total worldwide revenue for non-compliance. They were convinced… CONVINCED… that creating more regulations would… get this… increase demand for AI services.
The EC’s rules emerged yesterday. Fully formed and very oops. They goofed. People knew they goofed. And, in a shocking display of transparency, even they knew they goofed. “We may have set the regulatory bar too high.” Oops. Or how about this one, “Companies in Europe could just say there isn’t enough legal certainty in the AI Act to proceed.” Oh-oh. Maybe it is us, “Brussels has blind spots.” Well, that’s not good.
And it took minus four days for people to work their way around them. Yes, minus four.
On Friday, Google bought Character AI. Put bought in air quotes. Google didn’t buy the Character AI company in any traditional sense of the word buy. Because no company getting whacked like a piñata by the EC and days away from getting shellacked by the DOJ that it’s a monopoly wants to wade into a new quagmire.
So instead of buying Character, Google gave Character $3B for a non-exclusive license and hired all the key people. Character turned around and distributed the three very big bills to their investors and left a skeleton crew to keep the lights on.
That’s like NASA saying we didn’t leave the lunar buggy car thing on the Moon, we left it there for any alien species who finds it to give it a spin as a token of friendship so they will appreciate humankind when they come to invade us.
The remnants of Character AI are there — much like the Lunar Rover Vehicle — to be sued into oblivion by the EC. Seven percent of future revenue of a dead entity is still zero. And, Google remains isolated. “We didn’t buy it. We don’t own it. A few people joined us. It’s more of an HR thing.” And, that’s why you hire brilliant lawyers.
Media and tech companies circling silly rules isn’t new. This new LLM work around is based on the remarkably effective end-around of last generation LMAs. LMA are local management agreements.
Back when terrestrial TV mattered, the FCC didn’t want anyone to get too much control. So… they limited the number of stations any one group could have. Let’s say I maxed out my ownership. I really wanted the stick in Sacramento but not enough to give up any of my current stations. What’s a would-be owner to do? You enter into a deal with the Sacramento station. You program what does on air and you sell the ads. You also keep the lion’s share of the revenue. In exchange, you pay the owner a bunch of money up front and a tiny residual, but you never actually buy the station. Bingo, Bango, Bongo, and Irving, you have de facto ownership without tripping the regs.
It happens every time. Every time. Regulators set up rules. Lawyers side-step them instantly. In this case, we go from 80s era LMA (Lake Minchumina, a pretty lake in Alaska) → to current era LLM (Lomlom, a reef island in the South Pacific). Feel free to move around the cabin. It’s going to be a smooth ride. For big tech.
