Bill Gurley, a well-known venture capitalist, walked onto the stage at an event this week and asked the audience to shout a phrase that wouldn’t normally generate excitement. However, Gurley received a resounding response from the spectators.
“Regulation is the friend of the incumbent!” They shouted.
Gurley spoke at the All-In Summit in Los Angeles, an event primarily focused on technology All-in podcast. He titled his presentation “2,851 Miles,” which is the distance between Silicon Valley and Washington, DC
Gurley – who, as a general partner at VC firm Benchmark, has invested in companies such as Uber, Grubhub and Zillow – warned of the dangers of regulatory capture. He described his own experiences of opposing it when championing innovative startups, then warned about its role in artificial intelligence today.
To explain the concept, he quoted George Stigler, winner of the 1982 Nobel Prize in Economics, who said: “Regulation is generally adopted by industry and is designed and implemented primarily for its own benefit. ” In other words, a special interest is given priority over the general interest of the public.
Gurley talked about his experiences with Tropos Networks, in which Benchmark invested. He described how mayors were initially excited about the company’s wireless mesh networking technology, hoping to use it to provide municipal Wi-Fi services.
“There were hundreds of mayors across the country who wanted to provide free Wi-Fi services throughout their downtowns,” Gurley said. “It would help with public safety, economic development and of course the digital divide.”
Unfortunately, he said, the idea “clashed with commercial interests,” namely incumbents with powerful lobbyists. In Philadelphia, he said, Verizon and Comcast used lobbyists to push bills through the Pennsylvania Legislature that would protect their positions from upstart challengers like Tropos. Soon, more such rules spread to other states.
Regulatory risks in AI are captured
Gurley presented a few other regulatory examples before highlighting an issue that is more relevant today: AI
He shared on-screen one New York Times article from May titled: “OpenAI’s Sam Altman Urges AI Regulation During Senate Hearing.”
“Sam is just getting started,” Gurley said, referring to Sam Altman, CEO of OpenAI. “He also wants regulation.” OpenAI, the maker of AI chatbots ChatGPT and GPT-4, is widely seen as having a major lead over rivals.
“There is something very scary in this AI space,” Gurley said. “The incumbents who want to run for a meeting with… the government are spreading something that I don’t think is accurate or fair: they’re spreading a negative open source message, and I think this is precisely because they know that this is their biggest threat. ”
If large language models (LLMs) – which power AI chatbots like ChatGPT – are open source, the reasoning goes, more startups will be able to innovate and challenge incumbents. In contrast, OpenAI and Google’s LLMs (with its ChatGPT rival Bard) are generally not available for public scrutiny.
Tesla CEO Elon Musk, who co-founded OpenAI but later drifted away from it, tweeted in February: “OpenAI was created as an open source (that’s why I called it ‘Open’ AI), non-profit organization to serve as a counterbalance to Google, but now it has essentially become a closed source company with maximum profit controlled by Microsoft. Not at all what I meant.”
Altman and Microsoft have denied this characterization, and Ilya Sutskever, chief scientist and co-founder of OpenAI, shared his thoughts on the reasons for the move away from open source in an interview with The Verge in March:
“We were wrong. Plain and simple, we were wrong. If you, like us, believe that AI – AGI – will at some point be extraordinarily, incredibly powerful, then there is simply no point in using open source. is a bad idea…I fully expect that in a few years it will be completely clear to everyone that open source AI is simply not sensible.”
He added that “at some point it will be very easy, if you want to, to do a lot of damage with those models.” However, he also noted that “the safety side is not yet as salient as the competitive side,” and that “there are a lot of companies that want to do the same thing.”
Altman himself told lawmakers in May: “We don’t want to slow down smaller startups. We don’t want to slow down the open source efforts,” adding, “We still need them to comply.”
Marc Andreessen, general partner at VC firm Andreessen Horowitz, has spoken out against AI regulation, warning in June that “CEOs stand to make more money if regulatory barriers are erected that create a cartel of industry-driven government blessed AI vendors protected from new startups and open source competition.”
Gurley said Llama 2 from Meta, one of the leading open-source LLMs, “is actually super interesting.”
Silicon Valley celebrities, including Andreessen, YCombinator co-founder Paul Graham and Greylock partner Reid Hoffman, have signed a statement of support for Llama 2 stating:
“We support an open innovation approach to AI. Responsible and open innovation gives us all a stake in the AI development process, giving these technologies visibility, control and trust. By opening the current Llama models, everyone can benefit from this technology.”
Near the end of his presentation, Gurley warned that “if you care about prosperity and you kill innovation, you’re going to kill prosperity.”
He ended his speech by referring back to the title “2,851 Miles”.
“The reason Silicon Valley is so successful,” he said, “is because it’s so damn far away from Washington, DC.