Will California lawmakers give AI innovators a chance?

California was the birthplace of the digital revolution and some of the world’s most innovative modern tech companies and products. The secret sauce powering that development was a policy framework rooted in light-touch regulation that gave entrepreneurs and investors a green light to try to become the next big thing – and many did just that to the envy of the rest of the world. 

Unfortunately, like many other states today, California appears ready to reverse course with a new policy approach to artificial intelligence (AI) and advanced computation that could limit the next great technological revolution at a time when China and other nations are speeding ahead. 

For example, one new bill (SB 892), would demand that private vendors of AI services abide by a wide variety of new rules for AI that will be enumerated by the California Department of Technology if those companies hope to do any business with the state. And plenty more red tape could be on the way. According to the National Conference of State Legislatures, about a dozen other bills have been floated in California recently. 

Many of these measures would try to preemptively tackle a huge range of activities, including algorithmic processes used for automated hiring systems, social media systems, health care and more. And the state has already adopted a resolution that said California is committed to carrying out the vision outlined in President Joe Biden’s “Blueprint for an AI Bill of Rights,” although it remains unclear what that entails at this stage. 

The good news is California and other states have not yet advanced crushing AI regulations that would wind back the clock on the digital revolution. They still have a chance to emulate the crucial tech policy decisions made in the early days of the internet and e-commerce. During the Clinton administration, both California and the federal government adopted a framework summarized by one important word: forbearance. 

Start-ups could take a shot at building creative products without needing expensive permission slips from countless bureaucrats. Policy treated these innovators and their services as innocent until proven guilty. In other words, regulatory forbearance meant entrepreneurial freedom. 

This policy approach was a resounding success for America. Eighteen of the world’s 25 biggest digital technology companies are U.S.-based firms, and most of them are headquartered in California. The freedom to innovate gave us more firms, jobs, and world-leading products – and attracted talented workers, companies and investors to our shores. A recent list from venture capital firm a16z of the 50 most promising AI companies in America revealed that most of these start-ups and growing firms are also based in California.  

On the other hand, countries that have taken a more repressive approach to digital tech have shot themselves in the foot. It’s hard to name any digital market leaders based in Europe, for example, because heavy-handed mandates triumphed over the freedom to innovate. Experts have noted that Europe was “the biggest loser” in the global tech race, mostly due to their misguided regulatory policies. 

Importantly, the American forbearance approach does not mean ‘anything-goes’ anarchy. Like every other state, California already has plenty of laws and regulations on the books that can address the harms potentially caused by AI or any other new technology. The state has consumer welfare statutes that address unfair and deceptive practices, regardless of how they occur. Civil rights laws already cover discrimination and bias. And with over 200 state agencies and departments, California does not lack the power to handle other context-specific issues. 

For example, if AI-related harms develop in the context of finance, environment, employment, insurance or transportation, the state has powerful sectoral bureaucracies already well-staffed to handle such concerns. California should wait to see if those laws and agencies can handle AI-related issues before adding more red tape.

If America is going to win the AI race against rising global competition, California needs to give innovators a fighting chance. Fear-based policies that result in massive compliance burdens will cripple AI entrepreneurialism and prevent another great technological revolution from being birthed in the Golden State.