Andrew McAfee’s Post

The legislation is just killing free market and entrepreneurship. Please see those two tables in the post of Katharina Koerner and the last report from Bruegel - Improving economic policy (congratulations for an impressive work done to put all this information together). And it's only for the Digital Market. 😱 Do we really need all these laws and boards to drive the Digital Market in EU? #eu #ai #digitaleurope #innovation #economy

Digital companies are navigating non market complexity

How should we regulate digital markets and artificial intelligence? Is regulation a technocratic matter that can be left to experts? Or does it involve a democratic choice between competing collective goals? Just published in the journal Competition and Change, my article “The Regulator’s Trilemma” offers a new way of answering these questions. It outlines a novel framework for understanding differences between different digital markets, mapping them in terms of their reliance on different kinds of network effect: those that increase the quantity of matches available, and those that increase the quality of matches possible. Focusing on privacy, competition and innovation/efficiency, it argues that regulators’ ability to overcome tensions between public values and aims depends on the characteristics of different digital markets. Remedies such as interoperability or data-sharing mandates can resolve many conflicts - but there is a persistent residual category of cases where trade-offs are inescapable. Here, technocratic expertise reaches its limits, and wider public debate becomes invaluable. Technocrats can still be tasked with making these decisions, but they are not technocratic decisions. This analysis also suggests that a more flexible regulatory framework (like that created by the UK’s Digital Markets, Competition and Consumers Act) may be preferable to a more prescriptive approach (like the EU’s Digital Markets Act) – although much here will hinge on how these new regulatory regimes are implemented. “The Regulator’s Trilemma: On the limits of technocratic governance in digital markets” is available to download open access (i.e. for free) from: https://lnkd.in/eTHD3ymS (Hugely grateful to participants at the Centre for Competition Policy’s Digital Workshop in Cambridge last November for feedback on an earlier version of this paper!)

📢 We’ve been talking about the EU a lot lately. Digital markets, digital services, artificial intelligence… If you feel like something’s happening, you’re right. The EU digital strategy (or “A Europe fit for the digital age”) is an initiative to upgrade the EU to version 2.0, and take advantage of modern digital technologies. The law usually moves slowly, so the steps the EU has taken recently have felt faster than light. Interested in what changes the EU digital strategy is focusing on? Read on: https://lnkd.in/dztU4AZC #EU #DigitalStrategy #Michalsons

Mario Draghi's new report on EU competitiveness: a watershed moment for EU economic discourse "Across different metrics, a wide gap in GDP has opened up between the EU and the US, driven mainly by a more pronounced slowdown in productivity growth in Europe. Europe’s households have paid the price in foregone living standards." "Europe must profoundly refocus its collective efforts on closing the innovation gap with the US and China, especially in advanced technologies. Europe is stuck in a static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines. In fact, there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period. This lack of dynamism is self-fulfilling." "Regulatory barriers to scaling up are particularly onerous in the tech sector, especially for young companies. Regulatory barriers constrain growth in several ways. First, complex and costly procedures across fragmented national systems discourage inventors from filing Intellectual Property Rights (IPRs), hindering young companies from leveraging the Single Market. Second, the EU’s regulatory stance towards tech companies hampers innovation: the EU now has around 100 tech-focused laws and over 270 regulators active in digital networks across all Member States. Many EU laws take a precautionary approach, dictating specific business practices ex ante to avert potential risks ex post. For example, the AI Act imposes additional regulatory requirements on general purpose AI models that exceed a pre-defined threshold of computational power – a threshold which some state-of-the-art models already exceed. Third, digital companies are deterred from doing business across the EU via subsidiaries, as they face heterogeneous requirements, a proliferation of regulatory agencies and “gold plating” of EU legislation by national authorities. Fourth, limitations on data storing and processing create high compliance costs and hinder the creation of large, integrated data sets for training AI models. This fragmentation puts EU companies at a disadvantage relative to the US, which relies on the private sector to build vast data sets, and China, which can leverage its central institutions for data aggregation. This problem is compounded by EU competition enforcement possibly inhibiting intra-industry cooperation. Finally, multiple different national rules in public procurement generate high ongoing costs for cloud providers. The net effect of this burden of regulation is that only larger companies – which are often non-EU based – have the financial capacity and incentive to bear the costs of complying. Young innovative tech companies may choose not to operate in the EU at all." More: https://lnkd.in/gJb8uDbv

📰 Predicting the Road Ahead for Implementing EU Digital Rules 💻 As we look back on the past five years, it's remarkable to see the significant strides taken by the EU in shaping the digital landscape. From the Digital Services Act to the AI Act, numerous regulations have been established to govern the digital world. However, as they begin to take effect, it's essential to consider the challenges involved in their implementation. 💸 Here are a few takeaways that highlight the complexity of the task at hand: • Balancing individual freedoms with data protection requirements • Ensuring consistency across member states while addressing differing national interests • Adapting to the evolving digital landscape, where technological advancements outpace regulatory frameworks So, what can we expect on the horizon? 🔮 In five years, I predict that we'll see a more refined approach to implementing these regulations, with a greater emphasis on: • Interoperability between national authorities and industry stakeholders • Continuous monitoring and assessment of new technologies and emerging risks • Strengthened collaboration between EU institutions, member states, and civil society organizations By fine-tuning these implementation strategies, we can foster a more harmonious and resilient digital environment, ensuring the EU's continued leadership in shaping the digital future. 🌐

𝗘𝗨 𝗹𝗲𝗴𝗶𝘀𝗹𝗮𝘁𝗶𝗼𝗻 𝗮 𝗳𝗿𝗶𝗲𝗻𝗱 𝗼𝗿 𝗳𝗼𝗲 𝘁𝗼 𝘁𝗵𝗲 𝗱𝗶𝗴𝗶𝘁𝗮𝗹 𝗲𝗰𝗼𝗻𝗼𝗺𝘆? The EU has set a goal to make this decade Europe's Digital Decade. A clear legal framework is an integral part of the EU's digital strategy to shape the next era of global digital innovation. The EU has recently delivered laws on topics such as #AI, #Data and #Cybersecurity, triggering a significant wave of regulation that businesses now need to navigate. Is this new EU legislation a friend or foe to the digital economy? This was the key theme of this year's #BitkomForumRecht. My key takeaways: 💡 ꜰʀɪᴇɴᴅ ᴀɴᴅ ꜰᴏᴇ: A survey by CMS indicates that while regulation does present challenges, it also offers opportunities. European businesses see potential advantages including better standards, lower implementation costs, and competitive edges on a global scale – most importantly increased #trust. 💡 ᴛɪᴍᴇ ᴛᴏ ᴅɪɢᴇꜱᴛ: Both administration and companies now need time to fully comprehend and implement the new laws – a legislative pause in this area would be welcome. 💡 ɢᴜɪᴅᴀɴᴄᴇ: deep dives into the Data Act, AI Act, the DSA, DORA & NIS2 offered practical advice to companies on how to prioritize actions and navigate these areas effectively. 💡 ꜰᴜᴛᴜʀᴇ ʟᴀᴡ-ᴍᴀᴋɪɴɢ: very interesting insights into the work of the "Zentrum für Legistik" at the Federal Ministry of Justice which aims to provide law makers with contemporary methods for practical legislative work (e.g. using concepts from design thinking and visualization), and to help create good, understandable, digitally compatible, and bureaucracy-free laws. 💡 ᴇxᴄʜᴀɴɢᴇ & ᴄᴏʟʟᴀʙᴏʀᴀᴛᴇ: In a time of rapid technological development and many accompanying legislative activities, platforms like #BitkomForumRecht are even more important for the exchange between experts from politics, administration, academia and business in order to discuss critical points of current legislation and to offer practical assistance for implementation. ⭐ I was therefore particularly interested in the insights that Julia Marquier gave in our joint stage discussion about the work of the #DigitalClusterBonn , a new initiative where 6 federal agencies (BaFin, BfJ, BSI, BfDI, BKartA and BNetzA) are intensifying their collaboration aiming to coherently implement the new digital laws and to coordinate and share best practices on the digital transformation of their authorities. We both agreed that further exchanges between the Digital Cluster and Bitkom members would be valuable for both sides. Many thanks to the Bitkom team for the excellent organization of this highly relevant conference.

Great piece by Martin:” The well-known tech expert Andrew McAfee of MIT has made a powerful critique of EU policy. He agrees that the state of the EU tech industry is dire. But the problem is not lack of money: EU governments spend much the same amount (and share of GDP) on supporting research and development as the US federal government. Yes, the former is fragmented among member states. But that is not the main problem, he argues: “It’s governmental intervention in that ecosystem not with funding, but with laws and regulations, and other constraints, restrictions, and burdens on companies.” The tech policy analyst Adam Thierer elaborates the point: “Several recent studies”, he notes, “have documented the costs associated with the GDPR [General Data Protection Regulation] and the EU’s heavy-handed approach to data flows more generally.” This imposes heavy costs on innovative firms and, inevitably, the smaller the firm, the bigger the implicit tax. Given this, as well as the fragmented EU markets, it is little wonder that the US is so far ahead.

What challenges do businesses in the digital economy face this year? Our global team of experts have weighed in on emerging themes including regulatory reform, aggressive enforcement, intensified scrutiny of the digital sector, including AI.

2024 is going to be a big year for the digital economy. We are seeing an increasingly complex and evolving legal and regulatory landscape in the EU and UK with privacy and data regulation, online safety, competition and consumer issues increasingly intertwined in the digital sphere, and new regulation such as the EU AI Act, the EU Digital Markets Act and the Digital Services Act.