A narrative compelling enough to float
This week: Concentrated power, loopholes, AI pact, owners
Two answers from Meredith Whittaker
And one of them is sideways!
“What’s one underrated big idea?
We need to recognize the current paradigm of large scale artificial intelligence as a product of concentrated power in the tech industry, and we need to trace that history back to the moves that were made in the 1990s where unfettered surveillance became the engine of the tech industry’s business model. That enabled the creation of a handful of large firms that now have the resources necessary to produce artificial intelligence, those capital-intensive resources being computational power and data.”
“What’s a technology that you think is overhyped?
I’m going to give a sideways answer to this, which is that the venture capital business model needs to be understood as requiring hype. You can go back to the Netscape IPO, and that was the proof point that made venture capital the financial lifeblood of the tech industry.
Venture capital looks at valuations and growth, not necessarily at profit or revenue. So you don’t actually have to invest in technology that works, or that even makes a profit, you simply have to have a narrative that is compelling enough to float those valuations. So you see this repetitive and exhausting hype cycle as a feature in this industry. A couple of years ago, you would have been asking me about the metaverse, then last year, you would have asked me about Web3 and crypto, and for each of these inflection points there’s an Andreessen Horowitz manifesto.
It’s not simply that one piece of technology is overhyped, it’s that hype is a necessary ingredient of the current business ecosystem of the tech industry. We should examine how often the financial incentive for hype is rewarded without any real social returns, without any meaningful progress in technology, without these tools and services and worlds ever actually manifesting. That’s key to understanding the growing chasm between the narrative of techno-optimists and the reality of our tech-encumbered world.”
Loopholes
Incomplete contracts
“For some parameter values, the legislator, who is not sure whether or not there are any rights that he is unaware of, optimally chooses not to enumerate even those rights that he is aware of. We also show that, even if the legislator can add the sentence ‘this Bill should not be interpreted as suggesting that any unlisted rights can be impaired by the government’ to the Bill, the equilibrium outcome will stay the same.”
“Iredell told his fellow constitution ratifiers in North Carolina that it would be ‘not only useless, but dangerous, to enumerate a number of rights which are not intended to be given up; because it would be implying, in the strongest manner, that every right not included in the exception might be impaired by the government without usurpation’ (Elliot, Debates, 167 (James Iredell, North Carolina ratifying convention, Tuesday, July 29, 1788)). The goal of this study is to examine the logic behind Iredell’s argument, and explore its relations with incomplete contracts.”
“More generally, a more direct way to address his concern would be to express it explicitly in the Bill, by, for example adding the following sentence: ‘This list of rights is not meant to be exhaustive, and is limited by our own awareness, and hence this Bill should not be interpreted as suggesting that any unlisted rights can be impaired by the government’. Why would Iredell’s recommended action (i.e. not to write the Bill at all) ever be optimal?”
“In particular, Iredell’s argument resembled many modern-day arguments why it is sometimes optimal to write incomplete contracts. For example, merger agreements usually contain a material-adverse-change (MAC) clause that allows either party in a merger to opt out before completing the deal.”
“Why is it not a good idea to make the MAC clause less vague? The Economist magazine explains: ‘If a clause is too specific, factors that are not cited explicitly may be assumed by the courts to be excluded’.1 Note the resemblance between this argument and that of Iredell.”
“This article formally examines Iredell’s argument by studying a dynamic game with two players: a legislator who is to write the Bill of Rights and a judge who is to interpret it 200 years later. The legislator is aware of certain rights, which he can include in the Bill but is also unaware of some other rights. He is aware of his own unawareness but is uncertain about the number of rights he is unaware of.”
“We show that, for some range of parameter values, there is a unique equilibrium where the legislator optimally chooses not to write the Bill of Rights at all – that is, not even to enumerate those rights that he is aware of. The reason is that, in equilibrium, how the judge treats those rights not in the Bill depends on how elaborate the Bill is. The more elaborate the Bill is, the less likely that the judge would protect those unlisted rights.”
“These two results, combined together, suggest that the logical hole in Iredell’s argument was purely illusionary. Other founding fathers might disagree with Iredell on the values of certain parameters but it would be wrong to dismiss his argument as illogical”
“Our study of Iredell’s argument suggests that there may be a fourth definition for incomplete contracts. A contract is more incomplete in this fourth sense if the judge conceives more (subjective) gaps in it, possibly as a result of an unfavourable ‘awareness check’.”
Chung, K. S., & Fortnow, L. (2016). Loopholes. The Economic Journal, 126(595), 1774-1797.
https://lance.fortnow.com/papers/files/loopholes.pdf
AI Pact: Simplifying EU AI Act compliance for enterprises
Forced Synergies…but only if they’re integrated and holistic though.
“The CIO needs to understand where the post-market scrutiny lies. The law is both horizontal and vertical, forces a lot of synergies, and also takes into account the fact that artificial intelligence is complex and constantly evolving,” Quattrocchi points out. “For example, LLMs in the enterprise are modified through training and fine-tuning, and CIOs will have to make sure they always remain compliant both with respect to what the vendor provides and to their customers or users. The CIO is important as a liaison between the various business departments when AI products have to be purchased.”
“With the February 2 deadline for implementing the first stages of the EU AI Act upon us, more than 130 companies have joined the AI Pact initiative launched by the European Commission to help on the path to compliance with this complex legislation. Membership is open: The goal is to simplify implementation and the work of CIOs and other managers through guidelines and best practices.”
“The European law on artificial intelligence is extensive and complex and understanding it and integrating it into daily practice requires a great deal of effort, knowledge, and resources, say CIOs, experts and executives from the legal and public policy areas of enterprises, who agree that those two years to reach full compliance are as necessary as ever.
The European Commission is aware of these issues: It has set up an AI Office, a center of expertise on artificial intelligence, and has launched the AI Pact, a working group that all companies can join, on a voluntary basis, to collaborate with the AI Office in clarifying the many aspects of the regulation, suggesting simplifications and proposing best practices that serve as a model for compliance, especially for small and medium-size businesses.”
“The aim is to provide a framework that encourages early implementation of some of the measures in the act and to encourage organizations to make public the practices and processes they are implementing to achieve compliance even before the statutory deadline.In particular, companies that use AI systems can share their voluntary commitments to transparency and risk control. These commitments take the form of “pledges” (statement of goals and timelines) posted on the AI Office website.”
The strategic role of owners in firm growth: Contextualizing ownership competence in private firms
Maybe cool it with the nepotism yah?
“Our results suggest that it is challenging for owner–managers from family firms to leverage their governance competence to achieve growth, which could potentially be resolved by instituting governance mechanisms that prevent nepotism. We also show that owner managers' competences are particularly important in the early years of their firms when no standardized processes are in place.”
von Nitzsch, J., Bird, M., & Saiedi, E. (2024). The strategic role of owners in firm growth: Contextualizing ownership competence in private firms. Strategic Entrepreneurship Journal.
https://onlinelibrary.wiley.com/doi/10.1002/sej.1497
Reader Feedback
“Maybe most of us aren’t even aware of what some part of us is aware of?”
Footnotes
How do we want to work, reason and co-create with agents?
If you’ve spent time with me in the past few months, thank you. Discovery interviews with me aren’t linear affairs, are they?
If one assumes that agentic reasoning is an augmentation of Machine Learning Classic (TM), then it follows that all the same forces that limited the full potential of Machine Learning Classic (TM) during the last wave will still be there, if not amplified, during this wave. That is, unless agentic reasoning itself reduces those limiting forces. Could it be a doubly reinforcing loop?
And wouldn’t that be interesting?
Which is why all of this pressure on the CIO is deeply confusing. It’s not as though the CIO has been treated as an actual partner by boards and the core leadership team, have they? Has that changed? If so, where and why?
So, if we accept the dissatisfaction with how analytics / bi / ml / digital transformation / digital enablement / digital xanadu worked out in the 25 years prior, then, why are we assuming it’ll be any different in the next 25?
Strange, right?
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