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Who Regulates AI? · a16z AI Policy Brief

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SPEAKER_01: Montanans didn't like California.
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SPEAKER_01: Californians don't like Floridians.
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SPEAKER_01: Texans don't like anyone.
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SPEAKER_01: You know,
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I've lived in all of these places and no one wants to be under
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the thumb of any
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SPEAKER_01: other state.
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SPEAKER_01: If we let California redesign the fundamental engine of all of our cars,
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SPEAKER_01: for example,
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SPEAKER_01: that's going to lead to nationwide chaos.
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And so you're destroying any hope of competition in this realm
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of creating a
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national market where small and big players can compete on a
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level playing field.
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SPEAKER_01: As soon as you are admitting to trying to take the role of Congress,
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whether or not you think Congress should or should not be doing
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something,
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SPEAKER_01: you are exceeding the authority of the state.
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If you go and ask a voter,
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what is the most important thing you're looking for in 2026?
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SPEAKER_01: It's affordability.
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SPEAKER_01: And what is the thing that could drive down the cost of healthcare?
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SPEAKER_01: AI.
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SPEAKER_01: What is the thing that can drive down the cost of education, AI?
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What's the thing that can start to improve our transportation
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systems,
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our energy systems?
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SPEAKER_01: I can keep going, but we only have so much time.
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SPEAKER_00: Kevin, Jay, thanks for joining this conversation today.
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SPEAKER_01: Thanks for having us, Matt.
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SPEAKER_00: It's great to be here.
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SPEAKER_00: So the focus of our conversation is state AI policy.
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And I think that's the focus of the conversation because states
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are really at the
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SPEAKER_00: forefront of AI regulation.
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We have seen very few AI bills at the federal level,
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but lots and lots at the state level.
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SPEAKER_00: So, Kevin, can we start with you?
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Can you give us an overview of what we're seeing,
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both in terms of volume and kind?
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SPEAKER_01: Yeah,
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SPEAKER_01: so if we just look at the sheer volume of state legislation,
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you're gonna need to clear off your bookshelf because there's
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approximately 1,100
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SPEAKER_01: bills pending before the state legislature in 2025 alone,
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SPEAKER_01: which is just insane.
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SPEAKER_01: And we could debate the definition of AI-related bills for a long time,
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but the fact of the matter is we're seeing folks from Alaska
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all the way to Florida
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SPEAKER_01: debating how to regulate AI.
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SPEAKER_01: And I think a lot of this just has to do with
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the immense uncertainty that people perceive existing in the AI
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space,
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right?
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SPEAKER_01: They read headlines about job displacement occurring in tech,
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SPEAKER_01: occurring in the creative industries,
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SPEAKER_01: occurring for just about any profession that has to do with technology.
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And they're fearful about what am I going to do for my
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constituents in this regard?
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They're hearing from constituents about the energy usage of
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data centers and the
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SPEAKER_01: water usage of data centers.
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SPEAKER_01: And there's obviously very coordinated constituencies that have strong
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SPEAKER_01: environmentalist interests.
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SPEAKER_01: And then,
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SPEAKER_01: of course,
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you're hearing folks about some of the child safety issues that
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are arising as we
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SPEAKER_01: see AI companions become more and more ubiquitous.
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SPEAKER_01: depending on who you ask, which I'm sure we may get into.
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But all of this amounts to state legislators who pride
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themselves on being very
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close to their constituents and who really want to be
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responsive to public policy
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SPEAKER_01: concerns,
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feeling as though this is a moment where regulating first and
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asking questions
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SPEAKER_01: later is a wise strategy,
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SPEAKER_01: which
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SPEAKER_01: isn't necessarily the way good public policy gets made.
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SPEAKER_01: But in terms of talking points,
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SPEAKER_01: when you're running for reelection in 2026,
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SPEAKER_01: saying you did something about AI is a pretty good message to share.
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And so I think what we're seeing is just a natural response of
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a group of state
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legislators who want to be known as the AI person in their
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community who are trying
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to stake out some sort of territory for taking an affirmative
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response in a
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in opposition to what a lot of people I think would say we did
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with respect to social media.
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SPEAKER_01: So I often say that this is sort of the social media hangover phase where
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SPEAKER_01: everyone's saying,
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SPEAKER_01: all right,
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SPEAKER_01: we will not get tech wrong again.
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SPEAKER_01: So the best thing to do is to just jump on it and hope for the best.
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SPEAKER_01: And that's playing out right now.
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SPEAKER_00: So obviously,
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1100 bills is a large number and there are a range of different
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types of bills
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SPEAKER_00: included in that number.
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SPEAKER_00: Can you give a sense on one side of the spectrum?
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SPEAKER_00: Like what are the bills that you see as positive or benign?
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And then what are the kinds of bills that you're tracking that
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you think raise more concerns?
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So I think that the legislation that errs on the side of sort
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of let's do it.
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SPEAKER_01: I think it's positive.
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I think it's responsive to the proper role that states are
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supposed to play are in
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SPEAKER_01: these sensitive use cases.
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SPEAKER_01: So when we're talking about,
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SPEAKER_01: for example,
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SPEAKER_01: how should a doctor use AI in a medical setting in a specific community?
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That is something that is very much a state question of asking
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what sort of medical
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SPEAKER_01: services do we want provided?
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SPEAKER_01: How do we wanna make sure people are receiving care?
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SPEAKER_01: That's something that I think is naturally within the ambit of states.
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SPEAKER_01: Same goes for a lot of these educational questions.
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When do you want to see a tool being deployed in a K through 12
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education setting?
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SPEAKER_01: There's no right answer to that question.
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There's still a lot of unsettled debates about when and how to
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introduce kids to AI
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SPEAKER_01: in an educational context.
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SPEAKER_01: So states trying to figure that out and mapping requirements on to school
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SPEAKER_01: districts,
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SPEAKER_01: for example,
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SPEAKER_01: makes a heck of a lot of sense.
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SPEAKER_01: And we're seeing that these bills are popping up across the country.
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SPEAKER_01: But the issue arises when states start to go up the tech stack,
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when they're no longer dealing just with AI deployers and
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instead are trying to
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SPEAKER_01: regulate the developers themselves,
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SPEAKER_01: when they're trying to interfere with the actual technology,
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SPEAKER_01: how AI is being trained,
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SPEAKER_01: what thresholds have to be crossed before it's deployed,
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All of these questions that I think for a lot of folks would
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agree amount to
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national questions because what we're fundamentally tinkering
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with here with
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SPEAKER_01: respect to bills like SB 205 in Colorado,
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SPEAKER_01: with depending on who you ask,
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SPEAKER_01: SB 53 in California,
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and some of these more onerous state pieces of legislation is
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changing the
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SPEAKER_01: fundamental way that AI is going to develop.
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SPEAKER_01: And that's a national question,
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SPEAKER_01: in my opinion,
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because it's somewhat akin to saying that one state has the
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authority to redesign
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SPEAKER_01: the engine.
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SPEAKER_01: If we let California redesign the fundamental engine of all of our cars,
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SPEAKER_01: for example,
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SPEAKER_01: that's going to lead to nationwide chaos.
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If you want to instead change the speed limits in California or
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change the
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SPEAKER_01: threshold before you can have a driver's license in California,
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SPEAKER_01: that's fine.
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SPEAKER_01: You're not changing the underlying technology itself.
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SPEAKER_01: When states start to regulate how the technology itself is developed,
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then I think we see states interfering with what ultimately is
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a question that
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SPEAKER_01: should be left for Congress.
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SPEAKER_02: Yeah, I think that's a really good way of framing the question.
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I think the real issue is to what extent the activity that
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we're seeing reflects a
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genuine concern about protecting the citizens and residents of
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a particular state
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SPEAKER_02: versus something more,
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SPEAKER_02: which is like,
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SPEAKER_02: look,
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SPEAKER_02: the federal government hasn't acted.
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SPEAKER_02: And so we are going to step into the shoes of the federal government
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SPEAKER_02: to push them along,
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SPEAKER_02: to maybe be the first in the marketplace of ideas,
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SPEAKER_02: whatever the motivation is.
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The forward bucket seems to me to be exactly the type of things
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that states should be doing.
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SPEAKER_02: And the latter really starts kind of getting into
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SPEAKER_02: impermissible areas.
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SPEAKER_02: I guess,
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SPEAKER_02: Kevin,
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SPEAKER_02: the only thing that I would add to what you said,
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SPEAKER_02: which I thought was right on point,
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SPEAKER_02: is that stepping back for a second,
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SPEAKER_02: and I always put on my historical hat.
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SPEAKER_02: In a previous vocation,
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SPEAKER_02: I was a historian of political thought,
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SPEAKER_02: and now I do that as an avocation,
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SPEAKER_02: not as a vocation.
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But I think people forget sometimes that the federal government
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is a government of
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SPEAKER_02: enumerated powers.
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And what that means is that the powers that it can exercise are
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enumerated in the
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Constitution or are direct implications of what's enumerated in
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the Constitution.
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Whereas states have historically been seen as exercising
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plenary police powers,
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meaning that they have a broader range of things that they can
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legislate and
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SPEAKER_02: regulate in terms of human conduct within their borders.
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SPEAKER_02: And I think this is where the debate gets super interesting,
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because I think that when you map that kind of historical and
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we should realize
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SPEAKER_02: that that division was put in place for a very specific reason,
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SPEAKER_02: which is that in the early days of the Republic,
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SPEAKER_02: when we had the Articles of the Confederation,
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SPEAKER_02: you had states that were
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could have gone to war with each other because some were
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blockading other states,
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that there was actual commercial restrictions being put on each
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other that could
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SPEAKER_02: have led to the dissolution of the union.
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SPEAKER_02: And that's what gave rise to the Constitution itself.
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SPEAKER_02: So this is actually a foundational issue,
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SPEAKER_02: I think,
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SPEAKER_02: within the larger structure of our government.
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SPEAKER_02: And I think that the real question is, to what extent are the
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SPEAKER_02: issues that the states are concerned about,
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really about their own citizens' concerns and to what extent
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they're impinging.
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SPEAKER_02: Do you have a sense?
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SPEAKER_02: I guess it's kind of an unfair question,
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SPEAKER_02: but if you had to sort of game how much of the 1100 bills that we see,
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how many of them are really motivated by genuine concerns of
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exercising plenary
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state power under the 10th Amendment versus really enumerated
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powers under the
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SPEAKER_02: Constitution,
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SPEAKER_02: what would you say,
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SPEAKER_02: like,
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SPEAKER_02: if you had to sort of game it out?
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SPEAKER_02: Probably an unfair question for you.
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SPEAKER_01: I don't know if I'll be able to be as precise.
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I tend to avoid the PDOOM-like just guesstimates of where my
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thoughts land on certain things.
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SPEAKER_01: I do think that the vast majority of those bills are...
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narrow are directed towards police power type matters are
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trying to be responsive
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SPEAKER_01: to what are regarded as local concerns.
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SPEAKER_01: And I think,
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SPEAKER_01: as you pointed out,
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SPEAKER_01: Jay,
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that's within the ambit of the state to make sure that they are
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responsive to truly
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SPEAKER_01: local concerns.
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SPEAKER_01: But Jay,
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SPEAKER_01: as you teed up,
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not enough people are paying attention to the fact that some of
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the sponsors of
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SPEAKER_01: these bills are explicitly stating that
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we think we need to act on behalf of the American people and
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pass this legislation
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SPEAKER_01: to protect them from X,
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SPEAKER_01: Y,
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SPEAKER_01: or Z.
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SPEAKER_01: And that is fundamentally not the authority of the states,
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SPEAKER_01: right?
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SPEAKER_01: As soon as you are admitting to trying to take the role of Congress,
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whether or not you think Congress should or should not be doing
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something,
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SPEAKER_01: you are exceeding the authority of the state.
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And to admit so blatantly that you think your state should be
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the one that acts as
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this sort of national protector is just wild because I've lived
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in at least seven
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SPEAKER_01: states.
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SPEAKER_01: I actually lose count of how many states I've lived in.
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SPEAKER_01: And I can tell you that each one of those states would hate
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SPEAKER_01: to adhere to the laws of another state montanans didn't like california
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californians don't like floridians texans don't like anyone you
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know i've lived in
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all of these places and no one wants to be under the thumb of
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any other state and
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yet we're seeing that these apparently wise beneficial and
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benefactor state
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legislators saying oh don't worry the rest of the country we'll
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do it on your
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SPEAKER_01: behalf and
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SPEAKER_01: Jay,
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I appreciate you bringing up the Articles of Confederation
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because I'm explicitly
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SPEAKER_01: banned from being the first to bring it up.
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My wife says I just have to stop talking about the Articles of
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Confederation.
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But you are so right that we have lost sight of what actually
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motivated the
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SPEAKER_01: founders to move away from the Articles of Confederation.
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SPEAKER_01: Now, I'm going to raise you one.
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SPEAKER_01: You mentioned the Articles.
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SPEAKER_01: I want to raise you the Annapolis Convention.
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SPEAKER_01: Right.
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SPEAKER_01: Which is this took place before the Constitutional Convention.
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SPEAKER_01: We had just a handful of states get together.
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SPEAKER_01: And these were the biggest states.
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SPEAKER_01: Mind you, Virginia was there.
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SPEAKER_01: Right.
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SPEAKER_01: Pennsylvania was there.
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SPEAKER_01: New York was there.
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SPEAKER_01: And they realized our economic state is deplorable.
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We are not going to survive as a nation if we persist under our
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current fragmented
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SPEAKER_01: economic approach.
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SPEAKER_01: And that's what teed up the Constitutional Convention.
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And so for folks not to realize that when we're talking about
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the Commerce Clause,
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SPEAKER_01: as I know we're going to dive into,
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They were very,
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very intentional that this needed to be a congressional power.
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This needed to be reserved to the national government because
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to have a fragmented
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SPEAKER_01: market system was going to undermine the viability of the country itself.
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SPEAKER_01: So having that context is important.
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SPEAKER_01: But I also just want to add one other thing,
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SPEAKER_01: which is a quick quote from a North Carolina legislator.
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just to frame the popular understanding of how the founders
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regarded state
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SPEAKER_01: governments themselves.
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SPEAKER_01: So this is from James Airedale of North Carolina,
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SPEAKER_01: who said that the North Carolina state legislature,
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SPEAKER_01: of which he was a part,
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SPEAKER_01: passed,
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SPEAKER_01: quote,
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SPEAKER_01: the vilest collection of trash ever formed by a legislative body.
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SPEAKER_02: And we think it's bad now, right?
13:02
SPEAKER_02: We think our politics are bad now.
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SPEAKER_01: We think we got trash.
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SPEAKER_01: They got bags full of trash, streets littered with it.
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They were not like,
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you know,
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state governments,
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they're super on the up and up.
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SPEAKER_01: Let's defer to their wisdom on national matters of economic concern.
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SPEAKER_01: And I'm not saying that state legislators aren't hardworking,
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SPEAKER_01: that they're not attentive to important considerations.
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But there's a reason why the founders said we need to cabin off
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and clearly
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SPEAKER_01: designate who's responsible for what.
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SPEAKER_01: Thank you.
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SPEAKER_02: The only thing I would add there,
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SPEAKER_02: and I think this is lost,
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is that I think that it's fair to say the founders believed
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that local and state
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SPEAKER_02: governments were,
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SPEAKER_02: in a sense,
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SPEAKER_02: the place where the people would be represented the most.
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SPEAKER_02: Their interests would be most closely represented.
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SPEAKER_02: And the federal government would,
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SPEAKER_02: in a sense,
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SPEAKER_02: have a harder time being close to the will and wishes of the people.
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SPEAKER_02: Where I think that the federal government steps in,
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and this is key because we're going to be talking about the
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global implications of
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SPEAKER_02: this in a minute,
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SPEAKER_02: is
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SPEAKER_02: Back then,
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SPEAKER_02: the issue was if we started to separate on commercial terms,
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it may very well be that some of the smaller states would
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gravitate to Great
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Britain and the sort of commercial empire that Britain had
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built and destroy the
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SPEAKER_02: promise of a unified national state.
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And so the reason for the federal government having this kind
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of lock on on
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interstate commerce was as much an international issue as it
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was a domestic issue.
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It was that to present ourselves as a united set of colonies
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and now independent
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SPEAKER_02: states in a single national entity,
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SPEAKER_02: the national government had to be able to set policies that would,
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SPEAKER_02: in a sense,
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SPEAKER_02: drive international commerce.
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SPEAKER_02: That was sort of the key.
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SPEAKER_02: But Matt,
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I think that that's fair to say that that's kind of what's a
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concern here as well,
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SPEAKER_02: right?
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I mean,
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that we're worried about global implications of falling behind
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in the race for AI.
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SPEAKER_00: Yeah, I think that seems exactly right.
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SPEAKER_00: I mean,
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SPEAKER_00: I'm trying and it's not it's not a role I do easily,
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SPEAKER_00: but to put on my state lawmaker hat.
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And it seems like there are two senses of duty that a state
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lawmaker might have
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SPEAKER_00: when they're thinking about AI policy.
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SPEAKER_00: The first, which I really understand, is I was elected to office.
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I had a policy agenda or set of values in the world that I
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wanted to project once I
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got into office and I want to legislate and then I want to see
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those laws enforced.
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And I think when we saw the moratorium debate over the summer
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and we supported the
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SPEAKER_00: moratorium,
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SPEAKER_00: but I also understood state lawmakers hearing the term moratorium.
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And it sounds like it undermines that duty that they have that
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like we I was
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SPEAKER_00: elected and I want to do something good on the policy side.
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The second duty I think that state lawmakers are feeling in the
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eye now is one that
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SPEAKER_00: Kevin alluded to,
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SPEAKER_00: which is Congress hasn't acted.
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SPEAKER_00: And so therefore, we need to act in place of Congress.
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SPEAKER_00: And I think that's what we're talking about now,
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the sort of muddled terrain between what is the role of a state
15:56
lawmaker and then
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SPEAKER_00: what really should be the domain of Congress.
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SPEAKER_00: And as we'll discuss,
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the fact that Congress has or hasn't acted doesn't really
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change the remit of a
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SPEAKER_00: state constitutionally to act.
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SPEAKER_02: Yeah, I think that's right.
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SPEAKER_02: And this gets us to the question of,
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SPEAKER_02: really,
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SPEAKER_02: who regulates AI becomes as important as how we regulate AI.
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SPEAKER_02: Because in some senses, the who determines the appropriate how.
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SPEAKER_02: I think it's fair to say that states in this realm have historically,
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SPEAKER_02: in the realm of technology,
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SPEAKER_02: in the realm of commerce,
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SPEAKER_02: have historically regulated AI.
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SPEAKER_02: uses,
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SPEAKER_02: misuses of various technologies,
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SPEAKER_02: of various instrumentalities,
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whereas the federal government really has a bigger role to play
16:45
when we're talking
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SPEAKER_02: about setting national standards.
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SPEAKER_02: To your point, Kevin, about cars—
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regulating an underlying technology that would be very
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difficult for 50 states to
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SPEAKER_02: regulate consistently and create a national market for,
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SPEAKER_02: as opposed to the federal government doing.
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SPEAKER_02: So I think that that is part of it.
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And this may be a good way to sort of segue into kind of all
17:09
the nerdy terms,
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you know,
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SPEAKER_02: The preemption debates and the dormant commerce clause,
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SPEAKER_02: because I think,
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SPEAKER_02: as Matt pointed out,
17:16
the issue that I think raised a lot of hackles with respect to
17:20
the moratorium was
17:22
SPEAKER_02: that it was called a moratorium,
17:24
SPEAKER_02: which seemed new and novel and something that,
17:26
SPEAKER_02: you know,
17:27
SPEAKER_02: we don't do in the United States.
17:28
SPEAKER_02: We have preemption, but, you know, what's a moratorium?
17:30
SPEAKER_02: On the other hand,
17:31
I think the other thing was a bit of I don't want to call it
17:34
misinformation because
17:35
SPEAKER_02: I don't know if it was intentional,
17:36
SPEAKER_02: but a misunderstanding of even that legislation,
17:40
SPEAKER_02: because I think there was even under that legislation a role for states.
17:46
SPEAKER_02: And it didn't purport to put a moratorium on all forms of regulation,
17:50
SPEAKER_02: only on certain forms of state regulation.
17:54
SPEAKER_02: So,
17:54
SPEAKER_02: Kevin,
17:54
SPEAKER_02: it would be great if you could kind of give the audience maybe a,
18:00
SPEAKER_02: I don't know,
18:02
SPEAKER_02: 101 on preemption and the Dormant Commerce Clause.
18:06
SPEAKER_02: You know, that's what we're talking about here.
18:08
SPEAKER_02: And for legal nerds, that's what we're talking about.
18:10
SPEAKER_02: But, you know, it would be great for you to do that.
18:13
SPEAKER_01: I had to happily do that.
18:15
And I welcome you all to fill in blanks as well,
18:17
because it is a really complex topic.
18:19
SPEAKER_01: And I think part of what adds to the complexity is,
18:23
SPEAKER_01: I think of our interpretation of the commerce clause,
18:26
SPEAKER_01: like the worst game of telephone that's ever been played.
18:30
One justice whispered to the next,
18:32
like,
18:32
oh,
18:32
this is how you interpret it.
18:34
SPEAKER_01: And then, you know, the next justice and so on and so on.
18:36
And so our Commerce Clause jurisprudence is so muddied and so
18:40
murky that folks just
18:42
SPEAKER_01: aren't sure how to actually interpret.
18:44
So under the Commerce Clause,
18:45
Congress has the ability to regulate interstate commerce.
18:49
SPEAKER_01: And that hasn't been interpreted myriad ways since the founding.
18:53
We've seen,
18:53
for example,
18:55
some formalistic tests saying,
18:57
okay,
18:58
what qualifies as commerce?
19:00
And there are whole debates about how to define commerce and
19:03
what actually
19:04
SPEAKER_01: qualifies as a commercial activity.
19:07
We've also had debates about what does it mean to regulate
19:11
commerce among the several states?
19:13
SPEAKER_01: You can find whole law review articles,
19:15
SPEAKER_01: and I wish I was kidding,
19:17
just analyzing what does the word among mean and why is among
19:22
different from
19:23
SPEAKER_01: between?
19:24
SPEAKER_01: And you can lose your mind in that debate.
19:28
Then there's the really tricky issue of if we afford Congress
19:33
the ability to
19:34
SPEAKER_01: regulate interstate commerce.
19:36
SPEAKER_01: What does that leave for states with respect to interstate commerce?
19:41
SPEAKER_01: And there are kind of two main ways of thinking about this.
19:44
One way of interpreting the Commerce Clause is to say that
19:47
Congress alone has the
19:49
SPEAKER_01: authority to regulate interstate commerce.
19:51
So if something qualifies as interstate commerce,
19:54
that is exclusively the domain of Congress.
19:58
SPEAKER_01: Now,
19:59
another interpretation would say that so long as Congress has
20:03
not affirmatively
20:04
SPEAKER_01: acted to regulate in some way,
20:07
states may regulate interstate commerce so long as they are not
20:11
violating any other
20:12
SPEAKER_01: constitutional principles.
20:14
This has also been reinforced over time in various Supreme
20:18
Court opinions that have
20:19
allowed Congress to basically less state intervention into
20:24
interstate commerce.
20:25
SPEAKER_01: So basically saying,
20:26
SPEAKER_01: look,
20:27
we may not want to affirmatively act on a nationwide scale on
20:31
some matter of
20:32
SPEAKER_01: interstate commerce,
20:33
SPEAKER_01: but we're going to grant,
20:34
SPEAKER_01: essentially extend our authority to a state to do so.
20:39
SPEAKER_01: And so over time,
20:40
having this blend of is the Commerce Clause power exclusive to
20:45
Congress or is it
20:47
SPEAKER_01: concurrent is a very tricky question.
20:51
SPEAKER_01: Now,
20:51
the Dormant Commerce Clause is the understanding that even if
20:56
Congress has not
20:57
SPEAKER_01: acted,
20:58
there may be judicial authority to strike down state laws that
21:03
would interfere with
21:05
SPEAKER_01: that realm of what we think should be left to Congress alone.
21:08
SPEAKER_01: So for example,
21:09
we have seen laws early on in the founding passed by state
21:13
legislatures that courts
21:15
regarded as regulating interstate commerce and therefore
21:18
striking down those laws
21:20
because they interfered with a domain that the courts
21:23
interpreted as being left to
21:25
SPEAKER_01: Congress itself.
21:27
SPEAKER_01: Now,
21:27
SPEAKER_01: traditionally,
21:28
we think of a couple key categories of what sort of laws may
21:33
violate the Dormant
21:34
SPEAKER_01: Commerce Clause.
21:35
SPEAKER_01: The first is all about protectionism, right?
21:38
We very much don't want to see states exclusively favor
21:43
in-state interests over
21:44
SPEAKER_01: out-of-state interests.
21:46
SPEAKER_01: If we see that sort of protectionist legislation,
21:49
the Supreme Court has been very clear of saying that's going to
21:52
interfere with the
21:53
SPEAKER_01: sort of national market we were talking about earlier.
21:57
SPEAKER_02: And that would be sort of clear.
21:58
SPEAKER_02: That would be a clear case,
22:00
SPEAKER_02: I assume,
22:00
SPEAKER_02: of like,
22:01
SPEAKER_02: I don't know,
22:02
Kentucky saying we're just not going to allow out of state pork
22:07
in Kentucky.
22:09
SPEAKER_02: Like that's just not going to be allowed.
22:11
SPEAKER_01: So it depends.
22:12
SPEAKER_01: Right.
22:13
So if we see that in-state and out-of-state producers are
22:16
placed on uneven ground,
22:19
SPEAKER_01: right,
22:20
SPEAKER_01: or are treated differently,
22:21
SPEAKER_01: that's really where I'd say we start to see the difference that raises
22:25
SPEAKER_01: constitutional flags under the Dormant Commerce Clause.
22:27
In other words,
22:28
it doesn't have to be explicit discrimination saying an out of
22:31
state.
22:31
SPEAKER_02: It can also be in effect.
22:33
SPEAKER_01: So we can have if it is facial discrimination,
22:36
that's almost certainly going to be struck down under the
22:39
Dormant Commerce Clause
22:40
for those facially neutral laws that just tend to have the
22:45
effect of favoring
22:46
SPEAKER_01: in-state interests over out-of-state interests.
22:49
SPEAKER_01: Then we run into a very tricky question of whether that burden imposed on
22:55
interstate commerce is tolerable with respect to the local
23:00
gains we're seeing as a
23:01
SPEAKER_01: result of that burden imposed on interstate commerce.
23:04
SPEAKER_01: And we can dive more into that inquiry in a second.
23:06
SPEAKER_01: So just to pause for a second, we've got our commerce clause.
23:10
SPEAKER_01: We've got our theories of, okay, is this exclusive or is this concurrent?
23:15
We've got our dormant commerce clause where we're concerned
23:17
about favoring in-state
23:19
interests over out-of-state interests and therefore disrupting
23:22
the interstate
23:25
SPEAKER_01: commerce and the national economy.
23:27
And then we have this murky kind of third category that's
23:30
hanging out there,
23:31
SPEAKER_01: which is extraterritoriality.
23:34
And this is where we see one state explicitly try to regulate
23:39
commerce that occurs
23:40
SPEAKER_01: entirely in another jurisdiction.
23:44
SPEAKER_01: And this has also been declared unconstitutional.
23:47
SPEAKER_01: Some people would cabin that under the dormant commerce clause theory.
23:51
Other folks would say it exists both under the dormant commerce
23:54
clause and it's an
23:55
SPEAKER_01: amalgamation of the full faith and credit clause,
23:58
SPEAKER_01: the due process clause.
24:00
SPEAKER_01: You can even say the guarantee clause, right?
24:03
SPEAKER_01: It's just protected by a whole hodgepodge of things.
24:05
SPEAKER_01: So across all of those domains,
24:08
SPEAKER_01: we are left with a very muddied picture that unfortunately the court has
24:13
SPEAKER_01: if anything, made even less clear over time.
24:17
And we are in a period of significant debate about when and how
24:21
states can regulate
24:22
SPEAKER_01: with respect to interstate commerce.
24:26
SPEAKER_02: That's interesting.
24:26
SPEAKER_02: Matt, I know you and I have talked a lot about these different prongs.
24:32
SPEAKER_02: Where do you think,
24:33
SPEAKER_02: when we see AI legislation,
24:35
SPEAKER_02: where do you think it falls in this hodgepodge of different theories?
24:39
SPEAKER_02: Yeah.
24:40
So in our piece,
24:40
we focused on pipe balancing,
24:42
which is the excessive burden prong.
24:44
So that's the idea that if the out-of-state costs substantially
24:47
outweigh the local
24:48
SPEAKER_00: and state benefits,
24:49
SPEAKER_00: then a law is unconstitutional.
24:50
SPEAKER_00: I think it's interesting that Kevin,
24:51
SPEAKER_00: who's written extensively about this issue,
24:53
SPEAKER_00: has focused on the extraterritoriality prong,
24:56
SPEAKER_00: as you said,
24:56
SPEAKER_00: either part of the direct commerce clause analysis or separate.
24:59
SPEAKER_00: So I'm curious, Kevin, how do you think about that working in practice?
25:03
SPEAKER_00: Because like
25:05
SPEAKER_00: Economies are connected now.
25:06
It's likely that anything that a state is gonna do is gonna
25:09
affect out-of-state
25:10
SPEAKER_00: commerce in some way.
25:12
How do you think about the extraterritoriality prong being
25:15
actionable in practice?
25:16
SPEAKER_01: Yeah,
25:16
SPEAKER_01: so for me,
25:17
I focus most of the extraterritoriality analysis less on the
25:23
economic questions of
25:25
being able to parse out exactly when a state is wholly
25:29
regulating commerce in
25:30
SPEAKER_01: another jurisdiction.
25:32
SPEAKER_01: Because as you pointed out, Matt,
25:33
SPEAKER_01: Data today,
25:34
SPEAKER_01: for example,
25:35
if we just look at how data is stored and transferred and used
25:39
across basically
25:40
SPEAKER_01: every state,
25:41
the argument could be made that any law that deals with data is
25:46
extraterritorial
25:48
because at some point that data is going to live in a server
25:52
that's in another
25:52
SPEAKER_01: jurisdiction and you are regulating,
25:55
state A is regulating how that data is processed or stored or
25:58
managed in state B.
26:00
SPEAKER_01: Now,
26:01
SPEAKER_01: we can see that across a lot of questions,
26:04
SPEAKER_01: whether it's pollution,
26:05
SPEAKER_01: for example,
26:05
SPEAKER_01: and some of the environmental laws,
26:08
whether it is workplace specifications that are often really
26:12
hard to cabin to one
26:13
SPEAKER_01: jurisdiction.
26:14
Extra territoriality can get really murky if you focus mainly
26:19
on the economic
26:20
SPEAKER_01: question of trying to segment,
26:22
SPEAKER_01: finally,
26:23
SPEAKER_01: is this in one jurisdiction or is this in another?
26:25
SPEAKER_01: For me,
26:26
extraterritoriality is most strongly based in the guarantee
26:31
clause and in the due
26:32
SPEAKER_01: process clause and the full faith and credit clause.
26:35
SPEAKER_01: But I want to focus mainly on the guarantee clause.
26:38
SPEAKER_01: Now,
26:39
for folks who are not steeped in constitutional history and as
26:43
nerdy as the three
26:44
SPEAKER_01: of us are,
26:45
SPEAKER_01: the guarantee clause basically says that the U.S.
26:49
SPEAKER_01: government, and it's really important to specify this,
26:52
SPEAKER_01: The government, it doesn't say the judiciary.
26:54
SPEAKER_01: It doesn't say Congress.
26:56
SPEAKER_01: It doesn't say the executive, which is very bizarre, right?
27:00
Anyone who's a constitutional scholar or anyone who's just
27:03
answered a multiple
27:03
SPEAKER_01: choice question on the U.S.
27:05
Constitution generally thinks of us cabining each power to each
27:09
specific branch.
27:11
But the guarantee clause says the government will ensure to
27:14
every resident a
27:16
SPEAKER_01: Republican form of government.
27:18
SPEAKER_01: Now,
27:19
SPEAKER_01: again,
27:19
to go back to how the founders thought about the government and
27:22
how they thought
27:23
SPEAKER_01: about the proper relationship between an individual and their government,
27:27
SPEAKER_01: they weren't big on kind of virtual representation of don't worry,
27:32
SPEAKER_01: colonists,
27:33
SPEAKER_01: we'll represent your interests here in the UK.
27:36
SPEAKER_01: Trust us, you know, taxes.
27:38
SPEAKER_01: I know the Stamp Act sounds really bad, but it's in your best interest.
27:42
SPEAKER_01: We'll represent you over here.
27:44
SPEAKER_01: Just trust us.
27:46
SPEAKER_01: we fundamentally broke up with that concept.
27:50
And if you do not appreciate the transition from our status as
27:55
a colony to the
27:56
Articles of Confederation to the Constitution as being so
28:00
fundamentally grounded in
28:01
SPEAKER_01: Republican governance,
28:03
SPEAKER_01: then I think you may have missed the first class of AP U.S.
28:06
SPEAKER_01: history.
28:07
And maybe you need to go back and take that one because that is
28:10
the core of our
28:12
SPEAKER_01: document is to say you the people,
28:14
SPEAKER_01: we the people can hold the people who have power over us accountable.
28:19
And yet,
28:20
Jay,
28:21
you alone among us three get to vote on what California is
28:25
doing.
28:26
SPEAKER_01: Meanwhile,
28:26
SPEAKER_01: me and Matt are just like,
28:28
SPEAKER_01: all right,
28:28
if Gavin Newsom wakes up one day and wants to be really
28:32
aggressive on AI policy,
28:34
SPEAKER_01: great,
28:34
SPEAKER_01: we're going to have to live with those consequences.
28:36
And if he happens to veto a couple of bills,
28:39
great,
28:39
we didn't have any say on that either.
28:41
SPEAKER_01: And now we're seeing a really kind of radical,
28:45
SPEAKER_01: and we may get there or we may not,
28:47
SPEAKER_01: but I would encourage everyone to check it out.
28:49
SPEAKER_01: California AI ballot initiative,
28:52
where the Californians themselves may soon opt to pass pretty
28:57
expansive and onerous
28:59
SPEAKER_01: AI regulations,
29:00
SPEAKER_01: that will again impact me and Matt.
29:03
And we have no authority,
29:05
no ability to go into that state and try to be a part of that
29:09
process.
29:09
SPEAKER_01: So that to me is the greatest focus for extraterritoriality and the
29:16
SPEAKER_01: sort of strongest argument.
29:18
We see that become of more concern the greater the
29:22
ramifications are going to be on
29:24
SPEAKER_01: the technology itself.
29:25
SPEAKER_01: And so that's where I think seeing,
29:27
SPEAKER_01: for example,
29:28
state laws that are impacting the fundamental technology itself
29:33
is depriving people
29:34
around the country of a voice in the matter of the direction of
29:38
what can be and
29:39
SPEAKER_01: what I think is going to be an incredibly transformative technology.
29:45
I do think it's really interesting how the text of the
29:47
legislation interplays with
29:49
SPEAKER_00: the technology.
29:49
So several of the California bills haven't had any
29:52
jurisdictional limitation.
29:53
So if you said,
29:54
how do we know that California lawmakers are aiming for a
29:57
national standard?
29:57
There's nothing in the text that says limited to development in
30:01
California or
30:02
SPEAKER_00: residents in California or companies headquartered in California,
30:05
nothing related to deployment in California or specific effect
30:09
on California users.
30:10
SPEAKER_00: The text is just wide open and
30:13
SPEAKER_00: at least in its terms, is not limited to anything related to California.
30:16
SPEAKER_00: That's on the text of the legislation side.
30:19
SPEAKER_00: And then the nature of the technology,
30:20
and this has been a thing that I've been learning from our
30:23
technical teams,
30:24
SPEAKER_00: is moving in a direction of more and more remixed models.
30:28
So a developer is building off of open source software that
30:32
might be developed in another state.
30:33
SPEAKER_00: They're taking little bits of that.
30:35
SPEAKER_00: They're combining it with other models.
30:37
SPEAKER_00: might be developed in one place and deployed in another.
30:40
SPEAKER_00: A deployer might pick up a developer's model built elsewhere.
30:43
SPEAKER_00: And so there are all these cross-border dynamics around AI construction,
30:47
SPEAKER_00: the development process itself,
30:49
SPEAKER_00: and then the deployment process as well.
30:51
SPEAKER_00: And those two things,
30:52
SPEAKER_00: the legislative text and the nature of how the technology is developed,
30:55
seem to combine in a way that almost like in bright lights
30:59
invites a discussion of
31:00
SPEAKER_00: this doctrine.
31:01
SPEAKER_01: Well,
31:01
SPEAKER_01: and I think I just,
31:02
I have to reference one other point because I'm sure there are
31:06
some listeners who
31:07
SPEAKER_01: are saying right now,
31:08
SPEAKER_01: all right,
31:09
SPEAKER_01: they're fascinating,
31:10
SPEAKER_01: they're good looking,
31:11
SPEAKER_01: they're having a really interesting conversation,
31:14
SPEAKER_01: whatever,
31:14
SPEAKER_01: that's great.
31:15
SPEAKER_01: I still have no clarity around what extraterritoriality actually means,
31:19
SPEAKER_01: what the Commerce Clause means,
31:21
SPEAKER_01: what the Dormant Commerce Clause means.
31:23
SPEAKER_01: What the heck?
31:23
SPEAKER_01: This is clearly not justiciable.
31:26
There's no way that a court can sit down and actually try to
31:29
parse these out.
31:30
And I'm going to push back on that by going again into full
31:34
history mode.
31:35
There's a forgotten thing that a lot of people don't pay
31:38
attention to about James Madison.
31:41
SPEAKER_01: James Madison proposed giving Congress an absolute veto over state laws.
31:49
This was an actual proposal to say that any state law that gets
31:53
passed has to then
31:54
SPEAKER_01: go through Congress,
31:55
SPEAKER_01: which will determine not if it's constitutional or not,
31:59
SPEAKER_01: but just if it aligns with the national interest.
32:03
SPEAKER_01: This was a real thing that James Madison,
32:05
SPEAKER_01: you know,
32:06
SPEAKER_01: one of the founders we all talk about,
32:08
SPEAKER_01: actually proposed.
32:10
SPEAKER_01: The pushback was to say,
32:12
SPEAKER_01: and this is one of the most hilarious things in the AI debate,
32:15
SPEAKER_01: Jefferson retorts,
32:16
SPEAKER_01: hey,
32:17
SPEAKER_01: bro,
32:18
SPEAKER_01: this seems a little extreme.
32:19
SPEAKER_01: States don't pass laws that implicate the national interest.
32:24
SPEAKER_01: This just doesn't happen.
32:25
He made a guess that it was about one out of every 100 bills
32:29
would actually deal
32:30
SPEAKER_01: with,
32:31
SPEAKER_01: passed out of state legislatures,
32:32
SPEAKER_01: would actually deal with the national government.
32:34
SPEAKER_01: So they said, look,
32:36
SPEAKER_01: This isn't going to be a huge issue.
32:38
SPEAKER_01: We're going to leave it to the courts to strike down those sorts of laws.
32:43
SPEAKER_01: And so when we hear justices say,
32:46
SPEAKER_01: this doesn't seem like the sort of issue the Supreme Court should answer.
32:50
SPEAKER_01: This seems like something that should be left to the political branches.
32:54
SPEAKER_01: Go back and read your Madison.
32:55
SPEAKER_01: Go back and read your Jefferson.
32:57
The courts were explicitly designed to fill this function and
33:01
can't punt on these issues.
33:04
SPEAKER_02: Yes.
33:04
SPEAKER_02: That's a super interesting observation.
33:08
And I think it raises this question of how do you think of the
33:12
appropriate scope of
33:14
SPEAKER_02: state and federal legislation?
33:15
SPEAKER_02: To your point, Kevin, we've now been talking at Generalities.
33:19
SPEAKER_02: We have the history.
33:20
I believe we've convinced all of our listeners about this
33:23
structure and that it's
33:24
SPEAKER_02: the right thing to do.
33:26
SPEAKER_02: But now the question becomes, you know, brass tacks.
33:29
SPEAKER_02: It's great that you guys are talking about all this history,
33:31
SPEAKER_02: but at the end of the day,
33:32
SPEAKER_02: we've got a powerful technology.
33:34
SPEAKER_02: It's got uses.
33:35
SPEAKER_02: It's got misuses.
33:36
SPEAKER_02: It has great opportunities and great risks.
33:40
SPEAKER_02: And so it will be regulated in some way, shape or form.
33:44
And so how do you think about that real distinction between
33:49
what the federal
33:50
government has sort of exclusive authority and power over and
33:55
what the state
33:56
SPEAKER_02: governments have a purview over and are legitimately regulating?
34:03
I think that the distinction I'll add is a focus on alternative
34:10
mechanisms.
34:11
SPEAKER_01: And I'll get there in a second.
34:12
SPEAKER_01: So first,
34:12
I think all three of us agree that the distinguishing factor
34:17
between are you
34:18
SPEAKER_01: governing the deployment of the technology,
34:20
SPEAKER_01: right?
34:21
SPEAKER_01: Are you going back to our car analogy?
34:23
SPEAKER_01: Are you trying to regulate the engine?
34:25
SPEAKER_01: Or are you instead regulating use?
34:27
SPEAKER_01: You know, how does a driver get their license?
34:29
SPEAKER_01: What speed can you go on certain roads?
34:31
SPEAKER_01: Even designing the roads, all left to the state.
34:34
And so if states want to regulate that end user deployment,
34:38
how are you going to use AI?
34:40
SPEAKER_01: In what context?
34:42
What sort of transparency requirements do you want to provide
34:45
to your customer?
34:46
For example,
34:47
what sort of training do you want to provide to doctors,
34:50
to educators?
34:52
SPEAKER_01: two lawyers,
34:53
all of those things do not have a blatant and obvious attempt
34:58
to regulate what is a
35:00
SPEAKER_01: national question.
35:01
And we can very much see that there is also clear limitations
35:06
on the likelihood of
35:07
SPEAKER_01: that law exceeding the jurisdiction of that state.
35:11
SPEAKER_01: Now, I get that there is some use cases where it's harder to map on.
35:16
SPEAKER_01: As Matt was noting, there's, you know, mixing going on now.
35:20
SPEAKER_01: There's open source models being poured into other open source models.
35:24
SPEAKER_01: There's fine tuning.
35:25
SPEAKER_01: There's all of these things that blur that picture,
35:28
which is why I think it's also important that we start to hold
35:32
legislators
35:33
accountable for exploring alternative mechanisms that are not
35:37
grounded in burdening
35:39
SPEAKER_01: interstate commerce.
35:40
SPEAKER_01: So I just wanna focus explicitly on the mental health issues.
35:45
SPEAKER_01: I've been outspoken that I experienced mental health issues as a child.
35:49
SPEAKER_01: I think that AI companions and AI therapists
35:52
SPEAKER_01: if properly trained,
35:54
have an incredible role to play in making sure that kids who
35:58
otherwise would not
35:59
SPEAKER_01: receive care,
36:00
SPEAKER_01: and that's important to point out,
36:01
SPEAKER_01: we have a therapist shortage.
36:03
SPEAKER_01: It's not like if we woke up tomorrow and just said,
36:06
SPEAKER_01: oh,
36:06
SPEAKER_01: we want all kids to have therapists,
36:08
SPEAKER_01: they could suddenly find their therapist.
36:10
SPEAKER_01: There's a huge shortage.
36:12
SPEAKER_01: Why aren't state legislators making it easier for more students,
36:17
for more children to access human therapists rather than
36:20
starting to tinker with
36:21
SPEAKER_01: the technology itself?
36:23
SPEAKER_01: To me is just a obvious,
36:26
least burdensome or less burdensome alternative to trying to
36:29
tinker with technology
36:31
SPEAKER_01: that's still developing.
36:32
And so that's the two-part framework that I would encourage
36:36
state legislators to think through.
36:38
SPEAKER_01: First, use versus development or deployment versus development.
36:42
SPEAKER_01: And second, what is the actual problem we're trying to solve?
36:46
SPEAKER_01: Because I don't think enough state legislators are honest of saying,
36:49
SPEAKER_01: okay,
36:50
SPEAKER_01: if the problem is children experiencing mental health issues,
36:54
then I could list out for you like 50 other things you could do
36:59
besides banning AI
37:01
companions that would be more efficacious for actually helping
37:05
children with those
37:06
SPEAKER_01: mental health issues.
37:08
That delineation between use and development is something that
37:11
we've long focused on.
37:13
SPEAKER_00: And for a variety of different reasons,
37:15
SPEAKER_00: one is the benefits,
37:16
SPEAKER_00: as you're describing,
37:17
SPEAKER_00: from regulating harmful use.
37:18
Like if you really are concerned about harmful use,
37:20
you should target it directly.
37:22
And the second is the implications of development for not just
37:25
innovation,
37:25
but really for the part of the innovation pipeline that we're
37:28
most focused on,
37:29
SPEAKER_00: which is startups,
37:30
SPEAKER_00: little tech companies,
37:31
SPEAKER_00: because
37:32
If you're regulating development,
37:33
those costs tend to be disproportionately borne by startups.
37:37
SPEAKER_00: They have smaller legal teams or nonexistent legal teams,
37:40
SPEAKER_00: smaller policy teams or nonexistent policy teams.
37:43
And so the administrative regulatory burdens try to end up
37:46
making it harder for
37:47
SPEAKER_00: them to compete with larger platforms.
37:49
I think the funny thing about that policy framework and then
37:52
what we're focused on
37:52
SPEAKER_00: today is that the state patchwork is also really hard for little tech,
37:56
SPEAKER_00: right?
37:56
SPEAKER_00: So when we're talking about state versus federal rules,
37:59
we're not just talking about sort of an abstract constitutional
38:01
principle.
38:02
SPEAKER_00: From our standpoint,
38:03
the reason that this is something that we care so much about is
38:06
that a startup
38:07
without a legal team trying to figure out how do I offer one
38:09
tool in California and
38:11
a different tool in New York and a different tool in Florida is
38:13
going to be really
38:14
SPEAKER_00: burdened and be harder for them to compete with large tech companies.
38:20
SPEAKER_02: I was going to say that the other thing we're sort of mentioning,
38:24
SPEAKER_02: but I think it's worth just being explicit about it.
38:27
The thing we're most worried about at the state level is simply
38:31
model level regulation.
38:34
And the reason for that is,
38:37
I think,
38:37
pretty simple,
38:38
which is at the core of
38:41
SPEAKER_02: These models,
38:41
SPEAKER_02: when I say these models,
38:42
SPEAKER_02: I'm talking about the newest version of generative AI,
38:45
SPEAKER_02: the LLMs that everybody's focused on now.
38:48
But other models as well are really just math and statistics at
38:52
the end of the day,
38:52
right?
38:52
It's like taking a bunch of data and using statistical methods,
38:58
using vector math to...
39:01
slice and dice the data into different categories and then make
39:04
sense of that data.
39:06
SPEAKER_02: That's really what these AI models at core are doing.
39:10
SPEAKER_02: And to do that, you know, we call it training.
39:12
SPEAKER_02: You just train on a bunch of the data.
39:13
The models are developed and then they have a bunch of data
39:17
that passes through it
39:17
SPEAKER_02: that continually makes those models better.
39:20
And I think our big concern is that maybe there's a world in
39:24
which even a big
39:25
SPEAKER_02: company could train on data
39:28
SPEAKER_02: for 50 different standards, right?
39:29
SPEAKER_02: So I train my data in Kentucky and then I train it in California to their
39:35
SPEAKER_02: standards,
39:35
SPEAKER_02: but really that isn't feasible.
39:37
SPEAKER_02: The training takes months and months.
39:39
It takes,
39:40
you know,
39:40
as we are seeing enormous costs in terms of computing,
39:44
in terms of money.
39:45
And so it's not feasible to have models trained to different
39:48
standards in different states.
39:50
SPEAKER_02: And so de facto,
39:52
it ends up being a national standard when a state declares that
39:56
they're going to
39:57
regulate at the model level and they're going to regulate
39:59
effectively how these
40:01
SPEAKER_02: models are trained.
40:02
And that's our biggest concern is that there isn't a good way
40:06
to do state level
40:07
SPEAKER_02: model regulation.
40:08
That feels like the kind of thing that is so inherently federal
40:13
in nature.
40:14
SPEAKER_02: And yes,
40:15
it will definitely harm startups because even if somebody with
40:22
the adequate
40:23
SPEAKER_02: resources could do this,
40:26
SPEAKER_02: which I actually am skeptical of,
40:28
SPEAKER_02: but even if they could,
40:28
SPEAKER_02: a startup certainly can't do it.
40:30
And so you're destroying any hope of competition in this realm
40:35
of creating a
40:36
national market where small and big players can compete on an
40:39
effective playing,
40:40
SPEAKER_02: you know,
40:40
SPEAKER_02: on a level playing field.
40:42
And I'll note that Representative Lou,
40:44
a Democrat from California,
40:46
made that exact point.
40:48
SPEAKER_01: Everyone can go find it on C-SPAN,
40:50
SPEAKER_01: directly asking a witness,
40:52
SPEAKER_01: hey,
40:52
SPEAKER_01: tell me,
40:53
do you think a lab can comply with even two different state
40:58
training requirements?
40:59
SPEAKER_01: And the witness kind of shrugged and looked another way and said,
41:02
SPEAKER_01: but clearly if Representative Lou is aware of this,
41:06
SPEAKER_01: a very AI savvy person,
41:08
SPEAKER_01: This is not a matter of necessarily politics, or it shouldn't be.
41:11
SPEAKER_01: To your point, Jay, this is a technical question.
41:14
And I'll raise also that outside of just the sheer economic
41:18
questions of this,
41:19
SPEAKER_01: to me,
41:20
SPEAKER_01: this is truly a matter of national consequences.
41:24
SPEAKER_01: When we think about pushing the frontier of AI,
41:27
SPEAKER_01: this isn't just for fun in terms of,
41:29
SPEAKER_01: oh,
41:29
SPEAKER_01: I can't wait to see if the US beats China on the next benchmarks.
41:34
SPEAKER_01: These are questions of profound significance to voters right now.
41:38
If you go and ask a voter,
41:40
what is the most important thing you're looking for in 2026?
41:42
SPEAKER_01: It's affordability.
41:44
SPEAKER_01: And what is the thing that could drive down the cost of healthcare?
41:48
SPEAKER_01: AI.
41:49
SPEAKER_01: What is the thing that can drive down the cost of education?
41:53
SPEAKER_01: AI.
41:53
What's the thing that can start to improve our transportation
41:56
systems,
41:56
our energy systems?
41:58
SPEAKER_01: I can keep going, but we only have so much time.
42:01
AI really can be the biggest driver of a lot of human
42:05
flourishing across so many domains.
42:07
So for any state to interfere with our actual progression along
42:11
that effort to lead
42:13
on the AI frontier is fundamentally at odds with that sort of
42:16
national unity that
42:18
SPEAKER_01: the founders aspired for.
42:19
SPEAKER_00: Kevin, you were in D.C.
42:21
SPEAKER_00: a couple of months ago testifying at a hearing called AI to Crossroads,
42:25
SPEAKER_00: a nationwide strategy or Californication.
42:27
SPEAKER_00: I'm curious what you heard from lawmakers in D.C.
42:31
about how they're thinking about this issue and how the state
42:33
dynamics are affecting them.
42:35
SPEAKER_01: Yeah,
42:36
so the committee was really engaged in a way that I think the
42:42
rest of the panelists
42:43
SPEAKER_01: didn't necessarily anticipate,
42:44
SPEAKER_01: myself included,
42:45
SPEAKER_01: of hearing that lawmakers really were hungry for strong information,
42:49
reliable information on this very question of what is the
42:53
proper role of the
42:53
SPEAKER_01: states?
42:54
SPEAKER_01: What's the proper role of the federal government?
42:56
SPEAKER_01: And how do we map that on to that technology themselves?
42:59
SPEAKER_01: So one of the biggest takeaways for me was,
43:03
SPEAKER_01: So much of the AI policy discourse right now is grounded in vibes.
43:08
SPEAKER_01: And what people heard at some point,
43:11
SPEAKER_01: at some time from some person,
43:13
SPEAKER_01: they've anchored on that position.
43:15
SPEAKER_01: So for example,
43:16
we had the ranking member of that committee was very worried
43:20
that the moratorium
43:22
SPEAKER_01: and anyone loosely affiliated with being supportive of the moratorium
43:26
wanted to eliminate the ability of states to continue to
43:30
enforce the common law and
43:32
SPEAKER_01: to allow for courts to enforce things and adjudicate things like torts,
43:37
SPEAKER_01: negligence,
43:38
SPEAKER_01: just basic liability frameworks,
43:40
SPEAKER_01: which was never on the table.
43:42
But to hear those sorts of talking points emerge months later
43:46
during a committee
43:47
meeting on AI was indicative of the fact that a lot of this
43:51
discourse is just being
43:52
SPEAKER_01: swayed by whatever podcast you listen to,
43:56
SPEAKER_01: whoever was in your office last,
43:58
SPEAKER_01: and perhaps how you felt about the technology even way back in 2023.
44:03
SPEAKER_01: Now,
44:03
I'll also say that I was impressed by the rigor of the
44:07
questions that committee
44:09
SPEAKER_01: members were asking.
44:10
SPEAKER_01: To me, it really showed that they were hungry for information.
44:13
SPEAKER_01: And that's suggestive of the fact that we need more even keel,
44:20
SPEAKER_01: thorough,
44:21
objective analysis of AI and of the relevant laws so that
44:26
lawmakers can make
44:27
SPEAKER_01: informed decisions.
44:28
SPEAKER_01: Because I think that the
44:30
SPEAKER_01: Failure to appreciate,
44:31
SPEAKER_01: for example,
44:32
what it means to interfere with development and the
44:36
ramifications that that can
44:37
SPEAKER_01: have on national interests,
44:39
that just hasn't been shared thoroughly enough with a lot of
44:42
lawmakers who may
44:43
SPEAKER_01: otherwise be skeptical of reserving that power to the federal government.
44:47
SPEAKER_01: Now,
44:49
SPEAKER_01: One of the biggest takeaways,
44:50
SPEAKER_01: of course,
44:51
from that conversation was even among folks who may be somewhat
44:57
willing to consider
44:58
leaving this issue up to Congress and leaving this to the
45:02
national government,
45:03
SPEAKER_01: some feeling that there has to be an affirmative policy response
45:09
SPEAKER_01: to deal with this AI question.
45:11
So one of the biggest pushbacks on the moratorium was that it
45:14
was banning entirely
45:16
SPEAKER_01: state AI legislation,
45:17
SPEAKER_01: which again,
45:18
SPEAKER_01: as we discussed,
45:19
SPEAKER_01: wasn't the case,
45:20
SPEAKER_01: and replacing it with nothing.
45:22
And there is a real sense,
45:25
ask any behavioral economists,
45:27
we all suffer from action bias.
45:29
SPEAKER_01: We just want to see something get done.
45:32
SPEAKER_01: Something happening,
45:33
SPEAKER_01: even if it's bad,
45:34
SPEAKER_01: is often perceived as being better than doing nothing,
45:37
SPEAKER_01: just because we feel like we have to respond in some fashion.
45:41
SPEAKER_01: And lawmakers are hungry for what that should be.
45:44
And I would love to talk with you all about that ad nauseum for
45:48
a future podcast down the road.
45:49
SPEAKER_01: But
45:50
Minimally,
45:51
I think that there's so much we can be doing on how to increase
45:54
AI adoption.
45:56
SPEAKER_01: I would love to see a first century version of the Rural Electrification
46:01
SPEAKER_01: Administration,
46:02
SPEAKER_01: which went county by county,
46:04
SPEAKER_01: teaching people how to use electricity.
46:06
SPEAKER_01: Why don't we have an office of AI adoption, right?
46:09
SPEAKER_01: Let's go send our startups,
46:12
SPEAKER_01: our researchers into communities and help people learn how to use AI.
46:16
We also need to be attentive to the very real concerns about
46:19
economic displacement.
46:21
If people feel like they're going to live in a future in which
46:24
they don't have a
46:24
SPEAKER_01: job,
46:25
SPEAKER_01: they don't know how they're going to provide for their family,
46:27
SPEAKER_01: it's hard to say,
46:28
SPEAKER_01: yeah,
46:28
SPEAKER_01: I'm really pro-AI.
46:30
SPEAKER_01: I can't wait to lose my job.
46:31
SPEAKER_01: No one has that button.
46:32
SPEAKER_01: That bumper sticker will not be seen on any license plates.
46:36
So the federal government has a chance to rethink how can we
46:39
make benefits,
46:40
SPEAKER_01: for example,
46:41
SPEAKER_01: more flexible?
46:42
How can we help people transition to new opportunities to start
46:46
those new AI companies?
46:47
SPEAKER_01: Engine Org is doing fantastic work in this space,
46:50
SPEAKER_01: recommending,
46:50
SPEAKER_01: for example,
46:51
SPEAKER_01: how we can redefine the definition of investor.
46:55
just to make sure that more people can access startup funds and
46:59
things like that.
47:00
SPEAKER_01: So it was a great experience.
47:01
SPEAKER_01: I would, of course, welcome the call again.
47:03
Although I think after the fact,
47:05
they realized they invited the wrong Kevin Frazier.
47:08
If you Google me,
47:09
you'll find the more popular Kevin Frazier from Entertainment
47:13
Tonight.
47:13
SPEAKER_01: He would have been a way better witness, way more excited.
47:17
Kevin,
47:17
you mentioned ramifications that are on the minds of lawmakers
47:20
in D.C.
47:21
SPEAKER_00: Jay,
47:22
SPEAKER_00: that's something that we've talked about a lot at our firm,
47:24
SPEAKER_00: the ramifications,
47:25
SPEAKER_00: not just in terms of California versus Florida or New York versus Texas,
47:29
SPEAKER_00: but ramifications beyond the borders of the United States.
47:32
So what what is important about getting this issue right for
47:36
what happens outside
47:37
SPEAKER_00: the United States?
47:38
SPEAKER_02: Yeah,
47:38
SPEAKER_02: and I'll turn to that for a second,
47:40
SPEAKER_02: but something Kevin said really resonated with me,
47:43
SPEAKER_02: and then I'll go to the question you posed,
47:46
SPEAKER_02: Matt.
47:46
SPEAKER_02: But the thing that resonated with me was this,
47:48
I don't know if the policy is the right one in terms of the
47:51
rural electrification,
47:52
SPEAKER_02: but the notion that this is really game-changing for any society is,
48:00
SPEAKER_02: I think,
48:01
SPEAKER_02: underappreciated.
48:02
SPEAKER_02: And the way I think about it is, if you think about what AI really is,
48:07
SPEAKER_02: It's commodified intelligence.
48:11
SPEAKER_02: It's commodified and commoditized inference.
48:15
And if you look around the world at the lack of opportunity
48:19
that people have to
48:21
SPEAKER_02: The issue is not that there's too much inference and intelligence.
48:26
It's the lack of access to the tools that allow you to develop
48:30
that intelligence.
48:31
And so I don't see a world in which commoditized inference and
48:35
intelligence is a bad thing.
48:37
SPEAKER_02: I struggle to understand what that world would be.
48:40
SPEAKER_02: It's not that it won't be misused, et cetera, but at core...
48:43
I think it's really getting people to understand that this is
48:46
what it is.
48:47
SPEAKER_02: It's a tool for them.
48:48
SPEAKER_02: It's sort of Steve Jobs' bicycle of the mind on steroids, right?
48:53
SPEAKER_02: That's what this is.
48:54
SPEAKER_02: And that's really the potential that's here.
48:56
And that morphs into the broader conversation,
48:58
Matt,
48:58
that you were talking about,
48:59
which is...
49:01
SPEAKER_02: This technology really is,
49:03
SPEAKER_02: and I think this is the way we talk about lawmakers,
49:05
SPEAKER_02: makers about this.
49:06
SPEAKER_02: It really is a shift.
49:08
SPEAKER_02: It's more than an industry.
49:10
SPEAKER_02: It's more than a new technology.
49:11
SPEAKER_02: It's a change in the way that the control layer of computing operates.
49:17
SPEAKER_02: It operates through natural language.
49:19
SPEAKER_02: So we're talking to computers now rather than coding.
49:22
SPEAKER_02: I mean,
49:22
SPEAKER_02: there is coding obviously as well,
49:24
SPEAKER_02: but with the rise of LLMs,
49:26
it's very clear that the way that most people will now interact
49:28
with computers is
49:29
SPEAKER_02: by using their own native language.
49:31
SPEAKER_02: And the way that computers will respond to us
49:34
SPEAKER_02: will not be sort of deterministic, robotic.
49:38
SPEAKER_02: You put in A and you always get in B.
49:41
SPEAKER_02: But like human beings respond to us,
49:43
SPEAKER_02: the responses are contextual.
49:45
SPEAKER_02: They depend on the way that the questions are asked.
49:48
SPEAKER_02: And putting in input A doesn't always get you output B.
49:51
SPEAKER_02: It gets you output B,
49:52
SPEAKER_02: C,
49:52
SPEAKER_02: D.
49:53
SPEAKER_02: And so on many levels,
49:55
you're talking about a new control layer of computing that
49:59
makes us interact with
50:00
SPEAKER_02: computers in a profoundly different way than we've been used to.
50:05
The implications of this are huge because these systems do have
50:09
sort of values of
50:10
SPEAKER_02: openness or closeness,
50:13
SPEAKER_02: for lack of a better word,
50:14
built into them in the same way that the Internet could have
50:16
developed very
50:17
differently if it were an open system versus it were a closed
50:20
system that many
50:22
SPEAKER_02: advocated for in other countries and continue to advocate.
50:26
SPEAKER_02: And I think that that's the geopolitical thing that the U.S.
50:29
SPEAKER_02: and other countries will struggle with,
50:31
which is that the countries that have companies that produce
50:36
this AI that others
50:38
SPEAKER_02: adopt and that performs that sort of control,
50:42
SPEAKER_02: the function of computing,
50:44
SPEAKER_02: will have a massive benefit from these outsized to others.
50:50
SPEAKER_02: It's why China is investing a ton of money effort in computing,
50:55
SPEAKER_02: in software,
50:55
SPEAKER_02: but also in hardware to try to be that control layer.
50:58
SPEAKER_02: And so I don't think we should...
51:00
SPEAKER_02: diminish at all what the stakes are here,
51:03
SPEAKER_02: which is what type of computing do we have in the future?
51:08
And a computing platform based on technology that's informed by
51:12
the values of an
51:14
authoritarian government are going to be very different than
51:18
those informed by,
51:20
SPEAKER_02: in a sense,
51:21
SPEAKER_02: the software of open societies.
51:23
SPEAKER_02: And I say societies because it's the U.S.,
51:25
but it's also others within sort of that framework that are
51:28
developing these
51:29
SPEAKER_02: technologies.
51:31
SPEAKER_02: We have to be prepared to have the conversation that at this point,
51:36
SPEAKER_02: you know,
51:37
SPEAKER_02: one of the most popular models being developed on is Quen,
51:42
SPEAKER_02: is the Alibaba model.
51:44
SPEAKER_02: You know,
51:45
SPEAKER_02: we're in a neck and neck race,
51:46
SPEAKER_02: whether we like it or not,
51:47
SPEAKER_02: between technology that's being produced by companies in China.
51:51
SPEAKER_02: the U.S.
51:52
SPEAKER_02: and its allies versus companies that are coming out of China.
51:55
SPEAKER_02: And the implications, I think, from a geopolitical point are huge.
51:59
SPEAKER_02: In the same way the internet impacted cultural exchange,
52:04
SPEAKER_02: soft power,
52:05
SPEAKER_02: as well as hard power,
52:06
SPEAKER_02: that same dynamic is going to play out on steroids,
52:09
SPEAKER_02: I think,
52:09
SPEAKER_02: here.
52:09
And so I think that's the underlying thing,
52:12
Matt,
52:13
that you were asking about that I think
52:15
SPEAKER_02: is really at the forefront of everybody's minds in D.C.
52:19
SPEAKER_02: as they think about this.
52:20
And the way that this debate plays into that is it's going to
52:23
be very hard for the U.S.
52:24
to compete if the companies that are founded here have to
52:28
comply with 50 state laws
52:31
SPEAKER_02: for model development.
52:32
It's just hard to imagine that that ecosystem is going to
52:36
present and produce
52:37
something that can compete with the likes of the massive
52:40
efforts that are going on
52:41
SPEAKER_02: in China.
52:41
SPEAKER_02: So it has to be a national effort.
52:44
SPEAKER_02: There isn't really a choice, I think, once you bring geopolitics into it.
52:48
SPEAKER_00: Jay, thanks for bringing it full circle.
52:50
SPEAKER_00: Kevin, Jay, thanks.
52:51
SPEAKER_00: This was fun.
52:52
SPEAKER_00: Great.
52:53
SPEAKER_02: Thanks for having us.
52:55
SPEAKER_02: Thanks, Kevin.
52:56
SPEAKER_02: It's been a pleasure.