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The Tech Industry, Responsible Innovation and Self-Regulation

March 7, 2018

The rapid emergence of artificial intelligence and ubiquitous telecommunications networks has resulted in widespread criminal hacking of personal information.

“The time has come to seriously consider a responsible approach to innovation (in the tech industry,” said Shelly Palmer, the charismatic and creative CEO of the Palmer Group, a well-known strategic marketing advisory firm to the media industry.

Palmer proposed this challenge to the tech industry just before the annual CES 2018 convention in Las Vegas in early January. Along with contributors David Sapin, principal U.S. advisory risk and regulatory leader at PwC, and Rob Morrow, principal at PwC Connected Solutions, Palmer presented their formal proposal, “The Case for Responsible Innovation,” in AdAge.

The rapid emergence of artificial intelligence and ubiquitous telecommunications networks has resulted in widespread criminal hacking of personal information, such as the massive Equifax breach, the proliferation of fake news and advertisements on the internet, and online threats from Russia to our electoral process, to name a few issues of serious concern to the American public.

Palmer, Sapin and Morrow are legitimately concerned that “opportunistic politicians” in Washington will be rushing headlong into a new era of enacting innovation-hindering government regulation. To some extent, that train has left the station, as the 115th Congress has a number of cybersecurity bills (focusing on critical infrastructure protection, cybercrime prevention, and self-driving vehicles) on its active agenda, following the enactment of the Strengthening State and Local Cyber Crime Fighting Act of 2017 last November.

While tech issues saw plenty of legislative activity in the 113th and 114th Congresses, the Internet of Things is emerging as a “hot” topic in the 115th Congress, especially as it relates to the automotive industry’s technological trajectory to Level 5 self-driving automation and the aviation industry’s interest in unmanned aerial vehicles. The Internet of Things topic may be the ultimate nexus for a major “Techlash” by consumers against the tech industry.

The late Melvin Kranzberg, a professor of the history of technology at Georgia Tech, wrote his six laws of innovation to explain how society has a “love-hate” relationship with the power and pervasiveness of technological innovation on the lives of the average person. His first (and most important) law is critical when considering developing public policy: technology is neither good nor bad; nor is it neutral, and given a specific geographic, political and cultural context, it could often be good and bad simultaneously.

To counteract the “bad” in the tech industry — as well as to attempt to get out in front of the legislative stage of the public policy issue life cycle — Palmer, Sapin and Morrow offer their responsible innovation approach: a self-regulatory organization (SRO). This Innovation SRO for emerging technologies would consist of leading organizations in the tech industry converging to define responsible innovation principles that would be universally accepted and, most important, abided by.

This Innovation SRO would regulate compliance with those principles, levy fines and refer any violations to the appropriate federal regulatory agency, such as the Federal Trade Commission. The Innovation SRO model that Palmer, Sapin and Morrow recommend adopting is the Financial Industry Regulatory Association, a private corporation (approved by the Securities and Exchange Commission) charged with regulating the practices of broker/dealers and financial exchanges.

Palmer, Sapin and Morrow also considered two additional approaches — government regulation, which often reflects the innovation hindering precautionary principle, and company self-regulation, reflected in corporate social responsibility — but rejected both approaches as being insufficient for successfully addressing the negative social effect challenges of the fourth Industrial Revolution.

Palmer, Sapin and Morrow’s concept of an Innovation SRO is a reasonable departure point for initiating discussion of responsible innovation in the tech industry. This proposed Innovation SRO would likely require FTC approval, as it would regulate compliance, levy fines and refer violations in the tech industry to federal regulatory agencies, and thus structured as a quasi-governmental organization.

Moreover, developing a consensus on acceptable responsible innovation principles and regulating compliance of the “tech industry” will be formidable tasks, as would identifying a sustainable mechanism to finance the Innovation SRO’s operations.

Palmer, Sapin and Morrow’s Innovation SRO may have the “insight, technical knowledge, and incentive to create workable principles for responsible innovation.” Yet, whether the Innovation SRO will continue to operate in the so-called “public interest,” rather than the interests of the tech industry, will require a high level of organizational transparency and accountability, involving tradeoffs among competing values and costs and benefits, to a variety of stakeholders.

Kudos to Palmer, Sapin and Morrow for actively addressing responsible innovation, as the tech industry needs to not only respond to but also anticipate and proactively address the potential risks associated with their innovations to an increasingly skeptical society.

The ensuing tech industry “discussion” should lead to a workable responsible innovation approach based primarily on the development of private ordering governance mechanisms, or the precautionary principle, and the heavy hand of government regulation, will remain society’s default position.

[Originally Published at Inside Sources]

Article Tags
InfoTech & Telecom
Thomas A. Hemphill is a Professor of Strategy, Innovation and Public Policy in the School of Management, University of Michigan-Flint.

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