During a House Energy and Commerce Committee hearing prior to the Congressional recess, Rep. Brett Guthrie (R-KY) questioned Marc Bhargava, Managing Director at the General Catalyst, about European regulation of artificial intelligence.
00:00Appreciate it. Sorry I haven't been here for I've been in the Rules Committee over in the Capitol for most of the night. So good to see you all. This is very important to us. We have to get this done. We have to get it correct. You know, Europe, there's a lot of reasons not to invest in Europe right now. Unfortunately, we need a strong Europe. I think it's good for America to have a strong Europe. But we had the European Union, the United States had the same economy in 2008, about the same size. Now we're about 75% bigger. So it's more than their privacy law. But that's certainly a big part of it. A lot of it at
00:29going after our tech companies, specifically written to go after our tech companies, which is just unfortunate. So to beat China, we have to win the AI battle. And that's energy and making sure we have the right regulatory structure. And the answer is not zero. But the answer is not the AI act. I understand it takes 330,000 euro. It's probably about $350,000 just to comply with one of the actual requirements that was a study. So Mr. Heather and Mr. Borgava, if you'll go
00:59first, Mr. Borgava, Mr. Heather, what do you think would happen to little tech and people that want to create startup, people in the garage, you know, the proverbial two people in the garage trying to start a business, if we had the big tech privacy level, the level that Europe does?
01:15You want to start, Mr. Borgava, and then go to him?
01:17Sure, absolutely. Yeah, we do think that most, a lot of the European regulation goes too far on the AI side. But we understand that they're coming from a good place.
01:26Like, I certainly think that the European governments are trying to protect consumers, and a lot of the areas we need protection are extremely fair to voice.
01:34But unfortunately, it can also go too far. It can be conflicting. It can be between different groups.
01:39What are the couple of things that are too far?
01:41One thing that's too far, for example, there was one clause that, I think it was Article 10, but it basically said that a data set has to be relevant, representative, free of errors, and complete.
01:52And I, myself, have built a company and worked in tech for over a decade, and I've probably never seen a data set that's, quote, free of errors, for example.
01:59So some of the regulation potentially being written in Europe is not being written by people who are really close to the industry or helping.
02:06The big fear that we can't do, I don't think, is that there's this idea that you could take the AI, the algorithm, and send it off to the FDA-style entity and get them approved and send it back and say,
02:18well, China's just turning them out. And we saw what happened with DeepSeq.
02:23Their chips are not as good as ours, but it should wake us all up.
02:27So, Mr. Heather, what do you think would be the issues with those types of regulatory, where you have to get even data sets approved, so it could take you a year?
02:36You said in one of your earlier comments, they didn't even hear back.
02:39Yeah, I think one of my comments in my opening testimony, and you weren't here for it, was that there's also a lot of disclosure requirements associated with the EU AI Act,
02:49which will not only require the know-how and the technology be disclosed to the regulator, but to be disclosed to competitors, to be disclosed to Chinese competitors, people down chain.
03:01And that creates two problems, right?
03:02One is that the know-how is now out there, so someone could re-engineer that AI for more nefarious means.
03:08And then secondly, if your IP is out there on the street, what's the incentive to invest?
03:13And so it's not just whether you're sharing your secret sauce with the regulator.
03:17The EU AI Act is going to require that sharing to go more broadly because they have an interest to kind of help EU tech companies.
03:24We want to do that with pharmaceuticals, too.
03:25So we've seen, like, the governor of Colorado, Connecticut, California, race, concerned about proposed laws in their state.
03:33The governor of Virginia vetoed an AI bill.
03:36So this will be Mr. Thayer.
03:39So why are we seeing more and more governors publicly pushed back on AI?
03:44And that's kind of our issue right now, that we want to deploy AI through the government and through the commerce,
03:49and then we're worried about state-by-state laws.
03:50Why do you think governors of the states are even pushing back on it?
03:53Do you think it's going to make them uncompetitive?
03:54Absolutely, and let me answer this, Congressman, Mr. Chairman, by connecting your previous question with this one.
04:00Because when Governor Polis in Colorado passed the nation's first major comprehensive AI law,
04:05there was a lot of opposition, and he felt it.
04:07A lot of small and mid-sized entrepreneurs came out with letters and really pushed hard to try to stop it.
04:13He signed it anyway, but said that we needed a national standard,
04:17and then subsequently went back and had a special effort to try to review this law,
04:22could not come up with answers to the complexities of it,
04:25and then finally has called for now a moratorium to deal with this.
04:29So this is pretty astonishing for someone who signed the first-of-its-kind nation, state AI.
04:33I got elected with him here.
04:34Yeah, I know.
04:35And the connection here with your previous question, Mr. Chairman,
04:38is the fact that these small and mid-sized entrepreneurs, AI entrepreneurs in Colorado,
04:42recognize what's happening in Europe.
04:44And just yesterday, the Wall Street Journal published a story about Europe's very small share of the global tech marketplace
04:50and had this astonishing statistic.
04:53Quote, European businesses spend 40 percent of their IT budgets on complying with regulations,
04:57and two-thirds of European businesses don't understand their obligations under the EU AI Act.
05:03How do you do business in that environment?
05:05And this is what Colorado and other states are recognizing.
