European Union flags fly in front of the European Commission headquarters in Brussels, Belgium, on February 1, 2023

Yves Herman | Reuters

When Gerard de Graaf moved to San Francisco from Europe nearly a year ago, his job had a very different feel.

De Graaf, a 30-year veteran of the European Commission, has been tasked with revitalizing the EU’s Bay Area office. His title is “Chief Digital Ambassador to the United States,” and as of September, his primary role has been to help the tech industry prepare for new legislation called the Digital Services Act (DSA), which goes into effect Friday.

At the time of its arrival, the metaverse was trumping artificial intelligence as everyone was talking about it, tech giants and burgeoning startups were shedding thousands of jobs, and the Nasdaq was heading for its worst year since the 2008 financial crisis.

In de Graaf’s area of ​​responsibility, companies such as Meta, Google, Apple and Amazon have had to prepare for the DSA since April, which is based on banking regulations. They face fines of up to 6% of annual sales if they break a law introduced in 2020 by the European Commission (the EU’s executive body) to curb the spread of illegal content online and ensure greater accountability.

As envoy, de Graaf saw more action than he expected. In March, the legendary Silicon Valley Bank suddenly imploded, making it the second largest bankruptcy in US history. At the same time, OpenAI’s ChatGPT service, launched late last year, sparked an arms race in generative AI, with tech money pouring into new chatbots and the large language models (LLMs) that power them.

It’s been “a strange year in many ways,” de Graaf said in his office, which shares a building with the Irish consulate on the 23rd floor in downtown San Francisco. The European Union has not been officially represented in Silicon Valley since the 1990s.

De Graaf spent much of his time meeting with top executives, policy teams and technologists from the big tech companies to discuss regulations, the impact of generative AI and competition. Although the rules will be enforced by the European Commission in Brussels, the new outpost has been a useful way to promote a better relationship between the US tech sector and the EU, de Graaf said.

“I think there was a conversation that we had to have that didn’t really happen,” said de Graaf. With a touch of sarcasm, de Graaf said someone with “infinite wisdom” decided the EU should pull out of the region during the internet boom, just as “Silicon Valley was just on the rise and getting stronger became.”

The mindset in the tech industry at the time, he said, was that the internet was a “different technology that’s evolving very quickly” and that “political makers don’t understand it and can’t regulate it.”

Facebook Chairman and CEO Mark Zuckerberg arrives for testimony before the House Financial Services Committee on “An Inquiry into Facebook and Its Impact on the Financial Services and Housing Sectors” at the Rayburn House Office Building in Washington, DC, October 23, 2019

Almond Ngan | AFP | Getty Images

However, some big tech leaders have shown signs of taking the DSA seriously, de Graaf said. He pointed out that Meta CEO Mark Zuckerberg has met with EU Internal Market Commissioner Thierry Breton to discuss some details of the rules and that X owner Elon Musk has done so publicly supports the DSA after meeting Breton.

De Graaf said he sees “a little more respect and understanding for the European Union’s position, and I think that’s accelerated after generative AI.”

“Serious Commitment”

X, formerly known as Twitter, had withdrawn from the EU’s voluntary guidelines to combat disinformation. There was no penalty for not attending, but X is now required to comply with the DSA, and Breton said after his meeting with Musk that “tackling disinformation will be a legal obligation.”

“I think in general we’ve also seen a serious commitment from big companies in Europe and around the world to be prepared and prepare,” de Graaf said.

The new rules will require platforms with at least 45 million monthly active users in the EU to provide risk assessment and mitigation plans. They must also give certain researchers the ability to audit access to their services for harm, and give users more transparency about their recommendation systems and even give them the ability to tweak their settings.

The timing could be a challenge. Many companies laid off their employees as part of their cost-cutting measures implemented earlier this year Trust and Security Teams.

“You ask yourself: will these companies still be able to implement these new regulations?” said de Graaf. “Many of them have assured us that they have a renewed sense of confidence and security in the process of the layoffs.”

The DSA doesn’t require tech companies to maintain a specific number of trust and security staff, de Graaf said, just that they comply with the law. Still, he said that a social media platform, whose name he declined to be named, gave a “not entirely reassuring” response when asked how it planned to guard against disinformation in Poland’s upcoming October elections, since the company only got one person in the region.

Therefore, the rules include transparency about what exactly the platforms are doing.

“There’s a lot we don’t know, like how these companies moderate content,” said de Graaf. “And not just their resources, but the way they decide what content to keep and what to remove.”

De Graaf, a Dutchman who is married with two children, has worked extensively on EC regulatory issues for the past three decades. Previously he worked on the Digital Services Act and the Digital Markets Act, European legislation aimed at consumer protection and rights and improving competition.

This isn’t his first visit to the United States. According to his biography, he worked from 1997 to 2001 in Washington, DC as “Trade Adviser to the European Commission Delegation to the United States”.

For all the talk of San Francisco’s “disaster loop,” de Graaf said he sees different levels of energy in the city than further south in Silicon Valley.

There’s still “so much dynamism” in San Francisco, he said, adding that there are “such interesting and objective people that I find incredibly refreshing.”

“I meet very, very interesting people here in Silicon Valley and in San Francisco,” he said. “And it’s not just the companies that have a certain avant-garde, but also the people behind them. So the conversations you have with people here are really enriching.”

The generative AI boom

Generative AI was a near-unknown concept when de Graaf arrived in San Francisco last September. It’s now the only topic of conversation at tech conferences and cocktail parties.

The rise and rapid spread of generative AI has led a number of large technology companies and senior executives to call for regulation, citing the technology’s potential impact on society and the economy. In June, the European Parliament approved an important step towards the passage of the law EU AI law that would constitute the EU’s AI regulatory package. It’s still a long way from becoming law.

De Graaf noted the irony in the industry’s attitude. Tech companies, which have criticized the EU for years for overly aggressive regulations, are now asking, “Why is it taking so long?” said de Graaf.

“We will hopefully have an agreement on the text by the end of this year,” he said. “And then there’s always these transition periods where the industry has to prepare and we have to prepare. That can be two or a year and a half.”

The rapidly changing landscape of generative AI makes it difficult for the EU to formulate regulations quickly.

“Six months ago, I think our big concern was to legislate to protect the handful of companies — the extremely powerful, resource-rich companies — that are going to dominate,” de Graaf said.

However, as more powerful LLMs become available for free use, the technology spreads, making regulation more difficult as it’s not just a matter of dealing with a few big companies. De Graaf has met with local universities like Stanford to learn more about the transparency of LLMs, how researchers can access the technology, and what data companies could make available to lawmakers about their software.

One proposal being floated in Europe is the idea of ​​publicly funded AI models so that control is not solely in the hands of big US companies.

“These are questions that policymakers in the United States and around the world are asking,” said de Graaf. “We don’t have a crystal ball where we can just predict everything that’s going to happen.”

While there are opportunities to expand the development of AI models, there is little doubt where the computing power money is going. Nvidia, which just reported stunning earnings for the most recent quarter and has tripled its share price this year, is a clear leader in providing the kind of chips needed for generative AI systems.

“This company has a unique value proposition,” said de Graaf. “It’s not unique because of size or a network effect, but because their technology is so advanced that it’s unrivaled.”

He said his team meets with Nvidia and its policy team “fairly regularly” and they’ve learned “how the semiconductor market is evolving.”

“It’s a useful source of information for us and of course where the technology is going,” said de Graaf. “They know where many industries are evolving and are on the ball or will advance faster than other industries.”

REGARD: Former White House CTO Aneesh Chopra on AI regulation

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