🤖 Artificial intelligence

Europe Takes On AI

The European Union has stepped up to introduce the world's first AI regulation. Dubbed the Artificial Intelligence Act, the provisional agreement passed last week will open up AI models (and the companies behind them) to degrees of transparency they have thus far resisted. The new legislation may also serve as a roadmap for other countries like the US, UK, and Japan to use.

In the AI ACT, the EU designates systems that pose "significant potential harm to health, safety, fundamental rights, environment, democracy and the rule of law" as "high risk" and mandate that EU citizens have the right to file complaints about and receive explanations of those systems. How that will work in practice is yet unclear. Furthermore, as The Verge notes, "negotiators established obligations for 'high-impact' general-purpose AI (GPAI) systems that meet certain benchmarks, like risk assessments, adversarial testing, incident reports, and more. It also mandates transparency by those systems that include creating technical documents and 'detailed summaries about the content used for training'."

But not everyone is thrilled with tamping down on AI. French President Emmanuel Macron, head of the EU's second-largest economy, worried that the AI Act would stifle progress. "We can decide to regulate much faster and much stronger than our major competitors. But we will regulate things that we will no longer produce or invent. This is never a good idea," he told a French audience after the bill's passing, writes the Financial Times. He then touted France's lead within the EU on AI development, but cautioned that competitors like Britain (no longer a part of the EU) "will not have this regulation on foundational models. But above all, we are all very far behind the Chinese and the Americans.”

The American Code

While the US hasn't enacted any AI laws, it also hasn't sat idle on the issue. In late October, the Biden Administration announced an Executive Order they called the Blueprint for an AI Bill of Rights. In essence, it's own roadmap for how it wants to see AI develop, with the biggest takeaway being that any new models above a specific power and capability will have to inform the federal government of its plans. "The reaction from the A.I. developers in general was mostly neutral to lightly positive," tech reporter Casey Newton [said on The Ezra Klein Show](https://www.nytimes.com/2023/12/01/opinion/ezra-klein-podcast-casey-newton-kevin-roose.html?). "There was not a lot of blowback. But at the same time, folks in civic society were also excited that the government did have a point of view here and had done its own work."

THE VERDICT:

Macron may be right that regulation could change competitive dynamics between nations vying for AI dominance. That being said, wholly unregulated AI doesn't sound like a much better alternative. It seems that monitoring AI development and establishing guardrails now might be our last chance before the technology surpasses what we can control.

💸 Bankruptcy

A Broken Smile

After 9 years and 2 million customers, SmileDirectClub (the online orthodontics company) has shuttered. But, what exactly happened?

According to New York Times reporter Erin Griffith who has covered the firm extensively, the Nashville-based start-up suffered from both a disappointing IPO in 2019, and years of litigation. Let's dig into that second part.

In 2017, a BuzzFeed report detailed how the company was embroiled in several lawsuits against large groups of dentists in multiple states. Why? "Several dentists and orthodontists have made publicly false, disparaging and misleading statements on various social media websites regarding SmileDirectClub all in an effort to protect their traditional business model and to limit access of care to keep prices for orthodontic care artificially inflated," a statement from the company to BuzzFeed said at the time. In other words, SDC will come for you if you say anything bad about it.

That same year, the American Association of Orthodontists lodged complaints in 36 states alleging that SDC's practice of having patients skip in-person orthodontist visits and by-pass X-rays is “illegal and creates medical risks.” In 2019, a class action lawsuit was filed against the company, but an arbitration clause in SDC's customer contract meant that all but two plaintiffs dropped their case.

A Weak IPO

Beyond SmileDirectClub's myriad lawsuits, cease-and-desist orders against customers, and patent claims, the company also suffered an embarrassing IPO in September 2019. After opening at $23 a share (valuing the company at $8 billion), it dropped 28% by day's end. "The poor public debut marked SmileDirectClub as the worst IPO this year of a 'unicorn' company, or start-up valued more than $1 billion," CNBC noted. By November, the company's value had plummeted 61% to $8.83 a share.

Finally, in September 2023, SDC filed for Chapter 11 bankruptcy, vowing to restructure and emerge a better company. But when news of its permanent shutter were announced, Griffith was quick to point out that customers on the SmilePay Plan (a lifetime support program) were still obliged to continue paying.

THE VERDICT:

The 2010s was a wild time for start-ups. More specifically, "disruptors" like SmileDirect and WeWork turned out to be emperors without any clothes (but billions in their pockets). If your business model is sue into submission anyone who criticizes you, maybe open a law firm rather than an orthodontics service.