The EU elections, regulation and AI – How do we enable growth in Europe?

Public discourse on AI regulation oftentimes tends to veer into dystopian scenarios, ranging from fears of uncontrolled superintelligence to the destabilizing effect of AI on democracy. Nevertheless, it’s also crucial to examine the other side of the coin.  

It is by no means a new trade-off, but it is worth assessing whether the benefits of a certain policy will outweigh its potential negative ramifications. In the context of strategically important emerging technologies like AI I believe one question of paramount importance is: will regulation have a negative effect on innovation and competitiveness? And how might that eventually happen?

The European Parliament recently approved the world's first legal framework for AI, the so-called AI Act. In short, the aim is to protect fundamental rights, democracy, the rule of law, and environmental sustainability from high-risk AI, but also to promote innovation and support the global competitiveness of European companies. It remains to be seen what the effect will be and whether or not the AI Act will slow down the development of those ultimately realizing the value of AI: European software companies

So, how does that value creation happen and what might hinder European companies taking a leading role in AI?

AI alone does not create value. Its utilization can create value, by for instance efficiency improvements, when AI is utilized as a built-in functionality of a digital service or product, such as driver assistance, product recommendations or web-scale search. In that case, a large part of its value potential is claimed by those who integrate AI into their products, services or platforms. And the countries that develop digital services and products reap the economic benefits.

That is why, irrespective of the regulatory environment, Europe must ensure that value-creating digital products, services and platforms emerge in Europe. Products whose value increases further when AI is embedded as part of them. While regulation should ensure the use and creation of safe AI in Europe, it should also aim at enabling innovation and enhancing Europe's competitiveness, especially for software companies.

Back in 2011, entrepreneur and investor Marc Andreessen wrote that the software is eating traditional industries. Netflix, Spotify, Amazon, Google, and Tesla – to name a few that are good examples of such. At the heart of these products and platforms, AI is accumulating value through a continuous feedback loop. Value creation accelerates not just with every user but with every user interaction – and the AI learns in the process.

The emergence of leading digital services and products, as part of which AI increases their competitive edge, benefits everyone – and helps Europe grow sustainably. The alternative is to solely focus on applying and utilizing AI-powered products. To become increasingly adept at leveraging products like ChatGPT or Microsoft Copilot, instead of developing and distributing AI-powered products – innovating, building, and growing. And thus eventually also reaping the economic benefits.

Amid all the regulatory discussions, Europe should not lose focus of the big picture. New technologies usher in a promise of enhanced productivity, improved quality of life, and groundbreaking advancements that can transform industries and societies. In the case of AI, that promise is realized mainly through software-first companies. That is why, Europe should ensure investments in AI development as part of products and secure our role as a significant value creator brought by AI. When we regulate AI, we are most often actually regulating companies with software products. And we desperately need them for economic growth.

‍This article builds on Silo AI CEO Peter Sarlin's op-ed in Finland's largest business newspaper Kauppalehti.