Forget antitrust laws and let's regulate technology so it can disrupt itself.

For decades, policymakers have sought to curb the growing influence of big technology companies on our lives: From the government's antitrust lawsuit against Microsoft
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Against the FTC, which challenged Amazon's acquisition of Instagram and Whatsapp by Meta, citing anti-competitive behavior against Netscape in the browser market in the late 1990s.
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Seller-customer practices, Apple's recent $2 billion fine from the EU for its actions against Spotify, and now a new Justice Department lawsuit against Apple
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Unfortunately, in all of these cases, antitrust enforcement and fines have been extremely ineffective. Similarly, well-intentioned rules like GDPR backfired by raising compliance costs, helping incumbents and hindering new privacy-focused players.

Even if it does not backfire, regulation in this area will encounter all sorts of implementation challenges. Although the main purpose of the Digital Markets Act (DMA) is right in direction, it is to prevent companies that are gatekeepers to many economic and social interactions from abusing their dominant position. , its enforcement leaves plenty of room for incumbents to get stuck. It's done in the name of privacy, security, or technical complexity.

The truth is that Microsoft Internet Explorer was defeated not by expensive antitrust fines or by giving consumers the option to choose their browser in Windows, but by the world moving to mobile devices and Microsoft's innovations. It means that he was defeated by missing the wave. Essentially, the same innovative forces that created these highly successful companies can bring us back to competition. And it's up to policymakers to decide whether that happens. Truly disruptive innovation requires a rewiring of the architecture of how problems are solved, which in turn creates the need for new regulations.

When faced with a new technological paradigm, policymakers can make one of two big mistakes. Either we regulate too soon or we wait too long. Regulating too tightly or too soon is the same as picking winners when the situation is still uncertain. So it's no wonder this approach doesn't work.

A recent example is President Biden's executive order on AI. This order appears to be driven more by fear than by technical considerations. For example, set a threshold based on the number of floating-point operations to determine the level of regulation for your AI project. Thresholds are arbitrary and are either irrelevant or, at worst, actually harmful to AI development in the United States.

In fact, if regulations are enacted too late, policymakers fail to provide clear explanations and drive out talented innovators. That's what's happening with US cryptocurrencies, and the country is in danger of wasting its lead. It also, ironically, helps projects that are comfortable breaking the law, as we saw with the FTX scandal. At least the SEC's excuse is that the framework for financial markets, designed when rules written in 1933 and relying on public protest trading, physical stock certificates, and prices unfolding on ticker tape, needs to be updated. No.

Regulations that come too late or too soon protect incumbents. It is also difficult to blame policymakers because their incentives are not aligned. Unlike venture capitalists, who enjoy huge profits if they succeed and limited downside if they fail, regulators and policy makers receive little recognition when things go well and receive little recognition when things go wrong. If you do so, you will be responsible for everything.

The U.S. government's decision not to overregulate the Internet propelled decades of economic growth, but few people likely remember the names of the people involved. As a result, a typical regulatory “portfolio” is filled with safe but mediocre bets. The exceptions are moments in history when governments have courageously moved nations forward, from the Marshall Plan to China's economic reform to the space race to the EU's single market.

All digital infrastructure, from AI and robotics to financial services and digital markets, is currently at a similar crossroads. If the United States wants to continue to lead, it must create the right conditions for competition to flourish. As in the early days of the Internet, this begins with policymakers embracing and nurturing new architectures based on open protocols.

But how can open protocols limit the power of big technology intermediaries and accelerate a new wave of innovation? In Latin, “intermediate” means “in between.” Intermediaries are extremely beneficial to society, and many transactions cannot be completed without them. But when intermediaries accumulate too much power, they not only capture all the value they create, they also slow progress.

Unfortunately, the accumulation of power is a natural consequence of being an intermediary. When you are in the middle, you have access to better information than either side, you can decide on what terms other participants participate, and you can shape the conversation to your advantage. . As a result, historically we have alternated between the rise of new intermediaries and the subsequent promotion of their removal from privileged positions.

So what is an effective approach to reining in powerful intermediaries? We need to find another way to connect both sides of the market. In some cases, governments regulate the most outrageous practices of intermediaries, and in other cases they act as benevolent (but inefficient) intermediaries. Technology can surprise us all with something much better: interoperability. Interoperability in Latin means “to work between”. This makes it clear why interoperability is the best antidote to those standing in the middle.

We've seen this all before. Because the Internet is built on open and interoperable protocols, it has become a powerful decentralizing force, reducing the power of intermediaries across various industries. It has also created the conditions for new, more powerful intermediaries to emerge, from marketplaces and payments to messaging, social media, the creator economy, and more. Driven by the need to monetize the burgeoning networks they have built, Internet-based intermediaries limit interoperability and trap consumers and businesses within walled gardens.

Today, that wall defines how companies deliver products to customers, how developers distribute apps, how we interact with social networks, how creators connect with their audiences, and more. These platforms determine how society allocates its attention, effort, and funds by controlling access, underlying data, and algorithms that rank outcomes and match buyers and sellers. AI will build on the advantages these companies have established across data, computing, and distribution channels, and the situation will only get worse if they don't change course.

Interoperability fixes this. Imagine a world where you could send and receive messages regardless of the messaging app you use. The same goes for sending and receiving money, reading updates from social and news feeds, finding the right products and services, interacting with AI agents, and more. Truly interoperable networks allow consumers and businesses to port their businesses to other locations without having to rebuild their audiences, social graphs, or customer bases, giving consumers and businesses the ability to can have influence. Developers also don't have to worry about their platform becoming a competitor overnight.

By introducing interoperability into digital interactions, open protocols will unlock the advantages that tech companies have established over the past decades and force them to compete again. This drives the kind of innovation that helped lead the United States in the early days of the Internet.

However, for this to happen, regulators must first establish a framework that allows new open protocols enabled by cryptocurrencies to flourish. Now is the time to address cryptocurrency regulation, with everything from securities laws and financial market infrastructure to stablecoins. Otherwise, these protocols and the economic growth they promise will develop elsewhere.

The impact of these developments extends far beyond financial services. These open protocols are gradually rewiring the financial system and have the potential to reshape competition in AI, digital platforms, and infrastructure. Entrepreneurs and developers are already at work. But just like in the early days of the internet, without the right regulatory framework, their businesses will not succeed.