Welcome to another issue of Labrys Insights, your newsletter on technology design and policy.

Today, we'll look back at 2023 and review:

Policymakers’ lack of local knowledge;
Industries not internalizing public interest discussions;
How society wins when these problems are solved, and much more.

As we approach the end of the year and judge our friends’ “Spotify 2023 Wrapped” Instagram posts, our team at Labrys is also taking a moment to reflect on our work in 2023. For our next three editions, we invite our subscribers to revisit some of our past insights and take advantage of the review mirror perspective to connect a few additional dots. We'd love to finish every December edition with a wish for 2024, but the time is for action, not wishful thinking. So we'll finish each edition with a strong commitment from Labrys for the year ahead.

We start our 2023 review with one of the most prevalent themes in our research: policymakers and industries clashes. While frequent and damaging to society, these clashes are not unavoidable. So part of our efforts throughout the months have been to explore their causes and to identify alternative paths forward, to society’s gain.

Now, let's get to it.

M. and J.

Policymakers and Industries in 2023

Clashes between regulation and industries are nothing new, but 2023 was an interesting laboratory for SAT analysis.

These clashes tend to come from the regulator’s lack of local knowledge and from industries that do not internalize policy and public interest discussions. In both cases, society is the one that suffers from bad regulation and damaging products.

The conflict was quite clear in the Airbnb and NY policymakers clash:

In short: NYC policymakers seem to believe protecting the tourist economy has been harming the local economy in a way that demands immediate action. While Airbnb insists that their service is good for the tourist economy. Note that NYC officials’ point can still be valid if Airbnb can show that their argument is also true.

The issue here is one of balancing principles. In this case, we could say the two opposing principles are what is best for the tourist economy and what is best for the local economy. To reach the best solution, one has to find the right spot where both principles are compromised at the absolutely minimal extension possible to preserve what is core to the other. It requires debate, cooperation, and the belief that all parties are acting in good faith. This is where many tech companies, especially those in unregulated markets, make a crucial mistake. Instead of acknowledging public policy concerns and working to best incorporate those into their business strategy in a way that preserves their core value proposition to their customers, they often deny any responsibility and wrap themselves in the narrative of a righteous quest in the name of freedom.

While that was an obvious conflict, it was far from the only one. In multiple instances, the discussions and actions relating to privacy regulation and intermediary liability pushed the world a bit more in the direction of a fragmented internet:

3) What does it mean for the future of internet data flow?

Firstly, about the 2020 decision, it’s quite disconcerting how little European Commission decisions mean in the European central authority scheme. The fact CJEU effectively has the last word on whether international commitments from other nations will likely be honored shouldn't be taken lightly. Especially when the Court is very liberal about the legal documents it can use to base its decisions, the facts of the underlying case required to make a decision, and how far it can expand the meaning of the explicit text of the law.

Secondly, the 2020 and this week's decisions represent an ongoing trend in internet regulation. This kind of decision creates artificial boundaries and effectively fragments the internet into country-bounded silos. From a human rights perspective, internet fragmentation makes the free flow of information lesser off. From a business perspective, it makes the scalability of aggregators and platforms lesser off. From a technology perspective, it's unclear how an information-sharing business could enable European users to communicate with users in foreign countries without the risk of foreign governments surveilling their communications. That is especially true given how vocal European authorities have been about their dislike of end-to-end encryption.

But we should not forget that these conflicts of policymakers and industries are not inherent. They are a consequence of cartesian thinking in these domains and definitely possible to overcome:

For the past decade, Brazil's financial and payments market has been tightly regulated with masterful execution. Since 2013, the Brazilian Central Bank (BACEN) has opened up the market, expanding offers, improving quality, and reducing the cost of financial services and payments. As a result, the sector has witnessed 10 years of development with increased financial inclusion and guaranteed financial stability, even in scenarios of significant turbulence and systemic stress. The population percentage holding an account grew by 50%, and those with access to digital payments increased by 54% in the last 5 years, according to The World Bank's 2021 Findex.

Regulatory agencies acted on two main fronts to create the perfect environment for financial services development in Brazil: (1) removing barriers to competition and (2) creating the necessary material conditions to compete. In both cases, a notable factor is that regulators have been very open to industry contributions, including new entrants, as a source of local knowledge in creating and revising rules and standards.

In conclusion, the clashes between policymakers and industries in 2023 highlighted the need for a more collaborative and systemic approach to technology design and regulation. While these conflicts may seem unavoidable, they can be overcome through open dialogue, cooperation, and a willingness to find common ground. As demonstrated by successful examples such as the development of the financial services market in Brazil, when regulators and industries work together, society as a whole benefits. By embracing a more SAT-like approach, where local knowledge is valued and public interest is internalized, we can create a future where technology and policy align for the greater good.

Our first commitment for 2024 is to continue striving for a harmonious relationship between policymakers and industries, where innovation and societal needs are balanced, and where everyone can thrive in the ever-evolving digital landscape.