Global tech, local laws

TTL 16

The widening gap between tech & rules

👋 Good Morfternight! Paolo Belcastro here, welcoming you to the sixteenth issue of TTL: Tools & Thoughts for Leaders, your weekly dose of leadership insights.

As technology transforms our world, new challenges are emerging and businesses and developers are discovering that the biggest barriers aren’t just technical: they’re regulatory.

We live in a time when innovation reaches us quickly and seamlessly across markets. Most progress is digital and travels at the speed of light.

But differences in regulations mean that what’s possible in one country may be prohibited or delayed in another: while El Salvador promotes Bitcoin as legal tender, China has outlawed cryptocurrency transactions; drone technology was embraced in Australia for commercial use, but faces stringent restrictions in the U.S.

In an industry that thrives on fast-paced innovation, these patchwork regulations are potential blockers.

As technology accelerates, what will this mean for those looking to operate on a global scale?

When regulation becomes a roadblock

I was recently interviewed about experiencing a ride in a Waymo autonomous taxi.

I was in San Francisco, surrounded by autonomous cars gliding through the streets. I thought, “Why not try one?” I opened the App Store—but since my App Store is set to Austria, I couldn’t install the app.

No self-driving ride for me. So I shrugged and moved on.

I was meeting a friend later, and before long, we’re cruising down the streets in one of these driverless wonders. The experience is incredible—comfortable, safe, and, honestly, a little surreal. It even feels safer than when I drive myself.

I tweeted about this simple experience:

The next day, a journalist messaged me in response.

I can’t help but smile at the irony: I am unable to even download the app nor use the car on my own. What’s a daily experience for any SF resident is de facto inaccessible to me, and at the same time worthy of being interviewed about it in Europe.

A growing gap

The technological gap between the U.S. and Europe is becoming more apparent every day.

Recently, Apple launched its latest iOS update, version 18.1, packed with advanced AI features that users worldwide can already enjoy. Meanwhile, European (and Chinese) users will have to wait to access these innovations, thanks to regulatory delays.

Sometime, when I hear about these hold-ups, I get the urge to pack my bags and head where these constraints wouldn’t be as tight.

Of course, these delays exist for a reason. The difference lies in a fundamentally different philosophy between the US and the EU.

Here’s my oversimplified description of the difference:

In the U.S., the approach is to try things, discover problems in the real world, let the market force companies to fix them, and in case it doesn’t happen, leverage the legal system, through mechanisms like class actions.

Privacy is a minor concern, the approach is to ask for forgiveness, not for permission.

In the EU, we adopt the principle of precaution, have stronger protections for privacy and individual rights, and attempt to regulate before deploying innovations. When we eventually fail to consider all possibilities, we give little to no leverage to individuals to force companies on the right path.

As it stands, I don’t think either side is perfect, but I am concerned by the fact that we overestimate our weight, as a continent, and that over time our approach won’t lead to imposing the principle of precaution to all other countries, but instead to be progressively removed from technological progress.

This regulatory divide impacts more than just our day-to-day tech experiences—it shapes the entire tech industry, influencing how companies develop and deploy new technologies worldwide.

Law doesn’t speak technology fluently

In 2016, the EU introduced the GDPR (General Data Protection Regulation).

The aim: enhancing rights over personal data and impose strict obligations on organizations that process such data.

The result: I now have to close pop-ups about cookies every time I click a link.

Of course, part of this is great: the GDPR allows individuals to request access to the data companies hold about them and to ask for its deletion. This significantly improved our data management systems.

But the truth is there have been so many pop-up consent requests in our life that we now just approve everything.

This has shifted us from a situation where companies could exploit our privacy unduly to one where we actively give them the right to do so.

Sometimes we are lucky.

EU regulations imposed the same charging port to all electronic devices, which in turn makes it possible to not include a new charger with each new gizmo, which is a great step forward to reducing waste.

Thanks to that, USB-C is now the universal port worldwide. I am just glad it took long enough for this process that we didn’t make USB-A the universal port… imagine that!

The Product Liability Directive (PLD)

The Product Liability Directive, a 1985 EU regulation on defective products, was just updated. It is practically designed to allow individuals to hold companies accountable in cases where they’ve been harmed by a low-quality product.

It is a directive specifically written so that it cannot be used by companies against each other, nor by private individuals who use products for commercial purposes.

It only applies to individuals in situations where they used to have limited defenses.

Why do they have limited defenses if the European market is so regulated? Usually because they’ve already agreed to lengthy license agreements without reading it.

The real issue lies in that time gap between tech development and regulation—a gray zone where both users and companies can either thrive or falter.

The global expansion dilemma

For all these reasons and more, expanding into highly regulated regions like Europe is no simple decision for tech giants or for startups.

It requires carefully balancing the costs of compliance with the benefits of reaching a global market.

Here’s what makes it so challenging:

• High compliance costs.
  Meeting the EU’s strict regulations comes with high costs. Often, companies must hire specialized legal teams to keep up with evolving rules—a major expense, particularly for startups with limited budgets.
  
• Challenges for startups.
  Startups rely on agility, typically launching new products fast to quickly gather feedback and improve. However, EU regulations require even early releases to meet strict standards for safety and privacy, forcing startups to either slow down to comply or limit their reach to more lenient regions.
  
• The feedback gap.
  Feedback is vital for tech companies, especially for products aiming at a global market. Previously, companies could launch products widely and refine them based on user input. But now, with limited initial releases, many miss out on early feedback from Europe—valuable insights that could help make products more relevant to European users.
  
• Long-term impact on products.
  Products that don’t meet European needs from the start may end up less competitive in the region. This can create a cycle where products lack alignment with local preferences, making future market entry even harder.

The Digital Markets Act (DMA)

Let’s take Apple as an example: to comply with the Digital Markets Act, the company is introducing changes to some of its features and policies.

In particular, Europe now requires Apple to open up its devices to alternative App Stores, instead of just the Apple App Store. As a result, Apple is adjusting some of its products to meet these new rules.

There are three main consequences:

1. EU-only changes: Some features or changes that Apple disagrees with or finds restrictive are likely to be implemented only in Europe. This is because Apple has no legal choice in the EU. However, since these features go against Apple’s usual policies, the company will limit them to Europe only.
2. Global rollout of the good changes: The changes that represent positive improvements to Apple’s products, even if they were not a top priority before, are more likely to be introduced worldwide. For example, even if a feature was created specifically to meet European requirements, if it enhances the product and benefits users, Apple may decide to release it globally.
3. Blocking some features in the EU: recently launched features like Apple Intelligence, or iPhone Mirroring are not available in the EU at launch, or for the foreseeable future.

An interesting take by John Gruber on Daring Fireball is that considering the potential fines for infringing the DMA and Apple’s EU revenue are in the same ballpark, this could simply lead Apple to stop selling their devices, software, and services in the European Union.

Although I think this is presently a very remote possibility, I am evaluating it by looking at the past. And in 2024 it looks like that might be a mistake.

Striking a balance: freedom & accountability

I’d love to see more nuance in regulation—something beyond the typical all-or-nothing approach.

Instead of lumping all tech under the same rules, let’s assess based on real risk. Self-driving cars, for instance, come with serious potential hazards, and sure, I’d want strict oversight there. But if my calendar app loses my dinner reservation? Not exactly grounds for a legal dispute.

The more important point, in my opinion, is that the global expansion of new technologies reduces the perception of the differences between continents and countries, which makes it more likely we can coexist in peace.

There are industries that thrive with free markets, open borders, circulation of goods and people, and ultimately, construction of a common future. Other industries thrive in fragmented markets, closed borders, strict control of circulation, and ultimately, destruction and reconstruction.

I know which ones I prefer to see grow.

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That’s it for today.

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Here on TTL, we dig into practical leadership tips and effective strategies, with a particular focus on tech leadership and managing distributed teams (that’s what I do every day, add me on LinkedIn).

Whether you’re steering a tech startup or leading a remote team, these insights are designed to help you navigate the complexities of modern leadership.

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I also publish on paolo.blog and monochrome.blog

Cheers,