Gautam Mukunda: AI has no future without credible regulation

A Supreme Court ruling and an outbreak of explosive diarrhea seem to have nothing in common, and certainly nothing to do with artificial intelligence. But they’re a warning to the AI industry about the danger of getting exactly what it wished for.

On June 29, in Trump v. Slaughter, the Supreme Court ruled 6-3 that the president can fire the heads of independent agencies at will. For almost a century such agencies have been shielded from political interference, with presidents only able to fire their leaders for cause. Meanwhile, a Cyclospora outbreak in contaminated iceberg lettuce has sickened more than 11,500 people.

Both are signs of the weakening capabilities of the federal government. When Elon Musk — who leads xAI, a major AI company — ran DOGE, he gutted federal agencies, drove out many of their most experienced people, and left the rest demoralized, with Gallup finding a sharp drop in job satisfaction and a rise in burnout.

Amid the same budget cuts, the network that tracks foodborne illness stopped requiring states to report Cyclospora. Food safety was one of the causes that built the modern regulatory state in the Progressive era. There is no more fitting symbol of that state's decline than its retreat from the job it was created to do.

If the present capability of the government is worrying, its future may be worse. The Supreme Court's ruling gives President Donald Trump and his successors the authority to remove agency heads for any reason, including disagreement with the conclusions their agencies reach. The for-cause protection that once shielded them is now unconstitutional, making it functionally impossible to build a non-partisan agency guided by expertise rather than politics.

A companion rule reaches the rest of the building. In February the Office of Personnel Management completed a policy called Schedule Policy/Career that lets the administration reclassify 50,000 career civil servants in policy-influencing roles to strip their protections from firing. It’s being challenged in court, but if it holds, the technical staffer who finds a favored company's model unsafe could be fired for telling the truth.

But a non-partisan, apolitical, government agency guided by expertise is exactly what AI needs. Some of its leaders already agree and are lobbying for regulation even as others fight it. But whether they realize it or not, the industry requires public trust.

Johns Hopkins University researchers found this spring that even Americans who use AI daily and like it want it regulated, and the Pew Research Center found that about 67% of Americans have little or no confidence in the government to regulate AI effectively. The public wants a referee, and doubts the current one is up to the job.

If the public wants regulation, it will get it eventually. Well-crafted regulations that both earn public trust and help the industry flourish are far more likely to be produced by an apolitical expert agency. And even a bad regime is better than an unstable one, particularly for an industry with AI's capital needs and multi-year horizons. The industry can plan around rules it finds a hindrance, but not around rules that change every four years or at the whim of a president influenced by campaign contributions or personal favors.

The Supreme Court made a partial exception for the Federal Reserve, and only the Federal Reserve, by arguing that it had a long historical tradition of independence. There are, of course, no long traditions associated with AI, so any agency regulating it would end up on the other side of that line. But by the industry's own account, AI could upend the economy or even destroy humanity, which makes regulating it more important than the Fed, not less.

And any regulatory agency would need top-tier talent as well. While the government can't compete with AI companies financially for talent, it can offer currency money can’t buy: mission, prestige, and problems no private employer can hand you. Slaughter and Schedule Policy/Career burn that currency too. Strip them away and nothing draws a $1.5 million researcher into a $150,000 job. It’s already happening. The government's own evaluation body, once the AI Safety Institute, has been renamed the Center for AI Standards and Innovation. With the word safety dropped, its focus shifted to voluntary testing, and much of its technical staff are gone.

The irony is that some of the people dismantling this capability are the ones who will need it. Musk warned that AI carried “the potential of civilization destruction,” then ran the effort that hollowed out the very government that will have to manage it, an effort even the libertarian Cato Institute found saved almost nothing. David Sacks, the venture capitalist who served as the White House AI czar, has led the drive to preempt state regulation and keep the federal touch as light as possible.

AI regulations that vary from state to state would be a nightmare for the industry, but the credibility of that argument depends on federal regulations being seen as good enough to obviate the need for state-level actions.

Americans have seen the consequences of weak and captured regulators too often to take them on faith. Boeing Co. lobbied for a more relaxed FAA, as Bloomberg's Peter Robison documented in Flying Blind, and was rewarded with two 737 MAX crashes, 346 people dead, and travel sites giving people the option to avoid Boeing airplanes. Wall Street pushed for loose regulation and got the 2008 crash, which erased $11 trillion in household wealth, the worst single-year drop the Fed has ever recorded.

The level of public distrust and even hostility to AI is such that there is no long-term future without regulation. That means a strong, expert, insulated regulator is not the enemy of the AI industry. The industry has vast financial resources and enormous political influence. It needs to throw them behind strengthening the federal government's capabilities, not weakening them. The industry needs the public to believe that AI is as safe as eating lettuce used to be.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Gautam Mukunda writes about corporate management and innovation. He teaches leadership at the Yale School of Management and is the author of "Indispensable: When Leaders Really Matter."