Welcome to the Jungle
Fractionally Legal 28 Keeps Its Eye on the Ball, Looks at How the Law is Shaping the New Internet, and Thanks Uncle Joe
For any of my readers affected by the LA wildfires, let me know if there is anything I can do to help.
I know all the news these days is about the chaos agent and grifter named Trump, whom a slim majority of Americans decided should govern our country. A few of the things that Trump did “on day one” were illegal. For example, you can’t amend the 14th Amendment and end birthright citizenship by Executive Order (really scary stuff), and you can’t direct federal agencies to stop spending money that Congress allocated (“impoundment”). But Trump does not care about that – like any aggressive counsel, he just does things and waits until someone spends the time and money to challenge him. Good lawyers have seen this many times (perhaps even advised clients to behave that way). In my experience, it generally fails because someone does challenge it and wins, but it takes time to get sorted, which is frustrating. For those of you who work in and around the federal government, all I can say is, “welcome to the jungle.”
Most of the news is bad these days, and that is OK because they say the darkest hour is right before the dawn. One of my favorite Dylan lines, from the same song, is “look at the sun, sinking like a ship.” Let’s just hope it's the sun sinking, and not the ship (of state). When the sun sinks on the horizon, it returns the next day. Ships don’t.
It’s the Policy, Stupid
My focus over the next few weeks and months will be policy. What seems like saber-rattling around Greenland, the Panama Canal, retribution, attacking perceived enemies, releasing the January 6 rioters, erasing trans people, showy immigration raids, etc., are actually best seen as jazz hands to hide what's really going on: massive grift and giveaways to already massively privileged Americans. But, as I’ve written about before, we all need to live in reality.
Americans have expressed a preference for results, not process. If a fascist can make eggs cheaper, that seems to be OK with them.
So let's lean into that, again. Those of us who believe in little-d democracy know that it was never about process; it's about results. Democratic institutions create strong policy because they require buy-in and consensus and don’t allow any one group, and their ideas, to dominate. From my perspective, the flaws in our system are that power is too concentrated in selfish people who just don’t care about strong policy because they can buy their way out of bad policy, not that power is too diffuse in ineffective people. But we’re being told it's the opposite. We’re being gaslit.
I think the smart approach is to go back to policy. Does one-party governing by fiat (the MAGA dream) make life in America better? Do they bring down inflation? Do they create more housing? Do they protect Americans’ retirement savings? Do they help keep our kids safe and engaged? Do they keep America’s cities safe? Do they keep America’s communities safe from climate disasters?
And most important to my clients: Do they create a predictable and understandable framework to evaluate legal risk? That last one is a little esoteric, but it's easily explainable. When the government is run by fiat by a small group of people who think they are brilliant (and maybe they are – although in the US, we seem to have a bunch of clowns), they tend to use their perceived or actual brilliance to pick winners and losers. But that is not the role of government. The government’s role is to set the conditions where a competitive market can pick winners and losers. When different rules apply to different people based on politics, the government has failed at its most basic task.
Litigating Our Way to a New Internet
Broadly speaking, the history of the internet has three epochs to date: the early open internet of websites with interesting information chronicled by search engines; the closed internet of privately owned social media platforms with algorithmic gatekeepers; and a brief and failed “Web3” of interoperable, open-sourced, cryptographically secured “blockchains” that never really got off the ground. Other than the 1996 Digital Millennium Copyright Act, which regulated the early internet (badly), we never truly regulated any era. We certainly never regulated social media platforms.
These epochs just sort of happened and were shaped by the market, government enforcement actions, and how private actors interacted with each other – mainly through litigation. What ended up happening is that the second epoch of social media ate the open internet over a 15-year period. The third epoch (crypto/blockchain) lasted about 24 months, ate itself, and pooped out Bitcoin and “meme tokens,” like $TRUMP and $MELANIA. Interesting side note: because we never got around to regulating crypto, investment protection laws that date to 1933 and 1934 apply to $TRUMP and $MELANIA, new "worthless" meme coins explicitly designed to pay tribute to our grifter-in-chief and his wife. I’ll have more to write about that soon.
But I digress. A fourth epoch is currently taking shape: Artificial Intelligence. Every day, more people worldwide are turning to AI to get news and information and perform basic tasks. Call a customer service hotline and, instead of an ill-informed human giving you the runaround, you’ll get an informed AI bot still giving you the runaround. Ask ChatGPT, Claude, or Google Gemini to tell you the news, and it will (try it). This newsletter is proofread by artificial intelligence (so blame the bot, not me, for typos). There are applications in software development, financial services, law, fashion, manufacturing, and just about everything else.
Most AI applications are rudimentary at the moment, but given time, they will mature (early social media sucked, too). Whether AI becomes ubiquitous like social media or flames out like crypto/blockchain is unknowable. My bet is ubiquity. This post is written with the expectation that, over the next five years, AI will touch almost everything and do it well.
Like the other epochs, I doubt we’re going to have any meaningful regulation of Artificial Intelligence.
Rather, Artificial Intelligence will be shaped by rich and powerful people and corporations using it to make themselves richer and more powerful, subject only to restraints placed on them by other rich and powerful people and corporations.
How will these individuals and corporations shape Artificial Intelligence? They’ll use the legal system – or, more precisely, litigation – to get what they want. And we’re already seeing that.
Look at what's happening in the copyright world. Multiple media companies that own copyrights on news and information are suing AI companies for violating their copyrights by, essentially, republishing their work without permission. Wired is keeping track of all these lawsuits, proving, as always, that traditional media (Wired) is indispensable.
The law is pretty unsettled here, and I'll be keeping track of these lawsuits both for this newsletter and my clients. Hopefully, a trend will develop, and I can advise on how to train your AI (I’ve written about it before). As I’ve expressed many times, it’s much harder to advise clients on the law and their risks when private actors are shaping policy rather than the government, but such is the world we live in.
The reason these lawsuits are so contentious and worth watching is that they pit two important considerations against each other: compensating creators versus making information available to everyone. Information wants to be free, but the people creating it don’t want to work for free.
It’s not that simple, however. These days, compensating creators means reinforcing corporate control of creative output because most creative content is owned by big content companies (e.g., The New York Times, News Corp, Disney, Netflix, Warner Bros. Discovery, Condé Nast, Hearst, etc.), and you can’t use it without paying them. On the other hand, making information available to everyone means enriching platform owners who provide information in exchange for personal data and then run massive advertising businesses (and sometimes manipulate the information). Google, Meta, LinkedIn, and TikTok have built enormous businesses by not paying for content. It’s a pretty simple scam: content created by content owners ends up on these platforms, is commented on and regurgitated as “user-generated content,” and all the creators get are some page views (worth fractions of a penny) and the ability to sell subscriptions, which no one buys.
The question is whether AI platforms, like OpenAI, will also crush the content owners – but on steroids. For investors and tech folks, the great promise of AI is that it’s finally going to “free” information by eliminating creators. If AI can write a book or newspaper article, or create a photo-realistic illustration of a current event, why pay an author or photographer – or, more precisely, the company that employed them? Why would anyone visit a content creator’s website or buy a subscription?
Right now, AI companies are striking deals with content owners who will play ball. I assume these lawsuits have depressed the prices AI companies are paying. After all, they can just steal the content and get sued, with a 50-50 chance of winning. Hopefully, these are short-term deals. If content owners prevail and AI companies can’t just use the content without paying, the value of content will obviously increase.
The fight between content owners and AI companies is just a preview of how litigation will shape the next internet epoch. Content owners are protecting their businesses (and employees), and AI companies are building new products that challenge them. If I had to choose a side (and I don’t), I’d side with content creators because I prefer real news created by real people based on real facts.
But the real news is that Artificial Intelligence is coming for every profession, and this litigation process will play out everywhere. Doctors make good money diagnosing medical issues and prescribing treatments, but AI could likely do it just as well. How long before doctors sue to stop AI from doing their work?
In the legal field, we already know AI will handle the grunt work of being a lawyer: drafting agreements, writing briefs, summarizing regulations. Most lawyers do grunt work (and make a good living doing it). Lawyers have a long history of trying to prevent machines from competing with them and claiming that any machine providing legal advice engages in the “unauthorized practice of law.” That happens to be a felony in New York State. Thanks, New York State!
I have no doubt doctors and lawyers will try to keep AI from competing with them. The outcomes of these lawsuits will shape the next internet epoch as much as any regulation.
As a lawyer running a small business, I have many thoughts on how AI will shape my livelihood in the coming years. One thing is certain: like any smart professional, I’m planning for the day when AI can perform many of the tasks I’m paid to do now – and how that will impact my business. I’ll share more thoughts on that soon.
Goodbye, Mr. Biden
I’ll buck the trend a bit and send a big thank you to Joe Biden. He botched the election and left us with this mess, but he is a good person who did a great job holding the country together in a post-Covid world. It’s too early to know how history will judge him, but in the short term, the investments in clean energy and chip manufacturing are real and will impact communities across America. And for what it’s worth, Biden’s commitment to a peaceful transition of power (to one of the most despicable Americans, sadly) is a huge gambit on the resilience of democratic institutions. It seems foolhardy at the moment, but history might judge it differently.
Anyhow, as we’ve all been reminded by the death of Jimmy Carter, who was reviled when he left office and revered when he died, history takes odd twists and turns.
Keep building, keep thinking,
Jesse
Hi, and welcome to my newsletter! I’m Jesse Strauss, Your Fractional General Counsel. I’m a lawyer with a private practice based in New York City, helping clients in the United States and globally with their U.S. legal needs. My expertise spans various areas, including raising funding rounds, employment issues, negotiating master service agreements, intellectual property, compliance, legal process management, and dispute resolution. My focus is on founding and nurturing great companies from seed to exit. Discover more at Your Fractional GC and book a complimentary 30-minute consultation. You can also follow me on Threads @lawyerjesse1977, subscribe to my Substack here (follow me on notes), and follow me on LinkedIn here.
"Welcome to the Jungle" was the exact song that came to mind when thinking about Trump and his actions - thanks for showing me that I'm not the only one who thought that. "From my perspective, the flaws in our system are that power is too concentrated in selfish people who just don’t care about strong policy because they can buy their way out of bad policy, not that power is too diffuse in ineffective people. But we’re being told it's the opposite. We’re being gaslit." - Love this statement, and I completely concur. Thank you for this excellent article!