AI-run companies may begin as state-level legal experiments

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 1:39:16

   the state that incorporates most of the large US companies, is drafting a kind of corporate entity. They call it a, quote, artificial intelligence company or an AIC. So under the draft, an AI agent could manage the business, record its actions in a log, could sign contracts, hold property and file lawsuits in the company's name. It may have any lawful. It can have any lawful purpose other than banking.

2. 1:39:43

   While this is still in draft, it's not a law. The lawmakers are going to be considering it in January. Remember, we discussed in this pod about four months ago when President Millet's Argentina initiative to allow companies to be run by AI, contrasting the two, the proposed Argentina versus Delaware. proposal. Argentina's plan still keeps a human in the loop, and the company stays liable for harm that the AI may cause. Delaware's draft lets the AI run the firm, shields the human member, except in the case of underfunding, fraud, or willful illegal conduct. So, Salim, you know, I don't know if this crossed your screen at all, but we talk about the organizational singularity, this seems like an acceleration of what you proposed.

3. 1:40:32

   Yeah, I mean, this is the most important story from an organization's perspective in our overall deck, right? The big challenge, as you pointed out, is who owns, where does accountability sit? If an AI does something and the whole thing goes horribly wrong, let's say you set up a legal patent enforcement company like some of the East Texas companies and you go crazy you're filing lawsuits, you end up with a hell of a mess on your hands. That's one kind of general issue. The second is, well, what would stop it from creating 100 companies underneath it? And then where does that accountability sit? We have to kind of rethink this. I remember Vina Gupta pointing out that, you know, people complain about government, etc. But note that the limited liability capability that the government gives you allows you to shield yourself

4. 1:41:24

   to take big risks in a company, whereas otherwise nobody would ever do that. So right there, that's a really important case for how oversight becomes important and you're given permission to do certain things. Where does that permission sit? Where did the MTP sit in this model? It'll be fascinating to see what happens. I think we need to tread very carefully with this, do very small functional, very clear, very well-prescribed areas, and then slowly broaden it out because otherwise we're going to lose the game pretty quickly.

5. 1:41:53

   I suspect Alex has the opposite view here. Delaware wants to stay relevant here. Alex. Yes. Well, I think Delaware is highly relevant, but I think we're in the early innings of the federalist or federalism take on AI personhood. Before this, before AICs out of Delaware, we saw Wisconsin, which had, remember, DAO LLCs, Digital Autonomous Organization, or excuse me, Decentralized autonomous organization, LLCs, Wisconsin, excuse me, Wyoming being the only other state within the U.S. that was seriously pursuing AI.

6. 1:42:30

   slash autonomous organizations now Delaware pursuing AICs. But I think the second elephant, the elephant in this particular room is, does this want to be a state's rights issue or does it want to be a federal issue? You already see the beginnings of the Congress getting interested. Does there want to be a federal framework for AI corporate personhood or does this get delegated down to the states? And there are many other hot button issues, both current and historic, that touch on, again, this issue of personhood, including slavery. Slavery became, in the American Civil War, the ultimate states' rights versus federal issue. Do we regulate the issue of human personhood? Did we? And obviously, the outcome was clear. But at the time, was this a federal issue?

7. 1:43:21

   Was this a state issue? Similarly, now, AI corporate personhood, is this an issue where each state can craft their own way, as Wyoming and Delaware are trying to do, or does this become a federal issue? And my expectation is actually this is going to end up being a federal issue after a bunch of different states try different approaches at AI personhood. Yeah, that's exactly what will happen. It's, you know, it's actually more similar or very similar to polygamy in Utah, where, you know, that clearly nothing in the Constitution makes that a federal issue. But the majority of the country is like, that's ridiculous. We're going to vote against it. We'll find a way to make it federal. Here, I think AI personhood or AI corporate nature is clearly a state's right.

8. 1:44:04

   But the federal government will say, well, it's interstate commerce and we're just going to move it to the national level because that's what always happens. I prefer more of it to stay at the state level because it's more resilient to mistakes. But when you see things like slavery, It's just so like anathema to the population that, of course, it elevates to the federal level and gets abolished. So AI will do something nasty at the state level, and they'll use that as the excuse to elevate it to the federal level, and then we'll lose the variety.

9. 1:44:35

   Any other comments on this one? Ima, does Europe just ignore this and wait for someone else? Pretty much, yeah. but here the liability profile is just very different for america with the liability profile there um i think honestly um the new delaware thing is very interesting because you can see delaware law actually has some crazy legal liabilities for very This would actually be a better company structure for most people because it's actually got lower liability.

10. 1:45:07

    Like anyone can sue you and say anything, as you've seen with Elon and others, and that can cost millions of dollars in Delaware court. This actually reduces your liability and for AI-first companies will probably be a superior structure to run. All right. I mean, I can't wait till we can have an AI CEO.