EmergingTechs Nanotechnology, Synthetic Biology, and Geoengineering in the Governance Eye

The second annual Governance of Emerging Technologies conference held in Phoenix AZ May 27-29, 2014 discussed a variety of governance (regulation), legal, and ethical aspects of three areas of emerging technology: nanotechnology, synthetic biology, and geoengineering (climate management).

The prevailing attitude in nanotechnology is much like that in artificial intelligence, “no new news” and some degree of weariness after having experienced a few hype-bust cycles, coupled with the invisibility frontier. The invisibility frontier is when an exciting emerging technology becomes so pervasive and widely-deployed that it becomes invisible. There are numerous nanotechnology implementations in a range of fields including materials, computing, structures, nanoparticles, and new methods, similar to the way artificial intelligence deployments are also widely in use but ‘invisible’ in fraud detection, ATM machine operation, data management algorithms, and traffic coordination.

Perhaps the biggest moment of clarity was that different groups of people with different value systems, cultures, and ideals are coming together with more frequency than historically to solve problems. The locus of international interaction is no longer primarily geopolitics, but shifting to be much more one of collaboration between smaller groups in specific contexts who are inventing models for sharing knowledge that simultaneously reconfigure and extend it to different perspectives and value systems.

Key challenge of our era: health and preventive medicine

Delivering health care and keeping populations healthy is a key problem of the current era. Health expenditures currently comprise 17% of U.S. GDP and are growing; simultaneously health in the U.S. is in decline, with a new CDC report estimating that by 2030, 42% of American adults will be obese, compared to 34% today and 11% will be severely obese, compared to 6% today.

The Realization of Preventive Medicine
A key part of addressing health challenges is the realization of preventive medicine. Preventive medicine and health maintenance consist of identifying and managing conditions in the 80% of their life cycle before they become clinical, ideally avoiding clinical onset. Workable models for the execution of preventive medicine need to be developed. By definition, a broader ecosystem than the traditional medical establishment will be participating in all steps of the value chain ranging from health research to clinical delivery. More flexible regulatory models are needed that preserve the core ethical principles of the traditional models, but are geared towards the internet era and an expanded notion of health and health maintenance with a larger ecosystem of service providers and participants. The payments ecosystem needs to adapt in parallel, allowing for a wider range of payment mechanisms including out-of-pocket payments, H.S.A. dollars, patient advocacy group funding, and traditional (and increasingly diminishing) insurance payments.

Unregulated stock exchanges in Second Life

A variety of unregulated economic activity has been occurring in the virtual world Second Life. In-world banks sprang up a few years ago and have experienced considerable volatility, mostly closing and reorganizing, for example the high profile collapse of Brazil-based Ginko Financial in September 2007. Some banks have extended their activities into in-world securities. Though eventually repealed in real life, Glass-Steagall provisions could be helpful in preventing conflicts in developing virtual world economies.

There are at least three stock exchanges currently operating in Second Life, the SL Capital Exchange (physically based in Syracuse NY, USA) with 20 listed companies, the World Stock Exchange (physically based in Australia) with 15 listed companies and the recently launched Ancapex (physically based in New Hampshire, USA) with three listed companies. There is even a Second Life Exchange Commission to provide standards of performance, operations and ethics for in-world market participants.

Listed companies have not provided detailed financial statements (much less third-party audited financial statements), have not indicated a dividend policy and do not have RL (real life) professional CFO/CPA personnel. A prospectus is sometimes provided (example) and the RL's CEO name and location may be optionally provided.

Nonexempt issuance
Considering offering and purchasing activity in the U.S., the stocks do not appear to qualify for any U.S. securities registration exemptions. The only nod to RL securities laws is a disclosure at SL Capex, claiming that the securities are a fictitious simulation, however given the easy conversion of Linden$ to USD and legal precedent in this situation, it is likely that the Second Life activity would be deemed securities issuance.

Are the SEC in the U.S. and other corresponding national securities regulators likely to take an interest or is the issuance too small, the venue too novel and the cross border challenges too great? If there is enough $ value of harm incurred by investors, an investor could file a complaint. But to whom? To securities authorities in their country, to Linden Lab, to the securities regulator of the exchange or listed company, to the Second Life Business Bureau or other in-world adjudication bodies?

While creating virtual world analogs to those in the physical world is to some degree laudable, the attempts might be ultimately more successful by incorporating a greater balance of physical world regulation and protection mechanisms to build a sustainable ecosystem.

Sox Compliance: automated corporations next?

US public companies are struggling to implement the 2002 Sarbanes Oxley Act which is designed to protect shareholders and improve company internal controls and responsibilities in the wake of the Enron, WorldCom and other corporate scandals and malfeasance that hallmarked the early 2000s.

On the surface, Sox compliance is about complying with requirements to store records of business activity for five years. Less ostensibly, Sox is about the significant ongoing process of turning abstract perceptions of strategy, risk, security and control into measurable definitive processes that can be tracked over time. Companies may spend up to 2% of revenues to become compliant in year one, and to stay compliant, are hiring additional finance officers and staff. Accounting and consulting firms are enjoying a boom of engagements to aid firms in meeting compliance deadlines. Maintaining compliance is a moving target, it means having a company's accounting, finance, IT systems and other internal controls and security keep pace with the dynamism of the business.

To some degree, Sox sounds wasteful, bureaucratic, artificial and innovation-stifling, and it is not clear that it will resolve and prevent corporate abuse. Are formerly competitive US companies becoming more like the regulation-burdened enterprises of Europe? However, when seen with a slightly different frame, Sox may actually be quite helpful. Companies are developing a layer of consistent practice across entities and industries. Corporate business execution is becoming more standard and streamlined, paving the way for systems, not people, to administer both compliance and general business functions in the future. Greater standardization and clarity also facilitates process improvement as a next step.

Since Sox is so recent a corporate phenomenon and standardized physical implementation tools are still being created and refined, primarily by accounting and consulting firms, appropriate software automation solutions are evolving slowly but will presumably play a significant future role. It will be wonderful to start having self-discovering, self-healing, self-securing, self-monitoring, and self-executing software running a lot of the routine human tasks that keep processes moving within corporations. Another added benefit of the Sox compliance process is that humans are getting better at specifying and defining and standardizing concepts and tools in more abstract realms like business strategy and corporate risk.