Careful not to stifle innovation, Newsom hesitates on major tech bills

Gavin Newsom and Marc Benioff walking together

Sept. 30, 2024 3 AM PT

Newsom vetoed a bill that would have placed sweeping restrictions on the artificial intelligence industry to prevent the technology from being misused to conduct cyberattacks on critical infrastructure.
The governor acknowledged that AI safeguards are needed, but said he doesn’t want to hinder California’s role as a high-tech innovator.
Top labor officials worry that AI will replace jobs, and believe Silicon Valley will put profits over people.

SAN FRANCISCO —

Backstage at one of the largest artificial intelligence conferences in the world, Gov. Gavin Newsom listened to two leaders in the field debate opposite views of a high-profile bill on his desk to protect Californians from the technology.

“Honestly, I take advantage of opportunities like this,” Newsom said recounting the exchange later during an interview at the Salesforce conference in San Francisco in mid-September. “I just watched them, and I was like, ‘Here we go. Should I sign it, or should I not?’ Then ‘absolutely,’ ‘absolutely not’ and back and forth.”

The scene offered a peek into Newsom’s deliberations on regulating the tech industry, including an explosion of AI companies, and the forces seeking to influence him during bill-signing season at the state Capitol. The Democratic governor vetoed the AI bill a week after the conference, adding to criticism that he sides too often with Meta, Google and other power players in an industry he’s admired and been friendly with throughout his career.

As a supervisor and then mayor of San Francisco, Newsom had a front-row seat to the tech boom of the 1990s and forged political and personal ties to the titans of a California industry that funnels billions into the state economy. The guest list to his 2008 wedding in Montana included Google founders Larry Page and Sergey Brin, Intel co-founder Gordon Moore and other A-list business types.

He’s also an entrepreneur at heart whose own irritation over a city regulation, which required him to install a mop sink in his carpeted wine shop, partially motivated his interest in government.

Now as governor, Newsom said he seeks to balance his desire to preserve California’s role as the vanguard of technology against his job to shield society from potential harm, particularly around artificial intelligence.

“The approach is that he wants to be at the forefront, that he thinks somehow regulations, even smart regulations, thwart that effort to go fast,” said Lorena Gonzalez, the leader of the California Labor Federation. “His favorite word is ‘innovation.’”

Gonzalez represents labor unions in California that are concerned artificial intelligence will replace jobs. There’s also a distrust of Silicon Valley giants that profit off content produced by other people.

Newsom described his own philosophy on governing tech to a room full of conference attendees during a talk with Salesforce Chief Executive Marc Benioff, the godfather of his oldest child.

“I want to maintain our dominance. I want to maintain our innovation,” Newsom said at Salesforce’s conference, Dreamforce. “At the same time, you feel a deep sense of responsibility to address some of those more extreme concerns that I think many of us have — even the biggest and strongest promoters of this technology have — and that’s a difficult place to land.”

The public also appears torn. Last year, the Pew Research Center said 52% of Americans were more concerned than excited about AI in their daily lives.

Siding with Big Tech

Prompted by slow movement from the federal government, California legislators heeded a call this year to do more to regulate AI.

But there’s a divide about the best way to move forward.

Under Senate Bill 1047, Sen. Scott Wiener (D-San Francisco) sought to put among the first sweeping restrictions on the industry to prevent the technology from being misused to conduct cyberattacks on critical infrastructure.

Proponents, who include Elon Musk and the Center for AI Safety, say that the bill was necessary to prevent catastrophic disasters. Pioneers of artificial intelligence have warned about the danger of AI surpassing human intelligence and losing control over the technology if government fails to act.

The proposal was opposed by some of the largest tech companies in the world, including Meta, which owns and operates Facebook, Instagram, WhatsApp and other products. Facebook and Google collectively spent nearly $800,000 to lobby the Legislature, governor’s office and state agencies on SB 1047 and dozens of other policies from January through the end of June.

ChatGPT maker OpenAI and Democratic congressional leaders, including Rep. Nancy Pelosi (D-San Francisco), expressed concerns that the bill could stifle innovation in California.

Days before he vetoed the bill, Newsom said the legislation “created its own weather system” of interest in California and beyond.

“It’s one of those bills that come across your desk infrequently, where it depends on who the last person on the call was in terms of how persuasive they are,” Newsom said. “It’s divided so many folks.”

Newsom in his veto message said the legislation, while well-intentioned, could give the public a false sense of security about the new, rapidly developing technology.

“SB 1047 does not take into account whether an AI system is deployed in high-risk environments, involves critical decision-making or the use of sensitive data,” Newsom’s veto message stated. “Instead, the bill applies stringent standards to even the most basic functions — so long as a large system deploys it. I do not believe this is the best approach to protecting the public from real threats posed by the technology.”

Perhaps anticipating criticism of the veto, Newsom on Sunday also announced that his administration has enlisted leaders in the field to help the state create workable protections for the deployment of AI, focusing on analyzing its capabilities and risks. Newsom vowed to work with state lawmakers on the issue in the next legislative session.

Teri Olle, director of Economic Security California Action, which co-sponsored SB 1047, said Newsom’s veto forfeits a promising opportunity to put responsible guardrails around AI development.

“The failure of this bill demonstrates the enduring power and influence of the deep pocketed tech industry, driven by the need to maintain the status quo — a hands-off regulatory environment and exponential profit margins,” Olle said in a statement. “The vast majority of Californians, and American voters, want their leaders to prioritize AI safety and don’t trust companies to prioritize safety on their own.”

Many leaders and members of actors guild SAG-AFTRA, including President Fran Drescher, signed a letter urging Newsom to sign SB 1047. On Sunday, SAG-AFTRA said the union will continue to work toward a safer and more ethical AI world.

“While the promise of AI is yet to come, the dangers of AI are already being experienced,” a union spokesperson said in a statement. “To avoid inevitable catastrophes that come with unchecked tech, the time to ensure AI safety through regulation, including accountability and transparency, is urgent.”

Newsom and Democrats in the Legislature also came under fire this year when they shelved a bill that would have required Google and Meta to pay news outlets for distributing their content.

Instead, lawmakers struck a controversial compromise between Google and newspaper publishers that is expected to result in the company and the state spending $250 million over five years to fund programs to research artificial intelligence and support local journalism. The funding is a fraction of the money the companies could have been on the hook for under the bill.

The deal split the newspaper industry. Publishers supported the agreement, while labor unions representing journalists opposed the plan and were not involved in the negotiations. Newsom was a party in the deal and agreed to provide taxpayer dollars to support the journalism initiatives.

The agreement, and the omission of unions at the negotiating table, prompted Gonzalez to publicly state that Newsom is “enamored” with tech.

“It would be helpful to have somebody with as much power as he has to really explore how supporting working people in technology changes, and empowering them, can also coexist with tech changing,” she said of Newsom.

Gonzalez and the powerful Teamsters union have been at odds with the governor over legislation to regulate autonomous trucks.

Newsom vetoed a Teamsters-backed bill last year that would have required a human operator in any vehicle over 10,000 pounds. The union tried a repeat of the bill this year, and the legislation met a similar fate. In his veto message released Saturday, Newsom said he offered several amendments to the bill that were not accepted.

The governor said California must balance the state’s strong worker protection laws with its status as a leader in technological innovation: “We reject that one aim must yield to the other, and our success disproves this false binary.”

The Teamsters released a statement after the veto was announced saying the “vast majority of Californians oppose unregulated, unaccountable driverless cars and trucks on our roads.”

“A regulatory framework that ignores this reality does not benefit the people of California — the millions who want good middle-class jobs and safe streets, the people that our state government is bound by duty to serve. Such a framework only benefits a handful of billionaires in the tech industry,” the union said.

The state released draft regulations last month that could allow for testing of driverless trucks on state highways.

Technology companies and their billionaire chief executives have been some of the most generous donors to Newsom’s campaigns.

More than a half-dozen tech executives and investors gave more than $100,000 each to his campaign against the recall, including former Google Chief Executive Eric Schmidt; Netflix co-founder Reed Hastings; DoorDash co-founders Andy Fang and Stanley Tang; former Yahoo Chief Executive Marissa Mayer; former Twilio Chief Executive Jeffrey Lawson; and Silicon Valley angel investor Ron Conway, among others.

A long-standing interest

In an interview in August, the governor cited his 2013 book, “Citizenville: How to Take the Town Square Digital and Reinvent Government,” as an example of his approach to technology.

The governor begins the book by retelling a story about a visit from the president of Estonia, Toomas Hendrik Ilves, when Newsom was mayor. Newsom writes that he was eager to tell the president about the city’s exciting new tech initiatives, such as paying parking meters with cellphones.

The president was unmoved. Estonia had been doing that for years, as well as paying for parking tickets, property taxes and other government fees. They had free Wi-Fi, too.

Newsom describes the moment as a “wake-up call” to the reality that San Francisco wasn’t on the forefront of technology, but actually lagging behind. He goes on to call government’s delay in implementing new technologies “a big problem” in the book.

Under Newsom, the state has developed guidelines for public agencies to assess and safely use AI, hosted a summit on the topic with Stanford University and UC Berkeley and announced agreements to implement new technologies within government.

Dee Dee Myers, director of the Governor’s Office of Business and Economic Development, described the governor as “congenially imaginative.”

“He grew up in a community where there was a lot of technology and a lot of energy around it, and a lot of belief that you could make these things work,” Myers said. “You could take and create something where it didn’t exist before. He believes that we can harness some of this energy and these ideas to solve problems and to improve the quality of life for people, whether it’s just better regulation for his mop sink or AI that could help us manage our resources better.”

Tussles with the industry

Todd O’Boyle, senior director of technology policy at tech industry group Chamber of Progress, said he doesn’t see Newsom as “too close to the tech community.”

“There have been plenty of issues where tech wishes he might have gone a different direction. I think the reality is that tech is a major industry in the state of California,” O’Boyle said. “The governor is very mindful that a number of his constituents do work in tech, and that a healthy tech sector is great for the California economy and the California budget and critical to paying for California’s social safety net.”

The governor’s aides also reject the suggestion that he’s too slow to regulate.

“He thinks we have to have smart regulations and we have to have a thoughtful process of regulation that balances different interests,” Myers said. “So, I don’t think anybody else in the country would say that California has failed to regulate. That’s not our brand.”

Newsom’s office pointed to legislation he endorsed to protect children from social media.

The governor signed a bill this year to limit the ability of companies to provide “addictive feeds” on applications to minors and to restrict notifications to children’s phones during the school day and at night.

Senate Bill 976 was opposed by the Chamber of Progress, which counts Facebook and Instagram parent company Meta, TikTok owner ByteDance, Amazon, Google and Apple as its members. NetChoice, a national tech trade association, also opposed the bill.

He’s had other tussles with the industry.

Citing violations of the 1st Amendment, NetChoice sued to block a bill Newsom signed in 2022 that sought to require businesses that offer online services to provide privacy protections for children. The governor, who has four children, was angry over the lawsuit and expressed his frustration with tech executives directly for trying to prevent the bill from taking effect.

Newsom’s relationship with Musk, the chief executive of Tesla, founder of SpaceX and executive chairman of X, has also soured as the tech leader shifted to the right and threatened to move his companies to other states in response to California’s policies.

When Musk tweeted a doctored video that altered Vice President Kamala Harris’ voice, giving the false impression that she called herself a “diversity hire,” Newsom pledged to make it illegal to manipulate a voice in an ad.

On stage with Benioff at Dreamforce, Newsom signed into law several bills that seek to stamp out altered content.

“It was just wrong on every level — malicious intent behind these deepfakes impacting elections,” the governor said before pulling out his pen.