Installation-Phase Incumbents

In the AI Story

The pattern is consistent across revolutions. The canal companies lobbied against railway legislation. The railway companies lobbied against road-building subsidies. The telegraph monopolies lobbied against telephone regulation. The broadcast media lobbied against internet deregulation. In each case, incumbents used their accumulated political influence — lobbying capacity, regulatory relationships, public credibility, campaign contributions — to shape the regulatory environment in ways that protected their existing business models against the new paradigm's creative destruction.

For the AI turning point, installation-phase incumbents include the platform companies that captured the gains of the ICT revolution, the large technology companies developing AI infrastructure, and the professional service firms whose business models depend on the scarcity of human expertise that AI threatens. The lobbying expenditures of these firms in the United States and Europe have increased dramatically since 2023, and the revolving door between regulatory agencies and the industries they regulate continues to spin.

This is not conspiracy. It is the structural dynamic of regulatory capture operating in its characteristic manner: the parties most affected by regulation invest the most in shaping it, and the result is regulation that serves the interests of the regulated as much as the interests of the public. The outcome of the AI turning point depends substantially on whether reformers can counterbalance this structural asymmetry.

Origin

The incumbent-reformer contest is a recurring feature of Perez's framework, documented across all five surges. Her analysis draws on the public choice tradition and on empirical studies of regulatory capture.

Key Ideas

Legitimate interests, structural consequence. Incumbents are rational actors whose collective influence determines the turning point's outcome.

Regulatory capture. The parties most affected by regulation invest the most in shaping it.

Supply-side vulnerability. Regulation that directly affects AI industry competition attracts the most intense lobbying and is most susceptible to capture.

Historical pattern. Every previous turning point featured this contest; outcomes varied based on the strength of reformer coalitions.

AI's incumbents. Platform companies, large AI developers, professional services firms, and legacy enterprises whose models depend on expertise scarcity.

Debates & Critiques

Whether installation-phase incumbents should be treated as a coherent political force or as a fragmented set of competing interests is contested. Some analysts argue that internal divisions among incumbents create opportunities for reform coalitions. Others argue that shared interests in protecting the installation-phase distribution of gains produce effective political coordination despite surface-level competition.