Turning Oil Into Water
An analogy is a succinct means of transferring understanding from one topic to another.
A well deployed analogy is also a powerful tool in the art of persuasion. A good analogy will win an argument. An excellent analogy could change the course of human history. Excellent orators through time have understood their potential.
Which brings us to the testimony before Congress from the CEO of the biggest of the big data oligopolies.
One of the biggest takeaways from Mark Zuckerberg’s testimony was the surprising lack of depth and sophistication in understanding demonstrated by Senators of Facebook operations specifically, and of the true nature of what we’ll broadly call the “personal data economy”.
Which is why there’s been concern this same group of lawmakers, and Presidential candidates most recently, are making it known they have an appetite for getting tough in regulating the tech industry.
The “data is the new oil” analogy has had its day. While somewhat useful, and good for a headline, it fails to fully capture and explain key dynamics of the modern personal data economy.
For the benefit lawmakers as they consider their regulatory options, and the public for whom any statutory intervention must best serve, we are in need of a new analogy that better transfers an understanding of the true nature of the personal data as a resource.
To bring home the importance of data to our current and future economies, commentators have been searching for a persuasive, evocative analogy. The one they’ve invariably arrived at is oil. Which, on the face of it, makes sense.
It transfers the idea that data, like oil, is an essential input that runs through every aspect of the economy. It also then immediately conveys an appreciation of the power wielded by those big companies who can control data supply, like OPEC countries control the supply of oil.
The oil analogy works because extracting data from people, like taking resources from the earth, is known as mining. It works because improving data, like oil, from a raw state is known as refining.
It also works for those arguing that the big data oligopolies of today, think Facebook, Google, Amazon and friends, should be broken up under antitrust law in the same way Standard Oil was at the start of the 19th century. More on that in a minute.
Similar to oil, the “data is water” analogy transfers the same idea that data is an essential input that runs through every aspect of the economy.
But in lots of other ways personal data is nothing like oil. It behaves much more like water as it moves through the traditional water cycle. In the way it is created, stored and the limits of its economic potential.
Let’s first make this analogy more real by applying the personal data economy to the water cycle, where water is personal data and the landscape is the internet.
The big data oligopolies like Facebook, Google and Amazon occupy the highlands. They’re defined, more than anything else, by the vast dams they build for our personal data, designed to store as much of your information as possible for their own exclusive use. They’re also known for expanding as far as possible the data catchment that flows into their dam. Witness the race into our homes by Google and Amazon with their virtual assistants.
Everyone else lives downstream, under the shadow of these dam walls. That’s all of their present and future competitors. That’s also you and me and the great sea of users, the source of the data and value that they store. Everyone downstream makes do with the trickle of data that we capture ourselves or the bare minimum of data the big tech firms are required to release.
The most important thing to understand about the economics of our personal data is that it’s perishable. The longer our data languishes in a vast dam, the more if its value evaporates into thin air. It represents us at a point in time, but we change and so data quickly becomes obsolete. Storing it for any amount of time is counter productive.
Plus, big data oligopolies are only ever applying our data to a very narrow range of purposes. They are limited, by their own capacities and priorities, in what they seek to do with our data. We can and should be doing more with our own personal data. Extracting more value from it. And this value that can only be imagined and realised with access to it.
For the full value of our personal data to be realised it must be allowed to flow. And to flow quickly. From the headwaters high in the mountains to the sea and around the full cycle again. As it goes being absorbed, transformed in creating new value, and released again for someone else to utilise.
And this is where we come back to regulation and the question of how to squeeze the most value from our personal data.
Antitrust, or better known in many countries as competition law, promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.
The instruments available to regulators in enforcing competition law are many and include outlawing predatory prices, collusion and cartels, and prohibiting mergers that would likely create create a monopoly. Arguably the most hefty and blunt instrument of all is breaking up a company that has already created its own monopoly into several smaller competitors.
The breaking up of the US oil company Standard Oil is the prime example of the consequences of applying this most blunt of instruments.
One of the world’s first multinational organisations, Standard Oil came to dominate the industries it operated in through acquisition, vertical integration and an aggressive pricing strategy. That is until 1911, when the US Supreme Court ruled it was an illegal monopoly.
Aside from making its founders incredibly wealthy, including the famous industrialist turned philanthropist John D Rockefeller, it’s arguable whether the forced break-up of Standard Oil into 34 smaller companies did much at all for competition. Its successors ExxonMobile and Chevron remain two of the largest companies in their industry.
It would appear the effect of breaking the large dam wall of Standard Oil meant the creation of a multitude of lesser dams immediately downstream.
It’s not clear then that breaking up Facebook or Google for instance would achieve a great deal. The role they play in aggregating personal data is itself valuable. Breaking the company up and with it splitting our data into separate pools may only make it harder for us to access it.
So let’s think about personal data as water rather than oil, and big tech companies as catchments and dams rather than oil wells and barrels.
Let’s also understand personal data can act in the same way as water within the water cycle. The economy will thrive when data is allowed to flow, just as the environment thrives where water is allowed to flow.
And as noted above, we should also recognise the important and valuable role big tech firms play in this cycle, collecting and organising our data.
Our approach to regulating big tech shouldn’t be punitive, creating a liability for those companies who deal with our data. Not rewarding them for their role will likely lead to less and lower quality personal data being available downstream. And that’s not in anyone’s interest.
Our approach to regulating big tech should maximise the volume, velocity and quality of data flowing through the economy. But crucially, this must be balanced against maximising the privacy and rights of the individual.
Lastly, our approach to regulating big tech should not focus on regulating big tech at all. It should not seek to determine the extent of their catchments or the size of dam walls.
Richard Shannon is a data ethicist who publishes original thought pieces on the personal data economy and our personal data rights. He is also a digital media entrepreneur. His startup Worldview Exchange is built to empower people with more control over the data they create while engaging with news and current affairs.
Turning Oil Into Water
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