Data Is Not the New Oil

(Via WIRED)

“Data is the new oil” is one of those deceptively simple mantras for the modern world. Whether in The New York Times, The Economist, or WIRED, the wildcatting nature of oil exploration, plus the extractive exploitation of a trapped asset, seems like an apt metaphor for the boom in monetized data.

The metaphor has even assumed political implications. Newly installed California governor Gavin Newsom recently proposed an ambitious “data dividend” plan, whereby companies like Facebook or Google would pay their users a fraction of the revenue derived from the users’ data. Facebook cofounder Chris Hughes laid out a similar idea in a Guardian op-ed, and compared it to the Alaskan Permanent Fund, which doles out annual payments to Alaskans based on the state’s petroleum revenue. As in Alaska, the average Google or Facebook user is conceived as standing on a vast substratum of personal data whose extraction they’re entitled to profit from.

But data isn’t the new oil, in almost any metaphorical sense, and it’s supremely unhelpful to perpetuate the analogy. Oil is literally a liquid, fungible, and transportable commodity. The global market is designed to take a barrel of oil from the Ghawar oil field in Saudi Arabia and, as frictionlessly as possible, turn it into a heated apartment in Boston or a moving commuter bus in New York. With data, by contrast, the abstract bits are functionally static.

Let’s consider this Coen brothers–esque thought experiment: Thanks to some eccentric, long-lost uncle, I inherit the Phoenix Beacon, a 50,000-ton, Panamanian-registered crude oil tanker. The thing is filled to the brim with petroleum and the captain awaits my orders. To realize my newfound wealth, I’d call refinery offloading ports and oil-futures brokers in Chicago. After much drama, I’d monetize my inheritance at the prevailing price for West Texas Intermediate light, sweet crude, multiplied by the number of barrels in the ship (minus lots of fees).

Now, let’s consider a different inheritance: Amazon sends a delivery van to my home filled with hard drives containing all its sales and user browsing data for the past year. What do I do with it?

Keep in mind, this trove is worth billions. Accounting rules don’t call (yet) for tech companies to specify their data as a separate asset on the balance sheet, but by any reasonable valuation, Amazon’s purchase data is worth an immense fortune … to Amazon.

That’s because Amazon has built an expansive ecommerce presence, a ruthlessly efficient recommendation and advertising engine, and a mind-bogglingly complex warehouse and fulfillment operation around the data on those hard drives. Ditto Google, Uber, Airbnb, and every other company you’d identify as an “oil field” in this tired metaphor.

Sure, you could maybe sell some of that data—there are companies that would love to know Amazon’s sales data or Google’s search queries or Uber’s routing and pricing history. But here’s the key thing: Those interested outside parties are competitors, and the owners of the data would never in a million years sell it. Uber isn’t selling data to Lyft, Amazon isn’t selling data to Walmart, and Airbnb sure isn’t selling user lists to Hotels.com.

But what about the market in user data we occasionally hear about, such as the sketchy business of network carriers selling your location data to middlemen, who then sell it to disreputable buyers like bounty hunters? Or mobile apps who use your location to provide you some piece of mobile utility, and then sell the latitude and longitude of your phone to other middlemen?

Continua a leggere su WIRED.
Foto via Rainier Ehrardt/Getty Images.