February 18, 2020
Companies today realize that data is the new gold, the new oil. Through increasingly powerful means — from balloons and drones, to 5G, to fiber cable and LEO (low-Earth orbit) satellites — companies are fighting to control data in order to monetize what the data can do for them. It’s what will provide them with the new currency to compete in a world of Siri, Alexa, big data, artificial intelligence, machine learning and IoT interconnectivity.
One extreme example of this is a recent initiative that Alphabet, via its sister company Sidewalk Labs, has undertaken. It recently contracted with the City of Toronto and the Ontario and Canadian governments to develop a design for a new “smart” city built from the bottom up in a rundown area of Toronto known as Quayside. The city has been designed to be as efficient as possible while also collecting data on every facet of resident’s behaviors. Activities are tracked and data collected — from what’s thrown down “intelligent” garbage chutes to crowdsourcing whether noise from a party disrupts neighbors.
While this may sound Orwellian beyond reason, it’s not unique. China’s Social Credit Score — managed by Tencent and Alibaba — attempts to use collected data to create a “social credit score” that would be utilized much like we use traditional credit scores, even denying college entrance for those that don’t adhere to social norms. Is this worse or just different?
While China tends toward control and the EU (vis-à-vis regulations like its General Data Protection Regulation) toward the paternalistic, in the United States, caveat emptor (let the buyer beware) has traditionally ruled. Look no further than the (now defunct) app Good2Go where two individuals can give their consent to sex on the app to avoid claims later that consent wasn’t given. However, the company owns all the data you provide and you have no recourse. Your (or your children’s) sexual history could be sold to the highest bidder. While there’s no evidence that Good2Go has done that, do you feel comfortable putting that decision in someone else’s hands — particularly those that have a fiduciary responsibility to earn money for their shareholders? To date, little pushback has resulted, at least in the United States.
Much of the debate in the United States around data privacy since the scandal broke misses the fundamental point that companies like Alphabet, Facebook, Apple and others are in business — indeed, have a responsibility to their shareholders — to maximize profits.
Ask yourself, if Facebook couldn’t use your data, would you pay $14.99 a month to have it? Or $8.99, which is closer to what it currently earns off of you? What about for LinkedIn? Instagram? Twitter? Should they be paying you for your data (as the browser BRACE does currently? The point is that you can’t have it both ways.
You can’t get the service for free unless you let these for-profit companies use your data. They have to make money somehow or there never would have been incentive to create the service to begin with.
Good companies that will stand the test of time must find ways to monetize, yet act responsibly in the interest of the public good. Tim Cook at Apple has been an example of someone who has tried to do just that, even while it’s also a bit self-serving. Facebook, Alphabet and many, if not most, technology-based companies make only a small fraction of their earnings from hardware. Apple, meanwhile, is largely a hardware company. Consequently, for Tim Cook to promote data privacy restrictions, albeit in the public interest, has less bearing on his company’s bottom line.
So, what would a winning business model look like? Using data collected from you in order to provide a better service (these days often through AI, ML, IoT and advanced analytics) is considered a win-win. Companies that use collected data to offer value-added services (which can be charged for) are able to both monetize the data and serve the public interest. In the long run, that’s the right thing to do and the winning business model.
However, this is often easier said than done. Shareholder and earnings pressure and the constant drive for growth make it very tempting to use data in ways that may not be in your best interest. Resolving the conflict between the short run incentive to monetize data and doing the right thing in the long run doesn’t have an easy solution or answer.
Would you pay for Facebook, LinkedIn or any social media app you use often as a way to get around giving access to your private data? Do you appreciate the individualized services and offerings that come as a result of sharing your data?
We’re currently in the Wild West of data ownership that will have repercussions for years to come.
Dr. William Putsis is a Professor of Marketing, Economics and Business Strategy at the University of North Carolina-Chapel Hill, and a Faculty Fellow for Executive Programs at Yale University. He is also president and CEO of Chestnut Hill Associates, a strategy consulting firm, and founder of the software company, CADEO Economics, which automates his data modeling-based strategy development processes. His new book is The Carrot and the Stick: Leveraging Strategic Control for Growth (Rotman-UTP Publishing, Feb. 3, 2020). Learn more at putsis.com or chestnuthillconsulting.com.