The coming mis-regulation of data

This whole Cambridge Analytica situation is going to get worse. A LOT worse. And it’s not going to happen because of a lack of regulation — it’s going to happen BECAUSE of regulation. Here’s why.

Historically regulation favour incumbents over new entrants, not least because incumbents get a seat at the regulators’ table. And in the case of data it’s easy to see how this plays out. First, the big data owners like FB will assume a penitent stance and offer to work proactively to help the regulators. The lack of regulators’ own in-depth technical knowledge means that from their perspective this will almost be a necessity.

Next, the regulators (together with their industry advisors) will create rules that restrict the ability for companies to get data. This is most likely going to form the first and most obvious regulation. So the regulators will rule that companies must explicitly get permission from users (i.e., opt-in) before they can start capturing or using user data. This is an eminently sensible rule but it has a vicious side-effect. It effectively ensures that companies that ALREADY HAVE the data will develop quasi-monopolies with huge barriers to entry for any new players.

The other interesting lens on this is that companies like FB and GOOG have already built huge businesses with immensely strong user propositions. So even if these companies themselves have to ask us to opt-in, we have little choice but to comply. (How many of us are really going to stop using FB and GOOG just because we don’t want to give them our data? After all FB has already shown it’s power by pressuring 1.2B people to download its Messenger app in less than 3 years.)

So, what’s likely to emerge from upcoming regulation is a further tightening of the stranglehold that FB and GOOG have on data and advertising. No doubt FB and Zuckerberg understand this all too well. Zuck wasn’t lying when he said that he thinks regulation might be a good thing (for him).

Here’s the regulation we SHOULD get but won’t. US gun advocates will understand this. You’re allowed to have the guns. You’re not allowed to hurt people with them. This isn’t a great analogy btw because I don’t actually think people should have guns, but that’s a whole other post. Anyway, you get what I mean.

The big problem in data today is this. With the information that companies know about you they can create ‘segments of 1’. This has been the holy grail in Marketing for at least the last 30 years. But the problem is that when you as a marketer can target each person individually, based on their lifestyle, their circumstances and their fears and beliefs, the power dynamic between you and your target changes dramatically. The marketing message at such fine-grained resolution becomes indistinguishable from manipulation or coercion. THIS is the seminal problem with targeted advertising and the use of data today. Once you get to this point, you’re basically relying on the ethics and morality of a marketer to not brainwash individuals into acting against their own interests. Even though doing so may require that the marketer act against HER own interests.

So, coming back to regulation, to be effective the regulators should impose restrictions on WHAT and HOW data can be used (not just collected). The trouble is that this leads regulation into a domain of infinite variation and complexity. I may not ask for your religious data, for example, but what if I can figure out your religion from an image you’ve shared? I may not use your data explicitly for political ads, but what if I know that sowing division will have the effect of reducing liberal voter turnout and augmenting conservative voter turnout? There are a million different use cases and it is virtually impossible for regulators to police them all but in reality THAT’S what effective consumer protection requires.

So instead of the controls we need, what’s going to happen (the bad news) is that incumbent oligopolies are going to become even more powerful as a result of upcoming regulation. And the even worse news is that the misuse of data is going to become far more common and harmful than one might at first expect from the CA-FB story.

On the flip side, you won’t see as much spam for viagra and fake boobs.