Could Paying People for Their Data Lead to a Universal Basic Income?
New business models enabled by secure mass micropayments could upend how networks distribute value in exchange for consumer data and redefine our everyday notion of work
The Instagram Problem: Digital Networks and Value Distribution
Back in 2014 or so I was flipping through books in the science & tech section of the bookstore when I came across the following passage:
At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion…today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for a billion dollars in 2012, it employed only thirteen people.
It came from this book — “Who Owns the Future?” by Jaron Lanier.
I came of age in a world where digital progress meant people were going to lose their jobs: increasing automation from robotics and machine learning was making human labor obsolete, a trend which was only going to accelerate with time.
Jaron Lanier, the author quoted above, is a technologist and early pioneer of the generation that built the internet. He’s now bemoaning, very publicly, the unexpected consequences of the technology he and his contemporaries worked to build. Here’s his analysis of the Instagram problem:
Instagram isn’t worth a billion dollars just because those thirteen employees are extraordinary. Instead, its value comes from the millions of users who contribute to the network without being paid for it. Networks need a great number of people to participate in them to generate significant value. But when they have them, only a small number of people get paid. That has the net effect of centralizing wealth and limiting overall economic growth.
He noticed, in other words, that digital networks accrue immense value not by creating it out of thin air, but from pooling the valuable content contributions of millions. The way our digital economy is structured today, none of the members of the crowd who created this value actually capture any of it; instead, all of that value flows into the hands of just a few people who built the platform.
A Radical Solution: Pay People for Their Data
Back as early as 2013, Lanier was proposing shakeups to the digital economy which he hoped might solve this problem. What sounded radical or quixotic five years ago is, startlingly, beginning to sound prescient today. He proposed that
digital networking ought to promote a two-way transaction, in which you benefit, concretely, with real money, as I do. I want digital networking to cause more value from people to be on the books, rather than less…
How? Pay people for information gleaned from them if that information turns out to be valuable. If observation of you yields data that makes it easier for a robot to seem like a natural conversationalist, or for a political campaign to target voters with its message, then you ought to be owed money for the use of that valuable data…
An amazing number of people offer an amazing amount of value over networks. But the lion’s share of wealth now flows to those who aggregate and route those offerings, rather than those who provide the “raw materials.” A new kind of middle class, and a more genuine, growing information economy, could come about if we could break out of the “free information” idea and into a universal micropayment system.
In 2013 this sounded ridiculous. What, was Facebook suddenly going to start paying people for posting cat pictures? The business model of offering free services to the masses and selling their data to advertisers was so well baked into our modern digital system that it seemed a fundamental principle of the internet’s business landscape, the beating heart of our digital economy. Back in 2013 I put the book back on the shelf. It would be about five years before I gave it another thought.
A New Technological Primitive: Secure, Mass Micropayments
Today we still live in a world reeling from the consequences we didn’t expect the internet would have for our economy, our political systems, even our minds. The future as we know it will bring more job losses, continued consolidation of power in the hands of a few behemoth companies, and vastly increasing income inequality. This was the future I grew up with, the future every smart adult I respected told me was coming.
But innovation has a way of undercutting the future we’ve learned to expect. As early as 2008 — brace for it, yes, I’m about to start talking about you-know-what — an unknown individual(s) pseudonymously called Satoshi Nakatomo quietly dropped a new technological and economical primitive into our collective cultural toolbox. The invention of bitcoin set off a wave of financial innovation whose ramifications we are just beginning to grasp — one of these, I argue, has profound consequences for our conception of work and value.
I know that a lot of people don’t see much potential in bitcoin, and are turned off by both the speculative frenzy surrounding the technology and its quasi-religious adherents, who can seem more concerned about political insurrection than actual value creation. People are right to approach the subject with some degree of skepticism. I’m not yet convinced that bitcoin has any intrinsic value,* and I’m grateful for our real political system with its tradeoffs of centralization vs. efficiency (federalism, republican democracy, etc) as opposed to some anarchic algorithmic post-governmental utopia.
Yet, there is something (many things, actually, but let’s focus on just one for the sake of this post) very powerful bitcoin and its spinoffs have given us: a vastly improved mechanism for secure micropayments over the internet. Through immutable trustless ledgers, cryptocurrencies allow anyone anywhere to securely send micropayments of any size to anyone else with an internet connection in minutes to an hour.** No ACH wire with a 3–5 day waiting period, no handing over your routing number to some random third party company. That’s a significant reduction of a real pain point. The result is a new primitive: secure micropayments you can send to anyone anywhere over the internet.
New Tech Enables New Business Models
I believe that new business models enabled by this “secure micropayments” primitive are going to radically reshape the digital economy as we know it today. If this all sounds abstract, let’s look at a few concrete examples of real business models being implemented today that could not have existed under the old guard.
A classic example is the Basic Attention Token (BAT), spearheaded by Brandon Eich, the creator of JavaScript and Mozilla/Firefox. BAT is a digital advertising network whose token is built on top of Ethereum and runs on Brave, a native browser. Users can opt in to being served digital ads while they browse the internet, and in return are rewarded a portion of the ad revenue generated by the platform.
There are many cool things about BAT, including its quantification and tokenization of user attention as a tradable commodity, but I’ll focus on just the business model for its radical departure from today’s world of digital advertising. Brave is promising to pass on as much as 70% of ad revenue directly to users, in exchange for the anonymous use of data quantifying the attention users give to the websites they visit. This business model is directly enabled by the ability to securely broadcast micropayments to an anonymous crowd, a problem which would have been vastly harder before cryptocurrency.
To understand just how consequential a radically different business model for digital advertising could be, let’s take a brief look at the market. Digital ads are expected to surpass 50% of total advertising sales in the U.S. this year, reaching $97 billion. Digital ad spending in the U.S. per user is expected to be $335 in 2018. That number has a CAGR of 13.5%. If 70% of digital ad spending were passed on directly to users, every internet user would earn an additional $234 this year just from browsing the web through their normal behavior.
Digital advertising is the beating heart of two of tech’s biggest companies in the global economy, Google and Facebook. As Lanier noted above, the value of these companies is not created out of thin air but is instead created from routing and aggregating the valuable contributions of millions of people. A business model which accurately rewards users for these contributions would, if adopted, fundamentally attack the wide margins underlying these internet titans’ phenomenal success. And a new platform wielding such a business model may actually have a chance against the titans, since users should be drawn to a platform which compensates them for browsing data with micropayments of actual value. If these platforms do succeed in taking over some territory in the world of digital advertising, they would redistribute value across a much more even plain as compared to the companies they displace; Instagram’s billion dollar valuation, instead of being shared among 13 employees, could have been spread across the millions of users who provided the pictures that actually gave the platform value in the first place.
Beyond Digital Advertising
$234 a year is a substantial amount of money, but not enough to live on. This income stream might not be able to replace traditional work, but it could certainly supplement it. And digital advertising is just one area of the economy in which everyday users of products could contribute value. Lanier proposed just such a system for valuating the user data provided to, for example, machine learning algorithms:
In a world of digital dignity, each individual will be the commercial owner of any data that can be measured from that person’s state or behavior…digital data will be treated as being consistently valuable.
In the event that something a person says or does contributes even minutely to a database that allows, say, a machine language translation algorithm, or a market prediction algorithm, to perform a task, then a nanopayment, proportional both to the degree of contribution and the resultant value, will be due to the person.
These nanopayments will add up, and lead to a new social contract in which people are motivated to contribute to an information economy in ever more substantial ways. This is an idea that takes capitalism more seriously than it has been taken before. A market economy should not just be about “businesses,” but about everyone who contributes value.
Any data which users provide is candy to the innumerable machine learning networks crunching out better models for everything from “is this a cat picture?” to “how can I beat the world champion at Jeopardy?” As long as these data are properly encrypted and anonymized, I believe that users will be open to contributing these data to networks that properly pay them what their data is worth. The resulting information economy would look very different from today’s: it would be far flatter, and distribute value to far more people.
And there’s more: other cryptocurrency-enabled projects are allowing us to much more efficiently distribute usage of the physical products and resources we own, like storage or computing power. There are several promising projects attempting to offer distributed cloud computing, an “Airbnb for computers”: Filecoin aims to let people sell their unused harddrive space, and Golem aims to allow users to sell unused computing power to the cloud. Other imaginative projects allow users to sell resources they might have forgotten they even had. SMS Chain, a crypto startup aiming to let users sell their unused SMS messages to service providers, estimates that selling 500 unused messages a day could net users $75 a month, or $900 annually.
A New Definition of Work
As intelligent software takes on more and more functions, it will require more and more data from users in ways that we cannot yet anticipate today. Now that technology has made it much easier to build platforms in which users who provide this data are compensated for it, I believe we will see a proliferation of such models. Someday your supplemental income stream might come from many different sources, from the driving routes you take to work (your GPS data from Google Maps) to the emails you send and receive (which might improve language processing algorithms). All these could add up to a kind of “universal basic income,” generated entirely by free market forces which adequately compensate users for anonymously giving society access to the valuable data underpinning their everyday consumptive behavior.
Jobs are things that we think about today in monolithic terms. Today people contribute value to society more or less in one single capacity, from 9–5 five days a week. If you’re a doctor, you contribute value to society through medical practice and are compensated for this work, and that pretty much defines who you are and how the economy values what you have to contribute.
I believe that we are headed for a very different conception of work. In the software-mediated future, each of us is going to contribute value to society in innumerable ways, not just one, and we will receive a stream of supplemental income — a “universal basic income” — based on these many contributions. Providing anonymized, encrypted data about our everyday consumptive behavior to better our collective networks and improve intelligent software will combine with more traditional work to give a rich, diverse set of income streams. Jaron Lanier put it best:
Capitalism only works if there are enough successful people to be the customers. A market system can only be sustainable when the accounting is thorough enough to reflect where value comes from…which is another way of saying that an information age middle class must come into being.
“An information age middle class.” Now that’s a future I want to live in.
Notes:
*Some people argue that bitcoin does have intrinsic value for various reasons, including its utility as a payment mechanism in and of itself. For example, if bitcoin is a superior technology compared to cash or wire for paying cross-border remittances, the argument goes, then there will be natural demand for people to use bitcoin for this purpose. I’ll wait this one out for moon or bust.
**The bitcoin network’s ballooning transaction fees and wait times might make it less than ideal for mass micropayment systems, but the core technological innovation is really what I’m referring to. If bitcoin itself has transaction fees that are too high, a bitcoin cousin whose architecture permits much smaller fees to none at all (see proof of stake or inflation based funding models, for example) might serve this purpose.
