Five Myths about Data, Innovation and Growth

The UK Government plans to ‘reform’ data protection law to replace citizen data rights with corporate data rights.

The paper containing its proposals, Data: A New Direction, has 51,503 words. But you only need 58 of them to get to its essence (if you can find them).

The Government, says the paper, intends to “create a limited, exhaustive list of legitimate interests for which organisations can … process personal data without unnecessary recourse to consent.” [Paragraph 57]. One of these ‘legitimate interests’ (where no consent is required) would be “Managing or maintaining a database to ensure that records of individuals are accurate and up to date, and to avoid unnecessary duplication.” [Paragraph 58 (i)]

The “bold new data regime” created by this carefully crafted wrecking amendment (supported by many others) would replace today’s core principle for data protection legislation — that organisations should only process individuals’ data for ‘specified, explicit purposes’ — with a new general corporate right to data surveillance: the right to maintain databases about individuals without their consent.

The Government’s stated reason for these reforms is its wish to “usher in a new golden age of growth and innovation” [Ministerial Foreword] by creating “​​a better balance” between data protection and data use. [Paragraph 59] In other words, it’s based on the idea that there is an unavoidable trade-off between data protection rights and innovation and growth.

This narrative is flawed from start to finish. Everything the Government says it wants to achieve could be achieved without major changes to existing legislation and by enhancing rather than abolishing citizens’ control over their data. The Government wants a ‘new direction’ for personal data, but it has chosen the wrong direction.

This blog, the second in a series prompted by the UK Government’s proposals, shows why — and in doing so also shows why a practical, positive, citizen-empowering alternative to what the Government is suggesting already exists and is ready and waiting to be implemented.

The ‘trade-off’ myth

The thinking behind the Government’s proposals goes something like this:

“1. Personal data can play a huge role in enabling innovation that drives economic growth that benefits both citizens and businesses.

2. But organisations’ ability to access and use this data is being constrained by data protection regulations such as GDPR.

3. Therefore, to unleash personal data’s innovation and growth potential, citizens’ rights need to be curtailed.”

Some other sub-narratives go along with this story. They include the ideas that:

1. The innovations we’re talking about will take the form of ‘products’ that will be sold for money in ‘markets’ (where ‘amount of extra money made’ is the best or only way to measure the resulting ‘growth’)
2. By definition, this innovation and growth will be generated by the private sector.

Let’s start with the sub-narratives first.

Myth #1: ‘Innovation takes the form of products that generate growth by being sold in markets’

This may be true on some occasions. But not always. In our last blog we showed that data’s biggest source of value lies in its reliability — that if you can be confident that the data you are using is correct, you can use it without the costs and risks of making mistakes or having to invest time and effort ensuring that these mistakes are not made.

This being case, the most important form of innovation made possible by data lies in:

• better processes for making reliable data available — not separate ‘products’ …
• primarily relating to the more efficient, effective administration by which stuff gets done — not selling a product, or data, in ‘markets’ …
• resulting in cost reductions — not the ‘new revenue streams’ by which ‘growth’ is usually measured. (In fact, by enabling system-wide reductions in friction, effort, risk and cost, better uses of reliable data could result in a reduction of GDP because it involves less money being spent: GDP measures money spent not real value created.)
• enabled by new data logistics infrastructure that helps people and organisations to get exactly the right (reliable, up-to-date, accurate, complete) data to and from the right parties in the right formats at the right times — not a separate, additional activity called ‘new product development’.

Developing such infrastructure is a hugely important arena of innovation because it supports all the monitoring, decision-making, planning, organising, coordinating, implementation and administration that is needed wherever services are delivered to individuals across all industries and sectors — and it does not need to compromise citizens’ data protection rights in any way.

To the contrary, its best achieved by enhancing them, by providing individuals with their own personal data stores which enable them to collect and share their own data under their control. This approach is already being pursued in the public sector by the Scottish Government with its Scottish Attribute Provider Service (and by Mydex CIC). But it is ignored by the UK Government in its proposed ‘reforms’.

Myth #2: ‘The private sector is the source and driver innovation’

Again, this may be true. But not always.

Developing the infrastructure needed for improved availability of reliable data is an innovation that can (and needs to) take place everywhere: in the private sector and the public sector and the third sector (charities, social enterprises and so on). Yet, by focusing its attention on the private sector the Government’s proposals miss this opportunity.

Myth #3: ‘To innovate better, organisations need access to more data”

As ever, this may be true. But not always.

The story told by ‘Big Data’ enthusiasts is that organisations always need more data, because more data means they can generate better ‘insights’. But if the biggest economic benefits come from better administrative processes using reliable data, the key source of added value is not ‘insights’ made available by ‘more data’, but efficiencies made possible by the ability to access exactly the right data at the right time.

It’s worth exploring this a little more because of all the myths behind the Government’s disastrous proposals, this is probably the biggest one.

The vast majority of organisations that collect and use personal data to provide services do not need ‘more’ data. They need the right data for their specific service.

An online retailer doesn’t need to know your blood type. A doctor doesn’t need to know your bank balance. Whatever the service we are talking about, whether it is diagnosing an illness, assessing eligibility to a loan or a benefit, purchasing a product or ticket online, switching an energy supplier etc, delivery of the service in question depends on the availability of the exact data needed to complete that particular operation.

In such scenarios, which account for the vast majority of real life uses of data, ‘more data’ doesn’t drive value. To the contrary, it drives waste. A product manufacturer who has to handle a wide range of components that are not needed to make its product simply incurs extra unnecessary costs. Likewise, a service provider processing extra data.

Yes, service quality, timeliness and efficiency is compromised if any key data points are missing. To that degree, service providers may need to get hold of data that they don’t currently hold. But the key issue here is not accessing ‘more data’ in general. It is about being able to access the right data, which takes us back to data logistics infrastructure.

In fact, ‘more data’ is only needed in a very small proportion of activities. They boil down to two categories. Activities such as research and the use of training data in AI do indeed need ‘more data’ to get better results, but they don’t need personal data. That’s because they are using data for statistical analysis where anonymised data does the job just as well.

The only industry that always wants more personal data is ad-tech. The inner logic of data-driven advertising targeting flies directly in the face of data protection. To achieve perfect targeting (e.g. to eliminate waste and error in targeted messaging) you need a perfect profile, and to achieve a perfect profile you need to know all there is to know about the individual concerned. People may argue about the social and economic pros and cons of advertising itself. But the ad-tech industry is a different kettle of fish. It is an intrinsically totalitarian project.

Advertising accounts for around 1.5% of all economic activity. Basing a wholesale re-write of 25 years’ worth of regulatory fine-tuning on the needs of a tiny, toxic offshoot is not a sound way forward. But that is what the Government appears to be doing.

Myth #4: “Growth comes from helping organisations to improve their operations”

At first sight, this seems obvious. Who else is going to ‘innovate’?

But what this statement actually articulates is an innovation-constraining organisation-centric assumption. The organisation-centric mindset assumes that the only entities that can (and therefore should) collect and use personal data are organisations — not people themselves, because it is only organisations that do stuff with data. According to this view, individuals are (and always should be) treated as data subjects (as they are called under the GDPR data protection regulations).

Data subjects are not empowered to collect and use their own data for their own purposes. Rather, organisations collect data about these data subjects and use this data for their own organisations’ purposes (which may be benign or malign: see Myth #5 below).

But what would happen if individuals were able to collect and use their own data to manage their lives better (just as organisations collect and use data to manage their operations better)? What would happen if individuals could become the point where information about themselves is aggregated and integrated, directly under their control, rather than having their data dispersed across hundreds of separate and different organisational data silos?

Answer: an explosion of innovation focused on improving citizens’ lives by helping them use their own data to make better decisions and get stuff done in their lives. This is a whole new dimension of innovation — a vast new continent of opportunity — that is still waiting to be explored. And, far from creating a trade-off between data protection rights and innovation and growth, it relies on the opposite: on empowering citizens with their data.

Given this enormous untapped opportunity for innovation and growth, you would think the UK Government would be bending over backwards to promote it. But no. None of its proposals address this opportunity. Instead, they all reinforce the organisation-centric assumption that charges in exactly the opposite direction — of disempowering citizens, minimising their ability to control their own data … and ignoring opportunities for innovation that don’t fit its preconceptions.

Myth #5: “All ‘innovation’ is, by definition, a good thing”

Usually, when people talk about innovation, the unquestioned underlying assumption is that all innovation is a good thing, by definition. This is the assumption behind the UK Government’s proposed reforms.

But it is palpable nonsense. Nuclear bombs were an innovation. Fraudsters are constantly innovating: coming up with new, better ways to con people out of their money. Cambridge Analytica was profoundly innovative. So it is simply not true that all innovations make peoples’ lives better. Many do the exact opposite.

In fact, a recent research review of the history of innovation and entrepreneurship* concluded that throughout history there have been two types of entrepreneurship, resulting in two types of innovation: productive and unproductive/parasitic, with unproductive innovators “seeking to obtain a larger slice of the pie for themselves, rather than increasing the size of the pie for everyone”.

Here is the study’s conclusion:

“How the entrepreneur acts at a given time and place depends heavily on the rules of the game, the reward structure in the economy, that happen to prevail … It is the set of rules and not the supply of entrepreneurs or the nature of their objectives that undergoes significant changes from one period to another.”

By depriving citizens of most of their current rights under data protection law, the UK Government is trying to change ‘the rules of the game’ to recast ‘the reward structure in the economy’ in ways that incentivise the wrong sorts of innovation. What it is proposing would not benefit citizens or bona fide service providers. Instead, it would create a breeding ground for dozens more different types of unproductive, parasitic Cambridge Analyticas.

Conclusion

The rationale behind the UK Government’s data protection ‘reforms’ is flawed, made up of a bundle of myths, misconceptions and mistaken assumptions. It misunderstands what makes personal data valuable in the first place, where the biggest opportunities for innovation and growth lie, and the role data has to play in unleashing these opportunities.

This blog has shown that the route to innovation and growth lies in an entirely different direction to the one assumed by the Government: empowering citizens with personal data store-based data logistics infrastructure that enables the right, reliable data to get to and from the right people at the right times, while keeping citizens in control of their data.

The same infrastructure can enable individuals to aggregate data about themselves that is currently dispersed across hundreds of separate organisational data silos, to create new-to-the-world citizen-centric data assets that act as engines of privacy protecting innovation.

Current data protection law does nothing to hinder these — the right sorts of innovation and growth. What the law does hinder is the collection and use of personal data without individuals’ consent for purposes that individuals have not asked for — i.e. ‘innovative’ Cambridge Analytica-style business models. Government proposals would sweep these protections — now called “impediments” — away, thereby ushering in ‘a new golden age’ of surveillance capitalism.

As far as economy boosting innovation and growth goes, it is a wild goose chase. Another wild goose chase that the Government is pinning excessive hopes on is so-called Artificial Intelligence. That is the subject of our next blog.

Other blogs in this series are:

• Why is Data Valuable? Exposes misconceptions about the value of data, and therefore where its biggest economic potential lies.
• AI: The Emperor’s New Clothes? Shows how the Government’s claims that these ‘reforms’ are needed to promote Artificial Intelligence are without foundation, and based on deep misunderstandings of AI itself.

*The invention of enterprise: entrepreneurship from the ancient Mesopotamia to modern times, Princeton University Press, 2010, edited by David S Landes, Joel Mokyr, & William J Baumol