Why is personal data so valuable?
This is one of a series of blogs exploring Hidden in Plain Sight: The Surprising Economics of Personal Data, the subject of Mydex CIC’s latest White Paper.
Everyone knows data is incredibly valuable. After all, many of today’s biggest, richest and most powerful organisations get their riches and power from their ability to amass and leverage huge amounts of data. But what is it, exactly, that makes data so valuable?
If you ask that question today, it’s surprising how uninformative the resulting discussion is. Very often it quickly veers off on a tangent, to a different question entirely: “how to put a money price on data and create a market for it?”. Or people start repeating cliches such as “data is the new oil” — a cliche that tells us that, economically speaking, data is important without ever actually saying why.
Back to basics
To understand the economic value of personal data we need to go back to basics: to what it enables people and organisations to do.
Why has oil been so economically valuable? Because it’s been a key source of energy that provides the heat, light and motion upon which our civilisation is based. Look around you. Anywhere, everywhere, you’ll see oil at work in the form of heat (and refrigeration), light and motion. We need these things for virtually everything we want to do.
What is data’s equivalent of heat, light and motion? Here is the answer which, strangely, you won’t find anywhere except in this blog; which is almost universally ignored in debates about personal data, resulting in the building of countless castles of speculation that rest on foundations of sand.
Understanding this answer is important because it acts as a sort of filter and North Star that helps us assess the many contradictory claims and arguments that are made about personal data. It helps us distinguish between smoke and mirrors, snake oil and practical realities and opportunities.
Data provides us with reliability and surprise.
Like oil’s heat, light and motion, reliability and surprise lie at the heart of countless things every person and organisation do every day without fail: make decisions and implement them. To make good decisions and to implement them well we need information that is reliable and surprising (e.g. which keeps us up to date with a changing world).
Just how economically important these two contributions of reliability and surprise are, only really becomes apparent when they are absent.
If you know a piece of information is reliable, you can rely on it to make a decision and to implement your decision. If a piece of information tells you something you didn’t know before (a surprise, in other words) that means you can keep your decisions and actions in tune with what’s needed, rather than getting out of kilter.
Now consider what happens if these things are absent. If you are not confident that your information is reliable you have to stop what you are doing to get information you can rely on or check the accuracy of the data you are given. This causes delays and creates extra effort. You also have to invest time and effort, not in doing what you want to do, but in getting the information you need to do what you want to do.
Unreliable data also creates risks of error (resulting in wasted resources) and damage, which also add cost and waste. If you spill milk, you not only waste your milk, you have to spend time and effort clearing it up — time and effort you could spend more productively doing other things.
Surprises are information that is new to you, and which can therefore change how you act. A key part of every organisation’s activities is the methods it uses to gather such new information. Today, for example, forms are ubiquitous. Nowadays we have to fill in a form (in some form) to do anything we want online. These forms gather information that is new to the organisation in question (even though this information might not be new to other parties), and this new information is then used to deliver a service. Without this new information, the service either cannot be delivered, or cannot be delivered as efficiently or effectively as it could.
If you lack access to the right ‘surprises’ your decisions and actions get out of kilter with what’s needed. This means that all the time, money and effort that goes into making these decisions and implementing them risks being wasted.
In other words, without reliable and surprising data everything we do gets burdened with huge amounts of extra work, delays, errors and risks and all the costs associated with them.
FERC busting
Without reliability and surprise huge amounts of time, energy, material resources, effort and money is wasted doing unproductive things. We call this FERC, which stands for Friction, Effort, Risk and Cost.
This is true of both non-personal and personal data but our Paper shows how these two sources of data’s value — reliability and surprise — lie at the heart of new economic revolution revolving around personal data.
Today’s data systems operate with a design flaw at their heart: the siloed, organisation-centric database which is designed to make sure data is NOT shared. This means that reliable, surprising data that could be shared and used to avoid FERC never gets shared. The result is layer upon layer, upon layer, of FERC embedded into our economic system works, suffocating its potential and weighing it down with unnecessary costs.
It affects every individual and household trying to manage their lives, and every service that deals with identifiable individuals, including public administration and services in both central government and local government, financial services (banking, insurance, etc) health and social care, education, charities and the third sector, retail, transport, leisure, media and entertainment. Economically, it is pivotal to the workings of 80% of the economy (basically, ‘services’), affecting every man, woman and child and every household.
The new personal data logistics infrastructure built by Mydex provides a very efficient way for individuals to collect, store and share data about themselves easily, safely and in a way that ensures data protection and privacy. It helps ensure the reliability and surprises that people and organisations need to manage their affairs better, opening up the possibility of a new productivity and innovation miracle along the way.
This is why fixing personal data logistics — in how it is verified, gathered, stored and shared — is one way of fixing the economy itself.
The third blog in this series explains how.
Other blogs in this series are:
