Data is Different

On the value of data

Suppose you give me a $10 note. I take a look at it, then immediately return it, back to you.

Now, what happened during this double transaction?

The supply of $10 notes remains unchanged. The value of the $10 bill is still the same. I am as wealthy as I was before the transaction. And so are you.

Now, suppose you give me your credit card. I take a look at it, then immediately return it, back to you.

Before, only you knew your credit card number, its date of expiry, and its security code. You were the only person who possessed this data.

But afterwards, I also know. The “supply” of credit card data has doubled. First, only you had a copy. But now, I also have a copy. Before, I had no credit card — and hence, I was poor. But now, I can use your number to buy anything I like — I am rich. Before, the card was secure. After, it is compromised. For you, before, it had value. After, it must be cancelled and hence has no value.

Aphorisms on the value of data

Data has value. But it differs from physical valuables (PVs — like a $10 note) in several ways.

• During a transaction, the supply of PVs is conserved. The supply of data multiplies by the number of parties involved. If you give your data to one person, its supply doubles. If you give it to two people it triples. If you share it on the internet, it multiples several million times.
• During a transaction, the value of PVs conserves. The value of data dilutes.
• An individual would be rational to buy a PV if the incremental value they get from the PV exceeds its price. For example, if I consider a shirt more valuable to me than its $10 price tag, it is rational for me to buy the shirt. The same applies to data. I can do useful things with data. That value determines the data’s price. The act of buying is a transaction, and transactions dilute the value of data. Hence, the value of what I can do with the data is likely to diminish by my act of buying it. For example, I might believe that I can buy goodies worth $1000s with your credit card. But our transaction (the fact that I handled it) might influence you to cancel it. And thus its value goes to zero.
• The same applies to selling data. There is value gained, but also value lost by dilution.
• The utility of most PVs is sub-linear. As you own more supply, the incremental value of a unit diminishes. For example, to a pauper, a $10 note could be the difference between life and death by starvation. To a billionaire, it is equal to a strip of lavatory-paper. The utility of data is super-linear. The more data you have, the more incremental value you can get from a unit. For example, you have little or no use for the data which results from you clicking on an Ad on Google, or Facebook. Conversely, these tech giants do have use, because they can combine it with large amounts of similar and dissimilar data.
• A corollary of sub-linear utility is that the natural tendency of most PVs is to dissipate. The natural tendency of data (which has super-linear utility), is to concentrate. Many people have $10 bills. Only a few have horrendous amounts of data.