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Wednesday, 31 October 2012

New Economic Models for personal data

Excerpt from the book "Value and Worth: Creating New Markets in the Digital Economy" available in January 2013

Link to book at


New Economic Models for personal data

As the digital age progresses further, more of ourselves can now be potentially commodified. I say potentially, because it depends on the firm’s ability to do so. For practices that are measurably visible and direct such as mouse clicks, button presses, it's commodification potential is obvious. Companies like google or Facebook have sophisticated algorithms to calculate how much a recommendation, a share or a like could translate to creating worth to advertisers. However, since digital connectivity also allows us to interact, we are now digitally more visible – we vote, pay, applaud, and commodification of such practices are much more a challenge. With greater digitisation into the contexts of home and buildings, the digital self in future could be seen more transparently through how we create value within digital contexts i.e. the visibility of elements (nouns), system (verbs), structures (rules), agency, affordance and outcomes in contexts (see chapter 4). We already generate much personal data through our financial transactions, tax records, health behaviours and online interactions. There is a growing concern over our ability to control what information we reveal about ourselves over the Internet, and who can access that information. The US Federal Trade Commission has provided a set of guidelines on widely-accepted concepts concerning fair information practices in electronic exchanges called the Fair Information Practice Principles. The problems is that treating data according to what is ‚good practice’ doesn’t reduce individuals reservations about its collection and use. It breeds a culture of mistrust especially when so much of what we need to do digitally results in signing ‚informed consent’ about what firms could do with our data, documents that we cannot humanly and cognitively process in terms of its implication. In addition, injustice may arise because individuals could buy and use digital offerings under conditions of inequality or necessity which suggest that such practrices are coercive, prompted by the necessities of his situation.

How should we understand our personal data in terms of privacy, vulnerability and security for ourselves on one hand and while we wish to have firms create new offerings to serve us in context on the other? How should we think of personal data as protecting us while at the same time creating new markets?

These are the conditions we often face today for online personal data privacy.

We withhold our consent for personal data to be used because we get nothing in return.
We do not wish to participate in online digital activities for fear of being digitally visible as we do not know who holds our data and what they would do with it.
The firm refuses to compensate for use of personal data because it does not know yet what worth (new offerings) could be created.
The firm owns part of our data and could do with it what they wish, as long as they anonymise it. But they cannot share it with another party so there is limited understanding of the data.

One way of thinking about personal data is start from the position that its ownership is our digital labour. Thus, by allowing it to be owned by someone else such as a firm is allowing for its exploitation, regardless of how the firm anonymises it. This does not mean that firms cannot be allowed access, merely that as a point of principle, the information has to be owned by individuals and firms only give the right to access it. The reason this principle should exist is that personal data could then be seen as our labour for commodification just as the way we see our real work in life as labour for commodification.  This creates a market for digital labour of which firms could ‚buy’ and compensate individuals for. Continuing the logic, digital labour i.e. visible practices on line would then become an asset to individuals. By doing so, individuals may not be so restrained in their digital practices, since its a reduction of their assets, but may be more discerning on whom they could share them with, thereby sharing only when there is benefit to themselves. Firms could offer contextual digital offerings based on these assets they can view and compensate accordingly, to the individual as both digital labourer and as customer. Currently, our compensation for personal data is often what is commonly known as 'a free lunch'. So we may get back coupons, discounts, freebies from the commodification of our practices. By liberating personal data into a format where we could store and be accessible to firms, a market for prosumerism exchanges is created where individual choices can be respected even while markets can be created with new business models for compensation and experience.

This could be a solution because the current personal data held by several insitutions is often not shareable under data privacy acts. Thus different firms hold data that is partial, with visibility that is incomplete. This results in digital labour becoming less valuable to firms and commodification becomes a challenge since firms do not yet know how to create worth from digital labour. Access to a more complete visibility of the customer with suitable compensation to digital labour will create better offerings for individuals allow choice, and could stimulate market creation under conditions of fairness and consent.

Personal data may therefore be seen to be not just a privacy or legal issue but that about market exchanges of rights and the external effects that could be obtained from the creation of such a market. Our consent is not merely an ethical dilemma. It is a right not to 'work' and a right therefore not to be digitally visible, but if we decide to be visible we could be rewarded for that just as labour is compensated through work. When a market of personal data generation and use is created, individuals may be more willing to do digital work as a result, or at least, allow for their data to be visible and accessible. By doing so, they are accumulating a potential resource for a commodification opportunity, with the firm playing the role of developing its capability to create worth from that commodification. Without such a market, individuals may withhold consent and firms, being unable to create worth from partial personal data will not pay for it. With no incentive for participation, what economists would term as market failure results. While firms today talk about ‚big data’, data will get even bigger with greater connectivity and the internet-of-things. Fundamentally allowing firms to aggregate data so that they can serve the population through new services while recognising the rights of those who generate the data is the way forward. We will all benefit from better traffic information if we allow our individual travel data to be collected, aggregated and served back to help us with our travel plans but conversations around big data must recognise both the business and service generation from big data as well as the rights of the data generators who contribute their digital labour and a free market to allow more of this to happen is crucial.

When the economy is based on an exchange of ownership, we create unlimited value (or not) from what we buy. Traditional exchange economy for goods gave little visibility to value creation, especially for things. The economic system only measures worth and not the value created. As firms wish to appropriate more revenues from value creation and change their business models particularly in the digital economy, they may give up the ownership model, and instead, look to business models that derive revenues from use or experience e.g. Power by the hour. By not creating worth from value creating activities, the firm opens itself up to other ways of creating worth. Understanding personal data and how digital activities create value in context becomes a stimulus for new business models and new innovative offerings.


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