Personal Data Is Valuable. Give Pricing Power to the People

Today, people fuel the digital economy with vast streams of data but have virtually no power to demand fair compensation for it. The companies collecting all that data exert full control over the market, raking in billions of dollars without concern for the value of privacy . We need a new market for pricing data, one that can bring balance to this uneven marketplace and establish an economic value for data privacy.

We’ve seen initial discussions on this idea already, with several policymakers and researchers looking for models that would compensate people who share personal data. One such idea, proposed by California Governor Gavin Newsom, would redistribute some of the profits that tech companies reap from user data. Another, from Microsoft’s Jaron Lanier and Glen Weyl, considers the much-needed concept of “data dignity,” which foresees a labor union-like institution that negotiates the terms for data sharing on behalf of end-users. These approaches point toward the much-needed correction of the digital economy’s power imbalances. They provide valuable provocations, but what we ultimately need is a more granular market design that specifies how data value is assessed, secured and traded.

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Olaf Groth is founding CEO of Cambrian Futures and Cambrian Designs, coauthor of Solomon's Code: Humanity in a World of Thinking Machines (2018), Professor of Practice at Hult International Business School, and a Professional Faculty Member at UC Berkeley Haas School of Business. Tobias Straube is associate partner for analysis at Cambrian Futures and VP of operations at Cambrian Designs. Dan Zehr is editor in chief at Cambrian Futures and senior adviser for communications at Cambrian Designs.More than anything an effective data marketplace needs a mechanism that accounts for individual users’ privacy sensibilities, which are rooted in personal experience, identity, and specific context. The value of a piece of data changes dynamically based on one’s life situation and how that bit of data is combined with other data points to yield insights. Location data alone might not mean much for someone walking through Manhattan, but adding their shopping, income, and family history could make those GPS details valuable for targeted advertisers. Some data can be cheap and ubiquitous, some are more valuable and worth negotiation. Some might be so valuable that users will withhold them entirely, such as sensitive health data or details about their children. But if we have learned anything from the accumulation of data breaches and disturbing revelations about privacy infringements , it’s that we will not reach the next stage of digital growth without greater trust. That trust must derive from the ability of people to ensure their privacy. Any real economic value of data will require greater user control over data sharing and a higher degree of data scarcity—scarcity that’s created through limits on the non-transparent and uncontrolled proliferation of data transactions. Achieving these aims and, by extension, building a fair and effective market for de-risked data will require four structural elements: personalized data management; the assignment of data ownership; a transaction infrastructure; and dynamic data pricing.
Personalized data management begins to balance the power between buyers and creator-sellers of data by managing personal information and privacy in digital interactions. This requires a fundamental shift in who defines the terms and conditions of such interactions. Today, data management and privacy controls come in the form of either tedious piecemeal offerings or one-size-fits-all solutions. While privacy settings in operating systems, browsers, apps, and other digital services give users some protection and customization, digital service providers still define the scope of those controls. It’s gotten so bad that it now takes about 900 pages and 34 hours to read the terms and conditions of popular apps on an average smartphone. Nine of every 10 users consent to online terms without reading any of them. Other privacy services give users more control, but with blanket solutions that don’t allow them to tailor inherently subjective and personal privacy preferences. As Michael Borrus, a general partner at XSeed Capital, told us, there is no general-purpose solution for individual privacy management. So, for a data market to succeed, individual data creators—whether enterprises or consumers—will need tools to set their own privacy terms and conditions. These tools will need to be able to insert unique identifiers into all kinds of personal data, track those different types of data across various uses and in real time, and negotiate terms regarding usage by third-party companies.
We need to turn the table and at once force and incentivize digital service providers to accept the user’s privacy policy, not the other way around. A “Personalized Privacy Charter” could provide a master control panel for privacy management and begin to establish degrees of scarcity for different types of data in different combinations while also ensuring those data sets against repossession and litigation before they get traded. Such a charter, when combined with the technical and legal tools described below, will begin to create scarcity for any type of data— whether passively or actively created—providing a necessary precondition to negotiate the data’s value.Of course, no one can sell data if they can’t first establish their data ownership. The most common way to secure ownership of personal data is copyright protection, which provides the owner a bundle of exclusive rights on an original work for the duration of the copyright. However, copyright doesn’t cover certain straightforward facts, such as a person's GPS location, limiting its ability to protect data and create scarcity. While some recent U.S. case law treats data like any other property and provides a basis for protecting someone’s ownership of it, a robust market would need a more effective, modern means.