Saturday, March 9, 2019

Wisdom Of The Week

But data isn’t the new oil, in almost any metaphorical sense, and it’s supremely unhelpful to perpetuate the analogy. Oil is literally a liquid, fungible, and transportable commodity. The global market is designed to take a barrel of oil from the Ghawar oil field in Saudi Arabia and, as frictionlessly as possible, turn it into a heated apartment in Boston or a moving commuter bus in New York. With data, by contrast, the abstract bits are functionally static.

Let’s consider this Coen brothers–esque thought experiment: Thanks to some eccentric, long-lost uncle, I inherit the Phoenix Beacon, a 50,000-ton, Panamanian-registered crude oil tanker. The thing is filled to the brim with petroleum and the captain awaits my orders. To realize my newfound wealth, I’d call refinery offloading ports and oil-futures brokers in Chicago. After much drama, I’d monetize my inheritance at the prevailing price for West Texas Intermediate light, sweet crude, multiplied by the number of barrels in the ship (minus lots of fees).

Now, let’s consider a different inheritance: Amazon sends a delivery van to my home filled with hard drives containing all its sales and user browsing data for the past year. What do I do with it?

Keep in mind, this trove is worth billions. Accounting rules don’t call (yet) for tech companies to specify their data as a separate asset on the balance sheet, but by any reasonable valuation, Amazon’s purchase data is worth an immense fortune … to Amazon.

That’s because Amazon has built an expansive ecommerce presence, a ruthlessly efficient recommendation and advertising engine, and a mind-bogglingly complex warehouse and fulfillment operation around the data on those hard drives. Ditto Google, Uber, Airbnb, and every other company you’d identify as an “oil field” in this tired metaphor.

Sure, you could maybe sell some of that data—there are companies that would love to know Amazon’s sales data or Google’s search queries or Uber’s routing and pricing history. But here’s the key thing: Those interested outside parties are competitors, and the owners of the data would never in a million years sell it. Uber isn’t selling data to Lyft, Amazon isn’t selling data to Walmart, and Airbnb sure isn’t selling user lists to Hotels.com.

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As happened with the CCPA, which was inspired by a wealthy activist’s concerns around Google’s data trove, future legislation will be lobbied by the Googles and Facebooks into aiming, not at them, but at the smaller data players. This will succeed mostly in conveniently solidifying those leaders’ positions. That sounds corrupt and self-serving, and it is. But it’s the right thing for users, whose fears around their data being pimped out are legitimate in the case of third-party brokers but much less so in the case of the first-party apps they actually use.

Ultimately, the majors like Google and Facebook will raise the castle walls around their data (and users) and disclaim any knowledge of data brokering, the “data-as-oil” traders. It’ll be first-party data all around: Publishers, apps, and ecommerce all huddling around their data and user piles, projecting that data externally in data-safe ways if absolutely necessary, but not otherwise.

No, data isn’t the new oil. And it never will be, because the biggest data repositories don’t want it to be.


- No, Data Is Not The New Oil



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