The mystery of ‘data capitalism’

I have been a book reviewer for Business Standardfor nearly five years, reviewing books across the spectrum from economics to political biographies and sports. So when BSsent me a book titled Reinventing Capitalism in the Age of Big Data for review, I thought the timing could not have been better, given my recent appointment as the chairman of data analytics for the Congress.

A book whose title promised to explain how traditional economic theory will be upended by data sounded mouth-watering. And when I browsed through the pages before beginning the book, the authors’ declaration that Lewis Branscomb’s advice “Don’t tell me what I already know” was their guiding principle in writing this book made it sound even more delicious. I dived right into the book. Sixty jargon-filled pages later, I found myself struggling, both to finish the book and with disappointment after all the build-up.

Big Data as a phrase owes its origins to computer scientist, John Mashey who coined it in 1990, according to The New York Times. Over the past three decades, it has evolved into one of the most-used but perhaps least understood jargons of the modern era. From this book, I was hoping to get a simplistic understanding of “Big Data” and its ramifications. Sadly, it turned out to be yet another large contributor to the growing jargon store of the field of “Big Data”.

The book’s central theme is that traditional markets based on money and price are now being replaced by data and information, which will make markets more efficient. This argument is a bit puzzling since “price” as understood by economists for centuries has always been about information and data. Price is the market’s mechanism to encapsulate a lot of information into one transactional number, which is precisely the beauty of markets and capitalism. But the authors claim that “price-based markets are the established orthodoxy and condensing countless dimensions of information into a single figure is hardly the right choice for the information age”. Apparently, “recent confluence of advances in data-handling is finally enabling us to leave behind the limitations of money and price and embrace data-richness on markets”. It is anybody’s guess what the authors mean by this concoction of words and how this “new” market will look sans “price”.

The authors coin a term “data-rich markets” to mean markets that are now inundated with massive amounts of data and information. They then postulate that such “data-rich markets will greatly reduce irrational decision making that lead to crazy stock markets”. Markets have exhibited irrational behaviour from the Dutch tulip bubble of 1630s to the subprime crisis of 2008. That is, markets have been irrational from the pre-telegraph information dark ages to the post-internet era of data and information. The authors’ argument that somehow their “data-rich markets” will remove market irrationality is quite bizarre. Surely, the 2000s were more “data-rich” than the 1630s?

The book begins with a chapter curiously titled “Communicative Coordination” that illustrates the human pyramid tradition of castells of Catalonia which the authors cite as an example of advanced human coordination, similar to our dahi-handi human pyramids of Mumbai. The book cites this example to illustrate how far we have come with advances in communication technologies that help humans coordinate better and faster. There is also the clichéd mobile phones’ impact on Kerala fishermen example to cite advances in information technology and its impact on markets. Advances in data processing, communications and machine learning have been a consistent hallmark of human endeavour over the past several centuries. The book vastly exaggerates the current era of advancement and does not clearly articulate how it will change the very idea of capitalism. Instead, it states “when artificial intelligence and Big Data meet the social reality of human coordination, we can become more sustainable”.

The book swerves from economic theory to technology advances to business management and venture capital with various examples from each. But it is difficult for the reader to find a thread that weaves all these disparate ideas together except for this one idea of a “data-rich” market. It makes tall claims about a new kind of capitalism called “data capitalism” which ostensibly will disrupt traditional notions of price, scale efficiencies of mass production and money-induced markets. But it is unclear what the authors exactly mean by “data capitalism” and how it will be different from traditional markets. In other words, why will “data-rich” markets not just be another step to greater market efficiency as it has been through centuries but instead lend itself to an entirely new economic construct of markets based on data without money and price?

The book is a thorough click-bait with its seductive title and a hyperbolic back cover that screams “Capitalism is dying. Profits soar while inequality rises and innovation stalls. Something has to give”. It is big on ideas, short on clarity and simplicity and filled with jargon and clichés. This loaded and inane line from the book’s last few pages sums up the tone: “Humanity’s future is going to be one of knowledge and insight — if we want it to be.”

REINVENTING CAPITALISM IN THE AGE OF BIG DATA Viktor Mayer-Schonberger and Thomas Ramge

Hachette

273 pages; ~599