Only a free market in data will save Big Tech from the coming storm
These firms face a bleak future unless individuals are given ownership of their personal information
For such a clever and connected industry, tech firms have proven hopeless at cultivating genuine friendships. They are increasingly hated by all sides of the political spectrum, and so the only question now is how severe the backlash will be, not whether it will happen.
The Left hate the size and profits of Big Tech, want it to pay more in tax, are upset at its employment practices, and are incensed at what they believe, with limited evidence, was its role in Donald Trump’s victory. The Right resent how Twitter is dominated by an elite that is hostile to capitalism, conservatism and Brexit, are angry at the technology establishment’s Left-wing politics, and hate the industry’s cultural conformity. Libertarians, who ordinarily have great respect for entrepreneurs, are terrified about the abolition of privacy, the rise of a surveillance society, and the fact that data could easily fall into the wrong, authoritarian hands; hawks are concerned that mass automation means the West is exposing itself to devastating Russian or Chinese cyber-attacks.
In other words, nobody is happy, except for, by and large, consumers, who continue to lap it all up, buying from Amazon or signing up to Netflix in droves. But as Sadiq Khan’s attack on Uber reminds us, consumers are never a powerful enough constituency when all other groups want to target an industry. We are about to witness an avalanche of crude anti-trust attacks, based on obsolete economic ideas, much higher taxes, often on revenues rather than profits, an economically stupid approach, and a generalised legislative onslaught. Some of this will help; but much will do more harm than good, and merely slow innovation. The Brussels-led assault on Microsoft in the Noughties proved the uselessness of this approach: regulators chased the wrong issues, not realising that another new technology – the internet – would make Microsoft’s power over the desktop irrelevant.
There is a better way, and that is to apply intelligent centre-right thinking to reforming tech. We need to create a real free-market in data: we need more and better capitalism, not less. We must empower individuals, not bureaucrats, by changing the rules of the game. History should be our guide.
Progress through the ages has come from extending, refining and spreading property rights to as many people as possible. Instead of tribal chiefs, kings, the Church or a few noble families owning all of the land, the dispersion of property over the centuries helped create the conditions for an explosion in economic growth, liberalism and democracy.
As ideas became more important, we extended ownership to intellectual property, incentivising inventions and creativity. We are now at another turning point: we live in a data society and yet haven’t started to think about who should own it. Should information about people – what they eat, where they drive, how they vote – be treated as “unowned”, in what John Locke described as the state of nature, ready to be homesteaded by the big tech firms in return for better services or “free” apps? Or is such an approach an outrage akin to the imperialism of yore, when Westerners seized resources that should have been owned by local populations, and employed them as a consolation prize?
If the answer is the latter, the good news is that economists are working on solutions. Luigi Zingales and Guy Rolnik of the University of Chicago, for example, want to make it easier for new social networks to be created, and for users to switch, by changing the ownership of the data and social relationships contained in people’s accounts. In the early days of the mobile phone, numbers were owned by providers, and it was hard for customers to shift to a competitor. They would have to inform all of their contacts of their new number, cumbersome for individuals and lethal for businesses.
All of this changed with mobile phone portability, when consumers were given ownership of their numbers. Our notion of property rights was upgraded: our mobile number is now part of our identity. Zingales and Rolnilk similarly want to reallocate the ownership of people’s “social graph” – our networks and data, including pictures – from Facebook, Twitter or Microsoft’s Linkedin to the individual user. Our digital relationships would be ours, just like our homes, our postal addresses and our phone numbers.
Social media companies would become like telecom operators: users would no longer be locked in, forced either to sign up to whatever terms and conditions are imposed by the company or to quit altogether. It would radically constrain corporate FOLLOW Allister Heath on Twitter @Allisterheath; READ MORE at telegraph.co.uk/ opinion power while avoiding the madness of nationalisation or forcible break-ups.
In a separate paper, economists, including Imanol Ibarra and Jaron Lanier, argue that user data is typically treated as capital, entirely created by and thus owned by firms from observing willing individuals who have signed away their rights to privacy. Yet this “neglects users’ role in creating data”, they explain, reducing incentives for consumers to help produce more of it, and fuelling mistrust. The solution? Classify data at least partly as the product of labour – in other words, make it part-owned by consumers. Data is a collaboration: without consumers, there wouldn’t be any, and ditto without the tech firms.
Gaspard Koenig, of French think tank Génération Libre, goes further still. He believes individuals should own all of the data they disclose about themselves, not the big tech firms that collate and distill it. He wants to give users a choice: they could refuse to hand over any data and instead be asked to pay a fee to use formerly free software, such as an email account; or they could rent their data, in exchange for a regular payment; or go the whole hog and sell it, for a bigger sum. A real market would be created – rather than an automatic trade of data for a free service – and a meaningful price for information would emerge.
The tech world is in crisis, but the answer isn’t more taxes, government meddling and socialism. It’s to create a free-market in data by making us own all of the information that we disclose, and by allowing us to choose whether we want to hand it over to companies and at what price. Radical? Of course, but the alternative – a Corbyn-style neutering of the tech industry – doesn’t bear thinking about.