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Hillary Clinton echoed the thoughts of many when she recently claimed “personal data is the most valuable commodity in the world right now. I mean, it’s far more valuable than any energy source or any other commodity you can think about, and we have given it over.” Clinton and others believe that personal data is extremely valuable and claim consumers are getting a raw deal, arguing that tech companies are greedily grabbing all this data with consumers getting little in exchange. Yet these critics are wrong about the value of an individual’s data, as they confuse the value data in aggregate can generate with the market price buyers will pay for individual data. Unfortunately, too many lawmakers have begun crafting policies stemming from these misguided notions leading to proposals that are bad for consumers and the digital economy.
Clinton may be one of the most prominent figures to make this argument about data, but she is not alone in her belief. Other individuals have called data the “new oil,” as well as the “new gold.” To be sure, this idea that consumers are sitting on a pile of digital gold, and that big tech companies are running off with their data, permeates many privacy debates. These beliefs have led to calls to tax companies based on the revenue they make from consumer data, proposals to give consumers property rights for their data, and arguments that firms should pay consumers for their data.
First, it is important to note that, on the facts, Clinton is simply wrong. An individual's personal data, particularly when compared to commodities, is cheap. For example, the advertising industry pays $0.005 per user profile while gold costs over $1,000 per ounce, crude oil costs over $50 per barrel, and a pound of coffee costs roughly $1 per pound. Moreover, the financial returns for users who do try to sell their data, such as Wired associate editor Gregory Barber, who sold his location data, Apple Health data, and Facebook data, will likely disappoint the users. Barber’s data, for example, was worth approximately 0.3 cents.
There are several reasons why any one consumer’s personal data is so cheap, including that data is non-rivalrous, meaning that multiple parties can use the same data simultaneously. As a result, users don’t “lose” their data when a company gains access to it. Rather, users can still share it with anyone else they like. In contrast, oil and other tangible goods are rival goods. For example, if someone sells a pound of apples from their backyard, they can no longer give that pound of apples to anyone else.
Just as importantly, data is usually more valuable in aggregate. For example, having one computed tomography (CT) scan from one patient does not have significant value to medical researchers. But a dataset such as DeepLeision, a collection of 32,000 CT scans from 4,000 patients published by the U.S. National Institutes of Health, is valuable because it has enough scans to possibly help develop algorithms that can spot lesions. Even then, however, data has decreasing returns. In the DeepLeision dataset, for example, the first 10 CT scans have a different value than the last 10 because each scan improves the accuracy of the algorithms by varying amounts.
Nonetheless, privacy advocates claim that users are getting a bad deal when companies provide services but collect consumer data. But their proposals to help consumers would actually make most consumers worse off. First, their proposals overlook that while some companies sell user data, most companies, such as Facebook and Google, do not sell their users’ data. Instead, these firms receive money from advertisers who pay to reach a particular audience, such as 18-34-year-old men who like hiking. The advertiser only knows that the ad was shown to someone in this category. Second, it should go without saying that policies requiring firms to pay users for their data would force most firms to either switch from free to subscription models or increase the price of services. Yet only 27 percent of Internet users want Internet companies to collect less of their data if it means paying a monthly subscription fee. Lastly, Google and Facebook earned roughly $29 billion in combined profits in 2017. If, in order to pay users for their data, the two firms distributed half of their profits equally to their roughly 4.6 billion users, each user would receive less than $5 a year.
It is certainly possible that business models could emerge where people are paid something for their data, either directly or indirectly (e.g., discounts from companies). But consumers and the market should choose whether these go forward and thrive, not government. These facts do not mean lawmakers should do nothing to help consumers in regard to their data. In particular, lawmakers should support policies that promote data portability, which maximizes the utility of data by allowing consumers to give permission to other firms to use their personal data that a separate firm originally collected. This type of policy creates more value for consumers and business. Lawmakers should not, however, create policies that limit options on the Internet by dictating how businesses can earn money and how consumers can access services.