Is data the new oil? And could that be a good thing?
Data is the new oil. So claimed Clive Humby in 2006, and for a long time that claim was more audacious than true. Sure, data is useful and the lifeblood of the internet but oil is the basis for industrial society and has been since Winston Churchill took over the British Navy before the first World War. As valuable as data is, it is nowhere near as valuable as oil; but there are some signs that the relative value of data could start to catch up.
As discussed in a previous post, social media sites Reddit and Twitter/X has had some issues with data scraping lately, which I think might be the first step towards getting a price for data which could ameliorate the atrocious lack of data protection on the internet. The theory is that when the commons are turned into private land that private property is easier to buy and sell which creates a price and a model for pricing similar commons. But for that to happen there needs to be several parties interested in the commons in the first place.
Internet data has largely been a kind of a monopsony until the advent of Artificial Intelligence (AI). When all the parties interested in buying data are doing so for the same reason — targeted advertising — there is a very limited market for data which the entry of AI developers could solve. Data has until now been sort of an internal input in social media, something you produce to make your advertising solutions better rather than a commodity product to be bought and sold in and of itself. Now that there is a second industry ravenously hungry for data there is more of an incentive to actually figure out what the data itself is worth, rather than what it is worth as an added spice to the social medias’ advertising products.
One the key features of oil is that it is fungible, i.e. it has a wide range of uses. It may well power your car, generate the electricity for your home, and it is the basis for all the plastics in your house. If the AI age its supporters claim to be inevitable actually materialises the digital oil will probably differ from its liquid counterpart in that data isn’t very fungible. The kind of data which Meta and its rivals harvest from users is not what OpenAI and its rivals use to train its large language models, but there are some potential overlaps between the two industries’ data of interest. For example, what a user searches for on a social media is valuable data for advertisers as it can give clues about what the user wants to buy, and it can also be useful AI training data.
Competition in the data space might seem like a bad thing, as more interested parties would presumably increase the value of data and thus create incentives for more companies to try to harvest data more aggressively. That process has largely run its course however. AI’s hunger for data increases the demand for already harvested data, the industrialisation of data harvesting is already complete; AI developers and advertisers both want processed data not raw data. To put it into oil terms, there is now demand for kerosene not just raw oil. Time will tell if the data economy takes off and what further refined products the digital oil could be turned in to.
A world where data is a commodity with a spot price is one where internet users know what their patronage to websites it worth. Even if AI doesn’t create a utopian future it could be key to a better internet by letting people know what their data is worth, and thus social media firms and search engines might be forced to stop ruthlessly exploiting their user bases. One can hope.
If you liked this post you can read my last post about cluster munitions in Ukraine here, or the rest of my writings here. It'd mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!
I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.
Written by Karl Johansson
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Cover photo by Jan-Rune Smenes Reite from Pexels, edited by Karl Johansson
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