Privacy Is The New Money, Thanks To Big DataPublication Date: April 20, 2016 6 minute read
The Apple/FBI showdown was the recent installment in an unfolding legal battle over privacy protection. Beginning with the Snowden revelations, it is widely thought that the major threat to our privacy in the digital era comes from the power of Big Government to access personal information stored in devices and websites. As this debate rages, we are losing sight of the other enterprise of personal data collection—known as “Big Data”—which is subject to less popular interest, but is far grander in scope, involves higher stakes and numerous ongoing legal battles.
The FBI or NSA data collection is Small Data. It focuses on meta-data or on few targeted individuals under investigation. In contrast, Big Data business is really big. I am talking about the collection of personal data by websites, mobile apps, retailers, insurance companies – any commercial entity that receives information from people. In the old brick-and-mortar world, firms had Pendaflex files about their customers, neatly tucked away in file cabinets. If you walked into a supermarket or bookstore and browsed the shelves, there would be no record of this activity. In the digital world, people leave their prints everywhere. The sum of our activities – where we browse, shop, or drive; what we read, eat, or own; who we chat with, like or love – is collected, neatly organized by algorithms, smartly analyzed by sophisticated software, and used or sold primarily for marketing purposes. It does not decay or gather dust, and it is never forgotten.
Is this a threat to our privacy? At one level, absolutely. Surely, if the occasional collection of (much less) data by government is worrisome, the rich harvesting of every shred of information about our existence by ruthless for-profit companies not subject to any public-interest scrutiny should be of much greater concern. Privacy regulation in Europe is indeed motivated by the worry that Big Data is the new Big Brother.
Indifference to Big Data collection
But people seem indifferent to Big Data collection. They share personal information on web platforms, knowing full well that it is collected by websites. Even more striking is how little people value potential protections. Economists have found that people are willing to pay at most a few dollars to prevent their apps from harvesting data, such as the content of their text messages, stored on their smartphones. People do say that they prefer their computer search histories to be discrete, but they are not willing to spend any money do so: only 16% of respondents in another study were willing to spend half-a-penny per search to make it private. Even the arguably most invasive data practice—Gmail’s scanning of the entire texts of people’s emails—is hardly troubling: a new study at the University of Chicago found that only a small minority of users are willing to pay more than $15 per year to stop this privacy invasion.
Upon further reflection, it is not quite surprising that Americans are nonchalant with respect to aggressive collection of their personal information. What is the harm? It might be creepy that websites know so much about us, but even the impertinent ad that this information allows them to tailor takes only a click to discard. Truly embarrassing or offensive uses of Big Data are rare, as are data security glitches. Websites dealing with the most sensitive information—adult sites and cloud services—are the most protective of their clientele’s privacy and do very little, if any, data sharing.
Not only is there no harm, there are also significant benefits to Big Data. In the digital economy, our personal information is the New Money to pay for services. Just a few years ago we bought car GPS devices and paid $200. Now Google Maps and Waze are free. Or, so we might think. Actually, we pay by giving them access to valuable data—our geo locations. With such knowledge, they can improve the functionality and convenience of the app, and, yes, sell real time ads for the nearest Dunkin Donuts. We don’t pay old money to use Facebook, Google search, CNET, or Forbes.com. Instead, each of these websites competes for our New Money currency—collecting mountains of information about us when we use their services, and commercializing their databases.
The Grand Bargain
I call this the Grand Bargain in digital marketplace. Free services in return for personal information. This exchange is largely good news for consumers. Most people don’t value their New Money currency much and therefore don’t mind paying with their data. The ticklish few—those who are more fussy about their privacy or have things to hide—can change the settings to turn off “dataveillance” or buy anonymizing services for less than $100 per year. There is no market failure in the Big Data sector and no proven need for protective regulation.
Nevertheless, there are threats to this Grand Bargain. The FCC added new rules this week that impose modest obstacles to Big Data, but they only apply to phone and cable companies, not to the rest of the internet. The main threat to the Grand Bargain comes from a procession of class actions against the most successful websites, alleging violations of privacy statutes, and seeking astronomical damages. One lawsuit claimed that Gmail was violating the federal Wiretap act by scanning emails. It failed due to technicalities, but if successful it could have exposed Google to liability of up to $9 trillion! Another cluster of lawsuits, still very much alive, complain that by using face recognition software, websites like Facebook and others are violating Illinois law. With statutory damages of $5000 per violation, Facebook may face liability of over $30 billion.
Unsurprisingly, none of these lawsuits demonstrate any actual injury. They are triggered, not by distressed consumers seeking redress for real anguish, but rather with lawyers combing through statutes to find a rule that is arguably violated and expensively compensated.
It would be a shame if, in the pretense of consumer protection, the law would drive the market to change the Grand Bargain. Consumers are happy to use their privacy as the New Money, and they are getting good value for it. Waving the class action sword, the “privacy protection” movement, could take away this popular currency.
The preceding is republished on TAP with permission by its author, Omri Ben-Shahar, law professor and Kearney Director of the Coase-Sandor Institute for Law and Economics at the University of Chicago Law School. “Privacy Is The New Money, Thanks To Big Data” was originally published April 1, 2016 in Forbes.