Data Doesn't Need to Be Free, But it Does Need to Have Sex

How do we pay for the services we want to create and use? That is the question. Systems like Twitter, Instagram, Pinterest and all the other services you love are not cheap to build at scale. Grow now and figure out your business model later as the VC funding disappears, like hope, is not a sustainable strategy. If we want new services that stick around we are going to have to figure out a way for them to make money.

I’m going to argue here that a business model that could make money for software companies, while benefiting users, is creating an open market for data. Yes, your data. For sale. On an open market. For anyone to buy. Privacy is dead. Isn’t it time we leverage the death of privacy for our own gain?

The idea is to create an ecosystem around the production, consumption, and exploitation of data so that all the players can get the energy they need to live and prosper.

The proposed model:

  • Data is a valuable resource on which much of the future economy rests.

  • Currently data is a zero-sum game, like iron that can’t be mined, transported, smelted, molded, engineered, or used to build the infrastructure that drives the engines of commerce.

  • This is because data is not a commodity that can be used to build more value in a larger value chain. Data can’t generally be bought or sold on an Open Market. It is not transformed. It is not repurposed. It is not combined with other things to make something new. Data has no multiplier effect while sitting behind high Garden Walls.

  • For data to be a viable material on which to build an economy that generates increasing amounts of wealth:

    • Data must be freely traded.

    • Data must be useful for something other than targeting ads.

The only way to make data valuable in the Adam Smith sense is to make data a marketable product. Data is expensive to keep. Currently advertising is the method of paying services. The only way to make advertising work is to control the UI. Which means that all APIs have to be locked down to capture revenues. Reducing costs won’t change anything really because revenue will still be based on the hoarding of data.

So we need to broaden the economic model for using data. An economy revolves around goods and services. Services like getting your haircut or a heart transplant. Goods like a camera. Data must be usable in those ways to create a market in which it makes sense for data to be traded, which would allow access to that data so the other entities could make economic use of that data too outside the original collector’s area of specialty.

Currently there’s no commodity market for raw data materials. If you want to start a Kickstarter project all the materials can be bought, design services, manufacturing systems, distribution, etc. all done, because there’s a market that enables higher level services to be built on top. Data has no such market. Data is the equivalent of a fully vertical industry. Collection, analysis, etc is accomplished by one entity.

We are essentially trading data for a service. Data has the most value when it is owned and sold on an open market, not given for use of a service so it’s dead and unusable. That makes for a dead economy. Historically the world economy grew immensely when it transitioned to a free trade and away from  mercantilist system. That’s the same sort of transition we need for data driven economies.

We’ll explore the idea of creating an open market for data as a way to create a vibrant ecosystem for funding rich services in later posts.