Privacy Isn’t a Right. It’s a Commodity.

What's to come?
Nov. 7 2013 7:51 AM

Privacy Isn’t a Right

It’s a commodity. Here’s how to profit from it.

online privacy.
Click "agree," lose your privacy.

Photo by Siri Stafford/Digital Vision/Thinkstock

This essay was adapted from Reputation Economics, by Josh Klein, published by Palgrave Macmillan.

Privacy isn't your right anymore. We sold it for pictures of cats and the ability to tell anyone in the free world what we had for breakfast.

I'm not saying it was a bad trade, either. The Internet as we know it came about through the monetization of metadata—information about us—instead of by replicating traditional models of content sales. As a result the Internet exploded into a plethora of useful services and platforms of every shape, size, and description. What's more, it was a great leveler—nobody had more valuable personal information than anybody else, so everyone was able to trade it in for the same kinds of services.

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The problem with all this is that "privacy" as a notion was abdicated the instant you clicked "agree" to the online services agreement you didn't read. And yet most consumers haven't yet realized that their date has left the restaurant and they're stuck with the bill.

Part of the reason for that is that Big Data has finally begun to produce some very real, tractable, monetizable techniques. As an example, see a couple of patents Microsoft filed several years ago. Roughly described, the first one allows the company to put a number on any identity's ability to influence others around a particular word or topic. So for the word cheese, you might have a high score of 88 because you run a popular cheese blog, whereas I might be lactose intolerant and only have a score of 17. The second patent is more interesting: It allows Microsoft to dynamically price a good or service based on your score.

This means that if you go online to buy some cheese, Microsoft can ask Kraft if it wants to give you a big discount in the hopes that you'll say something nice about its cheese and thus drive up sales. Conversely, if I go to buy some cheese, it can ask Kraft if it wants to jack up the price to the point where I'm unlikely to buy it, to save the embarrassment of a potentially bad review. Is that wrong? Is it a violation of privacy? Materially, it no longer matters. We clicked "agree" and now they legally can—and by doing so make a whole lot more money.

This emphasis on our data and its uses as a marketing tool has grown so fast and so far that competitors to the traditional credit card companies are now starting to drive down their collective margins by consistently underbidding one another. Square (a company whose dongle plugs into your phone and lets you accept credit card payments), Simple (an online-only bank), and others are happy to charge less of a percentage of each transaction because they know they'll be able to make up the lost profit through resale of the metadata they've collected—the "who bought what from whom, where, and when." It's not by accident that they emphasize the use of mobile phones (which have built-in GPS) for facilitating their transactions and Web browsers (which connect to all your other online identities) for managing related funds.

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