FinReg Blog: “What Kind of Asset is Personal Data?”

We just published a short article on The FinReg Blog run out of the School of Law at Duke University, USA, about our recent journal article: “Data as asset? The measurement, governance, and valuation of digital personal data by Big Tech“.

Here’s the opening paragraph …

“Digital personal data is often described as the resource of the future. In 2011, the World Economic Forum defined it as a “new asset class” that “is generating a new wave of opportunity for economic and societal value creation.” The importance of personal data is evident in the rise of so-called “Big Tech”—consisting of Apple, Amazon, Microsoft, Alphabet/Google, and Facebook—as the dominant firms in our society today (see the graph below). Big Tech firms have inserted themselves into our lives as key social and economic intermediaries, providing often essential services, products, and infrastructures, all of which we use in exchange for handing over our personal data. Our personal data seem to be the key asset for these Big Tech firms—and other digital technology firms like them—providing an important new means for investors to evaluate future growth and success. Consequently, data governance, or how we measure and value personal data, has become a major issue in policy and business circles.:

You can find the rest of the article here.

Is this the end of Big Tech?

“… you have data that is not to be replicated, that has a very long duration, that effectively can serve as an asset that can foreclose competitors from entering your market.”

– Margrethe Vestager, EU Commissioner

Reposted from my account:

The US Federal Trade Commission (FTC) is suing Facebook for “illegal monopolization”, alleging that Facebook has pursued a multi-year strategy undermining competition as a way to cement its social network monopoly. The FTC points to the acquisitions of Instagram in 2012 and WhatsApp in 2014 as key examples of this strategy, acquisitions that the FTC itself waved through at the time. But these are potentially just the tip of the iceberg. There is the very real possibility that the suit will end with the ruling that Facebook divest itself of Instagram and WhatsApp, thereby creating two new competitors and major digital players.

So, what has Facebook been doing? And what are the implications of the FTC suit?

The best account of Facebook’s strategies and practices is the Investigation of Competition in Digital Markets report released in early October this year by the US Congressional Subcommittee on Antitrust, Commercial and Administrative Law. Facebook is the dominant global social network with over 2.7 billion “monthly active users”: it made revenues of US$70 billion last year, almost all of which came from online advertising. According to the Congressional report, “Facebook has held an unassailable position in the social network market for nearly a decade, demonstrating its monopoly power”. Much of this monopoly power comes from the network effects that attract increasing numbers of people to Facebook, but there are other strategies Facebook is alleged to have pursued too. These include: using its data assets and centrality as a digital platform to identify potential competitors; acquisitions of potential competitors like Instagram and WhatsApp; using its platform policies to undermine potential competitors by selectively cutting off access to its platform; and attempting to clone competing products and services, like Snapchat Stories.

As to the implications of the suit, I can think of at least three outcomes worth considering.

First, nothing much happens. Facebook contests the suit and wins, either easily or after making some concessions. Life goes on, not quite as normal since this outcome would likely embolden all Big Tech firms to continue doing what they’re doing now.

The second and third outcomes are more interesting.

Second, the FTC suit adds to the already ongoing actions being pursued against Big Tech around the world: for example, by Competition Bureau Canada`s investigation of Amazon, the US Department of Justice’s case against Google, and the EU’s proposed Digital Services Act. As a result, momentum behind improving privacy and personal data rights keeps growing, which could stymie the rampant collection and use of personal data by Big Tech if the FTC wins its suit. New regulations could undermine Big Tech’s current business models, both those reliant on targeted advertising — like Facebook and Google — and those dependent on control over platform enclaves — like Apple or Amazon. They’d all need to find new ways to make money other than exploit our personal data through various forms of digital rentiership.

Third, the break-up of Facebook accelerates the growing crisis in online advertising highlighted by Tim Hwang in his book Subprime Attention Crisis. This is the most worrying outcome because it has the most potential to destabilize our economies, and yet it’s the least understood at present. To do so necessitates unpacking how Facebook makes money. To start, Facebook contests the claim that it’s a social network monopoly by arguing that it operates in the ‘attention market’ and competes against all applications — from Candy Crush to YouTube — that try to get us to stare at a screen for hours on end. Basically, Facebook is an online advertising company in the business of buying and selling what Hwang calls “attention assets”, by which he means you and I — that is, viewers watching screens for hours on end. Big Tech firms like Facebook understand us as these ‘user’ assets: we are standardized as “viewable impressions” so that we can be made measurable and legible as something valuable (e.g. ‘monthly active users’), something that generates future streams of income for them. According to Hwang, though, online advertising is entering a crisis phase: the real value of online ad space is increasingly opaque; the effectiveness of online advertising is increasingly unclear; the online ad market has concentrated with the introduction of intermediaries like Facebook and Google, leading to distortions in the market; and, most important of all, our attention is declining and click-through rates on online ads have fallen below 1 percent. Consequently, the value of online advertising is falling, so adding two more competitors — Instagram and WhatsApp — to the mix may tip things over the edge.

We could, then, witness the end of Big Tech as the defining political-economic institution of our age if either of the two latter scenarios play out the way I think they will.

From Entrepreneurship to Rentiership in Technoscientific Capitalism

Originally posted on on the DBP Blog, Copenhagen Business School, on 16th August 2017 by Joachim Lund. This post has since been deleted.

The DBP Blog ran a short series of contributions from our visiting scholars. Kean Birch wrote a blog called ‘Entrepreneurship and Rentiership in Technoscientific Capitalism’ while he was a Visiting Scholar at DBP, where he was working on a paper called “Technoscience rent: Towards a theory of rentiership for technoscientific capitalism”.

I want to start this blog by writing about tractors.

Writing on the Motherboard website, Jason Koebler argues that American farmers are buying black-market software from Ukraine in order to hack their John Deere — and other manufacturer — tractors because those manufacturers have made it increasingly legally difficult to do “unauthorized repairs” on those tractors. This is because, as part of their license agreements with tractor manufacturers, farmers are forbidden from “tampering” with their tractor’s software. It all sounds like the plot of a William Gibson novel.

According to Koebler — and others like Kyle Wiens, writing in Wired — tractor manufacturers are engaged in a process of reconfiguring the very nature of ownership and, by extension, of capitalism itself. According to the like of Wiens, for example, manufacturers like John Deer are ‘destroying the very idea of ownership’ by telling farmers that they “don’t own their tractors”. At the heart of the issue is whether consumers own the electronic software that now underpins most physical hardware — including in tractors, cars, mobile phones, computers, and a range of so-called “smart” home products. All of this is rather amusingly deconstructed by the popular Twitter account, Internet of Shit, but it has real political-economic repercussions that are worth thinking about and theorizing.

As I see it, these are examples of what I am calling rentiership, which I have been writing about over the last year or so — see here, here and here — as have others like Steve Fuller, Peter Frase, and Andrew Sayer. Through this concept, I am trying to get a handle on the transformation of contemporary capitalism engendered by its increasingly technoscientific underpinnings, as evidenced by the tractor example. Simply, rentiership involves the extraction of value from economic activity — very broadly conceived — as the result of the ownership and control of a particular resource (or asset), primarily because of that resource’s inherent or constructed productivity, scarcity, or qualities.

Rentiership necessitates an examination of how a diverse array of things (e.g. infrastructure, data, knowledge, bodies, personalities, climate, etc., etc.) are being turned into assets — that is, a resource that accrues revenue over time. According to people like Eve Chiapello and others, this assetization process involves the definition of an asset’s boundaries, its measurement, and then its valuation in monetary terms. Turning something into an asset reflects the notion that markets are instituted by a range of knowledges, practices, and actors, including, in this context, accounting rules (e.g. Systems of National Accounts and the identification of assets versus expenditures), the re-categorization of things like personal data as a ‘new asset class’, and an array of experts and policy-makers needed to ‘establish’ value and validate these changes (e.g. economists, lawyers, consultants, etc.).

Rentiership represents the accumulation strategy, process, and priority that enables the capture of value from of these increasingly diverse assets. While economic rent theory has a long history, stretching back to Adam Smith and, especially, David Ricardo in the 19th century, much of the analytical thinking has focused on the implications of land ownership for entrepreneurial activities. Since then, rent theory has been extended to other resources and assets, such as knowledge and intellectual property — an area of research pursued by business school heavyweights like David Teece at Berkeley as well as their opposites like the Autonomist Marxist Yann Moulier Boutang. Even The Economist is now happy to declare that the “world’s most valuable resource is no longer oil, but data”. As more and more things are turned into assets — essentially tradable and capitalized property — then more and more things end up enclosed by the extension of property rights, thereby limiting access to them.

It is possible to unpack rentiership and think about different forms of rentiership, which can obviously overlap with another, based on different forms of ownership and control, including:

  • Government fiat: for example, Romain Felli argues that emissions trading represents a form of ‘climate rent’ in which governments create an entitlement (to emit) and then simply grant that entitlement to firms who can then capture value from it.
  • Monopoly: for example, Christian Zeller has written about the monopoly rights engendered by intellectual property rights (IPRs) because they usually cover unique assets that are hard to replicate or substitute (e.g. there is only one copyright for music by Metallica).
  • Reconfiguration of markets and technoscience: for example, I am interested in how social actors configure markets and technoscience in order to extract value from research and innovation financing.

In order to give some meat to the skeleton of these more analytical arguments, I want to finish off with a couple of examples. The first is a more traditional example of rent-seeking — as defined by neoclassical economists — while the second is meant to illustrate how rentiership can be applied in other settings.

First, Turing Pharmaceuticals represents an example of rent-seeking, although with a twist. Back in 2015, Turing bought the marketing rights to a generic drug called Daraprim and raised its price 5000% — from US$13.50 to US$750 per pill. It seemed like a clear case of rent-seeking as Turing obtained market exclusivity — monopoly basically — from the FDA as the result of agreeing to test whether Daraprim is compliant with current regulations. However, other firms could also undertake this testing, but Turing convinced the previous rights holder to starve the market before they bought Daraprim’s rights so that other firms could not get hold of the drug in order to do said testing themselves. They then changed the distribution channels in order to limit access. I see this as more complicated than simple rent-seeking. It is, in my view, a form of rentiership involving the creation of monopoly through regulations, as well as reconfiguration of markets by Turing.

Second, I have to make a confession first: I like watching YouTube videos of people playing computer games, so-called ‘LetsPlay’ videos. I have basically replaced my terrestrial TV watching with these YouTube videos. These LetsPlay videos are a really interesting phenomenon, with some LetsPlayers becoming social media superstars (e.g. PewDiePie has over 55 million YouTube followers and is the most followed person on the platform). It is interesting to analyze how they turn playing computer games into something they can extract value from. At base, it is about extracting value from their personality (e.g. humour, zaniness, skill, etc.) by monetizing it (e.g. through ads). I see it as another example of rentiership in which the ‘ownership’ of an asset enables the extraction of value from it. However, unlike the above example, it’s probably less socially egregious.

Over the next few years I am going to try and puzzle my way through rentiership in all its shapes and sizes, and will hopefully be able to say something interesting, maybe even insightful, about contemporary capitalism as I do so.