Privacy is a competitive advantage

In the 21st century digital economy, personal data has become the most valuable resource for nearly every business. But the technology companies that mine it may soon have to define whether they are data peddlers or data stewards. Are they tracking us and selling our personal information to the highest bidder, as both Google and Facebook do? Or do they have a different business model, one in which data can be monetised in a way that leaves them less open to public criticism and the possibility of increased regulation?

Over the last two weeks, both Apple and IBM have launched public relations efforts to position themselves in the latter camp. Apple rolled out a new privacy website to better showcase features that it believes differentiate the company from competitors such as Google, including algorithmic searching that works at the level of individual devices rather than in the “cloud”, giving users more control over what the company can see.

Meanwhile, Ginni Rometty, IBM’s chief executive, met with European commissioners and members of the European Parliament to announce a new set of data principles and practices aimed at increasing trust in Big Tech. These included a pledge never to turn over client data to any government surveillance program in any country, as well as a promise that clients will own not only the rights to their end data, but to any algorithmic “learning” from it.

The clear and very interesting message is that in a world in which companies have more personal information about us than ever before, and hold data that can be used in myriad nefarious ways (à la the Russia-Facebook scandal), privacy has become a competitive advantage.

“We’re entering an era in which data can be used to solve all sorts of the most pressing problems, but only if there’s trust in how that data has been handled,” Ms Rometty told me in a phone interview last week. “We see ourselves as stewards of clients’ data. And we don’t need to be regulated to do the right thing. We’ve been doing the right thing for a hundred years.”

The comment was a clear swipe at Google and Facebook, both of which have been fined by national privacy watchdogs for their data collection methods, as well as a reference to new UK and EU regulations, such as the General Data Protection Regulation, that will make it tougher for companies to process, sell, or allow third-party access to personal data without consumers’ explicit consent. But it was also a new kind of marketing pitch: in a world in which most economic value is going to live in intellectual property, we are not only going to protect that value, we are going to offer a greater share of profits from it to clients.

How would this work in practice? IBM, which serves mainly other businesses and governments, is now pitching the fact that they won’t keep any proprietary data in their servers for more than a specified contract period, and that the informational wealth garnered from using artificial intelligence to analyse that data would be owned by the clients themselves. For example, if a national health service gave IBM health records, the company could not then monetise information about the fact that certain populations in certain parts of the country have higher than average cancer rates.

That’s a very different model than Google’s or Facebook’s — those companies are basically highly-targeted advertising businesses which make nearly all their money selling as much specific information about individual users as possible.

Likewise, Apple, which is a consumer business, is touting a technique known as “differential privacy”. This allows the company to gain insights into what users are doing, while preserving a certain amount of privacy by mathematically transforming the data before it leaves a user’s device, in such a way that Apple can’t associate the data it receives with any particular user. The data are used to improve the devices and services that are sold within the Apple ecosystem rather than to send customers hyper-targeted ads from other businesses that they had no idea were getting their data to begin with. That is, again, quite a different business model than the Google/Facebook approach.

Does all of this address the questions I’ve raised numerous times in this column about Big Tech’s oversized economic and political power? Yes and no. Apple’s business model doesn’t lend itself to influencing an election like Russia attempted to do in the US via Facebook. It’s also great to hear Tim Cook say that he believes “privacy is a fundamental human right”. But I don’t get the sense that the company has any deep view about how to better share profits within the tech ecosystem (see its battles with Qualcomm and other suppliers). And I don’t expect them to stop offshoring cash anytime soon.

IBM is in some ways a more interesting case study in whether the digital economy can avoid becoming a zero-sum game. While the power of Watson’s artificial intelligence has been overblown, the idea of simply and explicitly saying to customers “you own the data, and you own the learning” is unique, and, to the extent that clients can really monetise that learning, impactful. Either way, it’s good PR, and that’s certainly something that Big Tech could do with these days.

Leave a Reply