The Value of Data: A Misunderstood Concept in Today's Economy

In a world where data is king, it's surprising how little we truly understand its value. We've been told that "data is the new oil," but what does this really mean? Is it merely a buzzword, or is there substance behind the claim? The Economist's recent article, "How to Think About Data in 2019," sheds light on this topic and raises important questions about our relationship with data.

The article highlights that seven of the world's ten most valuable companies by market capitalization are technology firms. These companies have built their foundations on tying data to human beings. Google and Facebook want to know as much as possible about their users' interests, activities, friends, and family. Amazon has a detailed history of consumer behavior. Tencent and Alibaba are digital wallets for hundreds of millions of Chinese, both knowing enough about consumers to provide widely used credit scores.

This understanding of data's value is not new. Companies have been collecting data on their customers to improve design and advertise products and services for years. Governments have also looked at these firms and instituted their own systems to gather information on their citizens. Narendra Modi, India's prime minister, cites Facebook as an inspiration for his country's Aadhaar ID system.

The Misconception of Data as an Abstract Concept

We often refer to data as an abstract concept, something intangible. However, the article argues that this is a misconception. Data is not just numbers and codes; it represents tangible human beings. When we talk about "data," we're actually talking about people's personal information, their habits, and their preferences.

This understanding has significant implications for how we think about data collection. We've become accustomed to sharing our personal information with companies and governments without fully realizing the value of that information. However, when data breaches occur, such as those experienced by Facebook and Google in 2018, people begin to take notice. The list of companies that have suffered data breaches reads like a roll call of household names.

The Risks Associated with Data Collection

The use of data to manipulate people's behavior is a significant concern. Uber ratings determine who gets a taxi, while Airbnb reviews decide what sort of property you can stay in. Dating-app algorithms choose your potential life partners. Firms use location data and payment history to sell products, and online searches may establish the price you pay for things.

The article highlights that states have also used data techniques to influence people's behavior. Algorithms that recognize patterns in data can pinpoint dissenters or even those with unconventional opinions. In 2012, Facebook experimented with using data to manipulate emotions, while in 2016, Russia used data to influence the American presidential election.

The Portfolio Implications of Data Collection

The implications for portfolios are significant. As investors, we need to understand that our personal data is being collected and used by companies and governments. This has risks associated with it, such as identity theft and manipulation. However, there are also opportunities to be had, particularly in the field of data analysis.

We can use data to make informed investment decisions. For example, we can analyze a company's customer behavior and understand its growth potential. We can also look at a country's economic indicators and use data to predict future trends.

Practical Implementation

So how should investors actually apply this knowledge? The first step is to understand that data is not just numbers and codes; it represents tangible human beings. When we talk about "data," we're talking about people's personal information, their habits, and their preferences.

We need to take control of our online behavior and be mindful of the data we share with companies and governments. We can do this by reading the terms and conditions before sharing our data and being cautious when using public Wi-Fi networks.

Conclusion: Taking Control of Your Data

In conclusion, the value of data is not just about numbers and codes; it represents tangible human beings. When we talk about "data," we're talking about people's personal information, their habits, and their preferences. We need to take control of our online behavior and be mindful of the data we share with companies and governments.

By understanding the value of data and taking control of our online behavior, we can make informed investment decisions and avoid the risks associated with data collection.