WHAT IF DATA WAS ESTABLISHED AS A LEGAL ASSET FOR EVERYONE? * WHY HERNANDO DE SOTO IS RELEVANT TO THE BIGGEST ISSUE FACING US TODAY

Hernando de Soto Polar, the Peruvian economist whose work centred on the informal economy and property rights, has much to contribute to the dialogue raging in the so-called developed world about privacy and data.
De Soto showed how enabling individuals to own property legally would drive economic prosperity. Many credit him with the surge of wealth creation happening in some parts of Latin America.

The US tech platform companies and the EU are engaged in an arms race around privacy. The issue is not whether my data is private. As Scott McNealy, the founder of Sun Microsystems said, ‘you have no privacy; get over it.’ It is over who owns my data and to whom the value accrues.

Google’s use of my data drives their business model and their multi-billion dollar market capitalisation. We get no economic benefit for that beyond free search and online stalking. But my bank account doesn’t benefit from their success.

I long thought an entrepreneur would develop a business model to incentivise individuals for the use of their consumer data. I found that entrepreneur, John Paleomylites who was running BeatThatQuote, a UK price comparison financial services firm, that my firm Ariadne Capital advised. BeatThatQuote were providing cash back deals and discounts through their channel deals. Despite having less than £500,000 of EBITDA, they articulated their strategic value or threat to Google in a £37.7 million sale in 2011.

Who says Goliath doesn’t get scared?

The battle is no longer about incentivisation. If we believe that my data, whether financial, telecoms, health, transportation or property, is my data, than its use surely must accrue value to me.

Re-enter Hernando de Soto. He changed the world for Peruvian farmers by establishing property rights for them. What if data was established as a legal asset for everyone?

Those of us who have had property rights have the ability to build other assets on top of our property assets. If you are still securing your basic needs at the bottom of Mazlov’s pyramid, the American psychologist whose theory explained how human needs are fulfilled in priority from survival to actualisation, then you advance more slowly and with less certainty if at all.

So if data is the new universal asset, instead of arguing about privacy, should we just argue about money?

If the starting point is ‘it’s my data’, then there should be a corresponding accrual for its use in the financial accounts for any business whose business model uses it. ‘Data’ and the cost of purchasing it would become a ‘cost of sale’ in transactions.

If a large bank or a telco opened up its customer data to start-ups for applications using that data and then sold those applications on, a percentage of the revenue would have to accrue or be netted against any other monies paid in by those customers. The value of what is owed to any one individual would be 1/N where N is the size of the customer base used. One of the effects of British inventor John Taysom’s patent for the method of anonymising an interaction between devices leads one to this understanding of an individual’s value to the cluster.

At each point in history where power has shifted towards the individual from a hierarchy, power is forcefully taken. There is a net social gain for the common man and woman if their data is valued. Prosperity will rip across society if we set up the right data architecture for business.

The non-technology traditional business – whether retailer, bank, transportation company – has an ace to play. By engaging with entrepreneurs and embracing consumer data as a legal asset of the individual, the incumbents in all traditional industries could deliver singularly spectacular growth.

This is a system-level challenge. A start-up is at best today a car – a revenue-generating algorithm – in need of a highway. What large firms have is distribution, audience and reach. They can be a very smart highway and put lots of cars and tollbooths on it.

The Judo Move is for large, traditional enterprises to recognise consumer data rights and proactively value them in their business models.

One can never win by playing by the rules of someone else’s game: You must change the rules of the game. Every successful entrepreneur knows this.

It’s time for the Judo Move.