Sunday, 30 June 2019

Data, business & the economy 1: The modern factory is a data factory

     Economics = Land, Labour, Capital               [foundation of economics]
                  Economics = Land, Labour, Capital, Data      [ the information age?]

Data has value; that we know from the exploits of new economy firms Google, Facebook, Baidu et al.

Such startups, primarily data firms (revenue derived from data), are increasing in numbers.

And with machine learning conventional firms are increasing the role of data in their business.  They now see value in data, once discarded from their daily operations.

This is the beginning.

As society digitises, more data will be tapped and monetised to benefit businesses, governments, citizens.  The latter in ways that is unthinkable a decade ago, even now!

What will industry look like as the data economy enters mainstream?  What is the effect on society? Will the suppliers, we, be compensated if data as The Economist suggest is the most valuable resource?  Will governments offer up their massive data (privacy contained and managed) - now sitting fallow, for a fee?  Can this compensate for the tax we pay?  This post ponders.

Once superfluous, data is becoming important for business in the information age

Alibaba rose with a business model that unlike traditional retailers holds no stocks.  Instead it hosts a digital platform for sellers to list their products.  That is, Alibaba makes money by providing data for buyers and sellers to transact.   The foundation of Alibaba business is data.  Likewise, AirBnB’s and Grab’s revenue derives from data, not physical assets.

Most internet startups are either based on data or data forms a crucial part of their business.  This is similar to the early stage of the industrial revolution.  Just as the new firms (Ford, US Steel, Standard Oil, JP Morgan) then created businesses around commodities such as oil, steel and industrial machines, this one is on data, computers and the internet (Uber, Google, Facebook, Ant Financial).

And while there have always been firms profiting from data, it was never at this scale.  The way data is collected is different too.  Unlike the labouring of traditional data firms, these next-gen firms employ crowdsourcing (a method to source from the crowd, individuals, to participate in an activity, paid or unpaid, but of mutual benefit, over the internet (see crowdsourcing; a tool for business), us, largely based on day-to-day usage of services, itself unusual.

Is data or rather the revaluation of data pointing to new dynamics in the economy?

One effect of data on industry – see Datarisation and its transformative impact on industries

Anything that can be digitised, turned into data – products (music, books, software, media), services (voice phone calls, recruitment, photography, computing), transactions (money) -  and delivered over the internet will have its value reduced, some to zero, transforming industry…messaging apps (telephony and telcos), Amazon (books and retailing), Uber (transportation and taxis), Paypal (money and finance industry), Netflix/YouTube/Spotify (video/music and movie industry).

If your industry involves products that can be digitised, it’s a candidate for transformation.


We have bandied the term ‘information age’ about for decades, but never quite figured out what it all means.  We now have an instance, data has value.  It affects the way business is done.

The modern factory is a data factory

The process is similar to the factories we are familiar with.  Instead of raw materials as input and workers turning them into physical products, these new forms of factories take as input data produced from the usage of services (and other sources) using computers to ‘manufacture’ informational and quasi-informational products.  These ‘finished products’ – specific, tailored information are used to support the sales of ads. They also add value to physical products or to services or to businesses while nuggets of information, refined data and data itself have a market.

The difference is that instead of a factory, this modern version is a digital platform.  Instead of miners, consumers produce the raw material.  Instead of the assembly line, networks of computers use analytics, machine learning and AI to assemble insights of information. 

This suggests that a new form of production is emerging just as moving assembly lines did in the industrial one. 

Prof. Yochai Benkler of Yale in his treatise “Coase's Penguin, or Linux and the Nature of
the Firm” suggest a new resource in the production of goods and services through the open source model” …he is referring to a form of crowdsourcing.  With the open source model, participants from all walks of life partake, out of interest, on a project, be it software, an encyclopaedia (Wikipedia) or even shoe designs.  See Open source business model

This also suggests that personal effort, personal data has value.

In the second post here, we ask if the ‘miners’ that is you and I, should be paid and if this solves the issue of personal data privacy.  Further, we’ll argue that governments could monetise the data throve they have, using the proceeds to benefit society, perhaps reduce tax.

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