Privacy is a very important value, yet we routinely make decisions that undermine it. It is not just someone else doing it to us, we're doing it to ourselves as well. How come? I will attempt to explain this through examples, analogies and thought-experiments.
Behavioural economics is a field that can offer some insights. One of its basic premises is that buyers are not behaving rationally, as a hypothetical "homo economicus" would, instead they're subjected to a range of biases.
An engaging introduction to this mindset is Dan Ariely's "Predictably irrational", he provides a lot of clever examples that demonstrate how such biases can be exploited (whether you're maximizing profits or the probability of getting a date).
When I was a child I found an unusual metallic artifact, I have never seen anything like it before, it had a strange elongated U-shape with a tail. I did not know what it was, but a classmate of mine knew, he told me that he'd explain that to me, with one condition - I give it to him after I learn the answer. Would you have accepted the deal? Take a moment to think about it.
Note: when I ask you to "think about ..." it helps if you really think about it, instead of reading on right away.
Comment from: Esther [Visitor]
That is a well elaborated storyline, great to read and I love the connection to game theory! Yet, the story leaves me wondering and I feel there’s even more behind!
As you suggested, I deducted from Facebook’s Financial Statement that, on average, the company generates $6 of revenue per year with each daily active user. Now I can view this from two perspectives.
First perspective: “6$ is cheap”
It’s like someone tells me “You can use all of Facebook’s great services and advantages for free! And they make only 6$ per year with your data. That’s not much, is it!?” True. 6$ is not much. It seems like a very small sum… per year… Let them have the 6$, I get an entire year of using Facebook for free. My personal data is obviously less valuable than I thought!
but is it?
Second perspective: “6$ is a small price for something so valuable”
Now someone tells me about all the possible consequences it COULD have, when I am under constant surveillance and when a company knows a lot about me. I might be discriminated, e.g. I receive a higher price for a flight ticket because the company knows I can afford it or I may get a lower service quality, because I am not as solvent as other customers. Or I make myself manipulable. Can I still form a free political will, when someone shows me the news they want to show me?
The possible risks list can be continued for a long time. But the point is: When I know about the risks, I know what is at stake. I learn that information is power and that I grant some stranger a lot of power about me when I share my personal information with him.
If now the imaginary someone tells me, I could pay only 6$ per year to facebook and completely avoid the collection and processing of my personal data, would I pay that fee? I most certainly would!
I’m trying to say, that personal data is worth a lot more than the revenue a company makes with it. Privacy is a pre-condition for many fundamental freedoms of modern democracy and if we view it as such, we are suddenly forced to think about the value of democracy or the value of being treated equally. The power a company has is not reflected in it’s revenues.
The thought of potential consequences which we could avoid for only 6$ per year, makes me wonder WHY THE HELL no one offers me that opportunity? Why do we always have to choose between the essential service and the essential privacy?
P.S.: I would never have given the U shaped object away :-)
Comment from: gr8dude [Member]
Thanks for the feedback, Esther. I must say that so far I haven’t met anyone who would have given the U-shaped object :-)
I agree that 6$ is not much, but that’s the data in their public reports. My gut feeling tells me they’re making piles of money off my back, but…
One thing I learned while attempting to write a paper (yes, that one) was to support my statements with evidence. The figures in those documents are all we’ve got, so making other assertions would be foolish.
Profit = revenue - expenses. In other words, if the ARPU is 6$ and you take out the expenses, then the average PROFIT per user is even smaller!
It is counter-intuitive and it probably hurts our ego (how come, you mean I’m worth less than six bucks to them!?!), but this is a conclusion one reaches by following logic and plugging in the numbers into the simplified model.
Could it be that the sheer quantity of accounts is their greatest asset? If you have a small quantity, but you multiply it __many__ times - you’re still getting a big figure in the end.
Comment from: Mark [Visitor]
Its hard to ascertain the true value of the data, as the profit = (revenue - expenses) calculation doesn’t factor in the potential for huge future profits resulting from those expenses. Facebook for example spends vast sums of money (expenses) on research and development, much of which also relies on the data its users provide.
It’s also difficult to understand the value of data without taking into account its collective value. My data on its own is worth nothing, but by data as part of a collection of data becomes much more valuable.
Perhaps our Facebook data is like diamonds, a collection of small diamonds that have the same collective value as a large single cut diamond are worth less than the one large diamond.
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