I was intrigued! The information was valuable, while the object itself presented no value to me since I didn't know how to use it. I agreed and within moments I learned it was a "tuning fork" - you have to strike it and it will produce a sound that allows you to calibrate a musical instrument.
The decision was not regretted afterwards, he took the "camerton" (as he called it in Romanian), while I "took" the information.
Would I have felt the same if I discovered this was "a key to unlock a safe with an unlimited supply of ice-cream"? Or a "teleportation device"? Or an "animal mind controller"? Not likely. I would also feel cheated and attempt to undo the transaction or at least decide not to deal with him in the future anymore.
Thinking about it today reminds me of a thought experiment from game theory - the ultimatum game.
Imagine that you and a friend walk in the street and there's a 100$ bill on the ground; she is the first one to reach it. She declares - "I will suggest a split, if you accept it - we share the money as stated, if you don't - we give it away to the first person we meet".
Basically, if you don't accept the deal - you both get 0$, and if you do - you're getting the amount dictated by your friend. Would you accept? Think about it.
....
...
..
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Rational agents who maximize profit will accept any split and earn X$, because rejecting it yields 0$.
A 50/50 split is fair and most people accept it. When it comes to outright unfriendly offers such as 10/90 or 1/99, people (i.e. irrational agents) choose to reject, despite the mathematically sound choice of accepting it. If you're maximizing your own profit, all you need to do is think of it in terms of "Do I want something or nothing?", leaving out the part about how much your friend earns (or the idea of punishing them for being unfair).
Let's twist the scenario a bit. The setting is the same, but because of your blurry vision you don't know exactly how much money was found, you only saw your friend picking up a greenish piece of paper. She suggests a split and you're both getting 10$ each ("a fair outcome", your inner voice says). Would you think the same if you knew that she actually picked up a 100$ bill?
When it comes to privacy, our data can be treated in a similar way - we agree to give it away in an informationally asymmetric context; our partner knows more than we do, so we cannot make an informed decision.
When you think about it, you're indeed getting a favour - a site gives you free videos of cats, while another one is a free platform to interact with your acquaintances - seems fair. But is it?
If your social network site charged a fee for their service, far fewer people would use it. Think about how much you would be willing to pay for such a service.
Imagine the acceptable cost is 5$/month*. You agree to it because you find the service useful and affordable.
Scenario A (informationally asymmetric)
[Sign up] to stay in touch with your friends and family for only 5$/month.
Scenario B (informationally symmetric)
[Sign up] to stay in touch with your friends and family for only 5$/month (we'll make 150$ off you by selling your data to our partners).
Scenario C (informationally symmetric)
[Sign up] to stay in touch with your friends and family for only 5$/month (our data analysts will learn your preferences and sell this information to third parties who will then use it to nudge you towards buying stuff they produce and you don't really need).
Scenarios B and C are more balanced, because now you know more about what your partner is really up to. What seemed to be a sweet deal ends up leaving a bitter taste, it is akin to finding out that the "U-shaped object with a tail" I gave away as a kid was, in fact, a teleportation device.
One of the reasons people may erode their own privacy is because they're unaware of the big picture. Information asymmetry plays an important role here, it enables large companies to play the game with us on a daily basis, consistently dictating unfair splits. They are getting away with it, while the users aren't even thinking of getting them "punished", being unaware of the disequilibrium.
This applies equally to other technologies that cause us to leave "informational footprints" all over the web: sensor data produced by "Internet of things" (IoT) devices, our search queries, the videos we watch, the Wikipedia articles we study, the music we listen to, or the books we read.
With the IoT, for example, your fitness tracker could allow someone to infer where you've been, at what time, how often you go there and who else was with you. The logs collected by a voice-controlled home assistant acting as a search engine interface could reveal you have a specific disease, or that you're rushing to buy flight tickets. If a travel agency knew about your intentions and could identify you in their store - do you think they would offer cheaper or pricier tickets?
Such things perpetuate with our consent - we're lured into these deals through a series of {next, I agree, continue, yes} clicks, which is why you cannot claim you were tricked.
Lawyer's tip: though it is unrealistic to read all the agreements you "agree" with, you should at least save these documents to a file, you might need them later.
I shall end this story by encouraging you to read about ARPU - average revenue per user, a metric service providers use to measure the monetary impact of each user account. This information is published in annual reports such as these, that are freely accessible to the public. Have a look and find out what your contribution is.
Acknowledgement
This story is written in the context of research funded by H2020 MSCA ITN Privacy&Us (project #675730).
The upcoming stories in the series will discuss other examples from behavioural economics, as well as from cognitive psychology and technology.
3 comments
Comment from: Esther Visitor
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.
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 :-)