The White House recently released a repo rt about the danger of big data in our lives. The report’s main focus was the same old topic of how big data can hurt customer privacy.
However, big data holds many other risks. Chief among them, to my mind, is the threat to free-market competition.
As ever-increasing amounts of data are collected by businesses, opportunities arise to build new markets and products based on this data. That is all good. But what happens next? Data becomes the barrier-to-entry to the market and thus prevents new competitors from entering. As a result of the established player’s access to vast amounts of proprietary data, overall industry competitiveness suffers. This hurts the economy.
Federal regulators must ask themselves: Should data that only one company owns, to the extent that it prevents others from entering the market, be considered a form of monopoly?
For example, Google revolutionized the search market in 1996 when it introduced a search-engine algorithm based on the concept of web site importance. But most modern search engines are based on algorithms combining thousands of factors. Today the most prominent factors are historical search query logs and their corresponding search result clicks. Studies show that historical search improves results up to 31 percent. But new players cannot enter the market and compete with the established players who have deep records of user behavior.
This dynamic isn’t limited only to Internet search. Given the importance of data to every industry, data-based barriers to entry can affect anything from agriculture, where equipment data helps farms improve yields, to academia, where school performance data improves education. Even in medicine, hospitals specializing in certain diseases become the sole owners of medical data that could be mined for a potential cure.
The biggest corporate players have the biggest data advantage. McKinsey calculates that in 15 out of 17 sectors in the US economy, companies with more than 1,000 employees store, on average, over 235 terabytes of data—more data than is contained in the entire Library of Congress.
We need to start thinking about data as a strategy. It should adhere to the same competitive standards as other business strategies. Data monopolists’ ability to block competitors from entering the market is not markedly different from that of the oil monopolist Standard Oil, for example. Perhaps the time has come for a Sherman Antitrust Act —but for data.
Studies have shown that around 70 percent of organizations still aren’t doing much with big data. If that’s your company, you’ve probably already lost to the data monopolists. Kira Radinsky
Kira Radinsky is the chief technology officer and cofounder of SalesPredict.