The Economics of Data and Information
According to the Economist, the world’s most valuable commodity is no longer oil, but data. This is very interesting because there was a time where mere access to information was what separated the rich from the poor and built in advantages for dynasties to continue throughout generations because the rich had access to the ability to gain knowledge that the poor simply did not have. As information became more available, first in cheap printed materials and then in the form of the internet, learning and knowledge were largely democratized in the developed world.
How, then, could information be the most valuable commodity if it is more available than ever? Doesn’t the law of supply and demand say that as supply increases, value decreases? In this blog, we will explore the difference between data and information, how each gets its value, how companies profit from it and what to do to protect it.
“The Most Valuable Commodity I Know of is Information.”
– Gordon Gecko, “Wall Street”
The Difference Between Data and Information
There is a pyramid in common usage known as the DIKW pyramid, which is represented below:
The general idea is that data is the least valuable, the easiest to gather and the most prevalent, and wisdom is the highest refinement of data and the most valuable outcome. However, you could argue that you cannot gain information, knowledge or wisdom without first having data, which would support the idea that it could be the most valuable commodity, as it is the building block for information, and without it there could be no information.
In this model, data is raw and unrefined and doesn’t mean anything by itself. Essentially, it is just a collection content with no context applied. Information is data organized in such a way that it can answer one or more of the interrogative questions of who, what, where or how many, which makes it useful. Data can also be turned into information when it is used to prove or disprove a hypothesis. It becomes information when insights are applied to it.
Knowledge then solves the more difficult questions such as know-how. This builds on information by allowing a subject to learn how to achieve an outcome in a repeatable way. This allows tasks to be repeated and eventually automated, which can be very useful in the modern world.
Finally, wisdom represents a complete understanding of a subject, including not only what is happening or how it happens but also why it happens. This is rare indeed. If you look at the human condition, we have observed what is happening in a lot of areas, and in many of them we also know how it is happening. But in very few instances can we say with confidence we know why something is happening. That deeper meaning of why is extraordinarily valuable.
Therefore, this question does not come down to whether data or information is more valuable; that is clear. Wisdom is more valuable than knowledge, knowledge is more valuable than information and information is more valuable than data. The question is instead, What is a commodity? In general, commodities are raw materials. You don’t have to look any farther than commodities to see that bacon is not a commodity, but pork bellies are; plastics are not a commodity, but oil is, etc. Therefore, data is a commodity and information is not. So, if either is the most valuable, then data is the most valuable commodity and information is more valuable than data.
Why is Data Stolen So Often?
There are a lot of potential answers to this question, likely too many to list. Many people will have differing opinions on the topic, but I have distilled my thoughts down to three distinct reasons:
First, data is easier to steal than any other valuable commodity. Think about it: How difficult would it be to steal oil?
Second, the thieves value the data more than the people they are stealing it from. As a result, they are willing to spend more time and effort stealing it than people are willing to spend to defend it. This is not my opinion; it is objective fact that is backed up by statistics or information I have gained from two juxtaposed data points. In 2017, according to Security Intelligence, the global cost of cybercrime was just over $600 million, which is a big number. However, the same year, according to Information Age, the global proceeds from cybercrime were $1.5 trillion. This means for the same criminal acts, the cost to the victims was only 40 percent of the proceeds.
Third, society is terrible at protecting data. The rules and regulations have not kept pace with technology. Some regulations, such as the European Union’s GDPR, are starting to address the problems associated with the Information Age, but the pace has been slow. The problem goes beyond regulations, though. Protecting data can be difficult and many people don’t understand how to do it. It seems easy enough on its face, but defining what data to protect—and how to distinguish commodity from critical data—can be deceptively difficult for organizations. Also, organizations find it difficult to measure the ROI for security investments and as a result either underinvest in cybersecurity or fail to leverage their investments wisely.
Conclusion
If data is the most valuable commodity, we as a society are failing miserably at protecting it. It is incumbent upon all of us for the sake of our coworkers, our shareholders and ourselves to ensure organizations are protecting data appropriately. You cannot protect everything, so you must distinguish what is critical from what is commodity. If you cannot accomplish either objective with your own resources, seek out help. The Information Economy depends on it.
