By Marc J. Lane
When petroleum spawned a new industry dominated by the Standard Oil Trust, antitrust regulators were prompted to break up the Rockefeller empire to protect consumers. Now, concerns are justifiably being raised about the tech giants that deal in data, the new oil – Alphabet (Google’s parent), Amazon, Facebook and Microsoft, among the most valuable companies in the world. Some are even arguing that they, too, should be dismantled to defeat their dominance. Yet, consumers clearly benefit from Silicon Valley’s success. Google’s search engine, Amazon’s one-day delivery service and Facebook’s newsfeed have enriched our lives.
Size alone is not a crime. But the misuse of the troves of information Big Tech collects from more than two billion human beings is.
Last week, on the very day that Facebook made it public that it was setting aside between $3 billion and $5 billion for the fine it expects the Federal Trade Commission to levy against the company for the misuse of consumer data in the Cambridge Analytica scandal, BuzzFeed News reported that in just one hour of after-hours trading, Facebook’s market capitalization increased by $40 billion. The Cambridge Analytica scandal, where data from tens of millions of users was misappropriated and shared to be used for voter profiling of behalf of the Trump presidential campaign, was not an isolated case. A security flaw exposed the public and even private photos of some seven million users on Facebook’s platform to unauthorized viewers. A separate bug exposed 30 million of its users’ emails, phone numbers, search histories, genders and locations. And the company recently admitted unintentionally uploading the email contacts of 1.5 million new Facebook users since May of 2016.
But, as Professor David Carroll of the New School who sued Cambridge Analytica in the U.K., put it, “No fine would be adequate for a monopoly. Advertisers, users and investors do not register the fines in their economic activity. [They’re] still buying, using, investing. It causes no material harm to Facebook. It’s just bad PR.”
So how can tech companies be held accountable, given their scale and impact, when they don’t feel the pain of fines based on an outdated view of the way markets work?
Professor Carroll pushes for the “seizure of servers, criminal penalties against corporate directors and ‘stop data processing’ orders.” Even more severe, he suggests that regulators might “force Facebook to delete its user data and models, and start from scratch under rigorous collection restrictions.” His Draconian prescription simply isn’t the answer.
While the world is struggling to govern data, Data for Good efforts are underway, and they are to be encouraged. Stefaan G. Verhurst, a Co-Founder of New York University’s GovLab, and his team are developing “Data Collaboratives” in which participants – including private companies, research institutions and governments – can exchange data to solve public problems. He believes that Data Collaboratives “will be essential vehicles for harnessing the vast stores of privately held data toward the public good.”
Others are working on “Data Trusts,” contracts between organizations that hold data on behalf of the public and those seeking to use it to develop artificial intelligence. The goal would be to give quasi-public organizations that hold data a share of any intellectual property and profits derived from the data’s use along with a right to the perpetual use of the developed technology. Meanwhile, the Organization for Economic Co-operation and Development is exploring the use of “Community-based Data Sharing Agreements,” similar to Data Trusts but intended to increase access to data across communities.
Last year the state of California enacted a landmark data privacy bill granting consumers specific rights related to their personal digital information that’s collected, maintained and shared by businesses. It allows consumers to request that personal information be deleted and requires businesses that collect personal data to disclose how and why it’s being used. Building on the state’s initiative to protect consumers’ online privacy, Gov. Gavin Newsom has now called for a new “data dividend” that could allow residents to get paid for providing access to their data. In his State of the State address, he proposed that, “California’s consumers should . . . be able to share the wealth that is created from their data.”
A better approach, it seems to me, is not to push for individual rights to data ownership or income which wouldn’t fix today’s problems and might create new ones. No one’s data, on its own, is of any economic value to a marketer or an insurer, so trying to monetize it for personal gain is a losing proposition. And hoarding one’s data only invites businesses and governments to draw inferences about your income, credit rating, consumer preferences and the like from data provided by other people, and may deny you the targeted benefits your data might afford you.
So let’s recognize that our online privacy and security are fundamental human rights, but that individual property interests in our data are not. Let’s urge Congress to pass a Federal Bill of Data Rights that keeps all of us safe from unreasonable digital surveillance, the surreptitious manipulation of our behavior through digital media, and unfair discrimination on the basis of our data -- rights that any of us can enforce in court, individually or as plaintiffs in class actions, against businesses, their officers and directors, and governments and their responsible officials.
Marc J. Lane is a Chicago attorney and financial adviser and the vice chair of the Cook County Commission on Social Innovation.
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.
A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.
Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.
The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.
If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.
Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.
Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.
Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
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