May 20th, 2011

MIT Prof: Data Privacy Is Your Problem (or Asset)

The Wall Street Journal

Despite the recent revelations — and subsequent Congressional hearings — about the use (and misuse) of personal data by companies doing business on the Internet, companies aren’t about to stop collecting and trying to use it to improve their results.

And why should they, when the more data companies use, the better their chances of selling you more products and services, at better returns? According to Sandy Pentland, a professor at MIT’s Media Lab, the best chance people may have of controlling their data online is a modern version of “if you can’t beat them, join them.”

Mr. Pentland, who has been working with private companies, consumer advocates and regulators from different countries around the world to find an approach to data collection that satisfies all those groups, said the simplest and most logical approach would be one that allows consumers to manage their data and receive compensation in exchange for making it available to firms who want to market to them.

“Your data becomes a new asset class, you have more control over the information, and it becomes your most lucrative asset,” he said during a panel discussion at the MIT Sloan CIO Symposium in Cambridge Wednesday.

Some start-ups have already started following that advice; London start-up Allow Ltd. Offers to sell people’s personal information on their behalf and give them 70% of the sale, the Journal reported recently.

Another panelist, Erik Brynjolfsson, an MIT Sloan professor of digital business, predicted that society will suffer a “catastrophe” involving the misuse of personal data, but said this doesn’t mean we should stop “experimenting” with the Internet.

After the session, he told Digits, “We don’t know if data ownership is going to solve the problem.” But nevertheless, he said, as a society, “we have to maintain an experimental, open mind.”

He noted that when cars were first introduced, they created tens of thousands of highway deaths per year until we learned more about best practices like stop lights, and we created technology, like disk brakes, that made it safer. But we didn’t stop using cars in the meantime.

And the potential benefits of using this data are just too good for private companies to pass up, he said. Brynjolfsson said he led a study of 330 companies and found that companies that said they’re more likely to use data than intuition to guide business decisions had between 4% and 6% higher productivity, and 5% higher revenues, than those who didn’t use data. “It’s statistically significant,” he said.

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