Data Justice Blog

The market for your personal data is maturing

As everyone knows, nobody reads their user agreements when they sign up for apps or services. Even if they did, it wouldn’t matter, because most of them stipulate that they can change at any moment. That moment has come.

You might not be concerned, but I’d like to point out that there’s a reason you’re not. Namely, you haven’t actually seen what this enormous loss of privacy translates into yet.

You see, there’s also a built in lag where we’ve given up our data, and are happily using the corresponding services, but we haven’t yet seen evidence that our data was actually worth something. The lag represents the time it takes for the market in personal data to mature. It also represents the patience that Silicon Valley venture capitalists have or do not have between the time of user acquisition and profit. The less patience they have, the sooner they want to exploit the user data.

The latest news (hat tip Gary Marcus) gives us reason to think that V.C. patience is running dry, and the corresponding market in personal data is maturing. Turns out that EBay and PayPal recently changed their user agreements so that, if you’re a user of either of those services, you will receive marketing calls using any phone number you’ve provided them or that they have “have otherwise obtained.” There is no possibility to opt out, except perhaps to abandon the services. Oh, and they might also call you for surveys or debt collections. Oh, and they claim their intention is to “benefit our relationship.”

Presumably this means they might have bought your phone number from a data warehouse giant like Acxiom, if you didn’t feel like sharing it. Presumably this also means that they will use your shopping history to target the phone calls to be maximally “tailored” for you.

How Data Allows Uber to Lead the Way on Destroying Workplace Rights

One conundrum in economics is why fims exist.  Why don't people with money just contract individually with anyone they want work from?  The answer people like Ronald Coase and Oliver Williamson highlighted were the problem of transaction costs, in particular the problem of monitoring employees to ensure that they deliver on the work promises (ie. the need to manage employees).  These monitoring and transaction costs meant we ended up with massive workplaces like Henry Ford's River Rouge plants and similar industrial firms across the country.  Nasty as management could be, workers could collectively at such places organize unions to demand standards of treatment that improved their lives and the lives of workers across the country.  Laws such as the minimum wage and workplace safety were passed as well oriented to raising work standards in the traditional workplace.

Enter new data tools and companies like Uber.  When every action of a contractor can be monitored by computer, the need for traditional onsite management is eliminated so workers can be treated as "independent contractors" and thereby lose most protections traditional workers have.  As Rebecca Smith at the National Employment Law Institute outlines in a Fortune article, by calling workers at Uber "non-employees", workers lose out:

Non-employees are not entitled to minimum wage, overtime pay, compensation for workplace injuries, or protection against discrimination. They have no federally-protected right to join a union and collectively bargain with the companies for which they work. Few have job-based health care or pensions.

Second, many on-demand companies break down and outsource what once were jobs into tasks, and those tasks into micro-tasks that are paid at piece rates, sometimes in pennies, to their independent contractor workers.

A recent survey of on-demand workers found that half have college degrees. Indeed, one in six landed these gigs through advertisements at their universities. Half said that finding enough work to pay the bills was their biggest problem. To make ends meet, two out of five work for more than one on-demand company at once, and just like workers in previous generations, what they most want from work is paid leave, pensions and health care.

The CEOs and venture capital firms behind these companies may be getting rich and a few high-end workers may benefit from a bit more flexibility in their work setups, but the overwhelming number of workers in this new "gig" economy are left with few tools to work together to improve their working conditions.  

"Great Decoupling" of Wages and Productivity Driven by New Technology

Erik Brynjolfsson and Andrew McAfee, faculty members at the MIT Sloan School of Management, have a fascinating interview in this months Harvard Business Review where they admit the upbeat message of their last book, The Second Machine Age, largely ignored the downside of stagnation of the incomes of working families.  And they think that technology itself may be a prime driver of that stagnation and rising economic inequality.  

What they highlight in the graph accompany their interview is that worker productivity and GDP has continued to soar over the last few decades but workers have not seen the fruits of their own growing productivity.  What’s notable is how anomalous this “decoupling” of wage growth from productivity is compared to earlier decades in the postwar period.   Their focus on rising inequality and stagnant incomes is hardly new, but their focus on why technology may be a key driver of the problem is newer. They argue globalization is only a part of the story, citing a study that competition from China explains only a quarter of the decline in manufacturing employment in the U.S.  Instead they focus on how technology has automated lower-skill jobs and increased the rewards to the more educated professionals.
This is not an uncommon theme but the authors add the worry that digital markets, with their nearly costless production of additional digital goods, makes them prone to winner-take-all control by dominant players.  What this means is that skilled professionals are not just winning out over working class stiffs, but the richest of the top 0.01% are winning out over the professional class as a whole.  As Brynjolffson notes, "If the top 1% are stars of a sort, they look up to superstars who have seen even bigger increases...evidence suggests that the divergence in incomes continues to grow with a fractal-like quality, with each subset of superstars watching an even smaller group of uber-superstars pulling away."
They still hold out hope that new technologies will yield new productivity gains that will benefit the broader public: "recent technological breakthroughs haven’t had their full impact on productivity—yet,” argues Brynjolffson.  But other economists are wondering if current technology is delivering anything but profits to the richest sectors, as Paul Krugman argued in “The Big Meh” this week.   That an Apple digital watch is one of the most hyped technologies of the year may be symbolic of the fact that we are getting less of a technological revolution than avatars of progress are admitting.  Argues Krugman: "the whole digital era, spanning more than four decades, is looking like a disappointment."

Carnival Cruises: Case Study in Price Discrimination

The Wall Street Journal has a long profile on how Carnival Cruise lines use big data to maximize the revenue and profits extracted from each customer.  It's a good example of how companies use data to find the maximum prices customers are likely to pay and push them towards those goods and services at that mximum price.

Carnival owns 100 ships and nine brands and can dynamically price cruises on each ship and figure out who to market those seats to in order to apply its big data analytics:

Every day at Carnival, a data science teams sets in motion several algorithms that crunch information about items such as passenger behavior, vacation trends and queries from travel agents and potential customers online and by phone, Mr. Leibowitz said. The analytics systems run for eight hours overnight, devising thousands of recommendations for ticket price tweaks to Carnival’s slate of scheduled cruises worldwide.

The company also use "psychographics" to figure out who they want on the ships in the first place, since there's "a difference between someone who will pay $12 for a pair of Carnival logo flip-flops and one who will shell out a few hundred dollars for a champagne catamaran side trip on the high-end Holland America line."

Google, Ebay, Facebook and Yahoo! Team Up to Gut Consumer and Privacy Laws

Consumer and financial protection laws are wonderful when passed, but the key is to get them enforced.  Government agencies have limited budgets for enforcement and political pressure often prevents government agencies from targeting lawbreaking companies.   The solution for many laws has been to give private actors the right under those consumer, environmental and labor laws to sue companies in civil court.  Whether those private actors have suffered direct harm is less the point than to have them act as "private attorneys general" enforcing the law on behalf of the public.

But there has been a large effort by corporate litigators to get the courts to declare that such laws are invalid if a plaintiff can't prove direct economic harm.  A current example is efforts to limit the ability of plaintiffs to sue under the Fair Credit Reporting Act (FCRA). In a case that the U.S. Supreme Court agreed to hear just today, the web company Spokeo published inaccurate information about Thomas Robins.  Robins sued Spokeo under FCRA saying publishing such inaccurate information for its corporate clients had injured his employment prospects.  The District Court ruled that Robins had failed to show specific economic harm -- hard to do in a world where you never know what information corporations are using for internal decision-making.  However, on appeal the Ninth Circuit Court of Appeals declared that since Congress had specifically granted private actors the right to sue based on violations of the FCRA, no specific demonstration of harm was needed to go to court, as Robins was "among the injured" meant to be protected by the statute, so Robins therefore has the right to stop violations of the law, whatever specific economic harm may or may not have occurred.

The bottom line is that Ninth Circuit said corporations have to follow the law and consumers protected by FCRA have the ability to enforce the law in court, without corproate defendants throwing up additional procedural barriers.

Proving economic harm in areas like reputation and the spread of false information is always challenging, so the Ninth Circuit decision was an important victory for consumer rights in the online world.

Unsurprisingly, the corporate world immediately began seeking to overturn the decision by appealing to the Supreme Court.  One notable example was erstwhile competitors Google, eBay, Facebook and Yahoo! finding common cause in a joint amicus brief to the Supreme Court asking them to take the case.  (See here for their brief)

The Police State is already here

The thing that people like Snowden are worried about with respect to mass surveillance has already happened. It’s being carried out by police departments, though, not the NSA, and its targets are black men, not the general population.

Payday Lending's Contrasting Cultures of Wealth and Exploitation- and Big Data's Role

Payday loans and other abusive high-interest loans targeting the working poor are one of the scourges of our financial system.  Last month, the Consumer Financial Protection Board proposed new rules for the industry to help families avoid what the Board calls “Payday Debt Traps.” 

To understand why payday loans are so noxious, there are a number of great studies (see here, here and here for examples), but I highly recommend people read this in-depth profile of the payday industry in Kansas City written up in the city’s alternative paper.  This post will summarize some of the story it tells, but it’s worth reading the whole thing (although it’s long and in two parts).

What the story highlights is the way the Internet metasized local payday industry players from shady storefront operators into respectable national financial players backed by mainstream financial firms and respectable investors. In many ways, it’s a story of how the vices of shady exploitation have used the sanitary interface of the Internet to mainstream loansharking among wealthy elites.

The technology of big data became a key to this transformation since it made it easy both to find new victims and largely hide the identities of the payday lenders. As Pitch describes the typical approach:

Say you need a quick loan. You type "fast loan online Kansas City" into Google and click on one of the sites that pops up. There's a good chance that the site is not an actual lender but instead is a middleman of sorts that processes your information, evaluates your credit in a matter of seconds, and creates a profile for you.

Such “lead generation” means there’s little accountability in the industry with so many layers between borrowers and lenders and borrowers often find their data has been resold multiple times as people get barraged by calls from offshore payday lending companies.  As U.S. Senator Jeff Merkley argued in 2012,"These websites mask the true identity of the lender so it is harder to track down and prosecute deceptive lenders."

Two Churches at Each End of the Online Payday Loan Pipeline

The article starts with a story contrasting two Catholic parishes in Kansas City.  At the wealthy Prairie Village Catholic church, wealthy investors in the local online payday lending industry suddenly start showing up throwing around money:

Roundup of News Reactions to EU Google Antitrust Action

With European Competition Commissioner Margrethe Vestager formally accusing the company of violating antitrust law and announcng a separate investigation of Google’s potential abuses of control of Android and other mobile practices, there was a deluge of coverage across the media

Many highlighted the protracted proceedings that Google will face and the likely expansion of charges as the investigations continue:

  • Vivienne Walt at Fortune wrote Google’s legal woes in Europe might only just be beginning.  The investigations are “serious indeed, and potentially extremely expensive.” Further, “Vestager’s announcement means that Google is now thrust headlong into a protracted legal wrangle in Brussels, which could well result in the company having to pay hefty fines.”
  • The Economist's Google: the end of the beginning argued “The case could drag on—ultimately in court—for ages before Google is fined or forced to change its ways. With the Android investigation starting too, Google could be in the regulatory mire for years.”
  • Reuters TIMELINE-Next steps in EU's Google case noted that “many observers question whether Vestager will be willing to accept any offer Google would make. If she does not, she can order it to change its methods and fine it up to 10 percent of its annual global sales of $66 billion.” 
  • In USA TODAY's Google faces trouble abroadBoston University law professor Keith Hylton said the “European process is not one in which American tech companies have prevailed."
  • In Mashable's Google's terrible, horrible, no good, very bad year, venture capitalist Paul Kedrosky said "I think Google is likely 75% [****]ed… Nothing's totally [****]ed, but... they're at a precipice, and no one is calling them on it." 

Others hailed the action as critical in taking on the rise of globally dominant companies like Google:

EU Antitrust Action Today is Just the Beginning of Google's Troubles in Europe

The announcement today that the European Competition Commissioner has launched an official antitrust action against Google promises to be just the first step in a likely escalation of actions against Google and other big data platforms increasingly dominating the online -- and increasingly offline -- economic landscape.

The initial probe by the European Commission is centered on how Google systemtically uses its search engine dominance to favor its own e-commerce services at the expense of rivals. As the Commission notes in its initial filings, Google first online shopping services failed miserably until it began favoring its own shopping services in its search engine results, so its "conduct may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete, to the detriment of consumers, as well as stifling innovation."  In the European legal process, this initial "Statement of Objections" will give Google ten weeks to respond before a more formal decision on whether Google violated the law will be made.  

In this, Europe would be addressing the core issue of search engine manipulation that the United States Federal Trade Commission said was not an antitrust problem in its 2013 decision, but then Europe will have the advantage of actually addressing the evidence from the FTC's own staff report that the FTC itself buried.

More importantly, this looks to be just an initial step for the European Commission.  At the same time, the EU has opened a separate formal investigation into how Google uses its dominance of the Android mobile operating system to force handset manufacturers to install its apps and otherwise "abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices."

This resurrects an issue that four years ago briefly dominated debate on Google's abusive practices, after a private lawsuit's discovery revealed internal Google memos highligting a systematic campaign by the company to use Android to coerce manufacturers into using its services, in that case its geolocation services.  As I wrote at the time in "Window into Google's Monopoly Maneuvers", the memos revealed "Google executives' views on how they sought to reinforce Google's monopoly and collect personal information from its users."  Google literatlly forced manufacturers such as Motorola and Samsung to suspend shipping devices until they removed a rival geolocations service by its Skyhook competitor in the name of remaining "compatible" with Android standards.   As Google's Dan Morrill had sad in an email, pretending the issue was one of  “compatibility” with the Android system was the reason for excluding Skyhook was hardly a persuasive argument to allied manufacturers. 

“it’s not like it isn’t obvious to the OEMs [manufacturers of the smartphones] that we are using compatitibility as a club to make them to things we want.” (p. 116)

Using compatitibilty as "a club" will no doubt be a red flag for antitrust regulators in Europe-- even if our own regulators have given Google a pass at every turn.  

Of course Google wanted its search apps and other services installed on Android devices, no doubt a focus for the European Commission, but the key is why this was so important.   It's not just to generate initial additional search and advertising revenue on mobile devices, but also that each of those apps collect crucial additional data on each user, which strengthens the ability of Google or any other data platform to more effectively make money off of each user-- "monetize the relationship" in Silicon Valley parlance.

And this is where the European Commission may be taking the first steps towards even bolder action in the online world.  

Predatory credit score-based insurance fees

I’ve been looking into who uses credit scores – FICO scores or other alternative scores – and I’ve found that the insurance industry is a major user.


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