I’ve been researching on data trading. China established several state-owned data exchange centers (e.g. Shanghai Data Exchange) and they are gradually building momentum recently because of the generative-AI booming bubble. But it’s not a new thing. An early article ‘Data is giving rise to a new economy’ sort of predicted the prosperous market seven years ago (The Economist, May 6th 2017).

Data are to this century what oil was to the last one: a driver of growth and change. Flows of data have created new infrastructure, new businesses, new monopolies, new politics and—crucially—new economics. Digital information is unlike any previous resource; it is extracted, refined, valued, bought and sold in different ways.

– The Economist, Data is giving rise to a new economy - How is it shaping up?

The metaphor is marvelous. Data is the fuel of our digital age. Just as how people are obsessed with oil decades ago (and even now), the same applies for data. There is already a booming industry revolving around data and a new ecology is shaping up. Most importanly, because data’s value is increasing, it’s evolving from a good into an asset. There are the data majors, a growing number of wildcatters and plenty of other firms trying to get a piece of the action.

For example, those giant tech companies such as Uber or Tesla are able to collect their user’s data tro train their own AI models so as to increase performance, hence attracting more consumers and on and on:

…to exploit a powerful economic engine called the “data-network effect”—using data to attract more users, who then generate more data, which help to improve services, which attracts more users.

For other smaller businesses,:

“Data-driven” startups are the wildcatters of the new economy: they prospect for digital oil, extract it and turn it into clever new services, from analysing X-rays and CAT scans to determining where to spray herbicide on a field. Nexar, an Israeli startup, has devised a clever way to use drivers as data sources. Its app turns their smartphones into dashcams that tag footage of their travels via actions they normally perform. If many unexpectedly hit the brake at the same spot on the road, this signals a pothole or another obstacle. As compensation for using Nexar’s app, drivers get a free dashcam and services, such as a detailed report if they have an accident. The firm’s goal is to offer all sorts of services that help drivers avoid accidents—and for which they, or their insurers, will pay. One such is alerts about potholes or when a car around a blind corner suddenly stops.

Yet, there are problem of exclusiveness in the data world. The market of data is still building up from scratch (at least back in 2017). All those information cost, egotiating deals, enforcing contracts and so on—make it simpler and more efficient simply to bring these activities in-house. Also, the nature of how data work to generate value (train-deploy-test) makes it almost impossible to estimate value of data ex ante. The pricing difficulty and repunancy emotion of trading data showcased the obstacles and opportunities.

Oil is the world’s most traded commodity by value. Data, by contrast, are hardly traded at all, at least not for money. That is a far cry from what many had in mind when they talked about data as a “new asset class”, as the World Economic Forum (WEF), the Davos conference-organiser-cum-think-tank, did in a report published in 2011. The data economy, that term suggests, will consist of thriving markets for bits and bytes. But as it stands, it is mostly a collection of independent silos.

Notably, speaking of repugnancy of trading data, those data brokers who sell all our personal information seem like something that should be be banned. But here’s another view:

It took decades for well-functioning markets for oil to emerge. Ironically, it was Standard Oil, the monopoly created by John D. Rockefeller in the late-19th century, that speeded things up: it helped create the technology and—the firm’s name was its programme—the standards that made it possible for the new resource to be traded.

Markets have long existed for personal data that are of high value or easy to standardise. So-called “data brokers” do a swift trade in certain types of data. In other areas, markets, or something akin to them, are starting to develop.

Oracle, which dominates the market for corporate databases, for example, is developing what amounts to an exchange for data assets. It wants its customers to trade data, combine them with sets provided by Oracle and extract insights—all in the safe environment of the firm’s computing cloud, where it can make sure, among other things, that information is not misused. Cognitive Logic, a startup, has come up with a similar product, but leaves the data in separate IT systems.

Following up, tmrw will be an extension of this topic.