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Rebooting the "Free lunch" in the Internet Age

Marco Moreira

The concept of getting something for "free" in exchange for one's attention and personal data has been around for a long time. "Free" trips to Florida in exchange for your attendance to a timeshare presentation. "Free" newspapers and TV channels in exchange for your attention to advertisements. "Free" social networking and search engines in exchange for your content. "Free" DNA sequencing in exchange for your genome and health history.

Obviously, as Milton Friedman put it, there is no such thing as a "free" lunch. "Free" services make money by selling whatever they're getting from you to another party. In this regard, you are not the customer, but rather, a supplier. The "free" thing you're getting is your compensation in this transaction.

"Free" news = your attention sold to advertisers. "Free" social networking and search = your personal data sold to pretty much any buyer. "Free" DNA sequencing = your personal health data sold to pharmaceutical companies. This is not necessarily bad, it just is.

One would think such a concept is undoubtedly common sense in the Internet age, where most services are "free". It is not.

This is a bug in our collective understanding of the world. Let's call it the "Free Lunch Fallacy". For our purposes, it can be stated as "people generally misunderstand or misprice what they're giving up in exchange for something they're getting for free."

The tricky thing about technological progress is that we get better at certain activities over time. We may now be living in the most powerful exploitation of the "Free Lunch Fallacy" in history. To further complicate things, progress is accelerating, meaning this issue is guaranteed to get worse unless we do something about it.

Who knows what the right solutions are, but how about we start by agreeing on what we are looking to achieve? In my humble opinion, here's what a new set of rules that enhance the benefits of "free" while reducing its harms on the Internet should set out to accomplish:

  • "Free" internet services continue to exist (but, since there's no free lunch, it costs users something of value).

  • People have extremely clear ways to see what information they're exchanging and in what ways it will be used.

  • Human attention and personal data are considered personal property that individuals may trade in a market-based way.

  • Monopolies built on top of locked-in user data are impractical or illegal.

  • Bonus points: there is a clear path for existing players to transition into this new world

This is not an exhaustive list, but here's some crazy ideas on how we could achieve some of these goals:

  • Treat attention and personal data as commodities and explain them in a consumer-friendly way. Any commodity we care about has standards that define the material and help set a market price. In general, people don't really care about what makes up a barrel of light sweet crude oil. When they are the commodity themselves, however, the story changes. This would help educate folks on the true economic value of their online activities.

  • Personal data cannot be purchased or resold, only licensed directly from individuals. Unlike attention, which cannot be easily copied at near-zero marginal cost, once you have someone's personal data, you can make and distribute as many copies of it as you wish. What if that was impractical or illegal? What if we invented a way to make a person's information a scarce good, licensable only by its owner, cutting out all other middlemen?

  • Products benefitting from network effects of personal data must be easily replaceable. Facebook and Google may get in trouble with their use of people's data, but very few people end up dropping their products. Why? Because there are few, if any, viable competitors to these products simply because their friends' content is accessible only via Facebook and Google. What if that wasn't the case? What if every social network, search engine, online marketplace, etc was built in such a way that, regardless of where the content was created, it is consumable by any other competitor of its kind? Or, better yet, what if we combine this idea with the one above and make it such that users could publish their content in a individually-owned channel and license it to these platforms? Competition would return to being about features instead of lock-in.

  • Give users royalties on any intellectual property built using their personal data. This is another twist on the licensing idea above, but with the incentive being that users would benefit only from some future economic gain that comes from lending their data for product innovation, instead of, or in addition to, receiving some kind of compensation upfront.

The march of technological progress is bound to make the "Free Lunch Fallacy" a bigger question than it already is. The norms and rules of the industrial economy are not appropriate for the digital economy. It will take a combination of innovative approaches by government, private sector and civil society to get it right. It will not be easy, but it's worth trying. The alternatives are simply unacceptable.

How do you manage culture?

Marco Moreira

I took a trip across a few different countries recently and it dawned on me that I was acting differently at each region we stopped along the journey. Every few days I would change the way I spoke, how fast I was walking, how open or closed to dialogue with the locals I felt, etc. "What's wrong with me?", I thought, but I eventually realized that, in general, I was quickly adapting to the local culture. Sometimes I would do the opposite of the local culture to compensate for it, sometimes I would emulate it directly, without any apparent logic behind my behavior changes.

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